Ackermann & Hearn
[2023] FedCFamC1F 111
FEDERAL CIRCUIT AND
FAMILY COURT OF AUSTRALIA (DIVISION 1)Ackermann & Hearn [2023] FedCFamC1F 111
File number(s): BRC 14159 of 2020 Judgment of: HOGAN J Date of judgment: 24 May 2023 Catchwords: FAMILY LAW – INTERIM PROPERTY – Where the applicant wife seeks a variation of a dollar for dollar litigation funding order – Where an order is made that should the respondent husband not receive an invoice from his legal practitioner each calendar month for legal costs incurred in the preceding calendar month, he will pay to the applicant’s solicitor’s trust account the amount of unbilled Work in Progress from the previous calendar month. Legislation: Family Law Act 1975 (Cth) Division: First Instance Number of paragraphs: 24 Date of hearing: 24 February 2023 Place: Brisbane Counsel for the Applicant: Ms McLennan Solicitor for the Applicant: Thynne & Macartney Counsel for the Respondent: Mr Williams of King’s Counsel Solicitor for the Respondent: Small Myers Hughes ORDERS
BRC 14159 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS ACKERMANN BY HER LITIGATION GUARDIAN MS B ACKERMANN)(
Applicant
AND: MR HEARN
Respondent
order made by:
HOGAN J
DATE OF ORDER:
24 MAY 2023
IT IS ORDERED BY WAY OF INERIM ORDER THAT:
1.Order 3 of the Order made on 17 August 2021 is discharged and, in lieu thereof, an order is made in the following terms:
“Within two (2) business days after the payment by or on behalf of the Respondent of any money referred to in Order 2 above, the Respondent cause to be given to the Applicant’s solicitors a memorandum stating the amount or amounts so paid, PROVIDED that should the Respondent not have received an invoice from his legal practitioner by the first Tuesday of each calendar month for legal costs incurred in the preceding calendar month, he will direct his legal practitioner to send to the Applicant’s legal practitioner, within a further two (2) business days, a statement showing the amount of unbilled Work in Progress incurred in relation to these proceedings in the previous calendar month and the Respondent will, within a further two (2) business days, pay the amount shown on the statement showing the amount of unbilled Work in Progress to the Applicant’s solicitor’s Law Practice Trust Account.”
2.Provided he first obtains the written consent of the Applicant, the Respondent may borrow against or sell any asset for the sole purpose of securing the funds he is required, by Orders 2, 3 and 4 of the Order made on 17 August 2021, as amended by the order made today, to pay to the Applicant’s solicitor’s Law Practice Trust Account.
3.Any application by any party for an order that the other party pay that party’s costs of and incidental to the Amended Application in a Proceeding filed 22 November 2022 shall be heard during the trial listed to commence on 11 September 2023.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Ackermann & Hearn has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HOGAN J:
The applicant (who was born in 1962) asserts that she and the respondent (who was born in 1957) commenced a de facto relationship in 2013; they married in 2017, separated in early June 2020 and divorced in 2022.
The applicant commenced proceedings on 9 October 2020.
The August 2021 interim consent order
On 17 August 2021, an interim order was made by consent (“the August 2021 consent order”) in terms which included the following:
2. That as and from the date of this Order, any payment by or on behalf of the Respondent of any money in payment of accounts rendered by any legal practitioner, accountant where accounts relate to these proceedings, counsel, valuer (other than a court expert or single expert), or other expert witness engaged by the Respondent in respect of these proceedings, the Respondent pay or cause to be paid the same amount of money to the Applicant’s solicitor’s Law Practice Trust Account.
3. That within two (2) business day after the payment by or on behalf of the Respondent of any money referred to in order 2 above, the Respondent cause to be given to the Applicant’s solicitors a memorandum stating the amount or amounts so paid.
4. That all money paid to the Respondent’s solicitors by or on behalf of the Respondent referred to in order 2 above be held in trust by the Respondent’s solicitors and not be applied in payment of his legal costs and outlays until such time as the amount has been paid by or on behalf of the Respondent to the Applicant’s solicitors, and in the event that such payment to the Applicant’s solicitors not be made within 7 days after the payment by or on behalf of the Respondent of any money referred to in order 2, the Respondent (by this order and in accordance with regulation 50 of the Legal Profession Regulations 2017) irrevocably directs his solicitors to pay 50% of the amount or amounts so held by them in trust to the Applicant’s solicitor’s Law Practice Trust Account.
5. That the amounts paid by or at the direction of the Respondent to the Applicant’s solicitors pursuant to these orders be applied by them in the payment of the Applicant’s legal costs and outlays incurred and to be incurred by the Applicant in the conduct of these proceedings, including but not limited to the reasonable costs and outlays:
(a) rendered by the Applicant’s solicitors in respect of these proceeding;
(b) rendered by any counsel, accountant, valuer, or other expert engaged by the Applicant in respect of these proceedings.
