Anderson and Walton - [2016] FamCA 588

FAMILY COURT OF AUSTRALIA

ANDERSON & WALTON

[2016] FamCA 588

FAMILY LAW – SECURITY FOR COSTS – Where the wife seeks an order for security for costs – Where security for costs is sought in relation to the husband’s application to set aside a binding financial and child support agreement – Where the husband resides overseas – Where the husband is in arrears under the terms of the agreement – Where an order for security for costs would not oppress or stifle the husband’s application – Where the Court declines to make an order for security for costs which would provide the wife with a full indemnity – Order made.

Family Law Act 1975 (Cth) ss 117
Family Law Rules 2004 (Cth) r 19.05

Abrum & Abrum [2013] FamCA 897
Ansilda & Hartford [2009] FamCAFC 128
Luadaka & Luadaka (1998) FLC 92-830
PS Chellaram & Co Ltd v China Ocean Shipping Company and Anor (1991) 102 ALR 321
Singer v Berghouse (1993) 114 ALR 521

APPLICANT:

Ms Anderson

RESPONDENT:

Mr Walton

FILE NUMBER:

SYC

479

2015

DATE DELIVERED:

20 July 2016

PLACE DELIVERED:

Sydney

PLACE HEARD:

Sydney

JUDGMENT OF:

McClelland J

HEARING DATE:

30 May 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Schonell SC

SOLICITOR FOR THE APPLICANT:

Broun Abrahams Burreket

COUNSEL FOR THE RESPONDENT:

Mr Kearney SC

SOLICITOR FOR THE RESPONDENT:

Clinch Neville Long Lawyers

Orders

Within twenty-eight (28) days of the date of these Orders, the husband do all such acts and things as may be necessary to pay the amount of $47 000 to the Collector of Public Monies in the Registry of the Family Court of Australia at Sydney, by way of security for costs.

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

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

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 479 of 2015

Ms Anderson

Applicant

And

Mr Walton

Respondent

REASONS FOR JUDGMENT

Introduction

This matter concerns an application by Ms Anderson (“the wife”) for security for costs. The security for costs is sought in respect to an Initiating Application filed by Mr Walton (“the husband”) on 30 January 2015, initially in the Federal Circuit Court of Australia. In his Initiating Application, the husband seeks orders to set aside a document titled “Binding Financial and Binding Child Support Agreement” (hereafter “the Agreement”) entered into by the parties.

