Author name: Oliver Trad

Deleon & Deleon (2023) FedCFamC2F 1366

Deleon & Deleon (2023) FedCFamC2F 1366

“The procedural unfairness and erroneous application of legal principle which can be identified in the Reasons for Judgment both stem from disagreement over the proper construction of the June 2018 Orders and the manner in which those Orders blocked the mother’s applications.”

In the case of Deleon & Deleon [2023] FedCFamC2F 1366, the court was asked to make a Hadkinson’s Order.

The mother asked for parenting proceedings to be stayed because the father had not fully performed a property settlement order.

The father and the Independent Children’s Lawyer wanted the parenting proceedings concluded.

The case involves a short discussion of the legal principles espoused in the decision of Hadkinson & Hadkinson.

The court said, “At its heart, the rule is said to provide that a party in contempt will not be heard”.

The court has, over time, in subsequent decisions, confirmed that the rule is, firstly, a discretionary one and, secondly, is confined to proceedings in the same cause in which the alleged contempt has been committed. A lack of nexus between the proceedings in the same cause was said by the court to be fatal to any application to apply the rule.

Authority for that consideration is Fahmi & Fahmi [1995] FamCA 106; Watson & Watson [2013] FamCAFC 25; and Dautry & Wemple [2018] FamCAFC 237.

The father is in breach of proceedings under Part VIII of the Act. The relief sought by the mother is in proceedings for parenting under Part VII of the Act. The court determined they
were separate causes of action.

The court considered there was a failure of the necessary nexus.

The court then considered the best interests principle and said:

“The best interests principle alone would be sufficient in my view to decline to make orders as sought by the mother. The court will not countenance any situation which might see a relisting of the father’s application on a liberty to apply basis. In my view, that would be tantamount to adjourning the proceedings sine die and does not meet with modern litigation procedures designed to bring litigation to an end.”

Amendments to the Family Law Act: The best interest principles and equal shared parental responsibility

Amendments to the Family Law Act: The best interest principles and equal shared parental responsibility

Recently, the Australian Parliament has passed two pieces of legislation amending the Family Law Act 1975 (Cth). 

This legislation was introduced with the aim of making the Australian family law system “simpler, safer and more accessible for separating families and their children”.

These amendments are to apply in relation to all proceedings after commencement, as well as proceedings already in the court-system but not subject to final order.   

Family Law Amendment Act 2023

The Family Law Amendment Act 2023 was passed on 19 October 2023 and received assent on 6 November 2023.

Most of the changes to the law will apply from 6 May 2024, unless an earlier date is otherwise fixed by Proclamation.

Its purpose is to ensure that the best interests of the children of separating families are prioritised in the family law system. 

Several changes will be made to the current Family Law Act 1975 (Cth).

This article briefly discusses the changes to be made in relation to the best interest factors and the repeal of the presumption of equal shared parental responsibility.

Other key amendments include:

  1. The requirement for the Independent Children’s Lawyer to meet directly with the children; 
  2. Greater powers to protect parties and children from the harmful effects of protracted and adversarial litigation;
  3. A definition of ‘member of the family’ that is inclusive of Aboriginal and Torres Strait Islander concepts of family and kinship; 
  4. Simplified compliance and enforcement provisions for child-related orders;
  5. Powers to enable government to regulate family report writers; 
  6. Ensuring that children’s voices are heard more easily in matters under the Hague Convention on the Civil Aspects of International Child Abduction.

Changes to the best interest principles

The current factors outlined under s 60CC, also referred to as the primary and additional considerations of the Court when determining parenting arrangements in the child’s best interest, were critiqued in the Australian Law Reform Commission Report Family Law for the Future: An Inquiry into the Family Law System: Final Report. 

The ALRC Report stated that amendments were necessary to simplify, clarify and improve how the best interests of the children are considered in parenting matters.

The amendments see the abolishment of the primary and additional considerations.

Instead, the amendments introduce six general considerations, and two further considerations for Aboriginal or Torres Strait Islander children.

Under the reforms, the Court must consider the following when determining what is in the children’s best interests:

  1. What arrangements would best promote the safety (including safety from family violence, abuse, neglect, or other harm) of
    1. The child; and 
    2. Each person who has parental responsibility for the child; 
  2. Any views expressed by the child
  3. The developmental, psychological and emotional needs of the child; 
  4. The capacity of each proposed carer to provide for the child’s developmental, psychological and emotional needs, having regard to the carer’s ability and willingness to seek support to assist them with caring; 
  5. The benefit to the child of being able to maintain a relationship with both of the child’s parents, and other people who are significant to the child, where it is safe to do so;
  6. Anything else that is relevant to the particular circumstances of the child. 

If the child is Aboriginal or Torres Strait Islander, the Court must look at two additional considerations. Namely, the Court must consider:

  1. The child’s right to enjoy the child’s Aboriginal or Torres Strait Islander culture, by having the opportunity to connect with, and maintain their connection with, their family, community, culture, country and language; 
  2. The likely impact any proposed parenting order under this Part will have on that right. 

Despite the changes, the Court retains their wide-ranging discretion to determine what parenting arrangements are in the child’s best interest.

Equal Shared Parental Responsibility

Currently, s 61DA of the Family Law Act 1975 (Cth) provides that when making a parenting order in relation to a child, the Court must apply a presumption that is in the child’s best interest for the parents to have equal shared parental responsibility for the child.

Section 65DAA, as it currently stands, requires the court to consider a child spending equal time, or substantial and significant time, with each parent when an order of equal shared parental responsibility is made.

This presumption, and consideration of equal or substantial and significant time, have been controversial since their inception. 

The Explanatory Memorandum to the Family Law Amendment Bill 2023 outlines that recent inquiries into the family law system have found that the presumption of equal shared parental responsibility is commonly misunderstood as creating a right to equal shared time with children. This has never been the case and has led to inappropriate arrangements for children and increased parental conflict. 

Given this, the presumption has been repealed. Under the reforms, there will be no presumption of equal shared parental responsibility. 

Parenting arrangements will be based solely on what is in the best interest of the child.

The Court may make orders providing for joint or sole decision making about major-long terms decisions. 

The Court may also find that it is in the children’s best interest that one parent has sole decision making in relation to a particular major-long term decision, but both parents have joint decision making in relation to the others.

The Court will still be required to consider the allocation of parental responsibility, and responsibility for decision-making about major long-term issues, when raised by the parties. 

Essentially, the wording of the Act has been clarified to avoid conflating the term ‘equal shared parental responsibility’ with equal time. 

Family Law Amendment (Information Sharing) Act 2023

The Family Law Amendment (Information Sharing) Act 2023 was passed on 19 October 2023 and received assent on 6 November 2023.

The purpose of the Family Law Amendment (Information Sharing) Bill 2023 is to ensure the courts have access to the full picture of family safety risk in order to prioritise the safety of children and families, particularly in circumstances where there is a risk of child abuse, neglect or family violence.

The main amendments to the Family Law Act introduced by this Act are the following:

  1. Establishment of two new information sharing orders to allow courts to quickly seek information from police, child protection and firearms agencies about family violence, child abuse and neglect that may place children at risk;
  2. Allowing a court to make these orders at any time during proceedings so information is accurate and up-to-date, and
  3. Ensuring sensitive information is only disclosed in a safe and appropriate manner.

This article is not intended to be a complete outline of the amendments to be made to the Family Law act 1975 (Cth). 

The team at Feeney Family Law have reviewed the amendments and understand how the law and the decision-making framework in parenting cases is expected to change. 

If you have any questions in relation to the changes, please do not hesitate to contact a member of our team.

