WELCH & ABNEY

[2014] FamCA 1133

FAMILY COURT OF AUSTRALIA

WELCH & ABNEY [2014] FamCA 1133

FAMILY LAW – PROPERTY SETTLEMENT – Interlocutory Application – Where the wife sought orders restraining the husband from disposing of a parcel of real property and from further enlarging debt secured over that property – Where the whole of the purchase price of the property came from moneys in which the wife had a direct interest, including from a loan secured by mortgage over the jointly owned former matrimonial home – Husband restrained by injunction from disposing of or dealing with the property – Husband restrained by injunction from causing the debt secured over the property to increase beyond the amount of $150,000.

FAMILY LAW – PRACTICE & PROCEDURE – Costs – Where the wife sought costs against the husband – Where the wife was largely, if not wholly, successful with her application – Where the wife attempted to consensually resolve the matter before filing her interim application – Where the husband’s conduct was unreasonable – Husband to pay the wife’s costs on a party/party basis.

Family Law Act 1975 (Cth) ss 117

APPLICANT: Ms Welch

RESPONDENT: Mr Abney

FILE NUMBER: NCC 629 of 2013

DATE DELIVERED: 16 October 2014

PLACE DELIVERED: Newcastle

PLACE HEARD: Newcastle

JUDGMENT OF: Austin J

HEARING DATE: 16 October 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr W. Tregilgas

SOLICITOR FOR THE APPLICANT: Burke & Mead Lawyers

COUNSEL FOR THE RESPONDENT: Mr I. Duane

SOLICITOR FOR THE RESPONDENT: Kim Monnox & Associates

Orders

1. The husband is restrained from causing or permitting the sale, mortgage, or additional encumbrance of the real property and improvements comprising Folio Identifier …, being the real property more commonly known as E Street, Town F, NSW.

1. The husband is restrained from causing or permitting the debit balance of the Bankwest Double Deal Home Loan (Account No. …317) to increase beyond the amount of $150,000.

1. The parties shall do all things reasonably necessary to:

a.Cause the transfer of ASG Account No …56 into the sole name of the wife; and

b.Ensure that future cheques payable from that account are made payable and sent to the wife.

1. The husband shall pay the wife’s costs of and incidental to the interim hearing conducted today on a party/party basis in the sum agreed or assessed.

1. Otherwise:

a.The Application in a Case filed on 29 September 2014 is dismissed;

b.The Response to an Application in a Case filed on 14 October 2014 is dismissed; and

c.Any and all outstanding applications for interim orders are dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Welch & Abney 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 NEWCASTLE

FILE NUMBER:  NCC 629 of 2013

Ms Welch

Applicant

And

Mr Abney

Respondent

EX-TEMPORE

REASONS FOR JUDGMENT

1. The applicant wife and respondent husband are trapped in litigation concerning the resolution of their financial affairs. Thankfully, they have been able to bring to an end the aspect of the litigation which concerned parenting orders for their two children. 

2. The parties separated on or about 1 October 2011 and these proceedings were commenced in March 2013, when the emotional strain on the parties became intolerable. The substantive property settlement proceedings between the parties are likely to be determined some months hence, during 2015, but occupying the Court today is an interim application brought by the wife which is opposed by the husband.

3. The amount of material filed by the parties in respect of the interim dispute is a testament to the emotional and financial stake that each party has in these proceedings.

4. The wife seeks the orders set out in her Application in a Case, filed on 29 September 2014, in support of which she relies upon the material contained within her affidavit filed on the same date. 

5. The husband filed a Response to an Application in a Case on 14 October 2014 in which he simply proposed dismissal of the wife’s application and payment of his costs. In support of his rebuttal of the wife’s application the husband relies upon the contents of his affidavit filed on 14 October 2014.

6. At the commencement of the interim hearing I was informed that the Court should be cognisant of two additional agreed facts. They are these:

   (a)In his affidavit filed on 26 February 2014, the husband deposed to the level of debt over a parcel of real property at Town F, NSW to then be $57,700; and

   (b)In the same affidavit, the husband deposed voluntarily that he would not increase the debt under the loan secured over the F property beyond a limit of $150,000. 

