BEKLAR & BEKLAR
[2012] FamCA 894
FAMILY COURT OF AUSTRALIA
| BEKLAR & BEKLAR | [2012] FamCA 894 |
| FAMILY LAW – INTERIM COSTS – Where interim costs order sought by Applicant or in the alternative payment by way of interim property settlement – Where Respondent opposed the Applicant’s application and in addition sought sale of property by way of partial property settlement – Where Applicant’s application upheld but for a lesser sum in the event the Applicant does not comply with certain requirements – Where Respondent’s application for sale of property dismissed as it would be both premature and unjust to order the sale ahead of the final hearing scheduled to take place in a matter of weeks. |
| Family Law Act 1975 (Cth): ss 117(1); 117(2); 117AA; 118; 117(2A); 74; 80(1)(h); 79; 75(2); 79A. |
| Gabel v Yardley (2008) FLC 93-386 Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578 Penfold v Penfold (1980) FLC 98-800 Strahan & Strahan (2011) FLC 93-466 Zschokke and Zschokke (1996) FLC 92-693 |
| APPLICANT: | Ms Beklar |
| RESPONDENT: | Mr Beklar |
| FILE NUMBER: | SYC | 3556 | of | 2008 |
| DATE DELIVERED: | 30 October 2012 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | By way of written submissions |
| JUDGMENT OF: | Ryan J |
| HEARING DATE: | By way of written submissions received by the legal representatives for both parties on 12 October 2012 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Batey |
| SOLICITOR FOR THE APPLICANT: | Paul & Paul Lawyers |
| SOLICITOR FOR THE RESPONDENT: | Barkus Doolan Kelly |
Orders
That the husband pay to the wife interim costs as follows:
(a)Ninety thousand dollars ($90,000.00), in the event that the wife provides proof that subsequent to 30 August 2012 she has paid $11,500.00 towards outstanding legal expenses referred to at paragraph 53 of her Financial Statement filed 30 August 2012, payable as follows:
(i)five thousand dollars ($5,000.00) within seven (7) days of the date of these orders;
(ii)five thousand dollars ($5,000.00) following the wife’s attendance upon Dr M (on 17 October 2012);
(iii)twenty five thousand dollars ($25,000.00) by 14 November 2012;
(iv)the balance on 30 November 2012, upon written confirmation that the wife has filed all evidence upon which she relies and is ready to proceed with the final hearing..
In the event that the wife does not comply with Order 1(a) the amount payable by the husband is reduced to $80,000.00.
To facilitate the payments in Order 1 above, the husband will deposit the amounts due in the trust account of Barkus Doolan Kelly and it is directed that the husband’s solicitors certify to the wife’s solicitors seven (7) days prior to payment, that such funds are held.
Excluding any other application for costs, the wife’s Application in a Case filed 30 August 2012 and the husband’s Response to an Application in a Case filed 21 September 2012 are dismissed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Beklar & Beklar has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 3556 of 2008
| Ms Beklar |
Applicant
And
| Mr Beklar |
Respondent
REASONS FOR JUDGMENT
Introduction
In the context of property settlement, spousal maintenance and parenting proceedings, Ms Beklar (“the wife”) has applied for an order that her former husband, Mr Beklar (“the husband”), pays her $90,000.00 by way of interim costs. In the event that order is not made she seeks payment of that sum by way of interim property settlement.
The husband says that the wife’s application should be dismissed. In addition and by way of partial property settlement, he seeks the sale of a property at B Street, Suburb T (“the Suburb T property”). After payment of selling costs, discharge of the mortgage secured thereon and reimbursement for approved repairs to the SuburbT property each party would receive $50,000.00 by way of partial property settlement. The remaining balance would be deposited into an interest bearing account pending further order. The wife resists the sale of the Suburb T property, it being her case that, by way of final order, it would be retained by her.
Although the property pool is, in some respects contentious, it would appear that there is no dispute that the SuburbT property is the most valuable tangible asset.
The final hearing is listed before me for four days to commence on 10 December 2012.