Halloran & Keats (2023) FedCFamC1A 56

Halloran & Keats (2023) FedCFamC1A 56

The appeal in Halloran & Keats [2023] FedCFamC1A 56 is a judgement dealing with parenting. 

The appeal was allowed, and Orders made on the 15th of December 2022 were set aside, three of the Orders made on the 20th of June 2018 were aside and the matter was sent back to rehear an Amended Initiating Application filed in November 2022 and a Response to an Initiating Application filed on the 14th of September 2022. Costs Certificates were given. 

The mother had appealed eight Orders dismissing her application to revise existing Parenting Orders and compelling her to pay the father’s costs of successfully resisting her application. 

The parties had Consent Orders in place that were made in June 2018. 

Those original Orders:

“also purported to regulate the manner in which the parties could revise them, by expressly providing this:

That the mother may submit to an independent psychiatric assessment, involving the provision of a written report. In the event she does so she shall ensure the psychiatrist is provided with copies of the reports previously prepared by [other expert witnesses]; the father’s affidavit affirmed 1 June 2018, and the mother’s affidavit affirmed 29 May 2018, and the mother shall make available to the psychiatrist any further material requested by the psychiatrist.

The mother must serve a copy of any such psychiatric report on the father by email or by post.

Both parties have liberty to apply to vary all Orders except 1, 2, and 10 on one occasion upon the completion of Orders 20 and 21, and this will be the occasion referred to in Notation A.”

There was a notation that said:

“Notwithstanding the authority of Rice v Asplund, that once the mother has complied with Orders 20 to 21, that the parties be at liberty to seek a variation of all Orders except 1, 2, and 10 on one occasion without demonstrating there has been a significant change in circumstances since these Orders were made and neither party shall raise that as a reason the Court should not hear the application.”

This case was of interest because from time-to-time parties do wish to have Orders that can be revisited on their own terms without needing to run the gauntlet of the Rice v Asplund tests. 

It would appear that goal was that the mother was free to revive the proceedings “in an attempt to vary the original orders (save those governing the children’s residence and parental responsibility), provided only that she first obtains and serves an independent psychiatric assessment”.

In August 2022 the mother sought “the wholesale discharge and replacement of the existing orders.”

There was a hearing and “the primary judge only ordered the dismissal of the mother’s Initiating Application, but not her Amended Initiating Application, despite being well aware of the application in its amended form. Nevertheless, it is accepted by the parties that the appealed orders were intended to finalise the entire cause – not just to dismiss the mother’s primary application and leave her fall-back application to be determined on the merits at some later time.”

The mother’s amended application had brought her within the terms of the original plan that she wouldn’t need to establish a Rice v Asplund circumstance, but her original application had been one that would require it. 

The Appeal Court found:

“The procedural unfairness and erroneous application of legal principle which can be identified in the Reasons for Judgment both stem from disagreement over the proper construction of the June 2018 Orders and the manner in which those Orders blocked the mother’s applications.”

The Court said the orders thereby “purport to exclude the operation of the principles established by Rice v Asplund under certain conditions.”

The difficulty was that her original application took her outside the ambit of the means by which the parties had intended to exclude the operation of the principles of Rice v Asplund and it was that application that was dismissed but the mother had filed a more cautious application that did bring her within the ambit of the 2018 plan. 

The Appeal Court said: 

“contrarily, the primary judge appears to have imposed upon her the obligation to demonstrate materially changed circumstances in all respects.”

Although the primary judge who had dismissed her application had not questioned the validity of the June 2018 Orders 20-22, the Appeal Court said:

“An anterior question arises as to the validity of those orders for two reasons. First, the source of power to make the orders is quite unclear and, without any source of power, they are ultra vires and hence invalid. Secondly, the orders are irreconcilable with the guideline legal principles espoused in Rice v Asplund, which principles require the demonstration of materially changed circumstances whenever any application is made under s 65D(2) of the Act to vary existing parenting orders.”

Section 64B(2)(g) of the Act defines a Parenting Order. That includes one which prescribes the conditions which must be fulfilled before an application is made to change Parenting Orders.

That section is shaped by the provisions of s 64B(4A) of the Act. 

“Section 64B(4A) expressly states it does not limit the meaning of s 64B(2)(g) of the Act, but that does not mean the latter sub-section can be read so broadly as to empower the making of any condition imaginable to hinder a litigant’s right to re-contest parenting orders. There must be some proscription on the width of the sub-section, even if its limitations must be implied.”

His Honour says: 

“The exercise of statutory power to make an order either shutting out or restricting a litigant’s right to litigate is serious and must be exercised with due care.”

This decision then refers to Oberlin & Infeld [2021] FamCAFC 66.

The Appeal Court in this case says:

“The Full Court discussed the caution with which a judge should contemplate and craft any order which conditions a litigant’s right to bring fresh proceedings under Pt VII of the Act, so as not to stray beyond express or implied statutory power. Those observations are pertinent here.

The Court talks about limitations placed on litigants by Rice v Asplund and says: 

“Such obligations imposed by law cannot be relieved by an order, whether merely procedural or purportedly made in the guise of a substantive parenting order. Orders are made by courts to fulfil the law, not to undermine or circumvent it.”

The Appeal Court said:

“There could be little doubt then that the primary judge understood how the mother asserted she was entitled to re-open the proceedings pursuant to the text of Orders 20–22 and Notation A, and just as importantly, how her fall-back position was supposedly governed by those orders and that notation, even though her primary application was not.”

The Appeal Court said:

“Regardless of the way in which the primary judge chose to construe the June 2018 orders, they were still used to globally dismiss both aspects of the mother’s dual application without differentiation.” 

The Appeal Court said:

Orders 20–22 made in June 2018 are most probably not valid parenting orders or injunctions. Nor could they be properly regarded as valid procedural orders…Those orders should be set aside, for otherwise s 138 of the FCFCA Act requires that they be treated as efficacious. The fact those orders were neither appealed at the time nor the subject of this appeal does not preclude their discharge. The power to do so exists in ss 36(1)(b) and 36(5) of the FCFCA Act.”

The Appeal Court said that the mother’s dual application, which must be re-heard by another judge, will entail application of the Rice v Asplund guideline principles unconstrained by the artificial construct imposed by Orders 20–22 and Notation A.”

Gare & Farlow [2023] FedCFamC1A 98

Gare & Farlow [2023] FedCFamC1A 98

A single Judge appeal of Gare & Farlow [2023] FedCFamC1A 98 has some interesting points. 

It is a case dealing with an unsuccessful appeal and costs fixed for the Appellant to pay the Respondent’s costs. 

The wife appealed the trial decision that provided her with 66% of the parties’ net assets in which she retained her own superannuation. 

The wife had a business. She complained in the appeal that the Primary Judge erred by overvaluing the business and as a result, the amount she had to pay the husband was greater than she considered it should have been. 

The eventual trial took four days and judgment was reserved and delivered a year later. 

There had never been an order made compelling the parties to appoint a single expert to express an opinion about the value of the wife’s business. They each engaged adversarial experts and the trial became a combat between the two experts expressing different opinions.

The Trial Judge had accepted the adversarial expert opinion evidence adduced by the husband. 

The wife argued that the husband’s expert’s evidence was inadmissible pursuant to the application of Section 76 and 79 of the Evidence Act.  The Appeal Court noted that whilst s.76 renders opinion evidence inadmissible, s.79 allows for the exception in an area of specialised knowledge if based on relevant training study or experience.

At trial, both parties had taken objection to the admissibility of the other’s expert evidence, but all the expert evidence was admitted and thereafter evaluated by the Primary Judge in light of the cross-examination of each expert witness. 

