Wenz v Archer - [2008] FMCAfam 1119

FEDERAL MAGISTRATES COURT OF AUSTRALIA

WENZ & ARCHER

[2008] FMCAfam 1119

FAMILY LAW – Injunctions – orders relating to property – relevant considerations – sale of matrimonial home intended by wife and husband’s trustee in bankruptcy.

FAMILY LAW – Property and maintenance of parties – specific powers of court in relation to property, spousal maintenance and maintenance agreements – to make permanent or fixed order or order pending disposal of proceedings – relevant considerations – sale of matrimonial home by wife.

Family Law Act 1975, ss.79, 114
Federal Magistrates Act 1999

Barry v Barry [1992] Fam 140; [1992] 3 All ER 405; [1992] 2 WLR 799
Bearup and Bearup [1993] FamCA 72; (1993) 16 Fam LR 797; (1993) FLC ¶92-412
Blueseas Investments Pty Ltd v Mitchell and McGillivray [1999] FamCA 745; (1999) 151 FLR 298; (1999) 25 Fam LR 65; (1999) FLC ¶92-856
Bonisoli and Bonisoli [1996] FamCA 45
Burridge and Burridge (1980) FLC ¶90-902; (1980) 6 Fam LR 513
Carson & Carson [1999] FamCA 53; (1999) FLC 92-835; (1999) 24 Fam LR 360
Connor & Connor [2007] FamCA 623
Crest & Oates [2007] FamCA 549
Gelb & Gelb [2007] FamCA 514
Harris and Harris [1993] FamCA 49; (1993) FLC ¶92-378; (1993) 16 Fam LR 579
Hatton & Hatton [2007] FamCA 551
HMT & FHL [2006] FamCA 206; (2006) 197 FLR 335
Inch & Inch (No. 2) [2007] FamCA 806
Jess & Jess [2008] FamCA 30
Kearney and Kearney (1991) FLC ¶92-208; (1990) 102 FLR 233
M & DB [2006] FamCA 1380; (2006) ¶FLC ¶93-293; (2006) 36 Fam LR 454
Pedersen and Pedersen [2003] FamCA 625
Pitte & Pitte [2008] FamCA 316
S & S [2006] FMCAfam 396
Samuels & Shaw and Ors [2007] FamCA 833
Spoke & Spoke [2008] FamCAFC 59
Sterling & Sterling and Ors [2008] FamCA 119
Stowe and Stowe (1980) 6 Fam LR 75; (1981) FLC ¶91-027
Strahan & Strahan [2007] FamCA 139
Wicks v Wicks [1999] Fam 65; [1998] 1 All ER 977; [1998] 3 WLR 277
Yunghanns & Ors v Yunghanns & Ors; Yunghanns [1999] FamCA 64; (1999) 149 FLR 247; (1999) 24 Fam LR 400; (1999) FLC ¶92-836
Zschokke and Zschokke [1996] FamCA 79; (1996) FLC ¶92-693; (1996) 20 FamLR 766

Applicant:

MS WENZ

Respondent:

MR ARCHER

Intervenor:

MR SOUTTER

File Number:

MLC 2912 of 2008

Judgment of:

Riethmuller FM

Hearing date:

15 July 2008

Date of Last Submission:

15 July 2008

Delivered at:

Melbourne

Delivered on:

14 October 2008

REPRESENTATION

Counsel for the Applicant:

Ms Smallwood

Solicitors for the Applicant:

Pearsons Barristers & Solicitors

Counsel for the Respondent:

Mr Ham

Solicitors for the Respondent:

Westminster Lawyers Pty Ltd

Counsel for the Intervenor:

Mr Mahony

Solicitors for the Intervenor:

Piper Alderman

ORDERS

The Applicant Wife and Mr Soutter (the ‘Trustee’), as Trustee of the bankrupt estate of the Respondent, proceed to sell the property at Property R (the ‘property’) by public auction.
That an agent be appointed by the parties for the sale of the property and the terms and conditions of the sale be agreed between the Applicant Wife and the Trustee. In the event that the parties are unable to reach agreement then the President of the Real Estate Institute of Victoria be engaged to appoint the said agent and determine the method of sale.
Upon settlement of the sale of the Property, the proceeds of such sale be paid as follows:
(a)First, in discharge of all mortgages, charges and other encumbrances secured over the property;
(b)Second, in payment of the costs associated in the sale of the property;
(c)Third, in payment to the Trustee of such amount as is necessary to procure the annulment of the respondent’s bankrupt estate pursuant to section 153A of the Bankruptcy Act 1966.
(d)Fourth, upon annulment of the respondent’s bankruptcy, the Trustee pay the balance to the solicitor for the applicant to be held on trust for the applicant and respondent in their joint names in an interest bearing account maintained by the applicant’s solicitors for the applicant and respondent and be distributed only as agreed in writing by the applicant and respondent or as ordered by the Court.
(e)Fifth, from the money held on trust on behalf the applicant and respondent, payment of the presently outstanding school and college fees for the children of the parties, and the debts of the parties in no greater amount than the sums outstanding at the date of separation
That the determination of the classification of the payments to the trustee in bankruptcy, to discharge debts and for the school and college, for the purpose of s.79 of the Family Law Act 1975 be reserved to the trial judge.
That in the event that either party refuses or neglects to execute any deed or instrument necessary to give effect to all or any of these orders made herein the Registrar of the Federal Magistrates Court of Australia be appointed to execute such deed or instrument in the name of the said party and do all such acts and things necessary to give validity and operation to this said deed or instrument.
That the Registrar of the Federal Magistrates Court of Australia is authorised to execute any such necessary instrument upon being satisfied by Affidavit that neglect or default as the case may be has occurred.
That liberty be reserved to any of the parties to apply.

