PRATT & PRATT
[2012] FamCAFC 81
•13 June 2012
FAMILY COURT OF AUSTRALIA
| PRATT & PRATT | [2012] FamCAFC 81 |
| FAMILY LAW – APPEAL – PROPERTY – Where the appellant husband appeals against an order providing that the property and spousal maintenance proceedings between the parties be adjourned pursuant to s 79(5) of the Family Law Act to a date not less than three years from the date thereof – Where the trial Judge did not form an opinion on the threshold question of whether a significant change in the financial circumstances of the parties was “likely” – Where the trial Judge’s finding that a significant change within the period of the adjournment would be more likely to do justice as between the parties than an immediate order was unsupported by the evidence – appealable error established. FAMILY LAW – APPEAL – INTERIM SPOUSAL MAINTENANCE – Where the appellant husband appeals against an order requiring him to pay to the wife periodic maintenance – Where the trial Judge did not consider a material matter in the assessment of the husband’s capacity to pay such maintenance – Where the trial Judge did not consider a threshold requirement in the application of s 83(2) of the Act – appealable error established. |
| Family Law Act 1975 (Cth), ss 79(5), 83 Evidence Act 1995 (Cth) |
| Grace & Grace (1998) FLC 92-792 Vakil v Vakil (1997) FLC 92-743 Wreford & Caley (2010) 43 Fam LR 1 |
| APPELLANT: | Mr Pratt |
| RESPONDENT: | Ms Pratt |
| FILE NUMBER: | BRC | 3945 | of | 2009 |
| FIRST APPEAL NUMBER: | NA | 34 | of | 2011 |
| SECOND APPEAL NUMBER: | NA | 71 | of | 2011 |
| DATE DELIVERED: | 13 June 2012 |
| PLACE DELIVERED: | Perth |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Finn, Ainslie-Wallace & Ryan JJ |
| HEARING DATE: | 27 February 2012 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENTS DATE: | 6 April 2011 and 2 August 2011 |
| LOWER COURT MNC: | [2011] FamCA 1081 [2011] FamCA 606 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Berman SC |
| SOLICITOR FOR THE APPELLANT: | AM Legal |
| COUNSEL FOR THE RESPONDENT: | Mr Jordan |
| SOLICITOR FOR THE RESPONDENT: | Kennedy Spanner Lawyers |
Orders
Appeal NA 34 of 2011
That leave to appeal against the order made on 6 April 2011 by the Honourable Justice Bell be granted.
That the appeal against the order be allowed.
That the order be set aside.
That the property and spousal maintenance proceedings be listed for final hearing as soon as possible before a Judge other than the Honourable Justice Bell.
That there be no order for costs in relation to the appeal.
The Court grants to the appellant husband a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant husband in respect of the costs incurred by him in relation to the appeal.
The Court grants to the respondent wife a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent wife in respect of the costs incurred by her in relation to the appeal.
Appeal NA 71 of 2011
That leave to appeal against the orders made on 2 August 2011 by the Honourable Justice Bell be granted.
That the appeal against the orders be allowed.
That the orders be set aside.
That the issue of interim spousal maintenance be remitted for re-hearing as soon as possible by a Judge other than the Honourable Justice Bell.
That there be no order for costs in relation to the appeal.
The Court grants to the appellant husband a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant husband in respect of the costs incurred by him in relation to the appeal.
The Court grants to the respondent wife a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent wife in respect of the costs incurred by her in relation to the appeal.
The Court grants to each party a costs certificate pursuant to the provisions of s 8 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to each party in respect of such part as the Attorney-General considers appropriate of any costs incurred by each party in relation to the new hearing granted by these Orders.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Pratt & Pratt has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
First Appeal Number: NA 34 of 2011
Second Appeal Number: NA 71 of 2011
File Number: BRC 3945 of 2009
| Mr Pratt |
Appellant
And
| Ms Pratt |
Respondent
REASONS FOR JUDGMENT
The appellant, Mr Pratt (“the husband”), by Amended Notice of Appeal filed on 16 September 2011 (NA 34/2011), appeals against an order made by Bell J on 6 April 2011 in property settlement and spousal maintenance proceedings between him and the respondent, Ms Pratt (“the wife”).
The proceedings had been set down for hearing over three days to begin on 6 April 2011. At the commencement of the hearing, the wife applied for an adjournment pursuant to s 79(5) of the Family Law Act 1975 (Cth) (“the Act”). After hearing submissions on that application, his Honour ordered:
1. The matter be adjourned to the Registrar to be re-listed not before the expiration of three years.
The husband, by Amended Notice of Appeal filed on 15 December 2011 (NA 71/2011), also appeals against orders made by Bell J on 2 August 2011 which dismissed an application by the husband for a reduction of the maintenance he was paying and which required the husband, from 2 August 2011, to pay to the wife $1,500.00 each week or $6,500.00 each month by way of interim spousal maintenance.
Both appeals were heard together. Leave to appeal is required in relation to both. The wife conceded the issue of leave in respect of the appeal against the decision to adjourn the proceedings. Leave was contested in relation to the maintenance appeal.
