Artinos & Artinos
[2022] FedCFamC1F 221
•7 April 2022
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Artinos & Artinos [2022] FedCFamC1F 221
File number(s): MLC 4132 of 2020 Judgment of: STRUM J Date of judgment: 7 April 2022 Catchwords: FAMILY LAW – PROPERTY – INTERIM PROCEEDINGS – Where the wife sought orders in relation to disclosure, payment of mortgage, and litigation funding – Where the wife sought an order for costs pursuant to section 117 or an order for partial property settlement pursuant to s 79 – Where an order for partial property settlement was made pursuant to s 79. Legislation: Evidence Act 1995 (Cth) ss 75, 76
Family Law Act 1975 (Cth) ss 79, 80(1)(h), 117
Federal Circuit and Family Court of Australia Act 2021 s 67
Income Tax Assessment Act 1936 (Cth) Div 7A
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 rr 1.04, 1.31, 2.18, 6.01, 6.02, 6.03, 6.06, 6.09, 6.17, 6.18
Cases cited: Atkins & Hunt and Ors (2018) 57 Fam LR 128; [2018] FamCA 14
Bearup & Bearup (1993) FLC 92-412; [1993] FamCA 72
Bing & Bing (2007) FLC 93-318; [2007] FamCA 418
Black & Kellner (1992) FLC 92-287; [1992] FamCA 2
Breen & Breen (1990) 65 ALJR 195
Chorn v Hopkins (2004) FLC 93-204; [2004] FamCA 633
Esdale & Schenk (2012) 46 Fam LR 547; [2012] FamCA 111
Lao & Zeng [2021] FedCFamC1A 17
Molier & Van Wyk (1980) FLC 90-911; [1980] FamCA 85
Oriolo & Oriolo (1985) FLC 91-653; [1985] FamCA 54
Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578
Parker v Parker (1992) 16 Fam LR 458
Prantage & Prantage (2013) FLC 93-544; [2013] FamCAFC 105
Quayle v Perceval [2018] FamCA 664
Re JJT: Ex parte Victoria Legal Aid (1998) 195 CLR 184; [1998] HCA 44
Salvage & Fosse (2020) FLC 93-966; [2020] FamCAFC 144
Selena & Montez and Ors [2017] FamCA 583
Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466; [2011] FamCAFC 126
Verdon v Verdon [2020] FamCA 824
Weir & Weir (1993) FLC 92-338; [1992] FamCA 69
Zschokke & Zschokke (1996) FLC 92-693; [1996] FamCA 79
Division: Division 1 First Instance Number of paragraphs: 164 Date of last submission/s: 10 February 2022 Date of hearing: 3, 4 and 10 February 2022 Place: Melbourne Counsel for the Applicant: Ms Stoikovska SC with Mr Newland of Counsel Solicitor for the Applicant: Blackwood Family Lawyers Counsel for the Respondent: Mr North SC Solicitor for the Respondent: Belleli King and Associates ORDERS
MLC 4132 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS ARTINOS
Applicant
AND: MR ARTINOS
Respondent
ORDER MADE BY:
STRUM J
DATE OF ORDER:
7 APRIL 2022
THE COURT ORDERS THAT:
1.In addition to paragraph 6 of the Orders made on 3 December 2021, within 14 days, the husband provide to the wife copies of all documents within his possession or control relating to the issues raised in paragraphs 4 – 13 (inclusive) of the wife’s Application in a Proceeding filed 1 December 2021, which have not been provided to date in electronic form.
2.Within 14 days, the husband make, file and serve an affidavit containing the information and explanations sought in paragraphs 4 - 13 (inclusive) of the wife’s Application in a Proceeding filed 1 December 2021.
3.Upon compliance by the husband with his obligations pursuant to paragraphs 1 – 2 or the expiration of 14 days, whichever is the earlier, he file and serve an undertaking by him pursuant to rule 6.02(1) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021.
4.Within 14 days, the parties jointly instruct the single expert, Mr H, of T Accountants, to value:
(a)F Pty Ltd;
(b)the husband’s interest in F Pty Ltd;
(c)the C Group on the alternative bases that it includes:
(i)only the husband’s interest in F Pty Ltd; and
(ii)the whole of F Pty Ltd -
and the husband pay the costs of valuing F Pty Ltd in the first instance, with the ultimate liability therefor to be determined at trial.
5.By way of partial property settlement, within 14 days, the husband pay or cause to be paid to the wife the sum of $350,000.
6.To facilitate compliance with paragraph 3 of the orders dated 15 May 2020, the husband pay:
(a)The monthly mortgage payments for the property situated at J Street, Suburb Q (“former matrimonial home”) as directed by Westpac Bank from time to time, currently estimated by Westpac Bank to be $6,020 per month.
(b)Within 72 hours of the date of these orders, the wife provide to the husband copies of invoices for the outstanding rates and insurance with respect to the former matrimonial home and with respect to the property situate at K Street, Suburb L, and within 72 hours of the wife providing such invoices to the husband, the husband pay to the wife in bank account number ending …14, the total value of the outstanding invoices (estimated at approximately $17,637) and forthwith, the wife attend to payment of the invoices and will provide evidence of payment.
7.All extant interim applications of the husband and the wife, including for the orders sought in their respective minutes of proposed orders at the hearing on 3, 4 and 10 February 2022 be otherwise dismissed.
8.All questions of costs of and in relation to the hearing on 3, 4 and 10 February 2022 be reserved to trial.
9.There be certification for Counsel, including Senior Counsel.
10.The matter be listed for mention before the Honourable Justice Strum on 17 May at 9:30am.
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 Artinos & Artinos has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
STRUM J:
This matter comes before the Court for determination of interim financial issues as a consequence of the applicant wife filing an Application in a Proceeding on 1 December 2021, amended on 7 December 2021, and further amended on 21 January 2022 and the respondent husband filing a Response to an Application in a Proceeding on 31 January 2022. Further, each of the parties filed a minute of orders sought by them and, on the first day of the hearing, the wife sought and was granted leave to expand the basis of the litigation funding order she sought to include, in the alternative to a costs order under section 117 of the Family Law Act 1975 (Cth) (“the Act”), a partial property settlement order under section 79.
The wife seeks orders in relation to disclosure, single expert valuation, litigation funding and payment of mortgage and outgoings by way of spousal maintenance. The husband seeks orders in relation to the discharge of orders for payment of mortgage and outgoings and the sale of the former matrimonial home at J Street, Suburb Q (“former matrimonial home”). Each party filed an outline of submissions addressing those issues.
The wife relied upon the following evidence:
(a)her affidavit filed 2 December 2021;
(b)her affidavit filed 21 January 2022;
(c)her Financial Statement filed 12 January 2022;
(d)affidavit of her solicitor, Ms M, filed 12 January 2022; and
(e)affidavit of Mr N, single accounting expert, filed 1 December 2021 .
The husband relied upon the following evidence:
(a)his affidavit filed 31 January 2022;
(b)his Financial Statement filed 31 January 2022.
The matter was initially listed before me for a one-day interim defended hearing on 3 February 2022. However, due to the length of the submissions, it was adjourned part-heard to 4 February 2022, and again to 10 February 2022.
BACKGROUND
The applicant wife, Ms Artinos, was born in 1978 and is presently 43 years of age. The respondent husband, Mr Artinos, was born in 1977 and is presently 45 years of age.
The parties commenced cohabitation in or about 2003, married later that year, and separated on a final basis some 16 years later, in 2019. More particularly, they separated under the one roof in June 2019 and the husband vacated the former matrimonial home in September of that year.
There are two children of the marriage, X born in 2008 and aged 14, and Y born in 2011 and aged 10 (“the children”). Pursuant to an agreement between the parties, the children live with both parents equally, on a week about basis.
At the commencement of cohabitation, the husband was employed by P Company. In 2008, the parties established G Company, a business conducted through a number of companies and trusts, collectively known as the C Group. The primary entity within the group has been C Pty Ltd. It is broadly common ground that the husband was primarily responsible for the business and that the wife was primary responsible for their children and home, although each deposes to some degree of involvement in the other party’s primary sphere of responsibility.
The parties constructed a property in Suburb L (“the L Property”) in 2008 and they purchased the former matrimonial home in Suburb Q in 2017, in which the wife and children (when living with her) continue to live.
In September 2020, more than a year after the parties separated, F Pty Ltd (“F Company”) was incorporated. The husband is the sole director thereof and the shareholders are B Pty Ltd (a company associated with Mr O, a senior manager within the C Group) as to 45 per cent, D Pty Ltd as to 20 or 25 per cent, and the husband as to 30 or 35 per cent. He has advised one thing but the ASIC records suggest otherwise. The reason for the uncertainty is unclear and cannot be resolved at this interlocutory stage; however, nothing turns on it for present purposes. On either case, he is prima facie a minority shareholder but the sole director.
The wife asserts that, by the incorporation of F Company, the husband breached an undertaking given by him to the court on 15 May 2020 that he would “not establish or cause to be established any corporation trust or entity with the purpose of having the same conduct the business of any entity now in ‘the [C Group]’ without first giving [her], by her solicitors, 21 days' notice in writing of an intention so to do.” Further, she asserts (and the husband does not appear to dispute) that she was only given notice of the incorporation of F Company on 23 September 2021 by the husband’s solicitor who advised that this was done “to tender for new work as the ongoing viability of the existing entity (namely [C Pty Ltd]) was became [sic] untenable”.
On 8 October 2021, less than a month after with wife was very belatedly given notice of the incorporation of F Company, the husband’s solicitor advised her solicitor that C Pty Ltd was not financially viable and would be placed into voluntary administration upon the completion of the project in which it was then engaged. That has occurred and C Pty Ltd has been joined as a second respondent, albeit that no final relief is presently sought against or in relation to it. However, the wife draws attention to the fact that in the single expert’s report dated 28 May 2021, he opined that C Pty Ltd had “substantial cash assets and other investments which support the group’s solvency” and that “the recent decision not to tender for further projects … [did] not reflect the long term outlook for the company”.
