Tomkin and Tomkin (No. 3)

[2007] FamCA 1378

FAMILY COURT OF AUSTRALIA

TOMKIN & TOMKIN (NO. 3) [2007] FamCA 1378

FAMILY LAW – MAINTENANCE – Review of orders re interim spouse maintenance and injunction

Family Law Act 1975 (Cth)

APPLICANT: Mrs Tomkin

RESPONDENT: Mr Tomkin

FILE NUMBER: SYC 1151 of 2007

DATE DELIVERED: 22 November 2007

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Moore J

HEARING DATE: 20 November 2007

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Richardson SC

SOLICITOR FOR THE APPLICANT: Barkus Edwards Doolan

COUNSEL FOR THE RESPONDENT: Mr Lloyd

SOLICITOR FOR THE RESPONDENT: Pearson Family Lawyers

Orders

1. The application of the husband for review of the orders of 28 August 2007 is dismissed.

2. Until further order, by way of spouse maintenance:

   (a)the husband pay to the wife $4,500 per month to an account nominated by the wife; and

   (b)the husband pay the following expenses as and when they fall due:

   (i)       petrol card

   (ii)      mobile telephone plus mobile telephone plan

   (iii)     E-Tag

   (iv)     comprehensive car insurance premiums

   (v)      registration of her motor vehicle

   (vi)     expenses for service of the wife’s motor vehicle

   (vii)in relation to the [M] home - electricity accounts, gas accounts, landline and internet telephone accounts, house and contents insurance

   (viii)family private health insurance premiums with HCF at the existing level of cover.

3. The application of the wife for review of orders filed 4 October 2007 is dismissed. 

IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Honourable Justice Moore delivered this day will for all publication and reporting purposes be referred to as Tomkin & Tomkin.

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 1151  of 2007

Mrs Tomkin

Applicant

And

Mr Tomkin

Respondent

REASONS FOR JUDGMENT

Proceedings

1. The husband seeks a review of orders made by Judicial Registrar Loughnan on 28 August related to interim maintenance for the wife who seeks a review of orders related to the husband’s continued access to the balance of funds available via an overdraft facility she raised on the security of the family home registered in her name. 

2. The husband seeks the setting aside of the orders and does not propose any payment of spouse maintenance.  The order sought by the wife is to retain the orders of the Judicial Registrar which, in effect, would provide her with approximately $4,500 per month with the husband to pay additional expenses identified in orders 5(a), 5(b), 6 and 8. 

Approach

1. Determined de novo, the wife’s entitlement to interim spouse maintenance falls for consideration pursuant to s 72 of the Act which makes a spouse liable to maintain the other to the extent s/he is reasonably able to do so if s/he is unable to support herself or himself adequately whether (a) by reason of having the care and control of a child under the age of 18 years; or (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 S75(2). 

2. That threshold question has to be satisfied before the level of need is determined and capacity to pay is considered.  Pursuant to s 74(1) such order as the court considers proper for the provision of maintenance may be made. 

3. Before coming to those assessments, some brief account should be given of the background. 

Background

1. The husband (45) and the wife (48) married in 1988.  They have three children: a daughter (18) and twin boys (16) who live with their mother in the family home at M.  They separated in April 2006 though they continued to occupy the family home together until February when the husband withdrew.  He now lives in rented premises in H proximate to the boys’ school.  They divorced in June 2007. 

2. The husband is a director of T Pty Limited which conducts a business known as T Consultants.  He holds 50% of the class A shares in the company; the other 50% holder is Mr N. 

3. The husband works in the business and derives his income from that source as well as from his position as a director of T Pty Ltd.  That company pays him director’s fees but the Tomkin No 1 Trust [Tomkin Trust] receives his share of the income generated by the business and it allocates to the husband a salary before any distributions to potential beneficiaries.  M Pty Limited is the trustee of the Tomkin Trust and of a trust related to Mr N’s financial arrangements.  The husband and Mr N are directors and shareholders of M Pty Ltd.  Pursuant to the Tomkin Trust Deed, the husband holds the power of appointment of the trustee.  The Tomkin Trust is a discretionary trust which has amongst its’ beneficiaries not only the parties and their children but the husband’s brother and his sister in law. 