The Appeal against the Order of 6 April 2011 for an Adjournment of the Proceedings
Considerable evidence had been filed in preparation for the final hearing before the trial Judge of the property and maintenance proceedings. It is unnecessary for the disposition of this appeal to traverse much of the evidence, turning as it does on a discrete point. However, some background to the parties’ financial circumstances is necessary to give context to his Honour’s order and reasons for decision.
The parties are graziers by occupation and they have large land holdings used for cattle grazing. The husband also has an interest in an aviation company which conducts mustering by helicopter. Of particular relevance to this matter are two grazing properties, “the X property” and “the Y property”. The parties also have significant liabilities.
In April 2010, Mr C valued the two properties for the parties’ bank. He valued the X property at $10 million and the Y property at $16 million.
On instructions from the wife, in March 2011 Mr R valued both properties. He found the value of the X property to be $6 million and that of the Y property to be $10.4 million.
There was no dispute that, at the date on which the matter came before his Honour for hearing, there was a loan facility in place from the parties’ bank in the order of $34 million on which annual interest of 9.52 per cent was accruing. It was undisputed before his Honour that, as at October 2011, a sum of $2.983 million would accrue as interest on those borrowings. It was also undisputed that the bank had indicated that no further borrowings would be permitted.
On 30 March 2011, Mr C swore an affidavit in which he referred to his earlier valuation and said of the then current market conditions:
…
“It is our opinion that the market place for large scale pastoral properties has continued to deteriorated (sic) since our valuation. The deterioration has been due to a number of factors including the decreased availability of finance on an equity basis which is resulting in significantly extended time periods to achieve finance for pastoral properties; as a consequence the supply of properties available for sale in this sector continues to increase.
Given the number of properties on the open market is continuing to increase and with very few sales having been recorded or achieved, there is currently an oversupply situation. This has created a situation where the market place is now a buyers market with the expectation of reduced values, a situation that appears to have worsened since our valuation.
The recent capping of numbers and weight restrictions on live export cattle has added to the nervousness of the market and whilst not having directly influenced values to date is another area of concern in the market place.
…
Mr C referred to some then recent sales which “…generated a certain amount of positive attitude in the market place, likely to culminate in a slow return to pre GFC prices and the increased saleability of pastoral property…” He referred to two further sales, one of which “...reflects a heavily discounted mortgagee in possession value…” which he said was “…suggesting purchasers are slowly returning to the market place…”
We note that counsel for the wife conceded that there was no evidence before his Honour of “pre GFC prices of pastoral property” or what that phrase might mean in relation to the value of the properties under discussion.
Mr C referred to other factors likely to influence further reductions in value and said:
…
Given the generally negative impact the combination of these factors have had on pastoral properties, and given it is unknown how long it will take the market to adapt to the changed pastoral environment, it is unknown how much further the market expectations may deteriorate before we see a return to equilibrium in the market place.
…
On 5 April 2011, Mr R wrote a letter to the wife’s solicitors reflecting on the “…likely future movement in values of [the] properties…” He said:
…
The sudden introduction of import restrictions on live cattle by Indonesia in 2010 had an immediate impact on the profitability of [regional] pastoral properties. Coupled with tightening of credit policies by financial institutions, demand and values for [regional] pastoral property (supplying live cattle to south-east Asia) have weakened considerably since that time. As outlined in our report, a large number of properties are now available for sale with limited enquiry, creating a “buyers’ market.” It is our opinion that these market conditions are likely to remain in place in the short term.
It is our opinion that an increase in beast area values could reasonably be expected over a 2 year timeframe. Over this period, live cattle export restrictions could be eased or substantial new markets opened up (such as alternative destinations for live cattle or even local processing). Such events would improve the profitability of [regional] pastoral enterprises, with a subsequent increase in beast area values.
…
It was in reliance on this evidence that the wife applied for an adjournment of the property settlement and spousal maintenance proceedings pursuant to s 79(5) of the Act. That sub-section provides:
(5)Without limiting the power of any court to grant an adjournment in proceedings under this Act, where, in property settlement proceedings, a court is of the opinion:
(a) that there is likely to be a significant change in the financial circumstances of the parties to the marriage or either of them and that, having regard to the time when that change is likely to take place, it is reasonable to adjourn the proceedings; and
(b) that an order that the court could make with respect to:
(i)the property of the parties to the marriage or either of them; or
(ii)the vested bankruptcy property in relation to a bankrupt party to the marriage;
if that significant change in financial circumstances occurs is more likely to do justice as between the parties to the marriage than an order that the court could make immediately with respect to:
(iii)the property of the parties to the marriage or either of them; or
(iv)the vested bankruptcy property in relation to a bankrupt party to the marriage;
the court may, if so requested by either party to the marriage or the relevant bankruptcy trustee (if any), adjourn the proceedings until such time, before the expiration of a period specified by the court, as that party to the marriage or the relevant bankruptcy trustee, as the case may be, applies for the proceedings to be determined, but nothing in this subsection requires the court to adjourn any proceedings in any particular circumstances.