Background facts
The parties married and commenced cohabitation in August 1990. Both parties were in paid employment; in the wife’s case as an assistant in a professional firm and the husband in the financial industry. It would appear the husband had few assets whereas the wife had interests in two parcels of real estate, as well as superannuation and (apparently contentious) items of personalty and savings.
The parties’ daughter was born in February 2001.
Their son was born in March 2004.
The parties separated on 19 September 2007. At separation, the children remained with the wife. They have spent significant time since then with the husband.
The wife has not been in paid employment for many years and not at all following separation. An issue in the final hearing is whether the wife has capacity for paid employment, indeed whether she has had such a capability for some time.
Post separation the husband has been continuously employed as a senior professional with G Limited.
On 18 June 2008, the husband commenced parenting proceedings in the Federal Magistrates Court. In her Response, the wife applied for property settlement, spousal maintenance and child support departure orders.
Since that time the parties have been embroiled in ongoing and expensive litigation.
The parties’ proceedings were listed for final hearing on 27 July 2009.
On 2 July 2009 the wife applied to split the hearing. Orders were made by a Federal Magistrate as sought by her and thus, only the parenting proceedings were listed for final determination on the July 2009 dates.
In preparation for the July 2009 hearing, an Independent Children’s Lawyer (“ICL”) was appointed to represent the children’s interests and an expert report obtained from Dr M, psychiatrist. Ultimately, the parenting proceedings were settled. In broad terms, orders were made by consent to the effect that the children would continue to live with the wife and spend significant time with the husband.
At that time, the husband consented to an order that he pay $40,000.00 for the wife’s legal expenses by way of interim property settlement; which he did. Interim spousal maintenance was ordered and directions made for a further final hearing.
The parties were divorced in February 2010.
The further final hearing, with respect to property matters, was listed to take place on 19 and 20 April 2010. On the husband’s application that hearing was adjourned. On that occasion a further interim property settlement order (again towards the wife’s legal expenses) was made in her favour which required the husband to pay another $40,000.00. With this order the husband complied.
On 20 April 2010, the husband filed a Further Amended Application by which he added an application to vary the 2009 parenting orders; essentially to have the children live with him.
The wife’s Application filed 25 August 2010 that the husband’s application for parenting orders be summarily dismissed was refused.
In February 2011, the wife and children moved from the family home at Suburb C (“the Suburb C property”) to the wife’s parents’ home at Suburb D. The Suburb C property was owned by the wife and members of her family at the commencement of cohabitation. It is unencumbered and has stood vacant since February 2011.
All outstanding applications were again listed for final hearing in June 2011.
On 3 June 2011, the wife’s application for an adjournment of the June 2011 hearing was granted. At the same time the proceedings were transferred to this Court.
In July 2011, the husband purchased an apartment at Suburb E for $750,000.00 (“the Suburb E apartment”).
The husband remarried in August 2011. He and his wife have one child together: S who is 14 months old. The husband’s wife has taken maternity leave which it would appear is now unpaid. Thus the husband’s day to day expenses include his wife and their son.
The proceedings came before me for the first time on 31 May 2012. On that day the matter was listed for final hearing to commence on 10 December 2012, in relation to which directions were made. Provision was made in those directions for the wife to file and serve any application in relation to legal costs within 14 days.
Notwithstanding these directions, it was not until 30 August 2012 that the wife (who acted on her own behalf at that time) filed her application for interim costs/property settlement. Directions were made in relation to that application on 31 August 2012. These directions included that the application would be determined without oral argument. The submissions filed on behalf of the husband (pars 2.1 – 2.8) accurately summarise the provision of documents required pursuant to the 31 August 2012 directions. Although in those submissions the husband opposes the wife being granted permission to rely on her affidavit sworn 3 October 2012 (it being out of time), the delay was not egregious and the husband is not disadvantaged if leave is granted. Leave is thus given. However, as sought by the husband, leave is also given for him to rely upon a letter from his solicitors to the wife’s solicitors dated 4 October 2012.