7. As I will explain momentarily, the level of that debt is currently $135,000.

The Issues

1. Analysis of the Application in a Case and the evidence adduced by the parties enables the determination of these interim proceedings according to three discrete issues:

   (1)The wife proposes a restraint by injunction upon the husband, precluding him from disposing of the parcel of real property at Town F of which he is the sole legal proprietor;

   (2)The wife proposes a restraint by injunction upon the husband, precluding him from extending the level of the debt under the home loan secured over the F property beyond its current limit of $135,000; and

(3)The wife proposes a rearrangement of the parties’ entitlements in an educational fund held with ASG for the benefit of their children.

1. There is an additional issue pertaining to costs, because each party seeks a costs order against the other in respect of their contest of these proceedings, and I will deal with that, obviously enough, at the end.

Issue 1 – the injunction pertaining to the Town F property

1. It was submitted by the husband’s counsel that the wife’s proposal for injunctions in these proceedings was misconceived, but would fail anyway by reason of an inability to demonstrate the necessity for the injunction.

2. I am unable to accept that submission. The F property is owned in the sole name of the husband, but any opposition to the wife’s equitable interest in the property is eliminated by the evidence. The whole of the purchase price of the F property was paid by funds in which the wife had a direct interest.

3. The property was purchased by the husband literally days before the parties’ final separation. The deposit on the purchase price was paid from moneys paid or payable to the wife.  At [59] of his affidavit, the husband conceded the deposit was drawn from an account containing moneys which formed part of a termination payment made to the wife in respect of her former employment.

4. The balance of the purchase price was drawn on an account held by the parties in their joint names, which account was secured by mortgage against the former matrimonial home situated at Town D, NSW, in which the wife then did and continues to live. At [64] of his affidavit, the husband acknowledged the balance of the purchase price was drawn upon a line of credit from the Commonwealth Bank in the sum of $313,264.89, which account was in joint names and secured over the former matrimonial home.  According to the husband’s evidence (at [41]), not so long beforehand, the debt secured over the former matrimonial home was near enough to nil.

5. Obviously enough, sale of the F property by the husband, which he would ordinarily be at liberty to sell as its sole legal proprietor, would enable him to keep and disperse the entirety of the sale proceeds, which he estimates (at [111]) to be $345,000, subject, of course, to payment out of the debt he created which now amounts to approximately $135,000.

6. In the affidavit recently filed by the husband on 14 October 2014 (at [115]), the husband deposed to the appropriateness of an injunction restraining his disposal of the F property. He said therein “I propose and would consent to an order that I not dispose of the property at [E] Street, [Town F].” Why the husband did not acknowledge that concession in his solicitor’s letter in reply to the wife’s solicitors remains a complete mystery.

7. Annexed to the wife’s affidavit (at page 17) is a letter written by the wife’s solicitor to the husband’s solicitor on 5 September 2014. It attached a draft minute of order which would, relevantly, restrain the husband from selling, mortgaging, encumbering or in any other way dealing with his interest in the property at Town F.

8. Annexed to the husband’s affidavit (at page 82) is a copy of the letter dated 29 September 2014 written by the husband’s solicitor in reply. The letter addresses another of the wife’s proposals, with which I am yet to deal, concerning restriction upon the husband’s further encumbrance of the F property, but the letter is silent about the proposed order precluding the husband from dealing with the property.  Obviously enough, the failure of the husband to deal with the proposal motivated the wife to commence these proceedings on 29 September 2014, some three to four weeks after a letter was originally written to the husband’s solicitor in an attempt to settle the proceedings. The wife, having filed her Application in a Case on 29 September 2014, had already instituted this interim dispute before the husband’s solicitor replied. 

9. In my view the application for an injunction is well-founded. The husband accepts that to be so, because he deposed to its appropriateness at [115] of his affidavit.  An injunction should be made restraining his disposal of or dealing with the F property. I will make an order to that effect shortly.

Issue 2 – injunction concerning the debt over the Town F property

1. As I have already indicated, in the days preceding the parties’ final separation, the husband purchased the property at Town F for approximately $345,000.  The whole of that purchase price came from moneys in which the wife had an interest – firstly, the moneys forming payment of the deposit, and secondly, by raising debt secured over the former matrimonial home of which she is a joint owner.

