Snipper & James
[2022] FedCFamC1F 266
•26 April 2022
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Snipper & James [2022] FedCFamC1F 266
File number(s): SYC 431 of 2022 Judgment of: HARPER J Date of judgment: 26 April 2022 Catchwords: FAMILY LAW – PROPERTY – Interlocutory dispute over $720,000 held in the trust account of the wife’s solicitors – Where final property, periodic and non-periodic child support, spousal maintenance, and parenting orders had been made in 2018 – Where final orders concerned three children, one of whom has now reached the age of 18 and another will reach 18 in a few months – Where wife sought fresh financial orders due to husband receiving a termination payment from the Second Respondent in the amount of $1,302,713 – Where injunctive orders have been restraining distribution of $720,000 of the termination payment – Where jurisdictional basis for existing orders said to be s 114 of the Family Law Act 1975 (Cth) or the Court’s inherent jurisdiction – Statutory basis of such order found in s 141 of the Child Support (Assessment) Act 1989 (Cth) – Wife seeks lump sum child support order as final relief, to be paid from the $720,000, in substitution for 2018 child support orders – Wife also seeks retention of $720,000 as security for final relief – Husband seeks release of the $720,000 or regular payments to him in the alternative – Consent orders made for $7,150 to be paid towards cost of single expert report – Consideration of whether there is a serious question to be tried – Whether possible to make interim prima facie finding that a lump sum order for child support would be just and equitable – Allegations husband has a history of refusal to pay child support and guilty of non-disclosure – Court unable to make findings of fact on an interim basis – Wife failed to demonstrate prima facie entitlement to lump sum child support order for $653,237 on final basis – Court satisfied some interim security for child support orders at a lesser amount demonstrated on a prima facie basis - Order made for release of $35,000 to the husband for legal expenses and $8,805 for weekly living expenses – Money held in trust account to otherwise remain untouched. Legislation: Child Support (Assessment) Act 1989 (Cth) Div 5, Div 4, ss 114(1), 114(3), 117(4), 117(6), 117(7), 117(7A), 117(8), 118, 123(1), 123A, 124, 129
Family Law Act 1975 (Cth) s 79
Cases cited: ABC v Lenah Game Meats Pty Ltd (2001) 208 CLR 199; [2001] HCA 63
Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148; [1986] HCA 58
Gilmour and Gilmour (1995) FLC 92-591
Jackson v Sterling Industries Pty Ltd (1987) 162 CLR 612; [1987] HCA 23
Norton & Locke (2013) FLC 93-567; [2013] FamCAFC 202
Sresbodan & Sresbodan [2016] FamCA 954
Division: Division 1 First Instance Number of paragraphs: 48 Date of hearing: 11 April 2022 Place: Sydney Counsel for the Applicant: Mr Watkins, mentioning by consent on behalf of the Second Respondent Solicitor for the Applicant: Harris Freidman Lawyers Counsel for the First Respondent: Mr Eardley, direct brief Solicitor for the Second Respondent: Company C ORDERS
SYC 431 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS SNIPPER
Applicant
AND: MR JAMES
First Respondent
C PTY LTD
Second Respondent
ORDER MADE BY:
HARPER J
DATE OF ORDER:
26 APRIL 2022
THE COURT ORDERS THAT:
1.Pending further order, there be released from the funds held in the Trust Account of Harris Freidman Lawyers, the Applicant's solicitors, pursuant to Court orders dated 9 February 2022, each week to the husband on Monday, commencing on 2 May 2022, an amount $8,805 for rent and living expenses.
2.Within seven days, the sum of $35,000 be paid to the husband, to be applied exclusively towards the payment of legal fees.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Snipper & James has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HARPER J:
This judgment concerns a dispute about interlocutory relief in relation to a fund of $720,000 currently held in the trust account of the solicitors for the Applicant Wife (“the wife”). The relevant background can be briefly stated.
The parties in these proceedings were married in 1994, separated in 2011, and divorced in 2013. There are three children of the relationship.
On 12 January 2018, final orders were made by Watts J for property division pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”), periodic child support departure orders and non-periodic child support orders pursuant to ss 118 and 124 of the Child Support (Assessment) Act 1989 (Cth) (“the Assessment Act”), spousal maintenance, and parenting orders (“the 2018 orders”).