Application of the Law to the Facts
Consideration will first be given to the wife’s claim for legal expenses reliant upon the costs power.
The wife’s claim for legal expenses
Section 117(1) of the Act is the basic provision concerning costs and provides the general rule that subject to s 117(2), s 117AA and s 118, each party to proceedings under the Act shall bear his or her own costs. Section 117(2) requires a finding of justifying circumstances as an essential precursor to the making of an order for costs (Penfold v Penfold (1980) FLC 98-800). If there are circumstances that justify it in so doing, the Court may make an order for costs pursuant to s 117(2) as the Court considers just. In considering what order, if any, should be made regard must be had to the provisions of s 117(2A) to the extent each is relevant.
Here, the justifying circumstances are said to be the wife’s incapacity to meet her own legal expenses compared to the husband’s capacity to meet his as well as his position of relative financial strength, including that he has a surfeit of income over expenses even after the interim spousal maintenance order is addressed.
In relation to future legal expenses, whether pursuant to s 74 or s 117(2), in Strahan & Strahan (2011) FLC 93-466 per Boland and O’Ryan JJ at [96] the Full Court referred with approval to remarks made by Brereton J in Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578 as follows:
…in addition to the three matters described in Zschokke, where the order was made pursuant to either s 74 or s 117 of the Act:
·an applicant should have “at least an arguable case for substantive relief which deserves to be heard”: Chester v Chester (1995) FLC 92-612 (“Chester”) at 82,107 per Moss J;
·there should be evidence of the applicant’s “likely costs of the litigation”: see Wilson and Chester;
·“it is not an essential precondition” that the applicant’s legal representatives will not continue to act unless the costs are paid or secured on an ongoing basis: Columb and Columb (unreported, Family Court of Australia, Fogarty J, 27 November 1987); see however Coomes and Coomes (1995) FLC 92-558 per Cohen J;
·an order may “make a provision for litigation expenses at a rate that appears reasonable in all the circumstances”;
·an order can be made “in respect of costs already incurred as well as of future costs”;
·“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”;
·“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” and this may be 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”: Breen.
We observe that Brereton J at [33] also said that “many of the foregoing considerations [he described] are less important, though not necessarily irrelevant, where what is relied on as a source of power” is an interim property order under s 79 and s 80(1)(h).
Reference to the three matters referred to in Zschokke and Zschokke (1996) FLC 92-693, is to:
·a position of relative financial strength on the part of the respondent;
·a capacity on the part of the respondent to meet his or her own litigation costs;
·an inability on the part of the applicant to meet his or her litigation costs.
These are not preconditions but, where they exist, add considerable weight to the case for an order of this type. Strahan [90].
The wife’s financial circumstances are set out in her Financial Statement filed 30 August 2012. Her total average weekly income is $1,659.00. This is made up of government benefits in the amount of $369.00, dividends and interest of $40.00 with the balance paid by the husband as child support ($450.00) and interim spousal maintenance ($800.00). It is difficult to discern her average weekly expenses. However, doing the best that I can with Part N of her Financial Statement, when this is considered in the context of Part G, it would appear that her weekly expenses are at least the equivalent of her income. The point being, she has no obvious capacity to pay, from income, the further $90,000.00 in legal fees which it is established she will require if she is to be represented until completion of the final hearing.
However, the wife has approximately $26,500.00 in savings. Her savings are offset by the liabilities she identifies at paragraph 53 of her Financial Statement. What is not apparent are the arrangements she has made with her former lawyers to pay the amounts outstanding or when she will pay the ICL and Dr M (as mentioned in paragraph 53 of her Financial Statement). According to the wife, her family loans there mentioned, are repayable, at the conclusion of these proceedings. When the wife is required to pay her share of the council’s fees is not in evidence.
Although it is accepted that the wife is not required to exhaust her entire savings before she could seek a further advance towards legal expenses from the husband, in circumstances where she has had access to funds secured against the Suburb T property, interim spousal maintenance, child support and two interim lump sums towards costs from the husband, it would not be just to ignore her savings or make provision for future legal expenses but disregard legal expenses which remain outstanding.