The wife complained the husband’s expert did not satisfy the exception of s.79 and that his opinion evidence had been late. 

The appeal deals only with the alleged inadmissibility of the husband’s expert evidence by reference to the provisions of the Evidence Act

There had been a voir dire on the discrete issue of the husband’s expert’s qualification and experience in the field of business valuation. 

The Primary Judge had overruled the wife’s objection after the voir dire.   

The wife, really, in her appeal, reissues the challenge to the expertise she made in the trial. 

The court said:

“The evidence given by the husband’s expert in the voir dire verified his training and experience as the foundation for his specialised knowledge, thereby making his expert opinion evidence admissible under the Evidence Act as an exception to the opinion rule.”

The weight of the husband’s expert’s evidence was available to the wife to challenge, but not the admissibility.

This case, again, acknowledges the concept of the value to owner. 

Paragraph 36:

“The essential point of difference between the two experts in respect of the “value to owner” methodology was the treatment of the business proprietor’s annual wage paid from the business. The husband’s expert added back to the business revenue the entirety of the wage paid to the business proprietor, whereas the wife’s expert would only add back the proportion of the proprietor’s wage which exceeded a reasonable wage for the time expended by the proprietor working in the business.”

The wife’s expert had properly admitted in cross-examination “that there was a distinction to be drawn between owner-operated and managed businesses, with the former type, like the business under consideration, often valued as the husband’s expert had done”.

The wife’s expert would apply a multiplier of 2.5 to the added back portion of the business proprietor’s annual wage from the business which was not much different from the multiplier of 2.75 used by the husband’s expert. 

In the years before the trial, the wife had paid her sister $75,000 to acquire the other 50% shareholding in the corporation which owned the business. That would suggest the wife had believed it to be worth $150,000. 

A discussion of the value to owner approach to valuation provided as follows:

“It is intended to capture the reality of the situation by bringing to account any special or additional economic benefit which is conferred upon the business owner by his or her control of the shareholding. It is intended to include within the value any commercial, financial or other advantage which accrues to the owner which might not necessarily be available to any hypothetical third party purchaser.”

The court discussed fair market value as the risk is considered from the hypothetical willing but not anxious buyer. It reflects the value of each asset and liability on a going concern basis and the profitability, market position and attractiveness of the business.  The value to owner approach, on the other hand, considers risk from the perspective of the existing owner and assumes that the party wishing to hold onto the asset will do so in good faith and seek to maximise the value that could be obtained in a hypothetical sale.

The court considered the value to owner concept further. 

The Appeal Court determined that the value to owner approach to valuation was appropriate:

  1. There was no market for the wife’s interest in the business because there was no written commercial lease. As such, the business was not saleable as a going concern to a third-party purchaser and cannot be valued on that basis;
  1. There was evidence the business was successful and profitable;
  1. The unique benefit to the owner of the ongoing business is the security of its tenancy on favourable terms notwithstanding the absence of a written lease;
  1. The business was inferred to have significant value having regard to what the wife was prepared to pay out her partner in 2002;
  1. The evidence established that the wishes to retain the business; and
  1. A further significant benefit to the wife is the likelihood that her landlord father would act in her best interest should she ever decide to sell the business. 

This is interesting because it again refines the use of the value to owner concept with family lawyers being provided with further insight into the court’s approach. 

The ground of appeal which is of interest is that there was a notional addback to the assets of $106,681.87 which the wife had paid her father in August 2018 supposedly in repayment of loans extending back some 20 years about 6 months before the parties separated. The Primary Judge discussed the evidence and concluded the sum should be added back to the asset pool. 

Having determined to add back the wife’s savings, the Trial Judge failed to take the monies advanced by the wife’s father to the wife and the parties into account as a contribution by or on behalf of the wife and failed to consider the accrual of savings as a further contribution by the wife. 

This ground of appeal failed. The court said:

“The wife impermissibly seeks credit for contribution of the $106,682 in two ways: first, as monies advanced to her by her father; and secondly, as a “further” contribution by her accrual of the savings. But the wife’s contribution could only be properly taken into account in one way, given the finding that the money was not advanced by the wife’s father as a loan. Either the money was a gift received from the wife’s father, for which the wife obtains credit as a contribution, or alternatively, she accumulated the money from revenue generated by the business, in which case she would derive credit for the contribution of the earnings.

The wife admitted putting aside the sum of $106,682 from revenue generated by her business and the primary judge expressly acknowledged her contribution by bringing in the business, running it, and generating income. The primary judge said this in that regard:

“˜In addition to her financial contribution to the matrimonial home, at the commencement of the relationship the wife was the sole director and shareholder of [the business], a business which had been successfully operating for about 10 years under her ownership. This business must also be taken into account as part of the wife’s initial contribution to the parties’ assets.’.”

The wife contended in another ground of appeal that having adopted “a methodology with respect to the wife’s [business] which capitalised the income of the wife as notional property, the learned trial judge erred in then “˜double counting’ the wife’s income when considering s 75(2)(b) of the Family Law Act 1975″.

The Judge had in fact found an adjustment in favour of the wife at 1%. 

The court said:

“The findings reflected the reality that the wife controlled a valuable business, generating her annual income, which could be sold to a willing purchaser (with a lease). Whilst ever she retained the business, she had an income.”

This is an interesting case in that there is clearly a particular perspective in mind in relation to the argument about the addback once added back requiring the recognition of a contribution. 

Why students shouldn’t be so quick to write off family law

Why students shouldn’t be so quick to write off family law

Every law student who aspires to be a family lawyer has experienced the somewhat awkward, but not surprising, shocked gasp and grimace of another person after telling them that family law is the goal.

That person (usually the aspiring corporate or commercial lawyer) almost always responds with a statement along the lines of “but that must be so hard and emotional”.

Given that many students aspire to be the Harvey Spector’s or Elle Woods’ of the world, it is incredibly common that many of them write off family law without considering the numerous benefits this area has to offer to a young lawyer.

As there is no Hollywood fictionalised family lawyer for students to aspire to, this article outlines three big ticket items of family law for young lawyers, and why students shouldn’t be too quick to write it off.

  1. Time in court

A common goal of the aspiring corporate lawyer is their desire to become a great litigator. The aspiring commercial lawyers can be seen participating in the law school mooting competitions, or witness examination at every opportunity to advance their skills in this regard.

These students are ready for their time in court.

What many of them do not realise is that young family lawyers often have more exposure to the court system and appear far mor regularly in the Federal Circuit and Family Court than young corporate or commercial lawyers.

Between court ordered dispute resolution conferences and defended hearings, there are ample opportunities for young lawyers to appear before the court. Obviously, this greatly assists young lawyers with gaining an in-depth understanding of the court system and processes early on in their career.

Here at Feeney Family Law, our young lawyers frequently appear on behalf of our clients before the court for numerous reasons.

  1. Interacting with the clients

Unlike commercial or intellectual property law, family law allows you to build significant rapport with your clients.

Our clients are almost always “everyday” people who come from an array of backgrounds and cultures, which require legal assistance as a result of a breakdown in their relationship.

Young lawyers have far more involvement in speaking and meeting directly with the client on a regular basis, than they might in a tax or commercial setting.

It is extremely common for young lawyers, and paralegals to have relatively constant communication with the client.

As you can imagine, this naturally develops young lawyers’ interpersonal skills which greatly assists in all aspects of life.

It is expected, and very common, that the clients are likely to be extremely emotional and in a particularly fragile, anxiety-fraught part of their life. Our work, and the outcome that we receive from a matter can have a potentially drastic effect on our client’s lives. For this reason, it is vital that young family lawyers actively listen and correctly advise their client’s while understanding the emotional turmoil and difficulty they are facing.