2. After his acquisition of the F property, using funds in which both parties had an interest, the husband created another debt, albeit in his own name, which encumbered the F property. In his affidavit (at [77]) the husband referred elliptically to the debts that then existed. Aside from the line of credit held by the parties with the Commonwealth Bank, secured over the former matrimonial home at Town D, which had been extended by over $300,000 to enable his purchase of the F property, the husband arranged another line of credit through the Commonwealth Bank, but secured over the F property.

3. According to documents annexed to the husband’s affidavit (at page 66), that line of credit secured over the F property had a nil balance as at January 2013. The affidavit (at page 64) proves the debt increased to $99,000 by December 2013.

4. In December 2013, the line of credit then held by the husband with the Commonwealth Bank was refinanced with an organisation called Bankwest.  The husband deposed to that refinance in his affidavit (at [77]).

5. It was an agreed fact the husband deposed in February 2014 that such debt had a debit balance of $57,700. Its reduction from $99,000 to $57,000 in the period between December 2013 and February 2014 is explained by the husband’s deposit into the account of moneys he received from another source. 

6. Nonetheless, by August 2014, the debt had again grown to $112,000, as evidenced by his affidavit (at page 70), and the husband deposed (at [79]) that the debt currently amounts to approximately $135,000.

7. As the husband’s solicitor told the wife’s solicitor in the letter dated 29 September 2014 (extracted at page 82 of the husband’s affidavit), 95 per cent of the funds drawn against that account have been used to pay legal fees in the family law dispute. The husband himself deposed (at [82]) to that effect. Not only has money been expended on legal fees. The husband deposed (at [84]) to having withdrawn some $50,000 to pay some dowry for his new bride who, according to what he deposed (at [103]), will not even be a resident of this country for another five or six years.

8. Clearly enough, the husband’s use of the F property, bought entirely with funds in which both he and the wife had an interest, is eating into the equity of the parties’ assets.

9. The husband’s legal costs should not be defrayed by the wife in the advance of any order against her under section 117(2) of the Family Law Act1975 (Cth) (“the Act”), altering the usual position stipulated by section 117(1) of the Act requiring the parties to bear their own legal fees. That is particularly so when he chooses to incur the debt to pay legal fees of approximately $82,000. The husband deposed (at [113]) to having paid his current solicitor that sum of money in the period between June 2013 and August 2014.

10. The husband openly acknowledged his intention to continue increasing the debt secured over the F property for the express purpose of paying his legal fees. The husband further deposed (at [115]) that he should have an entitlement to continue paying his legal fees as they arise, but he accepts he ought not increase the debt secured over the F property to an amount beyond $220,000. It is an agreed fact he deposed in February 2014 that the limit should be much lower at $150,000. 

11. Although there is considerable disparity between the parties’ opinions about the constitution and value of the matrimonial pool of property, whatever the true circumstances, the debt for legal fees the husband currently envisages, which encumbers an asset in which both parties have a proprietary interest, would significantly reduce the value of their assets. It seems to me unnecessary to calculate a percentage, as the husband has done in his affidavit (at [117] and [118]), or to accept the percentages calculated by the wife’s counsel.  Whatever way the figures are cut and diced, the debt will be a substantial proportion of the assets.

12. The husband deposed (at [122]) to the need for him to encumber the family assets in the manner he indicated because his solicitor informed him she will only represent him if her fees are paid as invoices are rendered. One wonders whether that is correct because (at [113]) he deposed to last receiving a memorandum of fees from his solicitors in November 2013, which is nearly 12 months ago. Clearly enough, the husband’s solicitor has continued to act for him since November 2013 despite not having rendered an invoice, and the husband’s estimate of fees of $82,532.70 incurred up until August 2014 must be based on some form of estimate.

13. In any event, even if that is not correct, alternatives are available. The husband’s solicitor might have to wait for payment of her fees from the husband’s share of the assets ultimately distributed to him on the resolution of the proceedings under Part VIII of the Act, as many other solicitors do. Alternatively, the husband could pay his solicitor’s fees from the income he derives. He deposed (at [119]) to current income of $60,000 per annum. Alternatively, the husband could retain a different solicitor who is prepared to act on the basis that fees are paid from his share of the assets at the conclusion of these proceedings. There could not be any doubt about his ability to ultimately do so because, with his solicitor’s help, the husband deposed to his opinions about his ultimate entitlement to the matrimonial assets.

