SELSTEAD & REIDLER

[2020] FCCA 2794

FEDERAL CIRCUIT COURT OF AUSTRALIA

SELSTEAD & REIDLER [2020] FCCA 2794

Catchwords:
FAMILY LAW – Property – competing applications for sole use and occupation by wife and sale of the former matrimonial home by husband – agreed that if house not to be sold wife should have sole use and occupation with the children – husband bears legal and evidentiary onus – husband’s income exceeds expenses – two issues raised by husband – proper housing and legal costs – husband’s income still exceeds expenses even with rental of what he identifies as a suitable property – husband has the capacity to pay current legal expenses and to save for future legal expenses – most legal expenses will not be incurred until near a final hearing – wife has a real arguable case that she will be able to retain the former matrimonial home at final hearing: Held – husband has not met onus – wife to have sole use and occupation.

Legislation:

Family Law Act 1975 (Cth), ss.68B, 114, 81H, 79, 75(2)

Cases cited:

Strahan & Strahan (Interim Property Orders) [2009] FamCAFC 166

In the Marriage of Harris (1993) 16 Fam LR 579; [1993] FamCA 49

In the Marriage of Bearup (1993) 16 Fam LR 797; (1993) FLC 92-412

Applicant: MR SELSTEAD

Respondent: MS REIDLER

File Number: SYC 5090 of 2019

Judgment of: Judge B Smith

Hearing date: 6 October 2020

Date of Last Submission: 6 October 2020

Delivered at: Sydney

Delivered on: 9 October 2020

REPRESENTATION

Counsel for the Applicant: Mr Livingston

Solicitors for the Applicant: Taylor & Scott Lawyers

Counsel for the Respondent: Mr Longworth

Solicitors for the Respondent: Hogg & Associates Lawyers

ORDERS

1. The matter be listed on 25 June 2021 at 9:30am for mention.

2. Any Application in a Case or Objection to Subpoena made returnable by the Registry from the date of these orders until the next adjourned date will not be heard on that date without the express leave of Judge B Smith.

3. Pursuant to section 114 of the Family Law Act 1975 (Cth), the respondent , Ms Reidler, shall have sole use and occupation of the property located at B Street, Suburb C, in the State of New South Wales (Folio Indentifier ...) (“the B Street, Suburb C Property”), to the exclusion of the applicant, Mr Selstead.

4. For the purpose of Order 3, the applicant is restrained by injunction from entering the B Street, Suburb C Property, or doing any act which interferes with the respondent’s use and occupation of the B Street, Suburb C Property.

5. The respondent’s costs of the interim application be reserved.

IT IS NOTED that publication of this judgment under the pseudonym Selstead & Reidler is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYC 5090 of 2019

MR SELSTEAD

Applicant

And

MS REIDLER

Respondent

REASONS FOR JUDGMENT

1. These are oral reasons for decision in relation to an interim hearing heard by me earlier this week. 

2. The short background is that the applicant husband and father is 51.  The respondent wife and mother is also 51.  The parties commenced cohabitation in 2009, had X in 2010, who is now 10, and Y in 2011, who is now 9.  They separated in 2017.  The applicant husband commenced proceedings on 2 August 2019.  The proceedings are about parenting and property.  However, the interim application before me related solely to financial matters. 

3. In effect, I heard two competing applications.  The wife filed an Application in a Case on 9 June 2020, at page 19 of her Court Book, seeking, effectively, sole use and occupation of the former matrimonial home at B Street, Suburb C in the state of New South Wales.

4. She has sought the orders based upon either section 68B and/or section 114 of the Family Law Act1975 (Cth) (“the Act”). The wife effectively seeks not only sole use and occupation, and that the husband be restrained from entering the property. I note that the wife and children are currently living in the former matrimonial home pursuant to orders made on 11 June 2020.

5. The husband’s response, filed on 10 July 2020, in effect seeks the sale of the former matrimonial home and orders around that there be an interim distribution of $100,000 to each party, as an interim property settlement. 