Students often wish to make a positive change in the world. Once a matter is finalised, and the client is satisfied with the outcome, it is immensely rewarding to have had such a positive impact in their lives. Often it is not just the client, but also their children that benefit from our work. This is
something for students to consider when deciding whether family law is an option for them.

  1. Getting the win

Something that practitioners who work in family law recognise very early on in their careers, is that there is no real win or lose in family law.

In many cases, a partial win is a win. It is not uncommon for client’s to “˜give and take’ throughout the process, especially at the negotiation and mediation stages of a matter.

The “need to win” mentality common in other areas of law is significantly challenged in family law.

That is not to say that family lawyers don’t need to fight to advance their client’s case, but the goal should never be to bulldoze over the other side to advance our client’s case.

Our clients are people, who often share children with the other party, and it is vital that we work together with the other side to advance everyone’s best interest.

A drawcard to family law is that it is resolution focused, rather than “˜win’ focused. While the collaborative approach is not always possible, it does allow young lawyers to acquire and exhibit skills of cooperation and “˜big picture’ thinking.

Family law practitioners choose to specialise in family law for an array of reasons, the pros outlined above are just a handful of them.

Hopefully next time a student is faced with the very common utter shock and disbelief from others, they enlighten them with the ample positives of a career in family law. Who knows, family law may gain a practitioner or two.

Gare & Farlow (2023) FedCFamC2F 109

Gare & Farlow (2023) FedCFamC2F 109

In the recent case of Gare & Farlow [2023] FedCFamC2F 109, Judge Forbes considered valuation issues.

This case also deals with parenting, but this note will focus on the valuation points.

The value of the wife’s business was one of the contentious issues.

At paragraph 17 of the Judgment, the Court said:

“The expert evidence regarding the valuation of the wife’s business was contested, complex and detailed.”

At paragraph 21, the Court said:

“The wife owns and operates F Pty Ltd (“˜the Business’). She is employed in the Business as a worker and manager. She asserts that she currently earns approximately $62,000 per annum although her earnings have varied over time and her potential income potential remains an issue in dispute.”

At paragraph 27, the Court said:

“In 1998, some ten years before cohabitation, the wife purchased the Business with a friend and business partner, Ms O, in equal shares. Each of them contributed $25,000 towards the $50,000 purchase. The pair incorporated F Pty Ltd to run the Business. At the time of purchase, the business premises was subject to a third-party lease for which the rental was $3,330 per month.”

A year later, the freehold of that premises came up for sale and the wife’s father and Ms O’s father-in- law purchased the premises. Importantly, no written lease was entered into between the business and the landlords, and the wife and Ms O were permitted to carry on the business in the absence of a written lease. They, however, continued to pay commercial rent at the rate it had been paid to the previous landlord at $3,330 per month and they maintained the property and paid all the outgoings.

By 2002, the wife purchased Ms O’s interest in the business for $75,000 and became the sole director and shareholder.

Between 1998 and 2002, the wife paid a total of $100,000 for the business. It continued to operate out of premises owned by her father as it does to this day.

At paragraph 31, the Court said:

“The wife contends that during her adult life, commencing in her late teens or early twenties, she has been the recipient of various loans from her father… A repayment of the “loans” by the wife to her father, shortly prior to separation, is the subject of dispute
in these proceedings.”

In 2014, the wife’s father purchased Ms O’s father-in-law’s interest in the business premises. Her father, Mr K, has never offered her a written lease and asserts he has no intention of doing so. The wife continues to occupy the premises and pay rent at the rate of $3,330 per month and outgoings.
She is required to keep the premises in good repair by redoing the floors, painting and landscaping approximately every three (3) years.

The absence of a lease is a relevant fact in the case. The husband argues that there’s no lease in place because of the father/daughter relationship and argues that they have refrained from entering any formal arrangement in order to minimise the value of the business as an asset in these
proceedings.

The wife asserts that by August 2018, her father made demand for repayment of a substantial portion of the funds owed to him and she paid him the sum of $106,681 from her savings.

Formal separation occurred in February 2019 after this payment.

The initial application was for a division of 70% to her.

The wife sought the appointment of a forensic accountant to value her business.

At paragraph 54, the Court said:

“On 6 November 2019, Mr G, the forensic accountant instructed by the wife, valued the business at $57,129, based on a valuation method developed by him over two decades….Mr G’s valuation was based on an assessment of the earnings before interest and taxation (i.e. EBIT) that could reasonably be expected to flow to a hypothetical purchaser as profit.”

The husband’s valuer valued the business at $60,288 on a fair market value basis.

He said, however, that he would have adopted a value of $361,723 for the business if it had an industry standard lease in place.

The husband’s valuer prepared an amended valuation assessing it to be valued as a going concern at $400,000 on a value to owner basis.

The wife’s valuer, Mr G, stayed with his valuation of $56,948.

By February 2022, the husband’s valuer valued her business at $429,500 on a value to owner basis.

Just before the trial, Mr H reverted to the same fair market value methodology used in the preparation in his November 2019 valuation, and he then expressed the realisable value of the business absent a commercial lease to be $224,820 on a fair market value basis.

The discussion of the valuation of the wife’s business in the Judgment commences at paragraph 102.

The wife’s case is that the business provides her with a source of income but if she were to sell it, she would not recover anything other than the cash value of the business assets. She agreed she could receive a higher return for the business if her father entered a written commercial lease with her or a prospective purchaser, but she said she had no intention of selling and that her father would not offer a written lease in any event.

At paragraph 109, the Court said:

“The gravamen of the husband’s case is that the Court should conclude, on the evidence, that in the event that the wife wished to sell her interest in the business, her father (as landlord) would provide a purchaser a suitable commercial lease for the continuation of the business at that site in order to maximise the financial return to his daughter by allowing her to realise the goodwill of a successful 20+ year investment.”

There is a heading in the Judgment called “Lay evidence”.

The wife has been able to draw a regular income of up to $130,000 per annum, but her salary had decreased substantially from about the time of separation.

The wife did not accept the contention that her father would enter into a lease so she could get the best possible price at time of sale.

The father said that he owned a number of commercial properties and that if she chose to close the business, he would revert the current business premises into another business centre.

His evidence was he wouldn’t provide a lease to a purchaser to maximise her gain as he would rather repurpose the building.

The father has many properties where he has no lease with the tenants.

The Court said of the father:

“I felt that his answers in cross-examination, although confidently expressed, were tailored to a narrative that would minimise the value of the business in the asset pool. In giving his answers my impression was that Mr K was not prepared to seriously countenance the possibility that his daughter would ever contemplate selling the business as a going concern…my impression was that Mr K did not really think it would ever happen and for that reason was confident to maintain the position that he would repurpose the building if his daughter did not want to continue operating the business. However, if confronted with the reality that his daughter’s business might realise well over $400,000 (on Mr H’s evidence) if sold with a lease, I have considerable doubt, given his previous acts of generosity, that Mr K would deny his daughter the opportunity to realise the fruits of her 25 year investment.”

Mr G said that he had given an opinion of the intrinsic value of the business rather than any market value. He explained he had produced an objective valuation based on the notion of a rational hypothetical purchaser meeting with a rational hypothetical vendor both possessed of the same information and both intent on acting in a rational manner. He said that his valuation was based on what the rational purchaser would be prepared to pay and what the rational vendor would accept.

One of the relevant considerations in such a hypothetical exchange of critical information would
include the true profit of the business after remunerating the owner. The price to be paid by a rational purchaser would be derived by capitalising the true profit by the capitalisation rate. Based on that analysis, a business with no viable EBIT would be considered unsaleable as a growing concern.

