Pirelli and Pirelli

FAMILY COURT OF AUSTRALIA

PIRELLI & PIRELLI

[2017] FamCA 1114

FAMILY LAW – SPOUSAL MAINTENANCE – Interim – Where it is ordered that the husband make payment of arrears of interim periodic spousal maintenance to the wife – Where it is ordered that the husband make a lump sum payment of interim spousal maintenance to the wife – Where an interim litigation costs funding order is made to meet the wife’s costs of future proceedings – Where all other interim applications are dismissed.

Family Law Act 1975 (Cth)

In the Marriage of Fahmi (1995) FLC 92-637
Hadkinson v Hadkinson [1952] 2 All ER 567
Malpass and Mayson (2000) 27 Fam LR 288

APPLICANT:

Ms Pirelli

RESPONDENT:

Mr Pirelli

FILE NUMBER:

BRC

778

2017

DATE DELIVERED:

22 December 2017

PLACE DELIVERED:

Brisbane

PLACE HEARD:

Brisbane

JUDGMENT OF:

Forrest J

HEARING DATE:

18 December 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Linklater-Steele

SOLICITOR FOR THE APPLICANT:

Ramsden Lawyers

COUNSEL FOR THE RESPONDENT:

Ms Bertone

SOLICITOR FOR THE RESPONDENT:

Barron & Allen Solicitors

Orders

IT IS ORDERED UNTIL FURTHER ORDER

That paragraph 2.8 of the Orders of Judge Turner of the Federal Circuit Court, Brisbane, made 5 May 2017 (“the 5 May 2017 interim orders”) be varied as follows:
(a)The amount of $500 included therein be varied by being increased to $700; and
(b)The following words be added to the end of the paragraph after “per week”:
“plus such further amount as will enable him to pay any child support (including any amount assessed for private school fees) as may be assessed from time to time by the Child Support Agency, conditional upon him only using that amount to meet his assessed obligation to pay child support”.
That paragraph 4 of the 5 May 2017 interim orders is discharged.
That paragraph 5.7 of the 5 May 2017 interim orders is discharged.
That paragraphs 10.10(d) and 10.10(e) of the 5 May 2017 interim orders are discharged.
That the funds currently held on trust for the husband and the wife by B Lawyers be paid in the following manner and priority:
(a)$7,000 to the wife’s solicitors, for the wife, in payment of arrears of interim periodic spousal maintenance owed by the husband pursuant to the 5 May 2017 interim orders;
(b)$53,820 to the wife’s solicitors, for the wife, in lump sum payment of her interim spousal maintenance for one year calculated at the sum of $1,035 per week;
(c)$2,140 to the wife’s solicitors, for the wife, in payment of interim spousal maintenance being the cost of her rental bond deposit;
(d)$22,000 to the wife’s solicitors to be used by them only for the payment of the mediator’s costs of mediation of this dispute between the parties and the costs of the single expert accountant’s valuation of the parties’ interests in the company that runs the business and in their other entities;
(e)$100,000 to the wife’s solicitors as interim litigation costs funding, only to be used by them in meeting the wife’s costs and outlays incurred in these proceedings from this day on; and
(f)The balance to be held by the wife’s solicitors as per paragraph 10.10(f) of the 5 May 2017 interim orders.
That the impact of each of the payments made pursuant to paragraph (5) hereof on the determination of the property adjustment orders is a matter for the Trial Judge.
That paragraph 14 of the 5 May 2017 interim orders is discharged.
The husband shall cause the wife to be informed forthwith as to whether the credit card liabilities she listed in the table in paragraph 15 of her affidavit filed 14 December 2017, listing “Mr C” as the responsible party, have been paid out and as to which of those credit card accounts, if any, have been closed.
That the husband shall cause no steps to be taken to interfere with the wife’s use and possession of the 4WD1 motor car currently in her possession.
That the husband shall cause no steps to be taken to interfere with the wife’s (or her agent’s) use and possession of the Japanese motor car currently in her or her agent’s possession.
That all other interim applications not dealt with by these orders, save as for costs, are dismissed.

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 Pirelli & Pirelli 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 BRISBANE

FILE NUMBER: BRC 778 of 2017

Ms Pirelli

Applicant

And

Mr Pirelli

Respondent

REASONS FOR JUDGMENT

Earlier this year, the husband and wife in these proceedings separated after nine years of marriage and eleven years of cohabitation. They have one child, a seven year old, and he has been living with his mother since separation and now spends regular time with his father.
The former couple have been litigating since their separation.
On 5 May, this year, Judge Turner of the Federal Circuit Court made interim orders dealing with property and spousal maintenance. She made almost all of those orders by consent. The orders included an order that the husband pay the wife $500 per week for her maintenance. Before her Honour, the husband argued for that obligation not to commence until the beginning of October. The wife argued for it to commence straight away. Judge Turner ordered that the payments commence straight away on 8 May.
On 31 October 2017, the wife filed an Application in a Case seeking enforcement of the spousal maintenance order and some other relief. On 11 December 2017, she filed an amended Application in a Case seeking further orders on an interim basis.
In his Response to the wife’s Application in a Case, the husband seeks discharge of quite a few of the orders of Judge Turner of 5 May and some additional orders. At the hearing before me in the judicial duty list on Monday, 18 December, 2017, counsel for the husband informed the Court that he did not press one of those. I shall return to that.

