Seitz and Seitz

[2018] FamCA 618

FAMILY COURT OF AUSTRALIA

SEITZ & SEITZ [2018] FamCA 618

FAMILY LAW – PROPERTY – Where the wife seeks the husband make various payments, including interim spousal maintenance and a lump sum payment – where the husband has continued to financially support the wife and the children of the marriage after separation – where the wife asserts the husband’s expenditure post separation has been extravagant and he has depleted the parties’ assets – where the husband asserts that the income from his business is not sufficient to maintain it and support the current lifestyles of the parties and the children – where the single expert report supports the husband’s position.

Strahan & Strahan (Interim property orders) (2009) FamCAFC 166

APPLICANT: Ms Seitz

RESPONDENT: Mr Seitz

FILE NUMBER: MLC 3822 of 2017

DATE DELIVERED: 15 August 2018

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Macmillan J

HEARING DATE: 4 July 2018

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms O'Connell

SOLICITOR FOR THE APPLICANT: Perry Weston Lawyers

COUNSEL FOR THE RESPONDENT: Mr Werner

SOLICITOR FOR THE RESPONDENT: Westminster Lawyers Pty Ltd

Orders

IT IS ORDERED THAT

1. By 4.00pm on 24 August 2018 the husband pay to the wife the sum of $50,000 the characterisation of the said payment to be reserved for the determination of the trial judge with such payment to be made up as follows:

   (a)The proceeds of sale of the husband’s share portfolio; and

   (b)The balance to be paid to the wife by the husband out of either the B Bank Account (USA) or the C Bank (UK).

2. The husband and wife forthwith do all acts and things required and sign all necessary documents to place the property known as and situate at D Street, Suburb E in the State of Victoria (“D Street”) on the market for sale by an agent to be agreed upon by the parties and in default of agreement to be nominated by the President of the Real Estate Institute of Victoria upon such terms and conditions including as to the reserve price as may be agreed and in default of agreement as recommended in writing by the said agent.

3. The method of sale to be by agreement or in default of agreement as recommended in writing by the agent so appointed to conduct the sale save that if D Street is to be sold by public auction the auction be held by no later than the end of the first week of December, 2018.  

4. Upon settlement of the sale, the proceeds of sale be applied in the following order and priority:

   (a)first to pay all costs of the sale, including agent’s fees and commissions;

   (b)secondly, to discharge the mortgages and any other encumbrance registered over D Street including but not limited to the F Bank Line of Credit;

   (c)to pay to the husband the sum of $50,000 by way of partial property;

   (d)to pay to the wife the sum of $200,000 by way of partial property settlement; and

   (e)the balance to be held in an interest bearing account by the solicitor for the wife in trust for the husband and the wife pending further order or otherwise by agreement in writing between the parties.

5. The parties be and are hereby restrained from liquidating any motor vehicles, boats, caravans or any other vehicles except by Court order or with the written consent of the other party.

6. Within 14 days the husband provide to the wife’s solicitors full and frank disclosure with respect to the following:

   (a)Statements with respect to all bank accounts, loan accounts, credit cards from the date of separation to 1 May 2018 with respect to all such accounts held by the husband or any business entity in which the husband has an interest;

   (b)All dealings by the husband or any business entity in which he has an interest with the Company G;

   (c)All work undertaken by the husband or any business entity in which he has an interest from 1 January 2016 to date including copies of all contracts, variations to contract, invoices and receipts relating to such work; and

   (d)The alleged theft from the caravan located at the husband’s business premises in 2017 including all insurance documentation and police report.

7. Within 14 days the wife provide by way of disclosure copies of the following documents:

   (a)Bank and credit card statements since 1 January 2016 for all accounts to which the wife has or has had access;

   (b)Her most recent superannuation fund statement;

   (c)The most recent dividend statement in respect of Telstra Limited and all other shares held in her name;

   (d)Invoices and/or receipts for all items of domestic furniture and/or appliances purchased by the wife since separation;

   (e)A list of interstate and overseas trips undertaken by the wife since separation including details of related accommodation;

   (f)Statements since 1 January 2016 for all Flybuys and/or Frequent Flyer accounts operated by the wife;

   (g)Details of legal costs and disbursements expended by the wife in relation to the current proceedings;

   (h)Details of any private investigation costs expended by the wife since separation;

   (i)Details of any and all bank accounts opened by the wife in the names of any of the children of the marriage since separation;

   (j)Details of any applications for employment made by the wife since separation.