IT IS NOTED that publication of this judgment under the pseudonym Wenz & Archer is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLC 2912 of 2008

MS WENZ

Applicant

And

MR ARCHER

Respondent

And

MR SOUTTER

Intervenor

REASONS FOR JUDGMENT

The applicant and respondent are husband and wife, having married in 1982 and separated in early 2008. The husband is 57 years of age and the wife 53 years of age. They have four children, the oldest of which is self-supporting. The second child is over 18 years of age but reliant upon the parents for support, principally in the form of college fees. The younger two children are at high school and living with the mother.
The husband is a self-employed [occupation omitted] who worked for a major [omitted] firm until about 8 years ago, when he commenced working for himself. There is considerable dispute as to the extent to which he has applied himself to earning an income, however at present he is receiving approximately $1,200.00 per week from consulting work as a [occupation omitted]. As a result of some recent work in Queensland, he is earning additional income of between $2,000.00 and $5,000.00 a month, according to his most recent affidavit material. No detailed information was provided by the husband as to his actual earnings, either in the form of balance sheets and profit and loss statements, or account statements showing gross earnings over the period since separation.
The wife is a [occupation omitted] who suffers Parkinson’s disease. At present she says that she is on sick leave payments from her employer, however there is some dispute as to the extent of her current earnings as a result of the impact of Parkinson’s disease upon her capacity to work as a [occupation omitted]. In her financial statement she says that her weekly income is around $1,107.00.
Until recently the parties remained separated under the one roof and, pursuant to Orders that I made earlier in the proceedings on 20 May 2008, are sharing the outgoings with respect to the matrimonial home, utilities, cleaning costs and other household expenses, together with the mortgage payments, car payments and health insurance payments. As a result of the husband leaving the matrimonial home he is obliged to pay one half of the mortgage, car loan and health insurance, with the wife paying the balance of the outgoings on the home she remains in, caring for the children.
In May 2008 the wife opposed the sale of the matrimonial home, as did the husband. The wife now seeks to have the matrimonial home sold so as to reduce the debts of the parties, pay necessary expenses, and to be in a position to relocate to a more modest residence once the property proceedings have been determined.
The husband continues to oppose the sale of the matrimonial home, citing a number of reasons. Initially his opposition was based upon his desire for the parties’ daughter to complete her VCE (the end of 2009) without the disruption caused by moving house; that he desired to undertake work on the home to increase its value; and that he believed the market would improve. More recently he has stated that he wishes to explore the possibility of retaining the matrimonial home himself and paying the wife her share in such sum as may be determined in these proceedings. However, the husband has not indicated where he may have any alternative source of funds over and above the matrimonial pool of the parties as currently alleged in the proceedings.
There are school fees outstanding of around $23,000.00 for the two younger children, which will continue to accrue. There are university college fees outstanding for the second eldest child of $12,250.00, which will also continue to accrue. The parties have significant credit card debt which, according to the husband, is in excess of $26,000.00.
Both parties have a motor vehicle, the husband saying that his is worth around $1,000.00 and the wife’s motor vehicle around $20,000.00 (and subject to a debt of around $20,000.00).
The wife has superannuation of a little over $172,000.00. It is not clear the extent to which the husband has superannuation but it does not appear to be much in excess of around $20,000.00 or $30,000.00.
The only significant asset that the parties have is the matrimonial home. It is valued by the wife at $1.8 million and the husband at around $1.62 million. There is a mortgage of around $520,000.00. The wife claims that her parents advanced $400,000.00 to the parties for various purposes. The husband does not dispute that the advances were made, but disputes that the advances were by way of a loan. He also disputes whether $80,000.00 of those advances was to the parties or simply to the wife to do with as she saw fit. On any version it appears clear that wife’s parents made significant contributions, if they are not in fact owed several hundred thousand dollars.
The wife has minor interests in a property on an island and a property in the ski fields, valued by her at $14,000.00 and $10,000.00 respectively, and by the husband at $30,000.00 each.
The parties have had a lengthy marriage with four children, and both appear to have made significant contributions.
Whilst the husband’s future earnings may be restricted by his age, he is nonetheless a capable [occupation omitted] engaging in consulting work. The extent to which the wife’s Parkinson’s disease has advanced is unclear on the material, there being no report or formal assessment, however it is not disputed that she has Parkinson’s disease and this will certainly impact upon her in increasingly significant ways into the future. Whilst she may be able to continue to work as a [occupation omitted] at present, ultimately the Parkinson’s disease will bring her capacities in this regard to an end.
There are further issues between the parties, such as allegations by the wife that the husband forged some mortgage documents, however they must wait for trial.
It is important to note that the matrimonial home is held by the wife as trustee of a unit trust in which the wife holds one half of the units and the husband’s bankruptcy trustee holds the other half of the units. At present the husband is still registered on the title of the property, however this appears to be from when the parties were joint trustees (the husband’s position as a trustee coming to an end upon his bankruptcy).
The husband’s bankruptcy debts have, it appears, been discharged. The husband has not been discharged from bankruptcy as he owes his trustee fees. Those fees are said to be between $40,000.00 and $45,000.00. The husband does not accept that this amount is owing and wishes to dispute the amount of the fees. At the time of the hearing the husband had not taken the necessary steps to apply to have the fees assessed in the Courts, nor has he paid the fees that are owing so as to be discharged from bankruptcy.
The husband says that he can continue to make his one half payments of the mortgage with respect to the matrimonial home, if they are set-off against his child support assessment.