The Orders of 5 May

Relevantly, the Orders of 5 May said:
2.That except insofar as it is necessary for the respondent to do so consistent with his duties as a director or trustee and then only to that extent without the prior written consent of the applicant or further Order of this Court, the respondent will not take any steps, or cause or direct any such steps be taken, towards:
…
2.2ceasing to trade, appointing a receiver, appointing a liquidator, winding up or voluntarily deregistering any company of which a respondent is a director or shareholder or any trust of which a respondent is a trustee, appointer or beneficiary, including but not limited to the relevant entities;
2.3trading in any capacity whatsoever other than through the relevant entities;
2.4assigning any income to any other entity other than to the relevant entities;
2.5drawing money or causing the drawing of money from any bank account or loan account facility held or operated by them or any of the relevant entities or incurring any liabilities
other than:
2.6in the ordinary course of the ordinary business of the person, company or trust;
2.7in compliance with obligations pursuant to these Orders;
2.8otherwise up to an amount of $500 per week plus an amount for accommodation costs of the respondent of up to $750 per week.
3.That except insofar as they are inconsistent with his duties as a director or trustee the respondent shall take all reasonable steps to ensure that each of the relevant entities complies with his undertaking as though that undertaking was given by each of them.
Spousal maintenance
4.That the respondent shall pay to the applicant the sum of $500 per week each Monday into her nominated bank account with those payments classified as spousal maintenance.
5.That the respondent shall cause payment of the following expenses to be made as and when due:
5.1.the mortgage in respect of the property at [D Street, E Town] (the [E Town] property)
5.2.the following costs in respect of the [4WD1] and the [4WD2] (the motor vehicles):
(a)        lease payments;
(b)        registration; and
(c)        insurance.
5.3.      the following costs in respect of the [E Town] property:
(a)        water and general rates;
(b)        house and contents insurance; and
(c)garden and pool maintenance costs capped at $230 per month.
5.4.the costs associated with the ownership of the boat;
5.5.payment of the minimum payments required in respect of the liability currently owing in respect of the credit cards in the names the respondent (the credit card liabilities);
5.6.the AMP Life insurance policy;
5.7.school and co-curricular fees for the child of the applicant and respondent capped at an amount equivalent to $400 per week; and
5.8.health insurance policy costs for the applicant, the respondent and their child.
…
10.10the proceeds of sale of the property shall be paid in the following manner and priority:
(a)to discharge the mortgage secured over the property;
(b)in payment of the legal costs of sale and outlays relating to the sale;
(c)in payment of the amounts then owing in respect of the credit card liabilities;
(d)the payment of any shortfall necessary to discharge the liabilities owing on the motor vehicles upon their sale;
(e)the payment of $100,000 to each of the applicant and the respondent to be characterised at trial; and
(f)the balance to be held on trust in an interest bearing account for the applicant and the respondent by the applicant’s solicitor pending further Order or prior written agreement.
…
THE COURT ORDERS UNTIL FURTHER ORDER:
14.That commencing 8 May 2017 the husband pay to the wife $500.00 per week by way of spousal maintenance.

The Wife’s Application

Recently, the parties’ former home sold and now there is approximately $307,000 sitting in the trust account of the firm of solicitors who acted for the former couple on the conveyance of that property, notwithstanding paragraph 10.10 of the Orders of 5 May. The parties have not been able to agree on the distribution of that money and each seeks substantially different orders dealing with that money now.
There is no dispute that in September this year the husband stopped paying the wife the $500 per week that he was obliged to pay her. At the time of the hearing early this week, he owed her $7,000 in unpaid maintenance. The husband says he stopped paying it because he could not afford to keep paying it. He did not first make application to this Court to discharge the order. He just stopped paying it and the wife brought this enforcement application that then prompted a response from the husband in which he seeks to have the spousal maintenance obligation discharged.
At the outset, I set out my rejection of the husband’s argument that he could not afford to pay the maintenance order. I will, of course, set out my reasons for that rejection further in these reasons.
The wife seeks enforcement of the payment of the arrears. At the same time, she seeks orders varying the orders of 5 May, so that the money now held in trust after the sale of the former family home, is distributed differently to the way in which the consent orders of 5 May provided for.
The wife seeks orders that the $307,000 now be distributed as follows:
(1)$7,000 in payment of the arrears of spousal maintenance;
(2)$53,820 to be paid to her by way of lump sum interim spousal maintenance;
(3)$2,140 to the wife for her rental bond deposit;
(4)$215,000 to the wife’s solicitors in payment of her outstanding legal fees to date.
The husband opposes the wife’s application. He wants not only the spousal maintenance order of 5 May discharged, but also a number of the other orders made that day to be discharged, relieving him of the obligation to make a number of payments. He also wants to vary the way in which the funds now held in trust are to be distributed, but not nearly as differently as the wife seeks.
One of the matters the husband wants dealt with using the money in trust is payment of the single expert accountant’s valuation costs and the costs of the mediator who is to conduct a mediation between the parties. The wife actually accepted that proposition at the hearing. As they agree upon that now, it will be ordered.

