Toohey and Toohey

[2013] FamCA 750

FAMILY COURT OF AUSTRALIA

TOOHEY & TOOHEY [2013] FamCA 750

FAMILY LAW – PROPERTY

Family Law Act 1975 (Cth)

Gabel v Yardley [2008] FamCAFC 162, (2008) FLC 93-386, 40 Fam LR 66, 221 FLR 270
Strahan & Strahan (Interim property orders) [2009] FamCAFC 166

APPLICANT: Ms Toohey

RESPONDENT: Mr Toohey

FILE NUMBER: MLC 5928 of 2013

DATE DELIVERED: 7 October 2013

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 4 October 2013

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Sweeney

SOLICITOR FOR THE APPLICANT: Taussig Cherrie Fildes

COUNSEL FOR THE RESPONDENT: Mr Wilson

SOLICITOR FOR THE RESPONDENT: Saxby's Lawyers

Orders

1. That by way of interim distribution of property, the wife retain the net proceeds of the sale of the real property at B Street, C Town.

2. That paragraph 2 of the application for interim orders contained in the response of the husband filed 4 October 2013 is dismissed.

3. That all other outstanding interim applications are adjourned to 10.00am on 19 December 2013 in the Judicial Duty List.

IT IS CERTIFIED:

1. That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 5928  of 2013

Ms Toohey

Applicant

And

Mr Toohey

Respondent

REASONS FOR JUDGMENT

1. In the coming days, about $850,000 will become available from the sale of the former matrimonial home of Mr Toohey (the husband) and Ms Toohey (the wife). This interlocutory dispute is about how those proceeds should be divided in circumstances where the picture of the value and accessibility of their assets remains unclear.

2. The wife, as the sole registered proprietor of the home, seeks all of its net proceeds of sale. The husband, who asserted an equitable interest in the home, seeks the repayment of a significant company debt which he said funded renovations and then he desired half of the remaining proceeds.

3. It was the husband’s case that he may have cash flow problems over the ensuing months pending the final hearing and maintained that he could not access funds from the business entities or readily dispose of shares in those entities. He said that it would not be just and equitable for the wife to have all of the cash even if there was a likelihood that she might receive more than the full sum of the net proceeds of the home at a final hearing.

4. It was the wife’s case that the house was in her name and that this sum would not satisfy her overall entitlement. She submitted that it was a matter for the husband as to how he accessed money for the same purposes that she intended including legal fees and living expenses.

5. In my view, it is just and equitable in the circumstances for the wife to have the proceeds. These are my reasons.

6. This case was argued in the judicial duty list last Friday and I reserved to consider the determination over the weekend to enable a careful reading of the affidavit material and documents relied upon by the parties.

7. Although the wife was the applicant for orders initially, the reality was that she had the legal entitlement to the proceeds of the sale and injunctive orders were not sought against her use of them. She had brought the interim proceedings to obtain a much larger partial distribution of property and also spousal maintenance. It was the husband who was seeking the partial distribution of the money from the sale and thereby seeking to alter her interests in the property.

8. By way of background, the wife is 48 years of age and a student nurse by occupation and otherwise engaged in caring for the parties’ 14 year old son. She is not receiving income but it was the husband’s evidence that she could work part time although it was not clear how. As this was not a maintenance case per se, it does not matter.

9. The husband is 50 years of age and the manager of a business which was described by the wife as a family business; that is largely correct. However, there are a small number of shareholders who have nothing to do with the family and, then there is a large percentage of extended family members. This business which is conducted by two main entities in country Victoria had been the creation of the husband’s father.

10. The geographical area where the business is conducted is currently in something of a crisis contributing to the husband’s view that the shares in the entities are not worth their balance sheet value and they could not be sold anyway. He also pointed to banking pressures which have reduced the lending facilities to the entities. His evidence was that the overdraft facility cannot be used any further. Despite that, he earns a significant salary which is still being paid.