It appears that F Company has entered into a least two contracts, with a combined value of $32.6 million. In respect of one of those contracts, C Pty Ltd, now in administration, had tendered in October 2020.
By way of background, in her affidavit filed 2 December 2021, the wife deposes at [9]:
The [C Group] has been extremely successful to date. […] The success of the company allowed us the freedom to have a very comfortable lifestyle. We enjoyed several holidays each year, both overseas and in Australia. We built a [property] in [Suburb L] in 2008. In 2017 we purchased the marital home in [J Street, Suburb Q] for $4,200,000. We have both owned luxury motor vehicles for many years. [Mr Artinos] enjoys his beloved hobby of fishing from the luxury of his own boat. Our daughters have attended a private school since primary school.
Although these matters are not directly germane to the matters in issue before me, nor can they presently be resolved, they exemplify some of the presently “known unknowns” which await trial in this case.
HISTORY OF PROCEEDINGS
These proceedings were commenced by Initiating Application filed by the wife on 27 April 2020 to which the husband filed a Response on 13 May 2020.
On 15 May 2020, a Registrar made orders, by consent, which provided, inter alia, for the husband to pay or cause to be paid the interest-only component of the mortgage instalments due with respect to the mortgage encumbering the former matrimonial home (“the mortgage”) and the rates and land taxes due and house and contents insurance with respect to the former matrimonial home and the L Property. The orders further provided for the husband to make disclosure, including in relation to the C Group, and for the appointment of a joint single expert forensic accountant to value the C Group.
On 30 October 2020, the Honourable Justice Johns made orders by consent which further provided, inter alia, for disclosure by the husband and the valuation of the C Group.
On 17 December 2020, the Honourable Justice McEvoy made further orders in relation to the valuation of the C Group and disclosure by the husband. His Honour also made orders, inter alia, for partial property settlements of $250,000 to the wife and $140,781 to the husband; the conversion of the monthly mortgage instalments in respect of the former matrimonial home to an “interest-only” obligation; and the payment by him of mortgage arrears to that date, to be characterised as a partial property settlement in favour of the wife. However, the latter order did not vary the husband’s spousal maintenance obligations under paragraph 3.1 of the orders made on 15 May 2020.
Nearly a year later, on 1 December 2021, the wife filed her Application in a Proceeding, the balance of which is the subject of this judgment. On the first substantive return of that application, the Honourable Justice McEvoy made orders by consent, including injunctions restraining the husband from taking certain steps in relation to the C Group and F Company; again providing for disclosure by the husband; granting leave to the wife to join C Pty Ltd (in administration) to the proceedings; and requiring the husband to pay the arrears in relation to the mortgage within seven days and the monthly mortgage instalments until this hearing.
The wife’s Application in a Proceeding (as amended on 7 December 2021) came before me on 16 December 2021, in relation to the balance of the relief sought by the wife therein against C Pty Ltd and its administrator. Orders were made by consent between those parties, the provisions of which are not germane to the issues the subject of this judgment.
The balance of the relief sought by the wife in her Application in a Proceeding filed 1 December 2021, as amended on 7 December 2021 and further amended on 21 January 2022 and, most recently, in the minute of orders sought by her at the hearing before me is that:
1.Within 7 days of the date of these orders, the husband comply with order 6 of the orders dated 3 December 2021 and specifically provide electronic copies of documents within his power and/or control relating to the issues raised in paragraphs 4-13 of the wife’s Application in a Proceeding filed 1 December 2021.
2.In addition to any and all documents that fall within paragraph 1 above (and including but not limited to where no such documents exists), within 7 days of the date of these Orders, the Husband provide information and/or explanation in relation to the issues raised in paragraphs 4-13 of the wife’s Application in a Proceeding filed 1 December 2021.
3.Within 7 days of the date of these orders, the parties jointly instruct the single expert, [Mr H] of [T Accountants] (the single expert), to provide an expert valuation report for:
(a) 100% of the [C Group] excluding [F Pty Ltd]; and
(b) 100% of [F Pty Ltd].
4.The parties instruct the single expert to opine as to whether the valuation of the [C Group] inclusive of [F Pty Ltd] would be different from the valuation of [C Group] excluding [F Pty Ltd] and if yes, why?
5.The First Respondent be solely responsible for the single expert’s fees for all work undertaken by the single expert after 29 October 2021.
6.The First Respondent be solely responsible for the single expert’s fees for all work relating to the valuation of [F Pty Ltd].
7.To facilitate compliance with paragraph 3 of the orders dated 15 May 2020, the First Respondent is to pay:
(a)By way of partial and ongoing spousal maintenance, the monthly mortgage payments for the property situated at [J Street, Suburb Q] (the FMH) as directed by Westpac Bank from time to time, currently estimated by Westpac Bank to be $6,020 per month.
(b)Within 72 hours of the date of these orders, the wife will provide to the First Respondent, copies of invoices for the outstanding rates and insurance with respect to the FMH and with respect to the property situate at [K Street, Suburb L] (the [L Property]), and within 72 hours of the wife providing such invoices to the First Respondent, the First Respondent will pay to the wife in bank account number ending […14], by way of lump sum spousal maintenance, the total value of the outstanding invoices (estimated at approximately $17,637) and forthwith, the wife will attend to payment of the invoices and will provide evidence of payment.
8.Within 7 days of the date of these Orders, the First Respondent pay, from funds held in his personal bank accounts, the sum of $10,000 to the Westpac [Artinos] Family Super Cheque account number ending […22] by way of reimbursement of the $10,000 removed by the wife due to the First Respondent’s failure to comply with paragraph 9(b) of the orders dated 3 December 2021.
9.Pursuant to s117(2)(A) of the Family Law Act 1975, within 7 days of the date of these Orders, the First Respondent pay or cause to be paid to the trust account for Blackwood Family Lawyers, the lawyers for the wife, the sum of $350,000, to be applied towards the wife’s outstanding and anticipated costs and disbursements.
As recited earlier in these reasons for judgment, at the commencement of the hearing before me, Senior Counsel on behalf of the wife sought leave, which I granted, to make an oral application for partial property settlement under s 79 of the Act, in the alternative to litigation funding order under s 117 of the Act.
Notwithstanding rule 2.18(2) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (“the Rules”), which provides that “a response must be filed and served within 28 days after service of the application to which it relates”, the husband only did so on 31 January 2022. Thereafter, as did the wife, he provided a minute of the orders sought by him (albeit in similar terms to those sought in his Response), seeking that:
(a)paragraphs 3.1 and 3.2 of the Orders made by consent on 15 May 2020 and paragraph 9(b) of the Orders made by consent on 3 December 2021 (for spousal maintenance) be discharged; and
(b)the former matrimonial home be sold and, from the net proceeds of sale, each party receive a payment of $200,000 by way of partial property settlement and the balance otherwise be held in a solicitor’s interest-bearing trust account.
The following issues therefore arise for determination by me:
(c)disclosure by the husband in relation to F Company;
(d)single expert valuation of the C Group and F Company;
(e)payment or discharge of the husband’s spousal maintenance obligations in relation to the former matrimonial home and the L Property and the related issue of the sale of the former matrimonial home sought by the husband; and
(f)litigation funding, whether by way of costs order or partial property settlement.
DISCLOSURE
By paragraphs [4] – [13] of her Application in a Proceeding filed 1 December 2021, the wife sought orders for financial disclosure by the husband in relation to F Company, including by the provision of documents, information and explanations. Those paragraphs seek:
4.That the Respondent provide disclosure of all information relating to business activities involving [F Pty Ltd] since its incorporation and including proposed and/or future business activities.
5.That the Respondent do all things necessary to cause the Applicant to have read only access to online banking platforms for all bank accounts held by [F Pty Ltd].
6.That the Respondent provide all information relied upon by him as the basis for the valuation of [F Pty Ltd], being $1 per share, as at 28 October 2020 when [F Company] shares were sold to [B Company].
7.That the Respondent provide all information relied upon by him as the basis for the valuation of [F Pty Ltd], being $1 per share, as at 19 August 2021 when [F Company] shares were sold to [D Company].
8.That the Respondent disclose and provide evidence of the date on which the [W Project] contract (provided to the Applicant on 23 September 2021) was entered into.
9.That the Respondent provide disclosure in relation to the [R Project] , including but not limited to any tender or bid documents, the contract or contracts by which [F Company] agreed to supply works, and full details of any part payments received by [F Company] to date.
10.That the Respondent provide information and evidence regarding the bonus or bonuses paid by [F Pty Ltd] in the amount of $200,000, including who received a bonus and why.
11.That the Respondent provide information and evidence regarding the management fee paid by [F Company] in the amount of $315,000, including who received that money or any part of it and why.
12.That the Respondent provide information and evidence regarding the marketing services provided by [Mr S] for $433,000, including any contracts, any evidence regarding relevant qualifications [Mr S] has to undertake such activities, any evidence regarding the project or projects for which marketing activities were undertaken and evidence regarding what those marketing activities were.
13.That the Respondent provide an explanation of the purpose of, and all source documents evidencing, the payment by [C Pty Ltd] to [B Company] made on 29 September 2020 in the sum of $220,000.
On the first return of that application, on 3 December 2021, the Honourable Justice McEvoy ordered by consent (at [6]) that “within 28 days, the husband provide electronic copies of documents within his power and/or control relating to the issues raised in paragraph [4] to [13] contained in the wife’s application in a proceeding filed 1 December 2021”.
Insofar as the wife now seeks that “the husband comply with order 6 of the orders dated 3 December 2021”, that is not an order I am prepared to make in such terms. If a party does not comply with an order, it is not for the Court again to order them to comply with earlier order, without anything more. The Family Law Act 1975 and the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 provide remedies and consequences for breaches of the Court’s orders. Insofar as the husband’s obligations under order [6] have not been discharged by him, that order remains executory and he is bound by it. He does not seek its discharge. That was an order, the terms of which the wife and he negotiated and to which they consented on 3 December 2021. Had he been of the opinion that he could not comply with it in full, presumably he would not have consented to it in those broad terms.
