Shepherd and Shepherd
[2016] FCCA 3038
•25 November 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SHEPHERD & SHEPHERD | [2016] FCCA 3038 |
| Catchwords: FAMILY LAW – Property – characterisation of interim payments made to the wife – addbacks to asset pool including legal fees of both parties – addback of mortgage payments and living expenses when husband had the benefit of income from the parties joint business – whether advance by husband’s mother in 1991 or 1994 was a loan or contribution and whether it should be added back to the asset pool – adjustment for s.75(2) factors claimed by both parties – application for costs arising from husband’s tardy financial disclosure – application for periodic spousal maintenance by the wife. |
| Legislation: Family Law Act 1975, ss.72, 75, 79, 117 |
| Cases cited: Stanford v Standford [2012] HCA 52 Beklar v Beklar [2013] FAMCA 327 |
| Applicant: | MS SHEPHERD |
| Respondent: | MR SHEPHERD |
| File Number: | MLC 2099 of 2015 |
| Judgment of: | Judge Williams |
| Hearing dates: | 29 February 2016; 1, 2, 4 March 2016; 1 April 2016; 20 April 2016; 21 June 2016 |
| Date of Last Submission: | 17 October 2016 |
| Delivered at: | Melbourne |
| Delivered on: | 25 November 2016 |
REPRESENTATION
| Counsel for the Applicant: | Mr Whitchurch |
| Solicitors for the Applicant: | Australian Family Lawyers |
| Counsel for the Respondent: | Mr Taghdir |
| Solicitors for the Respondent: | Doherty & Colleagues |
ORDERS
The Husband pay to the Husband/Wife the sum of $478,000 (“the payment”) on or before 120 days from the date of these orders.
That contemporaneously with the payment:
(a)The Wife do all such acts and things and sign all such documents as may be required to transfer to the Husband at the expense of the Husband all of her right, title and interest in the real property situate at and known as Property T.
(b)The Husband discharge the mortgage, encumbering the real property and indemnify the wife against all payments and liability pursuant to all apportionable rates, taxes and outgoings of or with respect to the real property of whatsoever nature and kind
That in the event that the whole of the payment has not been made by the date/then the Husband sign all documents and do all things necessary to transfer to the Wife the real property to be held on trust for sale (“the sale”) the real property be forthwith sold altogether out of Court (“the sale”) and upon completion of the sale, the proceeds of the sale be applied:
(a)first to pay all costs, commissions and expenses of (the said trust transfer and) the sale;
(b)secondly to discharge the mortgage and any other encumbrance affecting the real property;
(c)thirdly so much of the payment as is then outstanding together with interest thereon at the rate presented by the Family Law Rules adjusted monthly from the date to the Wife;
(d)fourthly the balance to the Wife;
(e)fifthly the balance then remaining, if any, be paid to the husband.
That pending the payment or completion of the sale:
(a)The Husband have the sole right to occupy the real property and during such right of occupation the Husband pay all instalments pursuant to the mortgage and all rates and taxes and like apportionable outgoings of the real property as they fall due;
(b)The parties hold their respective interests in the real property upon trust pursuant to these orders; and
(c)Neither party encumber the real property without the consent in writing of the other party.
In the event the husband fails to comply with order 1 hereof and the real property is sold pursuant to paragraph 2 hereof, then the following orders apply:
(a)The net proceeds of sale shall mean the proceeds of sale of the real property after payment of the liabilities referred to in paragraph 3 (a) & (b) hereof;
(b)In the event the net proceeds of sale are not sufficient to make the payment in full to the wife, then the husband shall have a further 30 days from the date of sale of the real property, to pay the balance of the payment to the wife, together with any accrued interest.
(c)For the purposes of this paragraph, “date of sale” shall be the date on which the settlement of the sale of the real property is effected
Upon receipt of the payment in full subject to paragraph 5 hereof:
(a)The wife do all things required (if any) to transfer to the husband her right title and interest in the business (business omitted) and (business omitted) (“the business”);
(b)The husband be liable for indemnity and keep indemnified the wife in relation to any liability of whatsoever nature of the business.
That the Husband forthwith do all necessary acts and things and sign all necessary documents to transfer to the Wife at the expense of the Wife all his right, title and interest in the Honda motor vehicle.
That the husband be liable for and indemnify the wife against all payments in respect of the Centrelink debt of the parties.
That unless otherwise specified in these orders and save for the purposes of enforcing any monies due under these or any subsequent orders:
(a)Each party be solely entitled to the exclusion of the other to all superannuation and other property (including choses-in-action) owned by or in the possession of such party as at the date of these orders (the furniture, personal possessions, and like chattels in the property being deemed to be in the possession of the Husband).
(b)Insurance policies remain the sole property of the owner named thereon.
(c)Each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders.
(d)Any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
The husband pay to the wife for the maintenance of the wife the sum of $250 per week, until payment in full of the payment referred to in paragraph 1 of these orders, with such payment of spousal maintenance to be made each Friday by direct debit, into the wife’s nominated bank account.
The Court allocate, as required by s.90MT(4) of the Family Law Act 1975 (Cth), a base amount of $12,539.50 of the husband’s interest in (omitted) Super as at the date of these Orders to the wife.
Pursuant to s.90MT(1)(a) of the Family Law Act 1975 (Cth), whenever the Trustee of the fund makes a splittable payment out of the husband’s interest in the fund, the Trustee will:
(a)pay to the wife, or her administrators, executors, beneficiaries, heirs or assigns, to the extent permitted by law, the entitlement calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 (Cth); and
(b)make a corresponding reduction in the entitlement that the husband would have had in the fund but for these Orders.
Paragraph 11 has effect from the operative time and the operative time for the purpose of these Orders is 4 working days after the service of a sealed copy of these Orders on the trustee, with such service to be effected by the husband.
The Trustee of the fund will do all such acts and things, and sign all such documents as may be necessary so that, in accordance with the obligations set out under the Family Law (Superannuation) Regulations 2001 (Cth), the Trustee can calculate the entitlement awarded to the wife in accordance with paragraph 11 of these Orders and pay the entitlement whenever the Trustee makes a splittable payment from the husband’s interest in the fund.
The wife do all things necessary, including but not limited to, exercising her request pursuant to r.7A.05 of the Superannuation Industry (Supervision) Regulations 1994 (Cth) for the creation of a new interest in the wife’s name in the fund with the value of the transferable benefits calculated in accordance with r.7A.11 of the Superannuation Industry (Supervision) Regulations 1994 (Cth).
Pursuant to r.14F of the Family Law (Superannuation) Regulations 2001 (Cth), any payment from the husband’s superannuation interest in the fund made after the Trustee has created a new interest in the wife’s name in the fund are not splittable payments.
Until the happening of any of:
(a)the establishment of a separate account in the name of the wife;
(b)the transfer or rolling over into another superannuation fund of the wife’s entitlements created by paragraph 11 hereof;
(c)the wife satisfying a condition of release and being paid the payment split which was created by paragraph 11 hereof; or
(d)the wife executing a waiver of rights within the meaning of s. 90MZA of the Family Law Act 1975 (Cth) in relation to the payment split created by paragraph 11 hereof;
the husband be, and is hereby restrained by himself, his servants or agents from executing a death benefit nomination in favour of any person or doing any act or thing which would render any part of his interest in the fund a ‘non-splittable payment’ within the meaning of regulation 12 or 13 of the Family Law (Superannuation) Regulations 2001 (Cth).
