Tripp & Tripp
[2013] FamCA 1107
FAMILY COURT OF AUSTRALIA
| TRIPP & TRIPP | [2013] FamCA 1107 |
| FAMILY LAW – INJUNCTIONS – Section 114(1) – Where the wife alleges the husband has improperly asserted control of Trust and income of Trust. FAMILY LAW – LITIGATION FUNDING – INTERIM ORDERS – Where the financial matters are significantly complex – Where the wife has insufficient funds to meet her existing and future legal and associated costs – Where the wealth of the parties is controlled predominantly by the husband. FAMILY LAW – CHILD SUPPORT DEPARTURE – INTERIM ORDERS – Where wife seeks a child support departure order and husband’s assessed rate of child support is nil – Where the husband has capacity to pay child support. FAMILY LAW – SPOUSAL MAINTENANCE – Lump sum – Where the husband has capacity to pay maintenance as sought by the wife – Where the wife’s claimed expenses are deemed to not all be reasonable. |
Family Law Act 1975 (Cth) ss 72, 74, 77, 114, 117
Child Support (Assessment) Act1989(Cth) ss 116, 117, 124
| APPLICANT: | Ms Tripp |
| RESPONDENT: | Mr Tripp |
| FILE NUMBER: | MLC | 8048 | of | 2012 |
| DATE DELIVERED: | 22 October 2013 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Johns J |
| HEARING DATE: | 5 September 2013 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr North SC |
| SOLICITOR FOR THE APPLICANT: | Nicholes Family Law |
| COUNSEL FOR THE RESPONDENT: | Mr O’Shannessy |
| SOLICITOR FOR THE RESPONDENT: | Macpherson & Kelly |
Orders
1.That until further order the husband pay or cause to be paid to the wife the sum of $2 500 per week by way of spousal maintenance, the first such payment to be made within seven days of the date of these orders and weekly thereafter.
2.That until further order the husband pay or cause to be paid all instalments of mortgage and rates on the property situate at Suburb B as and when they fall due.
3.That until further order pursuant to s 117 of the Child Support (Assessment) Act1989 there be a departure from the administrative assessment of child support payable by the husband to the wife with respect to the children M born … 2000 and D born … 2002 (“the children”) such that the rate of child support for the children shall be $750 per child per week such sum to be paid on a weekly basis, the first payment to be within seven days of the date of this order.
4.That until further order pursuant to s 124 of the Child Support (Assessment) Act 1989 the husband pay or cause to be paid the following expenses by way of non-periodic child support for the children in addition to the periodic child support payable pursuant to order 3 hereof as follows:-
(a)Tuition fees for the children to attend H School or such other school as may be agreed between the parties from time to time;
(b)All of the children’s other education expenses for attendance at H School including enrolment fees, compulsory building fees, school books, stationery, uniforms, school excursions, camps, and extra-curricular activity expenses;
(c)Private health insurance for the children at the highest level of cover; and
(d)All gap health costs for the children not otherwise covered by private health insurance.
5.That by way of litigation funding and for the assistance of the wife’s legal and accounting costs the husband pay or cause to be paid to the wife the sum of $175 000 such sum to be paid into the trust account of the wife’s lawyers, Nicholes Family Lawyers in seven monthly instalments of $25,000 per month with the first monthly instalment to be paid within 14 days of the date of these orders and thereafter on the first day of each month.
6.That pursuant to s 77 of the Family Law Act1975 within 14 days of the date of these orders the husband pay or cause to be paid to the wife the sum of $29 489 by way of urgent lump sum spousal maintenance.
7.That the wife’s Application in a Case filed 21 June 2013 and the husband’s Response to an Application in a Case filed 6 August 2013 be otherwise dismissed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Tripp & Tripp 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 8048 of 2012
| Ms Tripp |
Applicant
And
| Mr Tripp |
Respondent
REASONS FOR JUDGMENT
Introduction
Before me on 8 August 2013 in a Judicial Duty List were the Application in a Case of the wife filed 21 June 2013 and the response to an Application in a Case of the husband filed 6 August 2013. The wife’s application sought orders for a departure application and interim child support, interim spousal maintenance, urgent lump sum maintenance, interim costs, disclosure and the appointment of single expert valuers. In the alternative to the orders for maintenance and interim costs, the wife sought an equal division of the net income of the X Property Trust (“the Trust”).
Notwithstanding the terms of her filed application, that day Senior Counsel for the wife indicated that the wife’s primary application was for the equal division of the Trust income and in the alternative, she sought orders for interim financial relief.
The husband sought orders that the wife’s application be dismissed.
Senior Counsel appearing for the wife and counsel for the husband indicated that the matter was likely to take between half a day to one day. Each party had filed voluminous material in support of their respective applications.
In the circumstances I made procedural orders that day adjourning the matter to a half-day hearing before me on 2 September 2013 and further procedural orders which provided:-
·That each party file any further affidavit material upon which they sought to rely by 15 August 2013;
·That by 16 August 2013 the wife file and serve an outline of case; and
·That by 23 August 2013 the husband file an outline of case.
Ultimately the competing applications were heard by me on 5 September 2013.
The matter was conducted on the papers. Each party relied upon the material referred to below and their counsel’s oral submissions. The onus of proof lies with the applicant, in this case the wife, and the standard of proof is the balance of probabilities. However, given the nature of the hearing, contentious facts cannot be determined without the evidence being properly tested. Accordingly, in determining the matter, I have relied only upon those facts which are agreed or not in issue.
MATERIAL RELIED UPON
The wife relied upon the following material in support of her application:-
·Case outline filed on behalf of the applicant wife;
·Application in a Case filed 21 June 2013;
·Affidavit of the wife filed 21 July 2013;
·Financial statement of the wife filed 21 June 2013;
·Affidavit of Mr F filed 21 June 2013;
·Affidavit of Keturah Sanae Sageman filed 21 June 2013;
·Affidavit of the wife filed 8 August 2013;
·Affidavit of Mr U filed 15 August 2013; and
·Affidavit of the wife filed 5 September, 2013.