Some relevant history and the problem it created for the husband

The wife gave evidence that the parties had purchased a boat last year that was moored to a jetty at the former family home that was a waterfront property. When she went back into occupation of that property earlier this year after the separation, the boat was not there, plainly having been removed from the property by the husband.
Paragraph 2 of the Orders of 5 May expressly restrained the husband from selling or disposing of any real or personal property of the parties without the prior written consent of the wife or an order of this Court. Clearly, that included personal property such as the boat.
When the husband stopped paying the spousal maintenance, the wife proposed the sale of the boat to provide some money for her support pending property division being effected. In her Application in a Case filed in October, she sought an order for its sale and the particular distribution of the sale proceeds. The husband then sold the boat to a friend of his without the prior agreement of the wife or authorisation of the Court and spent the proceeds of sale. He asserts he paid $24,695 to the parties’ accountants. He paid $3,319 in school fees for their son. He asserts he paid $5,000 to their business, allegedly reimbursing the business for payments it had made on the motor cars in the possession of the parties. Notably, he also paid $8,000 for horse training and upkeep fees in respect of a number of thoroughbred race horses he has interests in. He paid all these expenses whilst refusing to pay the wife the sum of $500 per week as had been ordered, asserting that he could not afford to make those payments to her.
At the outset of the hearing, I asked the husband’s counsel to address me on the question of whether I should hear the husband at all in circumstances where he was, on the face of things, in contravention of an order.
There undoubtedly exists discretion in this Court to refuse to entertain an application by a party who is in contempt of this Court. I refer particularly to the decisions, authoritative as they are, of the Full Court of this Court in In the Marriage of Fahmi (1995) FLC 92-637 and Malpass and Mayson (2000) 27 Fam LR 288. Those Full Court decisions have been followed and applied by former Justice Warnick of this Court, and then Federal Magistrate Jarrett of the Federal Magistrates Court (as the Federal Circuit Court once was). Those Full Court decisions particularly refer back to a very pertinent decision of the British Court of Appeal in the case of Hadkinson v Hadkinson [1952] 2 All ER 567. In his decision in that case, Lord Denning said at 574:
It is a strong thing for a court to refuse to hear a party to a cause and it is only to be justified by grave considerations of public policy. It is a step which a court will only take when the contempt itself impedes the course of justice and there is no other effective means of securing his compliance.
Lord Denning went on to say at 575:
Applying this principle, I am of the opinion that the fact that a party to a cause has disobeyed an order of the court is not of itself a bar to his being heard but if his disobedience is such that so long as it continues it impedes the course of justice in the cause by making it more difficult for the court to ascertain the truth or to enforce the orders which it may make, then the court may, in its discretion, refuse to hear him until the impediment is removed or good reason is shown why it should not be removed.
Counsel for the husband submitted that the husband is seeking to resist enforcement and seeks discharge of the obligation on the basis of an incapacity to pay the amount, caused by a change in his financial circumstances, and that he ought still be heard on that regardless of whether he, prima facie, contravened the Court’s order, a matter that cannot be properly determined on this application in any event.
I told counsel for the husband that I would hear her submissions on all the matters and would decide whether to actually entertain his application for relief in my judgment that would be reserved at the end of the hearing in any event.
I am most moved on the point by the words of Lord Denning cited above. On consideration, I do not take the view that the husband’s non-compliance with the order to pay spousal maintenance and his prima facie contravention of the order not to sell personal property actually impede the course of justice, particularly when the Court is still seized of the issues on an interim basis and can still remedy the situation regardless of his apparent disobedience of the Court’s orders. I do not consider it to be a case where ongoing compliance can be brought about by refusing to hear the husband, so I have decided that I will entertain the application he made and have regard to his evidence and the submissions made on his behalf.

Some more relevant background

I have already mentioned there is a family business. The husband and the wife, through a discretionary family trust controlled by the husband, are 65 per cent shareholders in a company that runs a business in F Town. The other 35 per cent is owned by interests controlled by Mr G and his wife. Mr G and the husband both work in the business in different roles.
The wife has not been in employment for around ten years, principally engaging in parenting, home duties and supporting the husband’s business activities in that time with, I am satisfied, the acquiescence and approval of the husband, at least up until separation.
Historically, the family income has been received by regular monthly payments to the husband and regular quarterly payments to him of larger amounts. The husband has controlled the use of those payments received. I am satisfied that these payments have all been treated as dividends paid to the shareholder, the family trust of the husband and the wife. At the time that annual financial statements have been prepared and tax returns lodged, that dividend income received via the family trust has been notionally distributed amongst the beneficiaries of the trust who include the husband, the wife and the husband’s parents, as a legitimate form of tax minimisation, though I accept for the purposes of determining these matters before me, all the money was actually at the disposal of the husband.
The wife gave evidence that in the 2016 financial year the husband’s taxable income was $166,547 whilst hers was $138,345. That is a total of $304,892 between them – the equivalent of $5,863 per week before tax. I am satisfied that was all a notional representation for tax minimisation benefits. It is also relevant to note that is the equivalent of $25,407 per month. That is relevant because the evidence is that last year the husband was getting paid $20,000 per month and that was reduced down to $15,000 per month around the end of 2016 in order to build capital within the business at a time when they were trying to sell it. There is evidence that supports a finding that in late March this year, the husband received at least one of those other periodic dividend payments in an amount of $48,000 in addition to his monthly payments that were still $15,000 at the time.