Unless otherwise specified in these Orders, and save for the purposes of enforcing these Orders:
(a)Each party be solely entitled to the exclusion of the other to all property in the possession of such party as at the date of these Orders.
(b)Money standing to the credit of the parties in any bank account is to remain the property of the person in whose name the account stands.
(c)Save as provided herein, each party renounces any claims they may have to any superannuation or employment benefits or insurance benefits belonging to or earned by the other.
(d)All insurance policies will become the sole property of the owner named thereon unless specified otherwise in these Orders.
(e)Each party be solely liable for, and indemnify the other, with respect to any liability encumbering any item of property to which that party is entitled pursuant to these Orders or which is in that parties’ name as at the date of these Orders.
(f)Any joint tenancy is hereby severed.
IT IS NOTED that publication of this judgment under the pseudonym Shepherd & Shepherd is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 2099 of 2015
| MS SHEPHERD |
Applicant
And
| MR SHEPHERD |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
This is an application for property adjustment pursuant to s.79 of the Family Law Act1975 (“the Act”).
BACKGROUND
Relationship History
The applicant wife is aged 50. The respondent husband is aged 53.
The wife is unemployed and in her Financial Statement deposes to an income of $319.00 per week which she derives from Newstart. The husband asserts that she earns an unspecified income from a business known as “(business omitted)”.
The husband continues to operate a business established during the marriage, known as (business omitted) and (omitted) Pty Ltd. He deposes in his Financial Statement to an income of $2,186.00pw.
The parties commenced living together in (omitted) 1988, married on (omitted) 1995 and separated under the one roof on 22 November 2014. They physically separated on 28 February 2015 when the wife left the former family home situated in Property T, for what she described as an intended 3 week respite period. Save for a short period in April 2015, the wife did not live in the family home.
There are four children of the marriage, W born (omitted) 1999, X born (omitted) 2001, Y born (omitted) 2001 and Z born (omitted) 2001, all of whom have remained living in the former family home.
On 15 April 2015 orders were made by consent providing that the children remain living in the family home and that each parent would live with the children in the home, on a week about basis. This arrangement continued until 26 May 2015, following a s.11F report, when orders were made on 26 May 2015, for the children to remain living in the family home with the husband.
Final parenting orders were made by consent on 1 March 2016, which provide for the children to live with the husband, and for them to spend time with the wife.
RELEVANT LEGISLATION
Property proceedings between parties to the marriage are governed by the provisions of s.79 of the Family Law Act1975.
Section 79 (1) of the Act provides that the court may make such orders as it considers appropriate altering the interests of the parties in the property.
Section 79 (2) provides as follows:
The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
If the Court is satisfied that it is just and equitable to make an order altering the interests of the parties in property, s.79 (4) of the Act sets out the matters which the court must take into account when considering what order (if any) should be made.
That section provides as follows:
Section 79(4) In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:
Section 79(4) (a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
Section 79(4) (b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
Section 79(4) (c) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
Section 79(4) (d) the effect of any proposed order upon the earning capacity of either party to the marriage; and
Section 79(4) (e) the matters referred to in subsection 75(2) so far as they are relevant; and
Section 79(4) (f) any other order made under this Act affecting a party to the marriage or a child of the marriage; and
Section 79(4) (g) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
Prior to the decision of the High Court in Stanford v Standford [2012] HCA 52 the preferred approach to determine property matters was set out by the Full Court in the matter of In the Marriage of Hickey [2003] FamCA 395.
The approach, as set out in Hickey (supra) may be summarised as follows. Firstly, the court should make findings as to the identity and value of the property pool. Secondly, the court should determine the contributions of the parties both direct and indirect, including financial and non-financial contributions and then determine the contribution based entitlements of each of the parties; as a percentage of the value of the property of the parties. Thirdly, the court should determine whether any further adjustment should be made to the contribution based entitlements of the parties, after giving consideration to the relevant matters referred to in s.75(2) of the Act. Fourthly the court should consider the effect of those findings and decide what order for division of property is just and equitable.
In Stanford (supra) the High Court noted that s.79(1) enables the court to make such orders as it considers appropriate. However, prior to making any orders for the adjustment of parties interests in property, the court must first determine whether it is just and equitable to make any property orders, or to alter the parties interests in property.
The High Court stated in Stanford at [37]:
[37] First, it is necessary to begin consideration of whether it is just and equitable to make 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……. The question posed by S79(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.”
The High Court further stated at [42] that in most cases:
[42] In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s.79(4).
In summary, in the majority of matters the decision as to whether or not it is just and equitable for the Court to make property orders is resolved by the breakdown of the marital relationship and the mutual applications of the parties to the court for orders altering their respective property interests.
In this matter the parties have separated and both parties have made an application to the court seeking orders altering their respective property interests. It is clearly just and equitable to adjust property matters between the parties.
Having satisfied myself that it is just and equitable to make an order altering the interests of the parties in the property, the approach and considerations I must make are as follows:
(a)attribute value to the assets comprising the property pool;
(b)identify and give weight to the various contributions of each of the parties as set out in s.79 (4) (a) – (c) and make an assessment as to the entitlements of the parties based on their respective contribution;
(c)identify the identify the relevant considerations as set out in s.79(4)(d) - (g), including the matters set out in s.75 (2) so far as they are relevant, and then decide whether any further adjustment is appropriate;
(d)consider whether the proposed orders are just and equitable.
PROPOSALS
Applicant Wife
The wife seeks orders that she should receive 50% of the assets she asserts comprise the asset pool.
She contends that the contributions of each of the parties are equal and that there should not be any adjustment to either party for future needs.
The wife is seeking to transfer to the husband her interest in the family home and the business, and that in return the husband makes a cash payment of $692,978 to her.[1]
[1] Applicant's final proposed orders and submission.
In addition, the wife is seeking prospective spousal maintenance payments of $750.00 per week.[2]
[2] Applicant's final proposed orders, and submissions.
In her final submissions, the wife also sought an order that the husband pay to her $54,692 on account of her legal expenses.
Respondent Husband
The husband seeks orders that he should receive 65% of the assets he asserts comprise the asset pool
He also contends that the contributions of each of the parties are equal. However, he contends that there should be a 15% adjustment in his favour for future needs, resulting from his future obligations to maintain the four children.
The husband is seeking that the wife transfer to him her interest in the family home and the business and that in return he makes a cash payment to her of $274,796.[3]
[3] Respondent minutes of proposed final orders.
ISSUES IN DISPUTE AT THE HEARING
The following issues were in dispute:
i)The dissipation of the offset account between July 2011 and December 2014;
ii)The characterisation of the sum of $29,797 withdrawn by the wife from the (omitted) Bank offset account on 7/8 December 2014;
iii)The characterisation of the sum of $160,000 withdrawn from the (omitted) Bank offset account by the husband on 9 and 10 December 2014;
iv)The characterisation of payments to the wife pursuant to orders made as follows:
15 April 2015 ($20,000);
4 September 2015 ($15,000);
11 March 2016 ($20,000);
29 April 2016 ($7,000);
v)Whether the legal fees of both parties should be notionally added back into the asset pool;
vi)the circumstances of the lease/hire purchase of the Mercedes motor vehicle;
vii)Whether the sum of $10,000 advanced to the parties by the husband’s mother in 1994 was a gift or a loan;
viii)Whether the unilateral repayment of $31,344 by the husband to his mother in December 2014, should be notionally added back to the asset pool;
ix)Whether the Husband had other assets, including bank accounts in (country omitted);
x)The nature of the husband’s interest in the (country omitted) property;
xi)what adjustment should be made for both parties for factors under s.75 (2);
xii)The Wife’s application for payment of spousal maintenance of $750.00 per week.