4. The wife holds a Bachelors degree and a diploma.  Prior to the birth of the twins in 1991 she ceased full time work and she has not been in the paid workforce since. 

5. Nothing need be said here of the developments from separation until the husband’s departure from the home in February save to mention two of some relevance to later discussion.  In October last year the wife arranged an overdraft facility of $250,000 on the security of the home and earlier this year the husband was charged with assaulting the wife, the criminal proceedings in the Local Court were ultimately dismissed, and he incurred around $80,000 in legal fees in defending the charges which were paid from the M Pty Ltd overdraft account. 

6. At the time the wife instituted property proceedings in February this year she had been receiving from the husband $3,000 per month paid to an account in her name as well as a salary from T Pty Ltd of $2,976 per month along with benefits such as E tag, petrol, mobile phone, car service, insurance and registration.  The husband also paid expenses related to the family home such as rates and utilities, telephone and insurance as well as insurance on the vehicle she leased and private family health insurance. 

7. On 26 February the matter came before the Judicial Registrar and resulted in various orders though it is not relevant now to recount them all.  The husband was ordered to pay to the wife’s account interim spouse maintenance of $1,500 per month, the order to expire 1 June unless otherwise agreed.  A notation was recorded to the effect that he proposed to pay $1,500 child support and all of the other expenses he had been paying to that point.  It was further noted that he will do nothing to cause the wife’s salary to be terminated or cause T Pty Ltd to cease paying her the salary and providing to her the other benefits mentioned.  A further order was made to expire 30 June for the husband to pay expenses related to the servicing of her motor vehicle.  Orders 2 and 3 related to the wife’s overdraft facility and provided for her to allow drawings on the facility for the purpose of paying the husband’s legal fees as billed to him on production of the accounts and if the facility is drawn as to $150,000 she is to forthwith notify his solicitor of that fact. 

8. On 30 June the husband agreed to the continuation of the payments as ordered until August. 

9. On 28 August the matter came before the Judicial Registrar again when spouse maintenance was argued and, while expressed differently on this occasion, orders were made effectively continuing the February arrangement.  However, an order provided that if the wife’s employment with T Pty Ltd is terminated, the husband is to pay the wife the equivalent to the benefits she had received from the company.  Also, order 9 is in these terms:

   9.   That the Court notes:

   (a)the matter referred to at paragraph 4 of the orders made on 26 February 2007;

   (b)that orders 2, 11 and 12 of the said orders continue in force. 

10. Order 4 was about occupancy of the home, order 2 has been mentioned, and orders 11 and 12 imposed an obligation on the wife to pay out of the overdraft facility fees for experts and reserved the characterisation of those payments for the trial judge. 

11. On 30 August at a meeting attended by the husband, Mr N and Mr B, another shareholder in the business, T Pty Ltd purported to terminate the wife’s employment.  However, as Mr Richardson pointed out, Mr B’s right to participate by vote in that decision is not supported by the company’s Articles. 

Threshold

1. Mr Lloyd argues that the wife does not qualify for the necessary threshold finding.  He submits that with tertiary qualifications and experience in property management, albeit many years ago, she has a capacity for employment.  She does not complain of ill health, the eldest child is now 18 and in employment, the twins at age 16 will be in year 11 soon, and their father will share in their care.  Yet despite all this she has made no attempt to obtain work, even part time.  The only inference available from her failure to make an attempt to find work is that she has chosen not to work and therefore she has not discharged the onus demonstrating she is unable to support herself.  Apart from those matters, she is the registered proprietor of the M home agreed to be worth around $8 million, she also has a motor vehicle, jewellery and superannuation, and there is no evidence she could not extend the overdraft facility she obtained last year and meet her needs from that source. 