The wife, in her first affidavit filed 2 December 2021, deposes at length as to the circumstances giving rise to her application for disclosure. They include, inter alia, the husband placing C Pty Ltd into voluntary administration, the incorporation of F Company, the allotment of shares to third parties and the entry by F Company into at least one contract for which C Company had tendered.
In her second affidavit, filed 21 January 2022, the wife gives examples of how and why she asserts the husband has not complied with paragraph [6] in respect of paragraphs [4] to [13] of her Application in a Proceeding.
The wife presently continues to seek an order that, in addition to any and all documents that fall within order [6], and including but not limited to where no such documents exist, the husband provide information and/or explanations in relation to the issues raised in paragraphs [4] to [13].
The husband, in his affidavit filed 31 January 2022, asserts without any particularity that he believes he has complied with his obligations under order [6], insofar as the documents are in his power or control. He deposes that paragraph [6] only requires him to provide electronic copies of documents. However, that does not absolve him of his obligations generally to make full and frank financial disclosure under the Rules.
That is not a controversy in respect of which I necessarily can make detailed (or, indeed, any) findings at an interlocutory stage in respect of contested matter. However, the paucity of the husband’s evidence of his compliance is noteworthy. He deposes that he caused a letter to be sent by his lawyers to the wife’s lawyers on 18 January 2022 (annexure A to his affidavit) as “I believed I had already provided all documents in my control”. Further, he deposes that “I have provided the documents within my power and control as already deposed” [emphasis added]. However, all that he has “already deposed” is, in fact, his belief that he has done so. His solicitors’ letter, to which he refers in and which he annexes to his affidavit is similarly minimalist in its terms.
The husband, in his Senior Counsel’s outline of submissions and oral submissions, contended that the disclosure relief sought by the wife is beyond the scope of the Rules. He submits that:
3.… The general duty expressed in rule 6.01 is fulfilled by compliance with the more specific duties imposed by subsequent specific obligations contained in the Rules. That obligation in 6.01 is intended to be subject to limits upon the use that may be made of the information, for instance, when in a document as specified by Rule 6.04.
4.Information disclosed other than by production of document is otherwise received subject to limits as to its use by being received by affidavits filed or financial statements filed.
(Footnote omitted)
I disagree. The importance of full and frank disclosure in family law proceedings is well settled and known and cannot be gainsaid. In Oriolo & Oriolo (1985) FLC 91-653, the Full Court said at 80,256-80,257:
We consider that the principles to be correctly stated in the judgment of Smithers J. in the case of Briese (unreported 27 June 1985) where he said:
“The wife has sought an order that the husband pay her legal costs of the proceedings. She relies upon the husband's conduct of the litigation, which in a number of respects I have referred to in this judgment. This conduct has had the effect of very greatly increasing the costs of the wife. The husband's counsel submitted that it was a matter for the wife to pursue her rights under the Family Law Regulations and that there was no positive obligation on the husband to do more than comply strictly with the Regulations and with orders of the court. He likened his client's position in this respect to that of a defendant in a civil action.
In my opinion this submission is not correct. I believe that a person in the position of the husband in this case has a positive obligation to set out at an early stage his financial position in a clear and comprehensive manner. The Regulations, and now the Rules, are not intended as a vehicle to mask the true position, or as an aid to confusion, complexity or uncertainty. They are not intended as the outer limits of the obligation of financial disclosure, but as providing avenues towards disclosure. The need for each party to understand the financial position of the other party is at the very heart of cases concerning property and maintenance. Unless each party adopts a positive approach in this regard delays will ensue with the consequent escalation of legal, accounting and other expenses, always assuming that a party has the strength to continue the struggle for information and understanding.
In this case it is possible, but I believe largely with the benefit of hindsight, to suggest one or two other strategies which the wife could have employed in her search for the facts before the trial. On the whole however, I do not believe that her case was conducted other than appropriately and reasonably. It was in the power of the husband to curtail the costs by making adequate disclosure.
Although the case relates to quite different circumstances, I believe that the conclusion in the House of Lords in the case of Livesey v. Jenkins (1985) 1 All E.R. 106 is apposite, namely that in financial proceedings between spouses each party must make a full and frank disclosure of all material facts. In that case it was made clear that full and frank disclosure was required as a matter of principle in the light of the fact that it was the duty of the court, taking into account a number of designated criteria, to make a decision which basically involved the exercise of a discretion. This is quite different from common law litigation between strangers, in which such a general duty does not exist, and obligations would only exist in so far as statute or court rules required.
In my view it is fundamental to the whole operation of the Family Law Act in financial cases that there is an obligation of the nature to which I have referred. Livesey v. Jenkins makes it clear that mere compliance with rules of court or practice directions does not alter the basic principle of the need for full and frank disclosure by the parties. The fact that in the present case it is not a question of ultimate non disclosure of a matter relevant to the orders made, but is of a different nature being relevant to delay and expense, does not in my view prevent the principle being applicable here as to the matter of costs. There is an obligation on each party to act so as to provide a basis upon which the two of them are in a position to resolve the case by agreement, or proceed to a hearing, as expeditiously as may reasonably be done.”
Rule 6.01(1) of the Rules provides:
Subject to subrule (4), each party to a proceeding has a duty to the court and to each other party to give full and frank disclosure of all information relevant to the proceeding, in a timely manner.
As is readily apparent, the obligation in that rule is to provide information.
Rule 6.01(2) provides:
The duty of disclosure applies from the start of the proceeding and continues until the proceeding is finalised.
Rule 6.03 provides:
The duty of disclosure applies to each document that:
(a)is or has been in the possession, or under the control, of the party disclosing the document; and
(b)is relevant to an issue in the proceeding.
Again, as is readily apparent, the duty to make full and frank disclosure of information includes documents.
Rule 6.06(1) provides, lest it be necessary, that “[t]he duty of disclosure applies to a financial proceeding”, reinforcing the general of duty of disclosure in rule 6.01(1).
Rule 6.06(3) provides that, “without limiting subrule (1), a party to a financial proceeding must make full and frank disclosure of the party’s financial circumstances”, including (but not limited to) the matters specified in paragraphs (a) to (h).
Rule 6.06(6) provides:
If a party is aware that the completion of a Financial Statement will not fully discharge the duty to make full and frank disclosure, the party must also file an affidavit giving further particulars.
Rule 6.06(7) provides:
If a party’s financial circumstances have changed significantly from the information set out in the Financial Statement or an affidavit filed under subrule (6), the party must, within 21 days after the change of circumstances, file:
(a)a new Financial Statement; or
(b)if the changes can be set out clearly in 300 words or less—an affidavit containing details about the party’s changed financial circumstances.
Rule 6.09 provides for disclosure of documents, as follows:
Without limiting subrule (1), a respondent to an application for maintenance only must bring to the court on the first court date the following documents:
(a)a copy of the respondent’s taxation return for the most recent financial year;
(b)a copy of the respondent’s taxation assessment for the most recent financial year;
(c)copies of the respondent’s bank records for the 12 months immediately before the date when the application was filed;
(d)the respondent’s most recent pay slip;
(e)if the respondent has an Australian Business Number—a copy of the last 4 business activity statements lodged;
(f)any document in the respondent’s possession, custody or control that may assist the court in determining the income, needs and financial resources of the respondent.
Similarly, rule 6.18 provides for disclosure of documents, as follows:
(1) A party (the first party) may seek an order that:
(a)another party comply with a request for a list of documents in accordance with rule 6.09; or
(b)another party provide an affidavit of documents; or
(c)another party disclose a specified document, or class of documents, by providing a copy of the document, or each document in the class; or
(d)another party produce a document for inspection; or
(e)another party file an affidavit stating:
(i)that a specified document, or class of documents, does not exist or has never existed; or
(ii)the circumstances in which a specified document or class of documents ceased to exist or passed out of the possession or control of that party; or
(f) the first party be partly or fully relieved of the duty of disclosure.
(2)A party making an application under subrule (1) must satisfy the court that the order is appropriate in the interests of the administration of justice.
(3)The court may make an order of a kind referred to in subrule (1) on its own initiative if it is satisfied that the order is appropriate in the interests of the administration of justice.
(4) In making an order under subrule (1) or (3), the court may consider:
(a)whether the disclosure sought is relevant to an issue in dispute; and
(b)the relative importance of the issue to which the document or class of documents relates; and
(c)the likely time, cost and inconvenience involved in disclosing a document or class of documents, taking into account the amount of the property, or complexity of the corporate, trust or partnership interests (if any), involved in the proceeding; and
(d)the likely effect on the outcome of the proceeding of disclosing, or not disclosing, the document or class of documents.
(5)If the disclosure of a document is necessary for the purpose of resolving a proceeding at a dispute resolution event, a party (the requesting party) may, on the first court date, seek an order that another party:
(a)provide a copy of the document to the requesting party; or
(b)produce the document to the requesting party for inspection and copying.
(6)The court may make an order under subrule (5) only in exceptional circumstances.
(7) The court may inspect a document to decide:
(a) an application made under this rule; or
(b) whether to make an order under subrule (3).
In Quayle v Perceval [2018] FamCA 664 at [37], McClelland J (as his Honour then was) noted that:
The fact that the obligation of disclosure exists as a duty to the Court, as well as to the other party, is significant. It is also significant that the obligation is in respect to the disclosure of “information relevant to the dispute”, not simply one that attaches to the production of documents.
Nothing turns on the fact that, under the new, 2021 Rules, rule 6.01(1) now refers to “information relevant to the proceeding”.
The importance of full and frank disclosure is reinforced by the consequences for non-compliance. Rules 6.02(1) – (2) provide:
(1) A party (but not an independent children’s lawyer) must file a written notice:
(a) stating that the party:
(i)has read Parts 6.1 and 6.2 of these Rules; and
(ii)is aware of the party’s duty to the court and each other party (including any independent children’s lawyer) to give full and frank disclosure of all information relevant to the issues in the proceeding, in a timely manner; and
(b)undertaking to the court that, to the best of the party’s knowledge and ability, the party has complied with, and will continue to comply with, the duty of disclosure; and
(c)acknowledging that a breach of the undertaking may be a contempt of court.
