WITHERS & WITHERS

[2018] FamCA 920

FAMILY COURT OF AUSTRALIA

WITHERS & WITHERS [2018] FamCA 920

FAMILY LAW – PROPERTY – Interim property – Interim Application – consideration of applicable principles – Where insufficient evidence has been adduced by the parties for an assessment of the parties’ assets and liabilities and contributions to be made – Where there is a conflict in the evidence and issues in dispute that are not capable of resolution at interim hearing – Where application dismissed – Where it is appropriate to make an order for costs to be reserved to final trial.

FAMILY LAW – PROPERTY – Interim spousal maintenance – Consideration of applicable principles – Where wife has not established incapacity to support  herself adequately – Where application dismissed

Family Law Act 1975 (Cth) ss 72, 75, 79

Strahan & Strahan [2009] FamCAFC 166
Harris & Harris (1993) FLC 92-378

APPLICANT: Ms Withers

RESPONDENT: Mr Withers

FILE NUMBER: CRC 129 of 2017

DATE DELIVERED: 9 November 2018

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Foster J

HEARING DATE: 17 September 2018

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Petersen

SOLICITOR FOR THE APPLICANT: Nambucca Valley Legal

COUNSEL FOR THE RESPONDENT: Mr Grew

SOLICITOR FOR THE RESPONDENT: Coleman Greig Lawyers

Orders

1. That the wife’s Application in a Case filed 22 August 2018 be dismissed.

2. That the parties’ costs of and incidental to the said application be reserved to final trial.

Note: The form of the order is subject to the entry of the order in the Court’s records.

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

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: CRC 129 of 2017

Ms Withers

Applicant

And

Mr Withers

Respondent

REASONS FOR JUDGMENT

1. The application for determination is as to interim financial issues.

2. In April 2017 the applicant wife filed an Amended Initiating Application seeking property settlement orders in substance as follows:

   a)that the husband transfer to her his interest in a real estate property at B Town;

   b)that simultaneously with that transfer the husband pay to the wife the sum of $500,000.00;

   c)that simultaneously with the payment to the wife transfer to the husband her interest in a real estate property at C Town;

   d)that simultaneously on compliance with the previous orders the husband refinance the mortgage secured over the C Town property into his name;

   e)that the husband indemnify the wife in relation to any debts and loan accounts liability that she may have in relation to D Pty Ltd, E Pty Ltd, the Withers Family Trust, and the Withers Partnership.

3. In July 2017 the husband filed a Response to the wife’s Amended Initiating Application and, in summary, sought the following orders:

   a)that within 42 days the husband pay to the wife $50,000.00 and that contemporaneously with that payment the husband transfer his interest in the B Town property to the wife and that he do all things necessary and sign all necessary documents to discharge the mortgage thereon;

   b)that contemporaneously with compliance with the previous order the wife transfer to the husband her interest in the C Town property and that the husband refinance the mortgage secured over that property into his sole name;

   c)otherwise, the husband sought various consequential enforcement orders.

4. These proceedings were initially commenced in the Federal Circuit Court of Australia in April 2017.

5. On 14 July 2017 orders were made by consent that, in summary, provided:

   a)that pending further order the husband pay mortgage payments in relation to the parties’ property at B Town;

   b)that the husband provide to the wife certain documents by way of disclosure as to his personal financial circumstances and those of various corporate entities;

   c)that a single expert be appointed to value the business entities D Pty Ltd and E Pty Ltd;

   d)that a single expert be appointed to value the real estate properties at B Town and C Town.

6. Otherwise, on 14 July 2017 the Court noted that the parties had agreed to cause F Pty Ltd “being the corporate trustee of the self-managed super fund to sell the property known as and situate at unit G Street, H Town.

7. Subsequently, on 31 October 2017 an order was made for a single expert to value the property at H Town.

8. Subsequently and somewhat inexplicably Judge Costigan in the Federal Circuit Court of Australia transferred proceedings to this Court on 30 April 2018 notwithstanding that they had been pending for more than 12 months.

The present application

1. On 22 August 2018 the wife filed an Application in a Case.  In that application she sought interim financial orders, in summary, as follows:

   a)that the husband pay to the wife lump sum spouse maintenance in the sum of $50,000.00 within 28 days or in the alternative periodic spouse maintenance in the sum of $1,000.00 per week for a period of 50 weeks;

   b)that in the alternative, the husband cause to be paid to the wife by way of interim property the sum of $50,000.00;

   c)otherwise, the wife sought various consequential orders in relation to disclosure that were not pressed at interim hearing. 

2. The wife relied upon her affidavits filed 22 August 2018 and 14 September 2018 together with her Financial Statement filed 7 April 2017.