The orders pursuant s 118 of the Assessment Act were based upon an annual rate of child support payable up to an amount of $101,608 per annum calculated from 12 January 2018, to be adjusted on 1 January each year in accordance with any change in the consumer price index for Sydney for the previous calendar year (Orders 31–33). The calculation of $101,608 per annum was based upon the wife’s evidence of the expenses for all three children, and a finding that, as of 12 January 2018, the husband had the capacity to pay $1,954 per week by way of periodic child support.
The orders for non-periodic child support were made pursuant to s 124 of the Assessment Act, which obliged the husband to pay 87.6 per cent, and the wife 12.4 per cent, of a range of other expenses relating to the children, including education, private health fund, private hospital, optical, physiotherapy, dental, and medical (Order 34).
It is important that the 2018 child support departure orders were made in relation to three children. The oldest child reached the age of 18 in 2020. The second child is currently 17 years old and will reach 18 in 2022. The youngest child is 12 and will reach 18 in 2028.
On 28 January 2022, the wife filed an Initiating Application in the Federal Circuit and Family Court of Australia (Division 2) seeking fresh final and interim financial relief against the husband. This application seems to have been prompted by the imminent receipt of a termination payment by the husband from his employer, Company C (“Company C”), in a total amount of $1,302,713. This sum was comprised of a retirement payment as at 1 February 2022 of $484,313, together with a payment of $409,200 for six months’ notice, and a further amount of $409,200 for six months’ long service leave.
The wife sought interim injunctive orders for the joinder of Company C, restraints on the payment of the termination payment by Company C pending further order or payment into the wife’s solicitor’s trust account, further disclosure by the husband, and payment to her of an amount to discharge the husband’s child support obligations under the 2018 orders.
On 9 February 2022, his Honour Judge Smith (as he then was) made orders joining Company C as a party to the proceedings. Judge Smith then made a number of interlocutory injunctive orders in relation to an amount of $720,000 out of the termination payment. It is unnecessary to set out those orders in full, other than to note the terms of Orders 4 and 12, as follows:
4. Pursuant to s 114 of the Family Law Act (1975) (Cth) and/or the Court’s inherent or implied jurisdiction, the Second Respondent is required by injunction to cause to be paid into the Trust Account of Harris Freidman Lawyers, the Applicant's solicitors, the first $720,000 of the termination payment when those monies would otherwise have been due and payable to the First Respondent, and payment in this fashion shall give a good release of the Second Respondent’s liability for payment of that amount of the termination payment.
…
12. The First Respondent’s ongoing liability for child support is to be paid from the funds held in trust by the Applicant’s solicitors to the Applicant as and when they fall due, and that payment shall constitute discharge of the First Respondent’s obligation to pay that child support.
These orders were interlocutory, but are of indefinite duration. An order was also made transferring the proceedings to this Court.
The stated statutory basis for Order 4 is somewhat puzzling. Section 114(1) gives a court power to order an injunction in proceedings meeting the definition of a matrimonial cause, while s 114(3) gives the court a power to order an injunction when exercising jurisdiction under the Act. Neither condition is satisfied in these proceedings. The statutory jurisdiction invoked by the wife is under the Assessment Act. Nonetheless, a combination of ss 141(1)(a), (d), (g), and (n) of the Assessment Act would seem to grant statutory power to make Order 4 and, for that matter, Order 12. I accept the orders can also be supported by the jurisdiction of a court to protect its own processes, as explained more fully later in these reasons.
Company C have made payment of the first $720,000 into the trust account of Harris Freidman Lawyers, being the solicitors for the wife, as required by Order 4. The husband received the balance of the termination due to him, subject to tax liabilities. Consequently, the evidence disclosed that from the $1,302,713, the husband has received a distribution of two amounts totalling approximately $231,000. Of this amount, I was informed from the bar table, and it was not disputed, that the husband retains approximately $150,000.
There is no dispute that the husband owns the $720,000 held by the wife’s solicitors.