Background

The husband was born in 1970 and is currently aged 46. The wife was born in 1970 and is currently aged 46.
The husband moved to Australia in December 1995 and became a citizen on 23 August 1997.
The parties were married in 1996. The parties separated on 2008 or 2009.
The parties have two children, B who is aged 17 and C who is aged 14.
On 4 November 2009 the parties entered into a document titled “Binding Financial Agreement and Binding Child Support Agreement”. The coversheet included a notation that the Binding Financial Agreement was made pursuant “to Part VIIIA of the Family Law Act 1975 (as amended)”.
Annexures “A” and “B” to the Agreement are certifications by the solicitor for the husband and the solicitor for the wife respectively, that they provided independent legal advice to the parties in accordance with section 90G(1)(b) of the Family Law Act 1975 (Cth) (“the FLA”)and section 80C(2)(c) of the Child Support (Assessment) Act 1989 (Cth) (“the CSA”). Those certifications are in identical terms and read:
I, [NAME] of [NAME OF FIRM], of [ADDRESS], Solicitor, hereby certify that in relation to a financial agreement in writing proposed to be entered into between [Mr Walton] and [Ms Anderson] (hereinafter called “the parties”) I advised [NAME OF PARTY] (hereinafter called “my client”) independently of the other party and before the time at which my client sign the agreement, as to the following matters:
1.The effect of the agreement on the rights of my client pursuant to the Family Law Act 1975 (“the Act”).
2.The advantages and disadvantages, at the time, of the making of the agreement.
Of the husband’s more significant financial obligations under the Agreement, he is required to pay:
a)Spousal maintenance of $2000 per month (Clause 3.9);
b)Periodic child support of $2500 per month (Clause 3.14);
c)All mortgage repayments in respect to the former matrimonial home (Clause 3.2);
d)Tuition fees of the children’s private schools (Clause 3.15 (a)); and
e)Ancillary costs associated with the children’s education and extracurricular activities (Clause 3.15).
At paragraph 12 of his affidavit filed 30 May 2016, the husband notes that the Agreement also requires him to:
a)Purchase a car for the wife;
b)Pay for insurance premiums, including health and life insurance, for an indefinite time; and
c)Make a lump sum payment for a swimming pool at the matrimonial home.
The wife alleges that the husband has failed to comply with his obligations pursuant to the Agreement in the following respects:
a)The husband ceased paying spousal maintenance in late 2013;
b)The husband has either not made child support payments or has only made partial payments;
c)The husband ceased making mortgage repayments at the end of 2012; and
d)Aside from payments made totalling the sum of $4100 in April 2014, the husband has not paid the children’s private school fees since 2011.
At paragraph 24 of his affidavit, the husband asserts that in 2010 he made payments of approximately $79 958 to the wife and, in 2011, he made payments of approximately $66 092. The husband further asserts that similar payments were made by him in 2012 and 2013.
On 30 January 2015 the husband commenced proceedings in the Federal Circuit Court of Australia seeking final orders to:
a)Set aside the Agreement;
b)If a) was successful, alternate orders for periodic and non-periodic child support and a discharge of child support arrears.
On 10 February 2015 a stay was granted in respect to the collection or enforcement of any child support arrears or for the collection of periodic child support payments exceeding $2500 per month. A further stay was granted in respect to the Child Support Registrar making a Departure Prohibition Order against the husband. The husband asserts at paragraph 46 of his affidavit that, pursuant to those Orders, he has since that time paid the sum of $2500 per month by way of periodic child support to the wife.
On 14 April 2015 orders were made requiring the parties to provide financial disclosure to each other, restraining the husband from dealing with funds in a Commonwealth Bank of Australia account and the husband was ordered to sign an authority to Lloyd’s Bank Limited to produce documents in relation to any accounts held by or controlled by the husband through his entities.
On 26 June 2015 the following orders were made:
1.         The Interim Application filed by the Husband on 30 January 2015 is     dismissed.
2.         Orders 2 and 3 made on 10 February 2015 providing for a stay on:
a.Collection or enforcement of any arrears of child support and collection of periodic payments exceeding $2,500.00 per month; and
b.The Child Support Registrar issuing a Departure Prohibition Orders
are both discharged.
3. The Applicant husband is to pay the costs of the Respondent wife in accordance with Schedule 1, Part 2 of the Rules fixed in the sum of $1,536.00.
4.         The Application for final orders is adjourned to 7 September 2015      for call-over at 10:00am.
On 5 August 2015 consent orders were entered into in respect to a Notice of Objection filed by the husband to a subpoena issued by the wife to the solicitors who had advised the husband in respect to the Agreement.
On 7 September 2015 the proceedings were transferred to the Family Court of Australia.
On 15 September 2015 the wife filed an Application in a Case seeking orders which enforced various clauses of the Agreement.
On 24 March 2016 the wife filed an Application in a Case seeking orders for security for costs.
The husband is a trained professional. He describes his current position as “Chief [trained professional] IFR Offshore and Standards for [Company E]” which the husband asserts is a Country D subsidiary of an international corporation, Company E Group. The husband states that his current role involves him working in the oil and gas fields in Country D. He says he has been working in that role since February 2014. The husband states that his current income is approximately $160 000 per annum.
The wife is employed in a professional capacity. The husband asserts that the wife’s income is approximately $120 000 per annum.
The wife deposed in her affidavit filed 24 March 2016, at paragraph 21, that the amount outstanding pursuant to the Agreement is in the total sum of $459 702. The husband deposed in his affidavit filed 30 May 2016, at paragraph 13, that the amount payable by him pursuant to the Agreement is approximately $289 403.