The evidence also supports a finding that in the 2016 financial year the business made an actual net profit before tax of $1,345,000. It also had recorded retained earnings of $1,766,306 as at 30 June 2016.
The 2017 profit and loss statement adduced into evidence for the husband shows that the net profit before tax for that financial year was not much different to the previous year – at $1,261,221. The Balance Sheet for the company as at 30 June 2017 showed dividends paid out to shareholders from the retained earnings during the 2017 financial year as $661,500. That was less than 50 per cent of the net profit for the 2016 financial year. That took retained earnings to $2,366,027 at 30 June 2017 and total net assets of the company to $7,766,028 (of which the husband and wife own 65 per cent through their family trust – the equivalent of over $5,000,000).
If the dividends paid out during the 2017 financial year were $661,500 as represented, then as 65 per cent shareholders, the husband and the wife, through their family trust, would have received $429,975 of those dividends. That equals $35,831 per month. Clearly, if the husband was only receiving $15,000 per month, he must have received another couple of hundred thousand dollars in dividends over the separate quarters of the year, such as with the $48,000 he received in March this year. That is entirely consistent with the evidence the wife gave of a conversation she had with the husband prior to separation in which he told her he would be getting around $400,000 in dividends from the business.
The evidence also supports a finding that the net profit of $1,261,221 was made after thousands of dollars of expenses related to the running of the motor vehicles of the husband and the wife (and the other shareholding G family) were deducted as business expenses of the company.
Now, of course, as I have already observed, the husband makes a case that the business cannot afford to pay him the $15,000 per month and has reduced that to $9,750 per month. Annualised, that is only $117,000. That evidence is supported by affidavit evidence adduced from the other shareholder, Mr G, and their accountant, Mr H, who is a good friend of theirs.
The explanation proffered is that the business has taken on a manager who is paid $170,000 per year, is again having to pay the $60,000 salary of an employee who has returned from maternity leave, and now must, though by choice rather than by bank demand, begin paying off more of the principal of a $1.6 million dollar business loan.
There has been no attempt at all to give evidence that the gross business income is, all of a sudden, decreasing. It is simply that expenses are a few hundred thousand dollars higher which will impact net profit before tax. But not even the evidence adduced supports a finding that the dividends paid to the husband necessarily must be $300,000 less this year.
I am simply not persuaded that the business must pay the husband so much less during this financial year than it clearly paid him during the last financial year and the year before that. However, if that is what the husband and his business partner, Mr G, have decided to do, the decision is likely to have as a consequence, as I remarked during the hearing, the further accumulation of capital in the business and a commensurate increase in the value of the parties’ interests in the company that runs the business.
The husband has given evidence that he must pay out of the $9,750 dividend that is paid to him each month, a total of $6,040 in expenses relating to the holding of an investment property, accountancy fees and motor vehicle expenses that were previously paid for by the company. His evidence is that he is left with $3,710 per month, but that another $1,800 per month is received in rent on the investment property giving him $5,510 per month. From this he is currently obliged to meet the periodic spousal maintenance of $500 per week, pay child support currently assessed at $1,022 per month, pay school fees of $1,100 per month and the private health insurance premiums of $450 per month as well as $3,000 per month in rent for his current rental apartment and all of his other expenses, including ongoing legal fees and training and upkeep fees for the racehorses he has an interest in.
Plainly, on the reduced dividend payment of only $9,750 per month or $117,000 per year, he cannot meet his ordered obligations and pay for his other expenses. Though I am satisfied that is his choice and that it is not necessarily one forced upon him. I am satisfied that he chooses to take this course rather than pay spousal maintenance to his wife. I am quite satisfied that he has demonstrated an intention to simply ignore the Court’s orders and not to pay her, even though he has the capacity to if he caused the dividend payments to be structured appropriately.
I am satisfied that the existing periodic spousal maintenance order should be discharged, not because the husband does not really have the capacity to pay it, but because I am satisfied that he will simply not pay it and that will result in the wife being left in a parlous position. I will not though leave the wife without any spousal maintenance payments at all. That would not be just. It would be just to discharge the existing order (see s 83(1)(c) of the Act) in my judgment only if it is to be replaced with another order that ensures the wife receives appropriate spousal maintenance. In the circumstances of this case, that is best done by making an order that she receive a lump sum payment on an interim basis to be made out of the funds now held in trust for the parties. Doing that, of course, will require variation of the existing orders made on 5 May 2017, that provide for the proceeds of sale of the former family home to be distributed in a certain way. I am satisfied that is a just and equitable course in this case.

The Arrears

I will order that $7,000 from the proceeds of sale of the former home now held in trust be paid to the wife in discharge of the arrears of spousal maintenance on the basis that, prima facie, the husband had capacity to pay it but simply chose not to. I will order that whether that amount is to be treated as coming out of the husband’s entitlement to property division is a matter for the trial judge. My first thought about that is that if the capital value of the parties’ share in the business increases as a consequence of the husband’s decision to take less in dividends from the company at this stage, then it might not be just and equitable for this amount to actually come out of the husband’s share of property rather than simply treating it as used by the wife of their capital for her maintenance when she could not otherwise maintain herself from her own resources. That will be a matter for the trial judge.