In support of the application, counsel took his Honour to the financial statement filed by the husband in June 2009 in which he estimated his total assets at approximately $44.9 million with total liabilities of approximately $30.2 million. We note that, in that document, the husband attributed a combined value of $40.9 million to the rural properties in issue in the application, the larger figure incorporating other assets, but nothing turns on this. Although counsel for the wife conceded that the husband was “not an expert” in the valuation of the properties, it was argued that, compared with the valuation of Mr C of April 2010, the properties had decreased in value by $27 million. It was further argued that, based on the valuation of Mr C alone, there had been a “drop in value” of $10 million.
His Honour was urged to adjourn the hearing of the matter for two years in order to afford the wife “…the opportunity to have a just and equitable property settlement…” It was submitted to his Honour that in that time, the values of the properties might return to those estimated by the husband in his financial statement.
Counsel for the husband opposed the application, arguing that the liabilities of the parties exceeded the value of their assets, pointing to the burgeoning debt to the bank, and that the husband was unable to meet the whole of the interest owed on the loans to the bank and that any income earned on the properties was applied to running them.
In his reasons for his orders granting an adjournment, and after outlining the valuers’ evidence and counsel’s submissions, his Honour said:
9. An adjournment is sought by [counsel for the wife], as I have said, on behalf of his client saying that if in fact we proceed today, what – and I think these are my words – I would be discussing is a percentage determination pursuant to the provisions of sections 79 (sic) of, say, fifty-fifty at nothing, since the parties at this stage are clearly unable to point to any amount of money, property or anything that I could distribute between them which are not heavily encumbered. The properties are valuable, but unfortunately the liabilities are more than what the properties are worth at this stage.
10. Am I sufficiently of the view that there is going to be a change and it must be significant? One would have said that anything above zero is a significant change. What we are dealing with here is the parties to the property which in effect have zero worth to them. If there is a chance of a change for the better, I would think such change could be nothing else but significant for the parties. It is tragic that after having worked as long as they have in a difficult area of properties particularly in the [region] that they are faced with the fact that they are going to be fighting over in effect nothing. I am of the opinion that even though the change may be a small (sic) it is significant to them, as I have said, one over zero is significant, two is even better and four becomes more significant. Consequently, having been satisfied that there is a significant change, I now have to consider what period.
11. Mr [R] says – and I think he said two years. I would have been less than frank to say that there could not be such a significant change in two years to increase the value of these properties by something like, I think, 70 to 75 per cent in two years. However, it has happened in the past and I take historical notice of that, that there have been bounces in the property markets and consequently I think that doing the best I can that I have considered the decision of Grace in which there was a trust which had something like $10 million in it ready to be distributed once it became enforceable. In this case, we do not have the benefit of a fixed sum but we have the benefit of hope, and I could only hope that in fact the change will be significant. I am satisfied that change will be significant and I can only hope that such change will be enough for the parties to be able to get something out of their endeavours.
12.I am picking a figure somewhat out of the air, a qualified guess, but I sincerely hope it is reasonable, of three years. I note in the reasons that they do suggest that it is not really an adjournment because the matter has not really started and I think perhaps the Full Court is right there. So I will adjourn this application back to the registrar to be set down for hearing not before the expiration of three years from today…
The Amended Notice of Appeal filed 16 September 2011 raises eight grounds of challenge to his Honour’s decision, although they were argued in a more global way before us and that is how we will address them.
Senior counsel for the husband argued that s 79(5) requires a judicial officer to form affirmative opinions that:
a)There is likely to be a change in financial circumstances;
b)The likely change is a significant one;
c)Having regard to the likely and significant change, it is reasonable to adjourn the proceedings; and
d)An order made, if that likely and significant change occurs, is more likely to do justice as between the parties than an immediate order.
We observe that, in determining whether it is reasonable to adjourn proceedings, the Court is also required to have regard to “the time when that change is likely to take place”. This is a matter of significance to the understanding of the subsection because the time in which the likely, significant change is to take place is directly related to the assessment of whether it is reasonable to adjourn the proceedings. In this case, however, nothing in particular turns on this point.
Senior counsel for the husband argued that the making of the findings required by s 79(5) is a “precondition” to the exercise of the power under the subsection and likened each to a “jurisdictional fact”. Because of our conclusions about the determination of the appeal, it is unnecessary to consider whether this is a correct reflection of the obligations imposed by the subsection.
Likelihood of Significant Change
Relying on Grace & Grace (1998) FLC 92-792 (“Grace”), senior counsel for the husband contended that the term “likely” in the subsection should be read to mean “substantial and real” or “more probable than not” and not a “remote chance”.
Counsel for the wife argued that, while his Honour was required to be satisfied that there was likely to be a significant change, the subsection did not require him to make that finding with certainty, and argued that the terms of the subsection are “…couched in the ‘unknown’ and ‘subjective’…” in the use of the words “likely” and “if” in relation to the occurrence of the significant change.