Evidence

The wife relied upon the following material:
a)Application in a Case filed 24 March 2016;
b)Financial Statement filed 27 March 2015
c)Affidavit of the wife sworn 23 March 2016 and filed 24 March 2016;
d)Bank records of the wife’s credit card (Exhibit 1); and
e)Bank records of the wife’s savings account (Exhibit 2).
The husband relied upon the following material:
a)Response to an Application in a Case filed 30 May 2016;
b)Amended Initiating Application filed 30 May 2016;
c)Financial Statement filed 30 May 2016;
d)Affidavit of the husband sworn 26 May 2015 and filed 29 May 2015; and
e)Affidavit of the husband sworn 28 May 2016 and filed 30 May 2016; and
f)Documents produced under subpoena by the solicitors who acted for the husband when he signed the Agreement (Exhibit 3).
The husband’s Amended Initiating Application was filed the day of the hearing and had not come to the attention of senior counsel for the wife prior to the hearing commencing. In those circumstances, a valid objection was raised in respect to the husband relying on the issues raised in the Amended Initiating Application to oppose the wife’s application for security for costs. However, I decided to consider the application on the basis that the husband’s Amended Initiating Application includes those matters that the husband will seek to argue at final hearing. Most relevantly, the Amended Initiating Application now includes the husband’s argument that the certifications by the parties’ respective solicitors were not in accordance with the FLA or the CSA.
The Amended Initiating Application seeks:
a)A declaration that there is no binding child support agreement or, alternatively, that it is set aside;
b)A declaration that there is no binding financial agreement or, alternatively, that it is set aside;
c)Orders that the husband pay child support to the wife for the children as assessed under the CSA;
d)Orders that all arrears of child support and spouse maintenance be characterised as paid and wholly discharged; and
e)Orders under section 79 of the FLA which would affect 60 per cent of the net asset pool to the husband and 40 per cent to the wife.