On the basis that the wife can show that she has paid outstanding legal expenses referred to in paragraph 53 of her Financial Statement (in whatever proportion she determines) from her savings so that $15,000.00 remains, her claim for $90,000.00 is proper. This would provide a buffer which can then be used towards her day to day expenses.
However, unless the wife can demonstrate that she has made these payments, she is unable to establish that it would be proper to make an interim costs order greater than $80,000.00.
The husband’s financial circumstances are more complex than the wife’s and not quite as readily determined. In his Financial Statement filed 21 September 2012 he deposes to an average weekly income in the amount of $8,919.00. This comprises $5,372.00 salary, dividends and interest in the amount of $86.00 and $3,461.00 bonus (for the year ended 30 June 2012). He says his weekly total personal expenditure is greater than his income and is in the amount of $9,419.00. The husband will pay his future legal expenses, which it is established will be in the vicinity of $123,000.00, by drawing down on the ING redraw facility secured over the Suburb E property. Because there will be a deficiency (his wife requires reimbursement of $44,000.00 she paid into the mortgage) he will also sell shares worth about $30,000.00 in order to fund his legal expenses. So that it is clear, the $123,000.00 which he will expend is in addition to the approximately $330,000.00 (from income) he has already paid.
With provision made for the payment of his legal costs as discussed above, the husband is left with about $11,000.00 savings and otherwise assets which are not immediately realisable. However, attached to the wife’s affidavit filed on 30 August 2012 is a copy of the husband’s application to AMP (Annexure “A”) dated 4 May 2011 and signed by the husband for a home loan. In that document the husband said his annual income (before tax) is $573,000.00. At page 7 of the document the husband confirmed and declared “… that the information set out here is true, accurate and complete …”. The evidence presented in the husband’s case does not reconcile the information he provided to AMP with his evidence about his financial circumstances. If the husband’s income is along the lines disclosed to AMP, he would have little difficulty meeting the wife’s application for interim costs. It may also explain his capacity to save for the Suburb E apartment and to pay (from income) about $61,000.00 for legal expenses in the second half of 2011.
In the husband’s minute of proposed orders, should his primary applications fail, a scheme for payment to the wife of $50,000.00 by instalments is set out. The instalments are linked to steps required by the wife so that the December hearing can take place. The rationale for the instalment plan is “to ensure that the matter is in fact prepared for the Court and further monies are not wasted” that payment, it is contended, will exhaust the husband’s financial capacity. Payment of $50,000.00 (or indeed $90,000.00) would still result in the husband spending much more on legal expenses than the wife. According to the wife’s affidavit filed 30 August 2012 she has spent an estimated $200,000.00 to date on legal expenses. In broad terms, it is apparent that the husband proposes that he will spend approximately $460,000.00 in total in legal expenses whereas the wife will spend in the vicinity of $290,000.00. Again, in this regard it is noteworthy that in the period following his purchase of the Suburb E apartment, the husband has paid $61,000.00 for legal expenses from income.
It is not accepted that after the husband has made provision for his further legal expenses his capacity to contribute to the wife’s interim costs is limited to $50,000.00. Although he may need to rearrange aspects of his financial affairs; for example increase his borrowings against the Suburb E apartment, ask his wife to return the $44,000.00 she recently withdrew from the mortgage (or lend it to him on commercial terms) or perhaps jointly with the wife seek to extend the mortgage secured against the Suburb T property, on balance I am satisfied he has the capacity to advance to the wife the amount sought.
The effect of these matters is that the wife has also established that the husband’s superior financial circumstances weigh in favour of her application. Comparatively, the quantum and rate of the wife’s legal expenses are reasonable and, as the husband will be represented, it is in the interests of justice that she too is also represented.