The Law

The Court has wide powers to grant injunctions pending the determination of the proceedings, relying upon the powers provided in s.114 of the Family Law Act when read together with s.79. This court also has broad powers to grant injunctions pursuant to the Federal Magistrates Act and is therefore not restricted to the powers set out in the Family Law Act. In addition the Court has powers to make interim property orders under s.79, although the exercise of the latter power is closely proscribed in the authorities.

Injunctions

Injunctions may be granted if there is a serious question to be tried, and the balance of justice and convenience favours an injunction: s.114(1) and (3), and Stowe and Stowe (1980) 6 Fam LR 75; (1981) FLC ¶91-027, Yunghanns & Ors v Yunghanns & Ors; Yunghanns [1999] FamCA 64; (1999) 149 FLR 247; (1999) 24 Fam LR 400; (1999) FLC ¶92-836, and Blueseas Investments Pty Ltd v Mitchell and McGillivray [1999] FamCA 745; (1999) 151 FLR 298; (1999) 25 Fam LR 65; (1999) FLC ¶92-856.
In this case there does not appear to be any restriction upon the wife selling the property at present. She is the trustee of the property, and the two beneficiaries of the unit trust are her and the trustee in bankruptcy. Both beneficiaries of the unit trust are in agreement that the sale ought to proceed. The case is therefore one in which the husband effectively seeks an injunction to restrain the sale of the matrimonial home pending the trial.
The husband argues that the s.79 proceedings should be concluded before the sale of any property. He argues that there is no pressing need to sell the property at present, having regard to the capacity of the parties to meet the mortgage payments in the interim. This overlooks that the husband can only do so by seeking to have the payments credited against his child support assessment, thereby denying the children child support for the purpose of meeting the mortgage debt on the property, and thereby increasing the property pool for the parties. This is not an appropriate use for child support.
In effect the husband’s argument is that the wife should be required to remain in the matrimonial home and do without the appropriate level of child support so as to enable him to continue to meet mortgage payments on a mortgage of over $500,000.00 pending the property settlement, thereby increasing the value of the pool and preserving for him an option to purchase the property should he find the financial resources to do so.
I note that the husband led no evidence that financial resources will be made available to him from persons other than those who are parties to the proceedings to enable him to retain the home.
The wife faces the prospect of not having met the college and school fees for significant sums. She is exposed to proceedings and potential bankruptcy as a result of failing to meet these debts as and when they fall due. Significantly, these debts will also place the children at risk of exclusion from the schools and colleges that they have been attending for some time. Whether both parties should be required to contribute to these expenses, or only the wife (if it were concluded that the husband had not agreed to send the children to these institutions - as unlikely as that appears on the current material), the wife has a real need to deal with the matrimonial assets to ensure that creditors are paid so as to preserve the assets and her own financial status.
I have considered whether or not it is open to the wife to sell either or both her interests in the minor properties, but note that neither interest is a sole interest: she has only minor shares in the properties. It is unrealistic to think that the minor interests would be marketable as such, nor that it would be available to the wife, in the reasonably foreseeable future, to force the sale of the properties themselves.
In the circumstances of the case it appears to me that the balance of convenience does not favour restraining the wife from selling the home pending the outcome of the property proceedings, but only to restrain her from dealing with that part of the proceeds of the sale in excess of the proceeds necessary to meet the debts of the parties at separation, and the school and college debts.
As I have found that it is appropriate to grant injunctions to preserve the proceeds of the sale to the extent referred to above it, is appropriate that I make orders regulating the sale of the property and the way in which the money should be held pending further order.

