Rylands and Rylands
[2013] FCCA 493
•27 June 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| RYLANDS & RYLANDS | [2013] FCCA 493 |
| Catchwords: FAMILY LAW – Property – interim hearing – whether to sell or retain shares – agreement to sell investment properties. |
| Legislation: Family Law Act 1975, ss.75, 79, 80, 114, 117 |
| G and T (2003) 32 Fam LR 101; (2004) FLC 93-176; [2003] FamCA 1076 Harris and Harris (1993) FLC 92-378 Hickey & Hickey & Attorney-General for the Commonwealth of Australia [2003] FamCA 395; (2003) 30 Fam LR 355; (2003) FLC 93-143 Stanford v Stanford [2012] HCA 52 Strahan & Strahan (Interim Property Orders) [2009] FamCAFC 166; 241 FLR 1; (2009) 42 Fam LR 203 Wenz v Archer (2009) 40 Fam LR 212; [2008] FMCAfam 1119 |
| Applicant: | MS RYLANDS |
| Respondent: | MR RYLANDS |
| File Number: | SYC 1170 of 2013 |
| Judgment of: | Judge Monahan |
| Hearing date: | 31 May 2013 |
| Date of Last Submission: | 31 May 2013 |
| Delivered at: | Sydney |
| Delivered on: | 27 June 2013 |
REPRESENTATION
| Counsel for the Applicant: | Not Applicable |
| Solicitors for the Applicant: | Pryor Tzannes & Wallis |
| Counsel for the Respondent: | Mr Givney |
| Solicitors for the Respondent: | Vizzone Ruggero & Associates |
ORDERS
Subject to paragraphs 2 and 3 herein, all interim orders remain in full force and effect.
Pursuant to paragraph 9(d) of the minute attached to the orders made on 31 May 2013 (“the Consent Minute”) the parties cause the following payments to be made from the controlled monies account:
(a)to the wife the sum of $130,000.00;
(b)to the husband the sum of $80,000.00;
with the characterisation of these payments to be a matter for determination by the Court at any final hearing or by agreement.
The husband cause the following debts to be paid by no later than the time he receives the sum referred to in paragraph 2(b) herein:
(a)Land rates $296.89
(b)Land rates $284.98
(c)ATO $3,766.00
(d)Visa card $3,487.00
(e)(omitted). credit card $3,280.00
(f)(omitted) & Co. $1,350.00
(g)(omitted) & Co. $2,300.00
in addition to any amounts that may still be owing to third parties pursuant to paragraph 17 of the Consent Minute.
The following interim orders sought by the parties be otherwise dismissed:
(a)paragraphs 6 and 13 of the interim orders sought by the wife in her Initiating Application filed on 7 March 2013; and
(b)paragraphs 21 to 32 inclusive of the interim orders sought by the husband in his Response filed on 28 March 2013.
IT IS NOTED that publication of this judgment under the pseudonym Rylands & Rylands is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYC 1170 of 2013
| MS RYLANDS |
Applicant
And
| MR RYLANDS |
Respondent
REASONS FOR JUDGMENT
Introduction
These are property and parenting proceedings between the Applicant wife, MS RYLANDS, (“the wife”) and the Respondent husband, MR RYLANDS, (“the husband”). This decision only concerns the parties competing interim proposals with respect to the property dispute between them.
Background
The parties commenced cohabitation upon their marriage on (omitted) 1994. They separated during 2010 but continued ‘to live under the one roof’ until early 2013. There are three children of the parties’ marriage: X, born (omitted) 1995 (now aged 18 years); Y, born (omitted) 1997 (who will turn 16 years next month) and, Z born (omitted) 1999 (who recently turned 14 years).
X currently lives with the husband in rented accommodation and the other children live with the wife in the former matrimonial home and spend time with the husband.
The wife works part-time as a (omitted) at the (omitted). The husband works as a (omitted) for (omitted).. The husband is currently taking long service leave (until August 2013) which he asserts is being taken under ‘doctor’s advice’ as evidenced by a medical certificate which he attaches to his most recent affidavit.
Procedural history
These proceedings were commenced by the wife by her Initiating Application filed on 7 March 2013. The husband filed a Response on 28 March 2013.
