SKEATES & SKEATES

[2017] FamCA 696

FAMILY COURT OF AUSTRALIA

SKEATES & SKEATES [2017] FamCA 696

FAMILY LAW – SPOUSAL MAINTENANCE – Interim proceeding – distribution of funds

Family Law Act (Cth) 1975 ss 72, 79 and 117

Strahan & Strahan (2011) FLC 93-466

APPLICANT: Ms Skeates

RESPONDENT: Mr Skeates

FILE NUMBER: SYC 1017 of 2016

DATE DELIVERED: 11 September 2017

PLACE DELIVERED: Canberra

PLACE HEARD: Canberra

JUDGMENT OF: Gill J

HEARING DATE: 16 August 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr G Howard

SOLICITOR FOR THE APPLICANT: Pigdon Norgate Lawyers

COUNSEL FOR THE RESPONDENT: Mr G Stagg

SOLICITOR FOR THE RESPONDENT: Moylan Family Lawyers

Orders

1. It is ordered, until further order, that the husband pay to the wife, to an account as directed by her, the sum of $215 each week as interim spousal maintenance.

2. The parties do all acts and execute all necessary documents to cause the money held in their NAB iSaver account to be dealt with in the following manner:

   (a)To pay the sum of $100,000 to the wife in accordance with a direction given by the wife;

   (b)To pay the sum of $20,000 to the husband, in accordance with a direction given by the husband;

   (c)The balance to remain in the iSaver account, unless otherwise agreed by the parties.

3. The wife’s applications for interim or procedural orders as set out in her Further Amended Initiating Application filed 10 November 2016 are otherwise dismissed.

4. The husband’s applications for interim or procedural orders as set out under the heading ‘final orders sought by you the respondent’ in his response to an initiating application filed 14 August 2017 are dismissed, save for the application that the wife pay the husband’s costs which has not been dealt with.

5. In the event that the husband intends to continue the application for costs, a minute setting out the orders sought is to be provided to the Court and the wife along with any material to be relied upon in support of such an application within 14 days of the delivery of this judgment, or it will be otherwise treated as discontinued.

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

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

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

FAMILY COURT OF AUSTRALIA AT CANBERRA

FILE NUMBER: SYC 1017 of 2016

Ms Skeates

Applicant

And

Mr Skeates

Respondent

REASONS FOR JUDGMENT

1. The applicant and first respondent to these proceedings were married in 1992 and finally separated in October 2014.  They have one adult child, Ms B, born in 1998.  The second respondent did not take part in this aspect of the proceedings, which related to spousal maintenance and a release of funds on an interim basis. 

2. The wife seeks spousal maintenance at $1,475 per week. She further seeks the payment of a lump sum of $123,460, being the balance in the parties NAB iSaver account firstly as spousal maintenance pursuant to s 72 of the Family Law Act1975 in lieu of periodic payments pending the trial of this case. A date for trial has not yet been set. In the alternative, she seeks the payment of the $123,460 pursuant to s 79 of the Family Law Act as an interim property distribution. Alternatively again, she seeks payment of the same amount pursuant to s 117 of the Family Law Act as litigation funding. 

3. The husband opposes any payments to the wife other than on the basis that the husband and wife each receive $20,000 from the NAB iSaver account.  He asks that a further $9,000 be held on trust for the payment of potential partnership tax liabilities, with the balance then to be held on trust. 

4. The parties’ general living circumstances are that the husband lives on the farm that the parties previously operated with his new partner.  The wife lives in Sydney with their daughter, who suffers from an anxiety disorder.  The husband operates the farm and works full time.  The wife is not in paid employment. 

spousal maintenance

1. The gateway for making a spousal maintenance order is contained in s 72 of the Family Law Act.  It provides that an order for maintenance may only be made where a party has the reasonable ability to provide the support to the other party and that the party to be supported is unable to adequately support himself or herself. 

2. For the wife, the inability to support herself was submitted to flow from the fact that she has not engaged in paid employment since 1992.  Although she has worked on the family farm, this is not equated to paid employment, nor, she says, to an ability to undertake paid employment.  It is reasonable to infer that the wife is presently unlikely to find employment given this history.  The wife also suffers from a disorder which she says makes it difficult for her to work, although evidence as to how this is so was not presented.  The wife accepted that she receives $100 per week in dividends.

3. The husband did not seriously challenge the wife’s inability to obtain employment at present, but relied principally upon the wife having a capacity to derive support from two sources.  The first of these was social security benefits.  The husband pointed to an absence of evidence on the part of the wife as to whether or not she was entitled to receive some form of social security payment.  The mere suggestion of the possibility of income being available does not go so far as to undermine the incapacity of the wife to support herself.  In the absence of any evidence as to the availability or unavailability of social security payments, and in any event noting the potential application of s 75(3), this will not be taken into account as a source of support for the wife. 

