West and West

[2012] FamCA 182

FAMILY COURT OF AUSTRALIA

WEST & WEST [2012] FamCA 182

FAMILY LAW – PROPERTY - Partial distribution of property; problem of undefined pool of assets; discovery orders.

Family Law Act 1975 (Cth)

Strahan and Strahan (Interim property orders) (2009) FamCAFC 166; (2011) FLC 93-466

APPLICANT: Ms West

RESPONDENT: Mr West

FILE NUMBER: MLC 11632 of 2011

DATE DELIVERED: 28 March 2012

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 26 March 2012

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Nikou SC

SOLICITOR FOR THE APPLICANT: Richard Calley Family Lawyers

COUNSEL FOR THE RESPONDENT: Mr Williams

SOLICITOR FOR THE RESPONDENT: Carew Counsel Pty Ltd

Orders

1. That the husband and the wife forthwith give instructions to Carew Counsel to pay out from their trust account equally to the parties one-half of the balance of approximately $139,470 by way of interim distribution of assets under s 79 of the Family Law Act 1975 (Cth).

2. That by 13 April 2012 or such other time as is agreed between the parties, the wife provide to the husband a list of documents that she wishes to inspect and that within a further 21 days thereafter, the husband provide the documents for inspection at a time and place to be agreed and failing agreement, at the offices of the solicitors for the husband subject to any objection to the production of such documents on the grounds of privilege.

3. That the wife have leave to issue such subpoenae as she is so advised notwithstanding any restriction on number as required by the Family Law Rules 2004.

4. That the parties exchange appraisals of the real estate and such other estimates of their values of the assets prior to the conciliation conference.

5. That the interim application of the wife and the response thereto by the husband be otherwise dismissed.

6. That the parties forthwith do all acts and things required to place the real property at … F Street, Suburb B on the market for sale on terms and conditions to be agreed and upon the settlement of the sale, those net proceeds be paid into the parties’ self-managed superannuation fund pending further order.

IT IS NOTED that publication of this judgment by this Court under the pseudonym West & West 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 11632 of 2011

Ms West

Applicant

And

Mr West

Respondent

REASONS FOR JUDGMENT

1. In their judgment dated 14 September 2009, in Strahan and Strahan (Interim property orders) (2009) FamCAFC 166; (2011) FLC 93-466, Boland and O’Ryan JJ said:

   101Section 79 of the Act confers a power to make an order for property settlement. The approach to the determination of an application pursuant to s 79 is well established by authority. Section 79(2) provides that an order shall not be made, under the section, unless the Court is satisfied, in all the circumstances, that it is just and equitable to make the order. The Court is required, in considering what order, if any, it should make, to take into account the respective contributions of the parties referred to in paragraphs (a), (b) and (c) of s 79(4); the effect of any proposed order upon the earning capacity of the parties; the matters referred to in s 75(2), so far as they are relevant; any other order made under the Act affecting a party or a child; and any child support under the Child Support (Assessment) Act 1989 (Cth). There is a preferred approach to the determination of such an application which involves four interrelated steps which we need not repeat in these reasons: Hickey and Hickey and the Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 per Full Court (Nicholson CJ, Ellis and O’Ryan JJ) (“Hickey”).

   …

   113There is only one exercise of the power under s 79 of the Act. However, this power may “be exercised by a succession of orders until the power … is exhausted” and the power is exhausted “when there remains no property … with respect to which orders by way of alteration of interests in property could be or have been made.”: Gabel v Yardley per Bryant CJ and Coleman J at [57]…

2. Their Honours then said that in exercising the power in s 80(1)(h) of the Family Law Act 1975 (Cth) (“the Act”), the first step was whether or not to exercise the s 79 power before a final hearing. The second step only arose if the first was answered in the affirmative. If so, the power may be exercised but using the approach set out earlier.

3. Thackray J agreed with Boland and O’Ryan JJ and said:

   220Accordingly, I accept the submissions of senior counsel for the wife that:

   ·    s 80 confers a “free standing and unfettered discretion to entertain an application for an interim property settlement”;

   ·    it is “contrary to proper judicial practice to confine the jurisdiction … by artificial formulae”; and

   ·    the only limits on the application of s 80 “are the usual limits on the exercise of a judicial discretion”. 

4. This interim case is about a division of the parties’ property but also in the alternative, the wife sought a lump sum by way of spousal maintenance. The latter application brings into consideration s 72 of the Act and in particular, the requirement that the wife establish that she is unable to adequately support herself by reason of a number of factors having regard to “any relevant matter” referred to in s 75(2).