IT IS FURTHER ORDERED THAT

1. The husband and the wife be and are hereby restrained by injunction from drawing upon the F Bank Line of Credit secured over D Street save and except with the consent in writing of the other party or further order.

2. The husband and the wife be and are hereby restrained by injunction from disposing of, encumbering or otherwise dealing with the real and personal property in their sole names, joint names or in the name of any entity in which they or either of them have an interest save and except in accordance with these orders or with the consent in writing of the other party or further order.

3. All extant interim applications be otherwise dismissed and removed from the list of cases awaiting hearing.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Seitz & Seitz has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 3822 of 2017

Ms Seitz

Applicant

And

Mr Seitz

Respondent

REASONS FOR JUDGMENT

1. This matter was listed for hearing before me in the Judicial Duty List on 4 July 2018. Although the wife is the respondent in the substantive proceedings which were commenced by the husband on 24 April 2017, on 29 May 2018 she filed an Application in a Case seeking, inter-alia, orders requiring the husband to pay all arrears of mortgage payments and instalments due, periodic spousal maintenance in the sum of $1,500 per week, a lump sum payment of $50,000, such payment to be categorised by the trial judge, injunctive orders restraining both parties from making any further withdrawals from the mortgage accounts, financial disclosure and an order that the husband pay her costs of that application. 

2. On 29 June 2018, the husband filed a response to that Application in a Case seeking orders that the wife’s application be dismissed, that the former matrimonial home at D Street, Suburb E (“the former matrimonial home”) be sold and the mortgage over that property be discharged, the balance of the net proceeds of sale to be invested pending the final hearing and that the wife deliver up to him a 4WD motor vehicle and a caravan.  The husband also sought an order that the wife pay his costs of these interim proceedings. 

3. The husband, who is a self-employed tradesman, is 49 years of age.  Although, it is his evidence that he has high blood pressure and a back condition which restricts his mobility making manual work difficult it was not his case that he could not continue to operate his business.

4. The wife is 46 years of age.  During the marriage she was and is currently engaged in home duties and describes herself as having “the ongoing care of the children of the marriage”. It is the husband’s case that the wife is in good health, was formerly employed in administration, is capable of performing bookkeeping and office duties, but chooses not to seek employment. 

5. The parties were married in 1993 and separated in April 2016.  The divorce order made by the Federal Circuit Court of Australia took effect on 15 October 2017.

6. There are four children of the marriage, twins who are 22 years of age, another adult child who is 19 years of age and the youngest child who is 15 years of age.  The twins are employed as apprentices by the husband’s business one earning $866 per week gross and the other $732 per week gross and it is the husband’s case that they are not and should not be financially dependent upon the wife.  It is the wife’s case that the third child is not in employment or able to obtain employment due to various medical conditions including a rare blood disease.  She describes this adult child as “having substantial needs both with respect to his care, medical treatment and living expenses all of which are borne by me at present.”  Counsel for the wife was unable to tell me whether this child, if unable to work due to his health, was in receipt of any government benefits and if not why not. The youngest child is in year nine and it is the wife’s evidence that she is progressing well. All four children reside in the former matrimonial home with the wife.  

7. Although the husband admits that their third child had a blood condition, it is his case that he has made a good recovery as evidenced by the fact that he plays senior football for a local football club, not missing a game this season, and that he had been due to commence an apprenticeship this year and is perfectly capable of working. He further deposed that this child had been intending to commence an apprenticeship at the beginning of 2018 but that his mother had told him not to.

8. It is common ground that prior to separation, the husband met all of the family expenses, the business met their motor vehicle expenses and that in addition to $500 per week for housekeeping, the wife had access to a credit card.

9. It is the husband’s evidence that he has continued to support both the wife and the children including paying $500 per week child support for the youngest child, private health insurance for all four children at a cost of $380 per month, mobile phones for the two youngest children plus dongles for the internet (approximately $500 per month), the wife’s mobile phone (approximately $200 per month), landline for the former matrimonial home ($120 per month), home internet ($100 per month), home security and monitoring ($40 per month), council rates for the former matrimonial home (approximately $5,000 per annum) and land tax (approximately $755 per annum). The husband further deposed that in addition the business pays the registration and insurance for the two vehicles used by the wife and e-tags for three vehicles in her household. Although the husband had only recently filed his affidavit and the wife had not, in these circumstances, filed an affidavit in reply, she did not, other than in general terms, take issue with the husband’s evidence.     