2. Mr Lloyd also makes the submission that she has not made a full and frank disclosure of her financial position.  That relies on the tender of a business card with her name on it along with her current phone number [exhibit 8] and her failure to produce documents including her passport as required by a Notice to Produce [exhibit 7].  Her passport relates to four trips she is said to have made since separation to South Africa, where it is said the man she has a relationship with lives.  Nor has there been disclosure of her financial arrangements with him or his financial situation.  Nor did she produce any documents related to proceedings in the Probate Division of the Supreme Court, as requested in the Notice. 

3. The last of these can be put aside because the advice that she is but a witness in those proceedings is accepted at this stage.  As for the other arguments about non-disclosure, I assess them as insufficient - or the evidence on which they are founded lacks sufficient probative value - to justify a finding of failure to disclose her financial circumstances. 

4. Mr Richardson SC dismisses the suggestion that the threshold hurdle has been a live issue throughout the proceedings and submits that historical matters constitute an admission by the husband which satisfies the test.  That admission, he contends, is constituted by the post separation payments to the wife along with the husband’s payments for household and other expenditure, actions which concede not only her need of periodic financial support but also his capacity to pay.  His argument is bolstered by two documents which became exhibit 10: the first is a letter from the husband’s solicitors dated 25 January 2007 and the second is the husband’s proposed order 4 of his response filed in February.  The letter says in part:

   In paragraph 4 under the heading “Interim Arrangements” it was specified that our client would continue to meet expenditure incurred on your client’s credit cards, on the condition that such expenditure does not exceed $3,000 per month. 

   The expenditure incurred by your client on the Visa card in recent months has significantly exceeded her average monthly expenditure.

   We write to advise that commencing 1 February 2007, our client will be suspending your client’s usage of the Visa credit card of which she is a supplementary holder, and will in lieu thereof, deposit into her CBA Account…..the sum of $3,000 each month in advance.

   Your client will continue to receive her salary of $40,040 per annum (gross) from [T] Pty Ltd, from which she will be required to meet her car lease repayments.’

5. The order he sought in the 24 February response is:

   ‘4.  That the husband not do any act or thing which could result in the wife’s employment with [T] Pty Ltd being terminated, or result in the wife not receiving her current benefits from that employment, such benefits as those specified as Orders 6.2.2.1, 6.2.2.2, 6.2.2.3, 6.2.2.4 of the wife’s application in a case filed 19 February 2007.’

6. As pointed out, at both junctures the husband was proposing a cash flow on an interim basis directed to the wife’s needs. 

7. Mr Lloyd submits that none of it constitutes an admission and in any event the payment of a salary from T Pty Ltd should not continue because it is not appropriate when she is not an employee.  I agree and would not make an order to that effect.  However, I am unable to accept the thrust of Mr Lloyd’s other submissions on the threshold point. 

8. In this family the wife relinquished paid work before the birth of the twins and the subsequent arrangements within the family saw her remain out of paid work, a role continued by the husband, for over 16 years.  It may well be that now the family arrangements have broken down the wife should equip herself to re-enter the workforce at some point and thus provide for herself in some measure, despite her 48 years and lack of work experience for more than a decade and a half.  To see the printed business card as meaning she is contemplating that would be to speculate, but even if she is moving in that direction it seems probable that implementing a business plan and generating a cash flow from it would take some time and is unlikely to happen immediately.  The decision now to be made is not about the longer term but about the relatively short term future – perhaps 6 months or 12 at the outside – until the property proceedings are settled or heard.  In the meantime, the 18 months or so that have elapsed since the separation, when the wife has taken no apparent steps to find paid work, has been a period in which the husband continued financial arrangements at least akin to what was occurring over the many years beforehand – namely, the income he generated was used to support not just himself but all of the family while the wife continued in her role with the children and in the home – and it has also been a period when their daughter has been completing the important last year of secondary school and the boys have been moving towards upper secondary classes.  Further, none of the children can possibly have been unaffected by the uproars accompanying the breakdown of their parents’ relationship, at important stages of their adolescence.  Infant children they are not, but adolescent children can also need continuity and stability. 

9. In my assessment, the long standing historical division of their separate roles, the husband’s continued financial support post separation and the important stages of the children’s development when the marriage broke down all suggest it is not unreasonable for the wife not to have re-entered paid work after so many years absence.  Nor, as I further assess it, is it unreasonable for there to be some relatively short term continuation of her current situation.  The longer term is for evaluation as a component of their property division. 