The matter first came before me in a duty list on 2 April 2013. On that occasion I was pressed by the parties’ legal representatives to list the matter for interim hearing of the relevant property and maintenance orders sought. I also ordered the parties to attend a Child Inclusive Child Dispute Conference which they duly did on 13 May 2013. At this stage I note that in her Memorandum to the Court, family consultant Ms M stated that “[f]inancial settlement and child support issues may be impacting the willingness of each parent to come to an agreement” about parenting. That said, according to Ms M, the parties were able to reach agreement that they will “share parental responsibility” and that Y and Z “will live in an equal parenting arrangement between the parties”.
In respect of property and maintenance matters, I note that the matter has not, as yet, had the benefit of a conciliation conference or private mediation.
At the interim hearing on 31 May 2013, the wife was represented by her solicitor, Mr O’Sullivan and the husband by Mr Givney of counsel.
Issues and proposals
By the commencement of the interim hearing the parties were in agreement that they should sell their two investment properties; namely the properties situated at Property M, (the “Property M property”) and Property B, (the “Property B property”). By the conclusion of the interim hearing the parties were also in agreement about a number of other matters that they subsequently incorporated into a comprehensive Minute of Consent Orders (the “Minute”).
Apart from providing for a process for the sale of the two investment properties, placing the net proceeds of sale into a controlled monies account in the name of the parties, and the obtaining of a single expert valuation for the former matrimonial home situated at Property K, (the “former matrimonial home”), the Minute provided:
“12. That neither party shall speak about the other parent, or a partner of the other parent or family member, in a manner that is critical, insulting or derogatory, either in the presence of the children or within their hearing.
13. That neither party shall discuss with Y or Z these proceedings or permit any other person to do so except as may be necessary pursuant to an order of the Court.
14. That the parties shall attend for family therapy on a non-reportable basis with Ms V (or a family therapist who will accept payment claimable upon Medicare) and to give effect to this order, the following shall apply:
(a) The parties shall bear half the costs;
(b) The parties shall attend not less than three sessions with the family therapist and such further sessions as may be reasonably required by the therapist;
(c) The parties shall ensure the attendance of their children, Y and Z and shall request the attendance on X if requested to do so by the Family Therapist.
15. In respect of the husband’s non vested (omitted). options (the options), the following shall apply:
(a) The husband shall within 48 hours of being informed of his entitlement of the options, provide written confirmation to the wife of the strike price and the market price paid and any costs associated with and or tax incurred or to be incurred on the exercise of the said options, and the last date upon which he can exercise his right to obtain the difference between the option price and the current share price (without purchasing the shares) together with any written documents in the husband’s possession or control corroborating those matters, and
(b) Unless the wife causes the husband to exercise the option pursuant to these Orders, the husband is restrained from exercising his right to obtain the difference between the option price and the share price until the last day he can exercise that right;
(c) Within 7 days of having received the notice referred to in (a) above, the wife is at liberty to provide the husband with instructions to purchase the total number of options and shall provide a bank cheque for such purchase
(d) Upon the wife’s compliance with (C) the husband shall exercise the option and purchase the shares and shall thereafter be restrained from dealing with those purchased shares;
(e) In the event that the wife does not cause the purchase of the shares and the husband exercises his right and obtains the difference in the option price and share price, the husband is restrained from dealing with those monies and shall upon receipt of the monies, pay same to his Solicitor to be held pending further order.
16.Without prejudice to the interim orders sought by the parties, it is noted that the wife consents to the husband selling 1,700 (omitted). shares.
17. It is noted that husband will pay from the proceeds of the (omitted). shares:
(a) Arrears of school fees;
(b) GIO insurance;
(c) Arrears of mortgage.”
At this point I will also note that it was not necessary for the wife to press the order she sought on an interim basis seeking exclusive occupation of the former matrimonial home as the husband was not presently seeking to re-enter the property or seeking its sale. Indeed the husband is seeking to retain the former matrimonial home as his residence as a final outcome. That said, the husband indicated that, subject to the outcome of this decision, he may be required to seek to re-enter the former matrimonial home if he is unable to fund alternate accommodation for himself and their daughter X.
The areas of disagreement focussed on whether there should be an interim distribution favouring one, or both, parties from the net proceeds of sale of the two investment properties to be held in the controlled monies accounts and whether their should be an interim distribution to each of the parties of the (omitted) shares held by the husband.