Interim Property Settlement

If I am in error in concluding that the orders I propose are in the nature of injunctive relief to the husband to restrain the wife from dealing with the matrimonial assets as they presently stand, it is appropriate that I consider whether the orders should be made as interim property orders under s.79.
Where a court is adjourning property proceedings because ‘there is likely to be a significant change in the financial circumstances of the parties’ there is a specific statutory basis for interim property settlement orders in s.79, which provides for the court to make such interim or other orders ‘as it considers appropriate’: see s.79(6). The general discretion provided in s.79 is for the court to ‘make such order as it considers appropriate’. However, a court can not make an order under s.79 ‘unless it is satisfied that, in all the circumstances, it is just and equitable to make the order’.
In Burridge and Burridge (1980) FLC ¶90-902; (1980) 6 Fam LR 513 Nygh J framed the test for a partial property settlement as requiring one to ask the question: ‘Is the making of the order necessary to do justice in this case?’ Later, in Kearney and Kearney (1991) FLC ¶92-208; (1990) 102 FLR 233 the Full Court exercised the power to make interim property orders under s.79(6) without any reference to ‘compelling circumstances’ (per Nicholson CJ at 78,414), referring only to the likely entitlement of the wife and benefits of allowing her to deal with the matrimonial home.
The issue was considered in some detail in Harris and Harris [1993] FamCA 49; (1993) FLC ¶92-378; (1993) 16 Fam LR 579 where the Full Court (Nicholson CJ, Fogarty and Moore JJ) concluded that:
42. We do not doubt that the Court has power in a proper case in s.79 proceedings to make what may be conveniently described as an interim order, that is an order dealing with some of the property of the parties prior to the final hearing. We do not consider that it is necessary to draw a distinction in terminology between an "interim" order and a "partial" order.
43. But in the exercise of that power the following matters need to be considered:-
(1) The exercise of the power should be confined to cases where the circumstances presented at that time are compelling. As a generality, the interests of the parties and the Court are better served by there being one final hearing of s.79 proceedings. However, circumstances may arise before there can be a final hearing which dictate that some part of the property of the parties should be the subject of orders. A common example is where both parties agree to the disposal of some assets pending the trial. However, we do not consider that it is confined to cases where the parties consent. Urgent situations may arise where it is necessary to exercise this power if injustice is to be avoided. Examples include cases where it is necessary to do so to avoid an asset being eroded or lost in the intervening period, and cases (beyond the maintenance power) where an order in favour of one party is necessary to preserve or obtain a home for or is otherwise necessary for the welfare of the children. As to the position in England under the Matrimonial Causes Act 1973 in relation to an interim property order in opposed proceedings and as to the matters to be taken into consideration in the exercise of that discretion including the "overriding grounds of individual or family welfare" - see the discussion in Barry v Barry [1992] 3 All ER 405.
(2) It is an exercise of the s. 79 power. Consequently it must be performed within those parameters. Since it is not the final hearing the Judge is unlikely to have the final findings, but the exercise must fall within that general framework and the material available at that time.
(3) Of necessity it is likely to be a somewhat imprecise exercise. Consequently, it must be exercised conservatively and the Judge must be satisfied that the remaining property will be adequate to meet the legitimate expectations of both parties at the final hearing, or that the order which is contemplated is capable of being reversed or adjusted if it is subsequently considered necessary to do so. It is for this reason that we doubt whether the distinction which Nygh J drew between interim and partial orders is necessary or desirable.