EVIDENCE OF THE PARTIES
Wife
The wife relied on the following documents :
a)initiating application filed 17 March 2015;
b)affidavits of the wife filed on 17 March 2015 and the 11th of the breach 2016;
c)financial statement of the wife filed 16 February 2016;
d)affidavit of Mr D sworn 30 March 2016 in relation to the business valuation;
The wife gave evidence and was cross examined. She did not call any other witnesses. She answered questions in a straightforward and direct manner, and impressed me as a witness of truth. She was, however, very aggrieved about the conduct of the husband, and what she had ascertained, subsequent to separation, about their joint financial position.
Husband
The husband relied upon the following documents:
a)response filed by the husband on 14 April 2015;
b)notice of risk filed by the husband on 14 April 2015;
c)affidavits of the husband sworn on 14 April 2015, 1 September 2015, 3 September 2015, 15 February 2015 and 14th of April 2015 financial statements of the husband sworn on 15 April 2015 sworn on 23 July 2015 sworn on 15 February 2015;
d)affidavit of his mother Ms L sworn on the 15 February 2016;
e)affidavit of Mr K, business valuer sworn 31 March 2016;
The husband gave evidence and was cross examined. His mother, Ms L gave evidence on his behalf and was also cross examined. The husband was a loquacious and repetitive witness and tailored answers to questions to suit his own case. He did not answer questions in a responsive fashion. It was apparent from the evidence of his mother, that there had been discussions between mother and son about the mother’s evidence about both the terms of advancement of the $10,000 in 1991/1994 and the circumstances surrounding the (country omitted) property. Where the husband’s evidence differed from the wife’s, I preferred the wife’s evidence.
I note that on the second morning of the hearing, the husband’s counsel sought leave to file an affidavit summarising the cost of renovations to the Property T property. Despite procedural orders providing for the filing of all affidavit material on or before 15th February 2016, and the husband’s trial affidavit being filed on 10 February 2016, I granted leave to file the affidavit to avoid the necessity of lengthy evidence in chief. The wife’s counsel agreed that there was no prejudice to the wife in adopting this course of action.
THE ASSETS AND LIABILITIES OF THE PARTIES
The parties were unable to provide an agreed asset and liability statement at the commencement of the trial, despite being requested to do so.
At the commencement of the Wife’s case, her counsel provided a document headed “wife’s List of Assets” and indicated which assets were agreed and which were not.
The agreed assets and liabilities were as follows:
No. Asset Valuation 1. Property T $880,000 2. (business omitted) and (business omitted) ( agreed on day 6 of the trial) $509,000 3. Partial payment to wife ( 4 September 2015) $15,000 4. Honda (omitted) motor vehicle $2,000 Sub total $1,406,000 Superannuation 5. Wife $68,723 6. Husband $93,802 7. Sub total superannuation $162, 525, Liabilities 8. (omitted) mortgage secured against Property T $440,000 9. Centrelink debt $3,224 10 Sub –total liabilities $443,224 11 Total nett assets $1,125,301
The additional assets the wife sought to include were as follows:
No. Asset Valuation 12. Payment to husband’s mother $31,344 13. Property T contents $50,000 14. Cash at bank
( as at January 2015 $373,585) [4]$200,000 15. Cash at bank (wife) $760 16. Cash at bank (husband) $7,000 17. Wife’s withdrawal from (omitted) offset account December 2015)
$29,797 18. Husband’s withdrawal from (omitted) bank offset
( December 2015$160,000 19. Property in (country omitted) Not Known [4] In her Final Submissions, the wife stated that the cash at bank as at December 2014 was $360,000.
In addition, the wife sought to have characterised at trial the payments which she received on the following dates:
a)15 April 2015 ($20,000);
b)4 September 2015 ($15,000);
c)11 March 2016 ($20,000);
d)29 April 2016 ($7000);
I note that the wife agreed that the additional sum of $15,000 which she received on 4 September 2015, and which was characterised as partial property, should be added back into the pool.
The additional assets the husband sought to include in the pool were as follows:
No. Asset Valuation 20. Payments to wife -
15 April 2015
4 September 2015
11 March 2016
29 April 2016$20,000
$15,000
$20,000
$700021. Wife’s withdrawal from (omitted) bank offset
(7/8 December 2015)$29,797
I note that the husband agreed that the sum of $15,000, which wife received on 4 September 2015, which was characterised as partial property, should be added back into the pool.
Notional Addback of property to the asset pool
In order to determine the property pool available for distribution between the husband and the wife, it is necessary to determine the issues in dispute which are referred to at paragraphs 30(i) – (xii) hereof. This requires consideration of the principals relevant to the notional addback of property to the asset pool.
The Full Court in the recent matter of the Vass v Vass [2015] FamCAFC 51, at [138] stated the position in relation to notional add back of property which is no longer in existence but which one party has had the use of:
[138] There is no error committed per se in adjusting the parties’ actual property interests by a calculation involving notionally adding back into the pool sums which have been dissipated by the parties. We reject any suggestion that the decision of Bevan & Bevan (2013) FLC 93–545 — or, more particularly, the decision of the High Court in Stanford & Stanford (2012) 247 CLR 108 — is authority for any necessary contrary solution.
In Vass & Vass, the trial judge added back $50,000, which both parties agreed had been advanced by the husband’s parents during the marriage. The husband asserted the sum was a loan and he repaid the $50,000 to his parents, almost immediately after separation. The wife asserted that the $50,000 was a gift. The trial judge found that the sum was not a loan and added it back into the asset pool. A further sum of $25,000 was removed by the husband from the parties joint funds, ostensibly to pay for living expenses, despite the fact that he continued to operate the parties business and derive an income from the business.. This sum was also added back into the asset pool. The Full Court did not find any error in the trial judge’s approach, and dismissed that aspect of the appeal.
Living Expenses
Ryan J in Beklar v Beklar [2013]FAMCA 327, at [135],[136] and [137] noted:
[135] “As a general approach, the court has been that reluctant to notionally add back assets where monies that existed at separation have been spent on reasonably incurred living expenses; the point being that parties are entitled to continue to provide for their own support: M and M [1998) FamCA 42.
[136] In M and M, Baker, Kay and Chisholm JJ said at [2.10]:
It is well settled that save in exceptional circumstances a trial Judge should deal with the property as at the date of the hearing and make adjustments taking into account the various matters set out under s 79. (Wells v Wells (1977) FLC 90-285; Wardman v Hudson (1978) FLC 90-466; In the Marriage of Geyl 7 Fam LR 219). However, the particular justice of the case may make it appropriate to notionally add back assets which have been demonstrated to have been dissipated either during the marriage or post-separation. Normally it is necessary to demonstrate an appropriate basis for doing so, for example by wastage such as gambling or extravagant living. (Kowaliw v Kowaliw (1981) FLC 91-092; Fane-Thompson v Fane-Thompson (1981) FLC 91-053; Winnel v Winnel (1984) FLC 91-580; Townsend v Townsend (1995) FLC 92-569; Doherty v Doherty (1996) FLC 92-652.