10. It is important to bear in mind that these are interim proceedings and the evidence has not been tested. In these circumstances, I cannot make findings of fact when evidence is in dispute and must focus on those parts of the evidence which are not controversial. 

11. The wife alleges that since separation the husband has had access to the business accounts including the line of credit secured over the former matrimonial home, using those funds as he sees fit, including paying his legal fees and on what she asserts is extravagant personal expenditure. It is her case that between separation and February 2018, the husband increased the level of indebtedness of the line of credit from $1.2 million to its limit of $2.5 million, significantly eroding the value of the property available for division. The wife relies in particular on the husband’s purchase of a new prestige motor vehicle in May 2017, his overseas travel and the employment of his now partner in the business, which the wife asserts was done for the purposes of reducing the income of the business and getting access to additional income. The wife also asserts that the husband has rented a town house notwithstanding that he had spent significant sums converting part of his business premises into an “upmarket” apartment.

12. The husband denies the wife’s assertion as to his extravagant lifestyle, the degree to which it is asserted he has drawn down on the line of credit for personal expenditure and it is his case that the only way he could support himself, the wife and the children, including meeting loan repayments, was out of income from the business and when that was not sufficient, by using the line of credit to meet that expenditure. It is also the case that whilst the wife asserts that he has been living beyond his means, for example, travelling overseas on a regular basis, the wife has not only not sought employment in order to defray some of her expenses but has also sought to maintain the lifestyle they had prior to separation, which was not sustainable then and is not sustainable now.  Although the husband agrees that he purchased a new prestige car, he denies that the employment of his current partner is a sham or that he is renting the town house.

13. Although the evidence has not been tested and I cannot make findings about these disputed matters, there is no dispute that the only source of income available to the parties either during the marriage or since separation is the income from the business operated by the husband. I have the benefit of the single expert Mr H’s report dated 24 July 2017 with respect to the income of the business and its value. That report concludes that although the income of the business fluctuates, the Seitz Consolidated entities (“the Seitz Group”) reported losses for the financial years ending 2013, 2015, 2016 and for the period ending 31 May 2017. The Seitz Groups’ income for the year ending 31 May 2017 was $394,805 and after deduction of expenses there was a net loss of $103,034. Mr H’s opinion was that the reported expenses were representative of the nature of the business with “significant expenses being accounting fees, advertising, bookkeeping, insurance, motor vehicles, rent, salaries & wages and superannuation” and the figures as at 31 May 2017 did not include any allowance for depreciation. It is not clear whether the husband’s partners salary is included in the salaries and wages expense however even if the wife is correct and her employment is not bona fide the Seitz Group would still report a loss as at 31 May 2017. Based upon Mr H’s report, it also appears to be unlikely that there will be any significant change in the position of the Seitz Group in the foreseeable future.

14. The single expert adopted the balance sheet for the year ending 30 June 2016. Although the report will need to be updated and the parties will at that time have the opportunity to ask questions of him and if there is a final hearing, cross examine him, his report is the best evidence available to me at this time. The report was not the subject of any real challenge, the wife’s case being focused rather on the husband’s spending and the parties increased indebtedness. In my view the evidence of the single expert does lend weight to the husband’s case that the business is not profitable and that there never was and is still not sufficient income to maintain the business and support the lifestyle of the parties and the children of the marriage and that in these circumstances, that lifestyle was, during the marriage and continues to be, supported by drawing down on the line of credit. That of course does not mean that the husband has drawn down on the line of credit to support an extravagant lifestyle. That is a matter I am not in a position to determine.    

15. At the commencement of the hearing, the wife opposed the husband’s application for the sale of the former matrimonial home on the basis that she wished to retain the home as part of her entitlements.  It was her case that the husband had the capacity to pay not only the arrears but also ongoing mortgage payments pending a final hearing and to avoid the possibility of the bank taking action and had an obligation to do so, pending that hearing or a resolution of the matter.