We accept that the subsection does not require the opinion as to the likelihood of a significant change to be certain. However, we reject the argument that a determination under this subsection requires a consideration of the “unknown” or reliance on “subjective” considerations. The subsection requires the Court to form an opinion after a consideration of the evidence as part of an exercise of judicial discretion.
The Butterworths Australian Legal Dictionary defines the term “likely” as “[h]aving a degree of probability greater than merely possible, but less than certain…” (Butt, P, Butterworths Concise Australian Legal Dictionary, (2004, 3rd ed), Lexis Nexis Butterworths, Australia). It notes that “…[t]he location of ‘likely’ on the probability spectrum varies according to the statutory context”.
We accept that the determination of the meaning of the term “likely” should be made having regard to the context of the subsection within the section and within the Act itself.
However, in this matter, it is unnecessary to determine where precisely the term “likely” sits on the “probability spectrum”, but we do find that, in order to be satisfied that a significant change is “likely” for the purposes of s 79(5), the Court must be satisfied that it is more than merely possible.
Senior counsel for the husband argued that his Honour misinterpreted the effect and meaning of the subsection and, further, that his findings about a likely, significant change in financial circumstances were unsupported by the evidence.
Senior counsel for the husband argued that, in any event, his Honour did not form an opinion that a significant change was more than possible and argued that, at its highest, his Honour’s reasons amount to an expression of “hope” that there would be a significant change.
His Honour at [6] of the reasons referred to the reports of Mr R and Mr C and, after noting that Mr C had a less optimistic prediction for an improvement in property values than Mr R, said that “…he might be quite right about [it]…” His Honour then at [8] found there to be “…some degree of hope for graziers in the [region]…”
After reflecting that, if the matter was to proceed to hearing, there would be nothing to divide between the parties, his Honour said at [10] in answer to the question of whether he was “…sufficiently of the view that there is going to be a change and it must be significant…”, moved then to a consideration of what, in the context of this case, would amount to a “significant change”. His Honour concluded that even a small change would be “…significant to them…” and then turned at [11] to consider the period of the proposed adjournment.
In the course of discussing the period of the adjournment, his Honour found that there could not be “…such a significant change in two years to increase the value of these properties by something like, I think, 70 to 75 per cent in two years…” He said, after referring to Grace and observing that in that case the Court was considering a trust in which there was a fixed sum, that “…[i]n this case, we do not have the benefit of a fixed sum but we have the benefit of hope, and I could only hope that in fact the change will be significant…”
Counsel for the wife argued that, in reliance on the evidence of Mr C and Mr R, his Honour formed the opinion that there was likely to be a significant change. As a reading of his Honour’s reasons readily shows, while he formed the view that any change to the value of the parties’ properties would amount to a significant change, his Honour did not, however, either expressly or impliedly demonstrate that he formed an opinion as to the likelihood of that change occurring.
We are satisfied that his Honour did not form an opinion on the threshold question of whether a significant change was “likely” and, in so failing, fell into appealable error.
We further accept the argument of senior counsel for the husband that the state of the evidence before his Honour could not have provided the basis for the level of satisfaction required. At its highest, the evidence of Mr R was little more than an expression of hope premised on a number of speculative changes.
Significant Change
It was argued for the husband that, although his Honour said at [11] of the reasons that he was “…satisfied that change will be significant…”, he was in error in so finding and, further, the reasons do not support that finding and there was no evidence to support such a finding.
As has been seen, his Honour considered the issue of “significant change” at paragraphs 9, 10 & 11 of his reasons.
It was argued by the husband that his Honour’s determination of significant change was flawed in that he did not take into account the evidence of the cost of maintaining an increasing debt through interest on the loan facility or the cost of running the properties in assessing whether an increase in value of the property would amount to a “significant change”.
Counsel for the wife argued that, taking into account his Honour’s findings of there being “negative equity” in the parties’ properties, he was entitled to find as he did at [10] that, “…[i]f there is a chance for a change for the better, [he] would think such change could be nothing else but significant for the parties…”
We find force in the husband’s argument. Taken at its highest, the report of Mr R posited an improvement in the market for rural properties if a number of events occurred, none of which was expressed as a certainty or even a possibility. It could not of itself provide the basis for the finding of a significant change. Further, by not taking into account the costs of maintaining the property and the debt in the adjourned period, his Honour could not properly evaluate the factors necessary to determine whether any change would be significant.
It was further argued for the husband that the evidence before his Honour did not support his findings that there was a likelihood of a significant change in the financial circumstances of the parties by reason of a change in value of the properties to the extent that the value would exceed the level of debt, especially in the light of the husband’s evidence that the income from the properties was insufficient to meet the whole of the accruing interest on the debt.
In the written argument, senior counsel for the husband argued that there was no evidence at all to support a finding of such a magnitude of change as his Honour apparently made at [11], nor any basis for taking account of the movement in the property market pursuant to s 144 of the Evidence Act 1995 (Cth).
We accept this argument. Nothing in the evidence nor in submissions would support a finding, if such it be, that change of that magnitude could occur within two years or at all.
Discretion
Counsel for the wife argued that the determination to adjourn the applications was a discretionary one and that an appeal court would be slow to intervene in the exercise of that discretion.