5. An alternative to the s 79 power lies in s 117 of the Act. That too was discussed in Strahan (supra). If the s 117 power to make an order for costs was sought to be used, a different approach must be taken. Senior counsel for the wife does not promote the use of that power.

6. Ms West was the applicant.  I shall refer to her as “the wife”.  Mr West was the respondent.  I shall refer to him as “the husband”.

7. Bearing in mind the basis of the application just mentioned, the wife sought an order that $139,470 currently held on trust for the parties, be divided equally between them.  That was opposed by the husband because he wanted to use those funds to service mortgage debts into the future. 

8. The husband also sought an order that a property next to the family home be sold and the proceeds be placed in the parties’ self-managed superannuation fund.  The wife agreed to that order.  There were also minor disputes about discovery of documents and the valuation of assets to which I shall later refer.

9. The parties filed voluminous and prolix affidavit material.  Although that material was possibly relevant when the proceedings began, having regard to the discrete nature of the immediate dispute, much of it was unhelpful but I was asked to read it all.  I have done so.

10. In this case, on any view of the parties’ affidavits, there is very little dispute about the assessment of contribution.  The nature and extent of their respective contributions widely differs but I am satisfied that, as neither party argued to the contrary, for this exercise of power, I presume the assessment of the varied contributions would lead to an equal determination finding.  That might not necessarily be the finding at a final trial when the evidence is properly tested.

11. The wife was the homemaker and parent in the family and contributed financially when able to do so.  The husband was the driving financial force in the family and the provider.  The wife assisted him in his business activities in one form or another.  This was a long marriage.

12. There is currently a modest argument about s 75(2) factors. The husband is 57 years of age and the wife 47 years of age. The husband was an executive of a public company but was recently retrenched. The wife described herself as an employee health worker whose income was about $20,000-$25,000 per annum.

13. The parties have a shared arrangement with their children.  The undisputed evidence is that the parties lived an affluent lifestyle and whilst it is important to take that into account, I am conscious of their current financial problems which seem certain to lead to an end to their affluence.  There are certainly disputes about wastage, misuse and inappropriate use of funds but I am unable to make any findings about any of those issues.

14. Thus, on the brief overview above, I could not make any finding at this stage as to whether or not there should be an adjustment for s 75(2) factors. I can however take into account that some of those factors favour the wife at this time.

15. The pool of assets in this case is controversial.  The wife’s position was that she did not know what assets there were because the husband had been behaving “suspiciously”.  She complained about his use of significant funds and said that until such time as the forensic exercise and discovery had been completed, she would not be able to say what there was in that pool.

16. The husband was more blunt.  In an annexure to his affidavit, he said there was $5.5 million in the self-managed superannuation fund and a net sum of $3.7 million in the non-superannuation pool.  He pointed to the fact that subsequent to separation, the wife had acquired the home in which she was living for $2.1 million and therefore she already had more than 50 per cent of the non-superannuation assets.  None of those matters was conceded by senior counsel for the wife. 

17. As I earlier pointed out, the first step in the process is for the applicant to satisfy the Court that the s 79 power should be exercised. In this case, the wife points to the costs that she will incur and has already incurred. She not only is limited by her income but also because her house is the only resource that she has. That is in some way affected by the financial arrangements that she says are under the control of the husband. Senior counsel for the wife argued that unless the power was exercised and the wife was given access to funds, she was being denied the opportunity to present her case. In support of that argument, the wife pointed to a variety of conversations with the husband, usually in message form, subsequent to separation in which he indicated that he would not comply with the Court’s requirements to give her a financial statement. It was argued that in exasperation, she issued proceedings in December 2011 and only then, was the husband forced to file a formal financial statement. She complained that he had refused to provide documents by way of discovery.

18. For his part, the husband said that he had been forthright and had provided “ninety per cent plus” of the documents available in discovery.  There is no doubt on the evidence that the husband has had a number of business activities all of which need to be investigated.  It is conceivable that taxation documents will not adequately disclose enough information to enable the wife to make an informed view about the value and extent of the assets.  As I pointed out, the wife is living in a $2.1 million home which is affected by cross-collateralised mortgages.  She has a very limited amount of income.  She deposed to the fact that she had endeavoured to obtain a credit card facility and was rejected. 