4. The second, and primary argument mounted for the husband, related to a bequest to the wife made by her recently deceased mother in her will, at exhibit W2.  Specifically he pointed to a bequest of $320,000 to the wife set out at [5] of exhibit W2.  Additionally, he pointed to a further bequest contained in the will of an as yet unknown amount from the estate.  He alleged this to be a potentially significant amount but no evidence is as yet available to identify the extent of the balance of the bequest, nor is there any evidence suggestive of when an amount might be received, other than the $320,000. 

5. Some argument was mounted as to the characterisation of the $320,000, with the wife conceding that she was able to continue to draw against that portion of the bequest.  The parameters of the bequest of $320,000 are that there are to be deducted from that amount any loans that had been made from the wife’s mother for the maintenance, support, and legal fees for the wife and for the support of Ms B.  Annexure BS9 of the wife’s affidavit, along with [34] of the affidavit shows that she has already taken drawings of $294,000 in respect of the $320,000, by way of loan ultimately to be deducted from this amount.  Concession was also made that she has drawn a further $10,000 since the making of that affidavit.  The consequence of this, if correct, is that there is no significant part of the $320,000 bequest left to be paid to the wife.  She is reliant upon the further bequest of the as yet unknown amount, to be made available at an as yet unknown time. 

6. As to her expenses, the wife relied on her financial statement, but only to the extent that it represented her expenses rather than their daughter’s.  Primarily this consisted of rent and the items identified at Part N.  Of those expenses attributed to the wife in Part N, she acknowledged a portion of those ($290) as “aspirational”, relating to hobbies and holidays.  She did not seek maintenance in respect of these items.  Taking into account the dividends she receives, this leaves her with a weekly shortfall of $1,495.

7. The conclusion to be drawn from this material is that at present she lacks the capacity to self-support, although that incapacity may change on the receipt of the further bequest.

8. The question turns to the capacity of the husband to support the wife.  His financial statement asserts a deficit between his weekly income of $1,096 and expenditure of $1,793.  The occupation of the husband was described as farmer/real estate agent.  He said that he received the $1,096 from the partnership Mr & Ms Skeates.  No other income was disclosed in the financial statement.

9. The wife claimed that the financial statement of the husband did not represent his true position. For example, the husband’s tax return for 2016 showed a partnership payment of approximately $27,000[1].  Annexure BS6 of the wife’s affidavit showed the partnership return for 2016 as approximately $54,000, attributing payments to each of the parties at approximately $27,000.  However, the wife’s evidence was that she did not receive any of this income, despite receiving a tax liability in respect of it (see exhibit W1 and the wife’s affidavit [28]).  This was not a matter addressed by the husband in his affidavit, despite addressing other matters in the wife’s affidavit.  He qualified his response in the following manner at [35]:

   Where I do not respond that is not necessarily because the matter is agreed but rather I do not consider a reply to be relevant.

   [1] Husband’s affidavit at p23.

10. However, the non-receipt of partnership income by the wife and the receipt of such by the husband is obviously relevant.  The choice in those circumstances not to respond does not, even in this interim context, undermine a conclusion that the husband received that sum.  Taking into account the extra receipt of partnership money, his income in the 2015-2016 financial year appears to be close to $85,000 rather than the $57,000 claimed in his tax return.  The receipt of the partnership income by the husband also tells strongly against his application to otherwise use the parties’ joint property form the iSaver account to pay a tax liability for the partnership.

11. The husband estimated his 2016-2017 income as “in the order of less than $90,000”.

12. Further, while at [14] the husband asserted that between 1 July 2017 and the date of the hearing, 16 August 2017, he had performed no work deriving income, Exhibit W1 showed that he received $44,000 for work during that period (presumably earned prior to that period but paid during that period).  The husband accepted that he earned income of about $50,000 in the 2016-2017 financial year.

13. The husband also receives other benefits from his work which were not quantified, such as the payment of his telephone bill.  These are offset by the related expense, whatever their value.

14. Given the above assessment of the husband’s income, the husband’s assessment of his income in his financial statement as $1,096 per week significantly underestimates his income.  Given the income received over the previous two years, and the receipt of commissions already this year, his income is more properly assessed as 50 per cent higher than estimated.  It is more properly reckoned as approximately $1,650 per week.