While s 79(5) speaks in terms of an “adjournment”, the power being exercised is not merely one which regulates the conduct of the hearing. As the Full Court observed in Grace at 84,888, distinguishing the exercise of the discretion under s 79(5) from a general discretion to adjourn the conduct of a hearing, and having indicated the very serious consequences that flow from a decision to adjourn proceedings pursuant to the subsection:
…It is therefore a different type of “adjournment” to that which is often the subject of discussion in those authorities that suggest that appellate courts should be reluctant to interfere with the exercise of discretion by a trial judge as to whether to grant an adjournment or otherwise…
The subsection imposes an obligation on a court to form an opinion first as to whether there is likely to be a significant change in the financial circumstances of the parties or either of them and then, having regard to the time in which the change is likely to happen, as to whether it is reasonable to adjourn the matter. The Court is also required to form the opinion that an order made if the significant change occurs is more likely to do justice as between the parties than an order made immediately.
As we have indicated, his Honour did not determine the likelihood of any such change before embarking on an assessment of the change and its significance. In failing to consider the first step, we find him to be in error. We also accept senior counsel for the husband’s argument that, in the determination of the significance of any change, his Honour failed to consider the costs of running the properties and servicing the debts on them. Further, his Honour, in finding that a small change would be significant to these parties, did not take into account that a small change would not alter the position facing the parties which is that their liabilities far outstrip the value of the properties. Finally, we accept the argument that there was no evidence to support the findings that an adjournment for two years as sought or three years as granted would be more likely to do justice as between the parties than to hear the matter at the time.
We propose to uphold the appeal against the decision of 6 April 2011 and set aside his Honour’s order adjourning the proceedings.
Disposition of the Appeal
The appeal having been successful, it is necessary that the parties’ property settlement proceedings and those relating to spousal maintenance be reheard by a Judge other than Bell J.
As to costs, the husband argued that if the appeal was successful he would seek an order for costs against the wife but if it was unsuccessful he could not resist a costs application.
In the circumstances we would not make a costs order against the wife but will make an order for a costs certificate in favour of both parties.
The Appeal against the Orders of 2 August 2011 with respect to spousal maintenance
In February 2006, the parties entered into a Binding Financial Agreement. By consent orders of 22 November 2010, Bell J set that Agreement aside and, relevant to this appeal, ordered:
5. THAT the husband pay to the wife the sum of $2,000.00 per month by direct deposit into an account nominated by the wife on the 1st of each month.
His Honour further ordered that the wife’s property application be listed for trial in 2011. In fact, the matter was listed for hearing over three days in April 2011 and as earlier explained adjourned by his Honour pursuant to s 79(5).
Although not expressed as such, there seemed to be no dispute that Order 5 was intended to be an order for periodic spousal maintenance for the wife.
At the same time, his Honour ordered the husband to pay the sum of $100,000 to the wife in two instalments, one of $65,000 and the other of $35,000. Although in circumstances of contention which are not relevant to this appeal, those sums were paid to the wife.
On 30 May, the husband filed an application seeking a stay of the order requiring him to pay $35,000 to the wife and that “…paragraph 5 [of the orders] be amended to provide that the husband’s payment to the wife of $2,000 per month cease after the payment of 1 October 2011…”
By way of response, the wife sought an order that the husband pay to her “…periodic maintenance… in the sum of $2,000 per week commencing 7 days after the date of this Order…”
These applications came before his Honour for hearing on 1 August 2011 and his Honour made orders and delivered reasons on 2 August 2011.
His Honour’s orders, which are now appealed, were:
(1) The Husband’s Application in Form 2 filed 29 April 2011 be dismissed.
…
(2) The Husband do pay as and by way of maintenance for the Wife an amount of $1,500 per week, the first of such payments to be made from the 2 August 2011 and thereafter monthly in the amount of $6,500 with such amount to be paid into the Wife’s bank account…
It was the husband’s contention before his Honour that the wife was living in a de facto relationship and that she was being given substantial financial support by the gentleman with whom she was living. It was also contended by the husband that he did not have the capacity to maintain the wife. Both the existence of a de facto relationship and the husband’s capacity to pay maintenance for the wife were in dispute.
In the hearing before his Honour, the wife was cross-examined. Counsel for the wife did not require the husband for cross-examination. It was undisputed that the wife was not challenged on her expenses. The principal thrust of the cross-examination of the wife was to demonstrate, unsuccessfully as it turns out, that she was living in a de facto relationship.
Reasons for Decision
His Honour noted at [7] that the husband had not paid the monthly amount of $2,000 to the wife pursuant to the consent orders of 22 November 2010 and that the wife had caused a Third Party Debt notice to issue which had secured such payment to her.