Mr G said he did not need to look at comparative sales under his valuation methodology.

He agreed he had not undertaken any market research to establish how much potential purchasers are paying for business in Victoria. He conceded also that in Australia, small businesses often, or at least sometimes, change hands on the basis of the purchaser buying themselves a job where the value of the business is derived by applying a multiplier to the proprietor’s wages.

Mr G remained steadfastly of the view that the approach taken by Mr H was flawed.

Mr H explained that “that without a long-term lease or ownership of the property on which the business is operated, the business had no goodwill value to a potential purchaser. The goodwill of the business is dependent upon a potential purchaser having the ability to continue to operate the business out of the same location after purchase. For goodwill to be transferred to a potential purchaser, a potential purchaser would require a transfer of lease or ownership of the property from which the business operates. These views are consistent with those expressed by Mr G” for the wife.

“The “˜value to owner’ approach to valuation was selected by Mr H (valuer for the husband) because it takes into account the value of the business in the hands of Ms Gare as the current sole director and operator and allows consideration of any benefits afforded to her that would not be available to a potential purchaser. In his opinion an appropriate way to value the wife’s interest, in terms of its actual value to her as owner, was to capitalise future maintainable earnings (or PEBITDA) using a multiple based on market data for sales of similar businesses.”

He determined the capital value of future income flows from the business rather than the price at which it may change hands.

While he acknowledged the business has no realisable value to a potential third-party purchaser without a long-term lease, he said he had taken into account the benefit of ownership which encouraged retention of the business by the owner for an indefinite period.

He said, “The value to owner methodology is appropriate because the value of the business to Ms Gare is higher than the value of the business to a potential purchaser“.

At paragraph 175, the Court began its conclusions as to the value of the business.

The Court reviewed a series of cases for principles in relation to valuation methods and stated:

“It is open to the trial judge as a matter of discretion to determine which valuation method is most appropriate, although the Court will of course be guided by (but it is not bound to uncritically accept) expert evidence on the issue.”

The Judge accepted the evidence of the husband’s valuer and valued the business at $429,500 on a value to owner basis.

This is clearly in the context where the Judge found the wife’s father’s evidence about a lease to be unsatisfactory.

Simmons & Simmons (2023) FedFamC1A 44

Simmons & Simmons (2023) FedFamC1A 44

An erroneous procedural ruling which affects the final result of a trial may nonetheless be appellable: Gerlach v Clifton Bricks Pty Ltd (2002) 209 CLR 478 at 6.1

Simmons & Simmons [2023] FedFamC1A 44 is a recent decision of the Full Court considering the appealable error of not admitting into evidence a report of a child’s treating therapist in a case involving allegations of sexual abuse.

The parties had three daughters. The eldest was four at the time of separation in November 2015; the twins were one.

The mother claims that in around March 2016 the eldest daughter disclosed to her that she had been sexually abused by the father. She started observing sexualised behaviours.

A child protection investigation found the allegation of sexual abuse unsubstantiated.

The children commenced overnight time with the father in late 2016.

By 2018 the eldest daughter became increasingly aggressive. She began seeing a psychologist in mid-2018 and made further disclosures of sexual abuse.

The disclosures were not made during a second child protection investigation in late 2018. The allegations were again unsubstantiated.

The time arrangements resumed.

During early 2019 the mother presented the eldest child to “a number of medical professionals”, receiving “varying diagnoses”.

She was referred to a counselling service offered by the Department.

The eldest child began attending on counsellors from two services. In mid-2019 both services recommended the child’s time with the father cease.

By the time of the trial in early 2022, the children had not spent time with the father since August 2019.

Single expert clinical psychologist

A single expert clinical psychologist was appointed by consent. Initially, she recommended the children live with the mother and spend time with the father depending on the Court’s findings in relation to sexual abuse.

In late 2021, a video emerged of the eldest child and one of the twins “engaging in sexualised activity”. The single expert “ultimately reversed her earlier recommendations, opining that orders should be made in line with the father’s proposed orders” because the video evidenced the mother
“struggling to set boundaries for the children”.

Treating psychologist

The eldest child continued attending on a psychologist from the service referred by the Department.

That psychologist prepared a report on the request of the ICL. She opined that the eldest child had in fact been the subject of trauma rather than simply subjected to the message from her mother that she had suffered trauma.

At trial, the judge questioned whether a party intended to adduce that report at trial. Counsel for the mother had not read the report. The trial judge declined to admit it into evidence.

Later in the trial, counsel for the mother applied for a “˜short service subpoena’ to the psychologist. The judge refused.

The Full Court considered the procedural function of the trial judge in respect of rulings in relation to admissibility or use of evidence before the evidence has been adduced and particularly in parenting proceedings, and, referring to Annesley & Pembleton2 and CDJ v VAJ, 3 said:

48. … the Court is bound to have regard to the effect that evidence “may have in determining whether the best interests of the child” are served by the admission of that evidence.

In a parenting matter, to refuse to admit the report into evidence must have consideration of the circumstances of the case. The primary judge was asked to consider a change of residence in circumstances where:

  • the mother was the children’s primary carer and attachment figure;
  • the children had not seen their father for almost 3 years;
  • the eldest child genuinely believed that her father had sexually abused her;
  • the children would be separated from their infant half-brother.

The trial judge accepted that:

477. … The expert considered this escalation in their problematic behaviour as arising from the mother’s inability to set appropriate boundaries, the eldest child having received the message that her behaviours are a function of trauma, and the influence of the eldest child’s behaviour on the younger child with the result that she had begun to engage in similar behaviours which in turn have adverse psychological and social impacts. …

The Full Court considered the treating psychologist’s report “highly relevant to this finding because it provided a counter narrative to the conclusion reached by the primary judge.”

The Full Court said:

51. While such an order needed to be balanced against the potential long-term psychological consequences for the children, it was nonetheless acknowledged that the orders proposed by the father to achieve that outcome would be likely to cause “significant emotional distress” to the children in being separated from both their mother and their younger half-brother.

52. Before making such an order that in and of itself was likely to cause such significant emotional distress to the children with potential lifelong implications for them, the Court had an obligation to ensure that a decision of such magnitude for these children was based upon
the most comprehensive and relevant evidence that was reasonably available. For reasons which we explain, this included the report of [the treating psychologist].

The appeal was upheld on the basis that:

65. “Having regard to the contents of the report of Ms R to which we have referred, it is
clearly the case that the admission of her report could rationally have affected the
determination of several issues in the proceedings. …”

An example that An erroneous procedural ruling which affects the final result of a trial may nonetheless be appellable: Gerlach v Clifton Bricks Pty Ltd (2002) 209 CLR 478 at 6.

1 Simmons & Simmons [2023] FedFamC1A 44 at [34] (McClelland DCJ, Aldridge and Baumann JJ).
2 Annesley & Pembleton [2022] FedCFamC1A 8.
3 CDJ v VAJ [1998] HCA 76.

Five quick tips for working with your Financial Professional during your Family Law matter.

Five quick tips for working with your Financial Professional during your Family Law matter.

Most of our clients have, at least to some degree, an ongoing relationship with a financial professional that existed prior to separation.

For some people, that could be as limited as having a tax accountant do tax returns each year, while for others they have a close, day to day relationship with their accountants, financial planners and/or other professionals.

Whatever the relationship between you and your financial professionals, they can be an invaluable and integral part of a team assisting you through the legal and financial aspects of a separation.

The following five tips will help you get the most out of your financial professional when going through a separation.

  1. Make sure you know who they are acting for.

This sounds simple, but many times an accountant or financial planner who someone thinks of as “their” financial professional is actually engaged by their ex-partner and/or a company/trust/business operated by one or the other of them.

