Pinta & Pinta
[2022] FedCFamC2F 34
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Pinta & Pinta [2022] FedCFamC2F 34
File number(s): ADC 3795 of 2021 Judgment of: JUDGE BROWN Date of judgment: 20 January 2022 Catchwords: FAMILY LAW – Interim application for sole occupation of jointly owned property – in the alternative partial or interim distribution of property – final hearing allocated in June of 2022 – significant controversy regarding extent of asset pool – high conflict – application dismissed. Legislation: Family Law Act 1975 (Cth), Part.VIII, ss.75, 79, 80, 114 Cases cited: S & S (2002) FamCA 59
Davis v Davis (1976) FLC 90-062
Bassett v Bassett (1975) 1 AER 513
Page v Page (1981) FLC 91-025
Sieling v Sieling (1979) FLC 90-627
Lee Steere v Lee Steere (1985) FLC 91-626
Ferraro v Ferraro (1993) FLC 92-335
Clauson v Clauson (1995) FLC 92-595
Wardman & Hudson (1978) FLC 90-466
Trevi & Trevi [2018] FamCAFC 173
Russell & Russell [1999] FamCA 1875
Hickey & Hickey & Attorney-General (Intervener) (2003) FLC 93-143
Bevan & Bevan [2013] FamCAFC 116
Strahan v Strahan (2010) 42 Fam LR 203
Harris & Harris (1993) FLC 92-378Division: Division 2 Family Law Number of paragraphs: 125 Date of hearing: 10 December 2021 Place: Adelaide Counsel for the Applicant: Mr Anderson Solicitor for the Applicant: Clelands Lawyers Counsel for the Respondent: Mr Jordan Solicitor for the Respondent: The Law Offices of Elizabeth Temnoff ORDERS
ADC 3795 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MR PINTA
Applicant
AND: MS PINTA
Respondent
ORDER MADE BY:
JUDGE BROWN
DATE OF ORDER:
20 JANUARY 2022
THE COURT ORDERS THAT:
1.The application for interim orders filed by the wife on 4 December 2021 is dismissed.
2.The final hearing dates of 6, 7 & 8 June 2022 are confirmed.
3.The applicant file and serve all affidavit evidence he proposes to rely on at trial along with an updated Financial Statement on or before close of Registry filing on 9 May 2022.
4.The respondent file and serve all affidavit evidence she proposes to rely on at trial along with an updated Financial Statement on or before close of Registry filing on 23 May 2022.
5.On or before 23 May 2022 the applicant do pay the setting down fee or file an exemption certificate in respect thereof.
6.The applicant pay such daily hearing fee as required pursuant to the Family Law (Fees) Regulations 2012.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Pinta & Pinta has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE BROWN:
INTRODUCTION:
These reasons for judgment centre on whether it is just and equitable for the court to make an interim property order awarding a specific piece of real property to one or other of the parties concerned, pending the final hearing of their competing property applications.
The trial in question has been allocated three hearing dates between 6 and 8 June 2022. In some ways, the proceedings are analogous to a sole occupancy application. It is a significant matter for one party to be deprived of his or her right to utilise a piece of property owned by him or her, in the context of a limited interim hearing.
Given the comparative imminence of the trial, real questions of fairness and probity arise regarding whether it is appropriate for the court to embark on such an exercise. These issues are exacerbated by the reasonably small pool of property available to be distributed between the parties. However, it should be pointed out that the parties disagree fundamentally about the value of their marital estate.
BACKGROUND
Mr Pinta (“the husband”) and Ms Pinta (“the wife”) were married in 1998. They finally separated, in mid-May 2018. They are the parents of four children aged between 18 and 7 years.
Proceedings have been on foot since August of 2020 in respect of both property distribution and children’s issues. The parties’ separation has been extremely difficult and emotionally conflicted. The conflict has involved serious allegations of family violence, committed by the husband against the wife, leading to police intervention. Family violence orders have been issued.
Against this difficult background, a Family Report was prepared, in April 2021, which recommended that the children spend no time with their father. It is common ground that all four children are currently estranged from their father and spend no time with him.
The husband is a tradesman by occupation. He is self-employed, being primarily engaged in construction for domestic buildings. He has technical qualifications as a builder. Mr Pinta began working for his father in the early 1990’s in the latter’s business – Company B. He too was a builder and in 2010 the husband purchased his father’s business from him.
The business is operated through a number of trusts and proprietary limited companies, of which the parties are shareholders and directors. The husband provided quotes, oversaw employees and sub-contractors and did much of the physical labour required in the business, whilst the wife assisted with its accounts and book keeping, from time to time. A chartered account, Mr C has been retained by the parties to value the business.
The business has a line of credit and a liability to the Australian Taxation Office. The line of credit is secured against the two real properties, which are crucial in the current proceedings. There are significant controversies between the parties regarding Mr C’s valuation of the business and what is its level of indebtedness. Mr Pinta derives his income from the business.