10. Therefore I find the wife is unable to adequately support herself by reason of her continued role with the two younger children and being ill equipped at this stage for employment by reason of the history of the arrangements implemented within the family during the marriage and since separation until the husband signified his change of direction. 

11. That said, it remains to consider the proposition that the wife as the registered proprietor of the family home worth $8 million can find funds to support herself by increasing the overdraft facility she obtained.  She may be able to – there is no evidence about it as far as I can see – but her ability to obtain an extension of the facility would not be an unreasonable inference in the circumstances.  Yet while the house is registered in her name, possibly for reasons associated with securing the family’s benefit in the face of adverse business developments, it is the centrepiece of the property which will be divided between them in due course.  To some extent taking up that suggestion would require her to support herself from assets which, in turn, would leave the husband to retain all of his income for himself, subject to the payment of child support.  The sharing of income and preservation of assets has been part of the history and until the wife is re-positioned by a change in those historical circumstances it is not unreasonable to see that pattern continue.  Therefore consideration of that factor does not alter the finding of her inability to adequately support herself. 

Need

1. The next step is to consider the level of her financial need.  For that I turn to her recent financial statement and initially to Part N where she asserts weekly expenses of $1,746 though it is conceded $950 related to legal fees should be deducted as they have been met from the overdraft facility.  That brings those expenses to $796 from which there is also to be deducted a further $100 which is the estimate given of the expenses the husband has been paying and she asks he continue to pay, leaving a balance of $696 per week. 

2. Mr Lloyd submits some of the claims are exaggerated: shoes, clothes, and holidays.  Of course the husband’s capacity to pay is the other side to the needs coin and his claims about his own expenditure for similar items is relevant to assessing their reasonableness.  Comparison reveals his claim for clothing and shoes is less, his claim for holidays is not dissimilar but his claim for entertainment and hobbies is $250 per week against hers of $25.  This takes the wind out of that submission. 

3. Turning to her other expenditure claimed in Part G, some of the items are deducted as they are part of her claim to have the husband pay directly and there remains the lease payments on her vehicle of $252 per week and payment of interest on the overdraft facility, since increased to $260 per week.  All up, her claimed expenditure amounts to $1,208 per week or $5,235 per month. 

4. On the question of claimed expenditure [by both parties], when interim maintenance is being assessed I think the link between time [the period it is anticipated the order will run] and needs [what constitutes reasonable expenditure in that period] worth considering.  In this case, the wife can be taken to have undertaken some pruning of her claims because the cash component of the order she seeks is not $5,235 per month but $4,500 or $1,038 per week.  I am satisfied that is the financial support necessary, excluding the items for which the husband has been paying separately. 

Capacity

1. It is submitted for the husband that he has no capacity to pay spouse maintenance but I reject that for reasons to be discussed. 

2. No analysis as such of his financial statement was undertaken but it is instructive to go through the same exercise as that applied to the wife’s needs.  In Part N he claims expenses of $2,195 per week, but that has a built in component of $1,294 per week for legal fees related to the Local Court criminal proceedings.  I accept Mr Richardson’s reply that referral to those proceedings as ‘instigated by the wife’ does not fit the situation and I also take the view that if the argument put for the husband about those fees were to be accepted, to the effect that the fees he incurred in defending the proceedings should be seen as attributable to her, a lot more would need to be established.  If the legal fees figure is deducted [they have been paid by the M Pty Ltd overdraft] his claim is reduced to $901 which is considerably more than the wife’s like expenditure.  Turning to personal expenditure in Part G, he makes various claims.  That includes rent of $2,000 per week for the apartment he now occupies, said to be consistent with the wife’s contention of reasonableness at an earlier time.  There is also a figure of $232 for ‘rates and unit levies’ and another figure of $140 for ‘other rates, unit levies’ and while it is not clear what they relate to other than the family home no issue is taken with them.  There are also motor vehicle and life insurance premiums and other vehicle costs.  Minimum credit card repayments totalling $320 per week in claimed though it is not apparent what, if any, expenditure reflected in those debts is already built into the claims for expenditure in either Part N or G.  In any event, there is also the claim for child support of $1,500 per month or $346 per week.  Finally, there are two other claims.  One is for $420 per week which the husband explains in note H34 to be the approximate cost of expenses incurred for the benefit of the children excluding his rent and, as the Tomkin Trust pays their school fees of $1,300 per week, also excluding those fees.  The other is for $590 per week which is the amount he was required to pay to the wife and for various expenses under the orders of February, extended with his agreement to August and continued by the August orders.  All up, removing the $1,294 related to Local Court legal fees, he claims expenditure of $5,320 per week or $23,050 per month.  His income from salary and directors fees as well as benefits such as superannuation and vehicle costs, are said to amount to $3,708 per week or $16,000 per month, producing a significant shortfall of income over expenditure.  I do not accept this represents a sound picture of his financial circumstances. 