6. There are allegations of family violence made by the wife against the husband, which are denied by him.  The parties chose to run the matter with little reference to that material, other than to point out that on the wife’s case there is a Kennon claim which on the husband’s case is denied.  These being interim proceedings, I can make no findings about it.  However, I will note that I am satisfied that there is sufficient evidence to establish that the Kennon case is a potentially real, or genuine, issue to be taken into account in considering the relevant factors in respect of the wife’s final claim, although I cannot at the moment makes any findings as to whether I would accept either that the family violence occurred, or that if it did it was of a such nature so as to effect the appropriate orders in respect of property.

7. However, the parties, very sensibly for present purposes agreed that, if the house is not to be sold, they clearly cannot live together in terms of the first question that must arise on sole use and that, since they cannot live under the one roof, one party should live there, and that should be the wife, and the children. 

8. So the substantive argument run before me was whether or not the house should be sold pursuant to the husband’s application.  This is, of course, an interim hearing pursuant to Practice Direction 2 of 2017 and as modified by my directions and, as is always the case, this is necessarily a circumscribed hearing where it is neither possible nor permissible to make findings of fact.

9. All I can do is weigh the evidence to consider the probabilities as is required on interim hearing. 

10. The law is well-settled and there was little argument over it.  I was referred to Strahan & Strahan (Interim Property Orders) [2009] FamCAFC 166 interim property orders. There was also reference to In the Marriage of Harris (1993) 16 Fam LR 579; [1993] FamCA 49.

11. In summary, whilst it is usual to have a single once and for all assessment at final hearing, there is no issue that the Court has the power to make an interim order for sale of the former matrimonial home pursuant to section 81H and 79 noting the judgment in Strahan & Strahan at 132, although I will note this is a de facto cause, but there is no doubt the same authorities apply in the same way to the relevant provisions in respect of de facto relations, and there is no issue that this is a de facto relationship.

12. It is agreed that it is not necessary that there be compelling circumstances in terms of Harris, but the question is only whether it is appropriate to make an interim order, with the “overarching consideration” being “the interests of justice” and, of course, one of the issues that arises is that the order must be capable of alteration up to final hearing. 

13. In this regard, the wife, who says she wishes to keep the property on a final basis and who says she has the capacity to do so, points to statements such as in In the Marriage of Bearup (1993) 16 Fam LR 797; (1993) FLC 92-412 that:

    If that order were to be carried out,    as I have said, she would be required to leave the former matrimonial home with the children and the trial judge who ultimately hears the substantive applications would then have removed from his purview the alternative of granting her an order in respect of that property upon the conclusion of the hearing of those applications.

14. I note from Strahan & Strahan the majority at 139:

    139. We also emphasise that in order to establish an appropriate case for an interim property settlement order more is required than the mere fact that upon a final hearing the applicant would receive the property being sought (or an amount in excess of the funds being sought) from the other party.

15. And Thackray J at 226:

    The Court must first identify circumstances that make it appropriate to give consideration to exercising its power to make an interim order. It is at this stage that the Court has regard to the policy consideration that it is generally in the interest of the parties and the Court for there to be only one exercise of the s 79 power.

16. Obviously, it is generally accepted (See Strahan & Strahan 138) that litigation costs are relevant, although the issue of bona fides may be as well and, considering the same question, Thackray J again at 227 said:

    227. I accept the submission of senior counsel for the Wife that in applications designed to secure funds for legal costs it is appropriate for the Court to give consideration to whether the claim for costs is “genuine” – i.e. that a party is not bringing an interim application on a pretext. …

17. Now, the wife submitted that in this case the consequences of the sale, where it is not essential because there is a real prospect, she says, of her retaining the property after final hearing, would be “dramatic”, in particular because of the fact that she has certain medical conditions.  In summary, the medical evidence makes it clear that she has been diagnosed, through a process of elimination, with a “medical condition” and, as was indicated at page 124 of her Court Book, in summary she has “genetically poor connective tissue”.