[137] In C and C [1998] FamCA 143, the Full Court said that where the monies have been shown to have been reasonably disposed of, the notional add back approach should be the exception and not the rule.
Legal Fees
The issue of treatment of legal fees was considered by Ryan J Beklar (supra) at [141] and [142] Her Honour states as follows:
[141] In relation to the treatment of paid legal fees, the most current and complete expose of principle is found in Chorn & Hopkins (2004) FLC 93-204. Writing ex judicially, Boland J correctly summarised the principles that emerge from that case as follows:
• The treatment of funds used to pay legal costs remains ultimately a matter for the discretion of the trial judge.
• In determining how to exercise that discretion, regard should be had to the source of funds.
• If the funds used existed at separation and are such that both parties can be seen as having an interest in them (on account, of contributions) then such funds should be added back as a notional asset of the party, who has had the benefit of them.
• If the funds used to pay legal fees have been generated by a party post-separation from his or her own endeavours or received in his or her own right (for example, by way of gift or inheritance), they would generally not be notionally added back as a notional asset; nor would any borrowing undertaken by a party post-separation for payment of fees be taken into account as a liability in the calculation of the net property of the parties.
• Funds generated from assets or businesses to which the other party had made a significant contribution or has an actual legal entitlement may need to be looked at differently from other post-separation income or acquisitions.
• Outstanding legal fees themselves are generally not taken into account as a liability.
• If in the exercise of discretion it is determined that legal fees already paid should be taken into account as notional assets, then normally any liability associated with the acquisition of the monies used to pay the legal fees should also be taken into account. (Trends in the Full Court: Recent cases“ 9th Australian Family Lawyers’ Conference, Sabah 11-13 June 2005)
[143] The key factors that appear to have general application are the emphasis on the source of the funds and an approach which delivers a just outcome. In particular, whether the funds received were through one party’s efforts alone or in his or her own right came from assets in which both parties had an interest, and whether the funds were acquired pre or post separation.
In Beklar, the wife’s legal fees had been paid from various sources, including a withdrawal from a line of credit, a payment from the husband for that specific purpose and money borrowed from her family. The husband’s legal fees were paid from his post separation earnings
Her Honour did not agree with the wife’s submissions that all legal fees of both parties should be notionally added back to the pool. The wife submitted if that were not the case, then a substantial amount of her property settlement would be legal fees, whereas the husband had the benefit of substantial post separation income and he would not need to pay any legal fees from his property settlement.
Instead, Her Honour applied s.75(2)(o) to take into account the husband’s legal fees.
I will now consider the issues in dispute, as identified at paragraph 29 hereof.
The dissipation of the offset account between July 2011 and December 2014
In 2011 the parties’ family home was a property situated at Property C (“the Property C property”) which they had purchased in 1994. In September 2011, prior to the sale of the Property C property, the parties purchased the current family home, Property T (“the Property T property”) for the sum of $706,000. In order to fund the deposit on the Property T property, the parties drew down on the mortgage facility with the (omitted) Bank which was secured against the Property C property. Prior to the drawdown for the deposit, the mortgage facility had a nil balance.
The purchase of the Property T property settled prior to the sale of the Property C property and the parties obtained bridging finance from the (omitted) Bank to purchase the property. Upon the settlement of the sale of the Property C property, the Property T property was encumbered by a mortgage of approximately $565,000. At the same time, the offset account had a credit balance of $445,000, being the nett proceeds of sale of the Property C property after discharge of the bridging finance. Thus, the nett liability of the parties to the (omitted) Bank was in the vicinity of $120,000.
The wife’s evidence was that she did not access the offset account, from the date it was established until 7 December 2014. She said that she was busy running the household and caring for the four boys of the relationship, and that the family duties were divided along traditional lines, that is to say, she was responsible for the family’s domestic life and the husband was responsible for the financial management of the family.
The wife was cross examined at some length about the substantial renovations carried out at the Property T property shortly after settlement. She conceded that renovations had been effected, but was steadfast in her evidence that the husband financially controlled the renovations. Her financial involvement was limited to her purchasing various items on her credit card, at the husband’s request, and the husband thereafter paying her credit card bill. She gave examples of purchasing blinds and items from (omitted). When the husband’s counsel suggested to her that the renovations cost between $150,000 and $180,000, she vehemently disagreed with this estimate. She stated that she thought the cost of the renovations was around $100,000.
In response to questions about the source of the funds to renovate the Property T property, her evidence was that she thought the income from the business was sufficient to fund the cost, as she understood the turnover of the business, at that time to be around $1,000,000 per annum. Counsel for the wife tendered the financial statements for the business for the relevant years. In addition, the wife said the husband had purchased a Mercedes motor vehicle for $85,000 and she would not have expected him to do so if the parties had to rely on capital to fund renovations.
On the morning of the second day of the trial, Counsel for the husband sought to rely on an affidavit of the husband, summarising the renovation costs. He also tendered a bundle of receipts for the cost of the renovations, and an index to the receipts which totalled approximately $150,000.
I understand the husband’s case is that the expenditure on the renovations was for the benefit of the family and has resulted in an increase in the value of the Property T property. His evidence is that the majority of the renovation costs were paid from the funds in the offset account.
Between September 2011 and separation, the husband’s evidence was that he deposited his wages into the offset account. In addition he transferred large sums of money from the business accounts into the offset account, and these deposits are reflected in the offset account statements.
The balance in the business accounts and the husband’s personal savings account, as at 24 January 2015, shortly after separation is set out in paragraph 82 of the wife’s trial affidavit. The balances were as follows:
a)(omitted) Pty Ltd (omitted) Bank (omitted) $51,673.04;
b)(business omitted) (omitted) Bank (omitted) $200,464.82;
c)(omitted business) Cheque Account (omitted) $7,498.01;
d)(business omitted) (omitted) (the proceeds of the offset account) $113,949.20.
Whilst significant time was spent on this topic by both counsel, I am uncertain whether either party contends that there is sufficient evidence for me to make any finding about the conduct of the offset account prior to separation and indeed whether I should do so.
What is apparent is that the wife would have preferred and in fact had assumed that the funds in the offset account had been deposited into the mortgage account, and thereby reduce the indebtedness of the parties to the bank.
From the evidence of the husband, it is apparent that his use of the offset account was analogous to an equity line of credit for the family businesses. His evidence was that there were significant transfers of funds between the numerous business accounts and the offset account with the aim to reduce any interest payable to the bank, and to enable a source of funds with which to operate the businesses. It is curious that he sought to operate the finances in that fashion, given the very significant balances in the business accounts from time to time.
The wife ostensibly had access to these accounts during the marriage, but did not seem to make any enquiries of the husband or indeed the bank as to the structure of these accounts.
I accept the husband’s evidence that the renovations to the Property T property were paid substantially from the offset account. I rely on the affidavit of the husband filed 2 March 2016 and the extract from the husband’s diary, which is exhibit H10. I do note however, that prior to separation funds from the business accounts were routinely transferred into the offset account, and that it would be impossible to speculate what would have been the balance of the offset account if these transactions had not taken place.