The Law

Section 117(1) of the FLA provides that, subject to certain exceptions, it will usually be the case that each party to proceedings under the FLA will bear their own costs. Section 117(2) makes it clear that the Court is empowered to make an order for security for costs as it considers just. While the discretion is expressed broadly, it must be exercised having regard to all of the circumstances of the case. In that respect, in Merribee Pastoral Industries Pty Ltd and Ors v Australia and New Zealand Banking Group Ltd (1998) 193 CLR 502 at 513[26], Kirby J said:
There is no absolute rule to control the exercise of the discretion to order security for costs where that jurisdiction derives from the inherent power of the Court. The jurisdiction, as one reposed in a court, is to be exercised judicially and for the purpose for which it exists. An analogous discretion has been described as "absolute". It would be wrong to attempt to hedge the jurisdiction about by rules or practices, even where derived from a number of instances. This is because what should be done in each case depends entirely on the circumstances of the case. The governing consideration is what is required by the justice of the matter.
(Footnotes omitted)
Section 117(2A) sets out the various considerations to which the Court must have regard in determining whether to make an order pursuant to section 117(2). Section 117(2A) provides that in considering what order (if any) should be made under subsection (2), the Court shall have regard to:
(a)the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g)such other matters as the court considers relevant.
Rule 19.05 of the Family Law Rules 2004 (Cth) (“the Rules”) sets out eleven considerations which the Court may have regard to in exercising its discretion to make an order for security for costs. Those matters are:
(a)the applicant's financial means;
(b)the prospects of success or merits of the application;
(c)the genuineness of the application;
(d)whether the applicant's lack of financial means was caused by the respondent's conduct;
(e)whether an order for security for costs would be oppressive or would stifle the case;
(f)whether the case involves a matter of public importance;
(g)whether a party has an order, in the same or another case (including a case in another court), against the other party for costs that remains unpaid;
(h)whether the applicant ordinarily resides outside Australia;
(i)the likely costs of the case;
(j)whether the applicant is a corporation;
(k)whether a party is receiving legal aid.
The statutory considerations prescribed under the FLA and the Rules have been developed in the context of relevant case law. In Luadaka & Luadaka (1998) FLC 92-830, the Full Court usefully summarised some of these considerations as follows:
61. In our opinion, when dealing with an application for security for costs the general rule provided for in s 117(1) applies, namely that subject to s 117(2) each party to proceedings shall bear his or her own costs. However, if the court is satisfied that there are circumstances that would justify an order then the court may, subject to s 117(2A), make such order for security for costs as the court considers just. It is not necessary to establish that there are special circumstances. However, it is necessary to establish that there are justifying circumstances. The decision to order security for costs is discretionary, both as to whether to order security, and as to the amount to be secured.
62.      The purpose of an order for security is to secure justice between the parties by ensuring that an unsuccessful party does not occasion injustice to the other. In considering whether or not to make an order, apart from those referred to in s 117(2A), matters which may be relevant include the following:
62.1 It may be relevant to take into account the means of an applicant to satisfy an order for costs if he or she is unsuccessful. Ordinarily the means of the applicant is not alone sufficient to justify an order for costs because of the rule that poverty should be no bar to justice. This is reinforced by s 117(1). However, the financial circumstances of the applicant do not prevent an order being made if there are other grounds which justify an order. Financial weakness may be relevant, for example, if the applicant is a company. In relation to the means of the respondent, who is the applicant for security, it was held by Goldstein J in Alexander & Alexander (supra) and Gee J in B & B (supra) that the question is whether or not the respondent is able to pay his or her costs. Section 117(2A)(a) requires consideration of the financial circumstances of both parties. However, we do not accept that it will only be in cases where the applicant for security does not have the means to meet his or her costs that an order would be made. In appropriate circumstances an order may be made even if the applicant for security has the means to pay his or her costs.
62.2 The prospects of success is a relevant matter to take into consideration: Parkinson & Co Ltd v Triplan Ltd (supra). However, ordinarily the court will not undertake a detailed assessment of the likelihood of the applicant’s success unless it can be demonstrated that there is a high probability of success or failure: Porzelack KG v Porzelack (UK) Ltd [1987] 1 WLR 420; Appleglen Pty Ltd v Mainzeal Corporation Pty Ltd (1988) 79 ALR 634; Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972. This is because of the lack of material at the time the application is dealt with. However, such an assessment may be possible in circumstances where, as in this case, affidavits have been filed in which the case sought to be made out is set out.
62.3 It is a relevant consideration whether the applicant’s claim is made bona fide, whether it is genuine and not trivial, vexatious or a sham: Parkinson & Co Ltd v Triplan Pty Ltd (supra); Lynnebry Pty Ltd v Farquhar Enterprises Pty Ltd (1977) 3 ACLR 133; J & M O’Brien Enterprises Pty Ltd v Shell Company of Australia Ltd (1983) 7 ACLR 790.
62.4 It may be relevant to consider whether or not an order for costs would be oppressive or stifle the litigation. In Mantaray Pty Ltd v Brookfield Breeding Co Pty Ltd (1990) 8 ACLC 304 Byrne J said at 306:
“A factor in deciding whether security should be required is that the order may well mean that the action cannot proceed. That prospect does not require refusal of the application but it is often a significant matter”.
See also Rosenfield Nominees Pty Ltd v Bain & Co (1988) 14 ACLR 467 and Sydmar Pty Ltd v Statewide Developments Pty Ltd (1987) 5 ACLC 480.
62.5    It may be relevant to consider whether or not the litigation may involve a matter of public importance: Equity Access Ltd v Westpac Banking Corporation (supra); Jodast Pty Ltd v A & J Blattner Pty Ltd (1991) 104 ALR 248. In Quick on Costs at [4.9440] it is said that this will militate against the making of an order.
62.6    It may be relevant to consider whether or not there has been delay in bringing the application. An application may be refused if there is delay in making the application and prejudice is caused to the respondent to the application: Buckley v Bennell Design & Constructions Pty Ltd (1974) 1 ACLR 301 and Loreva Pty Ltd v CEFA Associated Agencies Pty Ltd (1982) 7 ACLR 164.
62.7    Other relevant matters may include any difficulties of enforcing an order for costs and the amount of costs to be incurred.

In terms of the potential difficulties in enforcing an order for security, it is of note that in PS Chellaram & Co Ltd v China Ocean Shipping Company and Anor (1991) 102 ALR 321, McHugh J said at 323:
A circumstance which may have very great weight when only two or three circumstances have to be weighed may be of minor significance when many circumstances have to be weighed. However, for over 200 years, the fact that a party, bringing proceedings, is resident out of the jurisdiction and has no assets within the jurisdiction has been seen as a circumstance of great weight in determining whether an order for security for costs should be made. Indeed, for many years the practice has been to order such a party to provide security for costs unless that party can point to other circumstances which overcome the weight of the circumstance that that person is resident out of and has no assets within the jurisdiction.
(Emphasis added)
However, in Singer v Berghouse (1993) 114 ALR 521, Gaudron J said that the presumption that a litigant who is resident outside the jurisdiction will normally be required to show that such an order should not be made does not necessarily apply in those jurisdictions where costs do not follow the event. Whilst Gaudron J was considering the Family Provisions Act 1982 (NSW), her Honour’s reasoning is equally applicable to proceedings under the FLA. Lack of residence may nonetheless be a relevant factor that should be considered in the proper exercise of discretion. That is confirmed by rule 19.05(2)(h) of the Rules.