18. It is also noted that, unfortunately, the children most likely have the same condition.

19. Now, I note that it is a generalised condition.  It may be causing the cyst on her right knee, and/or a recent possible uterine prolapse with discomfort impacting on physical capacity, and these are all related questions.  I will come to the issue of future capacity for gainful employment later, but she has given evidence, that is not accepted by the father, that the current residence is appropriate for her medical needs. 

20. At the wife’s court book, starting at page 52 at paragraph 63 of her affidavit, she says:

    The layout of the B Street, Suburb C property, along with the adaptations and modifications to the property make it easier for X, Y, Z and me to manage on a day to day basis without a medical condition.

21. I interpolate that Z is the wife’s child from another relationship, who lived with them part-time, according to the husband, from cohabitation, and came to live full-time from about 2016.  She continues:

    64. The B Street, Suburb C property has ramped access allowing us to avoid stairs when we enter and leave the property. It has an electronic remote-control gate that opens onto a secure driveway which allows me to park the car next to the ramped path that leads to the house.

    65. The B Street, Suburb C property is one level with no stairs. When we renovated the B Street, Suburb C property, we installed a kitchen with double spacing between the cupboards and the centre bench to allow for access using mobility aids or wheelchair as it is common for people with a medical condition to need mobility aids or wheelchairs. I designed the kitchen so that the cupboards are low and easily accessible. The sink has a levered tap with a hose extension and the sink and kitchen bench can be accessed from both sides. The rear doors are wide to again allow access using mobility aids or wheelchair.

22. She says that if the property were to be sold:

    …I would find the move physically challenging and believe it would have an adverse impact on my physical health.

23. I should note that at the moment the wife is still working and the medical material, which I will not on an interim application summarise in detail, indicates that the administrative duties which she does in the Employer D appear to be the type of reasonably sedentary duties one would associate with administrative work. Although she had to wear a Moon Boot, she appears to retain, at the moment, reasonable mobility. 

24. However, it is reasonable to consider that there must be a real possibility that she will require mobility aids at a significantly younger age than the average person would, based upon the medical evidence, and noting some of the things that have been said about the children that issue may also arise for them much, much sooner than would be the case for another person. That is the background in which she says that this house, in particular, is not fungible. 

25. The husband has set out, it appears, two major grounds for seeking the sale of the property.  That was the wife’s submission and, I must say, it does seem to be the case.  The two grounds are the husband’s ability to pay for accommodation and also to fund legal fees. 

26. He deals with the accommodation in his first Affidavit, and I note that an unusual approach to the compliance with my directions was followed, but since the material on the first Affidavit not relied upon was marked out I was able to follow it I accepted it.  He said at page 19 of the husband’s Court Book, paragraph 22:

    …from in or about April 2017 until January 2019 I continued to make mortgage repayments of approximately $895 per month. I eventually ceased making those payments as I was unable to afford renting a more adequate property than an old caravan located at the backyard of a friend's property. 

27. He effectively restates that issue at paragraph 43 on page 25 of his Court Book where he says:

    Ms Reidler continues to live in the spacious four-bedroom property while I reside in shared accommodation waiting for a property settlement to be able to afford better living arrangements for myself and the Children. I have done some research and found similar houses with at least three bedrooms located in or close to B Street, Suburb C are currently being advertised for rent at about $600 per week. My intention is to use my income and supplement it with part of my interim property settlement if the court makes the orders I am seeking, to rent a property in the same area so I am close to the Children and their school. Annexed hereto and marked with the letter "F" are copy internet advertisements from realestate.com.au that show properties advertised for rent in or close to B Street, Suburb C.

28. I note that the husband has annexed a series of property searches and they make good his statement.  There seem to be properties somewhere in the $500 range, some of them are above $600, but I think it was a fair statement for him to say that it’s about $600 as the appropriate range, and I note those searches are at page 49 of the husband’s Court Book and following. 

29. Now, the husband’s Financial Statement contained in his Court Book at page 60, filed on 10 July 2020, states that his total weekly income as a factory worker with Employer E is $1,430 per week and his total personal expenditure is $679 per week.  As counsel for the wife pointed out $1,430 minus $679 = $751, so he has $751 excess income per week on his own Financial Statement. 