On the evidence before me, I am otherwise unable to make any findings about the conduct of the offset account prior to separation.
What is of more significance in the context of the current dispute is the expenditure of the funds in the offset account from December 2014 to date, namely $189,797. This is referred to extensively in this judgement.
The characterisation of the sum of $29,797 withdrawn by the wife from the (omitted) Bank offset account on 7/8 December 2014
The wife agreed that she attended the bank on 7 December 2014 and on that date found out that the mortgage was $440,000 and that there was $189,797 in the offset account. The husband asserts that the wife transferred the funds on 8 December 2014. Nothing turns on the exact date. The indebtedness of the parties to the bank was therefore approximately $251,000.This was an increase of approximately $130, 000, from the nett liability in October 2011. The wife immediately arranged for the funds in the offset account to be transferred to the mortgage, to reduce the mortgage balance. She was apparently shocked to discover the extent of the mortgage balance.
On the 9 and 10 December 2014, the husband made two withdrawals of $80,000 from the mortgage, and placed these funds into accounts controlled by him. The wife then withdrew the balance of the redraw facility and transferred $29,797 from the mortgage and placed this amount into an account which she controlled.
The husband seeks that the withdrawal of this amount, by the wife be notionally added back into the asset pool.
The wife’s evidence was that of the $29,797 which she withdrew on 7 December 2014, a significant portion was applied towards her legal fees. Her Statement of Costs, which was filed on 30 March 2016 states that $19,382 of this amount was applied towards legal fees. The balance, $10,415 was applied by the wife for living expenses, subsequent to her departure from the former family home.
Counsel for the husband spent some time cross examining the wife about her alleged (omitted) business, (business omitted). It was put to her she was capable of earning an income from this business, as she had retained the capital equipment. The wife’s evidence was that she had earned $4,998 from the business over a three year period from 2012 to 2014 and that various letter drops of business brochures in her neighbourhood had not resulted in any business other than friends and family.
I accept that as the wife has been relied upon Centrelink benefits since the date she left the former matrimonial home, and has been unable to secure employment and that (business omitted) did not provide her with a capacity to earn income. Furthermore, her evidence as to the circumstances of her exclusion from the former matrimonial home, made it abundantly clear that she had no option other than to find alternative accommodation for herself.
I find that the application of the balance of the funds withdrawn by her (excluding legal expenses of $19,382) was for reasonable living expenses and to enable her to secure appropriate accommodation.
Accordingly I do not propose to notionally added back to the asset pool the sum of $10,415, which is the difference between the amount withdrawn by her and the amount expended on legal costs.
In relation to $19,382, which the wife applied to legal costs, I refer to the notional addback of the parties legal costs at paragraphs 117 to 137 hereof.
The characterisation of the sum of $160,000 withdrawn from the (omitted) Bank offset account by the husband on 9 and 10 December 2014.
The husband’s evidence as to his expenditure of the funds as withdrawn by him from the offset account is contained in paragraphs 16 to 18 of his affidavit sworn on 1 September 2015.
He was cross examined at some length about this expenditure. He initially withdrew $160,000 from the offset account and placed it into an account name (omitted business) Cash Maximiser Account (account number (omitted)). On 12 January 2014 the husband opened an account known as (business omitted) Online Savings Account (account number (omitted)) and deposited the funds into this account.
His evidence was that he routinely transferred income from both (business omitted) into the offset account both during the marriage and subsequent to separation.
The husband’s evidence as to the disposition of the $160,000 withdrawn from the mortgage equity account by him, was that the funds were disbursed as follows:
(1)$38,881 spent on reasonable living expenses between September 2014 and April 2015;
(2)$ 78,784 on mortgage repayments;
(3)$31, 344 paid to his mother on 18 December 2014;
(4)$12,720 for his legal fees;
(5)$50,000 paid to the wife pursuant to the orders of 15 April 2015 and 4 September 2015.
I will separately address the categories of expenditure.
Husband’s living expenses and mortgage payments
On 15 April 2015 orders were made restraining the husband from selling or dealing with the matrimonial assets without the written consent of the wife including the (business omitted) online savings account ((omitted)), except for the purposes of mortgage repayments. The husband’s evidence was that his understanding of this order, mandated payment of the mortgage instalments for the family home from this account. I do not accept that interpretation of the order.
The husband was cross examined at length about the business, (business omitted), and the respective financial performance of both businesses. He conceded that he ran the businesses and that the wife did not have any access to the business accounts.
The family’s financial affairs were structured during the marriage so that the wife received a monthly payment of $2700 which was applied by her towards of the benefit of the family. Following separation this amount was not paid to the wife.
The husband’s evidence was the payment of $2,700 per month to the wife ceased in November 2014 and thereafter he paid to her nominal amounts in December 2014.
Thereafter, apart from the balance of the offset account which she removed in December 2014 and the lump-sum payments which the wife received pursuant to court orders in April 2015 and September 2015, March 2016 and April 2016, the husband did not make any provision for the wife’s support from family income.
He applied the income from the joint business assets, (business omitted) and (business omitted), towards payment of his living expenses and credit cards and payment of his legal fees. As previously referred to, the husband continued to pay the mortgage from the offset account rather than pay it from income generated post separation.
The financial statements of both businesses were tended by counsel for the wife as were various bank statements of both (businesses omitted). Those documents indicate that the businesses were in receipt of significant income and it was common ground that the parties enjoyed a comfortable lifestyle during the marriage.
The husband was cross examined why he chose to pay his living expenses from January to March 2015 inclusive from the (business omitted) online savings account ((omitted)), instead of from the business income. His evidence was that he panicked because of the legal fees he was required to pay and that his taxable income “is going through the roof.”
It was put to him that the expenses which he had paid and which were now being paid from the remnants of the offset account had previously been expenses which had been paid from the business account and which were still capable of being paid from the business account.
Furthermore it was put to him that there were no outstanding tax bills as at January/February 2015 in relation to (business omitted) or (business omitted), other than the quarterly BAS statement which was due to be lodged in April 2015. The husband agreed with that proposition and agreed that the business accounts, at that time, had a healthy balance.
I do not accept that it was necessary for the husband to utilise the joint savings of the parties for the payment of his living expenses and mortgage payments. He was clearly able to access significant income from the businesses which would enable him to pay his living expenses, including mortgage payments.
As previously stated, at that time, the husband was not making any payments for the wife’s support.
As noted at paragraph 63 hereof, the balance of the business bank accounts, as at January 2015 was as follows:
(i)(omitted) Pty Ltd (omitted) Bank $51,673.04;
(ii)(business omitted) (omitted) Bank $200,464.82;
(iii)(omitted business) Cheque Account $7,498.01.
The husband had business accounts with credit balances totalling $259,635.00 at the time he was using the family savings to augment his living expenses and make mortgage payments. There was no evidence that he had any unusual or compelling liabilities which would prevent him from drawing on the business accounts to meet every day living expenses.
There was no reason put on his behalf why he did not utilise those accounts for his expenses, rather than use savings, except that he had legal expenses and that his personal tax liability was increasing.
I understand the reference to his personal tax liability means that if the husband withdrew money from the business accounts, this would be treated in the business books of account as income received by the husband and he would be liable to pay tax on any such amount.
It is also common ground that the husband was the only person to access these accounts during the marriage and post separation.