Issues

It is convenient to deal with the relevant issues in the following order:
i)As best can be determined in these interim proceedings, what are the prospects of success or merits of the husband’s Amended Initiating Application?
ii)What significance should be given to the fact that the husband ordinarily resides outside Australia?
iii)Does the husband have the financial means to satisfy an order for security for costs?
iv)In that context, would an order for security for costs be oppressive or stifle the husband’s case?
v)What consideration, if any, should be given to the fact that there is an existing costs order against the husband that remains unpaid?
vi)What are the likely costs of the case and what relevance does this have to any order that may be made for security for costs?
vii)What other considerations, if any, impact upon the proper exercise of discretion?

As best as can be determined in these interim proceedings, what are the prospects of success or merits of the husband’s Amended Initiating Application?

As at the date of the hearing, the husband had not filed his ‘Points of Claim’ setting out the basis upon which he is seeking orders to set aside the Agreement. However, at the hearing, the parties agreed to consent orders requiring that to be done within two calendar months. Nevertheless, it appears from the husband’s affidavit filed 30 January 2015 that the husband’s primary arguments are as follows:
a)He received inadequate legal advice before entering into the Agreement (paragraphs 31 to 36);
b)The Agreement is “patently unfair” (paragraph 22); and
c)The husband’s financial circumstances have changed since the Agreement was entered into (paragraphs 37 to 51).
In addition, as noted above, during the course of the hearing, senior counsel for the husband sought to rely on an Amended Application filed by the husband on the day of the hearing and indicated that the husband would also argue that the Agreement is invalid in that the certification as to the provision of legal advice provided by the parties’ respective solicitors were not in accordance with the provisions of the FLA or the CSA.
Senior counsel for the wife presented quite detailed argument that the husband’s application for a declaration that the Agreement is invalid, or for orders nonetheless setting the Agreement aside, is hopeless.
In that respect, the Case Outline document filed on behalf of the wife made particular reference to paragraph 29 of the husband’s affidavit filed 30 January 2015 where he deposed that:
I paid little attention to the words of [the Agreement] that we entered into. In particular I did not pay attention to or understand the total quantum of what I would be paying to the benefit of [the wife] and the children nor the detail of how often payments were to be made and for how long. I did not read the document carefully and paid little attention to the brief observations made by the local lawyer who I retained to sign off on the document for me.
It was submitted that neglect or lack of attention on the part of the husband is not a sound basis for setting aside the Agreement.
Senior counsel for the husband noted that, at final hearing, the husband’s application would be considered in the context of the following provisions of the FLA:
·Section 90G which specifies when financial agreements are binding;
·Section 90K which specifies the circumstances in which the Court may set aside a financial agreement; and
·Section 90KA which deals with the validity, enforceability and effect of financial agreements.
While the focus of the husband’s argument was on the FLA, it was submitted that comparable provisions are contained in the CSA. For the purpose of considering this application, I will similarly focus on the relevant provisions of the FLA.
It was submitted that, insofar as the wife seeks to rely upon the Agreement, she carries the onus of establishing that it is a “binding financial agreement” as contemplated by section 90G of the FLA.
Section 90G of the FLA relevantly provides:
90G When financial agreements are binding
(1)      Subject to subsection (1A), a financial agreement is binding      on the parties to the agreement if, and only if:
(a)      the agreement is signed by all parties; and
(b)      before signing the agreement, each spouse party was                 provided with independent legal advice from a legal           practitioner about the effect of the agreement on the                 rights of that party and about the advantages and  disadvantages, at the time that the advice was  provided, to    that party of         making the agreement;  and
(c)      either before or after signing the agreement, each  spouse           party was provided with a signed statement  by the          legal practitioner stating that the advice  referred to in          paragraph (b) was provided to that  party (whether or not the statement is annexed   to the agreement); and