In support of his response the husband relied upon the following material:-
·Interim case outline document;
·Response to Application in a Case filed 6 August 2013;
·Affidavit of the husband filed 6 August 2013;
·Supplementary affidavit of the husband affirmed 15 August 2013;
·Cash flow spreadsheet handed up in Court on 8 August 2013 and annexed to affidavit of the husband sworn 5 August 2013 at annexure MT4;
·The following material filed on behalf of the wife:-
(i)Her financial statement filed 4 September 2012;
(ii)Paragraphs 34-38 of her affidavit filed 4 September 2012;
(iii)Paragraph 62 and 63 of her affidavit filed 21 June 2013;
(iv)Paragraphs 8 and 11 of her affidavit filed 8 August 2013.
·Further submissions and authorities relied upon by the husband dated 5 September, 2013 (Exhibit R1).
ORDERS SOUGHT
The interim orders sought by the wife were as follows:-
·That the parties as directors of XX Pty Ltd (“the Trustee”) do all such acts and things and sign all documents necessary so as to cause the Trustee in its capacity as Trustee of the X Property Trust (“the Trust”) to:-
(a)Distribute to the wife the sum of $56 000 (net of income tax and Medicare levies) each calendar month within seven days after the payment by the tenant of the H property of its monthly rent payable under the lease between it and the Trustee;
(b)Cause the Trustee to retain in the Trust such sums as are necessary out of each monthly rental payment by the tenant in order to pay income tax that may be payable by the wife by reason of said distributions;
(c)Cause the Trustee to indemnify the wife with respect to any income tax payable by her by reason of the said distributions.
·From the date the wife receives the first payment of distributions as provided above for so long as she continues to receive such payments:-
(a)The husband pay one half of all mortgage payments referrable to the property at Suburb B (“B property”); and
(b)In the event that either party is contractually obliged to meet any payment for tuition or school fees for either child of the marriage then the other party shall indemnify him or her for one half of any debt arising by reason of any such contractual obligation.
·As an alternative to the above the wife sought the following orders:-
(a) Urgent lump-sum spousal maintenance in the sum of $29 489;
(b) Until further order a child support departure such that the child support payable by the husband to the wife be varied and increased to the sum of $1 104.50 per child per week and thereafter increased on 1 July 2014 and each year thereafter by the percentage increase in the Australian All Groups Consumer Price Index;
(c) Until further order pursuant to s 124 of the Child Support (Assessment) Act1989 the husband pay or cause to be paid to the wife by way of non-periodic child support:
(i) Tuition fees for the children at H School;
(ii) All of the children’s other education expenses;
(iii) Private health insurance for the children;
(iv) Gap health costs for the children including but not limited to medical, hospital, dental orthodontic, optical, physiotherapy and counselling;
(d) That until further order the husband pay to the wife:
(i) spousal maintenance in the sum of $3 069 per week; and
(ii) mortgage repayments and rates for the wife’s property at Suburb B;
(e) That the husband pay to the wife by way of interim costs the sum of $478 240 such amount to be paid in 14 monthly instalments of $34,160;
·That within 14 days the husband provide to the wife’s solicitors specified documents by way of disclosure.
·Orders for the appointment of single expert valuers to value identified properties and the parties’ motor vehicles.
The orders sought by the husband were as follows:-
·That the wife’s Application in a Case be dismissed or in the alternative that the wife’s interim application for litigation funding and/or interim property settlement be stayed as an abuse of process and the balance of her Application in a Case be dismissed; and
·That the wife pay the husband’s costs of and incidental to her Application in a Case on an indemnity basis.
SHORT HISTORY
The wife was born in 1971 and is aged 41 years. She is engaged in full-time home duties.
The husband was born in 1971 and is aged 42 years. His occupation is company director of a number of entities.
The parties commenced cohabitation in 1995 and were married in 1996. Separation occurred in July 2011.
There are two children of the marriage, namely M, born in 2000 (aged 13 years), and D, born in 2002 (aged 11 years). Both children attend H School and are in years seven and five respectively.
There are no parenting orders in place with respect to the children. The children live with the wife and spend five nights per fortnight with the husband by agreement between the parties.
The husband resides in the former matrimonial home at Suburb Y and the wife resides in a property purchased post separation in Suburb B.
As part of their case outline each party provided a summary of the asset pool. From the wife’s perspective the parties have interests in assets valued in excess of $36 million gross. In his case outline, the husband identified assets in which the parties have an interest which have a total value of in excess of $44 million gross.
The principle issue for the parties with respect to the formulation of their respective asset pools is the quantification of their liabilities. It is common ground between the parties that the Australian Taxation Office (“the ATO”) has conducted an audit of the various entities controlled by the parties and has issued assessments and penalties giving rise to a debt to the ATO in the sum of $17.32 million. The husband asserts that liability has the potential to “wipe out the entire asset pool”.[1]
[1] Husband’s affidavit filed 6 August 2013 paragraph 18.
Currently the parties are undertaking negotiations with the ATO regarding the claim. It is common ground between the parties that the matrimonial proceedings cannot progress in a meaningful fashion until such time as the issues with the ATO have been resolved. Neither party was able to inform the Court as to the likely date by which the ATO issues will be concluded.
Proceedings commenced before this Court by the wife’s Initiating Application filed 4 September 2012.
Orders were made by consent on 19 December 2012 by Cronin J which provide that the husband pay to the wife the sum of $200 000 by way of interim property settlement, such sum to be paid to the wife’s solicitors in instalments of $25 000 per month. In addition, that day, extensive orders were made with respect to the husband providing disclosure to the wife’s solicitors. The final payment pursuant to the orders for interim property settlement, being a payment in the sum of $25,000, was made by the husband in May 2013.
The wife filed her Application in a Case on 21 June 2013. That application sought orders for departure order from child support, non-periodic child support, urgent lump-sum maintenance, interim costs, interim spousal maintenance and in the alternative to those orders, the equal division of net income from the Trust. In addition, the wife sought orders for disclosure and the appointment of single expert valuers.
