Barre & Barre and Ors

[2019] FamCA 907

FAMILY COURT OF AUSTRALIA

BARRE & BARRE AND ORS [2019] FamCA 907

FAMILY LAW – COSTS – Whether the Court should make an interim release of property in proceedings under the Family Law Act 1995 (Cth) – Whether there should be a release of funds from controlled monies account – where there is an order in the nature of a freezing order – order made to release funds – where the characterisation of the funds will be determined at final hearing.

Family Law Act 1975 (Cth) s 117

Barre & Barre; Gilliam & Barre [2019] FamCA 315
Cardile v LED Builders Pty Limited [1999] 198 CLR 380
CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345
Jackson v Sterling Industries Ltd (1987) 162 CLR 612
Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578
Strahan & Strahan (interim property orders) (2011) FLC 93-466
Zschokke & Zschokke (1996) FLC 92-693

FIRST AND SECOND APPLICANTS: Mr Barre and Barre Pty Ltd

FIRST RESPONDENT: Ms Barre

SECOND RESPONDENT: Ms Haynes

THIRD RESPONDENT: Ms Gilliam

FILE NUMBER: SYC 6149 of 2016

DATE DELIVERED: 3 December 2019

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Harper J

HEARING DATE: 21 November 2019

REPRESENTATION

COUNSEL FOR THE  FIRST AND SECOND            

APPLICANT:

Mr O'Reilly

SOLICITOR FOR THE  FIRST AND  SECOND APPLICANT: Mitchell Lawyers

COUNSEL FOR THE FIRST RESPONDENT: Mr Blackah

SOLICITOR FOR THE FIRST RESPONDENT: Swaab Attorneys

COUNSEL FOR THE SECOND RESPONDENT: Mr Salama

SOLICITOR FOR THE SECOND RESPONDENT: Wood Marshall Williams and Lawyers

SOLICITOR FOR THE THIRD RESPONDENT: Mr Milevski

Orders

1. The parties take all necessary steps to cause the release from the funds presently held in the controlled monies account in the name of Swaab Attorneys (# …78) within seven (7) days of:

   (a)       $70,000 to the First Applicant Mr Barre and

   (b)       $50,000 to the Third Respondent, Ms Gilliam.

2. The characterisation of the nature of each payment will take place at final hearing.

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

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

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 6149  of 2016

Mr Barre and Barre Pty Ltd

First and Second Applicants

And

Ms Barre

First Respondent

And

Ms Haynes

Second Respondent

And

Ms Gilliam

Third Respondent

REASONS FOR JUDGMENT

1. These are reasons for judgment concerning an Application by the respondent Mr Barre by the First and Second Applicants, Mr Barre and Barre Pty Ltd (“Barre Pty Ltd”) for the release to Mr Barre of an amount held in a controlled monies account, being account number #... 78.

2. This order is sought in paragraph 1 of his Amended Application in a Case filed 29 August 2019. His Amended Application seeks a range of other orders but they were not listed for hearing before me on 21 November 2019.

3. There are two substantive proceedings listed before me, one concerning the enforcement of a binding financial agreement, and the other seeking a declaration as to the existence of de facto relationship. I have set out the relationship between them and details of the procedural history of each matter in my judgment dated 8 May 2019, Barre & Barre; Gilliam & Barre [2019] FamCA 315 (Anonymised) (“the May judgment”). These reasons for judgment should be read with the May judgment. I will adopt the description of each set of proceedings used in the May judgment being the matrimonial proceedings and the de facto proceedings.

4. At present the balance in the controlled monies account, according to the material, is approximately $368,707. Pursuant to Orders made in the May judgment each of the parties to the proceedings, as then constituted, received payment of $25,000 from the controlled monies account. An order was also made otherwise freezing the funds in the controlled monies account pending agreement of the parties or further order of the Court. 

5. It is important to repeat that the monies in the controlled monies account are the balance of the proceeds of sale of a parcel of real estate owned by Barre Pty Ltd. None of the parties apart from Barre Pty Ltd have any proprietary interest in the funds.

6. The only shareholder in Barre Pty Ltd is another company named D Pty Limited, of which Mr Barre is the sole director and shareholder.  It is clear therefore that Mr Barre can exercise control over the disposition of the funds in the controlled monies account in the absence of the Court’s order prohibiting any such dealings. They are a financial resource for Mr Barre. The funds in the controlled monies account will also clearly form part, at least, of the basis for the value of Mr Barre’s share in D Pty Limited.