In the early years of their marriage, the parties purchased a property at D Street, Suburb E[1] for the sum of $115,000.00. They still own this property as joint tenants. It is the D Street, Suburb E property which is the subject of the current proceedings. Both parties would like to retain it as part of their respective settlement. The husband is currently living in it. The wife wishes to live in it pending trial. It is subject to a mortgage in favour of the Commonwealth Bank.
[1] Hereinafter referred to as “the D Street, Suburb E property”.
More recently, the husband and wife and the wife’s brother, purchased land at F Street, Suburb G,[2] which was then sub-divided. The husband and wife kept one block, on which they constructed a house, which became their family home. It is the husband’s case that he did much of the construction work required. It too is subject to a mortgage in favour of the CBA and secures the line of credit, as does the D Street, Suburb E mortgage.
[2] Hereinafter referred to as “the F Street, Suburb G property” or “the former marital home”.
On separation, the husband left the F Street, Suburb G property and moved in with his parents. The D Street, Suburb E property was rented. In late December 2019 the tenants concerned vacated the property. The husband provides the following account of what happened next:
On 9 August 2020 I informed the wife that I was moving into the D Street, Suburb E property as it has been vacant for approximately 8 months, the tenants having vacated the property in late December 2019/early January 2020. The wife had been telling me she was going to move with the children from the F Street, Suburb G property for over 12 months but had not done so. I had been living with my parents since September 2018 and I needed my own place. I also decided to move because I want to have a place for the children to stay if the Court makes such an Order. I sent a text message to the wife at 4.48pm on 9 August 2020 informing her that I had moved in and had changed the locks as I did not have any keys to the place and she responded at 5.02pm. Within 30 minutes she and the two older children, X and Y, turned up at the D Street, Suburb E property.[3]
[3] See Affidavit of the husband filed 14 August 202 at [38].
The wife’s position is that she and the husband had an agreement that she would move into the D Street, Suburb E property, with the parties’ four children, so that the F Street, Suburb G home could be readied for sale. From her perspective, the husband had reneged on this agreement and his occupation of the home was a provocative gesture.
Both parties agree that there was an unpleasant altercation, on the day in question, which involved the parties’ two older children, X and Y. Once again, police were involved. It seems clear that the parties’ relationship with one another, already poor, has reached a new nadir of acrimony.
The parties are of similar age. The husband has just turned 47; whilst the wife is 46. There is no controversy that Ms Pinta has been the children’s primary carer. In the past, she has worked in the allied health industry and more recently has operated a small business. It is her case that this business is no longer functioning and has no worth.
It is also the wife’s position that the Company L business generates a significant annual profit of approximately $250,000.00 per annum. It is also her understanding that it owns plant and equipment worth around $250,000.00.
Following separation, the wife and children remained living at the F Street, Suburb G property and continued to do so. It is the wife’s position that it is untenable for her to retain the property and she wishes to move into the D Street, Suburb E property, which is also convenient to the younger children’s school.
During the parties’ marriage, the wife was gifted an interest in a property located at H Street, Suburb E by family members. It is held, as a joint tenancy, by the wife, her parents, her brother and her sister. It is subject to a mortgage and the wife asserts that she has made no direct financial contributions towards it. Given the nature of her interest, she asserts that it has no present value so far as she is concerned. The husband is critical that the wife has resisted having the property valued.
The wife had a similar interest in another property owned with her family located at J Street, Suburb K. This property was recently sold. It is the wife’s evidence that her father received all of the proceeds and she received nothing. The husband appears to be dubious about this assertion.
ORDERS SOUGHT BY THE PARTIES
The husband commenced the proceedings on 14 August 2020. Initially his focus was on pursuing parenting orders in respect of the parties’ children – X born in 2003; Y born in 2005; W born in 2009; and Z born in 2014.
He conceded that no substantive orders should be made in respect to the two older children but, on both a final and interim basis sought orders to spend time with the two younger children on weekends, during term time and during school holidays and special occasions. He sought the conferral of equal shared parental responsibility.
In respect of property issues, he proposed a 55/45% division of property and an equalisation of superannuation but provided no concrete orders in respect of how this division was to be achieved in practical terms. He had no interim property proposals. He did however indicate in his supporting affidavit, his desire to retain the D Street, Suburb E property.
It is the husband’s position that his business, Company B, is struggling financially and is subject to a significant level of debt. From his perspective, its only assets are its plant and equipment and other real property, in the form of two warehouses previously owned by the parties which were sold to reduce debt in July 2020. The sale attracted capital gains tax.
Mr Pinta, in his statement of financial circumstances, deposed that he derived an income of approximately $1,500.00 per week from Company L, which he characterised as being in the nature of franked dividends. He indicated that his major expenditure was $1,100.00 per week, which went to the CBA to service the D Street, Suburb E mortgage and the line of credit. He pays child support of $276.00 per week.