15. On the husband’s expenses, a weekly expenditure of approximately $1,800 is asserted.  Despite the significant disparity between that and his asserted income and between that and his actual income, the husband did not point to a deficit in his bank accounts to show such a shortfall.  Rather, he is paying off a personal loan at a rate that reduces the principal.  Further, there was no evidence produced by the husband to support the assertion that he pays $115 per week for the support of Ms B in the face of the wife’s denial.  In particular, in addressing the wife’s assertion regarding the ending of the payment of support for Ms B, the husband does not appear to dispute the wife’s contention. 

16. The husband’s affidavit contradicted the assertions in Part N of his financial statement that he spends $200 per week on clothing and shoes, and that he spends $50 per week on hobbies and entertainment.  Finally, the financial records do not show the husband to be under the financial stress that he asserts.  Taking these various matters into account leaves expenditure more properly reckoned at $1,435. 

17. While precision is not possible, the husband’s income outweighs his reasonable expenditure to support himself by at least $215 per week.  This represents his capacity to pay periodic spousal maintenance.

18. This then leaves the balance of the applications by the wife, which involves the use of the funds currently held in the NAB iSaver account. These represent the balance of the proceeds of the sale of the former matrimonial home in C Town. At present these appear to be funds the parties are jointly entitled to. They do not readily bear the characterisation of capacity on the part of the husband to maintain the wife. If a payment is to come from this joint property, then it is more properly characterised as an exercise of the s 79 power.

19. The framework for making an interim property settlement has been set out by the Full Court in Strahan [118]:[2]

    There are two stages to the hearing of such an application where the power is to be exercised pursuant to s 80(1)(h) of the Act. This is recognised by the fact that although the power under s 79 should ordinarily be exercised on a once only basis, “circumstances may arise before there can be a final hearing” where the power is exercised. Thus the first step is to resolve whether to exercise the power before a final hearing and if it is resolved to do so then the second step involves the exercise of that power.

    [2] Strahan & Strahan (2011) FLC 93-466 at [118].

20. As to the first of these steps, being whether to exercise the power [132]:[3]

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

    [3] Strahan & Strahan (2011) FLC 93-466 at [132].

21. The parties both accept that this is a case in which ultimately there should be an alteration of their property interests.  Currently the wife does not have the income to support herself.  She has exhausted her resources (the advances from the certain of the two bequests) generally to support herself, to care for the parties’ adult child and pay legal expenses.

22. In those circumstances it is contrary to the interests of justice to follow the usual and desirable course of exercising the s 79 discretion in a once and final manner.

23. As to the second of these steps, being the manner of the exercise of the power [137]:

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

    [4] Strahan & Strahan (2011) FLC 93-466 at [137].

24. The key consideration regarding the terms of the order is that the interim adjustment sit within a likely ultimate distribution to the party in question.  Given the circumscribed nature of an interim consideration, a conservative approach is required.

25. Uncertainty as to the debts in the pool led to the amount sought by the wife being somewhere between 10 per cent (of a pool of $1.1 million) and 20 per cent of the pool ($1.1 million less possible debts of $430,000).  It was conceded that that it was very unlikely that the wife would ultimately receive less than 25 per cent of the pool.  This leaves the amount sought by the wife as sitting comfortably within an ultimate outcome.

26. A further consideration as to the size of a distribution in this instance flows from the husband’s position.  The husband sought that each of the parties receive $20,000.  Given the obligations to support herself set out above, this amount would be seriously inadequate for the wife’s interim requirements.  The matter raised by the husband as to there being a distribution to him flow from his inability to pay his legal fees from his current income.  He accepted that there is, as yet, no demand upon him to do so.  There is no requirement that there be a refusal of legal practitioners to act before an interim adjustment will be made to allow the payment.

27. In this case, the husband’s affidavit at [21] sets out the relative position between the parties as to legal fees.  Each has accumulated fees of about $150,000.  The wife has paid all but $20,000 of hers.  The husband has paid less than $20,000 of his.  Under the circumstances of the disparity in relation to this aspect, and where the husband seeks a moderate portion of the available funds to ameliorate this position, the interests of justice dictate that there is some corresponding adjustment in favour of the husband.

28. Accordingly orders will be made causing the payment of periodic spousal maintenance by the husband to the wife in the sum of $215 per week.  The wife will be entitled to $100,000 from the iSaver account, the husband to $20,000. 

29. At this stage of the proceedings it is important to note that although these amounts represent part of the ultimate s 79 adjustment, whether they are added back into the pool at trial will be a matter for the trial judge and will depend in large part on the purposes to which they are put. Frequently such amounts are added back when they are spent on legal expenses. Frequently they are not added back when they are spent on reasonable living expenses. Whether they will be added back will depend upon the circumstances disclosed at trial.

I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Gill delivered on 11 September 2017.

Associate:

Date:  11 September 2017