30. The costs taken into account there include his current rent at $265 per week at item 21 of Court Book page 63.  Now, add that back, and then take off $600, and you get an excess of $416 of income over expenditure, and if you basically multiply that by about 52 weeks you get just over $21,500 of excess income per year. 

31. So there doesn’t appear to be any issue with the husband’s capacity to house himself to the reasonable standard that he has identified, and which will allow the children to stay too, within his current income. 

32. I note there is also an issue about whether the husband earns income from his art.  He says it’s a hobby; the wife says she believes he makes money out of it.  You would think he would get something, but it may not be sufficient or significant to include here; that may be a matter for trial.

33. I also note, of course, that another issue which I will come to, related to the husband’s art work, is the value of his collection which seems, to be quite a significant issue in the case. 

34. Now, the second issue, apart from the husband’s need to house himself, and which should be considered after taking into account the reasonable expenditure of $600 per week on accommodation, is his ability to pay his legal fees.  And of course, payment of legal fees, particularly where, as here, the wife has the benefit of the majority of the parties’ assets in terms of living in the house which has the equity, is one of those matters which may properly found the application that is being made. 

35. Now, the affidavit relied on at page 58 of the husband’s Court Book is from Mr F; he is one of the two equity partners in the law firm.  There was some criticism, I think, made about the fact that someone not running the case swore the affidavit, but it seems entirely appropriate to me that it should be one of the equity partners in the firm, who make the fundamental financial decisions, rather than an employed solicitor running the case.  He says that they’re not prepared to be responsible for or wait on a deferred basis for payment.  If the client is not awarded sufficient on interim costs the firm will cease representing him and Mr F is entitled to take that view. 

36. Of course, there are firms who, where there’s clearly assets in the offing, may take up the case.  Indeed, some even provide, through other agencies, litigation funding for disbursements, but that’s a different issue. 

37. Mr F is entitled to say that, and the husband is entitled to pick his lawyers, but the more complicating factors are that the husband appears to have paid some of his legal fees using a personal injuries settlement, which I will come to, but the Affidavit at paragraph 4 says the Work In Progress (“WIP”) is about $5,000, there are outstanding fees of $2,650 and $1,187 is held in trust.  So that’s somewhere over $6,500 outstanding, and the estimate is that the costs to be incurred will be no less than $80,000 in legal fees on account of costs and disbursements from now up to and including an interim hearing, callover and final hearing. 

38. Now, as counsel for the mother again pointed out, it’s a bit of a circular argument in respect of the $13,000 that are said to be involved in this interim hearing, because if that’s one of the core parts of what’s required you wouldn’t say the house has to be sold so that this interim hearing can be run. 

39. So let’s start with the $6,000 something, and then there’s $5,000 for filing, settling, setting down, valuers’ fees, and knowing the art collection is to be valued,  so that’s about $11,000.  It’s $13,200 for this interim hearing, but the overwhelming majority, just over $61,000 as I calculate it, is for the final hearing, and unfortunately for reasons beyond my control as a trial Judge the likelihood is that those costs aren’t going to need to be incurred for a couple of years, based upon the age of the cases I’m listing into next year. 

40. That leaves about $6,000 owing and the possible need for another $5,000 apart from the interim.  Now, the husband has got two different things:  he has got $8,500 in a bank account, which is the residue of the $85,000 he received from his personal injury which I will come to; he also has an art collection worth, he says, $10,000.  He also has the capacity to save something like $21,000 a year, so there doesn’t seem to be any need within the next two years or so for the husband to have access to funds in excess of what he currently has available either from his bank account or from his earning capacity. 

41. Now, I note of course that the art collection is a hotly disputed issue.  The husband puts a value on it of $10,000; the wife says up to $150,000 not because she knows anything about art, but because she says, in effect, that’s what the husband has told her and she has seen some art and they’re very valuable. 