In those circumstances, their first obligation will generally be to the person/entity who has engaged them.

If that is the case, it is generally best to find a new professional, unless you can be completely comfortable that any information you provide them will be kept confidential and they are willing to take you on as a client in your own right.

  1. Understand what their expertise is (and what it is not).

Just like lawyers, financial professionals have their own individual skills, expertise, abilities and qualifications.

It may be that your financial professional is an expert at understanding complex tax issues, but cannot give financial planning advice about things like cashflow. In those circumstances there is little benefit in asking that person to prepare modelling based on a variety of different outcomes, but
they are likely to be very helpful in considering the tax implications of different ways of structuring the transfer of a business (or part thereof).

Talking to your financial professional about their expertise, then discussing that with your family lawyer, will ensure that everyone is on the same page when it comes to deciding who needs to do what.

  1. Engage them at the right time.

Different things are relevant at different stages of a family law matter and the effectiveness of the assistance from your financial professional will likewise change throughout your matter.

For example, at the very beginning of a family law property settlement matter, obtaining a lot of financial information quickly is very useful. The accountant for the family business is likely to have much of this information, at least for the business, and engaging or directing them to provide it to your lawyers and the other party can make what is sometimes a slow and involved process much quicker.

On the other hand, getting tax advice about potential business (re)structures before completing the disclosure process and obtaining valuations or getting an understanding of what the potential range of outcomes could be is potentially going to be money and/or time wasted.

Likewise, getting a financial planner to prepare modelling of what your financial future looks like after you have already negotiated a deal is unlikely to be of much assistance other than for the purposes of preparing a personal budget. If you had engaged them after you had received advice about potential outcomes but before negotiations, you could use that further information to guide you in negotiating an outcome that best suits your circumstances.

  1. Know when to bring in a third party expert (and why).

Whilst the financial professionals who are part of your day to day lives are experts in their own field, there are a few specific areas that we strongly recommend bringing in a third party expert for.

The most obvious of these is for the valuation of a business (or legal entity such as company or trust) for family law matters. There are a number of expert forensic accountants who specialize in this field and we would strongly recommend that one of them be engaged for this step.

These third parties have the benefit of being independent, so their conclusions generally carry more weight in negotiations and before the Court. It is generally a requirement that an agreed single expert valuer be appointed if parties cannot agree on the value of legal entities and/or a business.

  1. Be aware of limits to confidentiality.

It is important to know that there are limits to the confidentiality of the information you provide to your financial professionals.

Accountants, financial planners and other advisors can all potentially be subpoenaed to provide documents or give evidence in matters before the Court, so just be aware that information you provide them may be able to be obtained by your ex-partner.

There are also circumstances where you could be seen to have waived the legal professional privilege attaching to the instructions and advice given and received from your lawyers if you provide your financial professionals with advice you have received from your lawyers.

This is a complex area of law and can have serious consequences, so we always recommend getting specific advice from your lawyers before providing your financial professionals anything that your lawyer has provided you.

If you would like to talk to me or any of our team here at Feeney Family Law, please do not hesitate to contact.

Adding back these legal fees but not those

Adding back these legal fees but not those

Let’s consider this not uncommon scenario:

  • A husband and wife of 25 years separate.
  • They have 2 adult children.
  • The husband was the “˜primary income earner’ through his employment; the “˜financial spouse’.
  • The wife did not pursue her career in favour of raising the parties’ children.  She was the “˜primary homemaker and parent’; the “˜non-financial spouse’.
  • Together the parties have about $300,000 in cash, a real property or two, cars and so on.
  • The wife is recently employed but earns well below average wage.  
  • The husband continues to earn his good income and doesn’t pay any maintenance because the wife has sought to avoid paying the fees to run, and otherwise risk, the litigation.
  • By trial the wife has spent $150,000 on lawyers; the husband about $100,000.
  • The wife’s income is barely enough to support herself.  She has used savings to meet her legal fees.
  • By contrast, the husband’s income is sufficient both to support a standard of living well above that of the wife and to meet his legal fees.
  • At trial the husband argues that the wife’s legal fees should be added back, and his should not because they were met from “˜post-separation income’.

Save for a bit of discretion here and there, this scenario is probably straight forward.

Now, replace “through his employment” with “through his business“, and introduce the concept that the business is operated through a family trust of which the wife is a beneficiary, and, say, shareholder of the corporate trustee.  Less straight forward.  

Why?

The Full Court in Trevi & Trevi1 reminded us that those famous paragraphs in Chorn & Hopkins2 established guidelines.  There is a strong flavour of an analysis of the interests in the parties in the funds: income vs capital, but also the more complex situations.

In setting out the relevant principles in Trevi, Murphy J reiterated the distinction between pure income as a source and funds generated from assets or businesses to which the other party had made a significant contribution or has an actual legal entitlement.3

His Honour identified that the latter suggestion recognises the discretion inherent in the task and that adding back sums generated post-separation in the different manners suggested might create injustice as much as it might cure it.4

Trevi involved a first instance decision not to addback any notional property, including over $400,000 of the wife’s legal fees.  The husband was a solicitor and had the advantage of his legal fees being “absorbed in-house”.   He incurred about a third of the cost of the wife.  

Rather than treating the issue of the wife’s legal fees as an addback, Thornton J purported to consider the matter under section 75(2)(o).  But in conclusion her Honour said, in relation to section 75(2)(o), “[I] do not propose to make any “adjustment” to the pool for the funds which the wife has spent to pay some of her legal costs“.5

Murphy J spent considerable time explaining how the trial judge confused two established and alternative approaches:

  1. to addback legal fees; or 
  2. to take into account paid legal fees under section 75(2)(o) in the consideration of whether to adjust the contributions-based assessment, and if so, to what extent.  

But the confusion of two distinct exercises of discretion is not the source of the appealable error.  The error was summarised in paragraph 72:

In my view, her Honour’s confusion as to the approach to the wife’s paid legal fees led to her Honour taking into account irrelevant considerations in her s 75(2) assessment and, concomitantly, failing to take account of relevant considerations.

The impact of not adding back legal fees was to have the husband responsible for 50 per cent of the wife’s indemnity costs on the contributions assessment, and 60 per cent of the wife’s indemnity costs on the final outcome.   Thornton J did not include those considerations in her reasons.  The Full Court found that to be a failure to take into account a relevant consideration.

Further, the Full Court was of the view that, despite discussing the circumstances of paid legal fees under a heading referring to section 75(2)(o), insufficient reasons were given to explain how the trial judge took into account the expenditure in circumstances where it was not added back.  

In relation to the irrelevant consideration of the trial judge, it is useful to set out the relevant passage from her Honour’s reasons:

In both Calder & Calder and Chorn & Hopkins the Full Court affirmed that whether to take into account legal fees is a matter of discretion. This is an unusual circumstance where the wife was obliged to pay her legal fees of $437,628.10 whilst the husband, who is a solicitor, had the advantage of not being required to pay all of his legal fees other than approximately $142,587 which he has paid. Where there is no clear evidence that the husband will ever have to pay his legal fees, these are unusual facts which the justice of the case requires to be taken into account under s 75(2)(o) of the Act. In the unusual circumstances of this case and notwithstanding that the source of the funds paid by the wife for her legal fees was from joint property, I accept the submissions of counsel for the wife and do not propose to make any “adjustment” to the pool for the funds which the wife has spent to pay some of her legal costs. (emphasis added)

To the extent that the “unusual circumstances” were the reason not to give any weight to the paid legal fees, the Full Court said at [71]: 

The “sole matter” informing the decision to not addback emerges as the same sole matter in her Honour’s purported consideration of the wife’s paid legal fees as a relevant s 75(2) factor. Again, I am respectfully unable to see how that factor, notably expressed as a reason for not adding back the fees, is relevant to the s 75(2) analysis. … (emphasis added)

That must mean that the Full Court took the view that the parties’ financial and historical circumstances, underpinning the disparity in their paid legal fees, was an irrelevant consideration in the section 75(2) analysis.  