Ongoing Spousal Maintenance

Clearly, the circumstances of the husband and wife have changed since the orders of 5 May 2017. I have already discussed the changes the husband has made to the way he receives dividends from the company that runs the business. In so far as the wife is concerned, she has found alternative accommodation in the vicinity of the school their child attends. It is costing her $535 per week that she did not previously have to meet. She sets out her other expenses in a fresh Financial Statement she filed on 14 December 2017. She listed in her expenses water rates at $23 per week and then set out in an attached schedule what she claimed to be her reasonable weekly expenses at a total of $1,085 for herself and $433 for her son (for which she is currently receiving $236 per week child support from the husband).
Some submissions were made by counsel for the husband about the reasonableness or otherwise of the particular expenses set out in that schedule. There are only a few I would accept as having an element of unreasonableness about them, in the circumstances (noting the absence of any cross-examination). The first would be the $100 per week claimed for entertainment and hobbies. Whilst that pales into relative insignificance when compared to the amount of money that the husband is spending on training and keeping a number of racehorses in which he has interests, I would still only allow the wife $60 for entertainment and hobbies at this interim stage.
The other expense I would reduce is the $250 per week claimed for the expenses of hairdressing and toiletries. As I said during the hearing, whilst I accept that societal expectations naturally impose greater pressures on women to maintain standards of personal grooming and presentation than on men, and women’s hairdressing costs many times more than men’s hairdressing, I do not consider, without more evidence about it, that $250 per week is reasonably required by the wife for hairdressing and toiletries (which I do accept includes cosmetics). I would reduce that to $100 per week.
That reduces her reasonable weekly expenses to $1,453. She only claims or seeks $1,035 in spousal support. That is a total of $53,820 for a year. It is to be remembered that the husband himself caused her to notionally be allocated an income distribution from the family trust of $138,345 in the 2016 financial year. Now, he submits that she should be supporting herself entirely from her own efforts, less than one year after separation, at a time when the business they own a 65 per cent share of has just earned a net profit before tax of over $1.25 million and he has control of how that is distributed, to the complete exclusion of the wife.
The injustice and inequity of the husband’s position is plain to see. Clearly, his solicitor and counsel act on instructions. That the husband maintains this position does him little credit, in my judgment.
To the extent that it is necessary, I revert to the obligation imposed clearly by s 72 of the Act, as I did during the hearing. A party to a marriage is liable to maintain the other party, to the extent that he or she is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately whether by reason of having the care and control of a child of the marriage who is not yet 18, by reason of age or physical or mental incapacity for appropriate gainful employment or for any other adequate reason having regard to any relevant matter referred to in s 75(2) of the Act.
In circumstances where a party to a marriage has, by consensual agreement, been engaged for 10 years in homemaking, parenting and the support of the other party’s business efforts, sacrificing his or her own career and business advancement for the sake of what is seen by both to be a mutually beneficial partnership and one that benefits the family as a whole, it ill behoves the partner who has continued to work and build his or her career and business interests, on break-down of the relationship and separation to simply cut the other partner “adrift” financially and assert that she or he can just go out and get a job now to financially support himself or herself.
I am satisfied that the wife is unable to support herself adequately by reason of having been out of the workforce for those ten years, by reason of having the principal care of a young child who is now dealing with his parents’ recent, high conflict separation and by reason of being unilaterally denied access to the income generated by the very successful business that is 65 per cent owned by the parties’ discretionary family trust simply because the husband unilaterally controls that trust. I accept that she is making an effort to re-engage with the workforce and has re-connected with a former employer and made arrangements to start doing some work there, hoping that those arrangements might be productive of greater income from early 2018. I acknowledge that she has said that she had $19,237 in the bank as at 13 December, 2017, that comes mostly from the $28,288 tax refund she received in October after the lodgement and processing of her 2016 tax return. It is worth noting here that the child support the husband pays her for their child was reduced from $345 per week to $236 per week after she lodged that tax return reflecting a taxable income of $138,000 for the 2016 financial year, even though she does not receive that income now.
The wife is not required to use up that limited capital before she can look to the husband for her ongoing support. She has said she already owes a friend $10,000 that she borrowed from her to pay for her share of the family report writer’s costs and $5,000 for the accountants who were acting for the company on the proposed sale of the business last year to produce documents pursuant to subpoena. She will be able to repay that debt out of the money she holds in the bank if she is assured of her immediate financial needs being able to be met on an ongoing interim basis.
I have already acknowledged that she does not ask for spousal maintenance to be paid to the full extent of her reasonable needs. In that, there is an acknowledgment, I accept, of a capacity and an expectation that she will be contributing to her own support to a degree. That is appropriate.
I am satisfied, knowing how long this matter could be in this Court’s pending cases list before it gets to trial and already having a perception as to the conflictual nature of the parties’ interactions, that it could be, unfortunately, some time before this matter is finalised, however that might happen. Accordingly, I am quite satisfied that providing for the wife’s maintenance to be paid out of the parties’ capital, on an interim basis is the appropriate course to take.
I will order that $53,820 be paid to the wife out of the funds currently held in trust by way of interim spousal maintenance for a twelve month period calculated at the amount of $1,035 per week. Again, how that is ultimately treated by the trial judge will be a matter for his or her Honour.
I will also order that the sum of $2,140 be paid to the wife from the funds currently held in trust to cover the cost of her rental bond and that will be by way of interim spousal maintenance as well.

The Costs of the Valuation and the Mediation

As I have already indicated, each of the parties agrees that the costs of having the parties’ interests in the company that runs the business valued by a single expert and the costs of mediation should be paid out of the money that is currently in trust and I will order that.

What of the balance of the funds held in trust?