42. There’s a suggestion it should be valued, and that’s one option, but if the parties need money the other option is to auction this collection now, and if there’s only $10,000 involved well then, presumably, I think it would be reasonable for the husband to keep that.  If it turns up as $150,000 involved, well that would provide him with all the money he needs.  It’s clearly matrimonial property, but it seems to me that that’s a solution no one has thought about and I would be very happy to make an order in that regard. 

1. That’s an asset which is easily disposable and which doesn’t require the wife and children to be put out of the house and if it is, as the husband says, not an extraordinarily valuable asset of $150,000 or more but merely $10,000 worth of art well then, it’s in nowhere near the same concept of being irreversible, because a collection of art that are common and only valued at $10,000 one would assume could be repurchased over time relatively simply and for $10,000 or thereabouts. 

2. I note there was an argument about the husband being entitled to use the Section 102NA scheme.  I haven’t given any weight to that in these reasons as I don’t think it’s necessary and therefore I will not consider it.  It raises complex policy questions that I do not considered necessary to deal with today. 

3. I also note that in this context the husband received, as he agrees, a payout of $85,000 in November 2019 that arose from a personal injury he suffered some years earlier with different dates referred to in the material.  There was a lot of argument about the fact that he didn’t disclose he had received it until May 2020, and he says, of course, he did eventually disclose it, but in any event, he spent most of it.

4. The wife asks about the appropriateness of that expenditure where he says he had $85,000, he spent some of it on costs, but it was joint matrimonial property and he has used it to pay some of his costs.  He has used it on other things for his own personal benefit, and yet he says now he needs this money for more legal costs, and the house should be sold because he spent that money which he had in his hand, and I give some considerable weight to that. 

5. We then come to the question of whether, realistically, there’s any chance of the wife keeping this asset; I think that is a relevant factor.  Now, I’ve got competing balance sheets, although they’re not as far apart on most things as they might be.  The husband’s summary is at page 7 and finishes at page 8 of his Case Outline.  The property values for the former matrimonial home are similar and the mortgage is agreed at about $358,000, and there is the substantial difference between the valuations of the art collection as I’ve indicated, and there are other items.  There is a superannuation of about $500,000.  On the husband’s figures in his sheet, which I will adopt as his position, it’s $1,593,000 including the $500,000 super, so just shy of $1.1 million net of super. 

6. The wife’s balance sheet is in her Court Book at page 103.  Same value for the house and for the mortgage, although she says the art collection could be up to $150,000.  There are other differences; again, super is agreed basically.  On her calculations its $1.74 million and she says $1.24 million clear of super.  So the parties aren’t that far apart on one view and the valuation or sale of the art collection might clear that up. 

7. However, the issues on contributions are, as one of the counsel submitted “vastly different”.  I won’t go through the details; the husband sets it out in his first Affidavit starting at page 17 of his Court Book, paragraphs 6 to 23.  Much of it has to do, it appears, with the value he ascribes to what he says the mortgage was over the property the wife brought in.  On his analysis they both brought in net equity of about $240-245,000.  On her analysis she brought in about 63% of the wealth.  Now, I can’t decide that, however, that’s what she says.  I note there were two inheritances of $80,000 and $97,000 received by the husband.  The wife says even with that, taking all things into account, she made the greater financial contributions.  There’s going to be a dispute about that obviously.

8. The other factors that are going to be in dispute, as I said, are the Kennon question, and I said that there is evidence that makes me say it’s a case where it may be arguable, and includes some objective evidence. 

9. Now, there’s also this question about the possible capacity for gainful employment and earnings by the wife.  I’ve read the medical material; it’s treating or clinical material.  Obviously, medical impairment is not necessarily an impairment of earning capacity nor of the capacity to obtain gainful employment in the open labour market.  The classic example of the need to pair either the physical or psychological impairment with the restrictions and then apply the restrictions across the occupation and jobs, and in particular within the job or occupation the person usually follows, is often pointed out as the fact that a lawyer who loses the tip of one of their fingers may suffer no actual loss of earnings, but for a world class pianist it may be something that takes them from number five in the world making millions of dollars a year down to number 3000 making nothing, or earning a small fraction of their former income teaching. 