1. The relatively short time frame it is anticipated any interim order would need to run, there could be some pruning of his claimed expenditure consistent with the undertaken inherent in the wife’s proposal. 

2. It is recognised that his departure from the home in February has meant additional expenditure – rent, for example – and the criminal charge required significant expenditure to defend – but met by drawing on overdraft – yet he had paid funds for the wife’s continued support before the court proceedings and he proposed in January and February to continue that support from earnings.  Additional expenditure appears not to have been the catalyst for terminating her salary because he puts it on the basis of it being now ‘inappropriate’ as she was not an employee.  Whatever the case, he gives no explanation of the flow on effect to him that termination very likely brought about; in other words, as Mr Richardson submits, assuming the arrangement was about income splitting, he gave no explanation for the fate of the remuneration formerly paid to her.  In the face of that gap, it is reasonable to infer the funds are now available to him. 

3. I should note here Mr Richardson’s referral to the termination as a ‘sham’ arrangement because Mr B, who appears to have participated in the decision, is a holder of C class shares to which no right to vote attaches according to the Articles of the company; hence, the husband can be seen to have orchestrated the position.  For my part, I have no difficulty with the salary being terminated; the arrangement strikes me as problematic and I would not support it with court orders knowing in fact she is not an employee.  But the availability to the husband of the funds formerly channelled in that direction is another matter. 

4. On the topic of capacity, Mr Richardson drew attention to the transfer from the bank account of M Pty Ltd on 20 July 2006 of $509,000 with the notation “[T Pty Ltd] repay loan”.  The husband explained that the amount was 50% of the profit share from the sale of an investment property at C acquired by four persons or entities, including by the Tomkin Trust and the trust related to his business partner’s affairs.  He said the money was distributed equally to those two trusts, with half going to the Tomkin Trust.  In fact, as he pointed out, the bank statements for the Tomkin Trust bank account [also exhibit 4] shows a deposit on 14 August with the notation “[T Pty Ltd] ½ proceeds” for an amount of $217,500.  This is much less than half of $509,000, but there may be an explanation for the difference as there may be an explanation for the destination of the funds between 20 July and 14 August – it is just not available here.  Whatever the situation, it is also the husband’s evidence that the money deposited has been used to meet expenditure. 

5. On the same day the C property profit share is deposited to that account there is a debit entry for $129,881 with the notation “repay loan TN”.  This would appear to relate to discharge [or reduction] of a debt to T Pty Ltd which stood at $143,613 some weeks earlier as at 30 June 2006.  The husband was not able to confirm the position without looking at the accounts.  The point is that amount seems to have been repaid to T Pty Ltd when the profit share was deposited.  Which leads to another point Mr Richardson made in his submissions. 

6. That is about the apparent lack of parity between the husband and his business partner according to the draft 2007 financial accounts for the company.  More particularly, the Balance Sheet includes an asset of $433,672 which is apportioned as to $122,998 owing by the Tomkin Trust and as to $310,675 owing by the Trust controlled by the business partner.  The submission contends it is reasonable to infer some parity between the corporate partners which is not observed by his partner’s borrowings far exceeding his own.  That is not to suggest the husband can borrow money from the company when he wants, but it is to suggest the disparity could be addressed with his partner and the potential to borrow further is a financial resource for the husband.  For my part I agree the situation attracts scrutiny but it is not a compelling argument and can be discarded for present purposes. 