7. The existing order dated 8 May 2019 preventing release of funds is in the nature of, or is analogous to, a freezing order. It was common ground that it was made on the basis that the balance of the funds in the controlled monies account should remain untouched in order to prevent dissipation and ultimate frustration of any orders of the Court made ultimately in favour of parties other than Mr Barre including his former wife, Ms Haynes or Ms Gilliam.  It continued an earlier order restraining dissipation of the fund in the controlled monies account.

8. By his Application, Mr Barre originally sought a further order of the Court releasing $160,000 to him from the controlled monies account.  Initially each party indicated they opposed such an order.

9. When the matter was called on 21 November 2019 the parties asked for time to engage in negotiation. After some hours a form of partial consent orders was produced. Those orders provided for a payment to Ms Haynes, who was the Second Respondent, of $130,000, as a result of which she ceased to be a party to the proceedings, made no further claims and agreed to dismiss proceedings she had on foot against Mr Barre and some of his companies in the District Court of New South Wales. All parties consented to these orders being made.

10. As a result, the area of debate was narrowed to the consideration of two proposed further orders as follows:

    a)the payment of $120,000 to Ms Gilliam as she directs in writing being $40,000 to her and $80,000 to the trust account of her solicitors; and

    b)the sum of $110,690 to Mr Barre as he directs in writing.

11. After Ms Haynes is paid the balance in the controlled monies account will be approximately $238,707 according to the evidence. The effect of the proposed orders would be to distribute almost the entire balance of the funds held in the controlled monies account to Ms Gilliam and Mr Barre, after the agreed payment of $130,000 to Ms Haynes, which will take place pursuant to consent orders, as already noted.

12. Mr Barre and Ms Gilliam both consent to the order being made. The First Respondent, Ms Barre, does not consent.

13. The Application by Mr Barre, and now Ms Gilliam can be understood in two ways. The first is as an application for release of funds for litigation funding.  The second is as a carve out from a freezing order of funds for reasonable living expenses or legal costs. These overlap.

14. As to litigation funding, many cases have emphasised the importance in such applications of identifying the relevant source of power for a litigation funding order, since this determines the necessary preconditions and relevant considerations for making the order: Zschokke & Zschokke (1996) FLC 92-693; [1996] FamCA 79; Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578 and Strahan & Strahan (interim property orders) (2011) FLC 93-466; (2009) 241 FLR 1 at [84].

15. In Paris King Investments Pty Ltd v Rayhill (supra) Brereton J at [29]-[33] gave a detailed consideration of the authorities and principles which it is worth setting out at some length:

    [29] The juridical bases for an order for preliminary provision for litigation costs in matrimonial proceedings are diverse. Such an order may be made as a costs order under Family Law Act, s 117, or as an interim or partial property order under s 79 and s 80(1)(h), or perhaps as a maintenance order under s 74 [see In the Marriage of Poletti (1990) 15 Fam LR 794; Breen v Breen (1990) 65 ALJR 195; Parker v Parker (1992) 16 Fam LR 458, DFC ¶95-123 (a decision of Bryson J in this court, upheld in the Court of Appeal); and In the Marriage of Zschokke (1996) 20 Fam LR 766].

    [30] The Full Court of the Family Court of Australia reviewed the authorities and principles relating to the making of interim provision for litigation costs in Zschokke. That case establishes that it is important, when contemplating an order for interim provision for litigation expenses, to identify the relevant source of power - because it is the source of power that determines the necessary preconditions and relevant considerations for making the order. Thus, where an interim order for litigation expenses is to be made as an interim costs order under s 117(2), and probably also if it is to be made as a maintenance order under s 74, there are at least three requirements: first, a position of relative financial strength by the respondent; secondly, a capacity on the part of the respondent to meet his or her own litigation expenses; and thirdly, an inability by the applicant to meet her or his litigation expenses from her or his own income assets or financial resources. In addition, it has been said that such an order should be made only if the applicant has at least an arguable case for substantive relief which deserves to be heard [In the Marriage of Chester (1995) 19 Fam LR 281, 287], and that there should be evidence of what the applicant's likely costs of the litigation [In the Marriage of Wilson (1989) 13 Fam LR 205, 208-9; Chester, 288]. But it is not an essential precondition to the making of a such an order that an applicant first prove that his or her legal representatives will not continue to act unless their costs are paid or secured on an ongoing basis [In the Marriage of Columb (Family Court of Australia, Fogarty J, 27 November 1987, unreported); but cf In the Marriage of Coomes (1995) FLC ¶92-558, in which Cohen J declined to make an order where the Wife's lawyers had expressly said that she would not be required to pay their costs until she had received funds from the final property order].