14. The wife’s concern about more debt being incurred unilaterally by the husband is, in my view, well-founded.

15. At an early point the wife’s solicitor sent a letter to the husband’s solicitor in an attempt to avert this dispute. She deposed to that correspondence (at [13]-[16]) and annexed the letters to her affidavit (at pages 16 and 17). Those letters were apparently ignored. It was not until about a month later that the husband’s solicitor responded. The letter was dated 29 September 2014. It is referred to in the husband’s affidavit (at [125]) and a copy is annexed (at page 82).

16. The husband’s response to the wife’s proposal that he not continue to escalate the debt over the F property was simply:

    These fees will be brought back into account in the proceedings.

17. By the time that letter was written by the husband’s solicitor in response to the wife’s solicitor, the wife had already commenced these interim proceedings by filing her Application in a Case.

18. I accept the wife’s counsel’s submission that arguments about add-backs are best avoided. Effectively, they affect the computation of the parties’ financial affairs in a notional, not practical, way. Parties should not be entitled to spend matrimonial assets on legal costs, absent a costs order to that effect.

19. In my view, it is appropriate to restrain the husband from encumbering the F property to a much greater extent than he already has. The debit balance under the home loan is currently $135,000. In February 2014 the husband deposed to his willingness not to extend that limit beyond $150,000.  He now proposes in his affidavit (at [115]) to extend it to $220,000. I regard that as unreasonable. In the circumstances, I intend to impose an order that precludes him from extending the debt beyond the sum of $150,000, being the figure he thought months ago was quite sufficient.

20. The husband’s counsel spent time making submissions about the comparative dissipation of funds by the wife. In my view, that is not a persuasive submission because there is no evidence those expended funds are matrimonial assets in the same way the F property undoubtedly is. Moreover, there is no evidence before me to suggest those moneys were expended by the wife on payment of her legal fees.

Issue 3 – the ASG fund 

1. The third issue is the arrangement for control of the ASG school fund. 

2. The history in relation to this fund is derived principally from the husband’s affidavit. On the birth of each child the parties contracted with ASG to provide a fund for certain specified years of each child’s education. The idea was that the fund repays to the parties a sum of money in certain years of the children’s education, including tertiary education. Since separation, the husband has paid monthly instalments to the ASG fund for the two children of the parties. 

3. A dispute over the ASG account arose between the parties earlier this year and was resolved by consent orders made on 28 February 2014. That dispute arose because a cheque was sent in respect of the children’s education and there were problems over receipt of the cheque and to whom it was properly payable. The orders agreed between the parties on 28 February 2014 required the parties to forthwith direct ASG to issue a replacement cheque in a sum approximating $7,000 and to forward the new cheque to the husband’s solicitor. The orders also required the husband’s solicitor to deposit sums received from ASG into a trust account and to disburse the funds to pay the children’s 2014 school fees within seven days of receipt of invoices relating to the 2014 school fees.

4. Unfortunately, those orders were not implemented without complication.

5. On 3 March 2014 the wife received correspondence from the children’s school providing her with a quote of over $7,000 for the 2014 school fees. She had that correspondence sent to the husband’s solicitor. Two weeks later, on 17 March 2014, the wife’s solicitor received a letter back from the husband’s solicitor indicating the husband did not consider the information she had provided was adequate to require or permit compliance with the orders made on 28 February 2014.

6. The next day the wife caused her solicitor to forward to the husband’s solicitor a copy of the statement of account from the children’s school. It could hardly be argued the account was anything other than in the form of an invoice. There was no immediate response to that correspondence. 

1. Some weeks later, on 30 April 2014, the wife contacted ASG directly. She was informed that ASG required both the husband and her to personally write a letter requesting that the cheque be re-issued to the husband’s solicitor. The next day, on 1 May 2014, the wife wrote her letter to ASG and she confirmed through her solicitor to the husband’s solicitor she had done so. Confirmation was given to her that a cheque had been dispatched.

2. Some weeks later, in late May, the husband’s solicitor wrote to the wife’s solicitor informing that the husband objected to paying the ASG funds because he did not hold an authority, signed by the wife, that he considered satisfactory.  The result was that by June 2014 the school fees were still unpaid. 