That being said, I do not purport to ignore the words “notably expressed as a reason for not adding back the fees”.  

Interestingly, in the decision on re-exercise, no weight was placed on those “unusual circumstances” at all.6  The wife’s legal fees were added back, the husband’s were not, and there was no discussion in the section 75(2) analysis of the “unusual circumstances”.

I struggle to understand how even in that circumstance it could be said to be irrelevant to whether any weight is placed on those circumstances in the section 75(2) analysis.  

I think that is because it is not an irrelevant consideration.

In Oamra & Williams the Full Court considered Trevi and said:7

  1. As the Full Court in Trevi intimates at [42], when considering whether or not to add back paid legal fees, “source of funds” should be subservient to the overall discretionary consideration of the interests of justice in the circumstances of a particular case.
  2. As discussed during submissions, an example of an injustice which might occur is if a party, who had developed significant earning capacity during a course of a long marriage, was able to use that earning capacity to pay legal fees when the other party, who did not have that earning capacity, was left with a liability to pay legal fees from their share of the property settlement order. Another example of possible injustice arises in this case where it was agreed that an unspecified amount of monies from a redundancy payment received by the husband were contained in bank accounts added to the table of assets and liabilities, yet the husband asserted that an unspecified part of the redundancy payment used to pay legal fees should not be added back.
  3. In this case the primary judge declined to exercise a discretion to add back paid legal fees because of an inadequacy in the evidence on both sides in relation to the source of funds used to pay them.

The analysis in Trevi has been endorsed by subsequent Full Courts.8

Yes, Trevi is a case that turned on its own facts.  However, the essence of those facts cannot be said to be so unusual: 

  • the husband on a considerable income met his legal fees from his income; 
  • the wife on very little income relied on capital;
  • the success of the husband’s career could only be said to be something to which the other party had made a significant contribution in her role as primary homemaker and parent.

The wife did not have the same opportunity to meet her legal fees from her income, nor was she a partner in a law firm which carried much of her costs of litigation.  The husband had that opportunity due in part to the efforts of the wife throughout their marriage.  

Thornton J identified those circumstances in the broader section 75(2) analysis:9

  1. By reason of the arrangements made during what is indisputably a long marriage, the wife did not enhance her income earning capacity in any meaningful way.  The wife attempted to contribute financially during the marriage in undertaking work for approximately 12 months in 2006 which was ultimately not viable because of the low remuneration, the needs of the children and the husband’s work commitments.

The recent decisions merely emphasise that the process of consideration of legal fees paid or owing is a discretionary exercise guided by authority.

A more cynical view could be that despite failing to give reasons for departing from guidelines is not an appealable error of itself, it is dangerous to do so.

What then for the family lawyer whose client is at risk of being punished for having no ability to meet their legal fees other than from capital?  

In my view, whatever your argument is, articulate it well.

Fear often accompanies the section 75(2) case due to uncertainty in achieving anything from it.  But the recent cases in which legal fees are not added back usually involve an inadequacy of evidence about the quantum and/or source of paying legal fees.  I have included some cases below for example.  Do not be the lawyer who does not produce sufficient evidence.  

Some cases involve a concession to addback fees paid by capital, with no argument to addback the fees paid by income, and then some hopeful attempt for a section 75(2) weighting.

In the circumstances I have addressed in this paper, I think that more emphasis could be placed on the types of “injustice” alluded to in Trevi and Oamra & Williams and seek that both parties’ fees be added back despite their sources because of the nature of the circumstances.  

Doing so does not offend section 117, and it arguably requires no weighting under section 75(2) as in essence the overwhelmingly offsetting factors are found in subsections 75(2)(b) and (k), the latter of which provides:

(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

An important observation from the cases is that the difference between the parties’ fees is often a major consideration in the section 75(2) analysis.

If a refusal to addback legal fees is argued, it should be accompanied with at least a recitation of principle that the impact of that decision must be considered.

Despite being described as a “de facto costs order” by Judge Morley,10 a refusal to addback legal fees apparently does not require consideration of subsection 177(2A).  It is often argued that consideration of parties and their costs is best left to an application after trial.  But the authorities on costs do not discuss the critical circumstances, such as subsection 75(2)(k), relevant to the parties’ expenditure on legal fees.  

But of all the reported decisions, no distinctive pattern emerges even in this decade.

Baumann J put it aptly in Duffy & Duffy:11

  1. I am satisfied that justice and equity between the parties is better achieved by adding back the sums the husband has elected to pay to his chosen lawyers rather than for the wife to not only be required to represent herself but to, effectively, make a contribution of the husband’s costs by his use of the funds that would otherwise have remained in the pool.
  2. Mr Moxon, to his credit, valiantly contended that the discretion should not be exercised relying on two authorities of the Full Court where the Full Court found the primary judge was not in error in those cases in not adding back for legal expenses (see Oamra & Williams (2021) FLC 94-035; Dulton & Dulton (2020) FLC 93-984). In my view, those authorities are of little assistance (and are distinguishable on their individual facts) and can be offset by numerous Full Court authorities where a primary judge did addback legal expenses and no error was found to exist. This is, essentially, the nature of a discretion.

Review of the cases is important for context to inform the possible outcomes, rather than reliance on purported authority.

Judge Glass applied the comments from Oamra & Williams in Emmeran & Emmeran:12

  1. Generally the payment of legal fees from post-separation income rather than from funds that existed at separation would not be added back unless they were generated from “assets or businesses to which the other party had made a significant contribution or has an actual legal entitlement.”[7] However, that focus on the source of funds should be subservient to the overall discretionary consideration of the interests of justice in the circumstances of the particular case.[8] It may be unjust where a party “who had developed significant earning capacity during a course of a long marriage, was able to use that earning capacity to pay legal fees when the other party, who did not have that earning capacity, was left with a liability to pay legal fees from their share of the property settlement order.”
  2. Here, Ms Emmeran developed her significant earning capacity that exceeds $100,000 per annum during the parties’ 18 year marriage. She had the benefit of income from Mr Emmeran during the period in which she was able to accumulate funds to pay her legal fees. Ms Emmeran did not establish that Mr Emmeran was able to pay his legal fees which are anticipated to be owing in the amount of approximately $41,000. He nevertheless made contributions to Ms Emmeran’s household which persisted for 18 months after he left the former matrimonial home from his more modest income of approximately $65,000 per annum.
  3. In those circumstances, I consider it would create an injustice for Ms Emmeran’s paid legal fees not to be added back. Given her ultimate concession that the totality of her savings ought be included in the assets to be divided between the parties had she not paid her legal fees from those savings, there would have been an increase in the funds available for distribution to Mr Emmeran by the same sum. To fail to add back Ms Emmeran’s paid legal fees would have the effect of requiring Mr Emmeran to contribute to her legal costs contrary to the position enshrined in subsection 117(1) of the Act.

In Jong & Jeng the Full Court said:13

  1. Fundamental to a consideration of whether expenditure is “added back” into the assets of the parties for division is the source of those moneys.  In circumstances such as in this case where a party has been earning an income since separation, it would be necessary to demonstrate that the source of the funds in question was connected to the marriage in some way.