It is also his position that he pays many other expenses for the wife and children, including private health cover. Overall, it was his position that his recurrent income was exceeded by his recurrent expenditure by about $400.00 per month. Mr Pinta estimates the parties owe the CBA about $400,000.00 and there is a tax debt of around $76,000.00.
Ms Pinta responded to the application on 4 December 2020. She sought the conferral of parental responsibility on her solely and proposed that all four children should engage with their father as they wished to do so. She proposed more extensive property orders than the husband, on both an interim and final basis. However, she has not indicated the effect of those orders in percentage terms, which remains a bone of contention with the husband.
Essentially, on a final basis, the wife wishes to retain the D Street, Suburb E property mortgage free. In order to secure this outcome, she proposes the former matrimonial home be sold and its proceeds be directed towards discharging the line of credit secured against it and the D Street, Suburb E mortgage. In exchange, she would allow the husband to retain Company B and she would transfer all her shares in the various companies related to it to him. She also wishes to retain two motor vehicles.
Ms Pinta agrees that the parties have a significant level of indebtedness to the CBA. At the time of her response her view was that Company B was worth somewhere in the vicinity of $550,000.00. This was in significant contrast to the husband, who valued the business, when its level of debt was taken into account, at nil.
It is the husband’s view that the parties took significant amounts, as drawings, from the business, during their marriage, to fund their living expenses. It is his understanding that these drawings will ultimately attract a significant level of tax.
In her statement of financial resources, the wife indicated receiving an income of $1,495.00 per week, the chief component of which ($992.00) she received from the business, although it would seem uncontroversial that she is not actually working in it at present. Her other source of income is social security.
At the interim stage, Ms Pinta wished orders in line with her final position, namely the F Street, Suburb G property be prepared for sale and she have the sole use of the D Street, Suburb E property. The wife did not immediately press her interim application being prepared to attempt conciliation with the husband. This was unsuccessful.
More recently again, in September of 2021, the parties have arranged for formal valuations of both the D Street, Suburb E and F Street, Suburb G properties. The former has been valued at $650,000.00; the latter at $975,000.00.
On 6 October 2021, the parties’ competing applications were fixed for final hearing in early June of 2022. At this stage, the wife indicated her desire to agitate the interim issues regarding who of the parties should occupy the D Street, Suburb E property pending trial.
As a consequence, the husband formally filed a reply in which he seeks the dismissal of the application. He also wishes Ms Pinta to formulate an offer to finalise the proceedings on the basis of what she asserts is the parties’ pool of assets.
Underpinning this somewhat unorthodox application is the fact that he himself, with the assistance of his legal advisers, has prepared such an offer together with what he has calculated to be the relevant balance sheet.
In this context, he proposes a 65/35% division, in the wife’s favour, on the basis of a net asset pool of $812,642.00. He wishes the wife to focus on the practicalities of the situation with a view to seeing if they can begin to narrow the issues in contention between them and work towards an agreed outcome. For obvious reasons, this would be eminently sensible.
Given what he would characterise as a modest asset pool, Mr Pinta is anxious for obvious reasons to avoid the expense involved in the matter going to trial. I share his concerns. In keeping with recently inaugurated case management guidelines and other practice directions directed to ensure that there is a degree of proportionality between what is at stake, in financial terms and both incurred and potential legal fees, the parties’ lawyers have been directed to provide details of their respective client’s exposure to legal fees.
In my view, this should make for sobering reading for each of the parties concerned. The husband has paid costs in an amount of $39,444.30. His solicitor estimates his further costs, if the matter goes to trial, as being between $80,000.00 and $103,000.00.
The wife has billed fees of $23,852.40. Disbursements stand at $5,305.00. The costs of trial are estimated to be $34,000.00. If the husband’s view of the net asset pool is correct, it must mean that the parties have the potential to utilise, at the very least, around 15% of their property in legal fees. This is a conservative estimate on my part. I struggle to see that this level of expenditure can have any strong connection to commercial prudence.
In his affidavit filed in opposition to the wife’s application to move into the D Street, Suburb E property, the husband points to the fact that he has been in occupation of the property since October of 2020 and needs the property to store his plant and equipment. It is the case that he offered the property to the wife earlier and she rebuffed his overture, becoming interested in it only when he moved in. Essentially, he characterises the wife as capricious and difficult.
He has calculated that, once F Street, Suburb G is sold, he will be in a position to borrow sufficient funds to buy out the wife’s interest in both the business and D Street, Suburb E. He will pay any tax liabilities relating to the business. He estimates the sum to be due to Ms Pinta to be somewhere in the vicinity of $330,000.00.