(ca)     a copy of the statement referred to in paragraph (c)  that was provided to a spouse party is given to the  other   spouse party or to a          legal practitioner for the                other spouse party; and
(d)      the agreement has not been terminated and has not  been set aside by a court.
(1A)    A financial agreement is binding on the parties to the      agreement if:
(a)      the agreement is signed by all parties; and
(b)      one or more of paragraphs (1)(b), (c) and (ca) are not                satisfied in relation to the agreement; and
(c)      a court is satisfied that it would be unjust and  inequitable if the agreement were not binding on the              spouse           parties to the agreement (disregarding any  changes in circumstances from the time the  agreement was made); and
(d)      the Court makes an order under subsection (1B)  declaring that the agreement is binding on the parties  to the agreement; and
(e)      the agreement has not been terminated and has not  been set aside by a court.
(1B)    For the purposes of paragraph (1A)(d), a court may make an      order declaring that a financial agreement is binding on the parties         to the agreement, upon application (the enforcement application) by          a spouse party seeking to enforce the agreement.
(1C) To avoid doubt, section 90KA applies in relation to the enforcement application.
(2)      A court may make such orders for the enforcement of a financial agreement that is binding on the parties to the agreement as it thinks necessary.
It is to be noted that section 90G(1)(b) requires the parties to be provided with advice “on the rights of that party” rather than the rights of that party “pursuant to the Family Law Act 1975 (as amended)”. Section 80C(2)(c) of the CSA is to similar effect.
The distinction is of significance because Annexures “A” and “B” to the Agreement refer to advice being provided to the parties in respect to their rights “pursuant to the Family Law Act 1975 (as amended)” rather than, as required by section 90G(1)(b), of their rights generally. Also of significance, is the requirement set out in section 90G(1)(c) which provides that the signed statement to be provided by the parties’ legal practitioner must specify that advice was provided in accordance with section 90G(1)(b). That is, the statement must specify that the advice was provided in respect to the parties’ rights generally. An examination of Annexures “A” and “B” indicates that the statements provided by the parties’ legal advisors were not in accordance with the requirements of the Act. In that respect the FLA, as at the time the Agreement was entered into and currently, requires the certification to confirm that the party was provided with advice as to “the effect of the agreement on the rights of that party”.
In Abrum & Abrum [2013] FamCA 897, Aldridge J considered a matter where the certification provided by the legal practitioners to their respective clients in respect to a financial agreement was not in accordance with the FLA. His Honour said:
56. Section 90G(1)(b) requires advice to be given about “the effect of agreement on the rights of that party”. That is different to the “rights of the parties to apply for an order for property adjustment”. Similarly, the Act requires advice to be given about “the advantages and disadvantages” and not merely the “advantage, financially or otherwise” of entry into the agreement.
The certificates do not comply with the requirements of s 90G. As strict compliance with the requirements of the Act is essential this is, of itself, sufficient for the certificates to be non-compliant.
Accordingly, the husband has a strong argument that the Agreement is not in accordance with section 90G(1)(b) of the FLA.
That is, however, not the end of the matter because, as noted, section 90G(1A) provides that, in circumstances where the requirements of paragraphs (1)(b), (c) or (ca) are not satisfied and “a court is satisfied that it would be unjust and inequitable if the agreement were not binding on the spouse parties to the agreement”, the Court may make an order declaring the financial agreement to be binding upon the parties.
Section 90G(1A)(e) makes it clear that the ability of the Court to make such a declaration is subject to the agreement not having been terminated or set aside by the Court. This includes circumstances in which an agreement is set aside pursuant to section 90K of the FLA.
In summary, while it may well be the case that the husband will have difficulty in establishing a basis for setting aside the Agreement, the wife will face the challenge of satisfying the Court that “it would be unjust and inequitable if the agreement were not binding” on the parties as contemplated by section 90G(1A)(c).
Accordingly, I do not consider that the husband’s case to be hopeless or without merit.

What significance should be given to the fact that the husband ordinarily resides outside Australia?