(2)A party commits an offence if the party makes a statement or signs an undertaking the party knows, or should reasonably have known, is false or misleading in a material particular.
See also Black & Kellner (1992) FLC 92-287 and Weir & Weir (1993) FLC 92-338.
Further, rule 6.17 provides:
If a party does not disclose a document as required by these Rules:
(a) the party:
(i)must not offer the document, or present evidence of its contents, at a hearing or trial without the other party’s consent or the court’s permission; and
(ii)may be guilty of contempt for not disclosing the document; and
(iii)may be ordered to pay costs; and
(b) the court may stay or dismiss all or part of the party’s case.
As is apparent from Chapter 6 of the Rules generally, relevance and privilege are limitations on the duty of disclosure. Given the matters in dispute between the husband and the wife, in particular relating to C Pty Ltd (in administration) and F Company (of which, it will be recalled, the husband is the sole director), it cannot reasonably be contended that the documents, information and explanations sought are not relevant and there is no assertion of privilege by the husband in relation thereto.
Rule 6.01, which imposes the general duty of disclosure, is not limited by any other provision of Chapter 6 as to the means by which that duty may be discharged. Insofar as the husband contends otherwise, he is wrong. I am fortified in coming to this conclusion by section 67 of the Federal Circuit and Family Court of Australia Act 2021, which provides:
(1)The overarching purpose of the family law practice and procedure provisions is to facilitate the just resolution of disputes:
(a) according to law; and
(b) as quickly, inexpensively and efficiently as possible.
(2)Without limiting subsection (1), the overarching purpose includes the following objectives:
(a)the just determination of all proceedings before the Federal Circuit and Family Court of Australia (Division 1);
(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.
(3)The family law practice and procedure provisions must be interpreted and applied, and any power conferred or duty imposed by them (including the power to make Rules of Court) must be exercised or carried out, in the way that best promotes the overarching purpose.
(4)The family law practice and procedure provisions are the following, so far as they apply in relation to civil proceedings:
(a)the Rules of Court;
(b)any other provision made by or under this Act, or any other Act, with respect to the practice and procedure of the Federal Circuit and Family Court of Australia (Division 1).
Further, rule. 1.04(1) provides that:
(1)The overarching purpose of these Rules, as provided by section 67 of the Federal Circuit and Family Court Act, is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible.
The submissions on behalf of the husband in this respect confuse the proverbial “servant”, namely, the Federal Circuit and Family Court of Australia (Family Law) Rules 2021, with the proverbial “master”, namely, the Family Law Act of Australia 1975. In particular, rule 6.06, specifically provides that the duty of disclosure applies to a “financial proceeding”, paragraph (b) of the definition of which is “a proceeding (other than an appeal) involving an application … relating to the property of the parties to a marriage …” which, of course, includes an application under section 79. The duty of disclosure under Chapter 6 of the Rules, ultimately, is to enable the Court to discharge its obligation under section 79(2) not to make an order under that section, unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
Even if I were persuaded by the restrictive interpretation of Chapter 6 of the Rules urged upon me by Senior Counsel for the husband, which I am not, I would have no compunction in relying upon rule 1.31, which provides:
(1)The court may, in the interests of justice, dispense with compliance, or full compliance, with any of these Rules at any time.
(2)If, in a proceeding, the court gives a direction or makes an order that is inconsistent with any of these Rules, the direction or order of the court prevails in that proceeding.
In the circumstances, in addition to paragraph [6] of the Orders made on 3 December 2021, I shall order the husband to provide not only electronic copies of the documents within his power and/or control relating to the issues raised in paragraph [4] to [13] of the wife’s Application in a Proceeding filed 1 December 2021, but also, within 14 days, all documents in hard copy which have not been provided to date in electronic form, as well the information (other than documents) and explanations sought in those paragraphs of her application. That information and those explanations will be provided upon affidavit. Further, I shall also order the husband to file an undertaking by him as to disclosure pursuant to rule 6.02(1) of the Rules.
VALUATION
Orders have previously been made in these proceedings for and regarding the joint appointment of a single expert forensic accountant for the purpose of valuing the C Group. I refer, in particular, to paragraph [9] of the orders made on 15 May 2020; paragraph [4] of the Orders made on 30 October 2020; paragraph [1] of the orders made on 17 December 2020; and paragraphs [3] and [4] of the orders made on 23 August 2021. However, at that time, the wife was not aware of the incorporation of F Company and C Pty Ltd had not yet been placed into administration by the husband, unilaterally.
The wife deposes that the single expert was instructed by the husband and her on 20 October 2021 to undertake a valuation of F Company, as part of the C Group. Annexure 4 to her affidavit filed 2 December 2021 is a letter bearing that date to the single expert, signed by their respective lawyers, in which they refer to his draft report dated 28 May 2021 and advise him that “the parties wish to jointly instruct you to include a further entity in your final Expert Report”, referring expressly to F Company. She further deposes that on 29 October 2021, the husband’s lawyer wrote to the single expert and advised him as follows:
55.On 29 October 2021, [Mr Artinos’s] lawyer wrote to the single expert and advised him as follows:
“In our most recent joint letter of instructions to you dated 20 October 2021 in relation to [F Pty Ltd] you were requested to value the parties’ interest in [F Pty Ltd] being a separate entity. Adding this entity as part of the group is outside your scope of instructions.”
The wife also deposes that, in an email dated 12 November 2021, the single expert advised as follows:
57.Since this time, there has been further communication between our respective lawyers and the single expert about his instructions and the valuation of [F Company]. In an email dated 12 November 2021 the single expert advised as follows:
“there is an interconnectedness so in my view it would be important to consider the value of [F Company] and the impact on the [C Group] at the same time.”
By email dated 23 November 2021, the single expert advised, inter alia, that “standalone valuations of [C Group] (excluding [F Company]) and [F Company]” (as to100 per cent) would be provided.
Neither party, both represented by Senior Counsel, sought to tender the correspondence referred to in the preceding paragraphs, presumably because it was not in contention and, accordingly, they saw no need to do so.
The Husband, in his affidavit filed 31 January 2022, is conspicuously entirely silent on this issue. In particular, he does not deny his apparent volte face between 20 – 29 October 2021 and why, on that latter date, he advised the single expert that adding F Company as part of the C Group was outside the scope of his instructions.
The wife seeks orders that:
3.Within 7 days of the date of these orders, the parties jointly instruct the single expert, [Mr H] of [T Accountants] (the single expert), to provide an expert valuation report for:
(a) 100% of the [C Group] excluding [F Pty Ltd]; and
(b) 100% of [F Pty Ltd].
4.The parties instruct the single expert to opine as to whether the valuation of the [C Group] inclusive of [F Pty Ltd] would be different from the valuation of [C Group] excluding [F Pty Ltd] and if yes, why?
It was submitted on behalf of the husband that he seeks to have each party’s interest in the C Group and F Pty Ltd valued and that “to do less is to do half the job”.
The dispute between the husband and the wife, when distilled by me during the hearing, transpired to be that the wife seeks to have 100 per cent of F Company valued. However, at the moment, prima facie, the husband has a 30 or 35 per cent legal interest in the company. Given the circumstances in which C Pty Ltd was placed into administration and F Company was incorporated, and the wife’s protestations in relation thereto, it is not inconceivable that his interest may be found to exceed that at trial. However, equally, it may not. Further, even if the husband’s interest is found only to be between 30 or 35 per cent, there may be issues of discounts for lack of marketability and/or lack of control.
In the circumstances, I will order that the parties instruct the single expert also to value F Company and the husband’s interest therein and to value the C Group on the alternative bases that it includes only the husband’s interest in F Company and the whole of F Company.
I will not make an order in the terms of paragraph [4] of the wife’s minute; that is a matter for questions to the single expert regarding his valuation report, in the fullness of time. I will not pre-empt the outcome of that report.
It is common ground that the husband will solely meet the costs of valuing F Company. The wife also seeks that he be solely responsible for the single expert’s fees for all work undertaken by the single expert after 29 October 2021. Some of those fees will undoubtedly relate to the valuation of F Company. It is not clear to me what other work has been undertaken by the single expert since 29 October 2021 or why the husband should be solely responsible therefor. That issue can be explored and, if necessary, determined upon the trial of these proceedings.
LITIGATION FUNDING
By her Application in a Proceeding filed on 2 December 2021, the wife seeks that the husband pay to her “the sum of $220,000 pursuant to s 117(2) of the Family Law Act for litigation funding, with the ultimate characterisation of such funds to be determined at trial”.
By her minute of orders sought at the hearing before me, the wife amended the form of the order and the quantum of the payment sought by her, as follows:
9.Pursuant to s117(2)(A) [sic] of the Family Law Act 19785, within 7 days of the date of these Orders, the First Respondent pay or cause to be paid to the trust account for Blackwood Family Lawyers, the lawyers for the wife, the sum of $350,000, to be applied towards the wife’s outstanding and anticipated costs and disbursements.
At the commencement of the hearing, the wife sought and was granted leave to amend her application for litigation funding to include an alternative source of power, namely, by way of partial property settlement pursuant to section 79 of the Act. In Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578 at [30], Brereton J said that Zschokke & Zschokke (1996) FLC 92-693 –
… establishes that it is important, when contemplating an order for interim provision for litigation expenses, to identify the relevant also power because it is the source of power that determines the necessary preconditions and relevant conditions for making the order.
This passage was cited with approval by the Full Court in Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466 at [84]. Further, the Full Court said at [86]:
Once the relevant source of jurisdiction for making an order is resolved then it could be assumed that what Brereton J in Paris King Investments described as “the necessary preconditions and relevant considerations” or as the Full Court in Zschokke described as the “matters” to be taken into account should be easy to identify. If the source of jurisdiction is s 117(2) of the Act then the court may make such order as it considers just provided there are justifying circumstances. If the order is sought under s 79 of the Act then the court may make such an order as it considers appropriate provided it is satisfied that it is just and equitable to make the order. If the order is sought under s 74 of the Act then the court may make such order as is proper.