The wife greets this offer with suspicion. It is her view that the husband has restructured the business to conceal his use of its funds from her and has unreasonably restricted her access to its accounts. She further asserts that he has withdrawn funds from the old entity and transferred them to his new business or otherwise disbursed them.
In response, the husband agrees that he has restricted the wife’s access to business funds as he contends that she has not curtailed her level of spending in line with what he would say is the reality of their currently straitened financial circumstances. However, it is his position that he continues to pay around $8,000.00 per month in satisfaction of the parties’ joint expenses, including the children’s private school fees.
MR C’S REPORT
Mr C provided his report in May of 2021. It has not been subject to any independent scrutiny. He himself describes it as desk top review. He relies on the accuracy of documents provided to him.
Given the nature of the business, Mr C does not believe it could be sold as a going concern. He concedes that he is not in a position to determine the potential exposure of the business to top-up tax. He provides the following summary:
I have determined that the business known as Company B generates a maintainable surplus and has a value by reference to its underlying earnings.
I have valued the business operation at $201,325 as at 30 June 2020. I consider this to be the value of the business in the hands of the owner and not its market value.
The entity has then been valued bringing to account the value of the business at $201,325 resulting in a value of the net assets of the Trust (M Trust) as at 30 June 2020 to be $213,897.
I have also valued the corporate beneficiary Company L and a Property Trust, N Property Trust, although I note the property owned by that entity was sold in the 2020 financial year.
I have detailed net loan balances owing by the parties to group entities in order to record the value of the interest in the group entities as at 30 June 2020 net of loan balances. I have also identified an exposure to top-up tax in respect of Div 7A loan balances.
Whilst I cannot precisely calculate the exposure to top-up tax on these balances, I have provided an indication of the liability.
This exposure to top-up tax is a matter to be considered by the parties in assessing the net value of the asset pool.
I am not in a position to comment on the extent to which the Div 7A loans are compliant and my report is qualified to that extent.
I have calculated the interest of the parties in the group entities net of loan balances to be a deficiency of ($482,633) as follows and have separately identified the potential exposure to "top-up" tax.
M Trust $213,897
Company B Pty Ltd $646,016
N Property Trust $10
Net Loans owing to Group Entities ($1,342,556)
Value of Net Interest/(Deficiency) – 30 June 2020 ($ 482,633)
Less: Potential Exposure to Top-Up Tax ($ 193,308)
Accordingly, in his report, Mr C identifies the business having an overall net deficiency of $482,633.00. It most significant debt is $589,852.00 to the CBA in respect of the line of credit. Its most significant asset is its plant and equipment valued on its balance sheet at $199,863.00.
In reaching this gloomy conclusion, Mr C reports as follows:
It is apparent the parties have borrowed money to fund assets or lifestyle outside of the trading entity over and above profits that have been generated and withdrawn over a number of years.
This has been done in circumstances where significant historical trading profits remain to be exposed to personal rates of tax.
DISCUSSION
At this stage, whether Mr C opinion is right or materially wrong in some aspect cannot be definitively determined given that it has not been subject to challenge through cross examination.
Mr Pinta is prepared to accept Mr C’s opinion that the business is worth something slightly in excess of $200,000.00. However, it is his view that the potential attraction of top up tax cannot be ignored. In addition, it is his position that the parties’ indebtedness to the CBA in an amount well in excess of $900,000.00 cannot be ignored.
As previously indicated, Mr Pinta wishes to retain the D Street, Suburb E property in which he has lived for the past thirteen months and which he asserts that he requires to house some of the plant and equipment of the business. It is his position that it is capricious of the wife to now wish to occupy the property when she previously indicated that it was not suitable for her and the children’s needs.
The wife asserts that the husband is deliberately running down the business and utilising the line of credit to fund the monies he pays to maintain her and the children, whilst dissipating the income generated by the business in an unsavoury and unseemly manner to her detriment. Both now agree that there is no prospect of the F Street, Suburb G property being retained.
The husband has recently deposed that he has conditional approval to borrow funds to effect the 65/35% split of assets, on the pool determined by him, which includes the top up tax. On the basis that the wife retains two motor vehicles, her interests in the properties held with her family and any stock relating to the business, he calculates the sum due to the wife as being $332,161.00.
The sum would be secured against the D Street, Suburb E Property and would require the sale of F Street, Suburb G to reduce debt to the CBA. It is his position that he continues to advance significant sums to support the wife and children, as well as paying the D Street, Suburb E mortgage ($558.00 per month) and the business line of credit ($4,200.00 per month).
Accordingly, it is his case that whilst he continues to provide the wife with accommodation at F Street, Suburb G and the case remains unresolved, it would be inequitable for him to vacate the D Street, Suburb E property. On his calculations, the additional amount he provides to the wife amounts to somewhere in the vicinity of $2,400.00 per month, the most significant of which are school fees ($1,000.00); private health insurance ($632.31); and child support ($611.00).