It was common ground between the parties that the husband resides outside of Australia.
Senior counsel for the husband advised the Court that the husband had left his employment in Country F and now lives and works in Country D.
This is consistent with a letter from the husband’s solicitors to the wife’s solicitors that the nature of the husband’s work is such that he resides in “numerous overseas locations” (Annexure B to the husband’s affidavit).
The fact that the husband resides overseas would present its own difficulty for the wife, in the event that it became necessary for her to attempt to enforce a costs order against the husband. The fact that he resides in “numerous” overseas locations would make the task especially difficult.
Further, senior counsel for the wife noted that despite the fact that Part N of the husband’s Financial Statement filed on 30 May 2016 refers to house repairs in the sum of $150 per week, the husband has not disclosed the house that those repairs relate to.
While I am not, in these interim proceedings, in a position to determine whether there has been non-disclosure of a residence by the husband, the fact that the husband has not identified a usual place of residence is a factor that I consider to be relevant in determining that the wife would have great difficulty in enforcing a costs order against the husband.
In considering this matter, I have had regard to Singer v Berghouse (supra) and note that costs do not automatically follow the event in respect to family law proceedings. Nonetheless, costs orders are frequently made in respect to proceedings under the FLA in respect to both substantive and interim applications. The costs order made by Judge Scarlett on 26 June 2015 for the husband to pay the wife’s costs of those interim proceedings is an example.
Accordingly, subject to the further considerations that I will discuss, the fact that the husband resides overseas and has not provided to the wife, or the Court, a fixed address is a significant factor justifying the making of an order for security for costs.

Does the husband have the financial means to satisfy an order for security for costs, and, in that context, would an order for security for costs be oppressive or stifle the case?

It is convenient to deal with the third and fourth issues together.
Senior counsel for the wife argued that the husband has failed to provide full and frank financial disclosure and in those circumstances, the Court cannot be satisfied that the husband would have difficulty in meeting an order for security for costs. In that context, it was submitted:
a)The husband’s Financial Statement filed May 2016 records that the husband has funds in various bank accounts which are stated by the husband to total approximately $64 000.
b)The husband acknowledges that he inadvertently omitted, in an earlier Financial Statement, to include a reference to Commonwealth Gold Saver account which has a balance of $6243.
c)The Financial Statement also refers to three Royal Bank of Country F accounts, one of which has a balance of approximately AU$64 000. No documents have been provided to the wife in respect to those three accounts. It is of note that the husband’s salary is paid into one of those accounts.
d)The Court should have reservations about the husband’s Financial Statement in so far as he contends that he earns $3076 per week and that he is weekly expenditure is $40 less. In that context, in the husband’s affidavit, he asserts that he has been unable to accumulate any savings since signing the Agreement on 4 November 2009.
e)This assertion was a remarkable proposition, it was submitted, given that his Financial Statement would appear to disclose cash in various bank accounts in the sum of about $64 000 and that, according to paragraph 31 of his affidavit, he has paid his own legal fees in the sum of approximately $75 900.
f)The inference must arise that while the husband argues that he has been unable to accumulate savings, he has been able to accumulate a sum totalling at least $140 000. This suggests that the husband has access to funds that he refuses to tell this Court about.
In reply, senior counsel for the husband submitted that competing arguments regarding the thoroughness of the parties’ financial disclosure should not be determinative of the present application. He nonetheless argued that the wife is in no position to take issue with the husband’s non-disclosure in circumstances where the wife has not filed a further Financial Statement since that which she filed in March 2015.
The non-filing of an updated Financial Statement, it was submitted, is contrary to paragraph 13 of the wife’s affidavit in support of her application for security for costs wherein she refers to a Financial Statement “sworn and filed contemporaneously” with that affidavit.
It was argued that the updated bank records tendered by the wife at the hearing were not an appropriate substitute for the filing of an updated Financial Statement. In those circumstances, the Court was asked to draw an inference that an updated Financial Statement would not have assisted the wife.
The real issue in respect to the competing financial circumstances of the parties, it was argued, is that the husband will be shut out of obtaining the remedy he seeks if an order is made for security for costs.
In determining whether the husband would be so shut out of obtaining the remedy he seeks, I have had regard to the savings identified by the husband in his Financial Statement. While the second page of Annexure A to the husband’s Financial Statement refers to a total savings of $64 379, Annexure A rather suggests savings in the order of $94 918. Those savings are noted as being:
a)$1072 in a HSBC account;
b)$14 296 in a Commonwealth Bank of Australia account;
c)$6243 in a Commonwealth Bank of Australia account;
d)$8871 in a Lloyds Bank account;
e)$46 in a Royal Bank of Country F account; and
f)$64 390 in a Royal Bank of Country F account.
Accordingly, in addition to paying his own legal costs, the husband has been able to accumulate savings in the order of $94 918. It is reasonable to expect at least a portion of those funds remain available to him to satisfy an order for security for costs without having the consequence of shutting him out of the relief he seeks.
While requiring the husband to pay an amount equivalent to all or part of his savings would impact upon the funds available to meet his own legal costs, I note that the husband has been able to accumulate those savings despite also paying the sum of $75 900 in respect to his own legal fees.
I am therefore satisfied that an order for security for costs that can be satisfied from within the husband’s identified savings would not be oppressive or stifle the litigation.