It was unexplained how the precise figure of $720,000 was arrived at. However, I assume it was, broadly speaking, referrable to the amended relief sought by the wife as referred to in the next paragraph, and was substantially intended to cover the claim to a lump sum for child support.
After the orders of Judge Smith on 9 February 2022, the wife filed an Amended Initiating Application on 3 March 2022. The substantive proceedings, as disclosed in this amended application, involve final orders sought by her as follows:
a) Pursuant to s 123A of the Assessment Act, a child support departure order in the nature of a lump sum order in the amount of $653,237 to be credited against the husband’s liability under the assessment issued by the Child Support Agency, and to account for 100 per cent of the annual rate of child support payable to the wife by the husband under any assessment;
b) In the alternative, for $653,237 to be held by her solicitors and invested, from which $108,581.04 per annum is to be paid to her;
c) Discharge of the 2018 periodic child support orders; and
d) There be paid to the wife from the monies held by her solicitors:
i.$653,237;
ii.$76,565 for arrears of child support payable pursuant to the 2018 orders;
iii.$7,150 being one half of the fees payable for a single expert; and
iv.$36,726.06, being 80 per cent of the wife’s costs payable pursuant to order of the Full Court dated 22 February 2019.
According to the wife’s evidence, the calculation of the amount of $653,237 is based upon the husband’s annual obligation of $108,581.04 under the 2018 orders, until the youngest child turns 18 on 6 January 2028.
Therefore, in summary, the wife seeks on a final basis a non-periodic lump sum order in discharge of, and in substitution for, the existing 2018 orders for periodic and non-periodic child support orders. In the alternative, the wife seeks the preservation of a fund from which she can be paid $108,581.04 each year. In other words, she seeks an order that $653,237 of the husband’s funds should be held as security for, and source of payment for the husband’s future obligations.
Apart from s 123A of the Assessment Act, the source of power to make final orders as sought by the wife was not expanded upon in argument, but again, ss 141(1)(a), (d), (g), and (n) in combination seem to provide sufficient power, as does s 129.
The husband filed an Amended Response on 24 March 2022. In summary, as final relief, he seeks discharge of several orders made by Judge Smith, payment to him of the $720,000 held by the wife’s solicitors, variation of the periodic child support order in the 2018 orders, and dismissal of the wife’s Amended Initiating Application.
When the matter came before me for interim hearing, it was agreed that the only interim issue to be determined was whether the amount of $720,000 held by the wife’s solicitors, pursuant to the injunctions granted by Judge Smith on 9 February 2022, should be the subject of a partial or total release to the husband. In other words, the wife contended the orders of Judge Smith should simply continue, while the husband argued that those orders should be discharged or varied, so that he can have access to his own money pending determination of the wife’s claims to the final relief articulated in her Amended Initiating Application.
There was agreement by the parties that Company C should be removed from the proceedings. It was also agreed that there should be orders by consent for payment of $7,150 in respect of a single expert, Dr Y, out of the amount of $720,000 held by the wife’s solicitors. Orders to this effect were made by consent.
The same basic principles apply here, in my view, whether the statutory or inherent jurisdiction is relied upon by the wife to support her interlocutory relief. In any event, neither party contended different considerations applied. Any interlocutory injunction, including a freezing order, must be made in aid of “a sufficient colour of right to the final relief” which the claimant seeks: ABC v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at [11], often also expressed also as a “serious question to be tried”: eg Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153, and only if the balance of convenience favours the applicant.
It was common ground that the questions for determination are whether the wife has demonstrated a serious question to be tried that the final orders she seeks would be made, and if so, whether interlocutory orders should be made on the balance of convenience, either pursuant to s 141 of the Assessment Act, or in protection of the Court’s processes to prevent frustration of its final orders. In particular, the question is whether the orders should continue, retaining the full amount of $720,000 on an interlocutory basis to be used to meet the husband’s ongoing obligations for child support in accordance with Order 12.
Section 141(1)(g) of the Assessment Act clearly gives the Court the statutory power to make orders of an interlocutory nature. There is also no question that this Court has an inherent jurisdiction to grant an interlocutory injunction to protect its functions as a Court and as an incident of its power to control its own processes and to prevent frustration of those processes: Norton & Locke (2013) FLC 93-567 at [43]–[44], citing Jackson v Sterling Industries Pty Ltd (1987) 162 CLR 612 at 638 (“Jackson”).