He concedes that he has changed the business structure and accepts that this has had implications for the wife’s ability to access funds held by it. He assert that he did so because he did not consider it fair that all of the money that I earned was being spent by the wife at will.[4]
[4] See Husband’s affidavit sworn 9 December 2021 at [5] – [7].
The husband’s case is that it cannot be said that he has been cavalier so far as his obligations to provide financial support to the wife and children. Rather, he asserts that the wife has been profligate in her approach to joint funds and has no proper level of appreciation of how problematic the parties’ financial circumstance are.
More significantly, it is his position that he has made a realistic and open offer to resolve the case to which the wife has not responded. In these circumstances, he points to the fact that she has not provided any analysis as to how she can take on the D Street, Suburb E property or service any mortgage relating to it, whilst ensuring that he receives his fair share of the marital assets.
In these circumstances, he characterises her position at the interim hearing as being misconceived, particularly given that she rebuffed his earlier offers to allow her to occupy the D Street, Suburb E property.
In contrast, the wife’s position is that she is in a parlous financial position and has the sole responsibility for parenting the parties’ four children, each of whom has expensive needs, which are not likely to be satisfied by the formal assessment of child support.
In my preliminary assessment, the parties’ financial affairs are extremely tangled and they have complicated this tangle as a consequence of their profound mistrust of one another. These are not easy issues to resolve in the context of a brief interim hearing, particularly one in which the evidence of Mr C remains untested.
LEGAL CONSIDERATIONS APPLICABLE
The wife seeks to move into the D Street, Suburb E property, which she and the husband both legally own. She has not clearly delineated the principles applicable to such an application, which could occur either as an order for sole occupancy under section 114 of the Family Law Act 1975 (Cth) or a partial property settlement.
Either way, the tenor of her application is that it arises at what she would characterise as a point of crisis, which necessitates the court’s expeditious involvement in order to ensure that she and the children concerned have safe and secure accommodation. Given that she wishes to retain the D Street, Suburb E property after the final hearing it will be necessary for me to briefly outline the principles applicable to such property proceedings.
The urgency of the situation, from her perspective, dictates that the resultant hearing has occurred in a truncated form, without extensive oral evidence and cross examination. As a consequence, the court is not in a position to make concluded findings of fact regarding evidentiary issues in dispute.
The basis of the wife’s occupation for sole occupancy, of the D Street, Suburb E property, lies in section 114 (1) of the Family Law Act 1975 (Cth). The relevant portion of the section reads as follows:
114(1)…the court may make such order or grant such injunction as it considers proper with respect to the matter to which the proceedings relate, including –
…
(b) an injunction restraining a party to the marriage from entering or remaining in the matrimonial home or the premises in which the other party to the marriage resides, or restraining a party to the marriage from entering or remaining in a specified area, being an area in which the matrimonial home is, or the premises in which the other party to the marriage resides are, situated;
(e) an injunction relating to the property of a party to the marriage;
(f) an injunction relating to the use or occupancy of the matrimonial home.
In these circumstances, I am satisfied I have the authority to direct the husband to vacate the D Street, Suburb E property, although, in technical terms, it has not been the parties’ shared home. The relevant discretion is to be exercised by reference to what is considered to be proper.
The court has authority to make such orders in proceedings which relate to a matrimonial cause. Proceedings relating to the division of matrimonial property and spousal maintenance are such matrimonial causes.
Accordingly, in the present case, the court has authority to grant an injunction restraining the husband from entering the D Street, Suburb E property, notwithstanding he is one of the proprietors of the property and has legally occupied the property for over a year.
The Full Court of the Family Court has described the criteria to be applied to a sole occupancy application as “surprisingly vague”.[5] The seminal case regarding the use of section 114, in sole occupation applications, is Davis.
[5] See S & S (2002) FamCA 59 at paragraph 32.
In that case, it was said that the matters to which the court should have regard, in its deliberations, as to whether it was “proper” to make a sole occupation included the following:
·The means and needs of the parties;
·The needs of any children concerned;
·Hardship to either party, including any relevant children;
·If relevant, conduct which justifies one party being expelled from the former matrimonial home. [6]
[6] See Davis v Davis (1976) FLC 90-062 at 75,309.
More recent cases have focussed on issues related to strict practicality, within what has been coined, the “the realities of family life”. The question which it has been said the court should pose for itself being:
is [it] really sensible to expect a wife … to endure the pressures which the continued presence of the other spouse will place upon them.”[7]
[7] See Bassett v Bassett (1975) 1 AER 513 at 520 approved in Page v Page (1981) FLC 91-025.
Inconvenience to the parties concerned is not sufficient to justify a sole occupancy order. The court has been directed to be alive to the risk that a spouse may use a sole occupancy injunction as a tactical weapon in the ongoing matrimonial conflict.