Whilst Harris draws some support from Barry v Barry [1992] Fam 140; (1992) 3 All ER 405; (1992) 2 WLR 799, on the relevant considerations, Barry’s case is no longer good law on the power to make interim property orders: see Wicks v Wicks [1999] Fam 65; (1998) 1 All ER 977; (1998) 3 WLR 277 where the Court of Appeal found that there was no power to order interim distributions of property, or even an ‘administrative … switching of assets from cash to property or vice versa’ as was done in Barry.
Shortly after Harris’s case a differently constituted Full Court again considered the question in Bearup and Bearup [1993] FamCA 72; (1993) 16 Fam LR 797; (1993) FLR ¶92-412, where Baker J, after referring to Harris, said:
14. Trial judges must approach the sale of matrimonial property prior to the hearing of substantive applications for settlement of property with the utmost caution. Such orders, in my opinion, should only be made for the purpose of preserving assets or in the payment of either spousal or child maintenance. There was no justification in my view, having regard to the facts of the case in an interlocutory application, to require the sale of the former matrimonial home, albeit to satisfy debts, when the sale of the vacant land at Yowie Bay could have achieved the same result and leave money to spare.
In Bonisoli and Bonisoli [1996] FamCA 45 the trial judge ordered an interim payment to the wife of $350,000 as a condition of an adjournment. Ellis J (with whom Fogarty and May JJ agreed) said:
13. In relation to the submission as to the power of the trial Judge to make the order that he did, I note the decision of the Full Court of this Court in Harris and Harris [1993] FamCA 49; (1993) FLC ¶92-378. The Court there held that, in proceedings pursuant to s.79, this Court has the power in a proper case to make what the Court there said may conveniently be described as an interim order. I agree and adopt the observations of the Court in Harris and Harris (supra) in relation to the power of the Court to make an interim order. The Court, in that case, referred to matters that need to be considered in the exercise of that power. In so doing, however, in my view, the Court was not endeavouring to list, in an exclusive fashion, the matters which it was proper for a trial Judge to take into account in exercising the power. (emphasis added)
14. In my view, it was significant in this case that this was the third application made by the husband for an adjournment of proceedings which had been commenced in October 1993. It was also significant that even though the matter was listed for hearing on 29 January 1996, on that date, the husband was not prepared to indicate to the Court the order which he said should be made in the property proceedings, nor was he prepared to indicate, even in a general fashion, a range within which he believed, having regard to the factual situation, such an order should fall.
15. The trial Judge's attention was drawn, as appears at pages 17 and 18 of the transcript, to possible problems associated with the wife dealing with the money prior to the case actually coming on for hearing, if they were released to her without restrictions. I am not satisfied that he failed to take that matter into account, it having been squarely put to him, in coming to his final decision.
16. In all the circumstances, notwithstanding that, in my view, the sum which was released to the wife as a condition of the adjournment was a substantial sum, having regard to the value of the assets being, as I say, approximately $1,000,000, less about $250,000, to take account of the possible fine and costs, I am not satisfied that an error of principle and/or a substantial injustice to the husband arising out of the making of the order has been demonstrated. Accordingly I would refuse the application for leave to appeal. (emphasis added)
In Zschokke and Zschokke [1996] FamCA 79; (1996) FLC ¶92-693; (1996) 20 FamLR 766 (Baker, Finn and Hannon JJ), appeared to apply a test of ‘just and equitable’ as the term is used in Part VIII, but also went on to say that this was in accord with Harris:
There is then the question of the matters to which the Court should have regard, or take into account, in considering whether to make an order of the type in question either under s 80(1)(h) or under s 117(2). If the order is to be made under s 80(1)(h), it would seem that 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) including those referred to in s 75(2). If on a brief consideration of those matters, it seems likely to the Court that the party who is the applicant for the interim order for an advance of funds from the other party will be likely to receive by way of property settlement a sum sufficient to cover the advance, that would seem to be sufficient to enable the order sought to be made (cf Wilson and Poletti).
The views which we have just expressed in relation to the matters to be taken into account in an exercise of the power under s 80(1)(h) in a case such as the present case, accord with what was said by the Full Court (Nicholson CJ, Fogarty and Moore JJ) in Harris and Harris (1993) FLC ¶92-378. [Emphasis added]
In Carson & Carson [1999] FamCA 53; (1999) FLC 92-835; (1999) 24 Fam LR 360 the Full Court (Kay, Holden and Dawe JJ) indicated that where the husband had ‘virtually conceded’ the wife would receive the matrimonial home, ‘compelling circumstances’ were established. However, the Court ultimately determined the case on a test of ‘the balance of hardship’, saying:
36. It was apparent on the wife’s case that she would be unlikely to have the capacity to service the mortgage. This was likely to lead to the property being sold unless there could be a substantial re-calculation of the mortgage commitment. Given the estrangement of the parties it would be unreasonable to require the wife to seek the cooperation of the husband in that course, leaving him exposed to action by the bank and clearly affecting his credit rating and future capacity for further borrowings.
37. It was virtually conceded by the husband, in the manner in which the case was presented before the trial Judge and before us, that the very least the wife could expect out of the proceedings would be the entire equity in the former matrimonial home. Given that concession, in our view there were compelling reasons, within the meaning of the words as used in Harris’s case supra, to make an order for an interim property settlement in this case, namely the transfer of the home to the wife, subject to the wife being responsible for the outgoings and indemnifying the husband in respect of same.
38. The equity in the home is a comparatively modest sum. It was clear that the wife and children would need to be housed. Any order giving the husband a share in the home would have a far more detrimental effect upon the wife’s capacity to rehouse herself and the children than the benefits to be gained by the husband being alleviated from paying interest in respect of some outstanding loans that he had. The balance of hardship clearly favoured the wife. (emphasis added)
In Pedersen and Pedersen [2003] FamCA 625, Ellis, Rowlands and Finn JJ made clear that ‘it was only necessary for [the trial judge] to satisfy herself on the basis of a brief consideration of the matters that … the wife could be regarded as likely to receive … the sum … by way of property settlement’ (at [39]). There was no mention of ‘compelling circumstances’ in the reasons, although the Full Court noted that the Trial Judge had balanced the husband’s financial strength against the needs of the wife.
Recently, in Spoke & Spoke [2008] FamCAFC 59 the Full Court (Warnick, May, and Boland JJ) considered the adequacy of reasons in an appeal against interim property orders, saying:
[It was submitted that] The Trial Judge did not properly consider or determine all relevant matters when coming to his decision, including:
(a) Why each of the specific objections of the Appellant to the proposed sale of the home was without substance or was overborne by other considerations;
(b) Why the Respondent should be permitted to seek Orders entitling sale without proper notice having been given to the Appellant; or
(c) The practical effect of the Order he proposed to make, especially:
(i) how the Orders would progress the financial position of the Respondent and/or expedite final hearing, especially when there was no or little equity in the home and marketing, sale and settlement of the home was likely to extend to a date no earlier than the date appointed for final hearing [...];
(ii) notwithstanding that the funding difficulties of the company were conceded by the Case Guardian [...] and recognized by the Trial Judge [...], how the prospective detrimental effect upon the operations of the company of the loss of its security for necessary loan facilities were accommodated by the proposed Orders and/or could otherwise be overcome; and
(iii) why the Appellant’s final application to retain the home should be effectively refused or rendered nugatory.
(d) The limitations the Orders would impose upon the Court when final Orders for settlement were made (notwithstanding the Trial Judge’s seeming recognition of that difficulty during the hearing – see earlier)
Findings
28. When making Orders for interim settlement of property the Trial Judge did not undertake proper consideration and/or give proper reasons as to why the Court should embark on a partial settlement of property, nor matters relevant pursuant to s.79 of the Family Law Act, including the value of the home, the respective contributions of the parties during the marriage, the prospective entitlements of the parties at the final hearing. Or why the net proceeds should be divided in the manner ordered or at all (See Harris v Harris (1993) FLC ¶92-378 and Bearup v Bearup (1993) FLC ¶92-412 and Grounds 11, 12 & 13)