16. The difficulty with the wife’s case for keeping the former matrimonial home is that the line of credit which has been treated by the single expert as a liability of the business has a current balance of approximately $1.24 million and it appears that the Seitz Group may not have sufficient assets to meet that liability. This does not take into account any increase in the line of credit since the report was prepared. The wife also appears to have no capacity to make any mortgage payments she might be required to make in order to retain the former matrimonial home. In these circumstances there is a reasonable likelihood that the wife would not be able to retain the former matrimonial home. 

17. Ultimately the wife, in my view sensibly, agreed to a sale of the former matrimonial home with the parties agreeing upon a timetable for the sale taking into account that the youngest child is still at school. Albeit they could not agree on the exact amount, the parties also agreed that the husband should make an immediate lump sum payment to the wife, reserving the question of how that payment should be treated for determination by the trial judge. It was the wife’s case that the husband should pay her $50,000, whereas the husband proposed that she receive the proceeds of sale of his share portfolio which he estimated to be worth $41,000 less the sale costs. On the basis of this payment, the wife did not pursue her application for periodic spousal maintenance. The husband also agreed to the wife receiving a partial property settlement of $200,000 out of the net proceeds of sale of the former matrimonial home. Finally, although not vigorously pursued, the wife sought an order requiring the husband to meet the payments on the line of credit pending settlement of the sale.

18. According to the summary of the parties’ property set out in the case outline filed on behalf of the husband, his share portfolio is not the only readily realisable asset. There are also two bank accounts in the US in the husband’s name holding at total of $35,000 and I see no reason why these funds cannot be used to top up the proceeds of sale of the shares in order to pay the wife the $50,000 she seeks in circumstances where she will need to rehouse at least herself and the youngest child of the marriage in anticipation of settlement of the sale of the former matrimonial home. If the husband is correct and the wife can either not establish that she has a need for spousal maintenance or that he does not have the capacity to pay the amount the wife receives, it will likely be treated as a partial property settlement and taken into account in the final adjustment of their property interests.

19. The husband also sought a partial property settlement of $200,000 which was opposed by the wife.

Legal Principles

1. Although the Full Court in Strahan & Strahan (Interim property orders) (2009) FamCAFC 166 (“Strahan”) opined that it is preferable for there to be one final hearing of an application for property settlement, the Full Court cited Bryant CJ and Coleman J in Gabel & Yardley [2008] FamCAFC 162 where their Honours indicated that the Court’s power may “be exercised by a succession of orders until the power…is exhausted” (“Gabel v Yardley”). The Full Court said in Strahan at paragraph 132 as follows:

   … in our view, when considering whether to exercise the power under s 79 and s 80(1)(h) of the Act to make an interim property order the “overarching consideration” is the interests of justice. It is not necessary to establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power. In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.

1. The Full Court in Strahan also said at paragraph 137 with respect to the exercise of power as follows:

   Once a court proceeds to exercise the power in s 79 of the Act, being in the substantive phase, a court is required to undertake consideration of the matters in s 79(4) including by reference to s 79(4)(e) the matters in s 75(2) so far as they are relevant. However consideration of such matters may be brief and if it is established that “it seems likely to the Court that … the applicant … will be likely receive by way of property settlement a sum sufficient to cover the advance, that would seem to be sufficient to enable the order sought to be made”: Zschokke; Polletti and Polletti per Nygh J and Wenz v Archer. As senior counsel for the Wife submitted, “provided scope can be found within the assets of the parties for an order of the size sought … then that should be the end of the matter”. In other words, in such circumstances the applicant would only be receiving what he or she was entitled to receive when the power was exhausted.

2. It is those remarks made by the Full Court which are in my view pertinent in this case. The wife is to receive an immediate payment of $50,000. How that is to be treated remains to be determined. The wife is also, with the husband’s consent, to receive a partial property settlement of $200,000. I am satisfied that it is just and equitable to make the order for partial property settlement in the wife’s favour. Whilst it is not necessary for the husband to demonstrate compelling reasons as to why he should receive a similar partial property settlement, he must in my view demonstrate to the Court’s satisfaction not only that it is just and equitable to make an order partially adjusting the parties interests in property but also that he is likely to receive by way of final property orders a sum sufficient to cover the advance he now seeks.