Accordingly, caution is required in assessing whether such an order should be made, particularly as, at the interim stage, it is likely to be difficult for the court to predict who of the parties ultimately is likely to retain control of the property concerned, as issues to do with contribution have not as yet been determined.
In Price Lindenmeyer J indicated there had been a “softening of the court’s attitude” towards exclusive occupation orders. There was now no onus on an applicant for such an order to demonstrate irrational, intolerable or awful behaviour on the part of the party whom it was sought to exclude.
Rather:
[T]he court should regard the situation between the parties as being such that it would not be reasonable or sensible or practicable to expect them to continue to remain in the home together.[8]
[8] See Price (unreported) 12 July 1982 approved in S (supra) at paragraph 35.
As the power to grant an injunction is a discretionary one, it must not be exercised lightly, particularly if any interference with a spouses proprietorial interests is envisaged. As such, the court should not proceed on “vague or uncertain claim[s]”.[9]
[9] See Sieling v Sieling (1979) FLC 90-627 at 78,264.
In my view, these authorities demonstrate that the court must move cautiously in determining whether to exclude a spouse from a jointly held property, pending resolution of competing claims in respect of that property.
The court must examine the entire circumstances of the parties concerned and determine whether, on the facts of a particular case, such an order is justified. Essentially, the court must determine whether any order is proper and ensure that individualised justice is delivered.
Part VIII of the Family Law Act1975 deals with financial matters relating to marriages. Pursuant to section 79(1) the court is authorised to make such order as it considers appropriate in order to alter the interest of the parties to a marriage in relevant property.
Pursuant to section 79(2) the court is actively prevented from making an order altering proprietorial interests, unless it is satisfied that it is just and equitable to do so in all the circumstances prevailing. This follows from the use of the prohibitive words “must not” in the relevant section.
This was an issue analysed by the High Court in Stanford v Stanford.[10] In the case, the majority stated that:
The expression ‘just and equitable’ is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds.[11]
[10] Stanford v Stanford [2012] HCA 52.
[11] Ibid at [35]–[36].
Accordingly, whether it is just and equitable to make any individual property order, under the provisions of section 79(2), must depend upon the court’s analysis of the idiosyncratic circumstances of each particular case which comes before it. It is not an issue to be approached in a formulaic manner or on the basis of any assumptions regarding contribution issues.
The process to be followed for the division of the parties’ property is well-established by law.[12] The relevant legal principles are primarily contained in sections 79(4) and 75(2) of the Family Law Act 1975. I am required to follow a number of specific steps.
[12] See Lee Steere v Lee Steere (1985) FLC 91-626; Ferraro v Ferraro (1993) FLC 92-335;
In the first step, I must ascertain what are the parties’ assets and liabilities available to be divided between them. The normal rule is that those assets are to be determined as at the date of trial.[13] However, as indicated above, the court is not obliged to include an uncertain or imprecise liability.
[13] See Wardman & Hudson (1978) FLC 90-466; and Biltoft & Biltoft (1995) FLC 92-614.
In the present case, many controversies arise between the parties regarding the construction of the relevant asset pool. These centre on what is the value of the Company L business and whether it will equitable for sums allegedly withdrawn by the husband from it to be notionally added back into the pool resulting in the pool being theoretical bigger but not in practical terms.
It being, as I understand it, that the sums in question should be allocated to the husband, although they have possibly been liquidated, on the basis that they have either been wasted or represent some form of premature distribution. This is likely to be a highly contentious issue both in evidentiary and legal terms.
Recently, in Trevi & Trevi[14] the Full Court has reiterated that the court’s authority to add back is both discretionary and exceptional in nature. It should only occur when, in the particular circumstances of the case concerned, considerations of justice and equity require it.
[14] Trevi & Trevi [2018] FamCAFC 173 at [30].
In addition, it is not necessarily an exercise which requires any direct arithmetical tabulation. Rather, add back issues can be approached in general terms at the third step of proceedings under the rubric of any other fact or circumstances the justice of the case requires be taken into account [section 75(2)(o)].
In the second step, I must ascertain the contributions, which each party has made towards the pool of assets, which has been identified, following the first step. Contributions fall into two broad categories.
The first kind is contributions to the property: financial contributions and non-financial contributions, made directly or indirectly, by or on behalf of a party to the marriage to the acquisition, conservation or improvement of any of the property of that relationship.
The second kind is contributions to the welfare of the family: in the words of the section, “the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent.”[15]
[15] See Family Law Act1975 at section 79(4)(c).
It is clear from the authorities that this second kind of contribution must be given appropriate weight and is not to be treated as a token matter or as a contribution which is inherently less valuable or important than a financial contribution to property.
At this second step stage, the task set for me requires the balance and comparison of a multiplicity of contributions, many of which are necessarily different in nature, within the framework of a marriage. Many contributions in a marriage, such as being a homemaker, do not result in the direct acquisition of assets. They are also difficult to value in absolute dollar terms.