There are also a number of first instance decisions that provide useful examples of how the issue is being approached. In HMT & FHL [2006] FamCA 206 Watts J, discussed the distinctions between interim and partial property settlements before finding ‘compelling reasons’.
In S & S [2006] FMCAfam 396 Brown FM spoke of ‘sufficiently compelling reasons’. Similarly, in Gelb & Gelb [2007] FamCA 514 Moore J approached the case by considering whether the wife had ‘sufficiently compelling circumstances’ justifying the interim payment of $10 million from a pool of over $830 million.
In Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578, Brereton J considered the issue, saying:
[33] But many of the foregoing considerations are less important, though not necessarily irrelevant, where what is relied on as a source of power is not s 117 or s 74, but an interim property order under s 79 and s 80(1)(h). In that respect, the Full Family Court said in Zschokke (780–781) that while the requirements of s 79(2) and (4) must be observed in the same manner as for any interim property order, if it appeared that the applicant would likely receive by way of property settlement a sum sufficient to cover the advance, then an interim order may be made [Zschokke, 780–781; see also In the Marriage of Harris (1993) 16 Fam LR 579 at 586].[Emphasis added]
In Strahan & Strahan [2007] FamCA 139 Strickland J considered an application for an interim payment of $3 million from a pool of around $56 million, largely to fund lawyers in attempts to prove the pool was $150 million. Strickland J considered the reference to ‘compelling circumstances’ as it appears in Harris noting that it is to be read as highlighting the need to weigh the circumstances against the benefits of a single exercise of the s.79 power. Strickland J said:
46. Mr Ackman QC for the husband has suggested that if a compelling circumstance can be the need for funds to meet anticipated legal costs, then that will open the floodgates and there will never need to be an argument about interim costs again. However, I do not agree. An obvious and common source of funds to meet legal costs is the asset pool of the parties. Indeed, in many cases there is agreement between the parties and orders are made for an interim property settlement to specifically provide access to funds to meet legal costs. Why, then, is it not open to find in a contested case that the need for funds to meet legal costs can be a compelling circumstance within the meaning of Harris? It is an exercise of discretion and will depend on the particular circumstances of each case.
…
48. It is significant to note that the Full Court [in Harris] specifically refers to the “common example” of “when both parties agree to the disposition of some asset pending trial”. It is also necessary, in my view, to consider why the Full Court says that the circumstances need to be compelling, and the reason for that is apparent from the quotation above, namely that the interests of the parties and the court are better served by there being one final hearing of Section 79 proceedings. However, a clear need for two hearings arises if costs are required to prepare for the final hearing.
49. Here, the wife needs funds to continue her investigations of the P Club and to secure continuing legal representation, and without being able to do that she may be severely disadvantaged, given the control that the husband has over the business affairs of the parties. This provides the compelling circumstance.
50. It is also highly significant in this case that the husband offers to pay to the wife, by way of interim property settlement, the sum of $1.25 million. Whatever Mr Ackman QC may say about the husband's reasons for that, it can be regarded as a concession that an order for an interim property settlement is appropriate. In other words, a concession that all the requirements set out in Harris have been satisfied, including the presence of compelling circumstances. Thus, in fact, I do not need to make a finding that there is a compelling circumstance for the wife to receive $1.25 million by way of interim property settlement…[Emphasis added]
As to the argument by Counsel in Strahan, that ‘floodgates’ may be opened, it seems to me that a better analogy for access to ‘justice and equity’ is that of allowing those who thirst to take a cup from the pool rather standing by whilst those with control of the resources lock the gates.
In a number of cases, ‘compelling circumstances’ were found, sufficient to support orders for interim payments to allow wives to make contributions to superannuation during the single year when up to $1 million could be placed in funds without a surcharge: Gelb & Gelb [2007] FamCA 514 (per Moore J); Connor & Connor [2007] FamCA 623 (per Dessau J); and Inch & Inch (No. 2) [2007] FamCA 806 (per Guest J).
In Connor Dessau J noted some of the differences between the judgements in Harris and Bearup, pointing out that this may be explained by the differences in the underlying facts.
8. Interestingly, judgment was given by a differently-constituted Full Court, within just two weeks of Harris, in Bearup. In that latter case it was said that trial Judges must approach the sale of property prior to the final hearing with the utmost caution. Baker J gave the opinion that it should be only to preserve assets or to pay spousal or child maintenance. I note that the Full Court was there dealing with a case where the interim property orders had been made on the basis that the former matrimonial home in which the wife and the children were living needed to be sold to pay debts, when in fact that was incorrect. It was in that context that Baker J made those observations specifically about the sale of assets pending a final hearing.
In Crest & Oates [2007] FamCA 549 and Hatton & Hatton [2007] FamCA 551 Watts J applied a test of ‘compelling reasons’, as did Bolland J in Samuels & Shaw and Ors [2007] FamCA 833, Brown J in Jess & Jess [2008] FamCA 30, and Loughlan JR in Sterling & Sterling and Ors [2008] FamCA 119.
In Pitte & Pitte [2008] FamCA 316 Cronin J found ‘compelling circumstances’ but declined to make an order as he was not satisfied ‘that an injustice [would] occur unless the orders [were] made’ (at [31]).
Most recently, in Yeats & Yeats [2008] FamCA 430 Le Poer Trench J approached the issue by considering the likely outcome of the case, saying:
43. Taking a broad view, I think it reasonable to conclude that the wife will achieve a result greater than that sought by her in her application for a partial/interim property order and in those circumstances the authorities would support an order being made as sought by the wife.
As can be seen from the judgement of the Full Court in M & DB [2006] FamCA 1380; (2006) FLC ¶93-293; (2006) 36 Fam LR 454 some care needs to be taken to ensure that explanations of the reasons for the result in a particular case should not be taken as new principle.
A review of the cases indicates that the Full Court has not attempted to proscribe the relevant factors to be taken into account. The later Full Court decisions in Bearup, Bonisoli, Carson and Spoke all tell against Harris establishing a test requiring ‘compelling circumstances’ per se, rather than simply identifying considerations that would be relevant to the exercise of the discretion. Indeed a careful reading of the relevant paragraph of Harris reveals that the Full Court contemplated the exercise of the power ‘where it is necessary … if injustice is to be avoided.’
Thus, a consideration of the need for and effect of interim orders weighed against the risks that the exercise of the power on an interim basis will interfere with the power of the court to make ‘just and equitable’ orders on a final basis is required. Importantly, the considerations that may weigh in favour of such an order should not be considered to be limited, but must be determined on the facts and circumstances of each case: see generally Bonisoli and Bonisoli [1996] FamCA 45 at [13].
The test for an interim order under s.79 must be whether, in all of the circumstances, it is ‘appropriate’: s.79(1). This requires a consideration of the matters relevant to making a final order under s.79, not the least of which is that the order be ‘just and equitable’: s.79(2). In order to determine whether or not to exercise, on an interim basis, the power under s.79, the case must be first analysed in terms of s.79 to identify the range of outcomes that may flow in final orders. Whether it is just and equitable to make interim orders will require a balancing of the risks of unduly limiting the final orders that can be made (or even potentially defeating parties’ claims or legitimate expectations) against the circumstances said to show that it is just and equitable to make interim orders.
As was said by Nicholson CJ, Lindenmayer and O’Ryan JJ in Blueseas Investments (supra at para.54) a ‘highly relevant matter that distinguishes litigation under the Family Law Act from ordinary civil litigation … is the fact that very often the wealth of the parties is controlled by one rather than both of them.’ It cannot be the case that a party who has an irresistible claim to a substantial share of the property of the parties should be held out of that property whilst the matter is litigated, left to rely upon applications for exclusive occupation of the matrimonial home or spousal maintenance alone, particularly where the parties are asset rich but have relatively modest incomes (such as the present case). Nor could it be appropriate that a party should be denied the ability to liquidate assets when there are real needs for those resources, such as to meet debts which may result in the party being pursued by creditors, or the need for the party to make payments for the benefit of the children, or to take advantage of other financial opportunities (for example the superannuation contribution cases).