In support of her application for litigation funding, the wife relies upon an affidavit of her solicitor, Ms M, of Blackwood Family Lawyers, filed 12 January 2022. Ms M exhibits to that affidavit a copy of her firm’s disclosure statement to, and costs agreement with, the wife, as well as an updated costs disclosure letter. It is readily apparent, from the disclosure statement, that the costs payable by the wife to her solicitors are in excess of the scale provided by the Rules. Clause 1 provides, inter-alia, as follows:
Subject to you entering into a Costs Agreement with us, our fees are determined by hourly rates charged in 6 minute units stop for example, the time charged for an attendance of up to 6 minutes will be rounded up to 6 minutes and the time charged for an attendance between 6 and 12 minutes will be rounded up to 12 minutes.
For reasons which will become apparent, this case is not an appropriate vehicle for the Court to consider the appropriateness of such a basis of charging and whether it should be countenanced by the Court. However, it is difficult to understand why a partner who charges at a rate of $550 (including GST) per hour should be able to charge one 6 minute unit for work that may take only a minute or two of his or her time.
Ms M deposes that the wife owed her solicitors the sum of $17,031.80 in respect of their invoice for December 2021; she anticipated that, by 31 January 2021, the wife would incur further fees and disbursements of approximately $30,000 to $40,000; and she estimated the wife would incur further solicitors’ fees, barristers’ fees and other disbursements of approximately $330,000 to $350,000 up to trial.
The Court’s power to order litigation funding by way of costs order under section 117 or partial property settlement under section 79 of the Act was considered by the Full Court in Zschokke & Zschokke and Strahan & Strahan (Interim Property Orders). Less well settled, however, is the scope of litigation funding orders that may be made under section 117.
Litigation funding – section 117(2)
Relevantly, section 117 relevantly provides, inter alia, as follows:
(1)Subject to subsection (2), subsections 45A(6) and 70NFB(1) and sections 117AA and 117AC, each party to proceedings under this Act shall bear his or her own costs.
(2)If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A), (5) and (6) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
(2A)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.
(Emphasis added)
The form of the litigation funding order, as presently sought, does not seek that I provide for “the ultimate characterisation of such funds to be determined at trial”. Whilst the subsequent re-characterisation of a costs order made under section 117 as, say, a partial property settlement order under section 79 might be thought to be feat of judicial alchemy, in circumstances where different considerations apply, the issue seems to have been put to rest by the Full Court in Lao & Zeng [2021] FedCFamC1A 17 at [48]-[54] (per Ryan J), [114]-[116] per Austin J.
In that case, the Full Court referred to and acknowledged the “breadth” of and the “far-reaching” power reposing under section 117(2), which, it will be recalled, relevantly provides that “the court may … make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just”. See [41] (per Ryan J) and [121] (per Austin J). So much was settled by the High Court in Re JJT: Ex parte Victoria Legal Aid (1998) 195 CLR 184.
In Re JJT: Ex parte Victoria Legal Aid, Gaudron J, who agreed generally with Hayne J, said at [2]:
The power conferred by s 117(2) of the Family Law Act 1975 (Cth) ("the Act") is a power to "make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just." That power is not simply a power to make an order for costs. Were it so, it would only authorise orders to indemnify for "costs actually incurred in the conduct of litigation". However, a power to make an "order as to costs" is a broader power. And when regard is had to the consideration that s 117(2) expressly authorises interlocutory orders, that sub-section must, in my view, be construed as authorising orders requiring a party to proceedings under the Act to provide another party with funds to conduct those proceedings.
(Footnotes omitted)
Her Honour further said, at [4]:
One other matter should be noted with respect to s 117(2), namely that its terms are, if anything, wider than the bare power "to award costs" considered in Knight v FP Special Assets Ltd. Accordingly, it follows that the sub-section authorises orders against persons who are not parties to proceedings in the exceptional circumstances in which that course is appropriate. At least that is so if the order is one which indemnifies for costs actually incurred, an order of that kind being properly described as an "order as to costs".
(Emphasis added, footnotes omitted)
Kirby J said, at [14]:
In Aiden Shipping Ltd v Interbulk Ltd, speaking of the provisions of the Supreme Court Act 1981 (UK) affording the power to award costs, Lord Goff of Chieveley remarked: "It is strange that courts should think it right to impose, by way of implication, a limit upon a wide statutory jurisdiction". It is still strange. Limits upon such wide statutory powers may be imposed by constitutional law. Sometimes controls are imposed by the statute itself. But where, by valid legislation, a power to award costs is afforded to a court in general terms, the grant of power should be given an ample interpretation and not narrowly construed.
(Footnotes omitted)
Kirby J further said, at [41]:
…
3. A grant of power to a court to make orders as to costs will not, in the absence of a legislative indication to the contrary, be construed narrowly. This is because it is implied from the character of the donee of the power that the power will be exercised judicially and in accordance with established legal principles. Because the recipient of the power here is the Family Court of Australia, a superior federal court of record, it would be contrary to principle for the power to be given anything other than the most liberal and ample construction.
(Footnotes omitted)
Kirby J said at [53], that “when the principles governing the approach proper to ascertaining the meaning of a statutory provision for the ordering of costs are applied to s 117(2)”, there was, in his view, “no doubt that the words are broad enough to sustain” an order for the payment of future costs. His Honour continued at [55]:
If attention is confined to the language of s 117, there is nothing in it to restrict an order to one in favour of, or against, a party. Had it been the purpose of the Parliament to limit the power in such a way it might have said so, as it has in other legislation. Far from restricting the power, it would be hard to imagine a more ample phrase by which to confer it on a court. It is enough that the order should be "as to costs". Neither the recipient of the order is designated nor is the past accrual of the costs required. Approaching the meaning of s 117(2) in the way required by Knight, remembering that the power in question is conferred on a court, there is no reason to read the words down. The first part of Faulks J's order is an "order as to costs".
(Footnotes omitted)
Lastly, Kirby J said at [59]-[60]:
59.Let it be accepted that historically costs orders have ordinarily been made to provide a partial indemnity to a party with respect to the costs of litigation already incurred. This is by no means an absolute rule. The scope of a power to make orders as to costs must in every case be derived from the legislation in which the power exists. The limits of the power must be charted to achieve the purposes of the legislation. The very nature of the office of a "child's representative" involves the assumption that, in some cases at least, the representative will represent the child in adversarial proceedings before the Court. A party, whether husband, wife or other family member, will ordinarily be aware of the prospects of recovering their costs. A spouse in a vulnerable position might seek an order for the provision of future costs so as to ensure that the litigation is equalised. The power to make orders "as to costs" appears in an Act which does not apparently contemplate that the child's representative should act free of charge. Because the child itself would ordinarily be unable to pay the costs of its representative, it is necessarily implicit in the legislation that the court should have the power, by costs orders, to ensure that the representation is effective and that, in appropriate cases, costs are paid in advance of the hearing.
60.Once VLA accepted that orders for the payment of future costs of vulnerable spouses were permissible under the Act, the only way this concession could be reconciled with the argument that "costs" in s 117(2) relates only to past costs, is by the flimsy suggestion that orders in favour of a spouse amount to spousal "maintenance" within s 74 of the Act. I do not accept that argument. There is no reason why "costs" in s 117(2) should not be given the most ample meaning that the word permits. That word is broad enough to include future, as well as past, costs. There is nothing inherent in the notion of "costs" that requires a contrary conclusion. There is much in the context and projected operation of the Act which supports the opposing construction.
(Footnotes omitted)
Hayne J (with whom Gaudron J agreed generally) said from [90]:
90.In Cachia v Hanes, Mason CJ, Brennan, Deane, Dawson and McHugh JJ said:
“It has not been doubted since 1278, when the Statute of Gloucester introduced the notion of costs to the common law, that costs are awarded by way of indemnity (or, more accurately, partial indemnity) for professional legal costs actually incurred in the conduct of litigation.”
91.On its face, then, the reference in s 117 to "costs" is a reference to "costs" as that word is ordinarily understood in the law: the amount which the person to whom the order is directed must pay to some party to the litigation as partial indemnity for the professional legal fees and expenses incurred by that party in the course of the litigation. Section 117(1) provides, in effect, a prima facie rule that each party is to bear his or her own costs of the proceeding but that prima facie rule is subject to the operation of s 117(2) which, in turn, is dependent upon the court concluding "that there are circumst ances that justify" the making of an order.
92.Section 117(2) enables the Family Court to make orders "as to" costs and that may well enable a broad range of orders to be made. The subject-matter of those orders must, however, be "costs": a power to make orders "as to" costs does not enable the court to make orders dealing with something other than costs.
93.The section also makes provision for orders as to "security for costs". This kind of order is, of course, well known. Although it is an order which requires the provision of security against costs which have not yet been incurred (that security being provided, usually, by payment of a sum to be held for application in accordance with a future order or the provision of some other security) the subject-matter of the order is still, at its roots, the costs which a court may order one person to pay to another as partial indemnity for the professional fees and expenses incurred in the litigation.
(Footnotes omitted)
However, his Honour said at [82] that the order of the primary judge, that –
… pursuant to the provisions of Section 117 of the Family Law Act 1975 Victoria Legal Aid will provide either the sum of Nine Thousand and Thirty Seven Dollars and Sixty Cents $9,037.60 for the future costs of the child's representative in these proceedings or shall facilitate the making available of the child's representative services and provide for the payment of counsel's fees in advance of such proceedings. –
was not an order for security for costs. Rather, this order –
94.… required a person (Victoria Legal Aid) to pay for the representation of a party to the proceeding (the child or, perhaps, the representative of the child). That is, it required Victoria Legal Aid to outlay money (or time and services) for the representation of the child, not to pay or provide for the sum that might later be ordered by the court to be paid by one person to another as indemnity (or more usually partial indemnity) against costs incurred in fighting the suit.
However, it would seem that his Honour’s comments can be understood in the context of, and confined to, cases where it is sought that a third party pay a party’s future costs. His Honour continued at [95] – [98]:
95.The construction of s 117 that was urged in support of the order made by Faulks J would permit the Family Court to order a person not a party to the proceeding and not otherwise having any interest in the proceeding to incur expenditure for the conducting of litigation over which, by hypothesis, that person has no control. That construction should not be adopted. There is nothing, whether in the history of s 117 or the Act more generally, which supports construing s 117(2) in this way.