11. The 14 year old son will apparently live with the wife and it seemed to be common ground that the intention was that he would be schooled at a private school in Melbourne and for that purpose, the wife would move to Melbourne. It was for that reason that she sought the distribution of $2.5 million initially so that she could purchase a house nearby to the school.

12. Counsel for the wife conceded that on the material available, that application could not currently proceed but that left the sale proceeds of the house in dispute.

13. There are many factual disputes in this case about which the Court cannot make findings. Thus, this determination is made on the affidavit material and submissions of the parties relying largely, but not entirely, on the uncontroversial facts.

14. The approach to a partial distribution of property before the parties have had a final hearing was set out by the Full Court in Strahan & Strahan (Interim property orders) [2009] FamCAFC 166. The Court observed that the first step was to determine the relevant source of jurisdiction for making an order. Here, the parties have agreed that the Court was being asked to exercise its power under s 79 of the Act. That being so, as the Full Court said, the court may make such an order as it considers appropriate provided it is satisfied that it is just and equitable to make the order.

15. Boland and O’Ryan JJ said that if the source of jurisdiction was s 79 of the Act, regard should be had to the requirement in s 79 that the orders be just and equitable and this would require the Court to undertake at least some brief consideration of the matters in s 79(4) which of course includes s 75(2) by incorporation. It was essential to consider those matters but only briefly. 

16. The Full Court discussed the issue of the applicant being likely to receive by way of property settlement a sum sufficient to cover the advance but in this case, there was a general concession about that by the husband.

17. It is well understood that there is only one exercise of the power under s 79 of the Act but as the Full Court observed, this power may “be exercised by a succession of orders until the power ... is exhausted” and the power is exhausted “when there remains no property ... with respect to which orders by way of alteration of interests in property could be or have been made.”: Gabel v Yardley [2008] FamCAFC 162, (2008) FLC 93-386, 40 Fam LR 66, 221 FLR 270 per Bryant CJ and Coleman J and, as Finn J in Gabel v Yardley said:

    it is only the final order, which deals on a final basis with all known property of the parties, which completes the one single exercise of the s 79 power.

18. No issue was taken by the parties with those matters but it still behoves the Court to satisfy itself as to the matters of jurisdiction and power.

19. The Full Court then moved to the two steps that should be applied if the jurisdiction was to be exercised. The first step requires consideration as to whether the jurisdiction will be entertained and the second step arises if the jurisdiction is entertained and requires consideration of the factors which are relevant to the exercise of power under s 79 to make an order.

20. Counsel for the wife pointed to the fact that this was the wife’s money. Counsel for the husband submitted that there was no question that the Court should exercise the power in s 79 so the first step in Strahan can be seen to have been satisfied but even so, the Court must still consider the interests of justice.

21. In this case, both parties lay claim to the funds for different reasons both of which are equally plausible. The wife says that it is her money, she will receive more than that sum at trial even on the most conservative of figures being used by the husband and she desires to pay legal fees and set up house in Melbourne. The husband too desires to spend money in the same way but maintained that he could not do that from his income and access to capital because of the current industry problems.

22. In exercising the wide discretion conferred by the power to make such an order, it is relevant to consider the fact that this dilemma particularly for the husband, may be a temporary one, because the final hearing is not that far away. In other words, the problem of how the wife obtains her entitlement in due course not only has to be met at trial but consideration has to be given to it before too long because there are other and major shareholders who may be unwillingly brought into the proceedings if the cash issue is to be considered fully.

23. In relation to the second step referred to in Strahan, as the jurisdiction is being exercised, s 79 and in particular, ss 79(2) and (4) must be considered and applied. Here, neither party argued that there was not sufficient evidence to justify orders albeit the wife’s counsel urged the Court to start with the fact that the house was the property of the wife and thus it could be said that there was no basis to alter that interest. The husband pointed to the renovations undertaken to the property but also the longevity of the relationship and its consequential contributions.