3. In response to the wife’s application, the husband filed a Response on 11 September 2018.  That Response sought that the wife’s Application in a Case be dismissed and that the wife pay the husband’s costs of and incidental to the application.

Context

1. The wife is presently aged nearly 56 and the husband 61.

2. The parties commenced cohabitation about three or four years before marriage.  They married in 1993.  The wife asserts separation in about April 2010 when the husband left the matrimonial home at C Town.  The husband asserts separation in late 2008.  In the context of present application nothing turns upon the date of the parties’ separation.

3. There are two children of their relationship presently aged 25 and 22.

4. The husband had four children from an earlier relationship that from time to time spent time with the husband and wife in their home.

5. The husband continues to live in the former matrimonial home at C Town.  A separate granny flat is occupied by the parties’ daughter and her partner.

6. At the commencement of cohabitation the husband had assets, including a property at Suburb J and a business, to the value of approximately $250,000.00 and the wife assets to the value of about $5,000.00.

7. The parties purchased 25 acres of vacant land at C Town in July 1992 for $190,000.00.  The subsequent sale of the husband’s property at Suburb J facilitated the mortgage borrowing being significantly reduced.  Over the years a family home and later a second dwelling were constructed on the land but the parties lived in fairly difficult circumstances for some years.

8. In April 1996 the then mortgages secured over the C Town property were discharged and refinanced with the NAB with a mortgage of $50,000.00.  This mortgage was discharged in October 2001.

Business Entities

1. In 1994 the husband commenced a business “K Pty Ltd”.  This business was from about April 2000 operated through the parties’ partnership Withers Partnership.  The business was subsequently incorporated as D Pty Ltd in December 2007.  The company is the trustee of the “Withers Family Trust” with the husband asserting that the trust holds “90 per cent of the shares” in the business and his son Mr L owns “the remaining 10 per cent”.

2. The husband asserts that the partnership ceased trading in about 2013 or 2014.

3. In September 2010 the company E Pty Ltd was incorporated with the husband having an equal shareholding with an unrelated third party.  Subsequently, for no consideration, the husband acquired the whole of the shareholding in the company.  In March 2018 the husband transferred a 49 per cent interest in the company M Pty Ltd a company owned by a Mr N.  The wife has not sought to impugn this transaction as yet.

The Single Expert Report

1. A single expert valuer Mr O was appointed to value the current business entities D Pty Ltd and E Pty Ltd.  A draft report was released by the single expert in November 2017 and subsequent to significant further information requested and supplied a final report was issued by the single expert dated 18 May 2018.

2. There remain significant issues on the part of the wife as to the Single Expert Report.

Mortgage borrowings

1. In January 2002 the parties borrowed $150,000.00 from the NAB.  These funds were used for the purchase of the parties’ holiday home at B Town.

2. Later in May 2013, subsequent to separation, the parties appear to have borrowed from the ANZ bank $1.27 million secured against the C Town property and the B Town property and advanced those funds to D Pty Ltd.  This advance comprises a business loan of $850,000.00 and a line of credit facility to the value of $400,000.00 comprising an overdraft facility of $200,000.00 and a trade finance facility of $200,000.00. How these funds were applied is not known. The company makes the payments in relation to these loans and they are taken up in the Single Expert Report as a company liability. The prospect of repayment depends on the company trading circumstances into the future as at present interest only is being paid with no reduction in the outstanding debt (Single Expert Report).

3. Concurrently with this borrowing, the parties refinanced the B Town loan with a borrowing from the ANZ bank of $130,000.00.  The current balance of this mortgage is about $114,000.00.

4. The wife asserts significant contribution in about the development of the home, gardens and grounds and the property overall.  She, otherwise, asserts a significant contribution as primary homemaker and carer for the two children of the marriage.

5. Otherwise, she asserts a contribution to the husband’s business activities by reason of her undertaking manual work for the businesses.  The wife, otherwise, asserts that she undertook other work related to the business and had other employment.

6. Subsequent to separation the wife moved to the parties’ holiday home at B Town in mid-2011 and undertook improvements to the property.  The husband remained in the former matrimonial home and continue to solely operate the matrimonial business.

7. Subsequent to separation the husband paid to the wife voluntary payments of $700.00 per week and he continued to meet mortgage payments on the B Town property.  He reduced his support payments to $300.00 per week in 2013 and subsequently these payments ceased.  In 2017 the husband ceased making mortgage payments on the property occupied by the wife and pursuant to orders made 14 July 2017 the husband was ordered to continue those payments.

8. The husband asserts that he has facilitated mortgage payments on the B Town property being paid by D Pty Ltd.

9. As best can be determined the current matrimonial asset pool comprises the following:

   Assets:

   Joint   Home at B Town (Single Expert)  $  385,000.00

   Joint   Home at C Town (Single Expert)  $ 1,200,000.00

   E Pty Ltd  NK

   Withers Trust  $  272,567.00

   F Superannuation Fund  $   See below

   D Pty Ltd  $  302,852.00 (S Expert)

   E Pty Ltd  $              0.00

   Wife   Superannuation  $     11,000.00

   Liabilities:

   B Town mortgage  $   114,000.00

   NAB business loans  $ 1,147,000.00

   Joint   Debt to D Pty Ltd  $  563,317.00 (S Expert)

10. The trustee of the parties’ self-managed super fund is F Pty Ltd.  The fund’s primary asset are business premises at H Town owned by P Pty Ltd as trustee with an issue as to value and subject to a mortgage debt of about $338,500.00.  The H Town property was purchased in March 2011 for $621,500.00 in part funded by an NAB mortgage of $367,250.00.  The husband asserts that his business pays rent to the super fund of $49,972.00 per annum. There is an issue as to the value of individual member accounts in the fund.

The wife’s circumstances

1. The wife is presently working, earning about $600.00 per week net after-tax.  Her living expenses approximate her income with such expenses including repayment of a credit card and a small outstanding Centrelink debt.

2. The wife asserts that she requires dental work on her teeth at a cost of just over $10,000.00 together with other remedial medical surgery at a cost of about $11,000.00.  The wife does not contend that these matters are of any urgency.

3. The wife asserts that the property occupied by her is in need of maintenance and repair, she having received a “verbal quote” that indicated a cost of about $23,000.00.

4. The wife complains of the husband’s failure to disclose his financial circumstances.  In particular, the wife complains as to lack of information as to an alleged loan owing to a third party by the husband’s business in the sum of about $358,000.00.

5. The Single Expert Report reveals that rental payments owing by the husband’s business to the parties’ superannuation fund were as at 30 June 2017 about $30,000.00 in arrears.

6. The wife further complains that the husband has inappropriately encumbered the superannuation property at H Town in circumstances not known to her.  The wife at present has reservations in signing the financial statements and tax returns for the parties’ self-managed superannuation fund for the year ended 30 June 2016 as there is no signed commercial lease for the premises and no evidence as to appropriate market rent being assessed or indeed being paid.

7. The wife, otherwise, asserts that she has difficulty in paying her legal fees that she estimates will be in excess of $100,000.00.

The husband’s circumstances

1. The husband is employed by the company D Pty Ltd. He asserts a salary of $75,000.00 per annum plus superannuation plus a car allowance of $15,000.00 per annum.

2. The husband’s partner has now moved into the former matrimonial home.  There is no evidence as to the financial circumstances relating to their cohabitation save that she works for the husband’s company as general business manager.

3. The husband asserts some health issues but adduces no objective evidence supporting his contentions.

4. Otherwise, the husband has expended significant funds on legal fees to date.

Discussion

Spouse maintenance

1. Section 72 of the Act sets out the relevant provisions in relation to the right to spouse maintenance. Section 72 provides that a party to a marriage is liable to maintain the other party, to the extent that the first mentioned party is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately whether:

   a)By reason of having the care and control of a child of the marriage who has not attained the age of 18 years;

   a)By reason of age or a physical or mental incapacity for appropriate gainful employment; or

   b)For any other adequate reason,

   having regard to any relevant matter referred to in s 75(2) of the Act.

2. Matters that touch upon s 75(2) considerations are in the discussion above.

3. The wife does not contend incapacity for employment, indeed, she is in employment. The circumstances of that employment are not known in detail. She proffers no evidence as to any incapacity for further or other employment.

4. She does not contend as to any physical incapacity or other incapacity for employment. The husband meets the primary cost of her accommodation by way of mortgage payments.

5. The Court cannot be satisfied that she is unable to support herself adequately.

6. Her application for spouse maintenance provision will be dismissed.

Interim property

1. The principles as to applications for interim property provision are well settled, (Strahan & Strahan [2009] FamCAFC 166) and require a two-step process.

2. In Strahan (supra), the Full Court said:

   132.In relation to the first stage, in our view, when considering whether to exercise the power under s 79 and s 80(1)(h) of the Act to make an interim property order the “overarching consideration” is the interests of justice. It is not necessary to establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power. In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.

3. Firstly, there must be circumstances enlivening the power to make an interim order. The test is not limited to “compelling circumstances” but whether it would be “appropriate” to make an interim order, with the “overarching consideration” being the interests of justice.

4. Secondly, the Court is to have regard to relevant matters in s 79 of the Family Law Act 1975 (Cth) (“the Act”). It needs to be kept in mind that the final outcome of property settlement should not be compromised by an interim property order. Either the remaining property needs to be adequate to meet the legitimate expectations of both parties at the final hearing or the order that is contemplated needs to be capable of being reversed or adjusted if it is subsequently considered necessary to do so.

5. A detailed inquiry is not required, but there must be some assessment of s 79 factors.

6. In Strahan the Full Court went on to say:

   137. Once a court proceeds to exercise the power in s 79 of the Act, being in the substantive phase, a court is required to undertake consideration of the matters in s 79(4) including by reference to s 79(4)(e) the matters in s 75(2) so far as they are relevant. However consideration of such matters may be brief and if it is established that “it seems likely to the Court that ... the applicant ... will be likely 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”: Zschokke; Polletti and Polletti per Nygh J and Wenz v Archer. As senior counsel for the Wife submitted, “provided scope can be found within the assets of the parties for an order of the size sought ... then that should be the end of the matter”. In other words, in such circumstances the applicant would only be receiving what he or she was entitled to receive when the power was exhausted.

   138. The legislation does not prescribe what the Full Court in Zschokke at 83,218 described as “preconditions” and nor would we seek to exhaustively prescribe matters that may be relevant to take into account in the exercise of the discretion under s 80(1)(h) of the Act. As to the three “criteria” identified by the Full Court in Zschokke, we accept that an inability on the part of an applicant for an interim property order to defray the costs of litigation to meet his or her litigation costs would be a relevant matter to take into account at the procedural or first stage. Senior counsel for the Wife submitted that it may be relevant at the substantive or second phase in reviewing the “necessarily limited and impressionistic budget for costs” to ensure that the application is bona fide. We are of the view that it may be that any issue about the bona fides of an application is relevant at the procedural phase in the context of considering if in the interests of justice it is appropriate to make an order before the final hearing.

   139. We also emphasise that in order to establish an appropriate case for an interim property settlement order more is required than the mere fact that upon a final hearing the applicant would receive the property being sought (or an amount in excess of the funds being sought) from the other party.

   140. As to the other matters being a position of relative financial strength on the part of the respondent to an application and the capacity of the respondent to meet his or her own litigation costs, there is no doubt that the financial circumstances of both parties are relevant at the substantive stage and may also be relevant at the procedural stage. Senior counsel for the Wife submitted that all of the matters discussed by the Full Court in Zschokke are self-evident and we accept that this is so in relation to at least two of the matters being the need for funds and the financial circumstances of both parties.

   141. As to the various matters discussed by Brereton J in Paris King Investments which we have discussed above, we do not propose to deal with all of what his Honour said, however we make the following observations about some of the matters. Obviously the applicant should have “at least an arguable case for substantive relief which deserves to be heard”. Further, in determining at the procedural stage whether to exercise the jurisdiction there may need to be evidence of the applicant’s “likely costs of the litigation” given that the need for funds to defray litigation costs and expenses is the circumstance propounded as to why it is appropriate that an order be made. We also accept that “it is not an essential precondition” that the applicant’s legal representatives will not continue to act unless the costs are paid or secured on an ongoing basis.

1. It is important to have regard to an overall caution. In Harris & Harris (1993) FLC 92-378, the Full Court said:

   As a generality, the interests of the parties and the Court are better served by there being one final hearing of s 79 proceedings.

2. In Strahan (supra), the Full Court said at [132]:

   … regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.

3. It is now well settled that in property cases the Court must identify the existing legal and equitable interests of the parties in the property, the liabilities and financial resources of the parties at the time of the hearing and then determine whether it is just and equitable to make a property settlement order.  Such a consideration should not be guided by an assumption that the parties’ rights to, or interests in, property are, or should be, different from those that then exist. The question is whether those rights and interests should be altered.

4. Both parties seek final adjustive orders as to property.

5. Yet in the context of this matter there are significant issues remaining for determination, including valuation issues, aspects of financial disclosure, an asserted disposition of shares to a third party, the circumstances of the parties’ superannuation fund and the overall makeup of the pool of assets for division.

6. Otherwise, the parties’ personal real estate assets are significantly encumbered by company debt with some prospect that such debt will remain for some time.

7. In the circumstances of this matter it is not open to the Court to even commence as assessment of what the parties eventual property entitlements will be. It may be that the husband is required to dispose of his company so as to clear debt on the parties’ real estate assets, such debt having been taken up in the value of the company as was the parties’ loan account debt to the company.

8. It is thus not appropriate to make any interim order. The matter needs to proceed to final trial.

9. The wife’s application for interim property provision will be dismissed.

10. Orders will be made accordingly.

11. In the circumstances, the parties’ costs of the present application will be reserved to final trial.

I certify that the preceding sixty-eight (68) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 9 November 2018.

Associate: 

Date:  9 November 2018