By the time the matter came before the Court on 8 August 2013 the wife’s position had altered such that her primary application was for the equal division of the net income of the Trust. In the alternative to those orders, she sought interim orders with respect to child support, urgent spousal maintenance, interim spousal maintenance and interim costs.
At all times the husband has maintained the position that the wife’s application should be dismissed. His position is set out in his affidavit filed 6 August 2013. The husband’s position can be summarised as follows:-
·The husband asserts that since October 2012 he has been paying to the wife for the support of the wife and the children the sum of $4 000 per week. In addition to those amounts the husband deposes that he has been paying the wife’s mortgage, insurance costs, vehicle expenses, the children’s school fees and various other costs totalling a further $2 659 per week.
·Between November 2012 and May 2013 the husband has paid to the wife the sum of $200,000 by way of interim property settlement.
·Since the husband commenced payment of the monthly instalments pursuant to the orders of 19 December 2012 these proceedings have essentially been dormant as the parties have been awaiting the outcome of negotiations with the ATO. Accordingly, the husband is critical of the amounts expended by the wife on her legal advisors.
·The husband challenges the wife’s claim for an increase of her interim support and the interim support for the children.
DISCLOSURE
At the commencement of the hearing on 5 September 2013 Senior Counsel for the wife indicated that his client sought no orders with respect to disclosure, notwithstanding the orders sought in her Application in a Case and case outline documents. Accordingly, neither counsel made submissions in relation to that issue and I have made no orders with respect to those parts of the application.
VALUATIONS
In his affidavit filed 15 August 2013 the husband deposed that the Commonwealth Bank wishes to undertake valuations of the H property and the Y and A properties.
During the hearing it was conceded by Senior Counsel for the wife that it was appropriate for the parties to await the outcome of the Bank’s valuations of the properties before seeking the appointment of single expert valuers.
Accordingly it was agreed between the parties that there should be no orders with respect to the appointment of single expert valuers at this time.
SECTION 114 APPLICATION
The wife seeks an equal division of the net rental income received by the X Property Trust (“the Trust”) from the H property. The registered proprietor of the H property is XX Pty Ltd. XX Pty Ltd (“the Trustee”) is the Trustee of the Trust.
The husband and the wife are the two directors of the Trustee. They are also equal shareholders of the Trustee.
The primary beneficiaries of the Trust are the husband and the wife.
The Trust was settled by deed dated 30 May 2007. The husband is the appointor of the Trust.
The lessee of the H property is not connected to the parties in these proceedings. The annual rent payable by the lessee to the Trustee is currently approximately $4.3 million per annum inclusive of GST, or approximately $358 000 inclusive of GST per month.
Annexure MT 4 to the husband’s affidavit filed 6 August 2013 is his cash flow projection for the Trust for the period April 2013 to June 2015 (“the Cash Flow”). The Cash Flow shows rent received by the Trust exclusive of GST. After payment of interest and income tax the Trust currently has a net income of approximately $144 000 per calendar month. The Cash Flow shows that by July 2014 it is anticipated that the net income of the Trust after payment of interest and income tax will be approximately $151 000 per calendar month.
The wife did not challenge the quantum of rent received by the Trust, as disclosed in the Cash Flow. The issue, from the wife’s perspective is the manner in which the husband, as a director of the Trustee, has applied and proposes to apply the future income, as set out in the Cash Flow.
The Cash Flow shows that the net income after payment of those expenses is deposited into an overdraft facility from which various of the parties’ necessary expenses are paid, including mortgages on the properties at L, and B, payment of property expenses with respect to H and A, payment of BAS expenses, school fees and periodic payments to the wife.
The orders sought by the wife would see the net income of the Trust after payment of interest, income tax and BAS be divided equally. It is submitted on behalf of the wife that after payment of those expenses the net income of the Trust available for distribution is approximately $112 839 per month. Accordingly the wife seeks an order that will ultimately entitle her to a distribution of $56 419.50 per month from the Trust. Were an order to be made in those terms, save for a contribution by the husband towards one half of the mortgage on the B property, the wife would seek no other payment from the husband on an interim basis, save that she seeks an order that would ensure that the parties be equally responsible for the payment of the children’s school fees.
A closer analysis of the wife’s application disclosed that an adjustment in those terms does not in fact achieve equality as between the parties. For example, one of the issues between the parties is the question of whether or not the L apartment should be included in the pool of matrimonial assets. That property is registered in the name of T Family Trust and the husband asserts that it is held on trust for the husband’s mother. The husband asserts that the property does not form part of the parties’ pool of assets. However he maintains that he has a legal obligation to service the mortgage secured over the title to that property. That mortgage liability is approximately $377 000.
The wife asserts that that property should form part of the parties’ asset pool. One of the expenses claimed by the husband in the Cash Flow is payment of the mortgage for the L property. The husband claims that $7,200 per calendar month is paid towards that mortgage from the overdraft. I raised with Senior Counsel for the wife the question of whether or not that liability should continue to be paid from the overdraft, particularly in circumstances where the wife asserts that that property should form part of the parties’ asset pool. Senior Counsel for the wife conceded that it was open to me to make that adjustment in assessing an equal division of the net income of the Trust. Likewise I raised issue as to the wife’s position with respect to deduction of accounting fees for P Firm, the firm of accountants instructed by the parties to represent them with respect to the challenge to the ATO assessments. It was submitted on behalf of the wife that some of those fees relate to these proceedings and accordingly should not be deducted from the Trust overdraft. However, it was conceded that that portion of the fees which relates to the ATO challenge could properly be deducted from the Trust.
The wife relies upon the provisions of s 114(1)(e) of the Family Law Act as the source of power for the order she seeks with respect to the division of the net income derived by the Trust. Section 114(1)(e) provides as follows:-
114(1)In proceedings of the kind referred to in paragraph (e) of the definition of matrimonial cause in subsection 4(1), the court may make such order or grant such injunction as it considers proper with respect to the matter to which the proceedings relate, including:
….