What consideration, if any, should be given to the fact that there is an existing costs order against the husband that remains unpaid?

As noted, on 26 June 2015, Judge Scarlett made an order for the husband to pay the wife’s costs “in accordance with Schedule 1, Part 2 of the Rules fixed in the sum of $1,536.” Part 2 of Schedule 1 of the Federal Circuit Court Rules 2001 (Cth) relates to costs payable in respect of child support proceedings.
Rule 21.02(2)(d) of the Federal Circuit Court Rules permits the Federal Circuit Court, when making an order for costs, to “set a time for payment of the costs, which may be before the proceeding is concluded”.
No such time was specified in the costs order made by Judge Scarlett and, accordingly, I have not had regard to the fact that the husband has, as yet, failed to pay the wife’s costs as ordered on 26 June 2015.

What are the likely costs of the case and what relevance does this have to any order that may be made for security for costs?

In this matter the wife is seeking an order that the husband provide security for the wife’s costs in the sum of $240 000.
It appears from the wife’s affidavit that the amount of $240 000 has been calculated on the basis that the wife has incurred legal fees to date in the sum of $74 573.63 and estimates that her legal fees to conclude the proceedings will be approximately $167 747.14.
Accordingly, the security for costs sought by the wife appears to be an amount that would provide her with a full indemnity in respect to her costs for the proceedings.

In Ansilda & Hartford [2009] FamCAFC 128, the Full Court referred to a number of authorities to conclude that an order for security for costs would not usually be made to provide a full indemnity. In that respect the Full Court said:
70. If we were to make an order for security in the amount of say $23,000 as estimated above, then this would be an amount that provided a full indemnity. In Jones, Ellis and Mullane JJ said at 88,377-378:
29. We now turn to consider the question of the amount in which security should be given. In determining that question, we have regard to the amount of the costs likely to be incurred by the husband, although as Fullagar J. said in Brundza v Robbie & Co (No. 2) [1952] HCA 49; (1952) 88 CLR 171 at 175:-
“... in ordering security for costs , the Court does not set out to give a complete and certain indemnity to a respondent: see Aberdare & Plymouth Co. v. Hankey [(1888) 32 S. J. 644]. It is not, of course, to be assumed that the appellant will fail.”
71. In our view, although there is no binding rule that the amount of the security cannot amount to a full indemnity, ordinarily the order does not give the applicant for security a complete indemnity against costs: Bryan E Fencott& Associates Pty Ltd v Eretta Pty Ltd [1987] FCA 102; (1987) 16 FCR 497 at 515 per French J (as he then was).
Having regard to those authorities, I do not propose to make an order for security for costs to the full extent sought by the wife.

What other considerations, if any, impact upon the proper exercise of discretion?

It is to be noted that the application by the husband resulted from the wife’s endeavours to enforce obligations set out in the Agreement. As noted, the wife asserts that the arrears now totals $459 702. The husband concedes that if the Agreement is enforceable, the arrears are approximately $289 403.
The arrears include amounts that the wife claims in respect to spousal maintenance and periodic and non-periodic child support.
It would be a particularly harsh outcome for the wife to succeed in defeating the husband’s application to set aside the Agreement and establishing the husband’s liability to pay spousal maintenance and child support in accordance with the Agreement only to find that she is unable to enforce the Agreement because the husband resides overseas and at no fixed abode. It would be an even harsher outcome for the wife, in those circumstances, to be unable to recover legal fees in the event that she should obtain an order for costs in her favour.

Orders

In all the circumstances, it is appropriate for the husband to be required to provide security for costs. Based on the material before the Court, the order will require the husband to provide that security in the sum of $47 000. That amount represents approximately 50 per cent of the husband’s identified savings and would leave a surplus for him to obtain his own legal advice.
In the circumstances where this application suggests the parties are on track to incur combined legal fees in the order of the amount of arrears that are in dispute, it may well be that the parties may wish to consider options to achieve a fair and reasonable resolution of this matter.

I certify that the preceding eighty-one (81) paragraphs are a true copy of the reasons for judgment of the Honourable Justice McClelland delivered on 20 July 2016.

Associate:

Date: 20 July 2016