6. That the determination as to whether the payments made by or on behalf of the Respondent to the Applicant’s solicitors are to be treated as:
(a) part of the Applicant’s entitlement to property settlement; or
(b) the provision of spousal maintenance for the Applicant; or
(c) payment by the Respondent of the Applicant’s costs of and incidental to these proceedings; or otherwise;
be adjourned to the final hearing of this matter.
What happened after the August 2021 consent order was made?
The evidence establishes that the respondent acted for himself between 20 August 2021 and 31 January 2022. It follows that no payment of money was made during this period of time by him or on his behalf in payment of accounts rendered by any legal practitioner. It also follows that no payment of money was made by him or on his behalf to the applicant’s solicitor to enable her to apply the same in payment of the applicant’s legal costs and outlays.
The respondent engaged his current solicitors on about 31 January 2022. Despite this engagement, there has been no money paid by or on behalf of the respondent to the applicant’s solicitor’s trust account for application by her in payment of the applicant’s legal costs and outlays.
This situation has arisen because the respondent’s current solicitors have not required him to deposit funds into their trust account for the legal work they have done for him in relation to these proceedings; similarly, they have not rendered any invoices to him for the legal work they have done for him in relation to these proceedings – instead, they have given him updates in which they have particularised the Work in Progress (“WIP”) that they have done on his behalf in these proceedings.
Despite accepting that he has received legal services, the respondent appeared to assert that he had not actually “incurred” any legal costs. As would be apparent from my discourse with Mr Williams KC who appeared on the respondent’s behalf, I struggle to accept this submission.
As I noted during the course of the hearing, the respondent was, like any citizen, free to determine whether he engaged solicitors to act on his behalf or not; further, lawyers acting for any party are free to determine the bases on which they will provide legal services to persons seeking to engage them – they are free to decide that they will, in effect, carry the costs a client incurs for whatever period of time they consider appropriate.
I consider that, given the relevant terms of the August 2021 consent order, the fact that there has not been any payment of money by or on behalf of the respondent in payment of accounts rendered, relevantly, by any legal practitioner to him means that, as the interim order currently stands, he is not required to make any payment of money, or cause the payment of any money, to the applicant’s solicitor’s trust account to enable the application of the same in payment of the applicant’s legal costs and outlays.
It is in such circumstances that the applicant seeks the orders that she does – namely, to amend the August 2021 consent order or, alternatively, for an order in terms which would require the respondent to pay to her solicitor’s trust account a specified amount (calculated on the basis of amounts previously paid by the respondent to his former solicitors and/or by reference to the quantum of the WIP notified by his current solicitors) on a monthly basis.
The respondent opposes the making of any further interim orders; it was submitted on his behalf that the Court would dismiss the applicant’s Amended Application in a Proceeding and make an order that she pay his costs of responding to the same on an indemnity basis.
Consideration
The outstanding application also falls to be considered in circumstances where the matter has now been set for final hearing before me in the week commencing 11 September 2023.
Whilst I accept the submission made by Mr Williams KC (who appeared for the respondent) that, in exercising the discretion to vary the existing interim order, the Court should properly take into account that the Amended Application in a Proceeding was filed a not insignificant time after the respondent engaged his current solicitors, it is also necessary to have regard to the contents of the affidavit of Ms Di Muzio (the applicant’s solicitor) which included the communications she had had with the respondent’s solicitors. I am not persuaded that the passage of time between the respondent’s engagement of his current solicitors and the filing of the Amended Application in a Proceeding is such as to persuade me to dismiss the application on this basis alone.
Mr Williams KC submitted that the Court would not be persuaded to make orders sought by the applicant because:
(a)the purpose of the dollar for dollar litigation funding order found in the August 2021 consent order was to level the playing field for the parties involved in the litigation and here it is level because, despite the absence of the payment of funds by the respondent to the applicant’s solicitors, the applicant remains legally represented by them; and
(b)whilst the evidence when the parties entered into the August 2021 consent order was that the applicant’s solicitors would not continue to act for her without the payment of accounts rendered by them from time to time:
(i)they have in fact continued to act for the applicant since the order was made, despite not receiving any funds in relation to the legal services they have rendered to her; and
(ii)there is no evidence before the Court now to suggest that the applicant’s solicitors will not continue to act for the applicant if they do not receive funding; and
(c)the applicant’s legal representatives have not identified or particularised the source of power relied on as a basis for the orders sought: that is, it has not been submitted by them that they urge the Court to exercise the power accorded to it by s 117 or s 79 of the Family Law Act 1975 (Cth) (“the Act”) to make orders by way of litigation funding; and
(d)there is no evidence before the Court to quantify the applicant’s legal costs and to make an order that the respondent pay the applicant’s solicitors an amount calculated on the basis of WIP he has incurred with his current solicitors, or by way of a calculation arrived at through the averaging of funds paid to those legal representatives previously engaged, would, in essence, amount to an order that he pay the applicant’s costs on an indemnity basis – a consequence which, given the statutory starting point prescribed by s 117(1) of the Act (namely, that parties to proceedings bear their own costs) would be a very significant departure from the usual practice and one for which there is no evidentiary support.