3. The wife caused another letter to be sent to the husband’s solicitor about payment of fees. On the same day, the wife’s solicitor received correspondence from the husband’s solicitor saying they were not prepared to “act upon part of an authority from the wife to discharge trust moneys unless your office confirms that it is appropriate to do so.”

4. While it might be understandable that the husband’s solicitor wanted to be assiduously careful about acting with trust funds, clearly enough, the demands made on the husband’s instructions were not in strict accordance with the orders he agreed to and were made by the Court on 28 February 2014. 

5. In any event, the fees were ultimately paid, but months after they were expected to be so. 

6. According to the husband’s evidence (at [133]), his solicitor did not receive the replacement cheque from ASG until 13 May 2014, but his evidence also proved the cheque was not forwarded to the school until 5 June 2014. The delay, according to the husband, was because he and/or his solicitor were dissatisfied with the authority they had demanded the wife provide to them. 

7. The parties are so entrenched in their conflict they are unable to resolve matters of elegant simplicity without the intervention of their lawyers, and even the intervention of their lawyers is unable to smooth the process satisfactorily. 

8. The wife deposed (at [44] and following) to further complications she foresees.  The next ASG cheque is due to be issued in December 2014. By then, final orders will not have been made in this case. That is unlikely to occur until next calendar year.

9. In order to avoid a repeat of what happened between February and June 2014, understandably, the wife wants to adjust the interim orders to, firstly, reduce costs, and secondly, reduce tension between the parties. It is hardly unreasonable for her to desire such an outcome, particularly since parenting orders have been in existence since July 2014 vesting her with sole parental responsibility for the children. She believes it is logical for all future ASG cheques to be paid to her directly so she can attend to payment of the children’s educational expenses without delay. Her proposal has much to commend it.

10. The only opposition stated by the husband is found in his affidavit (at [129]), where he said:

    I wish to pay the ASG instalments and manage the ASG Fund in the hope of communicating to the girls that I care and love for the two girls and wish to provide for the two girls [sic].

11. While that is an understandable attitude, it is not such as to overthrow the logic of the mother’s proposal for change.

12. Even the husband foresees difficulties if the current situation is left unchanged.  His future proposal for handling of the ASG funds is as follows (at [131]):

    …I propose that the wife instruct the school to forward a copy of invoices to me and I will pay those invoices from the moneys I receive from ASG within 14 days of receipt of the invoice.  I propose, in the event that the wife consents to this approach, that the wife send to me a copy of invoices and receipts for the children’s clothing and school shoes and I will within 14 days deposit the sum specified in the invoice or receipts into an account nominated by the wife.  I propose, with the wife’s agreement that I inform the wife when I have made payments to the school, TAFE, university or into the wife’s account.  I would not communicate with the wife without her agreement.

13. Of course, the need for such a complicated process is currently necessitated because of the existence of an apprehended violence order, which is due to expire some months hence. All of that can be avoided by an order being made in the terms proposed by the wife. 

14. Having regard to the fuss that has previously occurred and the husband’s worry about escalating legal costs, in my view, the wife’s proposal is significantly more sensible than the husband’s and I intend to make an order in accordance with her proposal. 

15. For those reasons I make the following orders on an interim basis:

    (Orders 1-5 pronounced)

Costs

1. As I indicated at the outset of these reasons, both parties made an application for costs against the other. 

2. Having been largely, if not wholly, successful with her application, the wife presses her application for costs against the husband. The husband abandons his application for costs against the wife. 

3. As the husband’s counsel correctly pointed out, the ordinary position in relation to costs in litigation before this Court is dictated by s 117(1) of the Act, which provides that, subject to certain exceptions, each party to proceedings under the Act shall bear his and her own costs.

4. While that is the orthodoxy, it is not, by any means, set in stone that costs orders cannot be made. In fact, costs orders are expressly envisaged by s 117(2) of the Act, subject to an exercise of discretion by the court, the exercise of which is guided by the mandatory factors set out within s 117(2A) of the Act. Several of those criteria, which have been appropriately addressed by counsel for the husband, are of relevance.

5. As to s 117(2A)(a) – the financial circumstances of each of the parties – both parties are in receipt of handsome income, apparently in the form of income replacement insurance because of their psychological fragility.