In the present case, the marriage between the parties was one of significant length and produced four children. Both were involved in the business. It is also undisputed that the wife made significant contributions, both as a parent and homemaker. As such, it is difficult to conceive that one party will be in a position to strongly advocate that his or her contributions are significantly greater than the other. In this, as in many others, the weight of the court’s discretion will fall mainly on the third step.
The third step involves the assessment of the parties’ prospective needs, by reference to the factors set out in section 75(2) of the Family Law Act 1975. As indicated above, pursuant to section 75(2)(o), the court is entitled to take into account “any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account”.
The major controversy in this area will centre on the wife’s lack of formal skills and responsibility to parent the parties’ children, in contrast to the husband who has his building skills and will almost certainly continue to operate the Company L business, which has provided the parties’ income for many years.
The open offer made by the husband recognises these factors, which favour the wife. As previously indicated, in the context of the current interim deliberation, it is significant that the wife has not conducted the same level of analysis regarding either the construction of the asset pool or what is the percentage division she proposes.
This is significant, as, in my view, she has provided no clear pathway as to how she can retain the D Street, Suburb E property. Rather, she has made an inchoate plea that she should move into it because of her financial situation and parenting obligations.
These are clearly significant considerations but if, at the end of the final hearing process, it is not possible for her to retain the property, when other factors arising in the case are considered, chiefly the extent of the asset pool and the husband’s various contributions, this would not seem to me to provide a proper basis for evicting the husband from the property, on an interim basis, in all the circumstances currently prevailing in the case.
However, this lack of evidence does not automatically preclude the court from making orders in respect of the disposition of property, at an interim stage, if it is persuaded that it is just and equitable to do so. However, such an exercise must still be referrable to the applicable provisions of the Act.
Finally in determining what order the court should make under section 79, the court must be satisfied that in all the circumstances, it is just and equitable to make the relevant orders. Overall, it is the justice and equity of the actual orders that the court must consider.[16]
[16] See Russell & Russell [1999] FamCA 1875 at [80].
Accordingly the so called fourth step is for the court to take a step back and examine whether the orders it proposes are just and equitable. These considerations must also inform each of the preceding steps. [17]
[17] See Hickey & Hickey & Attorney-General (Intervener) (2003) FLC 93-143 at 78,386 [39] and Bevan & Bevan [2013] FamCAFC 116 at [60].
Section 80 of the Act provides the court with what are described as general powers. In particular section 80(1)(h) empowers the court to make an order pending the disposal of proceedings. However, it is clear that the same principles, set out above, apply both at the interim and the final hearing stage. In addition, pursuant to section 80(1)(k) the court is authorised to make any order which it considers is necessary to do justice between the parties.
In Strahan, apropos the making of an interim property order, the Full Court said as follows:
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 section 79(4) including by reference to s 79(4)(e) the matters in section 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 to 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’.[18]
[18] See Strahan v Strahan (2010) 42 Fam LR 203 at 230 [137].
In general terms, bearing in mind the limited nature of an interim hearing, the court is required to follow the process prescribed by section 79(4) in respect of both final and interim matrimonial property proceedings. Accordingly, it is necessary for the court to consider whether it is just and equitable to make such an order and whatever order is made must be justifiable by reference to the various criteria set out in section 79(4).
Accordingly, the court must make some assessment of the parties’ various contributions to the pool of assets in question and importantly must have regards to any applicable factor arising under section 75(2). Necessarily, any interim order must be capable of reference to any final order which is likely made in the case concerned, as both depend on the exercise of the same power.
Given these circumstances, the Full Court of the Family Court has pointed out that, as there can be only one exercise of the power under section 79(4) of the Act, it is usually preferable that there be only one final hearing of section 79(4) proceedings, rather than a succession of subsidiary provisional hearings.[19]
[19] See Strahan v Strahan (supra) at [114].
Considerations such as these loom large in interim hearings, such as this one, which throw up significant controversies, which cannot be resolved in the context of a truncated hearing but in which orders for property settlement are sought. However, this lack of evidence does not automatically preclude the court from making orders in respect of the disposition of property at an interim stage, if it is persuaded that it is just and equitable to do so. However, such an exercise must still be referrable to the applicable provisions of the Act.
In Strahan, the Full Court considered an earlier decision of the Full Court Harris & Harris.[20] In this case, the Full Court delineated the relevant considerations applicable to the making of what is conveniently described as an interim property order. The Full Court, in the case, considering it unnecessary to draw a distinction, in terminology, between an interim order and a partial order.
[20] See Harris & Harris (1993) FLC 92-378 at 79,930.