It is apparent that the manner in which he arranged his financial affairs was to reduce the joint savings from the offset account and thereby reduce the asset pool, and the wife’s entitlements.
Accordingly I intend to notionally added back to the asset pool the funds expended from the offset account by the husband post separation for living expenses and mortgage payments totalling $117,665
Payment to the husband’s mother
The payment to the husband’s mother is considered at paragraphs 143 – 158 hereof.
Payment of the husband’s legal fees
The payment of the husband’s legal fees is considered at paragraphs 118 – 131 hereof.
Payment to the wife pursuant to court orders
The payment of monies to the wife pursuant to the orders of 15 April 2015, 4 September 2015, 11 March 2016 and 29 April 2016 is considered at paragraphs 104 – 116 hereof.
The characterisation of payments to the wife pursuant to orders made on 15 April 2015 ($20,000) 4 September 2015 ($15,000), 11 March 2016 ($20,000), and 29 April 2016 ($7000)
Pursuant to paragraph 8 of orders made on 15 April 2015, the wife received the sum of $20,000 and pursuant to paragraph 1 of orders made by consent on 4 September 2015 the wife received a further sum of $30,000.
The 15 April 2015 orders provide that the sum is to be characterised at trial. The 4 September 2015 orders provide that $15,000 is a partial property settlement and the remaining $15,000 is to be characterised at trial
During the trial further orders was made by consent as follows:
(1)11 March 2016 providing that the wife was to receive $20,000, with such sum to be characterised at trial;
(2)29 April 2016 providing that the wife was to receive $7000, with such sum to be characterised at trial.
Therefore, I am required to characterise the sum of $62,000 which the wife has received pursuant to these four sets of orders.
The statement of legal costs provided by the wife on 14 June 2016 states, that in addition to the legal costs paid by her from the withdrawal from the offset account in December 2014, the wife has paid the sum of $38,531 in additional legal costs. The source of these payments was the funds released to her, pursuant to the four orders.
The wife’s legal fees of $25,177 are considered, at paragraphs 132 – 137 hereof.
The wife’s evidence of expenditure of the balance of the amounts paid to her pursuant to the 15 April 2015 and 4 September 2015 orders was that she had applied these funds towards rent in advance, purchase of household items and furniture as well as living expenses. As she had no rental history, she was required to pay $13,000 in advance rent. Furthermore, as the majority of the furniture and contents of the former family home remained there, she needed to buy whitegoods and furniture to establish suitable accommodation for herself. These capital expenses were in addition to her living expenses. Some of the capital expenditure was by credit card, and she obviously had to pay the credit cards when she received distributions from the husband.
The Statement of Legal Costs of the Applicant, dated 14 June 2016 states that the $20,000 received by the wife pursuant to the order of 11 March 2016, was applied towards legal costs. From the payment of $7000 pursuant to the order of 29 April 2016, $3,531 was paid towards legal costs. No explanation has been provided as to the disposition of the remaining $3,469, however, based on the wife’s income and earning capacity, I am entitled to conclude that this was applied towards her living expenses.
The wife’s additional legal fees of $23,531 are considered, at paragraphs 132 – 137 hereof.
I refer to my comments at paragraph 72 and 73 hereof in relation to the wife’s earning capacity at that time.
Post separation, the wife’s income, apart from Centrelink benefits, was from the distributions she received, pursuant to court orders. After deduction of legal fees, this may be summarised as follows:
i)between December 2014 and April 2015, $ 10,415;.
ii)between April 2015 and September 2015, $5,383;
iii)between September 2015 and April 2016 , $15,000;
iv)between April 2016 and the 14 June 2016, $3469;
Therefore, between December 2014 and June 2016, the wife’s income, was $34,267 for a period of 18 months, which equates to approximately $450.00 per week.
This is in stark contrast to the income of the husband during the same period. I am cognisant of the differing expenditure of both parties and their living arrangements and in particular obligations of the husband to support the children. However, I consider that the explanation of the wife of the disposition of these funds to be entirely reasonable.
The amount of $30,798 will not be notionally added back.
Whether the legal fees of both parties should be notionally added back into the asset pool
The party’s affidavits did not state the amount which each party had incurred for legal fees, the amounts paid to the date of the trial by both parties, the amounts outstanding and most importantly, the source of any payment of legal fees. Accordingly I requested each party to provide to the court a statement setting out that information. Updated statements were provided by the legal practitioners on the last day of hearing, 16 June 2016.
The Husband’s legal costs
The statement of legal costs provided by the husband states that he has expended the sum of $81,137 on legal costs and disbursements.
The source of payment of $12,720, between 22 January 2015 and 14 April 2015, was the (business omitted) Savings Account ((omitted)). These funds were removed from the offset account which existed at separation.
The source of payment of $45,240 of legal costs which were paid between 11 May 2015 and 13 March 2016 was the (business omitted) business account, and in the case of $19,500 which was paid on 17 February 2016, this was expressed to be a loan from (business omitted).
The source of payment of $23,177 of legal costs which were paid between 3 March 2016 and 15 June 2016 was the (business omitted) business account.
Of the $81,137, the sum of $7,480 was applied towards the payment of joint valuations of the property and the businesses.
I refer to my comments at paragraph 92 -99 hereof as to the manner in which the husband arranged his financial affairs post separation.
As to the payment of $68,417 of legal costs from post separation income of the husband, his income was solely derived from (business omitted) and (business omitted). Both businesses had been long established and both parties quite properly agreed that the value of the businesses should be included in the asset pool. It was also agreed that following her departure from the former matrimonial home in fairly acrimonious circumstances, the wife apart from the distributions made to her pursuant to court orders, did not receive any benefit from any of the matrimonial assets post separation.
I refer to paragraph 47 hereof, in relation to authority which refers to the treatment of legal costs paid from post separation income, generated from assets or businesses to which the other party has made a significant contribution or has a legal entitlement.
In this case the parties lived together for 26 years, and it is appropriately conceded by both parties that the accumulation of their joint assets has occurred during the marriage and that their respective combined contributions are equal.
It is also evident that the contribution of the wife has been primarily as a homemaker and parent, she having been the primary carer of the four boys of the marriage, three of whom are triplets. The husband’s contribution has been primarily as the family breadwinner.
I do not consider that the differing nature of the contributions is of any significance.
The inevitable result of any property settlement is that the wife’s legal fees will be deducted from the capital she will receive. This will not be the case for the husband, as he has had the benefit of payment of his legal fees from income from the joint asset. If the husband’s legal fees, which have been paid from joint assets are not notionally added back into the property pool I consider this would result in a significant inequity for the wife.
The facts of this dispute may be distinguished from those of Beklar, as in that case, the source of payment of the husband’s legal fees was post separation income, which was not derived from joint assets, but rather from his own endeavours.
Accordingly the sum of $81,137 spent by the husband on legal fees will be notionally added into the property pool.
Wife’s legal costs
The statement of legal costs provided by the wife states that she has expended the sum of $57,530 on legal costs. The source of payment of this amount was the amount she withdrew from the offset account on 11 December 2014 and distributions which she received pursuant to the orders of 15 April 2015, 4 September 2015, 11 March 2016 and 29 April 2016.
These may be summarised as follows
a)$19,382 from the withdrawal from the offset account on 11 December 2015
b)$14,617 from the payment of $20,000 paid to the wife pursuant to the interim order of 15 April 2015
c)$20,000 from the payment of $20,000 paid to the wife pursuant to the interim order of 11 March 2016.
d)$3,531 from the payment of $7,000 paid to the wife pursuant to the interim order of 29 April 2016.