I accept the submission made by Counsel for the applicant to the effect that a consequence of the parties entering into the August 2021 consent order was that the respondent recognised at that time that the applicant had a need for the provision of funds to enable her to engage legal representatives and that her financial circumstances were such that she could not satisfy that need herself. I also accept that there is nothing in the evidence to suggest that, since the August 2021 consent order was made, the applicant’s financial circumstances have improved or that there has been any positive change to her financial position vis-à-vis that which existed when that order was made by consent.
Whilst I accept that the applicant’s solicitors continue to act for her and that there is no evidence before me at present to suggest that they will not continue to act if they are not provided with funds, authority makes it clear that evidence that a party’s legal representatives will not continue to act for that party (here, the applicant) is not a pre-requisite to the making of an order requiring another party (here, the respondent) to provide funds to defray that party’s costs.
I accept that there is no evidence before the Court about the costs actually incurred by the applicant to date, whether assessed on a party and party basis or on a solicitor and own client basis. However, given that the power accorded by s 117 of the Act is to make an order “as to costs” as opposed to an order “for” costs, I am not persuaded that the failure to adduce such evidence is fatal to the application. Further, given that the power accorded by s 117 of the Act is to make an order “as to costs”, I see no reason in principle why such an order, made on a dollar for dollar basis, must be restricted to the amount of money actually paid by a respondent to their own legal representatives. I consider that, if a court is satisfied that the circumstances justify it and that it is just in the particular circumstances of the case, there is no reason in principle why the amount a respondent is ordered to pay to an applicant to meet the applicant’s legal costs cannot be quantified on the basis of the dollar amount which has been calculated, by the respondent’s lawyers, to be the cost of the legal services they have provided to the respondent – irrespective of whether they have actually required the respondent to pay them for those services at that time.
In the present case, the evidence is that the nett value of the property of the parties (exclusive of the yet to be valued business operated by the respondent) is in the vicinity of $7.5 million; here, the respondent’s financial position has remained significantly superior to that of the applicant. Whilst it may well be – as the respondent asserts in his affidavit – that these parties find themselves in a situation where they are “asset rich and cash (flow) poor”, such a circumstance is not, of itself, a bar to conclusions that:
(a)the circumstances otherwise justify the making of an order as to costs in the applicant’s favour; and
(b)it is just that the terms of such order adopt, by way of quantifying the sum to be paid, the dollar value of WIP incurred by the respondent – being the measure of the legal services rendered to him by his solicitors.
If I am wrong in concluding that the power pursuant to s 117 of the Act is sufficient to support the conclusions outlined above, I am easily satisfied, when regard is had to the necessary pre-requisites for the exercise of power pursuant to s 79 of the Act, that it is just and equitable to make an order for litigation funding. The overarching consideration in the exercise of this power is the interests of justice – I am not persuaded that these are met by the applicant’s legal representatives in effect being required to decide whether to cease to provide her with their services or to continue to act for her on a basis that is inconsistent with the terms of the costs agreement that exist between them.
In addition, I consider that requiring that the respondent pay an amount to the applicant’s solicitors by way of litigation funding reduces the possibility that, in the future and prior to the final hearing, the applicant’s solicitors may choose to exercise the preconditions contained within their costs agreement and cease to act for her – an event that, in the circumstances of this case where the applicant appears with the assistance of a litigation guardian and the matter is listed for final hearing, would almost undoubtedly result in an increased possibility of injustice.
For the reasons outlined above, I consider the circumstances justify the making of an order departing from the starting point that the parties to litigation pay their own costs of the same and that it is just that an order for litigation funding be made; in case this assessment is wrong, I consider it just and equitable and proper in the circumstances of this case that an interim order for the provision of funds to be used by the applicant to pay her legal expenses is made.
However, given that the respondent did not have legal representation in the period from 20 August 2021 until about 31 January 2022, I am not persuaded that it is just or appropriate to make an order that requires him, at this time, to pay to the applicant the amount sought by reference to the legal costs she incurred during that period of time.
Rather, I consider the order which is appropriate and/or proper and/or just on an interim basis is an order which varies the August 2021 consent order and which enables the respondent, with the applicant’s prior written consent, to borrow against or sell any asset for the sole purpose of securing the funds he is required, by Orders 2, 3 and 4 of the August 2021 consent order (as varied by the order made today), to pay or cause to be paid to the applicant’s solicitor’s Law Practice Trust Account.
Given that the trial is listed before me, any application by either party for an order that the other pay their costs of and incidental to the Amended Application in a Proceeding filed 22 November 2022 can be heard then – at which time, the evidence will no doubt clearly establish the total nett value of the property of the parties and I will be best informed of the parties’ respective financial circumstances.
I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Hogan. Associate:
Dated: 24 May 2023
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