The first consideration identified in Harris’s case appears to me to reinforce the importance of recognizing that any interim orders have the potential to limit the type and extent of the orders that can be made under s.79 which must ultimately be ‘just and equitable’: s.79(2). Because the orders under s.79 are the exercise of such a broad and complex discretion, generally the interests of the parties are better served by there being one final hearing under s.79. If the s.79 proceedings are not completed in one decision various options may not be left open and therefore the Court may not be able to ensure that a ‘just and equitable’ outcome overall is achieved. However, there will be cases where it would not be ‘appropriate’ to deny interim relief, as this would not permit a ‘just and equitable’ result in the interim.
Whilst the phrase ‘compelling circumstances’ is often referred to, it appears to me that this is simply descriptive of the need for there to be matters that weigh sufficiently against the benefits of having only one exercise of a s.79 power, rather than generating a new test of ‘compelling circumstances’ which is not referred to in s.79 nor within the usual legal framework of the tests appropriate for interim relief. It appears that this was the process contemplated by the Full Court in Bonisoli and Zschokke; similarly, in Carson where the court spoke of the ‘balance of hardship’. Such an approach adequately accommodates the other decisions which have referred to the test as being ‘sufficiently compelling circumstances’, and sits comfortably with the outcomes in the series of cases for interim payments to allow the wife to take advantage of the changes in the superannuation rules.
Of course, the relevance of the parties’ obligations as carers of children will also impact on the decision. This will be a significant factor in cases where the primary carer is living in the matrimonial home and wishes to continue to do so, pending the property proceedings being determined so as to be able to conduct the search for alternative accommodation in the knowledge of the outcome of the proceedings and without a hiatus in access to their share of the property (whether by use of a home or receipt of the appropriate share of the proceeds).
A review of the legislation and authorities allow for a number of comments to be made concerning the appropriate approach to applications for interim property settlement orders:
a)There is power to make interim property orders under s.79, which should be exercised when ‘appropriate’: s.79(1) and (5).
b)In order to determine whether it is ‘appropriate’ to exercise the power, the case must be analysed as required by s.79 through the usual 4 step process of identifying the pool, contributions, s.75(2) factors, and whether the ultimate orders are ‘just and equitable’.
c)As it is an interim hearing careful consideration must be given to the potential impact of any disputed facts and circumstances. Consideration must be given to the claims of the parties and their legitimate expectations. Whether the orders could later be reversed, bearing in mind the need to ultimately be in a position to make ‘appropriate’ orders that are ‘just and equitable’, will often be a significant, but not necessarily determinative consideration. For example the sale of an asset may not be reversible, but may be inevitable on any version of the facts of the case. In other cases the present needs may be so compelling as to outweigh these risks.
d)The reasons for making interim orders must be identified and assessed to allow them to be properly weighed against the risk that interim orders may pose to the parties’ claims or legitimate expectations.
e)Orders under s.79 are to provide relief to parties to the marriage by ensuring that they receive ‘appropriate’ shares of the matrimonial resources. It would be naïve to overlook the significant power differential between parties in many cases as a result of access to financial resources in the interim, pending final orders under s.79. It may well be unjust and inequitable for one party to be denied access to matrimonial property for a substantial period whilst awaiting a trial. Similarly, it may be unjust and inequitable to require the sale of a matrimonial home in the interim where a party has no other assets and can not reasonably purchase an alternative home until the quantum of the final orders is determined. In this sense regard must be had to the positions of the parties at the time of the application for interim orders.
Analysing the current case in these terms, I note that the net matrimonial property pool, on the husband’s case, is in excess of