His Honour considered and rejected at [9] and following the husband’s contention that the wife was living in a de facto relationship and, having done so, turned to consider at [20] “…why the Husband should not be compelled to comply with the consent order…”, noting that “…[the husband] says that he has insufficient funds…”
His Honour then said:
21.I refer to exhibits 1A and 1B. Those two exhibits which are bank statements respectively from the Rural Bank and Westpac indicate that in the last several months the Husband has had nothing less than over $60,000 as and by way of credit. I point out that the Rural Bank account on or about the 28 June 2011 the balance dropped to a figure of $301 because of very large payments out. Other than that it appears generally the aforesaid account on the 26 July 2011 was in credit in the sum of $51,556.49. The figures go as I have said from a low of $301 on this bank statement to a high of $234,000 on or about the 31 May 2011. That is only on that account.
22.In the other account which is the Westpac bank account, this varies from some $30,000 on 5 April 2011 to $5,000 on 9 June 2011.
23.On those figures alone, the Husband has more than sufficient funds available to him to adequately meet the payment of $2,000 per month.
His Honour then at [25] and [26] considered the wife’s claim for an increase in maintenance, referred to her expenses and expenditure, and at [28] said:
Since I am satisfied that she has shown a need and I am further satisfied that the Husband has capacity to make such payments. It appears to me to be unanswerable that on the material put before me, notwithstanding the fact that he says he goes up and down quite an amount he is in receipt of sufficient funds to adequately pay the amount of $1,500 per week which I order.
As we have indicated, his Honour ordered that the husband pay spousal maintenance to the wife in the sum of $6,500 per month. No order was made discharging the earlier consent order for payment of $2,000 per month to the wife.
The Amended Notice of Appeal of 15 December 2011 contains eight grounds of challenge to his Honour’s decision. At the start of the hearing, senior counsel for the husband did not press Ground 8 which went to his Honour’s failure to discharge the consent order made in November 2010 requiring the husband to pay $2,000 per month to the wife and making of a further order requiring the husband to pay $6,500 per month to her. It was accepted that the order for payment of $6,500, although not expressed as such, was in fact an order replacing the earlier order.
Discussion – Grounds 1, 2, 3, 4 & 5
Grounds 1 and 2 assert error in his Honour’s refusal to discharge the consent order made in November 2010 requiring the husband to pay $2,000 per month to the wife having regard to the adjournment of the final hearing of the property and maintenance proceedings and also to the parties’ arrangements with their bank.
Grounds 3, 4 and 5 challenge his Honour’s findings that the husband had a capacity to pay $2,000 per month to the wife and that he had a capacity to pay $1,500 per week maintenance to her. In so challenging his Honour’s findings, the grounds allege that his Honour failed to have proper regard to the husband’s financial statement and his evidence.
It was asserted that his Honour erred in failing to consider the fact of his order of 6 April 2011, by which he adjourned the hearing of the property settlement proceedings between the parties, was of itself sufficient to amount to a change of circumstances which would warrant a discharging of the consent order of November 2010 (Ground 1); and further, in light of the adjourned proceedings, in failing to have regard to the evidence that the financial accommodation between the husband and the ANZ bank was to come to an end on 30 September 2011 which made it inappropriate to make an order for maintenance for the wife that extended past that date (Ground 2).
Senior counsel for the husband argued that the order providing for the payment of $2,000 per month to the wife was consented to by the husband at a time when both parties were contemplating a hearing of the financial matters between them and that, at that time, the husband was continuing the parties’ cattle grazing operation subject to an Asset Management Agreement with the ANZ bank which, it was agreed, would remain in force until 30 September 2011.
It was asserted, and it seems to us, that there was no dispute that the husband’s capacity to continue to conduct the grazing business was contingent on the facility provided by the bank.
Senior Counsel for the husband argued that the adjournment of the hearing of the property settlement proceedings to a time beyond the life of the Asset Management Agreement with the parties’ bank was a material factor to be taken into account by his Honour in determining the husband’s application to discharge the consent order for monthly payments of $2,000 to the wife.
It was asserted that, in failing to have regard to the expiration of the arrangement with the parties’ bank, his Honour failed to have regard to a material matter necessary to his decision.
Counsel for the wife asserted that the only basis on which the husband sought a discharge of the consent order for monthly payments of $2,000 to the wife was his claim that she was living in a de facto relationship. It was argued that the husband did not raise with his Honour “…anything to do with the Husband’s capacity or the timing of the expiration of any accommodation with the bank…”
We do not accept this argument.
There can be no doubt that the husband argued that his ability to continue to operate the grazing business was “at the mercy of the bank”. The nature and effect of the Asset Management Agreement was not challenged.
Relevantly to this appeal, the husband set out in an affidavit sworn on 19 July 2011 the bank account balances and said:
…
I currently hold approximately $105,000 in my bank accounts and have urgent outstanding debts of about $220,000, including diesel 65,000, GST 64,000, staff superannuation payments $20,000 and PAYG $30,000. The other monthly accounts for insurance, plant and equipment maintenance etc continue to accumulate and are currently about $40,000.
…
The wife’s affidavit filed 18 July 2011 in response to that of the husband does not challenge the amount of the debt due to the bank or the husband’s evidence about the arrangement with the bank. We observe that in it would be difficult for her to do so given that shortfall of asset values over debt was the basis for her application under s 79(5).