More specifically, the wife seeks an interim order that she receive a payment totalling $110,327.55 and proposes that she receive those funds from the proceeds of the sale of the Property M property. Should the Court think it appropriate, the wife did not oppose the husband receiving a payment in the same amount less the value of the 1,700[1] plus shares that the wife was agreeable for the husband to have access to. Interestingly, the amount sought by the wife, being $110,327.55, represents the amount she asserts the husband has received from the post-separation sale of (omitted). shares by him.[2] I further note that the wife estimates her legal costs “up to an including the final hearing would be not less than $130,000”.[3]
[1] The figure proposed by the wife in her Minute of Orders attached to her case outline document dated 29 May 2013 was ‘1,770’. I note that the parties subsequently agreed in paragraph 16 of the Minute for the husband to be able sell “1,700 (omitted) shares”.
[2] Wife’s affidavit sworn 4 March 2013 and filed 7 March 2013, paragraphs 38-46.
[3] Ibid, paragraphs 50-54.
The wife also seeks some specific orders and restraints in relation to the husband’s (omitted) shares (the “shares”). More specifically, the wife seeks an order that the injunction preserving the shares[4] remain in place or, in the alternative, that there be a partial distribution to the husband of 1,770 shares and the balance of 9,112 shares either be preserved by further injunction or transferred into the sole name of the wife. That said, the Court notes again that the parties subsequently agreed to an outcome whereby the husband could sell 1,700 shares in order to pay certain debts.[5] Given this ‘agreement’, the Court assumes the wife now only seeks that the remaining shares either be preserved by the existing injunction or transferred into her name.
[4] This injunction was made by the Court on 2 April 2013.
[5] See paragraphs 16 to 17 of the Minute.
The husband opposes the orders sought by the wife and in lieu seeks an interim outcome whereby the injunction in respect of the shares be lifted and that he transfer one half of the shares to the wife. Thereafter each party would be free to deal with the shares as they wish, including any sale of them, on the proviso that both parties are at liberty to lead evidence at the final hearing as to any sale of any of the shares and the use of the proceeds of sale. The husband also proposed to pay the following outstanding debts totalling $26,442.00 from the future sale of any shares held by him:
“(omitted) College $2,281.00
(omitted) school $4,810.00
Land rates $296.89
Land rates $284.98
GIO $696.41
ATO $3,766.00
Loan arrears $3,890.00 [E]
Visa card $3,487.00
(omitted). credit card $3,280.00
(omitted) & Co. $1,350.00
(omitted) & Co. $2,300.00” [6]
That said, the Court notes again that the parties subsequently agreed to an outcome whereby the husband could sell 1,700 shares in order to pay the debts relevant to the schools, the mortgage and to GIO.[7] Using the husband’s figures,[8] this amounts to a payment of $11,677.41. The husband’s capacity to settle the other debts referred to in his case outline document, whether by further sale of shares (as he seeks) or presumably by using the funds flowing from an interim distribution to him from the net sale proceeds of the Property M property (as the wife seeks), will need to be considered as part of this decision.
[6] The husband’s case outline document dated 29 May 2013, at page 11.
[7] See paragraphs 16 to 17 of the Minute.
[8] The husband’s case outline document dated 29 May 2013, at page 11.
While the wife also seeks interim orders for spousal maintenance and child support departure in her Initiating Application, these orders were not pressed during the interim hearing. While the interim orders sought by the husband in his Response essentially ‘mirror’ the orders he seeks on a final basis, only the issues referred to above were pressed by the husband at the interim hearing.
Evidence
The wife relied on the following documents at the interim hearing:
·Initiating Application filed on 7 March 2013;
·Wife’s affidavit filed on 7 March 2013;
·Wife’s Financial Statement filed on 8 March 2013;
·Wife’s second affidavit filed on 10 May 2013;
·Affidavit of Mr O’Sullivan (wife’s solicitor) filed on 10 May 2013; and
·Wife’s case outline document dated 29 May 2013.
The wife also provided the Court with a Joint Balance Sheet in accordance with directions made on 2 April 2013.
The husband relied on the following documents at the interim hearing:
·Husband’s Response filed on 28 March 2013;
·Husband’s affidavit filed on 28 March 2013;
·Husband’s Financial Statement filed on 28 March 2013;
·Husband’s second affidavit filed on 16 May 2013;
·Husband’s third affidavit filed on 29 May 2013; and
·Husband’s case outline document dated 29 May 2013.
The husband also relied on a document tendered in support of his assertion that the NSW Police were withdrawing the Apprehended Domestic Violence Order application that is next before the Downing Centre Local Court on 11 June 2013 (see Exhibit “RH1”).