10. So that’s always the case.  I can’t make any assessment at the moment on an interim basis, and the medical material that has been provided hasn’t really been directed to the relevant questions, but having some broad understanding of the nature of the condition I think there is a real prospect that if an appropriately qualified expert or experts look at the wife’s role, relatively sedentary though it is, both her current job and jobs within the occupation, and looks at the possibility of the need for mobility assistance, there may well be a real arguable case that well before the normal age of retirement there may be either a significant reduction in hours of work or indeed, even potentially, of an incapacity to work in her current job, and the n also within her current occupation or in another occupation or job for which she is reasonably qualified. 

11. Again, I can’t make any finding about that, but it is relevant when I think about whether or not the wife’s case that she has a chance, realistically, of retaining the house, that this is arguable, and on an interim case I think that is the question:  is it genuinely arguable? 

12. I note that the husband’s counsel pointed to the wife’s application to the bank, where she said she was going to work to retirement age, that’s her intention, but intention and capacity in the context of a deteriorating disease are different things.  I do note that that bank application, at Exhibit 1, is relevant to the fact that in the mother’s response she did seek somewhat unusual orders, at page 9 paragraphs 19 to 21 of her Response, that she have two years to pay the husband $100,000, she keeps the house and the mortgage as well as giving him a super split of $150,000.  I think what Exhibit 1 makes clear at page 4 is that, subject to health, the wife has a capacity to borrow $495,000 there at just on $2,700 per month.  That would be enough to refinance the mortgage and to give the husband $100,000.  So she has that capacity; she will be stretched repaying it potentially, although at $622 a week but that’s certainly not lacking in feasibility. 

13. The question then is, is it possible that the wife will get an allocation of, depending upon the values, on her case, assuming the art collection is what she says it is and the husband keeps it or keeps the money from its sale, she says it’s 61% to her and 39% to him, and possibly closer to 64/36 depending upon the value of the art. 

14. Now, it very much depends upon the findings of fact, but on her analysis of who brought the greater initial contributions, and on her analysis which I think is arguable that there’s a Kennon claim, and that she may have needs, not only in respect of reduced income because of her diminished earning capacity, which is a double-edged sword potentially in terms of her capacity to keep the house in the long run, but also in terms of her care needs, there could be, depending upon the medical evidence, quite substantial 75(2) factors in her favour.  I can’t make any finding about it, but on the question of whether or not it’s feasible that the wife could retain the house, I think it is feasible depending upon how the evidence turns out. 

15. In those circumstances, I’m not satisfied that the husband, who bears both the legal and the evidentiary onus to establish that the Court should exercise the discretion to require the sale of the house on an interim basis, has met the onus. 

16. I am not satisfied that it is an appropriate case in which to make the orders he seeks for the reasons I’ve given, in respect of both of his capacity to house himself and in respect of his legal costs, and also taking into account the fact that it is feasible that the wife may be able to retain the house. 

17. In those circumstances, noting the agreement as to the position that the wife can have sole use and occupation if the house isn’t to be sold, and that although there are allegations of family violence since the case wasn’t run on the basis of an exploration of that issue and since the husband has been willing to give certain undertakings before and since, it is possible and more appropriate in the usual way to make orders pursuant to section 114 of the Act. I think that is the more appropriate course over s68B.

18. In those circumstances I will make order 3 and 4 of the orders sought in the wife’s Application in a Case filed on 9 June 2020. 

19. I should note before I finish that I did inquire about the mortgage redraw capacity, that if there had been a capacity to redraw I would have considered that as an alternative, but I was informed after the evidence had closed, that there’s no redraw facility, so that wasn’t an option, and I’ve weighed that in coming to my conclusion. 

20. Those are my reasons I will enter orders accordingly.

I certify that the preceding sixty-two (62) paragraphs are a true copy of the reasons for judgment of Judge B Smith

Date: 13 October 2020