24. In Strahan, the Full Court also referred to the “adjustment issue” or “claw-back issue” and noted that as Bryant CJ and Coleman J observed in Gabel v Yardley , the interim order must be capable of variation or reversal without resort to s 79A or appeal. Having regard to the most conservative view of the husband’s entitlements in assets other than the cash in dispute here, that is not a matter which I find is likely to be an issue.

25. Thus, the issue is about whether it is just and equitable to not allow the wife the use of all of the house funds bearing in mind that these funds, substituted for the house, will be reconsidered as property in the final hearing.

26. The evidence of the wife was that the husband received a monthly salary of about $6,300 net. Of that, $2,800 had been going to her until May 2013 when the husband stopped the payment. The wife conceded that the parties had lived a “lavish” lifestyle and said that they were able to access funds beyond the income stream of the husband. There is certainly support for that assertion in two things. First, there were significant renovations undertaken to the home in 2012 which may have been sourced from a bank but, on the husband’s evidence, they came from the company’s accounts. It was that borrowing that the husband wanted repaid from the sale proceeds. The second fact was that there are significant loan accounts in the two entities including in the name of the husband and whilst he submitted that the banking facilities would not support cash usage within the entities, it is clear he has an absolute entitlement to at least those monies without considering his entitlement to shares. How he could access those loan accounts was not stated but there was no evidence that the husband had approached any of the other extended family members or directors to see what could be done. The loan accounts were said by counsel for the husband to be a surprise to him but there has been movement in them in recent years.

27. The evidence also shows that the two main corporate entities have very different roles. One is an operating entity and the other an investment company. The latter has significant equity in assets which, on the evidence, looks largely like it is in real property. Whilst the picture portrayed by the husband of a very depressed country economy may very well be affecting the business, the real properties in the investment entity seemed largely to be in Melbourne. True it is that there are other shareholders in that investment entity who have control over the decisions relating to sales and borrowings but again, there is no evidence of how those people would react to buying the husband out, lending him money, supporting commercial borrowings or transferring specific items to him. The operating entity is also inter-connected with the investment entity but if the situation is currently dire or there will have to be decisions as to how the wife is paid out, pragmatism will have to be considered.

28. The final factual issue relates to the dispute as to the value of what is in the husband’s interests even if those are not readily within his ability to dispose.

29. Counsel for the wife produced an aide memoire which showed the balance sheet values as against the amounts that the husband said were the more realistic values given the control and economic circumstances. I am not in a position to make any finding in relation to that but if the book value is correct, there is a substantial value and consequently, a difficult problem for the parties ahead as to how that value is realised. If the conservative value is correct, the cash flow problem and negotiation with the other shareholders still arises but on any view, the wife is likely to receive more than the sum she currently has in her control. Thus, the short term problem of the husband still has to be addressed for the long term outcome.

30. It was agreed that the wife has other money from inheritances and also public shares but still seems likely to receive more from the husband’s interests. The question then is whether it is fair to allow her to retain all of what she has pending that determination. In my view, the husband may have difficulties but I could not say on the evidence that he has exhausted all of the avenues open to him.

31. I could not say that the cash flow problem is such an issue that it should deny the wife her entitlement to what is largely going to be hers anyway in circumstances where the husband has the control of the larger income and capital resources.

32. Having regard to the provisions of s 79(2), I could not find it would be just and equitable to make an order at this stage altering the interests of the wife in the net proceeds of the sale of the home.

33. The husband also sought the repayment of the company loan from those sale proceeds. I know no details about the indebtedness arrangements. Absent some evidence to indicate the company’s position relating to demand or need for those funds to be repaid, bearing in mind the other family members and the company as a separate legal entity have been largely silent on the financial issues raised by the husband, I have presumed that the company can wait.

I certify that the preceding Thirty Three (33) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 7 October 2013.

Associate: 

Date:  7 October 2013