7. Turning to the financial accounts of the Tomkin Trust [exhibit 3], they reflect gross revenue for 2005/06 of $326,180 and a decrease during 2006/07 to $288,000.  After the deduction of employee benefits and other expenses, the amount available for distribution as at 30 June 2007 was $100,977 but the accounts provided do not show any distribution of the net income.  Sitting at odds with that are the Minutes of the meeting of directors of M Pty Ltd held on 30 June resolving to distribute net income for the year as to $1,333 for each of the three Tomkin children, $20,000 and $75,000 respectively to the husband’s brother and sister in law, and the remainder to the husband.  Being potential beneficiaries, his brother and sister in law are eligible recipients of the trustee’s discretion.  But as the husband has the power of appointment of the trustee under the Tomkin Trust Deed [exhibit 2] according to a long line of authority that Trust can be seen properly as his alter ego.  That renders the decision to distribute available net income that way odd even though, as noted, the accounts provided have not taken up the resolution. 

8. Mr Richardson submits the evidence establishes the husband has had more than $800,000 available from various sources since 1 July 2006: 

   ·In the 2006/07 financial year the Tomkin Trust received, being the husband’s entitlement to income generated by the business, $288,400 [much more than the $16,000 per month Mr Lloyd advised from the bar table and more than the income reflected in the husband’s financial statement].

   ·On 14 august 2006 the Tomkin Trust received a share of the profits of the C property of $217,500.

   ·The sum of $197,500 has been drawn down in debt.

   ·He has been paid director’s fees by T Pty Ltd according to his financial statement of $461 per week or near $24,000 per annum.

   ·The salary attributed to the wife amounted to around $42,000 per annum – to August 2007 paid to her;

   ·He has also had funds from the overdraft arranged by the wife. 

9. Closer scrutiny of that list at a later time might throw the figure into doubt but the point holds good that the husband has had significant funds available to him from a variety of sources.  I find it difficult to locate the seismic shift that supposedly rendered him without capacity to pay spouse maintenance, contrary to the long history of family support from his income not only during the marriage but also post separation, despite the additional cost of secondary accommodation. 

10. I am satisfied he does have the capacity to pay what he had been paying. 

11. It follows that the husband’s review application will be dismissed.  However, to accommodate the change to the salary arrangements the orders imposing the obligation will be re-drafted. 

Interim costs

1. The submissions were little more than passing and the reasons for the order to issue can follow suit. 

2. The wife has about $75,000 left of the overdraft facility.  The rest of it has been spent on her legal fees, the husband’s legal fees, expert’s fees and other expenditure.  She maintains she needs what is available to run her case and meet the anticipated costs of bringing the matter to conclusion, set out in her evidence.  Mr Lloyd makes the point that the costs she anticipates take the matter up to the conclusion of a hearing, but Mr Richardson counters with the observation that they failed to achieve a settlement with both counsel involved for much of the day and so it is unlikely they will settle at the conciliation conference scheduled for Friday.  Obviously the course it takes cannot be predicted. 

3. What can be said now is that the case has not yet settled, the wife therefore has a need of funds for that purpose, and she has given at least some evidence relevant to the issue, including an estimate of the costs she will face in that event.  In the husband’s case he has not yet given evidence of what costs he anticipates needing but it is highly likely he will need funds if the matter proceeds. 

4. Neither loses anything by the current arrangement continuing.  What they each take ultimately from that overdraft facility will be considered by the trial judge in determining their property proceedings or can be taken into account in any settlement negotiated.  If the fund is exhausted and either wants to devote more of their property to the litigation they can address the problem at that stage. 

5. It follows the wife’s application for review of the continuation of the orders [assuming the notation in the August orders constitutes an order] will be dismissed. 

I certify that the preceding forty-nine (49) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Moore

Associate: 

Date: