Interim Property Spousal Maintenance Applications Guy Waterman Barrister

Interim Property & Spousal Maintenance Applications Guy Waterman, Barrister FLPA Twilight Seminar and Webinar, 7 May 2015

The Obligation of parties to make full and frank disclosure O’Ryan J summarised the principles in Luciano (2000) Fam. CA 401 as follows: “In proceedings in the Family Court in relation to financial matters, there is an obligation of each party to make a full and frank disclosure of his/her financial circumstances and all matters relevant thereto. The obligation arises because of the necessity for the court in such proceedings to consider all aspects of the financial circumstances of each party. The obligation is not created by the rules or the practice of the court and the rules simply set out the procedure by which that obligation may be fulfilled. If there is a deficiency in the practice adopted for the purpose of making such a disclosure, mere compliance with the requirements of the relevant rules if deficient, is not enough. If there is non-disclosure in the relevant sense then the failure to disclose undermines the whole process of adjudication of the proceedings in relation to financial matters. A finding of non-disclosure may in appropriate cases, depending on the circumstances, result in the other party being granted without more, the relief sought. ”

Family Law Rules 13. 04 Full and frank disclosure (1) A party to a financial case must make full and frank disclosure of the party’s financial circumstances, including: (a) the party’s earnings, including income that is paid or assigned to another party, person or legal entity; (b) any vested or contingent interest in property; (c) any vested or contingent interest in property owned by a legal entity that is fully or partially owned or controlled by a party; (d) any income earned by a legal entity fully or partially owned or controlled by a party, including income that is paid or assigned to any other party, person or legal entity; (e) the party’s other financial resources;

Family Law Rules (cont. ) 13. 04 Full and frank disclosure (continued) (1) (f) any trust: (i) of which the party is the appointor or trustee; (ii) of which the party, the party’s child, spouse or de facto spouse is an eligible beneficiary as to capital or income; (iii) of which a corporation is an eligible beneficiary as to capital or income if the party, or the party’s child, spouse or de facto spouse is a shareholder or director of the corporation; (iv) over which the party has any direct or indirect power or control; (v) of which the party has the direct or indirect power to remove or appoint a trustee; (vi) of which the party has the power (whether subject to the concurrence of another person or not) to amend the terms; (vii) of which the party has the power to disapprove a proposed amendment of the terms or the appointment or removal of a trustee; or (viii) over which a corporation has a power mentioned in any of subparagraphs (iv) to (vii), if the party, the party’s child, spouse or de facto spouse is a director or shareholder of the corporation;

Family Law Rules (cont. ) 13. 04(1) - continued (g) any disposal of property (whether by sale, transfer, assignment or gift) made by the party, a legal entity mentioned in paragraph (c), a corporation or a trust mentioned in paragraph (f) that may affect, defeat or deplete a claim: (i) in the 12 months immediately before the separation of the parties; or (ii) since the final separation of the parties; and (h) liabilities and contingent liabilities. (2) Paragraph (1) (g) does not apply to a disposal of property made with the consent or knowledge of the other party or in the ordinary course of business. (3) In this rule: legal entity means a corporation (other than a public company), trust, partnership, joint venture business or other commercial activity. Note: The requirements in this rule are in addition to the requirements in rules 12. 02 and 12. 05 to exchange certain documents before a conference in a property case.

Family Law Rules (cont. ) 13. 05 Financial statement (1) A party starting, or filing a response or reply to, a financial case (other than by an Application for Consent Orders) must file a Financial Statement at the same time. (2) If a party is aware that the completion of a Financial Statement will not fully discharge the duty to make full and frank disclosure, the party must also file an affidavit giving further particulars. 13. 06 Amendment of Financial Statement If a party’s financial circumstances have changed significantly from the information set out in the Financial Statement or the affidavit filed under rule 13. 05, the party must, within 21 days after the change of circumstances, file: (a) a new Financial Statement; or (b) if the amendments can be set out clearly in 300 words or less—an affidavit containing details about the party’s changed financial circumstances.

Federal Circuit Court rules Rule 24. 03 Full and Frank Disclosure (1) A party required under this Part to file a financial statement or affidavit of financial circumstances must make in the statement or affidavit a full and frank disclosure of his or her financial circumstances, including details of: (a) any vested or contingent interest in property (including real or personal property, superannuation and legal and equitable interests); and (b) income from all sources, including any benefit received in relation to, or in connection with, the party’s employment or business interests; and (c) the party’s other financial resources; and (d) any trust: (i) of which the party is, or has been since the separation of the parties, the appointor or trustee; or (ii) of which the party, or the party’s child, spouse or de facto spouse is, or has been since the separation of the parties, an eligible beneficiary as to capital or income; or (iii) of which a corporation is an eligible beneficiary as to capital or income if the party, or the party’s child, spouse or de facto spouse is, or has been since the separation of the parties, a shareholder or director of the corporation; or

Federal Circuit Court rules (cont. ) Rule 24. 03(1 d) - continued (iv) over which the party has, or has had since the separation of the parties, any direct or indirect power or control; or (v) of which the party has, or has had since the separation of the parties, the direct or indirect power to remove or appoint a trustee; or (vi) of which the party has, or has had since the separation of the parties, the power (whether subject to the concurrence of another person or not) to amend the terms; or (vii) of which the party has, or has had since the separation of the parties, the power to disapprove a proposed amendment of the terms or the appointment or removal of a trustee; or (viii) over which a corporation has, or has had since the separation of the parties, a power mentioned in subparagraphs (iv) to (vii), if the party is a director or shareholder of the corporation; and (e) any gift or other disposition of property made by the party since the separation of the parties; and (f) if there is a partnership, trust or company (except a public company) in which the party has an interest, copies of the 3 most recent financial statements and the last 4 business activity statements lodged by the partnership, trust or company.

Checklist to identify whether you received full and frank disclosure from the other party 1. Carefully read the other party’s affidavit and identify what documents are relevant to prove and/or disprove a particular issue. 2. Carefully read the other party’s financial statement to identify the documents required to prove the matters asserted in the financial statement as to that party’s income, expenses, property, liabilities and financial resources. 3. Write to your opponent to arrange an exchange of relevant disclosure documents within fourteen days. 4. To the extent that the response is inadequate, identify the missing documents or classes of documents and request disclosures within seven days of the date of the request and, in default thereof, place your opponent on notice that an application shall be made to the court without further notice seeking specific disclosure of the missing documents together with an order for costs.

Checklist to identify whether you received full and frank disclosure from the other party (cont. ) 5. In the absence of an adequate response, make an application for production of the specified documents or in circumstances where there has been material non disclosure and a basis for asserting that there are other specific documents or classes of documents relevant to the issues, then make an application for a declaration pursuant to s 45 of the Federal Circuit Court Act or an Application for Order for Disclosure, Family Law Rules 13. 22. 6. Engage a forensic accountant in cases of any complexity such as corporate, trust and partnership structures to identify the relevant documents to the enquiry at hand, and to advise in respect of the adequacy of the documentation disclosed, particularly when there are issues as to the valuation of the entity and non disclosure of income and/or assets by the other party in control of the entity. 7. Issue subpoenas where relevant, particularly when advances have been sought from financial institutions as invariably where advances have been sought by a party it is necessary to provide a Statement of Assets and Liabilities to the financial institution. The Statement of Assets and Liabilities provided to the financier can quite often indicate the existence of income and assets that have not been disclosed by that party in their financial statement. 8. Consider delivering a list of specific questions where relevant, eg where you seek clarification of a single expert’s report.

Family Law Rules Documents to be produced at hearing of Application for spousal or de facto maintenance Rule 4. 15 Evidence to be provided (1) On the first court date and the hearing date of an Application for spousal or de facto maintenance, each party must bring to the court the following documents: (a) a copy of the party’s taxation returns for the 3 most recent financial years; (b) the party’s taxation assessments for the 3 most recent financial years; (c) the party’s bank records for the period of 3 years ending on the date on which the application was filed; (d) if the party receives wages or salary payments—the party’s payslips for the past 12 months; (e) if the party owns or controls a business, either as sole trader, partnership or a company—the business activity statements and the financial statements (including profit and loss statements and balance sheets) for the 3 most recent financial years of the business; and (f) any other document relevant to determining the income, needs and financial resources of the party. Note 1: Documents that may need to be produced under paragraph (f) include documents setting out the details mentioned in rule 13. 04. Note 2: For modification of a spousal maintenance order, see section 83 of the Act. For modification of a de facto maintenance order, see section 90 SI of the Act. (2) Before the hearing date, a party must produce the documents mentioned in subrule (1) for inspection, if the other party to the proceedings makes a written request for their production. (3) If a request is made under subrule (2), the documents must be produced within 7 working days of the request being received

Federal Circuit Court Rules Rule 24. 05 Production of documents (proceedings for maintenance only) A respondent to an application for maintenance only must bring to the court on the first court date the following documents: (a) a copy of the respondent’s taxation return for the most recent financial year; (b) a copy of the respondent’s taxation assessment for the most recent financial year; (c) copies of the respondent’s bank records for the 12 months immediately before the date when the application was filed; (d) the respondent’s most recent pay slip; (e) if the respondent has an Australian Business Number, copies of the last 4 business activity statements lodged; (f) any document in the respondent’s possession, custody or control that may assist the Court in determining the income, needs and financial resources of the respondent. 24. 06 Amendment of financial statement If there is a significant change in the circumstances of a party who has filed a financial statement or affidavit of financial circumstances under this Part, the party must amend the statement or affidavit as soon as practicable by: (a) if the amendment may be clearly set out in 3 pages or less—filing and serving an affidavit setting out the amendment; or (b) otherwise—filing and serving an amended financial statement or affidavit.

Checklist for completion of Financial Statement 1. Carefully explain to your client his/her obligations in relation to making full and frank disclosure and provide a copy of the relevant Rules. 2. Have your client complete the first draft of the Financial Statement and wherever possible substantiate the item e. g. with payslip, rental statement, receipts for expenses, current superannuation statement etc. 3. Wherever your client does not have an exact figure, insert the figure as an estimate or for some reason that is not possible, insert ‘NK’. 4. In relation to the Applicant’s reasonable weekly needs, set out these in an affidavit as Part N deals with actual expenses. If it is the case that your client’s income is exceeded by expenses that will need to be explained in an affidavit as the source of the shortfall e. g. by drawing down on capital, savings, use of credit and may not be apparent from the Financial Statement. 5. To the extent that the Financial Statement does not enable client’s financial position to be adequately disclosed, provide additional information in an Affidavit.

Checklist for completion of Financial Statement (cont. ) 6. Where you act for the Respondent, carefully assess the expenses of the Applicant relevant to your client’s expenses. 7. Apportion expenses eg rent, electricity and utilities, food etc where parties other than applicant or respondent are living in the property. 8. Have your client complete all boxes of the Financial Statement (see Note Part D and Part G) by inserting ‘Nil’ or ‘N/A’ or ‘NK’. 9. Be careful to differentiate between property and income items. 10. Do not confuse employer-based superannuation payments with voluntary contributions. (See Item 20 of Financial Statement) 11. In relation to valuations of property, it is more prudent to put ‘not known’ if your client does not have a valuation or appraisal that can be relied upon. 12. Where is is likely to be disputed the valuations of major items of property are best left to the valuation to provided by a single expert. 13. Be careful in relation to clients inadvertently placing unsubstantiated values or estimates in respect of motor vehicles, furniture and jewelry where the issue is likely to be disputed

Checklist for completion of Financial Statement (cont. ) 14. Upon the client preparing the first draft, reality test the accuracy of the information provided by the client with reference to evidence of income and expenses and/or other items that seem to be either too low or excessive. 15. In the context of a spousal maintenance application so far as the applicant is concerned, take care in calculation of the Applicant’s reasonable weekly needs to enable you to accurately calculate the shortfall of reasonable needs over income and any other financial resources to meet the threshold question that the Applicant is unable to adequately support themselves without an Order. 16. Ultimately the Order that you seek on behalf of the Applicant is not an ambit Claim and must be established by reference to the evidence in the supporting Affidavit and Financial Statement. 17. To the extent that Financial Statement does not property reflect your client’s needs that should be taken up in the Applicant’s supporting Affidavit. 18. When responding to an Application for spousal maintenance, care needs to be taken in that all of the client’s expenses are carefully identified as the extent to which the Respondent has a surplus of income over expenses, absent any other evidence to his or her financial resources, will establish his or her capacity to pay should the Applicant establish need.

Family Law Act 1975 Section 72 – Right of Spouse to Maintenance (1) 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 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; (b) by reason of age or physical or mental incapacity for appropriate gainful employment; or (c) for any other adequate reason; having regard to any relevant matter referred to in subsection 75(2). (2) …… Section 74(1) In proceedings with respect to the maintenance of a party to a marriage, the court may make such order as it considers proper for the provision of maintenance in accordance with this Part.

Family Law Act 1975 (cont. ) Section 75 (1) In exercising jurisdiction under section 74, the court shall take into account only the matters referred to in subsection (2) The matters to be so taken into account are: (a) the age and state of health of each of the parties; and (b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment; and (c) whether either party has the care or control of a child of the marriage who has not attained the age of 18 years; and (d) commitments of each of the parties that are necessary to enable the party to support: (i) himself or herself; and (ii) a child or another person that the party has a duty to maintain; and

Family Law Act 1975 (cont. ) Section 75(2) – continued (e) the responsibilities of either party to support any other person; and (f) subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under: (i) any law of the Commonwealth, of a State or Territory or of another country; or (ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia; and the rate of any such pension, allowance or benefit being paid to either party; and (g) where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable; and (h) the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income; and

Family Law Act 1975 (cont. ) Section 75(2) – continued (ha) the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant; and (j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party; and (k) the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration; and (l) the need to protect a party who wishes to continue that party’s role as a parent; and (m) if either party is cohabiting with another person—the financial circumstances relating to the cohabitation; and (n) the terms of any order made or proposed to be made under section 79 in relation to: (i) the property of the parties; or (ii) vested bankruptcy property in relation to a bankrupt party; and (naa) the terms of any order or declaration made, or proposed to be made, under Part VIIIAB in relation to: (i) a party to the marriage; or

Family Law Act 1975 (cont. ) Section 75(2 naa) – continued (ii) a person who is a party to a de facto relationship with a party to the marriage; or (iii) the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or (iv) vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and (na) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and (o) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and (p) the terms of any financial agreement that is binding on the parties to the marriage; and (q) the terms of any Part VIIIAB financial agreement that is binding on a party to the marriage. Section 75(3) In exercising its jurisdiction under section 74, a court shall disregard any entitlement of the party whose maintenance is under consideration to an income tested pension, allowance or benefit.

Nowing and Nowing [2014] Fam. CA 888 In this case Kent J dealt with an interim application for spousal maintenance and in his judgment (para 41) summarised the relevant statutory provisions and applicable law (at para 79) in referring to the Judgment of Marlowe-Dawson & Dawson [2012] Fam. CA 702. The Applicant Wife sought an order of spousal maintenance of $3, 097 net of tax per week plus a gap “medical and dental expenses” [para 66 of Judgment] and his Honour upon consideration of the relevant statutory provisions and applicable law [66 -94] ordered spousal maintenance of $2, 178 net of tax together with the wife’s gap medical and dental expenses on the proviso that in any week such payments be reduced by the amount of the net income from employment derived by the wife, as to which the wife is to keep the husband advised. [7]

Family Law Act 1975 (cont. ) Section 77 Urgent Spousal Maintenance Cases Where, in proceedings with respect to the maintenance of a party to a marriage, it appears to the court that the party is in immediate need of financial assistance, but it is not practicable in the circumstances to determine immediately what order, if any, should be made, the court may order the payment, pending the disposal of the proceedings, of such periodic sum or other sums as the court considers reasonable.

Relevant Authorities in relation to s. 77 1. Malcom & Malcom (1997) FLC 90 -220 a requirement of ‘immediate need of financial assistance’ 2. Williamson & Williamson (1978) FLC 90 -505 referring to “urgent pressing need” and that the order be for a “period of relatively short duration” 3. Hirsch & Serle [2014] FCCA 2247 (22 September 2014) Judge Scarlett made order that the husband pay the wife by way of urgent spousal maintenance under the provisions of section 77, the sum of $1, 000 per week until 5 November 2014 with the first payment to be made on or before 24 September 2014. Scarlett J made the Orders on 22 September 2014 and discussed the relevant law in respect of an urgent spousal maintenance application in paragraphs [36 -38] of the Judgment, making reference inter alia to Malcom & Malcom and Williamson & Williamson. Scarlett J referred to an earlier judgment in Grimshaw-Grieves referring to the particular characteristics of urgent spousal maintenance applications (in that they are intended to deal with urgent situations). In drawing the distinction between interim spousal maintenance orders and urgent orders the Court is authorised to make an order on such evidence as may be available at the summary hearing and the application is heard at a time when all the evidence is not to hand… [Para 15]

Interim property Section 79 Section 80(1)(h) (1) The court, in exercising its powers under this Part, may do any or all of the following: …. (h) make a permanent order, an order pending the disposal of proceedings or an order for a fixed term or for a life or during joint lives or until further order; Section 117(2) If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2 A), (4 A) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.

Strahan & Strahan [2009] Fam. CAFC 166 (2009) 42 Fam LR 203 [57] 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

Strahan & Strahan [2009] Fam. CAFC 166 (2009) 42 Fam LR 203 [57] continued (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.

M & M (unreported) [2011] FMCAfam 742 Spousal Maintenance (1) Until further order the husband shall pay to the wife by way of spouse maintenance the sum of $768 per week to be paid into the applicant’s Commonwealth Bank Streamline account (Number …. 123) on Monday of each week, backdated to 27 June 2011. Interim Property (2) Until further order the husband shall cause to be paid to X School the tuition fees for the child J, born 1 January 2001, including all fees outstanding at the date of these orders.

M & M (unreported) [2011] FMCAfam 742 (cont. ) Litigation funding (3) Within 30 days of the date of these orders, the husband shall cause to be paid to the wife’s solicitors, the sum of $47, 000 plus an amount equal to any payment of legal fees by or on behalf of the husband between 22 June 2011 and the date of these orders. (4) From the date of these orders, in the event any amount is paid by the husband or on his behalf by way of legal fees in the proceedings, the husband shall, within seven days of the payment, cause an equal amount to be paid to the wife’s solicitors. (5) From the date of these orders, all legal fees paid by or on behalf of the husband to his solicitors in these proceedings shall be held in trust by those solicitors and not applied in payment of any account rendered until such time as an equal amount has been paid by or on behalf of the husband to the solicitors for the wife. (6) The husband shall forthwith authorize and direct his solicitors to provide to the solicitors for the wife a copy of any invoice or receipt issued by them in relation to his legal fees within seven days of the issue of such invoice or receipt.

Nowing and Nowing [2014] Fam. CA 888 In this case the wife sought litigation funding order comprising $100, 000 lump sum payment to fund her legal costs in what was described as ‘mediation/conciliation conference’ stage of the proceedings and then a further $200, 000 lump sum payment to fund litigation expenses to trial if matters did not resolve at the ‘mediation/conciliation conference’ stage. [Para 45] Kent J in paragraph [55] of his Reasons set out the basis upon which his Honour considered there was a proper case for an interim property settlement order to be made. 55. In terms of the “adjectival or procedural step” or the “first step” referred to by the plurality in Strahan & Strahan (Interim Property Orders) (2011) FLC 93 -466 (“Strahan’s Case”), I am satisfied that this is a proper case in all the circumstances for an interim property settlement order to be made. Those circumstances include the following: a. Self-evidently there is significant complexity about the financial affairs of the parties. There are numerous entities involved in the N Group and a complexity about the financial transactions and arrangements as between those entities. The difference between the parties of potential Division 7 A issues is but one example evidencing the complexity of the affairs involved; b. It is appropriate in order to do justice to the parties that they each have access to capable legal representation and accounting expertise in pursuing their competing claims in the substantive proceedings, if injustice is to be avoided; c. The parties have now been separated for almost four years and each apparently agitates issues, each in themselves of some complexity, concerning expenditures and use of funds in the postseparation period;

Nowing and Nowing [2014] Fam. CA 888 (cont. ) d. The husband has maintained, and continues to maintain, financial control over what may be described as the parties’ corporate or business interests and entities. There would be inherent unfairness to the wife if the husband were able to exert that control to fund his own expenses of this litigation whilst the wife has no commensurate ability. 56. Turning then to “the second step” referred to in Strahan’s Case as to whether it is just and equitable and appropriate to make an order, there is no issue in this case in circumstances where both parties seek orders for property adjustment after the end of a marriage of some 28 years, which produced four children, that the just and equitable requirement in s 79(2) is fulfilled. It is readily apparent by reference to what was said by the plurality in Stanford v Stanford [2012] HCA 52; (2012) 247 CLR 108 at [42] that the end of the marriage here also brought an end to common use of property and a range of assumptions underlying the parties’ marriage relationship whilst it subsisted. The Order ultimately made in respect of interim property settlement under the heading litigation funding. Litigation Funding 6. Each party do all acts and things reasonably required, including signing any necessary documents, so as to cause monthly redraws to be made (commencing October 2014 and each month thereafter) from the Westpac bank overdraft redraw facility secured by the X property, so that each party receives as and by way of partial property settlement $20, 000. 00 each month up to a total of $300, 000. 00 for each party provided that such redraws shall cease upon settlement of the sale of the X property or further order.