Submissions
Mr O’Sullivan for the wife, and Mr Givney of counsel for the husband, each presented oral submissions to the Court in support of their respective proposals, in addition to their written case outline documents.
The transcript for the interim hearing will, of course, reflect the oral submissions that were made. I do not propose to summarise those oral submissions any further for these reasons but I will refer to those submissions where relevant during the course of these reasons. That said, I have extracted the following submissions from the parties’ respective case outlines for context.
Wife’s argument
The wife outlined the following issues in dispute in her case outline document:
“1.The Wife is seeking an interim payment to her of $110,327.55. Whilst it is submitted that there is sufficient material before the Court such that the Court could make an interim/partial property order with the particular categorization of that left to be determined by the trial judge at the final hearing, the Court could also make orders pursuant with section 117 (interim costs).
2.Pursuant to section 79 and 80(1)(h) the Court has the power to make orders sought by the Wife within the framework identified by the Full Court in Strahan and Strahan [2009] FamCAFC 166.
3.It is respectfully submitted on behalf of the Applicant Wife that it is “appropriate” that the Court make the Order for the sale of the two investment properties and for a payment to be made to the Wife of $110,327.55 on the following grounds:
3.1The Wife does not have the capacity to draw any income and/or capital from the parties’ joint assets without the consent of the Husband.
3.2The Wife has no independent property or financial resources from which she can pay her legal costs due or those anticipated.
3.3The Husband can join the Wife in having capital realised in the amount that she is seeking.
3.4The Wife has;
· Outstanding legal costs (work in progress) in the sum of $12,381;
· Future anticipated legal costs up to and including the conciliation conference (including these proceedings) of about $27,681;
· Future anticipated legal costs up to and including (if required) the final hearing of about $130,000.
4.It is respectfully submitted on behalf of the Wife that the interim orders that she seeks are within the parameters of any final order a Court will make pursuant to section 79 Family Law Act. The Orders that the Husband seeks in his Response, include the Wife receiving 55% of the net value of the property at Property K; 50% of the net proceeds received from the sale of the real properties at Property M and Property B, and a superannuation splitting order in favour of the wife in the sum of $40,490. This would equate to a final division to the Wife of about $850,000.
5.The payment sought by the wife is well within the range of her anticipated final property division.
6.The Wife seeks an order that the injunction preserving the (omitted). shares remains in place or in the alternative that there be a partial distribution to the Husband of 1,770 shares and the balance of 9,112 shares either preserved by further injunction or transferred into the sole name of the wife. The wife refers to section 79 and her evidence that she has made valuable contributions to the acquisition, conservation and improvement of the share portfolio and she also refers to her initiating application wherein she seeks 60% or 9,112 (omitted). shares on a final basis. The Wife provides evidence identifying that the future dividend streams; imputation credits; and capital gains received from the shares will be of assistance in providing for her longer term future needs.
7.It is submitted that the Orders the Wife seeks are within a just and equitable result in circumstances where:
7.1 There was a long marriage of 16 years where both parties strived together to fulfil their mutual matrimonial goals.
7.2The parties’ have accumulated their assets throughout their marriage.
7.3The wife has been the homemaker and the primary caregiver of the children.
7.4The Wife supported the Husband to achieve his career ambitions.
7.5The Wife throughout the marriage undertook paid employment and made valuable financial contributions to the acquisition, conservation and improvement of the parties’ property.
7.6The Wife will continue to be the primary caregiver of the children, the youngest of whom will turn 18 in 5 years time.
7.7The Husband has a significantly higher income earning potential as compared to that of the Wife.
7.8The Wife has received from the Husband a direct cash payment of only $64 for child support. The assessment was issued in February 2013. The Wife has been compelled to rely on the Child Support Agency intercepting the husband’s tax refund in order to receive Child Support, and it presently remains in arrears.
7.9The (omitted). shares have a solid record for strong earnings growth; high dividend yields; solid capital gains and high tax imputation credits.
7.10The Husband has greater financial resources including his leave entitlements and the valuable (omitted). employee share incentive programme.[9]
[9] The wife’s case outline document dated 29 May 2013, at pages 3-5.