6. The husband deposed to his income approximating $60,000 per annum.  Nothing about his financial circumstances put before the Court is such as to suggest he is either impecunious or indigent. He seemingly has a financial capacity to pay costs. 

7. As to s 117(2A)(b), neither party is in receipt of a grant of legal aid. 

8. As to s 117(2A)(c), the Court is required to have regard to the parties’ conduct of the proceedings. Several aspects of the interim hearing are germane to that consideration. 

9. Before she began this interim dispute by filing her Application in a Case, the wife caused her solicitor to write to the husband’s solicitor on 5 September 2014 with a proposal about how their dispute could be resolved consensually.  For whatever reason, there was no response to that letter until 29 September 2014, but by then the horse had bolted. Several weeks having elapsed without any reply, the wife filed her Application in a Case on 29 September 2014.  The letter sent by the husband’s solicitor (no doubt on the husband’s instructions) would not, in any event, have been sufficient to conclude the proceedings, because of the way in which the hearing was conducted today. 

10. The husband ignored the proposal for an injunction restraining the way in which he may deal with the F property and, in respect of the proposed injunction concerning his extension of the liability encumbering that property, he rebuffed the wife’s proposal by simply saying any money he chose to spend from the loan secured by mortgage over the property would be brought back into account, presumably by notional add-back.

11. Somewhat surprisingly, when the husband filed his affidavit on 14 October 2014 – that is, two days ago – he deposed (at [115]) to his willingness to submit to an injunction precluding his dealing with the F property. Why that could not have been communicated to the wife and her legal representatives in advance of 14 October 2014 remains completely unexplained. Equally surprising, in his affidavit (at [115]) the husband deposed to his acknowledgement there should be some cap on his spending of the equity in the F property, but the cap should be $220,000. That was surprising because he deposed earlier this year, in February 2014, to his proposal that the cap should be $150,000. In my view, the husband’s conduct of the interim proceedings in so far as they related to the two proposed injunctions was unreasonable and should reflect in an order for costs against him.

12. The proposal in relation to the ASG fund apparently only became known to the husband upon the filing and service of the Application in a Case shortly following 29 September 2014. It is a dispute of more recent origin, but was adequately dealt with in the husband’s affidavit filed on 14 October 2014.  Notwithstanding the problems that attended their receipt and utilisation of funds provided to them from the ASG account between February and June 2014, despite the existence of consent orders made on 28 February 2014, and notwithstanding parenting orders investing the wife with sole parental responsibility for the children, the husband apparently seemed to believe he should continue to try and manage the account jointly with the wife.

13. Understandable though it is for the husband to wish for retention of some form of link with his children, it escapes me how he is able to maintain that link simply by controlling money paid solely in satisfaction of their educational expenses. His opposition to the wife’s proposal for her to handle the ASG account, in my view, was misconceived.

14. In my view, s 117(2A)(d) is not of material relevance. 

15. As to s 117(2A)(e), I have already referred to the success enjoyed in the hearing by the wife. It was not unalloyed success, because she requested an injunction that the husband not be permitted to increase his debt beyond its existing balance of $135,000 and an order has been made enabling him to extend the debt secured over the F property to $150,000, but it would be erroneous to regard the outcome as anything other than overwhelming success on the application she proposed. 

16. Section 117(2A)(f) is not relevant for present purposes, other than to the extent I have already explained. The wife’s solicitor sent a letter to the husband’s solicitor many weeks before the application was filed attempting to resolve the dispute consensually. 

17. As to s 117(2A)(g), the husband’s counsel reminded me that both parties have psychological fragility. It is not necessary for me to make lengthy observations about the evidence which underpins that submission. I accept the correctness of it. Both parties appear to have experienced emotional difficulties in the past, but that does not set them aside from most family law litigants. Litigation in this jurisdiction brings with it not just financial cost, but also an emotional wrench, for litigants. Many people involved in litigation in this jurisdiction are afflicted by some degree of emotional instability. 

18. For all those reasons I am satisfied it is appropriate to make an order for costs and I have already announced that order.

I certify that the preceding seventy-seven (77) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Austin delivered on 16 October 2014.

Associate: 

Date:  16 December 2014