It should also be remembered that in Jackson the High Court at 619 and 625 affirmed that the purpose of a freezing order is not to create security for a claimant: Sresbodan & Sresbodan [2016] FamCA 954 at [105]. On the other hand, s 141(1)(d) of the Assessment Act gives the Court power to order security.
Since the wife’s claim to final relief is based in the Assessment Act, it is necessary to consider the relevant provisions to form a view about the existence of a serious question to be tried. The decision in Gilmour and Gilmour (1995) FLC 92-591(“Gilmour”), made clear this Court has jurisdiction to vary or discharge a departure order. This may be done under s 129 of the Assessment Act, with regard to non-periodic child support departure orders made under the provisions of Division 5 of Part 7, or s 141(1)(j), with regard to periodic child support departure orders made under Division 4 of Part 7.
Sections 123A(1)(a) and (b) of the Assessment Act provide that the court may make an order for lump sum child support if the carer makes an application under s 123(1)(b), and the court is satisfied it would be “just and equitable as the regards the child” and “otherwise” proper”. In determining what is just and equitable, s 123A(5) requires the Court also to have regard to the matters mentioned in ss 117(4), (6), (7), (7A), and (8) of the Assessment Act. These include the needs of the child or children, the income, property and financial resources of each parent who is a party to the proceeding, the earning capacity of each parent who is a party to the proceeding, and hardship to the carer parent or liable parent, caused by the refusal or making of a lump sum order.
In support of her interlocutory application, the wife contends that she has shown that the $720,000 should be retained as security for her final relief, because the husband has demonstrated a history of a refusal to pay child support, has been guilty of significant non-disclosure, and, if he receives the money, it will be dissipated, rendering nugatory any final relief granted in her favour by the Court.
The husband disputed that he had failed to pay child support. On the evidence before me for this interlocutory judgment, I am unable to form a factual conclusion as to whether the wife’s submission in this regard is correct or not.
The nondisclosure to which the wife specifically pointed was that in the husband’s affidavit of 22 March 2022 at paragraph 7, where the husband identifies the amounts received by him which made up the total payment of $1,302,713, but failed to give any particulars of how the money received by him was spent. In particular, by letter of 1 April 2022, the wife’s solicitors sought disclosure of his bank statements evidencing payments received by him in the nature of regular earnings referred to in paragraph 7. In a responding email, the husband, who was then self-represented, pointed to the summary of payments received from Company C. The wife contends that this was inadequate disclosure. That may or may not be so. It is difficult, in an interim hearing, to form a view as to whether the husband was engaging in serious nondisclosure or, as a self-represented litigant, he failed to appreciate the extent to which disclosure should be made of a range of documents, including bank statements. I am not satisfied that the wife has shown significant non-disclosure for the purposes of her interlocutory relief.
The financial statement provided by the husband asserts that he has weekly expenditure of $13,898, superannuation of $69,064, liabilities of $3,466,000, and assets and financial resources totalling $835,510. On that basis, it appears that the husband is insolvent and if the $720,000 was released to him, it could swiftly be consumed in payment of creditors. However, payment of legitimate debts does not necessarily constitute dissipation within the principles applicable to a freezing order. The wife did not argue otherwise.
The assertions by the husband about his financial position are yet to be tested at final hearing. The wife points to the level of expenditure that he sets out in Part G of his financial statement. These are said to total $13,898 per week. But, even taking a broad-brush approach, this figure is not persuasive. For example, the husband contends that he spends $1019 each week on entertainment and hobbies, and $1273 each week on holidays. Taken together, roughly, those two figures suggest he spends some $110,000 a year on holidays, entertainment and hobbies. It is difficult, certainly on the basis of the evidence that he puts forward, to conclude that these are reasonable amounts.