    [31] Although there is some authority for the view that financial provision for litigation expenses should be calculated in accordance with the authorised scale of costs [Chester, 288], the better view – consistent with the approach that in my view applies in Mareva cases, that a party’s recourse to its assets for the purpose of funding its defence should not be limited to the bare minimum [Harrison Partners Construction Pty Ltd v Jevena Pty Ltd [2006] NSWSC 317, [11], and see [50] below] - is that a Court may make provision for litigation expenses at a rate that appears reasonable in all the circumstances [A Dickey, “Interim Financial Provision for Litigation Expenses: In the Marriage of Zschokke” (1997) 11 AJFL 231, 233]. While there is some dispute whether, at least where s 117 is the source of power, an order can be made which provides for past costs, as distinct from future costs - in Liati v Warren (1995) DFC 95-161, Master McLaughlin (as his Honour then was) declined to order provision to cover costs already incurred - the distinction is often semantic in practice, where there is a running account between solicitor and client for the ongoing costs of legal proceedings, though it may be relevant in calculating the amount of an order. As the practice of making orders for interim costs derives from the earlier practice of requiring husbands to provide security for their wives’ costs, and as it is established that security for costs may be ordered in respect of costs already incurred as well as of future costs [Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd [1985] 1 NSWLR 114], in my opinion an order can be made in respect of costs already incurred, though whether the order is to be in respect of costs already incurred or costs to be incurred, and whether the applicant’s lawyers will continue to act in the absence of provision for costs to be incurred, may be relevant to the discretion to make an order, and its quantum.

    [32] In Breen v Breen, the High Court emphasised that any such order should be framed to protect the parties from any risk of injustice arising from the manner in which the funds are expended. This is often done by requiring that the funds be administered solely by the applicant's solicitors and applied only to meet the expenses referred to in the order, with detailed records being maintained to permit review by the Court at the time of the exercise of its discretion in the substantive property proceedings or on the final determination of the issue of costs [Dickey, 11 AJFL 231, 233; Poletti, 795; Parker, 462].

    [33] But many of the foregoing considerations are less important, though not necessarily irrelevant, where what is relied on as a source of power is not s 117 or s 74, but an interim property order under s 79 and s 80(1)(h). In that respect, the Full Family Court said in Zschokke (780-781) that while the requirements of s 79(2) and (4) must be observed in the same manner as for any interim property order, if it appeared that the applicant would likely receive by way of property settlement a sum sufficient to cover the advance, then an interim order may be made [Zschokke, 780-781; see also In the Marriage of Harris (1993) 16 Fam LR 579, 586].

16. It is true that the position of Mr Barre can be analysed somewhat differently to Ms Gilliam. He was a party to the relevant marriage in the matrimonial proceedings. Ms Gilliam is a party to those proceedings only as a creditor of Mr Barre.

17. However, I am satisfied that the principles set out in Paris King Investments Pty Ltd v Rayhill (supra) as applicable to an interim application for the release of funds held on trust in proceedings under the Family Law Act 1975 (Cth) (“the Act”) can be called in aid by both Mr Barre and Ms Gilliam. They are both parties to the proceedings. It was not contended by Ms Barre that these principles were inapplicable.

18. Mr Barre and Ms Gilliam both gave evidence that they are in straitened circumstances and in need of funds to discharge existing debts to fund their representation in the proceedings before me, and to pay living expenses.

19. There is force in Ms Barre’s submissions that the financial position of Mr Barre cannot be known with any certainty. However, I am also satisfied that a broad brush approach is appropriate at an interim stage to assess the relative financial strengths of the parties. Logically, if the financial position of Mr Barre as currently disclosed is not accurate in the sense that he has other undisclosed assets at his disposal, the corollary must be that there would be more assets available to satisfy the claims of other parties against Mr Barre. On the other hand it is true, as counsel for the wife submitted, that the disordered approach of Mr Barre to disclosure of his financial circumstances also raises the possibility that his liabilities are greater than he has disclosed. For example, Mr Barre failed to file a Financial Statement until 15 November 2019 despite two earlier orders to do so.

20. However, I am satisfied that Mr Barre likely has significant financial problems.  He has appeared a number of times for himself. The evidence shows he and his companies have significant debts, and there may be claims against him by a liquidator.

21. I accept on an interim basis that the financial difficulties outlined in the evidence of Ms Gilliam likely have some substance.

22. Ms Barre has a property in her own name at C Street, Suburb J with equity of $342,000 and a joint asset with Mr Barre at D Street, Suburb J, with a net value of $1,654,000 and a joint interest in a self-managed superannuation fund with Mr Barre worth $733,000. The available matrimonial assets as between her and Mr Barre appear likely to be sufficient also to satisfy her claim for lump sum spousal maintenance. Her lawyers are acting on the basis they will be paid on the final determination of the proceedings.