(e)an injunction in relation to the property of a party to the marriage;
Section 4(1)(e) of the Act defines a matrimonial cause as:-
Proceedings between the parties to a marriage for an order or injunction in circumstances arising out of the marital relationship…
There was a dispute between the parties as to whether I had the power to make orders pursuant to s 114(1) as sought by the wife.
It is common ground between the parties that during the marriage the wife assumed a passive role with respect to the day-to-day operation of the Trust. Other than executing documents as was requested of her from time to time she was not otherwise involved directly in the affairs of the Trust. That arrangement has continued between the parties since separation in 2011 until the date of filing of this application.
As a consequence, it is alleged on behalf of the wife that as a result of the breakdown of the relationship between the husband and the wife the husband has:
…usurped to himself sole control with respect to the Trust and purported to make decisions on behalf of the Trustee with respect to the Trust property and its income without consultation with the wife, the other director of the Trustee[2].
The wife alleges that this is an improper assertion of control of the Trust and as such, is a circumstance arising out of the marital relationship which supports the making of the orders sought pursuant to s 114(1).
[2] Case outline of the wife paragraph 10.
Further, it was submitted on behalf of the wife that the following is property of the parties (or either of them) under the Act[3]:-
·the Trust assets;
·the Trustee’s powers to appoint those assets to the husband and/or the wife;
·the rights of the husband and the wife to due consideration and to due administration under the Trust; and
·the power of the husband and the wife as directors of the Trustee to apply the assets or the income of the Trust
[3] Case outline of the wife, paragraph 13
Finally, it was submitted that the orders sought by the wife are proper, that is, that they are reasonable or just in the circumstances.
On behalf of the husband it was submitted that:-
·the matters complained of by the wife are not circumstances arising out of the marital relationship; rather, they are issues arising from a mere theoretical assertion of “usurpation” of rights between directors of a trustee company who both are beneficiaries of the Trust;
·the order sought by the wife was beyond the power of the Court as it sought to alter the property of the parties. It was submitted that an order pursuant to s 114(1) may affect but not alter the property rights of the parties (Farr and Farr (1976) FLC 90-133);
·the proposed splitting of the Trust income works as an alteration of property and as such is beyond the power of s 114(1); and
·even if the power to make the order sought by the wife exists, in the circumstances of this case it would not be a proper exercise of the power.
It is the circumstances and not the proceedings that have to arise out of the marital relationship to enable the exercise of the power (In the Marriage of Esmore (1979) FLC 90-711).
The wife alleges the fact that the parties are now in dispute as to the division of the Trust income is sufficient circumstance arising out of the marital relationship to found the power. In circumstances where the Trust was settled during the marriage, at all relevant times the husband and the wife have been the only directors and shareholders of the Trustee and the husband is the appointor of the Trust and the injunction sought relates to the distribution of the income of the Trust, I am satisfied that the injunctions sought by the wife arise out of the circumstances of the parties’ marriage.
At issue is whether in the circumstances of this case the granting of the injunction sought would be proper.
His Honour, Cronin J observed in the decision of MacDougal & Benson [2013] FamCA 631 at paragraph 20 that:-
The propriety of an order depends upon the exercise of subjective discretion. Discretion must be exercised according to law.
Whilst s 114(1) empowers the Court to make orders in positive as well as negative terms, as in the case of mandatory injunctions, such order must be considered proper. The term “proper” means “reasonable and just in the circumstances” (per In the Marriage of Farr (1976) FLC 91-33).
The arrangements with respect to the operation of the Trust have been in existence since well prior to the separation and have continued, largely unchanged, for a period of approximately two years post separation without complaint by the wife. The wife has sought interim orders in her Initiating Application filed 4 September 2012, her Amended Initiating Application filed 23 October 2012, and her Further Amended Initiating Application filed 6 December 2012. None of those applications raised issue with the manner in which the Trust affairs had been conducted by the husband, nor did they seek to alter those arrangements.
The original position as put by the wife in her Application in a Case was for orders with respect to interim support, disclosure and appointment of valuers and in the alternative an order was sought for equal division of the income of the Trust. The proposition that there had been a usurpation of control of the Trust was put for the first time before me on 8 August 2013. It is a “late in the day” complaint by the wife as to the manner in which the husband has conducted the affairs of the Trust, those affairs having been conducted in the same manner for a considerable period both prior to and post the separation of these parties. Accordingly, it is not conduct that in my view can found an application pursuant to s 114(1).
As was observed by Forrest J in the decision of Lampros and Anor & Lampros and Anor [2012] FamCA 415 at paragraph 50:-
In this Court particularly, interim injunctive relief is primarily utilised to maintain things as they are, or to restore things to as they were until they were abruptly changed to the prejudice of an interested party, to protect claims that parties have or may have to substantive relief after a final hearing.
It was common ground between the parties that the Cash Flow disclosed a planned reduction of the Trust overdraft facility. That is, based upon the husband’s projections, as contained in the Cash Flow, the Trust income will continue to be applied to meet the parties’ mortgage liabilities, the children’s school fees, the wife’s maintenance and other expenses and to reduce the amount outstanding under the Trust’s overdraft facility. The balance of that overdraft stands at approximately $511 000 as at August, 2013. In April, 2013 it stood at approximately $573 000 and by September 2014 the husband predicts that it will have a nil balance. Senior Counsel for the wife sought to criticise the husband for the proposed debt reduction.
Such criticism in my view was unwarranted; it is a most unusual circumstance where a party to proceedings is criticised for preserving an asset or increasing the parties’ equity in an asset.
I am satisfied that in circumstances where there has been no change to the manner in which the Trust has been operated since prior to the parties’ separation and that further, the manner in which it is continuing to be conducted is likely to increase its value, there is no proper basis for an injunction as sought by the wife.
In light of those findings, I need not make a determination in relation to the submissions made on behalf of the husband as to whether the orders sought by the wife were an alteration of property interests.