Husband’s argument
The husband’s argument was also outlined in his case outline document:
“2.The Wife seeks an Order for spousal maintenance in circumstances where it is clear that the parties now having separated are unable to pay their day to day expenses without the necessity of liquidating assets. The Wife presently resides in the former matrimonial home which is mortgage free. The Husband seeks Orders that would provide to the Wife one half of the (omitted). shares which have a total value of $368,000.00. There are present indicates however that the share value is presently decreasing in the present climate. As such the Wife will have more than enough money to “survive” until the final hearing of this matter. The Wife is in full-time employment and in her Financial Statement indicates that she is receiving a net income of $616.00.
3.There have been a change of circumstances since the parties were in Court on 2 April 2013 which are:-
3.1The eldest child X whose care was being shared by the parties is now living full-time with the Husband.
3.2The Husband has received medical advice to the effect that he should cease working because of an adjustment disorder with a depressed mood. The Husband attaches to his Affidavit a report of his treating doctor, Dr P dated 25 May 2013.
4.The parties otherwise continue to share the care of the younger children Y and Z.
5.The Husband is presently receiving one half of his salary which will continue for a period of three months. The Husband advises that the effect on his child support assessment is that child support will reduce during the three month period to $197.00 per calendar month.
6.The Husband’s finances are in a parlous state. It is clear that he does not have any disposable income at all that would enable a Court to find that he should pay spousal maintenance. In any event the Wife will, subject to the Court making Orders in accordance with the Husband’s Application, have a substantial asset to which she can draw upon pending the final hearing of this matter.
…
8.The Husband sets out his weekly expenses at paragraph 15 of his Affidavit sworn 15 May 2013. These weekly expenses amount of $3,598.00 which are mainly related to the children’s expenses and the rent at (omitted) Apartments. The wife criticises the Husband’s quantum of rent however the Husband leads evidence in his Affidavit of 28 May 2013 as to the rental which he would necessarily have to obtain to properly house himself and the children [paragraph 5] and the cost of obtaining furniture and effects for such a home [paragraph 7].
9.The Husband seeks to rely on three Affidavits because of his change of circumstances as well as an attempt to meet the Wife’s assertions that he is not making a full disclosure.
10.It is noted that the Wife complains as to the Husband’s sale of shares. The sale of shares occurred when the parties were living separate and apart under the same room and except for one transaction all the proceeds of sale in dealing with the funds occurred through the parties’ joint account.”[10]
[10] The husband’s case outline document dated 29 May 2013, at pages 12-14.
Law and discussion
The competing orders sought by the parties respecting the shares and the interim distribution of monies sought by the wife raise a number of issues to be considered in light of the legislation, authorities, the available evidence and the parties’ submissions.
The Court will firstly consider the issue of whether an injunction should issue to preserve the shares until further order before secondly considering whether there should be any interim property orders to divide the shares and/or to produce an interim distribution of monies to assist the parties with their legal expenses and living expenses and to otherwise to retire any debt.
Injunctive relief in respect of the shares
There is already an existing interim order that prevents the husband from “selling, trading or otherwise dealing with all shares in (omitted) held in his name”[11]. There is also another order that grants the husband liberty to apply “only in respect to any possible urgent need to liquidate some of the (omitted). shares”.[12]
[11] Orders made 2 April 2013, paragraph 13.
[12] Ibid, paragraph 11.
The power to make an interlocutory injunction in relation to the property of a party to the marriage is found in s.114(3) of the Family Law Act 1975 (“the Act”). This provision allows the Court the power to:
“… grant an injunction, by interlocutory order or otherwise …, in any case in which it appears to the court to be just or convenient to do so and either unconditionally or upon such terms and conditions as the court considers appropriate.”
In the decision of in G and T (2003) 32 Fam LR 101; (2004) FLC 93-176; [2003] FamCA 1076; O’Rielly J stated that:
“53. The purpose of interlocutory restraining orders in a case such as this is to preserve the status quo until the trial. In order to exercise its discretion the Court is required to find that there is a serious issue to be tried and that the balance of convenience supports the making of an order: Blueseas Investments Pty Ltd. v Mitchell and McGillivray (1999) FLC 92-856 (FC) at par 56, citing Yunghanns v Yunghanns (1999) FLC 92-836 (FC) at par 109.
54. Plainly, it is also a requirement that the restraints sought be reasonably necessary in the sense that if the restraining orders sought are not made there would be a real risk of the defeat of the applicant's claimed interest: Waugh v Waugh (2000) FLC 93-052 at pars 32-44.”