23. Ms Barre has no interest in the de facto proceedings. But the factual determination of the alleged existence of the debt owed to Ms Gilliam and its quantum, and the capacity of the husband to repay her, is likely to be relevant in making orders in the matrimonial proceedings.  The same factual finding will then bind Ms Gilliam and Mr Barre in the de facto proceedings.

24. Ms Barre resisted any release of monies to either Mr Barre or Ms Gilliam by reference to the Court’s inherent powers to protect the integrity of its processes. It is settled law that the counterpart of a Court's power to prevent its processes being abused is its power to protect the integrity of those processes once set in motion: CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 at 391. This principle supports the orders in the nature of freezing orders, so that a party against whom judgment is obtained cannot destroy the capacity of the successful to obtain satisfaction of the judgment by dissipating or removing assets. Ms Barre argued the Court’s processes will clearly result in some payment to her and that the controlled monies account should remain in place, after the payment to Ms Haynes, to provide a fund to which resort may be had for either her child support claim or for her costs. She argued this was a sufficient basis to refuse the orders now sought by Mr Barre and Ms Gilliam.

25. I also note it is commonplace for freezing orders to permit payment out of the frozen property for reasonable legal fees and living expenses: e.g. Cardile v LED Builders Pty Limited [1999] HCA 18; 198 CLR 380; 73 ALJR 657; 162 ALR 294. A freezing order does not create any security right over assets frozen: Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 619 and 625.

26. Also the purpose of a freezing order is not to create security for costs. This is particularly so in proceedings brought under the Act, since s 117(1) creates a primary position that each party should bear their own costs. A party seeking a costs order in their favour must satisfy the Court that there are grounds justifying departure from the primary position in s 117(1). Mr and Ms Barre made competing submissions as to why a costs order would ultimately be likely in their favour. At this stage of the proceedings I am unable form any sensible view about the likely costs orders once the litigation is finalised. I am not persuaded that the proposed orders should be refused on the basis that a fund to secure the payment of future costs should be preserved.

27. However, there is some force in the submission of Ms Barre that a liquid fund should be preserved to satisfy her claim to lump sum child support. The tardy manner in which Mr Barre has complied with Court orders for financial disclosure, and the disorganised manner in which his disclosure so far has been made, support an inference that the accuracy of his disclosure is not reliable.

28. I have also taken account of the fact that there have already been numerous interlocutory arguments in both the matrimonial and de facto proceedings and they are listed consecutively for final hearing commencing on 3 February 2020. I am satisfied that it is appropriate to permit release of some funds to Mr Barre to enhance the prospects of final resolution of the proceedings in the final hearing time allocated.

1. The position of Ms Gilliam is different to Mr Barre in respect of disclosure.  She is a creditor.  Although Mr Barre concedes a debt of $150,000, Ms Barre does not concede the existence or size of any such debt.

2. Overall I am satisfied Ms Barre is probably in a position of relative financial strength to both Mr Barre and Ms Gilliam. She has clearly made an arrangement with her lawyers to meet in some fashion her own litigation expenses. Ms Gilliam, and less clearly, Mr Barre, have demonstrated an inability to meet their litigation expenses from her or his own income assets or financial resources.

3. On balance I am satisfied there should be a partial release of funds to Mr Barre and Ms Gilliam from the controlled monies account. I am not satisfied the balance of the controlled monies account should be distributed to Mr Barre and Ms Gilliam.  However, some funds should be retained in the controlled monies account as one asset, among others, available to satisfy any final orders for property adjustment or repayment of debts.

4. The evidence also does not provide a clear basis for a lesser amount to the figures in the proposed orders for either Mr Barre or Ms Gilliam. A release to Mr Barre of $70,000 and $50,000 to Ms Gilliam will leave in the controlled monies account approximately $118,707. Despite the arbitrary nature of the figures, which is unavoidable, given the evidence, I am satisfied they represent an appropriate balance of the interests of all remaining parties to the proceedings. The likely costs, to each of Mr Barre and Ms Gilliam, of instructing and funding legal representation in both sets of proceedings is not likely to be less than this amount. 

5. Accordingly, I will order that the parties take all necessary steps to cause the release to Mr Barre an amount of $70,000, and to Ms Gilliam an amount of $50,000, from the funds presently held in the controlled monies account in the name of Swaab Attorneys (# … 78) within seven days.  I will order that the characterisation of each payment will be left to final hearing.

I certify that the preceding Thirty-Three (33) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Harper delivered on 3 December 2019.

Associate: 

Date:  3 December 2019