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 15^th of December 2022 were set aside, three of the Orders made on the 20^th 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 14^th 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

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;

2. There was evidence the business was successful and profitable;

3. 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;

4. The business was inferred to have significant value having regard to what the wife was prepared to pay out her partner in 2002;

5. The evidence established that the wishes to retain the business; and

6. 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. 

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

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.

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].

Carswell & Tenson (2022) FedCFamC1F 467

The July 2022 decision by Smith J of Carswell & Tenson [2022] FedCFamC1F 467 discusses the concepts involved in the Practice Direction and also considers spouse maintenance and interim property settlement.

The case also provides a good set of Orders for the sale of a property by auction and the distribution of proceeds.

It is also interesting in that the court made a notation specifically about the husband’s income and the position of each party as to the husband’s 2021 income.

On 1 April 2022, a Senior Judicial Registrar made certain Orders. They were for spouse maintenance to the wife, partial property settlement to the wife and a dollar-for-dollar payment to the wife for any funds expended in the litigation by the husband from the date of the Orders. The Judicial Registrar also made an Order that in default of payment of the $250,000, a property was to be sold to make the payment.

The husband has filed an application for review and now acts for himself to avoid the impact of the dollar-for-dollar Order.

The husband applied for a stay of the Senior Judicial Registrar’s decision and the application for review was listed before Justice Smith.

Reviews of Registrars’ decisions are a significant part of the everyday process for practitioners given the greater likelihood of an appearance being in front of a Registrar than a Judge.

The wife sought to have the husband’s application for review struck out. She argued that the husband had not complied with the court’s filing directions for court books.

The wife, by this stage, had filed seven Affidavits. As the court said, “In the third and final Affidavit allowed, of the seven Affidavits the wife insisted she was entitled to rely upon, she stated that she sought orders” and these were set out.

The wife in fact sought the same Orders as she had before the Senior Judicial Registrar.

The husband was willing to consent to a partial property distribution to the wife of $150,000, although she had sought $250,000.

The wife was to receive $100,000 and $50,000 was to be deposited into an offset account from which the interest only payments and any fees and charges on that $150,000 were to be paid.

The husband was willing to continue to pay the wife’s weekly rent of $1,295.

The husband had filed an Affidavit of 25 pages and he was permitted to rely on that. He also was allowed to rely on an updating Affidavit of 2.5 pages of text.

The wife had been asked to specify the 25 pages and 10 documents in accordance with the rules upon which she proposed to rely. There was no engagement with the request and a repeated assertion.

The court then asked her to identify what factor meant the application should be exempted from the Rules limiting material to be relied upon. No basis for material in excess of the rules was identified, and she merely maintained her position.

Paragraph 30 of the Judgment is interesting. It provides:

“Litigants with a long purse and a litigious disposition, or who are willing to spend a disproportionate percentage of their net assets on litigation, or with a litigious disposition and the time and inclination to act as their own advocate, have contributed significantly to the notorious delays in the Family Law lists in Australia by taking up a disproportionate amount of the Court’s time while other citizens who abide by the Rules patiently await their turn.”

The court referred to section 63 and the case management provisions of Part 6 Division 4 of the FCFCOA Act as well as the provisions of the Rules such as Rule 5.08.

The court went on to say:

“The wife had a positive obligation pursuant to s 68 to act consistently with the “overarching purpose” pursuant to s 67 of the FCFCOA Act”.

That was extracted and section 67(2) was set out as follows:

“Section 67(2)…

(b)     the efficient use of the judicial and administrative resources available for the purposes of the Court;

(c)     the efficient disposal of the Court’s overall caseload;

(d)     the disposal of all proceedings in a timely manner;

(e)     the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.”