There is agreement that there is about $307,000 currently held in trust. After payment of $7,000 for arrears of maintenance, $53,820 for interim maintenance, a further $2,140 for interim maintenance and up to $22,000 for the costs of the single expert accounting valuation and the mediation, there will be approximately $222,000 left in the trust account.
Paragraph 10.10 of the orders of 5 May, 2017, as set out above provided for payment of the money that was to be realised on the sale of the former home. Credit card liabilities were to be paid. Then “any shortfall necessary to discharge the liabilities owing on the motor vehicles upon their sale” was to be paid. Finally, a sum of $100,000 was to be paid to each of the parties, to be characterised at trial.
Apart from the payment of the costs of valuation and mediation out of the funds, the husband now effectively seeks that those orders remain extant. With only around $222,000 to be left in trust after payment of the things I will be ordering as set out in paragraph 52 above, there will not be enough to comply with those orders as they stand. Clearly, they will be discharged.
Initially, the husband came to the Court on this hearing asking for $100,000 of the money to be paid to his parents in repayment of a “loan” he asserts his parents made many years ago, particularly in the light of receipt by him of a written request from his mother for repayment. After discussion between me and counsel for the husband during this hearing in which I made it clear that I was not attracted to the thought of making such an order on the evidence I had seen, counsel informed the Court that the father did not press that application.
As to the credit card liabilities mentioned in paragraph 10.10 of the Orders of 5 May, 2017, the wife said in her affidavit evidence that whilst the orders did not specify which credit card liabilities were to be paid out the parties negotiated through October and agreed to pay out credit card liabilities totalling $67,708 of which only $6,227 was liability on two credit cards in the wife’s name, with all the rest being liability on four credit cards in the husband’s name. The wife said that they agreed that the liabilities would all be paid and that the credit cards would then be closed. She adduced evidence of correspondence from her solicitors to the husband’s solicitors confirming that agreement, confirming that her two cards had been paid out and closed and asking for evidence that the husband had done the same thing. She said that neither the husband nor his solicitor had confirmed that.
However, the husband swore to the correctness of a Financial Statement filed on 14 December 2017, which includes no liabilities for credit card. Furthermore, he did not specifically press for an order that those now be paid out. I can only infer that he did pay out his credit card liabilities and now does not require them to be paid. I cannot infer that he closed the credit card accounts though. There is no evidence that he did. I will order that he inform the wife as to whether the credit card liabilities she listed in her letter and in her affidavit were paid out and whether or not the credit card accounts were closed by him.
I will work on the basis that the $307,000 was left in trust from the sale of the former home after credit card liabilities were paid out.

The Motor Cars

The husband does press for funds that are held in trust to be used to pay out liabilities on three motor cars, namely a Japanese car that is driven by the wife’s parents, a 4WD1 that is driven by the wife and a British car that is driven by the husband.
He apparently relies on the fact that the parties consented to “the payment of any shortfall necessary to discharge the liabilities owing on the motor vehicles upon their sale” in the May orders.
Without the consent of the wife or the authority of the Court, the husband went ahead and sold a 4WD2 motor car in November. He said he sold it for $26,500 and that the debt owing on the 4WD2 was $26,000 so there was neither loss nor gain on the sale.
The husband also said that he has a buyer for the British car that he drives. It is a valuable, luxury car. He said he has a buyer for it willing to pay $95,000 with a debt owing on it of $118,899. He wants to sell it and have the shortfall paid from the money held in trust.
The husband said that the wife drives a 4WD1 motor car. He said he seeks an order that she returns it to him so that he can sell it. He said that he has a buyer for it but he did not say for how much or how much the finance short fall might be. The wife said in her evidence that she was told that there was a buyer willing to pay $61,000 for the 4WD1 which would leave a shortfall of $13,757 to be paid to discharge the finance obligation.
The husband said the wife could then buy another car from the capital she gets from the proceeds of sale of the former home.
As for the Japanese motor car, the husband said that it has a finance obligation of $11,000 owing still on it. He said that he wants that to be paid out of the money held in trust and that the wife can keep it and do what she wants with it.
The wife said of the Japanese motor car that it has always been used by her parents and treated as if it was their motor car. She said that in 2012 the husband sold the parties’ motor vehicle to her parents for $15,000 which her father paid. She said that the husband then requested that this car be sold to one of his clients for $18,000. She said the husband retained those funds but bought the Japanese car and gave that to her parents in return for the other car. She said that the husband insisted the Japanese car be purchased in the business’ name so that the company could benefit from depreciation advantages. She said that the liability is a liability of the company that runs the business and that she opposes any liability associated with it being paid from the funds held in trust.

In terms of evidence, the Balance Sheet for the company that runs the business, as at 30 June 2017, shows the liabilities pertaining to the Japanese car, the 4WD1 and the British car all as being liabilities of the company. The profit and loss statement for the 2017 financial year that Mr G also attached to his affidavit showed fuel, registration and insurance costs and repairs and maintenance costs for the 4WD1 and the British car paid by the company and registration and insurance costs for the Japanese car also paid for by the company.
The balance of the evidence suggests that the parties’ family trust actually is principally responsible for paying for the lease payments on the vehicles. The husband said that he pays them from the $9,750 that is paid to the family trust on a monthly basis as dividend. He does not make a case that he cannot continue to pay them. In fact, I am satisfied that he can afford to continue paying for them. Paragraph 5.2 of the 5 May orders requires him to cause the lease payments, the registration and insurance costs to continue to be paid for the 4WD1. That order will stay in place.
In the absence of agreement about the sale of the three remaining motor cars and the discharge of the financing obligations attached to them, I will discharge paragraph 10.10(d) of the May orders. I will not make the orders about those cars that the husband seeks. I do not consider it necessary at this stage of the proceedings. The wife, as the parent principally caring for the child, needs a motor car to transport the child around in. She currently wishes to retain the 4WD1 for that purpose. I consider she ought to be permitted to. I will make an order restraining the husband from causing any steps to be taken to interfere with her use of that motor car on an interim basis. He is already obliged, as I have said, to make the payments owing on it as they fall due. I will make a similar order in respect of the wife’s (or her agents’) use of the Japanese motor car so as to protect her and her parents’ position in respect of the use of that car on an interim basis. I consider those orders entirely appropriate.
The husband also seeks an order that an amount of $1,022 owing for a time share interest the parties have be paid out of the money held in trust. He said nothing much about the issue in his affidavit save for the fact that it is said to be due on 1 January 2018. In his Financial Statement filed 14 December he did not even mention a time share interest. I infer by that omission that the interest is probably owned through another entity, perhaps even the family trust. I am not persuaded that is a priority for payment just at this point in time and will not order same.