In the case before me, the wife seeks final orders inter alia for the husband to transfer 60% of the shares to her presumably hoping that they will increase in value into the years ahead. In respect of the interim orders she seeks, the wife argues for the shares to be ‘locked up’ until final hearing. The wife asserts that, following the ‘agreement’ for the husband to liquidate a further 1,700 shares, the balance of the shareholding (being approximately 9,182 shares), represents approximately 60% of the amount of shares that were held by the husband prior to him disposing of 3,200 shares in late 2012 and a further 2,000 shares in early 2013.
According to the husband’s evidence, the sale of the 3,200 shares realised the sum of $73,266.83 which the husband asserts was used to retire debt, including his outstanding liability to the Australian Taxation Office.[13] In this respect, whilst the Court notes that the balance sheet discloses an asserted tax liability of $3,766.00 owed by the husband, the husband’s financial statement filed 28 May 2013 refers to a tax liability of $6,000.00. Regardless, the further sale of 2,000 shares (in separate transactions of 1,000 shares each) realised the combined sum of $65,699.00 which the husband asserts was used to pay various debts and expenses (including legal expenses of $15,000.00) and various purchases (including a car for X that cost $23,500.00).[14]
[13] Husband’s first affidavit filed 28 March 2013, paragraph 55.
[14] Ibid, paragraphs 56-57.
The balance of convenience argument appears to be between the wife’s desire to retain a significant portfolio of shares post final hearing. The wife asserts that the income to be produced from the shares will assist “her longer term future needs”.[15] She also fears that the husband will further dissipate the share portfolio as evidenced by his disposal of 5,200 shares in late 2012 and early 2013.
[15] The wife’s case outline document dated 29 May 2013, page 4.
In contrast, the husband argues that by immediately dividing the existing share portfolio equally to the parties, each party will be able to liquidate such shares as they think appropriate to meet their expenses (including legal expenses) prior to the final hearing. This would result in each party having 4,591 shares at their disposal which could generate approximately $145,000.00 to $150,000.00 for each party depending, of course, on the sale price.
There is, of course, arguable hardship in the form of the wife losing the benefit of any income stream flowing from the shares if they were significantly liquidated. That said, there would also be arguable hardship in the form of the husband losing the benefit of the monies that could be generated from the sale of all or some of the shares to use towards his expenses, including the costs of housing and legal expenses.
Interim property distribution
The Court has the power to make an interim property distribution and/or make interim property orders pursuant to ss.79 and 80 of the Act. This is most commonly done in appropriate circumstances to facilitate sufficient funds for immediate use by the parties.
In this case, the wife seeks interim property orders to primarily meet her current and anticipated legal expenses. To some extent, this is the outcome sought by the husband. The parties simply disagree on how their respective goals can be met.
In her submissions the wife referred the Court to the case of Strahan & Strahan (Interim Property Orders) [2009] FamCAFC 166; 241 FLR 1; (2009) 42 Fam LR 203 (“Strahan”). The facts in Strahan concerned an interim property distribution sought by the wife in that case for the purpose of paying legal costs up to a final hearing. The parties in Strahan were extremely wealthy and their legal costs had run into tens of millions of dollars. The facts of the case before me are somewhat different. The judge at first instance in Strahan had made an order for an interim property distribution to the wife in the sum of $1,000,000.00 for the payment of her ongoing legal costs. The wife, who had sought a sum of $5,000,000.00, later appealed to the Full Court of the Family Court of Australia (“the Full Court”). The Full Court determined that the trial judge had erred in holding that the wife needed to establish “compelling circumstances” to justify the interim property distribution sought. The decision of the Full Court in Strahan provided a thorough consideration of the authorities up to that point and provides useful guidance to the Court in exercising its discretion with respect to interim property distributions.
The Full Court, at [118] of Strahan, accepted the submission that where the power is to be exercised pursuant to s.80(1)(h) of the Act there are two stages to the hearing of an application for an interim property settlement order. This is in recognition of the fact that although the power under s.79 should ordinarily be exercised on a once only basis, circumstances may arise before there can be a final hearing where the power is exercised. Consequently the first step is to resolve whether to exercise the power before a final hearing and, if it is resolved to do so, then the second step involves the exercise of that power.