LITIGATION FUNDING
The wife seeks orders that the husband pay to her the sum of $478 240 by way of interim costs, such sum to be paid into the trust account of the wife’s solicitors in 14 monthly instalments of $34 160 per month.
That order is opposed by the husband.
As outlined above, previous orders were made on 19 December 2012 by consent which provided inter alia that the husband pay to the wife the sum of $200 000 by way of partial property settlement, such sum to be paid by instalments of $25 000 per month. The final payment pursuant to those orders was received by the wife in May 2013.
In her affidavit filed 21 June 2013 the wife deposes at paragraph 87 that she has incurred the following legal costs to date:-
(a)Professional legal fees in the sum of $157 130.05 (including GST);
(b)Disbursements in the sum of $110 220.63 (including GST); and
(c)Unbilled work in progress in the sum of $6 053 plus anticipated GST of $605.30.
At paragraph 88 of that affidavit the wife deposes that the total fees and disbursement outstanding, excluding work in progress at that time was $52 475.91.
The wife also relies upon the affidavit of her solicitor, Ms Keturah Sageman filed 21 June 2013. Ms Sageman deposes in her affidavit that the wife has paid her solicitors a total amount of $216 174.77. To date, she has been billed disbursements totalling $110 220.63. Further, Ms Sageman confirmed that the total fees and disbursements currently outstanding excluding work in progress is $52 475.91.
Ms Sageman at paragraph 11 deposed that her firm is not prepared to continue to act for the wife without funds in trust for costs incurred by barristers, accountants and other third party experts. Ms Sageman at paragraph 12 of her affidavit provides an estimate as to the wife’s future ongoing costs. The estimate provided by Ms Sageman to prepare and appear on behalf of the wife up to and including the final hearing of this matter is in the range of $351 588 to $479 002.
I note that Ms Sageman estimated the costs of the interim hearing before me to be up to $24 903 and for the period between this interim hearing and up to and including a conciliation conference as between $43 134 and $80 765. That is, the future costs of the wife up to and including the conciliation conference could be up to approximately$106 000. Those estimates included provision for payment of fees for the wife’s forensic accountant, and payment of the wife’s half share of property valuations, including provision for valuation of the H property. As noted above, it may not be necessary for the parties to engage a valuer to undertake the valuation of the H property, subject to the outcome of bank valuations.
In order to meet her existing outstanding costs and disbursements, and to have sufficient funds available to meet her legal costs and disbursements up to and including a conciliation conference the wife requires up to $156 843.91.
Whilst at paragraph six of the case outline filed on behalf of the wife reliance was placed upon ss 117, 72, 74, 79 and 80 as the source of power to make the order for interim costs, Senior Counsel for the wife confirmed in his oral submissions that in fact the wife sought only to rely upon s 117 of the Act as the source of power for the order sought.
The husband opposed the order sought on the basis that the question of the wife obtaining litigation funding had been dealt with in previous interim applications and accordingly the current application was an abuse of process. It was submitted on behalf of the husband that the wife was simply seeking to revisit an issue previously dealt with by the Court, referring to the orders made on 19 December 2012.
I do not accept that submission. The orders made by consent on 19 December 2012 made provision for a partial property settlement to the wife and not an order in respect of her legal costs.
Boland and O’Ryan JJ considered such matters in the decision of Strahan and Strahan (interim property orders) (2011) FLC 93-466 at paragraph 85 where they stated as follows:-
We also observe that Kendling v Kendling (2008) 39 FamLR 404; [2008] FamCAFC 70 (Kendling) the Full Court (Finn, Warnick and Boland JJ) at [35] concluded that more than one order may be made in the course of s 79 proceedings to fund the litigation expenses of a party. We accept that more than one order may be made and it is not essential that a second order necessarily be made under the same head of power. In other words, for example, a first order may be made under s 117 and a subsequent order may be made by way of an interim property order under s 80(1)(h) provided the power is identified and the principles applicable to the exercise of that power are observed.
During the course of his oral submissions, counsel for the husband conceded:-
(a)That the wife’s legal costs were likely to be more expensive than the husband’s as the husband controls most of the assets the subject of these proceedings; and
(b)To date the husband has incurred legal costs of approximately $115 000, not including the costs of his accountant, P Firm.
At the commencement of the hearing the wife sought and obtained leave to file an affidavit sworn by her on 5 September 2013. In that affidavit the wife deposed as to the failure of the husband to disclose a debt owing to the Trust by the tenant of the H property in the sum of approximately $1.5 million. That matter was raised by the wife’s solicitors with the husband’s solicitors in correspondence on 4 September 2013 and the existence of the debt owed was confirmed by letter of the same date from the husband’s solicitor. The husband makes no reference to the debt owing to the Trust in any of his material filed in these proceedings.
At the commencement of his oral submissions counsel for the husband quite properly conceded that whilst the documents disclosing the debt owed had been provided to the wife’s solicitors, confirmation of the existence of that debt should have been included in an affidavit by the husband. But for the diligence of the wife’s lawyers it is likely that that asset of the parties may have been overlooked. That evidence highlights:-
(a)The complexity of this matter; and
(b)The need for the wife to have legal representation in order to prepare and conduct her case.
Counsel for the husband conceded the need of the wife to have such representation in order to properly conduct her case. The complaint raised by the husband is that the amount sought by the wife is not reasonable in the circumstances of this case and that an order in the amount sought by the wife would provide her a “Rolls Royce” level of service which was unnecessary. It was conceded by the husband through his counsel that $100 000 for litigation funding is a more appropriate figure.
I am satisfied that this is a matter appropriate for the provision of funds for litigation expenses. This is a case where the wealth of the parties is controlled predominantly by the husband. Such a circumstance was recognised by the Full Court in the decision of Strahan and Strahan (supra) as being appropriate for the provision of litigation funding.
Section 117(2) of the Act provides as follows:-
If, in proceedings under this Act, the court is of 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.