Should there now be an equal Payment to the Husband and the Wife?

As I have said, I anticipate there being about $222,000 remaining in trust after payment of the amounts I have already determined should be paid from the money in trust in lieu of those payments provided for in the May orders. The husband would have me cause $100,000 of that to be paid to the wife and $100,000 of it to be paid to him. After all, it is said for the husband, that is what was agreed and ordered in May.
However, things have clearly changed since May.
The wife wants all of the money to be paid to her to discharge her legal costs and outlays incurred to date. They total $252,241, including $30,250 in counsel’s fees. Those fees are all owed to her solicitors. Her solicitors have estimated that her further costs and outlays to represent her at a mediation and, if the matter does not resolve at that mediation, to prepare and take the matter to trial, including counsel’s fees will be between $98,500 to $121,000.
In her affidavit the wife said that the barristers who have acted for her to date, including Queen’s Counsel, have acted on a “deferred fee” basis. She also said that her solicitors have acted on a “deferred fee” basis.
One of the solicitors from the firm acting for the wife swore an affidavit. In that she said that the wife entered into a costs agreement with the firm early this year which “provided for her fees to be deferred until this interim hearing”. She also said that the “firm’s present agreement with the [wife] is that her fees are deferred until the [wife] receives interim funds to meet these expenses”.
With respect to the solicitor, the wife did not depose to that understanding. Nor could I find anything in the Costs Agreement attached to the solicitor’s affidavit that actually confirmed that the wife’s payment of fees was deferred until the interim hearing. No letter or written memorandum was exhibited to the solicitor’s affidavit confirming that agreement.
There is no evidence that the solicitors will not continue to act for the wife if those “deferred fees” are not paid. There is no evidence that the barristers will not act for the wife in the future if their fees for the work they have done to date are not immediately paid. Given that the parties’ interest in the company that operates the business, owned through their discretionary family trust, is likely to be worth at least several million dollars, it is likely that the wife’s entitlement to just and equitable property division orders will see her securing sufficient funds to discharge her existing liability to her solicitors. What concerns me the most is ensuring that the wife does continue to have legal representation as the matter progresses, including at trial if the matter proceeds that far. At this point in time, the evidence suggests that the high conflict could continue and there is no immediate reason to conclude that the matter will resolve soon, though resolution at mediation is always a possibility.
I am of the view that an interim litigation costs funding order, pursuant to s 117(2) of the Act, would be justified. I will order that $100,000 of the money that is currently held in trust for the parties be paid to the trust account of the wife’s solicitors on account of future costs and outlays and only used for that purpose.
The husband’s solicitors’ costs letter to the husband, sent to him at 11:19 am on Monday, 18 December, after I had asked to see it pursuant to the Rules, said that the husband has paid his solicitors $72,368 in costs and outlays to date out of a total incurred of $190,740. The solicitors said that the $72,368 paid to date was sourced as follows:
(i)$9,923 from money received by the husband from his 2016 tax refund;
(ii)$20,000 said to have been borrowed from his parents; and
(iii)$42,000 said to have been borrowed from his friend, Ms G, who is the wife of his fellow business owner, Mr G.
The husband asserted that he still owes his solicitors $95,000 for work done up to mid-November 2017 and he also said that his solicitors have told him that they do not receive a “substantial reduction of at least $80,000 paid off their legal fees owed by [him] to them they will likely have to cease acting for [him] in these proceedings.”
The wife asserted in her affidavit filed on 14 December 2017 that the Balance Sheet of the company operating the business reveals $480,483 cash at bank. It certainly did as at 30 June 2017. The husband responded to that in his affidavit filed by leave on 18 December 2017. He said that the company only had $214,000 in bank accounts at the moment.
In her affidavit, in the same paragraph, the wife asserted that the Balance Sheet records a loan owing from the company to the parties’ family trust that owns the shares in the company. She asserted the loan is in the amount of $304,888. I have to say, without evidence explaining the way the Balance Sheet is drawn up, I do not necessarily accept the wife’s evidence about that aspect. There are amounts recorded under the sub-heading “Current Liabilities” as Loans and the parties’ family trust is referred to with amounts recorded as $168,969 for the 2015 year, $259,511 for the 2016 year and $304,888 for the 2017 year. However, I cannot determine whether they are recorded as loans owed to the family trust or amounts owed by the family trust to the company. Relevantly though, the husband did not directly respond to the wife’s assertion that the company owed $304,888 to the family trust. He neither confirmed nor denied it. He certainly did not assert that the family trust owes the company any money.
I am not satisfied that I can make a finding about this just at the moment. If indeed the company owes substantial amounts of money to the family trust, the husband, who is the sole director of the corporate trustee of the family trust, would have the right to call on the company to repay some of that debt and the family trust would then be in a position to distribute more income to the husband and/or the wife, including for the payment of legal fees.
Counsel for the husband pointed out to the Court that the existing 5 May orders prevent the husband from:
drawing money or causing the drawing of money from any bank account or loan facility held or operated by them or any of the relevant entities… other than in the ordinary course of the ordinary business of the person, company or trust ... or in compliance with obligations pursuant to these Orders.
I accept that does prevent him from drawing on any money held by the family trust to pay his legal fees. But it does not prevent the husband from calling for repayment of any money owing to the family trust and then seeking the wife’s agreement for its distribution, including for the payment of legal fees. It does not prevent him from calling for funds to be repaid to the family trust and then making further application to this Court for the appropriate distribution of any such funds should he not be able to secure the agreement of the wife.
It might be that the company does not, in fact, owe any money to the family trust and the husband may not be in a position to call for the repayment to the trust of funds owed to it. The reality of the situation is just not clear on the evidence.
I consider myself just not to be in a position at the moment, on the evidence before me, to determine that the husband should be paid $100,000 from the money held in trust so that he can pay the legal fees that he owes or so that his future legal fees can be secured. However, I am equally not satisfied that such amount should be paid over to the wife for her use at this time.
I consider it entirely appropriate to leave paragraph 10.10(f) in place and for any balance of the funds, after payment in accordance with the other orders I make, to be invested in an interest bearing account on trust for the parties, pending written agreement between them or further order of this Court. Should the husband be able to satisfy the wife that the company does not owe the family trust money, he might be able to persuade her to agree to let him have some of the money on account of his future legal costs and outlays so that he might continue to be represented in the matter. However, I will not make such an order at this time.