Furthermore, under the item described as “other necessary commitments”, he specifies “psychology and ATO interest” in the amount of $4,904. It was accepted by his counsel that this figure did not distinguish between psychology and ATO interest, but it was conceded that the reference to “ATO interest” was for interest which is accruing, not actually being paid by the husband on a weekly basis. Accordingly, I am not satisfied that the husband’s weekly expenditure is in the region of $13,898. I am unable to determine a more accurate figure for the husband’s weekly expenses, but taking a broad brush approach I consider $7,500 is indicated by his evidence.
In his proposed minute of order, the husband also sought a release each week to him of an amount of $1,305 for weekly rent expenses. The wife contended that since the husband is living with a de facto partner, this figure should be reduced by 50 per cent to reflect the fact that she is probably paying half the rent. I am unable to form a view as to whether that is correct or not. However, I do not consider $1,305 for weekly rental expenses to be unreasonable.
I note also that by his minute of order, the husband seeks $35,000 for legal expenses.
I take account of the fact that the husband is currently unemployed, by choice, since I was told he wishes to take a sabbatical after some 20 years of working life with Company C. I infer from this that he anticipates that he has a reasonable prospect of obtaining gainful employment in the future. However, on an interim basis, I am satisfied that presently, the husband’s main source of cash reserves is the fund of $720,000, together with $150,000 remaining from the funds already received by him from Company C.
I take account of the submissions made by the wife that, by reason of the nondisclosure of the husband, the Court should infer there are significant undisclosed assets. I do not accept this submission, but I note that even if it was correct, it would diminish the force of her contention that, if the $720,000, or part of it, were released to the husband and dissipated by him, her claims to final relief would be undermined. This is because if there are significant undisclosed assets, as she contends, it may be that by final hearing she will uncover those other assets from which any lump sum child support departure order may be satisfied.
Taking account of all these factors, I am not satisfied that the wife has demonstrated a serious question to be tried that she would establish an entitlement to a lump sum child support order of $653,237 on a final basis. In other words, I am not persuaded there is a serious question that it would be just and equitable, or otherwise proper, for a lump sum order of that magnitude to be made on a final basis. For example, the capacity of the husband to pay the lump sum sought in light of his other commitments is clearly in issue. It may be, of course, that the wife is able to demonstrate that a lump sum child support order should be made, but there must be real doubt, on the present evidence, as to whether she would be entitled to a lump sum figure of $653,237 on a final basis.
This latter conclusion is strongly supported when it is remembered that the calculation of $653,237 is based upon an annual figure of $101,608 reached by Watts J in 2018 for three children who were minors. As already noted, at the date of the interim hearing one of those children has now turned 18, while another is only a few months from his majority, and may well have reached adulthood by the date of any final hearing. Therefore, any lump sum ordered in favour of the wife on a final basis may be limited to the youngest child.
For the same reasons, I am not satisfied that the wife has demonstrated that the balance of convenience favours retaining $720,000 in her solicitors’ trust account.
In my view, therefore, I am not satisfied that the amount of $720,000 should remain untouched until further order or final determination of the proceedings.
However, I am satisfied that the wife has made out a serious question to be tried that a lump sum child support order may be made on a final basis, but at a level significantly lower than her present claim. I am unable to make any sensible calculation of an arguable figure on the evidence before me, but I note any lump sum would be effectively for one child, not three.
That being said, the evidence does persuade me that the husband has demonstrated a propensity in the past to dissipate funds through gambling, a factor which justifies some amount being quarantined as security. The best way to achieve this is for the husband to receive a weekly amount from the funds held, pending further order.
Balancing all these considerations, turning then, to the question of orders protecting the processes and final orders of the Court, for the same reasons I am not persuaded the retention of $720,000 by the wife’s solicitors is necessary.
There was no dispute that in accordance with usual principles, the husband should have access to his money for reasonable living expenses and to pay legal fees.
Accordingly, I will order that there be released to the husband each week $1,305 for rent expenses and $7500 for living expenses.
I will also order that there be released, within seven days, the sum of $35,000, to be applied by the husband exclusively towards the payment of legal fees.
As to the costs of the interim hearing, since neither party has been wholly unsuccessful, my inclination is to make no order as to costs. If any party wishes to seek a costs order, he or she should make an application in the proper form.
I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Harper. Associate:
Dated: 26 April 2022
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