In Harris, the Full Court, whilst affirming the preference that there be only one final hearing of property proceedings, identified three criteria applicable to the exercise of the power to make an interim property order namely:
·the exercise of the power should be confined to cases where the circumstances at the time were “compelling”;
·the exercise of the power, depending as it did on section 79 of the Act, must be exercised within the parameters provided by that section, notwithstanding the difficulty arising for any decision maker concerned in making final findings;
·the exercise of the power must be exercised “conservatively” in the sense that any remaining property needed to be sufficient to meet the “legitimate expectations” of both parties at final hearing, or the order being contemplated is itself capable of being reversed or adjusted at a later stage, if necessary.
In Strahan, the Full Court affirmed Harris in the sense that it accepted that an interim property application comprised a two-step process. Firstly what was described as an “adjectival stage” and secondly what was described as the “substantive stage”. The first step being concerned with the description or particularisation of the circumstances required to be established before an interim property order was made. The second step dealing with the mechanisms applicable to the making of such an order.
The controversy ventilated in Strahan centred on the phrase “compelling circumstances” used in Harris and whether such a formulation unduly fettered the court’s power to make an interim property order, which was “appropriate” at that stage of proceedings. This being the expression used in the enabling provision contained in section 79(1) of the Act.
In this regard, the Full Court said as follows:
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.[21]
[21] Strahan v Strahan (2010) 42 FamLR 203 at 236 [132].
In reaching this conclusion, the Full Court noted the idiosyncratic nature of litigation, under the Family Law Act 1975, when compared with other civil litigation. In the former, there was often a marked imbalance in the power of the parties concerned and artificialities in how property available to be divided was legally controlled in the period leading up to final hearing.
This is certainly Ms Pinta’s position. It is her position that the husband currently controls the majority of the parties’ marital property and it is fundamentally unfair that she should be excluded from the property she wishes to retain after final hearing and which she requires now to provide suitable accommodation for the parties’ children, of whom she is the undisputed primary carer.
CONCLUSIONS
At this juncture, in my view, two salient factors militate against the making of the orders sought by the wife. Firstly, the uncertainty and controversy surrounding the relevant evidence, particularly what is the parties’ worth in net terms. Secondly, the fact that a final hearing is relatively imminent being fixed to take place in June of this year, less than six months away.
At this hearing, unless the parties are able to resolve the case consensually, the court will assess the expert evidence of Mr C and make any necessary findings regarding the value of the business. At this juncture, I am not in a position to determine this central issue or whether considerations of justice and equity dictate that there should be an add back of funds; what is the extent of any such add backs; and whether there should be a direct attribution of them made to the husband. I reiterate that there is no general principles that this should occur and it is open to the court to consider such issues in non-arithmetical terms.
It is also, in my view, relevant that the husband has been occupying the relevant property for some months now and has provided a pathway to retaining it, at final hearing, pursuant to the applicable Part VIII principles, whereas the wife has not. As indicated above, I do not consider that it would be proper, in the sense of fair or appropriate, if the husband was evicted from the property and it ultimately proved impractical for her to retain it on a final basis.
In addition, although I appreciate that the wife need not provide compelling reasons regarding the need for an interim distribution of property to be made in her favour, I am concerned that she is not, as yet, able to demonstrate that considerations of justice and equity lead to such an outcome.
I appreciate the wife’s financial needs are significant. However, the husband has not left her bereft of financial support. She has the use of the F Street, Suburb G property. Again, I appreciate this must be sold. As such, there can be no doubt that the parties each find themselves in a significant financial predicament.
As in many cases, there may not be enough asset to go around to ensure each of them are able to enjoy a secure financial future. Clearly both of them cannot retain the D Street, Suburb E property. It will likely come down to who of them has the capacity to buy out the interest of the other, following the completion of the Part VIII pathway. I have no evidence regarding the wife’s borrowing capacity.
Obviously, this situation is highly regrettable and will not be assisted by the parties’ significant exposure to legal fees, which can only exacerbate their mutual financial predicament. It is in the parties’ best interest to see if, through respectful and informed discussion, a way can be found through this mire of controversy.
For all these reasons, I do not consider that it would be proper for the husband to be directed to leave the D Street, Suburb E property. In addition, I do not consider that it would be just and equitable, given the current state of evidence, for any order to made for the transfer of the husband’s interest in the property to the wife. This is an issue which must be determined at final hearing, unless resolved earlier.
I will confirm the hearing date and make the necessary trial directions. I have already made an order for the valuation of the wife’s interests in the property which she shares with her family. It is inappropriate for another order to be made. The obligation remains on the wife to comply with it.
Although, as I hope is implicit in these reasons, it would be sensible for the wife and those advising her to attempt to formulate a response to the husband’s offer to resolve the proceedings, I have no authority to compel her to do so.
For these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
126 I certify that the preceding one hundred and twenty five (125) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Brown.
Associate:
Dated: 20 January 2022
Clauson v Clauson (1995) FLC 92-595; and Hickey & Hickey & Attorney-General (Intervener) (2003) FLC 93-143 at 78,386.
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