The Balance of the Husband’s Application

The husband also seeks to have a number of the orders made on 5 May “vacated and removed” which I understand to be “discharged”. In particular, those are paragraphs 2.8, 4, 5.6, 5.7, 5.8 and 14.
Paragraph 2.8 restrained the husband from drawing from the family trust’s accounts (or any other account) any more than $750 per week to pay for his accommodation plus any more than $500 per week for his own needs.
I consider it appropriate that he be entitled to continue to draw up to $750 for his accommodation. I do not consider that $500 is sufficient for his remaining reasonable weekly expenditure requirements and those he has for the time his son spends with him.
In his latest Financial Statement filed on 14 December, in addition to setting out his rent of $750 per week and the other expenses he is otherwise currently obliged to pay under the 5 May Order, he sets out his personal expenditure requirements at $2,729 per week. That amount includes his $750 per week for rent that he has already included. I will not count it twice. It also includes $500 per week for spousal maintenance that he will now no longer be obliged to pay on a periodic basis. It also includes $373 per week child support (which he is not currently assessed to pay, in any event). That would leave $1,106. He includes $100 per week for entertainment and hobbies. I would allow $60 as I have with the wife on an interim basis. He includes $120 per week for holidays, whereas the wife did not include that in her latest expenses. I will deduct that amount as well, so that they are treated equally in respect of holidays. He also includes a sum of $255 per week for education expenses. I will not include those as they will be dealt with separately. That leaves $691, but I will round that up to $700.
I will vary paragraph 2.8 of the existing order so that it permits him to draw up to $700 per week for his personal expenses plus $750 for his rent, a total of $1,450 per week.
Paragraph 4 of the 5 May orders will be discharged.
I will not discharge or vary paragraph 5.6. It obliges the husband to continue to pay the premiums of his AMP Life Insurance policy. It is appropriate for him to continue doing that. It is only $20 per week.
Paragraph 5.7 will be discharged. It obliged the husband to pay the child’s school fees and extra-curricular expenses up to $400. I accept that it is a child maintenance order as defined in the Act and therefore beyond the power of the Court to make having regard to s 66E(1) of the Act.
“Child maintenance order” is defined in s 4 of the Act as having the meaning given by subsection 64B(5). That says:
To the extent (if at all) that a parenting order deals with the matter mentioned in paragraph (2)(f), the order is a child maintenance order.
Section 64B(2)(f) says “maintenance of a child” and s 66E(1) prohibits a Court making, reviving or varying a child maintenance order in relation to a child if an application could properly be made under the Child Support (Assessment) Act 1989 for the parent to be assessed in respect of the costs of the child, or vice versa.
An assessment has issued on the application of the wife as to the father’s child support liability in respect of their son. It did not include any amount for private school fees as they were already dealt with in the 5 May order. As I will discharge that part of the order, the assessment may be revisited on the further application for change of assessment by one or both of the parents. The fact that the current assessment is apparently based on the wife’s taxable income for 2016 that was only a notional income that she did not really receive and certainly does not receive now, would also, in my respectful view, be a sound basis for further reassessment, particularly having regard to my satisfaction that the husband has chosen to reduce the dividends that the company is paying him when the company has capacity to pay him higher dividends.
I consider it necessary, in the circumstances of discharging paragraph 5.7 of the May order to also vary paragraph 2.8 of the May order to include permission for the husband to draw such additional amount as will enable him to pay child support (including any amount assessed for private school fees) as is assessed from time to time, conditional upon him only using that amount to meet any such assessment.
I will not discharge paragraph 5.8 of the May orders. It obliges the husband to pay private health insurance premiums for cover for himself, the wife and their son on an interim basis. He said in his financial statement that is equal to $105 per week with Vero Insurance. I am not persuaded that he should not be obliged to continue doing that on an interim basis.
Paragraph 14 will also be discharged as it obliges him to pay $500 per week by way of periodic spousal maintenance.
I make the orders set out at the commencement of these reasons for judgment.

I certify that the preceding one hundred and three (103) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 22 December 2017.

Associate:

Date: 22 December 2017

[2017] FamCA 1114

22 December 2017

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Family Law

Civil Procedure

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Appeal

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Injunction

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