3. The difficulty in this case is that upon the sale of the former matrimonial home based upon the single expert valuation of $2.175 million, there will be proceeds of say $900,000 after discharge of the line of credit and selling costs, subject to any further increases in that line of credit.  The other significant effect of these orders is that the Seitz Group will no longer be liable for the line of credit which is likely to significantly increase its value. Although the husband in his Initiating Application has not specified the orders he seeks, there is nothing in his affidavit to suggest that he does not intend on retaining the business as part of his entitlements. This together with the fact that there is a significant dispute between the parties as to the husband’s expenditure since separation, there are only two other pieces of real property (one of which is the factory out of which the husband conducts his business and which is in any event included in the value of the Seitz Group) and the fact that the other assets not accounted for in the valuation of the Seitz Group are of relatively limited value or may not realise the value attributed to them, suggest that I should take a cautious  approach. I also note that although counsel for the husband included the vehicles owned by J Pty Ltd (“JPL”) in his summary of the parties’ assets, JPL is included in the valuation of the Seitz Group and on that basis it is likely that the value of those vehicles has already been accounted for in that valuation.

4. That being said I am mindful of the fact that the husband will also be incurring further legal fees and that after he has made the payment to the wife pursuant to these orders and in circumstances where counsel for the husband confirmed that his client will continue to make the payments set out in his affidavit for the benefit of the wife and the children of the marriage, including the child support of $500 per week for the youngest child, albeit some of those payments will not be necessary, once the property is sold, he will have limited funds from which to meet those legal costs. In all of the circumstances, I propose to order that the husband receive $50,000 by way of partial property settlement out of the net proceeds of sale of the former matrimonial home.

5. Finally the wife sought orders that the husband pay the accrued interest on the line of credit in the sum of approximately $16,000 and monthly interest payments pending settlement of the sale of the former matrimonial home. Counsel for the wife made general assertions about the husband’s business accounts being some $523,000 in credit as at 1 December 2017. This is disputed by the husband. Firstly he submitted that the accounts which counsel for the wife referred are operating accounts with fluctuating balances necessary for the operations of the business and that the current balances of those accounts is nothing like the  $500,000 plus that the wife says was in those accounts in late 2017. The husband also deposed that one of the accounts to which counsel for the wife had referred was an account with a balance of approximately $170,000, which had been divided equally by agreement between the parties in late 2017.    

6. Leaving aside the question of whether the husband’s personal expenditure has been excessive it is likely that at least as at 30 June 2017 the income of the business was insufficient to meet the party’s commitments and lifestyle, including the interest payments, and that in order to meet that expenditure they would have had to draw down on the line of credit.  There is no evidence based upon which it would be possible to find that the husband now has the capacity to meet the payments the wife seeks without having to draw down on the line of credit to meet other expenditure. Whilst the evidence will require testing, if the Court ultimately determines that the husband did have the capacity to make the payments the wife seeks independently of the line of credit, which in comparison to the amounts the wife asserts the husband has already applied for his own benefit will be relatively small, they can be taken into account upon the final resolution of the matter. 

7. In these circumstances, I do not propose to make the orders the wife seeks leaving the question of what, if any, adjustment needs to be made in the wife’s favour having regard for these matters, for determination at trial. However, the husband has access to the trading accounts for the operations of the Seitz Group and based upon the orders I propose to make there will be no obligation for him to pay either the arrears of interest or monthly interest on the line of credit, it being his case that those payments imposed a significant burden upon the income of the business. In these circumstances I propose to make an order that the husband and the wife not draw down on the line of credit without the consent in writing of the other party or court order pending the sale of the former matrimonial home and the discharge of the line of credit upon settlement.  I also propose to restrain the parties until further order or with the written consent of the other party from disposing of any other property, real or personal, This of course will not include the shares which are to be sold or the amount in the husband’s overseas bank accounts required to top up the amount payable to the wife to $50,000.

8. Each of the parties sought orders with respect to discovery, the wife for specific categories of documents and the husband for more general discovery. Neither party took significant issue with the orders sought by the other party and in those circumstances I propose to make orders in those terms.

9. The parties’ interim applications will be otherwise dismissed and removed from the list of cases awaiting hearing.

I certify that the preceding twenty-nine (29) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Macmillan delivered on 15 August 2018.

Associate:

Date: 15 August 2018