In relation to the first stage or step, the Full Court at [132] of Strahan stated that when considering whether to exercise the power to make an interim property order under ss.79 and 80(1)(h) of the Act, the overarching consideration is the interests of justice. Moreover, it is not necessary to establish ‘compelling circumstances’. All that is required is that, in the circumstances, it is an appropriate case in which to exercise the power. In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s.79 is a once and for all order made after a final hearing. In this respect, the Full Court in Strahan considered the decision of Judge Reithmuller in Wenz v Archer (2009) 40 Fam LR 212; [2008] FMCAfam 1119.
In relation to the second, or substantive, step, the Full Court in Strahan stated at [135] that, as the jurisdiction under s.79 of the Act is being exercised, the provisions of that section must be considered and applied – but subject to limitations, given that it is not the final hearing. Again, there is also no requirement of compelling circumstances in relation to the substantive step. The discretion conferred by the power in s.79 is to make such order as the Court considers appropriate, after due consideration of the matters in s.79(4), provided that it is just and equitable to make the order in circumstances where the power will not be exhausted by the interim order (see [137] of Strahan).
At [153] of Strahan, the Full Court stated that if an interim application for funds had relied on s.117 of the Act as the source of power, then in considering the amount to award, it would probably be necessary for an assessment to be made of the amount that is required, but this and other relative matters “are not relevant if the source of power is s.79 of the Act”. In Strahan, the trial judge should simply have made the orders sought by the Wife. Once it is determined that there are appropriate circumstances then the substantive stage should ordinarily be readily capable of resolution (see [155]).
In the event that the Court determines to exercise its discretion in favour of an interim property order, then clearly the Court is required to consider the preferred approach to the exercise of the discretion under s.79. This has been outlined in many cases including, more recently, Hickey & Hickey & Attorney-General for the Commonwealth of Australia [2003] FamCA 395; (2003) 30 Fam LR 355; (2003) FLC 93-143. That approach involves four interrelated steps:
·Step 1: identify and value the parties’ property, liabilities and financial resources as at the date of the hearing;
·Step 2: identify and assess the parties’ ‘contributions’ within the meaning of s.79(4)(a), (b) and (c) and determine the parties’ contribution-based entitlements expressed as a percentage of the net value of the parties’ property;
·Step 3: identify and assess the relevant matters referred to in s.79(4)(d), (e), (f) and (g) (the other factors) including, because of s.79(4)(e), the matters referred to in s.79(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution-based entitlements of the parties established at Step 2; and
·Step 4: consider the effects of those findings and resolve what order is just and equitable in all of the circumstances of the case.
In the exercise of it’s discretion, the Court is also guided by the comments of the Full Court in Harris and Harris (1993) FLC 92-378 where their Honours stated at page 79,930:
“(1) The exercise of the power should be confined to cases where the circumstances presented at that time are compelling. As a generality, the interests of the parties and the Court are better served by there being one final hearing of s. 79 proceedings. However, circumstances may arise before there can be a final hearing which dictate that some part of the property of the parties should be the subject of orders. A common example is where both parties agree to the disposal of some assets pending the trial. However, we do not consider that it is confined to cases where the parties consent. Urgent situations may arise where it is necessary to exercise this power if injustice is to be avoided. Examples include cases where it is necessary to do so to avoid an asset being eroded or lost in the intervening period, and cases (beyond the maintenance power) where an order in favour of one party is necessary to preserve or obtain a home for or is otherwise necessary for the welfare of the children ...
(2) It is an exercise of the s.79 power. Consequently it must be performed within those parameters. Since it is not the final hearing the Judge is unlikely to have the final findings, but the exercise must fall within that general framework and the material available at that time.
(3) Of necessity it is likely to be a somewhat imprecise exercise. Consequently, it must be exercised conservatively and the Judge must be satisfied that the remaining property will be adequate to meet the legitimate expectations of both parties at the final hearing, or that the order which is contemplated is capable of being reversed or adjusted if it is subsequently considered necessary to do so. It is for this reason that we doubt whether the distinction which Nygh J drew [in Burridge and Burridge (1980) FLC 90-902] between interim and partial orders is necessary or desirable.”
Step one
Details of the matrimonial property pool of the parties are contained in the parties’ affidavit evidence, more specifically in their respective financial statements. The Court also had the benefit of a Joint Balance Sheet that was the subject of input and submissions by both parties.