During the hearing, his Honour raised with counsel for the husband the credit balance then standing in the husband’s Westpac account to which counsel said:
…
[COUNSEL FOR THE HUSBAND]: Yes. But your Honour has to consider that in light of the wider context of this case – and your Honour will recall that the properties in the [region]---
HIS HONOUR: Yes. They’re huge. He’s one of these gentlemen unfortunately – is asset rich but unfortunately is equally debt poor.
[COUNSEL FOR THE HUSBAND]: Well, he has to run the properties.
HIS HONOUR: Yes.
[COUNSEL FOR THE HUSBAND]: And the only source of funds he has for running the properties is---
…
(transcript 1 August 2011, p 8, lines 26 - 38)
Counsel continued:
…If he needs those funds – and this is the extent of his evidence – to run the properties in the [region] because he’s not getting any funds from the properties themselves and the bank is not giving him any more funds, and he still has to pay electricity to keep the bores pumping so---
…
(transcript 1 August 2011, p 9, lines 11 - 14)
His Honour asked counsel why then was the account in credit to which counsel said that the balances “fluctuate wildly”. His Honour observed that, on 10 March, the husband showed a balance of account of $4,803 and, at 21 June, the balance was $120,537.
To this, counsel said:
…But the simple answer to that is, your Honour, is because in the meantime, some of the mustering funds have come in which he then has to then spread out over the next 12 months, if you like, before he’s again going to get further funds to keep these two properties alive.
(transcript 1 August 2011, p 10, lines 1 - 4)
True it is that counsel for the husband’s “primary submission”, as he referred to it, was that the reason for the application for discharge of the order for monthly payment was that the wife was in a de facto relationship. However, it is abundantly clear that the husband’s capacity to pay spousal maintenance was squarely in issue before his Honour. To put the matter beyond doubt, counsel for the husband put to his Honour in submissions in reply:
…All right. As long as your Honour has regard to all that my client says in his affidavit material about what he does have to spend money. He’s running two cattle stations at a serious loss and no one’s paying his bills.
…
(transcript 1 August 2011, p 60, lines 33 - 35)
It was further submitted in counsel for the wife’s written argument that the husband’s evidence about the expiration of the loan agreement with the bank was equivocal and said “without corroboration”. We accept the submission by senior counsel for the husband that there was no challenge by the wife in her affidavit to this evidence nor was the husband required for cross-examination. In those circumstances, we fail to understand how these submissions on behalf of the wife could be made, especially in the light of the agreed position of both parties before his Honour in April 2011 that accepted the bank’s arrangement with the husband meant that no further drawings would be permitted under the arrangement.
While his Honour referred to the credit balances in the husband’s bank accounts in his reasons, he made no reference to the need for the husband to pay the costs of running the properties from those funds. To simply consider the credit balances without considering the concomitant obligation to pay debts was an error that went directly to his Honour’s conclusion that the husband had a capacity to continue to pay the ordered $2,000 per month.
Ground 4 asserts that his Honour erred in finding that the husband had the capacity to pay $1,500 per week to the wife. In the same way as we have found error in his Honour’s approach to the husband’s bank account credits in relation to the application to discharge the consent order to pay $2,000 per month to the wife, we accept the argument that this error affected his Honour’s finding that the husband had the capacity to pay the wife $1,500 per week.
Discussion of Ground 6 and Ground 7
Ground 6 asserts that his Honour’s reasons for decision were inadequate in that they do not enable a discernment of his reasoning process.
No written submission by either senior counsel for the husband or counsel for the wife was directed to this ground and, while we do not consider it to have been abandoned, we do not propose to consider it further save to say that his Honour’s reasons, while brief, do enable his reasoning process to be discerned.
Ground 7 concerns his Honour’s application of s 83(2) of the Act.
Section 83 governs the modification of orders for spousal maintenance. Subsection (2), relevantly to this matter, is as follows:
(2) The court shall not make an order increasing or decreasing an amount ordered to be paid by an order unless it is satisfied:
(a) that, since the order was made or last varied:
(i) the circumstances of a person for whose benefit the order was made have so changed (including the person entering into a stable and continuing de facto relationship);
(ii) the circumstances of the person liable to make payments under the order have so changed; or
(iii) in the case of an order that operates in favour of, or is binding on, a legal personal representative—the circumstances of the estate are such;
as to justify its so doing;
(b) that, since the order was made, or last varied, the cost of living has changed to such an extent as to justify its so doing;
(ba)in a case where the order was made by consent—that the amount ordered to be paid is not proper or adequate;
(c) that material facts were withheld from the court that made the order or from a court that varied the order or material evidence previously given before such a court was false.
Senior counsel for the husband argued that nowhere in his Honour’s reasons does he indicate that he had regard to the subsection in determining to dismiss the husband’s application to discharge the order made in November 2010 to bring the husband’s obligation to pay to the wife $2,000 per month to an end on 1 October 2011 nor did he consider the subsection in coming to a determination that the husband pay to the wife $6,500 per month, and by so failing, his Honour lacked the power to make the order that the husband pay to the wife $6,500 per month.