In Kasiopoulos & Garapiperis14 the Full Court considered an appeal in which the trial judge erroneously recorded that the husband accepted that his about $70,000 in legal fees should be added back.  He in fact opposed that addback on the basis that he met his fees largely from post-separation income.  On the re-exercise, the Full Court said:

  1. The evidence before the trial Judge in relation to the funds available to the husband in the post-separation period, from capital and income to which we have earlier referred is in our view sufficient to justify adding back the husband’s paid legal fees in the sum of $77,292.15. This is particularly so given that the wife’s paid legal fees of $47,206.06 should be added back. The evidence reveals the wife to have received materially less income or capital than the husband did in the post-separation period.

In Bazzi-Cirino & Cirino,15 the wife ran a professional practice from which she met her legal fees and otherwise by a line of credit.  The husband had loans from his family to meet legal fees.  The wife argued that no legal fees should be added back and no loans relating to legal fees should be included in the balance sheet.  The husband sought that both paid legal fees and the loans should be included.  Rees J determined not to include in the balance sheet either paid or loans for legal fees.  Instead, her Honour took into account under section 75(2) the “difference in their liabilities for legal fees”.

The complexity of addbacks especially in the most settled category, legal fees, remains.  The guidelines are too blurred.

1Trevi & Trevi [2018] FamCAFC 173 Murphy J with whom Alstergren DCJ and Kent J agreed.
2Chorn & Hopkins [2004] FamCA 633 Finn, Kay & May JJ.
3At [31]; see also [41].
4At [42].
5Trevi & Trevi [2017] FamCA 321 at [424].
6Trevi & Trevi (Re-Exercise) [2019] FamCAFC 51 (Murphy J with whom Alstergren CJ and Kent J agreed), see for example [46].
7Oamra & Williams [2021] FamCAFC 117 (Strickland, Watts & Sutherland JJ).
8Carron & Laniga [2019] FamCAFC 115 at [56] (Aldridge, Kent & Austin JJ).
9Trevi & Trevi [2017] FamCA 321.
10Ungur & Inaba [2021] FedCFamC2F 65 at [175] and [177], for example.
11Duffy & Duffy [2022] FedCFamC1F 635.
12Emmeran & Emmeran [2022] FedCFamC2F 1507.
13Jong & Jeng [2014] FamCAFC 156 (Finn, May & Ainslie-Wallace JJ ). Cited with approval in Eufrosin & Eufrosin [2014] FamCAFC 191 at [41] and [42] (Thackray, Murphy & Aldridge JJ).
14Kasiopoulos & Garapiperis [2012] FamCAFC 85 (Coleman, Thackray & Stevenson JJ).
15Bazzi-Cirino & Cirino [2014] FamCA 920.

Badir & Badir (2022) FedCFamC2F 335

Badir & Badir (2022) FedCFamC2F 335

The case of Badir & Badir [2022] FedCFamC2F 335 is an appeal from Badir & Badir No. 2 [2021] FedCFamC2F 335.

This is an appeal from an interim spousal maintenance Order.

The appeal was unsuccessful, and the Appellant had to pay the Respondent’s costs in the sum of $17,416.65 within 28 days.

These parties cohabited from 1993 to 2013. They reconciled during June or July 2014 and separated on a final basis in July 2020.

After the initial separation, the parties entered into Consent Orders on 20 July 2014. The Consent Orders were not in dispute and contained a notation that the parties had reconciled.

The husband purchased a hospitality franchise in his sole name. He argued that between October 2018 and September 2021 the wife withdrew at least $72,893.12 from the business which he asserts were used for her personal expenses.

The wife says they were used to maintain the motor vehicle which she used and continues to use for the purpose of the business.

The wife filed an application on 30 October 2020.

The court said:

“That application is relevant only to the extent that it included an application for interim spousal maintenance.”

The court set the matter down for a callover to allocate a hearing date to hear the Respondent’s Application pursuant to section 79A of the Act.

In October 2021, the Primary Judge made an Order that upon the wife establishing her own residence, the husband would pay her periodic spouse maintenance on the interim basis in the sum of $600 per week with the first such payment to be due and payable on the Monday following written notice to the husband from the wife that she had established her own residence and taken occupation thereof, such payment to be made into an account with a financial institution in her name with the wife to notify the husband of the details therein in the same written notice.

The wife has appealed those Orders.

The court started with its approach and legal principles. It referred to Gilligan and Addison [2018] FamCAFC 211referring to the fact that an appeal has to be categorised otherwise it will be futile.

Appellate intervention may be required, the court said, where the Primary Judge:

“(a)    Acts upon a wrong principle; or

(b)     Allows extraneous or irrelevant matters to guide or affect the decision; or

(c)     Mistakes the facts; or

(d)     Fails to take into account some material consideration; or

(e)     Makes a decision that, upon the facts, is unreasonable or plainly unjust.”

An appeal can also succeed on the basis of an inadequacy of reasons. The court in this case referred to Rigby & Olsen [2021] FedCFamC1A 46.

The court at paragraph 20 said:

“The appropriate process to follow in considering an application for spousal maintenance is the four step process as set out in Saxena and Saxena [2006] FamCA 588(2006) FLC 93-268 per Coleman J:

(1)     To what extent can the applicant support him/herself?

(2)     What are the applicant’s reasonable needs?

(3)     What capacity does the respondent have to meet an order?

(4)     If steps 1-3 favour the applicant, what order is reasonable having regard to s 75(2)?“

The purpose of spousal maintenance was recognised to make provision for future needs and is future focused rather than the focus that a contributions case makes on the past.

Hall v Hall (2016) 257 CLR 490 at 496, was considered. Sections 72, 74 and 75(2) are considered.

Paragraph 25 of this Judgment says:

“In Hall at [3]-[8], the High court confirmed that an applicant seeking orders for spousal maintenance carries the evidentiary burden as set out in s 140 of the Evidence Act 1995 (Cth). However, the High court confirmed that, in the context of interim spousal proceedings, “[t]he evidence need not be so extensive and the findings not so precise” as in an application for a final order.”

And the evidence is of an “ordinary standard of proof in a civil proceeding”.

There are lots of words within the sections that have been interpreted over time.

McCrossen & McCrossen (2006) FLC 93-283 at [32] considered the word “adequately”.

Brown & Brown (2007) FLC 93-316 further considered that concept.

In 2009, Maroney & Maroney [2009] FamCAFC 45 at [56], the Full confirmed that “in determining the “capacity” of a party to satisfy an order for interim spousal maintenance, the court is not confined to considering only that party’s income, but rather: “Once a party…establishes an entitlement to interim spousal maintenance, and such entitlement is quantified in accordance with that spouse’s reasonable needs, an order may be made notwithstanding that the liable spouse could only satisfy the order out of capital or borrowings against capital assets.”

Paragraph 30 of this Judgment says:

“The appellant faces challenges in establishing errors in respect to factual findings made by a trial judge.”

There is then a discussion of the authority.

This appeal was unsuccessful. There is a good discussion of each of the appeal grounds.

As the appeal was without merit, the application for leave to appeal was dismissed.

There was then a useful discussion of section 117 of the Act.

The court focussed on section 117(2A)(g) referring to Manesh & Manesh No. 2 [2021] FamCAFC 47 at [63] noting that the point of requiring leave in respect to appealing interim decisions is to discourage endless interlocutory litigation and appeals that have the capacity to prolong Family Law litigation.

The court determined that there should be an order for costs in favour of the Respondent.

The court also commented that to fail to make an order for costs would deprive the Respondent of the benefit of the order for interim spouse maintenance.

The court accepted that the costs were logical, fair and reasonable, and relied on the authorities considered and the principles adumbrated in Bilson & Geer (Costs) [2017] FamCAFC 7 at [40] to [49].