It would be fair to say that the parties have at their disposal an impressive net property pool. The net pool is somewhere between $1.9 million (as asserted by the husband) and $2.4 million (as asserted by the wife). The net pool includes their respective superannuation entitlements but mainly comprises the former matrimonial home (valued by the parties in excess of $1.1 million and which is debt free), the two investment properties (valued in net terms at between $460,000.00 plus by the husband and $500,000.00 plus by the wife) and the shares (estimated to be presently valued at between $293,000.00 to $300,000.00).
Step two
It would appear that both parties assert contributions pursuant to s.79(4)(a), (b) and (c) of the Act.
Step three
It would appear that the wife, and perhaps the husband also, may be seeking adjustments to reflect s.75(2) and the related factors. The parties remain in dispute as to both parenting and child support matters and, as stated, the wife is seeking interim spousal maintenance, although that is not being pressed in this interim decision.
Step four
Under s.79(2) of the Act, a court shall not make a property settlement order unless satisfied that it is “just and equitable” to do so. This provision, and it’s inter-relationship with s.79(4), was recently the subject of discussion by the High Court in the case of Stanford v Stanford [2012] HCA 52. At paragraphs 36 to 40 the High Court stated:
“36.The expression "just and equitable" is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds. And while the power given by s 79 is not "to be exercised in accordance with fixed rules", nevertheless, three fundamental propositions must not be obscured.
37. First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. So much follows from the text of s.79(1)(a) itself, which refers to "altering the interests of the parties to the marriage in the property" (emphasis added). The question posed by s.79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.
38. Second, although s 79 confers a broad power on a court exercising jurisdiction under the Act to make a property settlement order, it is not a power that is to be exercised according to an unguided judicial discretion ...
39. Because the power to make a property settlement order is not to be exercised in an unprincipled fashion, whether it is "just and equitable" to make the order is not to be answered by assuming that the parties' rights to or interests in marital property are or should be different from those that then exist … The question presented by s.79 is whether those rights and interests should be altered.
40. Third, whether making a property settlement order is "just and equitable" is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s 79(4). The power to make a property settlement order must be exercised "in accordance with legal principles, including the principles which the Act itself lays down". To conclude that making an order is "just and equitable" only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.”
In the case before me, both parties seek an interim outcome impacting upon the shares and/or the net proceeds of the future sale of the investment properties. Both the wife and the husband assert a need to have sufficient funds to meet legal costs and living expenses and to reduce debt.
Conclusion
Having had regard to the relevant legislation and in light of the submissions and available evidence, the Court makes Orders as follows.
The case for selling all or some of the shares is not a compelling one. The Court is persuaded by the wife’s argument that the shares should, if possible, be preserved given the potential for income gain and capital growth. The need to sell the shares is further reduced by the parties’ decision to sell the two investment properties. The anticipated sale of these two properties will generate sufficient funds to retire debt and meet the various expenses of the parties, including anticipated legal costs. That said, should the share price drop below a particular dollar amount then the sale of some or all of the shares might become appropriate.
Consequently, the existing restraint over the further sale of the shares should continue in full force and effect. That existing restraint is, of course, subject to a further interim order that grants the husband liberty to apply “in respect to any possible urgent need to liquidate some of the (omitted). shares”.
The Court is satisfied that, prior to final determination, there should be an interim distribution of the net funds that will flow from the sale of the investment properties. The necessary funds can flow from the sale of the Property M property given both the likely net funds that will be available and the common view of the parties that this property is likely to sell first.
The wife can receive the sum of $130,000.00 and the husband the sum of $80,000.00 from the funds received from the sale of the Property M property (the “payments”). The characterisation of the payments will be a matter for determination by the Court at any final hearing of the matter or by agreement between the parties.
The husband will be required to cause the following debts to be paid by no later than time he receives his share of the payments:
i)Land rates $296.89
ii)Land rates $284.98
iii)ATO $3,766.00
iv)Visa card $3,487.00
v)(omitted) credit card $3,280.00
vi)(omitted) & Co. $1,350.00
vii)(omitted) & Co. $2,300.00
in addition to any amounts that may be still owing to third parties pursuant to paragraph 17 of the Minute.
Given this decision, the Court will hear submissions from the parties as to whether the matter may benefit now from a referral to a Conciliation Conference or to private mediation.
There will now be Orders and Notations of the Court to reflect this decision.
I certify that the preceding fifty-five (55) paragraphs are a true copy of the reasons for judgment of Judge Monahan
Date: 27 June 2013.
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