I refer to paragraph 77 – 81 hereof, which sets out the husband’s removal of $160,000 from the offset account. Clearly the majority of funds in the husband’s (business omitted) Savings Account ((omitted)) originated from the parties joint offset account, which existed at separation.
It was no doubt contemplated by the parties, that funds to be paid to the wife pursuant to the orders of April 2015, September 2015, March 2016 and April 2016, would partially be applied towards the payment of the wife’s legal costs which is precisely what eventuated.
The settled authorities clearly permit notional addback of funds disbursed by premature property settlement and applied to legal costs
Accordingly the sum of $57,530 spent by the wife on legal fees will be notionally added into the property pool.
The circumstances of the purchase and lease/hire purchase of the Mercedes motor vehicle
During the marriage the husband purchased a Mercedes motor vehicle, which was a seven seater van. The purchase price for the Mercedes was initially paid by the husband from the business accounts.
This is not relevant.
(na) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
Once the wife obtains paid employment, it is anticipated that she will be assessed to pay child support for the benefit of the children. It is not possible to quantify any future amount.
(o) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
There are no other factors which have not been referred to which are required to be taken into account.
(p) the terms of any financial agreement that is binding on the parties to the marriage; and
This is not relevant.
(q) the terms of any Part VIIIAB financial agreement that is binding on a party to the marriage.
This is not relevant
Is it just and equitable to alter the parties’ property interests
Both parties, in their respective Application and Response have sought orders adjusting their respective interests in property. I refer to paragraph 20 hereof.
As a result of the findings made relating to contributions and future needs, I am satisfied it is just and equitable to make orders adjusting property between the parties.
Adjustment of interests
Taking into consideration the above matters, I am satisfied that there should be an adjustment in favour of the husband pursuant to s.75 (2) factors.
I am satisfied that it is just and equitable that the wife receive 45% of the matrimonial property and the husband receive 55%.
On the basis of the property pool I have determined, the wife will retain/receive non superannuation assets of $552,530 and the husband will retain/receive non superannuation assets of $697,922.
This will be achieved by the wife retaining the benefit of certain assets worth $59,530 and receiving a cash payment from the husband of $ 478,000, (total of $552,530).
In relation to superannuation assets, the current division of superannuation is approximately 42% in favour of the wife and 58% in favour of the husband. I propose to make an order equalising the respective superannuation entitlements. This will achieve an overall division of all assets 45% to the wife and 55% to the husband.
The division of assets I have determined is summarised as follows:
Wife’s Assets
| Retention of funds paid for legal costs | $57,530 |
| Retention of partial property settlement | $15,000 |
| Honda Motor Vehicle | $2,000 |
| Payment from husband | $478,000 |
| Wife’s superannuation | $68,723 |
| Superannuation adjustment from the Husband | $12,539.50 |
| Nett Assets | $633,792.50 |
Husband’s Assets
| (business omitted) and (business omitted) | $509,000 |
| Property T | $880,000 |
| Retention of funds paid for legal costs | $81,137 |
| Retention of funds paid from the offset account for living expenses and mortgage payments | $38, 881 |
| Retention of monies paid to husband’s mother | $31,344 |
| Mortgage encumbering Property T | (-$440,000 ) |
| Payment to wife | (-$478,000 ) |
| Centrelink debt | (-$3,224) |
| Superannuation adjustment to the Wife. | (-$12,539.50) |
| Husband’s superannuation | $81,262.50 |
| Nett Assets | $779,184.50 |
The husband’s final submissions refer to the practical effect of the orders which I propose to make. I am cognisant that the four children of the marriage live with the husband and are likely to remain living with him in the immediate future. The husband requires the income from his business to support himself and the children. It is unlikely that the wife will ever be in a position to make a significant contribution towards the support of the children, although she will be assessed to pay some child support once she obtains employment.
I have some doubt that the husband will be able to borrow sufficient funds to pay the wife her entitlements, even if I acceded to his proposal of a payment to the wife of $274,796. The property is already encumbered by a mortgage of $440,000 and I anticipate that the husband may not be able to borrow sufficient funds to pay the wife her entitlements. There is a sense of inevitability that the Property T property will need to be sold with payment of the proceeds of sale to the wife. However, I am prepared to afford the husband the opportunity to make the payment to the wife, and retain the property if he is able to do so.
After hearing the evidence of the husband’s mother that firstly, she has retained the monies paid to her by the husband, and secondly that she would agree to pay those monies to her grandchildren if asked, I have no doubt that she would also repay those monies to her son, if requested, to assist him to satisfy the orders I intend to make. This would be an additional source of funds for the husband to meet the payment to the wife.
Spousal Maintenance
The wife initially sought future spousal maintenance of $500.00 per week for an unlimited period of time. In her final submissions she seeks a payment of spousal maintenance of $750 per week for 18 months.
The wife’s income is set out in her Financial Statement at $252 per week, which is her new start payment. Her evidence was that she had not been in the workforce since shortly prior to the birth of her oldest son and she had devoted herself to the role of homemaker and parent.
Prior to ceasing work she was employed at (employer omitted) in her early 20s as a (occupation omitted). Her responsibilities were to (duties omitted). She had not completed her high school certificate. Her only formal qualifications were a (omitted) course which she completed in 1986. She did not work in (omitted) field until around 2012.
During the marriage she had purchased some equipment to enable her to operate a (omitted) business from home, known as (business omitted). Her evidence was that she had purchased equipment on her credit card during a six week period when the husband was overseas. She had attempted to promote and advertise the business via a local letter drop, however, she had not had any response. She agreed with counsel for the husband that she had kept business records for the 2 to 3 years between 2012 and 2014 when she had attempted to operate the business. These records, which were not produced, established that she had earned the sum of $4998 during that period.
In June 2015, subsequent to separation the wife had undertaken a course in (omitted) which was in Brisbane. The husband had paid for the course prior to separation and her recollection was that the cost was between $500 and $1000 and the duration of the course was one week. She had been unable to obtain any employment in this area of expertise. Furthermore she had been unable to obtain insurance for this line of work and although she had registered an ABN, she had been unable to follow her dreams to establish this type of business.
Section 72 of the act sets out the requirements for an order for spousal maintenance. s.72 provides as follows:
Right of spouse to maintenance
(1) A party to a marriage is liable to maintain the other party, to the extent that the first‑mentioned party is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately whether:
(a) by reason of having the care and control of a child of the marriage who has not attained the age of 18 years;
(b) by reason of age or physical or mental incapacity for appropriate gainful employment; or
(c) for any other adequate reason;
having regard to any relevant matter referred to in subsection 75(2).
(2) The liability under subsection (1) of a bankrupt party to a marriage to maintain the other party may be satisfied, in whole or in part, by way of the transfer of vested bankruptcy property in relation to the bankrupt party if the court makes an order under this Part for the transfer.
The first matter which must be answered in order to determine the rights of a party to spousal maintenance, in this case the wife, is whether or not she has a demonstrated that she is unable to support herself adequately by reason of one of the factors set out in s.72(1) of the Act.
It is the submission of the husband that the wife has not demonstrated that she is unable to support herself, notwithstanding that she has been out of the workforce since 1999.