For the wife, it was argued that, while his Honour did not make specific reference to the terms of the subsection, his reasons disclose a consideration of the requirements imposed in s 83(2). It was argued that his Honour found that the wife had demonstrated a need for spousal maintenance and that her asserted need was reasonable (and we note that the wife was not challenged on her claimed expenses). Thus it was argued that, in those findings, his Honour had implicitly accepted that the previously ordered $2,000 per month was inadequate to her present needs and further by finding, as his Honour did, that the wife’s desire to move to live closer to her injured daughter was implicitly a finding of a changed circumstance.
As is not in doubt, s 83 of the Act is the governing provision in relation to the modification of spousal maintenance orders. Relevantly s 83(1)(c) provides for the discharge of an order where there is just cause for doing so and s 83(1)(f) establishes power to vary a spousal maintenance order so as to increase or decrease the amount payable. It is well settled that the provisions of s 83(2) establish “threshold requirements” (Vakil v Vakil (1997) FLC 92-743 at 84,027 (“Vakil”); Wreford & Caley (2010) 43 Fam LR 1 (“Wreford & Caley”)) to the determination of whether to vary or discharge a previously made order for spousal maintenance.
In relation to spousal maintenance, their Honours in Wreford & Caley agreed with Vakil that in deciding whether there is just cause to discharge a maintenance order the Court would consider, inter alia the right of a spouse to maintenance (s 72); the matters to be taken into account in relation to spousal maintenance (s 75); the duty of the Court to end financial relations (s 81); and the need to preserve and protect the institution of marriage as the union of a man and a woman to the exclusion of all others voluntarily entered into for life (s 43(a)).
A finding of one or more of the circumstances to which s 83(2)(a)(i) to (iii) refer does not conclude the Court’s consideration of the matter. If the Court is satisfied as to one of these matters as to justify its doing so, it may then turn to consider under s 83(1) whether in all of the circumstances the order ought to be varied as sought. The effect of s 83(7) is that in determining whether an order should be discharged, suspended or varied regard must be had to s 72 and s 75 of the Act.
Even if we accepted, as counsel for the wife contended, that his Honour’s reasons establish the necessary findings under s 83(2) to permit an exercise of power under s 83(1), without analysis of the husband’s financial circumstances, his Honour could not have properly considered the second step in the applications (whether that of the husband to discharge the consent order for $2,000 per month from October 2011 or that of the wife for an order for $2,000 per week). In failing to make that consideration of the husband’s financial circumstances, his Honour fell into error.
Leave to Appeal
This is a matter in which the appellant needs leave to bring an appeal against his Honour’s orders.
As to leave, senior counsel for the husband asserted that there had been an error of principle and/or substantial injustice to the husband in three ways. The first two relate to the apparent failure by his Honour to discharge the order of November 2010 or otherwise deal with it before ordering the husband to pay $6,500 per month to the wife.
As we have indicated, at the commencement of the appeal, senior counsel for the husband conceded that, in reality, his Honour’s order that the husband pay $6,500 per month to the wife was a fresh or subsuming order and not in addition to the order of November 2010.
The final ground on which leave was sought was:
…alternatively, his Honour made orders increasing the husband’s maintenance obligations without first making any determination as to being satisfied of any one of the matters set out in s.83(2) and the Family Law Act and hence without first fulfilling the statutorily prescribed prerequisite to the exercise of the power under s.83(1) of the Act.
Leave was opposed by the wife who argued that, having abandoned Ground 8 of the appeal, the first two bases on which leave was sought fell away and, as the husband had not demonstrated that his Honour failed to be satisfied of a matter in s 83(2), leave could not be granted and the appeal fail.
In the course of argument on the appeal, counsel for the wife conceded that his Honour’s reasons make no mention of the husband’s evidence of his financial circumstances, in particular the financial obligations to the bank or the costs of running the grazing business. This is particularly significant in the light of there being no cross-examination of him on that evidence which, unless the husband’s evidence was inherently improbable or unreliable, his Honour ought to have accepted it.
In the light of that concession and his Honour being satisfied of one of the conditions precedent in s 83(2) (the change of the wife’s circumstances), his Honour was obliged, as part of his consideration of whether to make a different order, to take into account the husband’s financial circumstances.
His Honour’s failure to take account of this evidence in determining the wife’s application for spousal maintenance amounts to a clear error of principle sufficient to warrant a grant of leave to appeal.
Disposition of the Appeal
It was properly conceded that, given the circumstances of the matter, this Court could not on the evidence before it re-exercise his Honour’s discretion and the matter must be remitted to another Judge for hearing.
As is customary, we asked each counsel for submissions as to costs in the appeal. The husband sought a costs order in the event that the appeal was successful and conceded that, if the appeal failed, there was little that could be said against a costs order in favour of the wife.
Given that the appeal is successful, having found error in his Honour’s approach to the question of spousal maintenance, we will make no orders for costs but we will grant costs certificates for both the husband and the wife.
I certify that the preceding one hundred and ten (110) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Finn, Ainslie-Wallace & Ryan JJ) delivered on 13 June 2012.
Associate:
Date: 13 June 2012
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