96.Some attention was given, in the course of argument, to whether s 117(2) would permit the making of an order for costs against a person not a party to the proceeding but who, nevertheless, had had effective control of the proceeding. I am content to assume, without deciding, that s 117(2) does give the Family Court a power to make an order of the kind dealt with in Knight v FP Special Assets Ltd. But the existence of such a power says nothing of whether an order of the kind made here is authorised by s 117(2). (That is why for present purposes it matters not whether Victoria Legal Aid was properly to be seen as a party to the proceeding in the Family Court.)
97.Appearing, as it does, in the context of a provision enabling a court to make orders for costs, which is a provision remarkable only because it departs from the ordinary rule that costs follow the event in favour of a prima facie rule that each party abide his or her own costs, nothing in the context of s 117 supports the construction of s 117(2) upon which the impugned order must depend if it is authorised by that sub-section.
98.Indeed, the list of matters set out in sub-s (2A) to which the Family Court is directed to have regard in making orders under s 117(2) indicates clearly that the subject-matter of the orders to be made under s 117(2) is the costs which a person may be ordered to pay another as indemnity for that other's liability for professional fees and out of pocket expenses reasonably incurred in the litigation, that is, "costs" as that expression is ordinarily understood in the law.
(Footnotes omitted)
Callinan J, with whom Gummow J agreed generally, said at [108]-[109]:
108.The form of the order is unusual. In his reasons for judgment, Faulks J characterised it both as an "anticipatory order for costs" and as "security for [the child's representative's] costs in the form of an order against Victoria Legal Aid".
109.The order is, in terms, not unlike a mandatory injunction. It purports to award costs to a party against a non-party. There are obvious difficulties associated with the alternative form of the order: …
His Honour said at [135] that section 117 “should be read in the light of the history and jurisprudence that has evolved in relation to orders for costs”. His Honour further said at [142] that, whilst not ruling on the point, he did not exclude from the scope of section 117(2) orders in the nature of interim orders for costs of the nature made by Bryson J in Parker v Parker (1992) 16 Fam LR 458 which, whilst made in the Supreme Court of New South Wales, under the De Facto Relationships Act (NSW), referred to various authorities founded upon the Family Law Act. His Honour continued at [143]:
Such orders appear to answer the description in s 117(2) of orders "as to costs". They, and the orders nisi made by Faulks J in this litigation, are not orders "as to ... security for costs". An order for security for costs is not an immediately operative determination as to where the burden of costs falls. Rather, the requirement of the provision of security is imposed as a condition for the continuation of proceedings by the party against whom the order is made.
(Footnotes omitted)
The issue of litigation funding under the costs powers was considered by McClelland J (as his Honour then was) in Selena & Montez and Ors [2017] FamCA 583. His Honour considered the decision in Zschokke & Zschokke, where the Full Court said (at [65]) that “while the present state of the law remains somewhat unclear, it can be asserted with some confidence in light of Brennan’s comments in [Breen & Breen] that there is at least power under section 117 (2) (the costs power) for the court to make an order which seeks to ensure that one party should be able to prosecute pending matrimonial proceedings and that the other party should provide the first mentioned party with the funds required to do so”. His Honour proceeded (at [75]) to consider the relevant comments of Justice Brennan, to which the Full Court in Zschokke & Zschokke referred and said (at [76]):
…it is apparent that the primary basis upon which the Full Court in Zschokke & Zschokke asserted ‘with some confidence’ that section 117 of the Act empowers the Court to make a litigation funding order, were the less than definitive views expressed by Brennan J in Breen & Breen.
(Footnotes omitted)
However, His Honour also observed (at [77]) that in Re JJT: Ex parte Victoria Legal Aid, which post-dated Zschokke & Zschokke, Gaudron and Kirby JJ also expressed the view that section 117 empowers the court to make a litigation funding order.
After reviewing the decision of the High Court in Re JJT: Ex parte Victoria Legal Aid, his Honour said at [82];
Several decisions of the Full Court have applied the statement of principle adumbrated by Hayne J in Re JJT; Ex parte Victoria Legal Aid that section 117 empowers the Court to make an order in respect to costs as ordinarily understood. That is, for costs actually incurred. For example in I Limited & Chester and Ors (Costs) [2011] FamCAFC 51, the Full Court, in referring to Re JJT; Ex parte Victoria Legal Aid, explained that “costs in the conventional sense and thus to the payment by one party to litigation of money by way of a partial indemnity for professional legal fees and expenses actually incurred by another party in the course of the litigation” (emphasis added).
(Emphasis in original)
His Honour said (at [83]) that an examination of the reasoning Brennan J in Breen & Breen (1990) 65 ALJR 195 and Gaudron and Kirby JJ in Re JJT: Ex parte Victoria Legal Aid suggests that each of their Honours was motivated by an understandable desire to achieve an outcome that evens up the litigation playing field in the context of family law litigation, in circumstances where it is recognised that, in family law matters, it is common for one party to retain control over the majority of the marital assets. His Honour continued at [84]:
As will subsequently be discussed, the merit of that objective has been noted in a number of decisions of the Full Court of the Family Court. However, the pursuit of that meritorious objective does not, in my view, justify adopting a construction of section 117 that results in it being applied at a point prior to the time when it is possible for the Court to fulfil its obligation to consider the matters referred to in section 117(2A). Most significantly, it is clearly not possible to determine whether the party seeking costs has been successful in the litigation, nor is it possible to consider the conduct of the party in circumstances where that conduct is yet to occur. Nevertheless, despite the significant doubt that I have expressed, I recognise that it is generally accepted that section 117 empowers the Court to make a litigation funding order. Accepting that to be the case, it is necessary to follow the clear legislative direction set out in section 117. This includes applying the presumption set out in section 117(1) that each party is to bear their own costs unless, having regard to those matters set out in section 117(2A), the Court is satisfied that it would be just to make such an order.
After considering some of the matters set out in section 117(2A), his Honour concluded (at [90]) that, on the basis of the available evidence, at that stage of the proceedings, he was not satisfied that an order should be made that displaced the presumption set out in section 117 (1) of the Act and dismissed the wife’s litigation funding application under that section. However, his Honour continued at [92] – [93]:
92.For completeness, I note that, even if I had been satisfied that the presumption set out in section 117(1) should not be applied, I would not have made the orders sought by the applicant for the payment of a lump sum amount of $175,000 in respect to costs. This is because the amount sought is effectively in the nature of an order for indemnity costs. The Court has not been addressed on why such an “exceptional” order should be made on the facts of this case.
93.Further, even if the order sought by the wife is not appropriately categorised as an order for indemnity costs, in circumstances where a trial has not taken place, I am not satisfied that the approach taken to estimate the lump sum amount sought by the wife is “logical, fair and reasonable”. In that respect, there is merit in the submission of senior counsel for the husband that, having regard to funds held in the wife’s solicitors Trust Account, the amount sought by the wife, even if her contentions are otherwise accepted, is excessive.
(Footnotes omitted)
The issue was again considered by McClelland J (as his Honour then was) in Quayle v Perceval [2018] FamCA 664. His Honour, referring to Zschokke & Zschokke, expanded upon the reservations expressed by him in Selena & Montez and Ors regarding section 117 as the basis for a litigation funding order. His Honour said at [60]:
It is, with respect, difficult to understand how their Honours gained such a sense of confidence from the decision of Brennan J in Breen v Breen (1990) 65 ALJR 195. In rejecting an application for special leave to appeal, Brennan J said at [48]:
It is unnecessary to determine whether the power to make the order falls under s 117(2) rather than under s 74 (as the decision in Wilson v Wilson [1989] FamCA 34; (1989) FLC 92-033 suggests). Nor is it necessary to determine whether the order in the present case is to be characterised as an order as to costs or an order as to security for costs. [Emphasis added].
(Emphasis in original)
Accordingly, his Honour opined (at [63]-[64]) that the Full Court in Zschokke & Zschokke adopted “a construction of s 117 that, in my view, gives it an overly expensive operation, beyond its intended purpose” and that was contrary to the subsequent decision of the High Court in Re JJT: Ex parte Victoria Legal Aid. His Honour continued at [68] – [70]:
68.Anticipated future expenses, in respect to services that have not yet been provided, are “no more than impending, threatened or expected”. They have not been incurred as at the date that the order is sought pursuant to s 117 and, for that reason, it is my view that s 117 does not empower the Court to make a litigation funding order. It is it is to be noted that there has been no suggestion that an application has been made for an order for security for costs, in which case entirely different considerations would apply: Rules 19.05 of the Rules; Luadaka & Luadaka [1998] FamCA 1520; (1998) FLC 92-830.
69.The reasoning of Hayne J in Re JJT is entirely consistent with the wording of s 117(2A) of the Act which mandates that the Court “shall” have regard to the matters listed in paragraphs (a) through to (g) of that subsection. The section does not read, for instance “to the extent that it is possible the Court shall have regard to...” While the authorities are clear that in making an order for costs, the Court does not need to be satisfied of each and every matter referred to in paragraphs (a) through (g) (Fitzgerald v Fish and Anor [2005] FamCA 158; (2005) 33 Fam LR 123 at [41]), it remains the case that the Court is nonetheless directed to have regard to those matters. Indeed, the use of the word “shall” indicates that it is a mandatory obligation. Clearly, there are many matters that the Court cannot have regard to until a matter, including an interim application, is finalised. This includes, significantly, whether a party has been wholly unsuccessful in that application and how they have conducted the litigation up to the point of the order being made.
70.In summary, while I recognise that existing Full Court authority is to the effect that the Court has power to make a litigation funding order pursuant to s 117 of the Act, for reasons that I have explained, it is my view that existing authority is inconsistent with the subsequent High Court decision of Re JJT. I nonetheless accept that I am bound by the existing authority of the Full Court and, accordingly it is necessary for me to determine whether s 117 of the Act empowers the Court to make the dollar for dollar order, as proposed in orders 7 to 12 of the wife’s application.