In making an order pursuant to s 117(2) of the Act I am required to take into account the relevant considerations pursuant to s 117(2A). In particular I have regard to the financial circumstances of the parties. The wife is a full-time homemaker. Her only source of income, as disclosed in her financial statement filed 21 June 2013 is the maintenance and support paid to her by the husband. In addition to the weekly sum paid to her the husband meets payment of various expenses on behalf of the wife and the children.
In his financial statement filed 2 November 2012 the husband discloses an average weekly income of $45 499 per week and expenditure of $7 646 per week. The source of the husband’s income is the Cash Flow from the Trust. The husband’s taxable income for the year ending 30 June, 2012 was $599 480. Accordingly, I am satisfied that there is a significant disparity in the parties’ income. I am satisfied that whilst the husband has the capacity to meet his own legal expenses the wife has no similar source of funds available to her.
As outlined above, there have been issues between the parties with respect to disclosure as is highlighted in the wife’s affidavit filed 5 September 2013. Whilst I make no findings in relation to those matters the wife’s evidence highlights the complexities in the matter, and also the need for her to have proper representation to ensure that her case is fairly put before the Court. The husband has had the capacity to meet his ongoing legal expenses out of his income. The wife has been reliant upon provision from the husband in order to meet her legal expenses.
I am satisfied that it is appropriate to make orders for litigation funding. However, I do not consider it to be appropriate to make provision for funding to the conclusion of the proceedings. As outlined above, due to the parties’ ongoing negotiations with the ATO, these proceedings are effectively dormant awaiting a conclusion of that process. It may be some considerable time before the matter is able to progress to a conciliation conference. The resolution of the ATO proceedings may ultimately enable these parties to resolve these proceedings without the necessity of a trial.
Accordingly I propose to make orders that will ensure that the wife has appropriate representation up to and concluding a conciliation conference. In my view it is appropriate that the wife have an additional $175 000 by way of litigation funding, such sum to be paid by way of instalments of $25 000 per month for a period of seven months commencing within 14 days of the date of these orders. That will enable her to meet her outstanding legal fees and ensure that she has sufficient funds to enable her to progress the matter to the conclusion of a conciliation conference.
SPOUSAL MAINTENANCE
The wife seeks orders that the husband pay to her the sum of $3 069 per week by way of spousal maintenance. In addition she seeks orders that the husband continue to pay the mortgage repayments and rates for the wife’s property at Suburb B.
The husband opposes those orders.
The statutory provisions relating to spousal maintenance are set out at ss 72, 74 and 75(2) of the Act. The first issue for the Court’s determination is whether the applicant has crossed the threshold (see Bevan & Bevan (1995) FLC 92-600 and Mitchell & Mitchell (1995) FLC 92-601.
The liability of the husband to pay spousal maintenance depends upon the need of the wife for it and the ability of the husband to pay. There can be no liability to pay spousal maintenance unless the wife is unable to support herself adequately. If that inability cannot be established, then an order for maintenance cannot be made.
The wife is engaged in home duties. She is the primary carer to the parties’ two children. The husband does not seek to challenge the wife’s role.
The husband concedes that he has the capacity to pay maintenance as sought by the wife. As outlined above, the husband’s weekly income, as disclosed in his Financial Statement filed 2 November, 2012, far exceeds his weekly expenditure. At issue is the question of whether the wife has a need for such maintenance order.
The wife set out in detail her weekly expenses at part N of her financial statement filed 21 June 2013(“the wife’s Financial Statement”). Those expenses contained in Part N total $2102 per week. Her total weekly expenses including those contained at Part G of the wife’s Financial Statement are $3237 per week.
In her affidavit filed 21 June 2013 the wife seeks to provide further evidence as to how her weekly expenses are calculated. In particular, she relies upon paragraphs 62 to 64 inclusive of that affidavit.
In support of her application the wife points to the following factors:-
(a)She acknowledges her weekly expenses are high but states that they are less than she spent during the marriage. The husband disputes that assertion.
(b)She points to the husband’s own personal expenditure. She deposes that she is unable to quantify with precision the husband’s personal expenditure but refers the Court to various letters and sworn documents which would suggest that the husband’s personal expenditure is between $8667 and $42 800 per month.[4]
(c)At paragraphs 61 and 62 of her affidavit filed 21 June 2013, she deposes that the husband has unilaterally changed the level of financial support provided to her at various times since the parties’ separation. She sets out in that paragraph a history of the maintenance and child support paid by the husband, noting changes in the quantum of support provided by the husband at various stages since the parties’ separation. The husband responds to those allegations in his affidavit filed 6 August 2013. He does not take issue with the chronology provided by the wife but complains of her use of credit cards and the like in support of the alterations he has made to the quantum of support provided by him at times since the parties’ separation.
[4] Wife’s affidavit filed 21 June 2013 paragraphs 65 to 67.
In his affidavit in response filed 6 August 2013 the husband concedes that his living expenses “remain considerable” but denies they are at the level alleged by the wife. At paragraph 56 of that affidavit the husband deposes that his weekly expenses total $4 351.40. Those expenses disclosed by the husband include provision for involvement in sporting pursuits which is an interest he has maintained since 2007. He deposes that the net cost of that interest (which is operated by T Company) for the year ending 30 June 2013 totalled approximately $34 500.[5]
[5] Husband’s affidavit filed 6 August 2013 paragraph 48.
It was submitted on behalf of the wife that the husband’s expenditure (including his interest in the sporting pursuits) far exceeds that of the wife and further that the husband had understated the amounts expended by him on his interest in sporting pursuits.
I am satisfied that the parties enjoyed a high standard of living during the marriage; their lifestyle was such that it was able to support the husband’s interests in sporting pursuits. The husband has been able to maintain his interest in the sports venture, notwithstanding the parties’ separation. The parties’ children continue to attend private school. In addition the husband continues to meet payments in respect of the property occupied by his mother, the untenanted A property and to his sister, Ms Z, in the sum of approximately $3 000 per month.
There is no issue as to the husband’s capacity to pay maintenance as sought by the wife. At issue is the question of what is “reasonable in the circumstances” of this case (Nutting & Nutting (1978) FLC 90-410).