At paragraph 35:

“The process of allowing the wife to select segments of different affidavits has further complicated the hearing and determination of this matter. To avoid the risk of confusion identified Franklyn & Franklyn [2019] FamCAFC 256 at [22] it has been necessary to have the hearing tapes reviewed to confirm the material the wife was permitted to rely upon. This has used Court resources that could have been better applied to other tasks and has delayed the preparation and delivery of this Judgment.”

At paragraph 36:

“As a consequence this matter has taken up more judicial time than it should have.”

The parties own a house that is valued at $6,600,000. The husband has paid legal fees of $242,325 and the wife $325,000.

At paragraph 58, the court said:

“I am satisfied that the wife’s remaining inchoate interest in the matrimonial property, and particularly in Suburb C, would be more than sufficient to cover the claimed interim payment.”

The court then moved to consider the husband’s capacity to pay.

The court said, in paragraph 65:

“I note, for later consideration by a Trial Judge, that in the context of the wife’s many allegations of non-disclosure, and conduct said to be intended to defeat the Court’s capacity to determine the husband’s true financial position, that the husband was specifically put on notice that as a professional, and acting as his own advocate, that if the wife’s current assertions about his conduct of the litigation are established at the final hearing then he should anticipate a referral to the appropriate professional conduct bodies to consider whether he is a fit and proper person to hold a professional licence.”

He explained that his income would have reduced because he had taken two months’ paternal leave following the birth of his child in 2021 and he was working at a reduced capacity since then so as to share the child-caring obligations and endeavouring “not to take on any work that will or have the potential to fall on a day that I have custody of the children”.

It is interesting to the writer to reflect that the child support legislation considers a change in earning capacity in the context of increased carer responsibilities.

The husband said that he had expenses of around $331,000 per year before income tax. His Statement of Financial Circumstances left a net income of approximately $8,200 per week and the husband said that he spent $3,878 per week supporting the children.

The court considered the wife’s capacity for gainful employment.

The wife explained that she was presently home schooling their children and not working.  The wife particularly raised Y’s care needs.

Y has been diagnosed with Adjustment Disorder and a probable Autism Spectrum Disorder.

The wife has a business, and the husband asserts she has earning capacity.

The husband pointed to the wife’s tertiary qualifications. She has a Bachelor’s Degree and a Master’s Degree which she obtained after separation, a Bachelor’s Degree obtained after receiving her Master’s Degree, and a Certificate III which she obtained in the last year or so.

The essence of the husband’s case was “that capacity for appropriate gainful employment is based on available skills and not restricted by a desire to work in a field, particularly if that field does not have many apparent opportunities for employment or remuneration”.

The wife’s expenses were investigated.

The court then considered the wife’s ability to adequately support herself.

The court said at paragraph 135:

“The wife is only 44. She suffers from no physical or psychological incapacity. She has a wide range of transferrable skills based on her education, training and experience which would make her a viable candidate for appropriate gainful employment in the current strong labour market, and in her reasonably accessible area at the centre of Sydney.”

At paragraph 139 the court said:

“That earning capacity is, however, subject to the wife’s duties as the primary carer of Y.”

At paragraph 141, the court accepted that the wife’s obligations as primary carer meant that “regular employment was unrealistic”.

The court then considered the wife’s reasonable standard of living.

The court then considered the husband’s capacity to meet spouse maintenance obligations.

The court said at paragraph 154:

“I have the historical material as to his income earning capacity and rely upon that.”

The court then considered the interim property settlement and litigation funding.

The court awarded the wife $250,000 and found that “the wife has no other source of funds, that her likely entitlement on a proper assessment of contributions exceeds $250,000, and that there is little real risk that the payment of this interim sum will mean that a Trial Judge cannot do justice and equity between the parties on a final basis, see for example, Strahan & Strahan (Interim property orders) [2009] FamCAFC 166.“

The court determined to characterise the entire sum as an interim partial property settlement order.

Then the court made default Orders.

This is an interesting case and covers many complex issues.

The court’s comments about compliance are interesting and heed perhaps could be taken of them by practitioners as required.