Similarly, in Verdon v Verdon [2020] FamCA 824 at [113], the Honourable Justice Wilson said that he entertained “very real doubt that this court is empowered by s 117(2) of the Family Law Act to make an interlocutory costs order in the nature of a litigation funding order in respect of future costs”.
However, a contrary view was expressed by Watts J in Atkins & Hunt and Ors (2018) 57 Fam LR 128. Referring to the decision in Selena & Montez, his Honour said at [33], albeit in relation to “dollar-for-dollar” costs orders:
If his Honour’s view is correct, no dollar for dollar order could ever be made. I respectfully disagree with his Honour’s opinion. His Honour’s reliance on Hogan & Hogan [1986] FamCA 34; (1986) FLC 91-704 does not have regard to the differences between the facts in that case and the facts that would normally lead to a discretion being exercised to make a dollar for dollar order. In Hogan the Full Court overturned the trial judge’s order that the husband pay “the solicitor and own client costs and outlays of the wife’s solicitors... (including counsel’s fees) rendered by such from time to time to the wife”. This was an order which gave the wife’s lawyers an open cheque book, over which the husband had no control. It was argued unsuccessfully on appeal by the wife that the court would still retain some control when dealing with any application to enforce that order. Understandably the Full Court did not consider that an appropriate answer to the challenge to the order. A dollar for dollar order is fundamentally different. The financially advantaged party can choose and control what amount he or she spends on their own legal costs. It is not uncommon that, once a dollar for dollar order is made, the playing field is somewhat levelled by the financially advantaged party simply choosing to represent themselves so they don’t have to fund their spouse’s case against them.
Watts J concluded (at [47]):
Once the relevant matters in s 117(2A) have been considered, then the overriding question is whether or not there are circumstances that justify making a costs order which is just in the circumstances of a particular case. In my view the statements made by McClelland J at [94] and [95] of Selena place an unwarranted gloss upon the preamble to s 117(1) and the clear words of s 117(2) of the Act. I do not accept I am precluded from making a dollar for dollar order because its quantum would not be certain and only able to be ascertained on each occasion the husband pays monies to his lawyers or other professionals for their services in respect of the case.
Since the doubts expressed in Selena & Montez and Quayle v Perceval, orders under section 117 in respect of unascertained future costs have been considered by the Full Court in Salvage & Fosse (2020) FLC 93-966 and in Lao & Zeng [2021] FedCFamC1A 17.
In Salvage & Fosse, Ryan and Aldridge JJ said at [8]-[9]:
8.This is not a case where there are assets available for division, and s 79 or its equivalent s 90SM of the Act which might ultimately apply here, have no operation because of the Cohabitation Agreement. Rather, the application is to set that agreement aside. Nonetheless, it is accepted by the appellant, as it must be, that s 117 of the Act empowers the Court to make such orders as to costs and is of sufficient width to empower the making of the order sought by the respondent in the proceedings.
9.Such a concession merely accepts a now long-held and unimpeachable jurisprudence.
Watts J said at [66]:
The plurality in Strahan at [96] also made reference to further considerations articulated in Paris King Investments at [31]. The first was that an order may “make a provision for litigation expenses at a rate that appears reasonable in all the circumstances”. In Kendling v Kendling [2008] FamCAFC 70; (2008) 39 Fam LR 404 at [48], the Full Court, referring to a statement by Nygh J at first instance in Poletti & Poletti [1990] FamCA 79; (1990) 15 Fam LR 794 (“Poletti”), said that it was not necessary to require an “itemised bills of cost” or that the costs “be at scale” or that a taxation assessment under the Family Law Rules 2004 (Cth) is required. The second was that “an order can be made in respect of costs already incurred as well as of future costs”. In Chester, Moss J at [26] notes that general principles expressed in earlier cases under the Matrimonial Causes Act 1959 (Cth), included recognition that the object of an interim costs order “is to provide the [a]pplicant with a means to continue the conduct of the litigation not to reimburse the [a]pplicant for moneys already expended on or towards her costs”. In Paris King Investments, Brereton J at [31] expressed the view that an order can be made in relation to costs already incurred but the exercise of distinction between costs already incurred and those to be incurred may be relevant to the discretion to make an order, and its quantum.
The wife’s evidence, at paragraph [9] of her affidavit filed 2 December 2021, is that for two consecutive years, the husband’s business success attracted media attention. In 2016, his wealth was estimated to be to be $60 million and in 2017 it was estimated to be $75 million. She refers in that paragraph and annexes to that affidavit a copy of an article published in a magazine in 2019.
Section 75 of the Evidence Act 1995 (Cth) provides that:
In an interlocutory proceeding, the hearsay rule does not apply to evidence if the party who adduces it also adduces evidence of its source.
The exception to the hearsay rule created by this provision is not an exception to the opinion rule in section 76 of the Evidence Act. However, I note that the husband does not object to or deny this evidence and, at paragraph [6] of his affidavit filed 31 January 2022, he merely deposes as follows:
In response to paragraph [9], I state that by the use of legitimate tax deferral [Ms Artinos] and I had the appearance of an extravagant lifestyle. However, we were living beyond our means. The deferral of taxes and distribution of income via trusts was no longer feasible once [Ms Artinos] and I separated.
The wife has deposed that, as at May 2020, the “joint asset pool” was approximately $28 million, including cash in bank accounts totalling $13,754,039. The husband disputes that the net assets of the parties have “never been anywhere near” $28 million and denies ever having access to cash at bank in the order asserted by her. Further, he asserts that she has failed to take into consideration substantial liabilities and make allowances for taxation accrual. However, nowhere does he condescend to depose to what he estimates to be the net value of the assets available for division between the wife and him.
The wife’s Financial Statement filed 12 January 2022 estimates the value of the former matrimonial home to be $4.25 million and that of the L Property to be $750,000. There is a mortgage registered over the former matrimonial home securing approximately $2.622 million. Excluding other assets, including the C Group and the husband’s interest in F Company, on the wife’s evidence, there is equity of approximately $2.378 million. The husband, in his affidavit filed 31 January 2022, agrees that the former matrimonial home is valued at over $4.2 million.
The joint single expert, Mr H, in his report dated 28 May 2021, which is annexed to the wife’s affidavit filed 2 December 2021, values the C Group alone at between $15.7 million and $19.5 million (at [23]-[24]). He observes (at [24]) that “a significant proportion of the group’s value (~49%) is held in a realisable assets (cash/net debt and property)”.
At [25] of his report, the joint single expert opines:
When a valuation range is presented, it is common practice to conclude that no point in the range is more appropriate than any other in the absence of specific factors. For purposes of this valuation, I note that the key difference between the low value and the high value is the assumptions in relation to claims expenses. In particular, the low value is based on [Mr Artinos’s] representations regarding the claims expenses at face value (adjusted for allocating to the relevant financial reporting periods only) while the high value assumes $0 for certain claims expenses where there is no supporting documentation. Accordingly, if required to conclude on the basis of source documentation provided to me, I would be inclined to adopt a value towards the higher end of the range.
I note that, at the time the joint single expert’s valuation was undertaken, C Pty Ltd had not yet been placed into administration nor had the existence of F Company been disclosed or the husband’s interest therein been taken into account. However, I also note that the joint single expert at that time opined [122]:
…based on my review, C Company has substantial cash assets and other investments which support the group’s solvency. Further, the recent decision to not tender for further projects does not reflect the long-term outlook for the company.
I have endeavoured to undertake a consideration of the matters in section 79(4), albeit briefly, in circumstances where there is limited and untested evidence. Having done so, it seems to me that the wife will be likely to receive by way of final property settlement a sum sufficient to cover the advance of $350,000 now sought be her, in addition to the partial property settlement of $250,000 previously received by her. Accordingly, I propose to order that the husband pay or cause to be paid to her the sum of $350,000 by way of partial property settlement pursuant to section 79 of the Act.
In Bing & Bing (2007) FLC 93-318 at [27], in the Full Court, the plurality said:
Finally it has been asserted that the husband was and remains unable to raise the capital sum sought by the wife. This is a matter which may become relevant if and when the husband defaults in the order and an enforcement application is brought. However, the question of enforcement of the order remains a separate question from the propriety of granting the orders in the first place.
Accordingly, it is not necessary for me to consider the husband’s capacity to pay or cause to be paid the partial property settlement I shall order. However, I am nevertheless satisfied that he does have the capacity to do so, for the following reasons:
(a)Exhibit A2 is a Westpac statement for account number …06 in the name of G Pty Ltd which discloses a closing balance of $1,961,472.55 as at 31 December 2021.
(b)Exhibit A3 is a Westpac statement for account number …82 in the name of E Pty Ltd as trustee for the E Trust which discloses a closing balance of $3,778,590.41 as at 30 September 2021.
(c)Exhibit A4 discloses that, as at 17 January 2022, there was a facility within the C Group known as the “Z Loan”, being account number …99, with a debit balance of $706,357.42 and $1,793,642.58 available.
PAYMENT OR DISCHARGE OF MAINTENANCE OBLIGATIONS
The remaining issues for determination are the wife’s application to “facilitate compliance” with paragraph 3 of the orders made on 15 May 2020 in relation to the monthly mortgage payments for the former matrimonial home and the payment of rates and insurance premiums with respect to that property and the L Property, as well as the husband’s application for the discharge of that order and for the sale of the former matrimonial home. I shall deal first with the former issues, as the outcome thereof will likely to be relevant to the latter issues.
In relation to the payment of maintenance of obligations, the wife seeks compliance by the husband with his obligations under extant orders. The husband seeks the discharge of those orders.
Paragraph 3 of the Orders made on 15 May 2020 relevantly provides:
The husband pay or cause to be paid the following expenses as and when they due for payment:
3.1The interest only component of the mortgage instalments due with respect to registered mortgage number [#...8H] encumbering the real property situated at [J Street, Suburb Q] (“the FMH”);
3.2The rates and land taxes due and house and contents insurance with respect to the FMH and with respect to the property situated at an known as [K Street, Suburb L] (“the [L Property]”);
On 3 December 2021, McEvoy J relevantly ordered by consent:
9The husband cause to be paid from the Westpac mortgage facility account number ending […99]:
…
(b)The mortgage instalments due in respect of the FMH each month until the hearing in relation to paragraph square brackets 26] of the wife’s application dated 1 December 2021.