The tenor of his submissions was that the wife would be able to obtain suitable employment if she was genuinely inclined to do so. It was also submitted that the capital she would receive from a property settlement would be sufficient to enable her to support herself until she was able to find suitable employment. The wife’s employment prospects are not limited by her care of the children.
In Brown and Brown (2007) FLC 93-316 at [161] the Full Court summarised the principles to be applied. These include the following:
(a)the idea that “adequate” means a subsistence level has been firmly rejected;
(b)where possible both spouses should continue to live after separation at the level which they previously enjoyed if this is reasonable, although the parties standard of living may have to be lower if financial resources are insufficient to maintain the standard;
(c)it is not necessary for an applicant for maintenance to use up all capital in order to satisfy the requirement that he/she is unable to support himself/herself adequately.
Whilst the wife will be receiving a cash payment from the husband, or proceeds of sale of the Property T property, the reality is that this payment will be deferred to either enable the husband to refinance the mortgage secured against the Property T property, or pending settlement of the sale of the Property T property.
I am satisfied that the wife has established that she is unable to support herself adequately during the period that she will be required to wait for a cash payment and in addition prior to her securing permanent employment.
In comparison the husband continues to receive the income from both businesses and from his evidence the quantum of that income appears to be somewhat discretionary. Much of the husband’s evidence was concerned about increasing his personal tax liability in the event he made higher payments of income to himself, from the profits of the business. He conceded that the businesses were travelling well financially and this had been the case for a number of years. It is apparent from the bank statements tendered that the business has accumulated considerable cash reserves from income generated by it. When cross examined, the husband conceded that there were no unusual liabilities for either business, which would need to be met from accumulated cash reserves.
The husband’s two Financial Statements sworn 22 July 2015 and 15 February 2016, both disclose an income of $2186.54 per week, which is an income of around about $113,000 gross per annum. Part N of the Financial Statement discloses the husband’s weekly expenditure. Part B of both Financial Statements[5] state that the total personal expenditure of the husband’s $3112.70 per week.
[5] At paragraph 2 B.
The Financial Statement sworn 23 July 2015, at paragraph 50 discloses a liability of the husband to (omitted) Pty Ltd (the family business) of $20,000, however, the Financial Statement of the 15 February 2016, states, that there is no longer any such loan. There are no other liabilities disclosed in either of the financial statements which would explain the alleged deficiency of income and expenditure to the extent of approximately $1000 per week.
I am aware that the husband has paid the mortgage payments from the offset account, which is now depleted. He has also progressively paid some of his legal fees ($68,417) from cash flow of (business omitted) and (business omitted) without apparently incurring any other liability.
I am satisfied that the husband has the capacity to pay some spousal maintenance for the wife for a limited period of time, however, I am not satisfied he has a capacity to pay spousal maintenance of $750 per week.
The wife is seeking the sum of $750 per week. Her income in her Financial Statement[6] is stated at $ 252 per week and her expenditure is stated at $1,113 per week.
[6] Financial Statement of the wife sworn 11 February 2016.
Accordingly an order will be made that the husband to pay spousal maintenance to the wife in the sum of $250 per week until payment of the wife’s entitlement or property settlement. This will supplement the wife’s income pending receipt of a lump sum and will enable her to undertake a further course of study and to actively seek employment.
Wife’s claim for costs
In her final written submissions[7] the wife seeks that the husband pay to her an amount of $54,692.42 on account of costs, which she alleges she has incurred as a result of the husband’s recalcitrant behaviour and failure to disclose. There is no evidence about the following:
a)any itemised account which may have been prepared by her solicitors;
b)whether the sum claimed has been calculated according to the relevant scale of costs or another method of calculation such as indemnity costs;
c)whether that sum is in addition to the costs the wife would otherwise have incurred in the absence of the husband’s alleged behaviour;
d)how the specific costs incurred were caused by the husband’s alleged behaviour.
[7] At paragraph 17.
Legal principles applicable to costs
Section 117(1) of the Family Law Act1975 (“the Act”),states, subject to the provisions of s.117(2), that the general rule in proceedings in this court, is that each party to proceedings shall each bear his or her own costs.
Section 117 (2) of the Act provides as follows:
If, in proceedings under this act, the court is of the opinion that there are circumstances that justify it in doing so, the court may subject to subsections (2A), (4), (4A) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
Section 117(2A) of the Act provides, that in considering what order (if any) should be made for the payment of costs, the court shall have regard to the following matters:
(a) the financial circumstances of each of the parties to the proceedings;
(b) whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c) the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f) whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g) such other matters as the court considers relevant.
In the Marriage of I (No.2) (1995) FLC 92-625, the Full Court said that the relevant matters in s.117(2A)
“must all be taken into account and/or balanced in order to determine whether the overall circumstances justified the making of an order for costs”
Section 117(2A) (a) the financial circumstances of each of the parties
The respective financial circumstances of each of the parties is referred to extensively at paragraphs 224 to 242 hereof, in the context of the wife’s application for periodic spousal maintenance.
Section 117(2A)(b) whether any party is in receipt of legal aid
There is no evidence before me that either party is in receipt of legal aid.
Section 117(2A)(c) The conduct of the parties to the proceedings in relation to the proceedings
The wife’s closing submissions assert that the husband’s conduct warrants an order for costs being made against him. It is asserted by the wife that the relevant circumstances are as follows:
i)the husband’s failure to disclose to the wife’s practitioners his financial circumstances;
ii)a failed Conciliation Conference;
iii)an application to the court seeking financial disclosure;
iv)preparation of a notice to produce and issue of subpoenas.
Section 117(2A) (d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court
The wife asserts that the husband failed to comply with interlocutory orders for disclosure and discovery.
Section 117 (2A) (e) whether a party to the proceedings has been wholly unsuccessful
This is not a matter where the wife alleges that the husband has been wholly unsuccessful.
Section 117 (2A) (f) whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer
This is not a relevant consideration.
Section 117 (2A) (g) any other matters the court considers relevant
Any other relevant matters are set out in this judgement.
Quantum of costs
Rule 21.02 of the Federal Circuit Court Rules 2001 provides:
21.02(2) In making an order for costs in a proceeding, the court may:
(a) set the amount of costs; or
(b) set the method by which the costs are to be calculated; or
(c) refer the costs for taxation under Part 40 of the Federal Court Rules or under chapter 19 of the Family Law Rules; or
(d) set a time for payment of the costs, which may be before the proceeding is concluded.
The wife does not provide any particulars of the calculation of the costs she claims
Conclusion as to costs
I am not satisfied that the factual circumstances of this matter justify a departure from the general rule that each party should bear his or her own costs.
Having considered the wife’s submissions in relation to the application for costs, the relevant factors which I am required to consider pursuant to s.117(2A) of the Act and having regard to the available evidence of the financial circumstances of both parties, I do not propose to make an order that the husband should pay the cost as claimed by the wife.
I certify that the preceding two hundred and fifty eight (258) paragraphs are a true copy of the reasons for judgment of Judge Williams
Date: 25 November 2016
Key Legal Topics
Areas of Law
-
Family Law
-
Equity & Trusts
-
Property Law
Legal Concepts
-
Remedies
-
Costs
-
Constructive Trust
-
Injunction
-
Statutory Construction
-
Fiduciary Duty
0
7
2