The husband is critical of the wife’s discretionary expenditure. The husband currently pays $4 000 per week for the wife and the children and in addition meets other household expenses, including the mortgage. He seeks to continue to provide support for the family at this level and further points to the fact that the wife did not seek to agitate any issue with that level of support when her original Initiating Application was filed on 4 September, 2012. Whilst the wife raised no issue as to the support provided by the husband to the family at that time, that is no barrier to her current application.
Paragraph five of the Case Outline filed on behalf of the husband highlights areas of discretionary expenditure of the wife with which he takes issue. There is some merit to the husband’s challenge to the wife’s claimed discretionary expenditure, particularly with respect to the following expenses claimed at paragraph 64 of her affidavit filed 21 June, 2013:-
(a)Alcohol of $110 per week for the wife and her friends “before [they] go out”;
(b)Eating out and take away food expenses of $620 per week (in addition to food and grocery expenses of $400 per week for herself and the children);
(c)Beauty treatments of $265 per week (in addition to hairdressing and toiletries of $156 per week); and
(d)Personal trainer of $150 per week (which she attends three times per week).
I do not consider the above claimed expenses to be reasonable when determining the amount of interim maintenance to be paid by the husband. I note many other of the expenses claimed by the wife at paragraph 64 of her affidavit appear excessive, particularly having regard to the wife’s circumstances as a full time homemaker and parent. However, I do not propose to undertake an analysis of each of the wife’s claimed expenses for the purposes of this interim hearing.
Whilst I am satisfied that it is reasonable for the husband to pay maintenance to the wife, I do not consider it appropriate to allow the expenses identified above. I will not allow the claim for alcohol, having regard to the amounts already claimed by the wife with respect to food and eating out. I will allow half of the claimed expenses for dining out and take away, thereby reducing it to $310 per week and half of the claimed beauty treatment expenses, thus reducing it to $132.50. Further, I consider it appropriate to reduce the personal training expenses to $75 per week.
The wife’s claimed expenses total $3,069 (excluding interest on her credit card). After deduction of the amounts disallowed above, which total $627.50 per week, that figure is reduced to $2 441.50 per week. The calculation of maintenance, particularly in an interim hearing is not a strict mathematical exercise. Accordingly, I will round that figure to $2 500.00 per week and order that that sum be paid in addition to the husband continuing to pay the mortgage and rates on the B property as and when they fall due.
CHILD SUPPORT
The wife seeks a child support departure order pursuant to s 116(1)(b) and s 117 of the Child Support (Assessment) Act1989. She seeks an order that the husband pay the sum of $1 104.50 per child per week, such sum to be increased on 1 July 2014 and each year thereafter by the percentage increase in the Australian All Groups Consumer Price Index.
In addition the wife seeks an order pursuant to s 124 of the Child Support (Assessment) Act1989 that the husband pay by way of non-periodic child support the following:-
(a)Tuition fees for the children to attend H School;
(b)All the children’s other education expenses including enrolment fees, compulsory building fees, school books, stationery, school uniforms and shoes, school excursions, camps and extra-curricular activities and all other incidental and educational costs;
(c)Private health insurance for the children at the highest level of cover; and
(d)All gap health costs for the children including but not limited to medical, hospital, dental, orthodontic, optical, physiotherapy and counselling.
The husband opposes that application. As outlined above, it is his position that he should continue to pay to the wife for the support of the family a total sum of $4,000 per week together with other family expenses, including school fees, and private health insurance.
The husband opposes the orders sought by the wife on the basis that:-
(a)The wife has not sought an internal review of the child support assessment in accordance with the legislation. It was submitted on behalf of the husband that it is not appropriate for the Court to exercise its discretion for a departure order on an interim basis and that such departure order should await a final hearing.
(b)Departure orders are not available as of right and the internal review process provided by the Child Support legislation should be complied with before resorting to orders of the Court.
Section 116(1)(b) of the Child Support (Assessment) Act (“the Assessment Act”) provides as follows:-
(1)A liable parent or a carer entitled to child support may, in respect of an administrative assessment of child support for a child, apply to a court having jurisdiction under this Act for an order under this Division in relation to the child in the special circumstances of the case if:
…
(b) both of the following apply:
(i) the liable parent or carer entitled to child support is a party to an application pending in a court having jurisdiction under this Act;
(ii) the court is satisfied that it would be in the interest of the liable parent and the carer entitled to child support for the court to consider whether an order should be made under this Division in relation to the child in the special circumstances of the case;
Section 117 of the Assessment Act sets out the circumstances where a court may make a departure order. The grounds for departure relied upon by the wife are those set out at ss 117(2)(b)(ii) and 117(2)(c) of the Assessment Act.
At paragraph 76 of the wife’s affidavit filed 21 June 2013 she deposes that she has applied for an assessment of child support in June 2013 and although not received, she has been informed by the Child Support Agency that the husband has a nil assessment to pay child support.
There are proceedings in this Court with respect to property and maintenance. To refuse the wife’s application for a departure order would result in the parties engaging in a review process of the assessment which would likely cause them to incur further costs. Accordingly, I am satisfied in the special circumstances of this case that it is in the interests of the husband (the liable parent) and the wife (the carer) for the Court to exercise the discretion conferred by s 116(1)(b) of the Assessment Act.
Having established that the Court has jurisdiction to determine the application, the Court must be satisfied as to the matters contained within s 117 of the Assessment Act. The matters to be considered in determining the application are embodied in the legislation and are also expressed by the Full Court in Gyselman & Gyselman (1992) FLC 92-279.
Having regard to:-
(a)The parties’ financial circumstances, particularly the high income available to the husband, as outlined above;
(b)The parties’ agreement that the children be educated at private schools;
(c)The evidence as to the high standard of living enjoyed by the family, also detailed above; and
(d)The nil assessment provided by the Child support Agency (“the CSA”), which clearly does not reflect the husband’s income and capacity to pay child support
I am satisfied that the circumstances of this case are special and sufficiently out of the ordinary as to warrant the Court’s interference with the assessment issued by the CSA. Accordingly I am satisfied that the grounds for a departure order are established.