In the wife’s minute of proposed orders, she seeks:
7.To facilitate compliance with paragraph 3 of the orders dated 15 May 2020, the First Respondent is to pay:
(a)By way of partial and ongoing spousal maintenance, the monthly mortgage payments for the property situated at [J Street, Suburb Q] (the FMH) as directed by Westpac Bank from time to time, currently estimated by Westpac Bank to be $6,020 per month.
(b)Within 72 hours of the date of these orders, the wife will provide to the First Respondent, copies of invoices for the outstanding rates and insurance with respect to the FMH and with respect to the property situate at [K Street, Suburb L] (the [L Property]), and within 72 hours of the wife providing such invoices to the First Respondent, the First Respondent will pay to the wife in bank account number ending […14], by way of lump sum spousal maintenance, the total value of the outstanding invoices (estimated at approximately $17,637) and forthwith, the wife will attend to payment of the invoices and will provide evidence of payment.
8.Within 7 days of the date of these Orders, the First Respondent pay, from funds held in his personal bank accounts, the sum of $10,000 to the Westpac [Artinos] Family Super Cheque account number ending […22] by way of reimbursement of the $10,000 removed by the wife due to the First Respondent’s failure to comply with paragraph 9(b) of the orders dated 3 December 2021.
In the husband’s minute of proposed orders, he seeks that paragraph 3.1 and 3.2 of the orders made on 15 May 2020 and paragraph 9 (b) be discharged.
The wife simply seeks orders to “facilitate compliance” with paragraph 3 of the orders made on 15 May 2020. I agree that those orders, if made, would do so. They would be machinery orders: see Molier & Van Wyk (1980) FLC 90-911. It is the husband who seeks the discharge of his obligations under sub-paragraphs 3.1 and 3.2 thereof. Accordingly, he bears the onus of establishing that grounds exist for me to do so and that I should do so.
Relevantly, section 83 (1) provides that if there is in force an order with respect to the maintenance of a party to a marriage made by the court, the court may discharge the order if there is any just cause for so doing.
The husband, in his outline of argument, submits that compliance with these orders is beyond his capacity. It is asserted that his most recent financial statement, filed on 31 January 2022, demonstrates that his financial capacity is much reduced from that which it was at the time of his filing his first financial statement on 13 May 2020. Whilst, at first blush, that appears to be so, it ignores the fact, that in the intervening period, F Company was incorporated and the husband placed C Pty Ltd into voluntary administration.
Further, it is asserted in the husband’s outline of argument that the reasons for his alleged reduced capacity appear from paragraph 3(f) of his affidavit filed 31 January 2022 and the reduced access to borrowings or drawings from related entities occasioned by C Pty Ltd being placed into administration and having had a much reduced income in the period leading up to its administration.
Those issues go to the heart of these proceedings, both in relation to property settlement and spousal maintenance. Indeed, in the husband’s first financial statement filed 13 May 2022 he disclosed a total weekly income of $4,903 from the C Group, in particular, C Pty Ltd. However, in his most recent financial statement filed 31 January 2022, he discloses a total weekly income of $1,085 from F Company.
At paragraph 3(f) of the husband’s affidavit, to which he points as the basis of his application, he deposed as follows:
In response to paragraph 28(b), I say that I am working two days per week and can no longer afford to pay any amount from my own income. Since separation, I have shared care of the children for 50% of the time. I have not been able to devote long hours to the business that I was able to prior to separation. The separation and Covid lockdowns have taken its toll on me emotionally and necessitated my stepping back from the business. It was always my wish to step back from work to devote more time to parenting. My emotional health cannot withstand the pressure.
Insofar as the husband relies upon the fact that he has equal shared care of the children and that he has not been able to devote the long hours to the business that he was able to prior to separation, such that he is only working two days per week, the following may be observed. The children are aged 13 and 10 years respectively and they attend school. Insofar as he asserts that the parties’ separation and Covid lockdowns have taken their toll on him emotionally and necessitated his stepping back from the business, as his emotional health cannot withstand the pressure, the following may be observed. The parties separated in or about the third quarter of 2019, nearly 3 years ago. His assertion that separation and Covid lockdowns have taken their toll on him emotionally is a conclusion; he has not deposed to the acts, facts, matters and things said to underpin that conclusion. There is no expert evidence from, for example, any treating counsellor or psychologist as to his emotional health and whether or why it cannot withstand pressure. Similarly, his assertion that he necessarily stepped back from the business is a conclusion; he has not deposed to how these matters necessitated him stepping back from the business. He remains the sole director of F Company. Insofar as he asserts that it was always his wish to step back from work to devote more time to parenting, that wish may need to await the finalisation of these proceedings.
Insofar as it is submitted that he has reduced access to borrowings or drawings from related entities occasioned by C Pty Ltd, I refer to paragraph [141] hereof and the cash and bank facilities available to him through G Pty Ltd, E Pty Ltd and the Z Loan. Accordingly, I do not accept that he has reduced access to borrowings or drawings as is submitted on his behalf.
I do not accept that merely because the husband’s present income from F Company is or may be less than his former income from C Pty Ltd (in administration), there is just cause, as required by section 83(1) for discharging paragraphs 3.1 and 3.2 of the orders made by consent on 15 May 2020. Whilst obligations to pay spousal maintenance may, and often are, made primarily by reason of a payer’s income, that is clearly not necessarily so. Section 75(2)(b) refers to the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment. At this interlocutory stage, I cannot make any findings in relation to the husband’s income and the related issue of his property. However, on the evidence, he clearly still has access to cash at bank and bank facilities with which to meet his obligations under paragraph 3.1 and 3.2. Whether or not any decrease in cash at bank or increase in bank borrowings in order to meet those obligations should be added back can be explored at trial.
The husband asserts that any such drawings, whether from cash resources or against bank facilities within the C Group, will give rise to deemed dividends under Division 7A of the Income Tax Assessment Act 1936 (Cth). That may well be so; however, as Senior Counsel for the husband agreed when I explored the issue with him in the course of the hearing, any such liability will not arise until the taxation returns of the relevant entities in the group for the current 2020/2021 financial year are lodged in about 12 months’ time. If the parties diligently prepare the matter for trial, rather than focus on interlocutory applications, it may be that the matter can be listed for trial within that time. If not, and the parties are unable to resolve any Division 7A issues by agreement, then a further interlocutory application may need to be made. However, that is no reason to discharge paragraphs 3.1 and 3.2 of the orders made on 15 May 2020.
Insofar as the wife seeks, at paragraph 8 of her minute of proposed orders, a reimbursement by the husband to the Westpac Artinos Family Super cheque account in the sum of $10,000, that is not a pressing issue in the context of this case and it too can await trial.
In the circumstances I shall make orders in the terms of paragraph 7 of the wife’s minute of proposed orders.
SALE OF FORMER MATRIMONIAL HOME
I foreshadowed earlier that the outcome of the wife’s application to facilitate compliance with, and the husband’s cross application to discharge, paragraphs 3.1 and 3.2 of the orders made on 15 May 2020 would likely be relevant to my consideration and determination of the husband’s application for the sale of the former matrimonial home. Having determined those applications in favour of the wife and against the husband, at this interlocutory stage, that is indeed relevant to my consideration and determination of the last of the issues before me.
The husband, in his outline of argument before me, submits that the sale of the former matrimonial home would release and make available to the parties the substantial equity in that home. That may well be so. However, insofar as it is submitted “there is no real likelihood that either party can retain it after the determination of this matter”, that may or may not be so. Again, this will turn in large part, upon my findings at trial in relation to the reasonableness, or otherwise, of the husband placing C Pty Ltd into voluntary administration and as to the extent of the husband’s interest in F Pty Ltd in all the circumstances. The wife asserts the value of the former matrimonial home to be $4.25 million, albeit that it is encumbered by a mortgage securing approximately $2.622 million.
As I observed above, the joint single expert valued the C Group alone at between $15.7 million and $19.5 million in his report dated 28 May 2021. Whilst he observed that a significant proportion of the group’s value (approximately 49 percent) was held in a realisable assets (cash/net debt and property), which appears no longer to be extant, again, the reason for why this may be so is a matter in issue and must await trial. However, on the evidence, I do not accept that, at present, there is no real likelihood that either party can retain the former matrimonial home after trial and the wife wishes to do so, if possible.
The source of the power to make the order sought by the husband for the sale of the former matrimonial home is in sections 79 and 80(1)(h) of the Act. In Strahan & Strahan (Interim Property Orders) at [132] – [133] the Full Court said:
132.In relation to the first stage, in our view, when considering whether to exercise the power under s 79 and s 80(1)(h) of the Act to make an interim property order the “overarching consideration” is the interests of justice. It is not necessary to establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power. In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.
133.In Harris at 79,930 the Full Court gave some examples of circumstances where it may be appropriate to exercise the power being “where both parties agree to the disposal of some assets pending the trial” and “[u]rgent situations” to avoid injustice. Another example is where, as in this case, one party requires funds to assist in defraying the costs of litigation without which funds an injustice may be caused.
In my opinion, nothing the Full Court said in that case is inconsistent with that which it earlier said in Bearup & Bearup (1993) FLC 92-412 at 80,218, namely, that “judges must approach the sale of matrimonial property prior to the hearing of substantive applications for settlement of property with the utmost caution”. Indeed, that is consistent with the observation of the Full Court in Strahan & Strahan that, when considering whether to exercise the power under sections 79 and 80(1)(h) of the Act to make an interim property order, the overarching consideration is the interests of justice, namely, that in the circumstances it is appropriate to exercise the power. For the reasons I have given, I am of the opinion that, in the circumstances, it would not be in the interests of justice, or appropriate, to order the sale of the former matrimonial home at this juncture. Accordingly, I shall dismiss the husband’s application for the sale of that property.
I certify that the preceding one hundred and sixty-four (164) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Strum. Associate:
Dated: 7 April 2022
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