$1 million.
The parties have been married for many years, working and raising four children. Even if the money from the wife’s parents’ were taken into account as contributions on behalf of the wife and not debts, and only in the sum of $320,000.00, it appears that the wife would be entitled to more than one half of the pool, on a contributions basis: a sum in excess of $500,000.00 on the husband’s case.
The s.75(2) factors that are relevant in this case are that the wife has the care of 2 children under 18 years of age, and suffers Parkinson’s disease which, even on the husband’s case must inevitably reduce her working capacity. The husband continues to work. The s.75(2) factors could not, on the husband’s best case on the material presently before the court, result in the wife’s entitlements being reduced as a result of the s.75(2) factors. On the present material it appears likely the wife would receive a greater share than the husband.
On his income as described in the material, and having regard to the other assets available, there is no prospect of the husband being able to obtain finance to make payments to the wife sufficient to enable him to retain the matrimonial home, as it would leave him with a debt of over $1 million on an income of between $50,000.00 and $100,000.00 per annum. He has put forward no evidence of any other method by which he could finance the retention of the house, even on his best case. On the wife’s best case the amount she would receive is far greater than the figures I have outlined.
The debts, that the orders I propose will make provision for, will have to be paid in any event. Neither party has the capacity to pay those debts other than by the sale of the home. In circumstances where there is a need for access to the parties’ resources at present in order to secure the solvency of the wife, and meet the school and college fees of the children. The present reduction in the child support assessment is diverting funds form the care of the children to maintaining a large mortgage. There are strong reasons in favour of making such an order.
The reasons that are raised against the making of such an order do not appear to have a proper foundation, in that it has not been demonstrated that the husband has any real prospect of retaining the matrimonial home, nor does it appear that any significant steps have been taken towards renovating the home. There is no evidence of likely increases in the value of the home if a sale is delayed. It does not appear to me that there is any reason for the wife to achieve anything but the best possible price from the sale of the home as it is likely that the greater share of the proceeds will ultimately be received by her.
In these circumstances I am satisfied that the husband has no reasonable prospects of resisting property orders which ultimately will result in the sale of the home and discharge of the parties’ debts.
The husband in no longer living in the home and the wife wishes to have it sold to facilitate debt relief, and move to more modest accommodation that is commensurate with her current income and obligations.
The immediate sale of the home and payment of the school and college fees is, on the material before me, an ‘appropriate’ interim order that is ‘just and equitable’.

I certify that the preceding sixty-six (66) paragraphs are a true copy of the reasons for judgment of Riethmuller FM

Associate: Robin Smith

Date: 13 October 2008