19. I am satisfied in the circumstances that the wife has a need for funds which cannot be obtained by her own resources even using the equity that she has in the home.

20. The husband did not seek orders for the sale of other properties which might have resolved the cross-collateralisation problem.  Similarly, the wife has not made an application for the sale of properties which ironically, are in her name and which would no doubt solve some of the financial dilemma. 

21. Be that as it may, the reality is that the wife is not in a position to move forward unless she has some funds to enable her to undertake the exercise to which I have referred.

22. The only solution to enable the Court to provide a just and equitable outcome is for there to be an exercise of the s 79 power unless the spousal maintenance provision can be applied. In my view, although that was put as an alternative, whilst the wife is living in a $2.1 million home and has taken no steps to sell other assets, I could not make a finding that she could not adequately support herself without maintenance.

23. As I have pointed out, there is sufficient evidence relating to what is in the pool at least to the extent of the admission against interest by the husband. There is sufficient evidence as to the parties’ respective contributions but not sufficient evidence to be able to make a confident finding about the factors required by s 75(2) of the Act. A fourth and final step in the four step process is to determine whether it is just and equitable to make an order.

24. The husband’s position was simple.  He said that if the $139,470 was used as the wife would have it so distributed, it was inevitable that the relevant mortgagees would move and there would be a sale of assets.  The wife’s position was that for the reasons outlined, she needed the money.

25. Whilst the wife has a far greater share of the non-superannuation assets if the pool as asserted by the husband is right, that does not take into account any entitlement she might have to the interests of the parties in the self-managed superannuation fund which holds (on the husband’s evidence) $5.5 million.  The husband did not indicate how he would resolve the overall settlement.  The wife was not in a position to say how she would resolve it either having regard to the disputed pool.  On any view however, it is conceivable that the wife will receive a significantly greater share than the value of the house of the total pool.  The question is whether or not that will be paid in cash or by some superannuation splitting order payment.  If the latter occurs, the wife is in the difficult position of being unable to access the funds by virtue of her age and ineligibility for retirement.  The converse is not so for the husband.  He could retire and access all of the funds.  Indeed, as was pointed out by counsel for the husband, he could obtain a pre-retirement lump sum taxed at 15 per cent which would free up considerable portions of the superannuation if the fund had the necessary liquidity.

26. The function of the Court in these cases however is to look at the entitlement rather than the precise division of the assets.  The question of how the adjustments are finally made later is not a problem at this stage.  There is no logical reason why the wife should not have the $70,000 that she seeks and to the extent that the liquidity crisis creates a problem forcing the sale of other assets, the parties may necessarily have to face that problem when it arises.  There is no injustice to the husband in the wife having half of the cash funds that are sitting in the trust account.  Any difficulty with such a distribution can be adjusted at a later time.

27. In those circumstances, I find that it is just and equitable for there to be a division of the trust funds equally between the parties.

28. I turn then to the discovery issue.

29. The wife said that she had not been given all of the documents that she wanted.  The husband said that anything that the wife wanted to the extent that it was within his control, would be so provided.  That is all that can be expected of him.  To the extent that he is a shareholder, he has rights under the Corporations Act.  The wife’s proposal was that she would send to the husband a list of documents that she wanted inspected by 13 April and the husband have 21 days thereafter to provide them for inspection.  Having regard to the husband’s indication that there is no dispute about discovery, I propose to make that order.

30. The wife also sought unlimited subpoenae.  The husband remained mute on that issue.  To enable the exercise of the valuation to be undertaken properly, I see no reason why the wife should not have that opportunity bearing in mind that she will be responsible for any costs incurred by any unreasonable approach if she does not satisfy the Court as to the relevance of the subpoenae.  I propose to make the orders accordingly.

31. The final issue related to the evaluation of real estate, business interests, shares and the superannuation fund.  The proceedings in this Court are a long way from a resolution although there is a conciliation conference in June.  My view that it is appropriate at this stage having regard to the financial difficulties to which I have already referred that the parties do not expend significant sums of money on formal valuations but exchange appraisals.  The appraisals in relation to company interests must be limited to an observation of the relevant balance sheets.  To do otherwise would require a formal forensic valuation.  That seems to me to be unnecessary at this stage.  There is no reason for the shares to be valued if they are in public companies and the real estate valuations can be taken by way of appraisals.

32. Accordingly I propose to make orders.

I certify that the preceding Thirty Two (32) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 28 March 2012.

Associate: 

Date:  28 March 2012