Section 117(4) of the Assessment Act identifies the matters to be considered in determining whether it would be just and equitable and otherwise proper to make a departure order. Further, s 117(6) of the Assessment Act sets out the matters to which regard must be had when assessing the proper needs of the children. I will not repeat my analysis of the parties’ respective financial circumstances as already addressed in this judgment within the context of the wife’s application for interim spousal maintenance.
The wife sets out at Part N of her financial statement filed 21 June 2013 the expenses incurred by her on behalf of the children. Those expenses total $2,209 per week, excluding the children’s expenses associated with their attendance at private school. The wife provides further detail as to the expenses for the children in her affidavit of 21 June 2013 at paragraphs 62 to 65 inclusive.
Again, I observe that many of the wife’s claimed expenses for the children appear excessive. The children spend five nights per fortnight with the husband. Notwithstanding that fact the wife deposes in her Financial Statement that she spends on two children aged 11 and 13, $470 per week on food and a further $67 per week on household supplies, $165 per week on gifts and $110 per week on clothing. In my view, those claimed expenses appear overstated. I propose to allow one half of each of those expenses.
In the context of an interim child support departure order and in circumstances where the evidence is untested, I am satisfied that it would be just and equitable, given the nil assessment and the husband’s capacity to pay that there be a departure order. I am also satisfied having regard to the provisions of s 117(5) of the Assessment Act that it would be otherwise proper to make such an order.
After deduction of the amounts disallowed, the wife’s claimed expenses total approximately $698 per child per week. Again, the calculation at an interim hearing is not a strict arithmetic exercise. For all of the above reasons, I will make an order for departure from the assessed rate of child support such that until further order the husband pay to the wife the sum of $750 per child per week.
As to the non-periodic payments of child support, I note that the husband has been meeting payment of the children’s school fees and private health insurance. It was his proposal that he continue to meet those payments.
In accordance with the provisions of s 124 of the Assessment Act, and having regard to the commitment the parties have to ensuring the children continue at their private schools, I am satisfied that it would be just and equitable and otherwise proper that the husband continue to meet the costs associated with the children’s attendance at that school, as well as the costs associated with maintaining their private health insurance and any gap medical expenses.
LUMP SUM MAINTENANCE
Pursuant to s.77 of the Act the wife seeks urgent lump sum spousal maintenance in the sum of $29,489. She seeks payment of that sum in order to discharge her credit card liability to the Commonwealth Bank, outstanding rates, gas, water, telephone and electricity accounts as listed at paragraph five of her affidavit filed 21 June 2013.
The wife deposes that those liabilities have arisen due to a shortfall between her income and expenditure and the fact that the husband ceased payment of some of her expenses.
The liabilities identified in her affidavit have been outstanding since either March or April 2013. The wife deposes at paragraph 14 of her affidavit that she is at risk of having some of her utilities disconnected. She deposes that her telephone and internet services have already been disconnected.
The husband opposes the orders sought. It is submitted on his behalf that the liabilities have arisen due to the wife’s reckless use of her credit card, which has been applied to discretionary expenditure rather than meeting her necessary utility accounts.
Whilst there may be some merit to that submission, it does not address the need for the utility expenses to be met to ensure that services are maintained at the home occupied by the wife and the children. In light of the wife’s evidence as to the disconnection of some services already and the likely disconnection of other utilities, I am satisfied that there is an immediate need for financial assistance.
Accordingly, I propose to make an order for lump sum maintenance as sought by the wife. However, in doing so, I note the comments I have made with respect to the wife’s discretionary expenditure on herself and the children and indicate that were the wife to find herself in a similar situation again, it is unlikely that I would entertain a further application.
The orders that I will make are as follows:-
1.That until further order the husband pay or cause to be paid to the wife the sum of $2 500 per week by way of spousal maintenance, the first such payment to be made within seven days of the date of these orders and weekly thereafter.
2.That until further order the husband pay or cause to be paid all instalments of mortgage and rates on the property situate at Suburb B as and when they fall due.
3.That until further order pursuant to s 117 of the Child Support (Assessment) Act1989 there be a departure from the administrative assessment of child support payable by the husband to the wife with respect to the children M born … 2000 and D born … 2002 (“the children”) such that the rate of child support for the children shall be $750 per child per week such sum to be paid on a weekly basis, the first payment to be within seven days of the date of this order.
4.That until further order pursuant to s 124 of the Child Support (Assessment) Act1989 the husband pay or cause to be paid the following expenses by way of non-periodic child support for the children in addition to the periodic child support payable pursuant to order 3 hereof as follows:-
(a)Tuition fees for the children to attend H School or such other school as may be agreed between the parties from time to time;
(b)All of the children’s other education expenses for attendance at H School including enrolment fees, compulsory building fees, school books, stationery, uniforms, school excursions, camps, and extra-curricular activity expenses;
(c)Private health insurance for the children at the highest level of cover; and
(d)All gap health costs for the children not otherwise covered by private health insurance.
5.That by way of litigation funding and for the assistance of the wife’s legal and accounting costs the husband pay or cause to be paid to the wife the sum of $175 000 such sum to be paid into the trust account of the wife’s lawyers, Nicholes Family Lawyers in seven monthly instalments of $25,000 per month with the first monthly instalment to be paid within 21 days of the date of these orders and thereafter on the first day of each month.
6.That pursuant to s 77 of the Family Law Act1975 within 21 days of the date of these orders the husband pay or cause to be paid to the wife the sum of $29 489 by way of urgent lump sum spousal maintenance.
7.That the wife’s Application in a Case filed 21 June 2013 and the husband’s Response to an Application in a Case filed 6 August 2013 be otherwise dismissed.
I certify that the preceding one hundred and twenty-six (126) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Johns delivered on 22 October 2013.
Associate:
Date: 22 October 2013
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