There are allegations and counter allegations about the parties’ conduct of the proceedings. In particular, in relation to the reasons why the three earlier hearings were vacated and with respect to disclosure. The evidence in relation to these matters is not sufficiently certain that it would be safe to conclude that one party rather than the other is responsible for the prolonged nature of these proceedings and possibly costs having been incurred unreasonably. It is appropriate to observe that neither party makes reference to disciplinary costs orders having been made as a consequence of failure by the other party to comply with directions or because costs were unreasonably thrown away. I infer such orders were not made which bolsters my view that findings cannot be made at this stage based on the parties’ conduct of the proceedings.
In relation to whether the wife has “an arguable case for substantive relief which deserves to be heard”, she has consent parenting orders made as recently as 2009 in her favour which the husband seeks to change. In circumstances where the children continue to reside with her, notwithstanding that the husband asserts merit in his parenting application, there is sufficient evidence to conclude that the wife’s opposition is also meritorious.
In relation to the property settlement and other financial proceedings, the draft Balance Sheet is a work in progress. However, it highlights significant factual disputes in relation to the formulation of the property pool, particularly in relation to notional assets, profit share and the treatment of funds withdrawn from the AMP and ANZ accounts. However, there is no dispute that the wife made contributions of the types referred to in s 79(4) and that she is entitled to a property settlement. Whether the range of outcome is more closely aligned to that which she asserts than is asserted by the husband, is not able to be determined. Given, however, that this will be the first property settlement hearing the wife has established “at least an arguable case for substantive relief which deserves to be heard”.
It is also accepted that any payment made by the husband can be taken into account in determining the overall justice and equity of the final property settlement and that there are sufficient assets from which an adjustment can be made in his favour if the interim costs order is for some reason reversed.
Conclusion
On balance, I am satisfied that an order for interim costs along the lines sought by the wife is just. As to the payment, there is obvious merit in the husband’s approach that the payment is made by instalments linked to necessary steps in the proceedings. So that it is clear, it is apparent that the wife has previously failed to comply with directions and this approach is, to an extent, warranted. Having regard to the wife’s fees outstanding to two sets of former solicitors, the interim costs order will require payment directly to the wife’s solicitors.
Although findings are sought by the husband about how the disposition of assets so as to satisfy an interim order, these matters can properly await the final hearing.
The husband’s application for the sale of the Suburb T property
The approach to an application for an interim property order is described in Strahan. Essentially, this involves two stages, neither of which requires that an applicant establishes compelling circumstances.
First, it must be established that s 80(1)(h) of the Family Law Act 1975 (Cth) (“the Act”) is enlivened to allow an interim property settlement pursuant to s 79. In determining to depart from the usual approach that there is a once and for all final order, it is necessary that it is appropriate to make an interim order, with the overarching consideration being the interests of justice.
In determining what interim property order might be in the interests of justice, a preliminary assessment of the application of s 79 and s 75(2) is required. The imprecise nature of this component of the exercise makes it appropriate to exercise a degree of caution so that the ability to achieve a just and equitable final property settlement is not compromised by the earlier order. In other words, as Bryant CJ and Coleman J observed in Gabel v Yardley (2008) FLC 93-386 the interim order must be amenable to variation or reversal without resort to s 79A or appeal.
The Suburb T property was acquired by the parties in December 2003 for $750,000.00. The property was acquired as both an investment and, following development, to be the parties’ future family home. It appears uncontentious that considerable time, effort and money was spent on plans and obtaining development approval. Post separation funds have been spent by the wife to ensure that the development approval did not lapse. It also appears uncontentious that the parties made decisions about where the children would attend school on the basis they would eventually live in that property.
Conclusion
Both parties present evidence about why, in the wife’s case, she should retain Suburb T and, in the husband’s case, why the sale of Suburb T is inevitable.
Simply put, there are too many contentious facts for the Court to determine, at this stage, that the wife’s claim to Suburb T is doomed to fail. With a final hearing scheduled to take place in a matter of weeks it would be both premature and unjust to order the sale of Suburb T.
Had the wife failed to succeed in securing an order for interim costs, her case for an interim property order would have been granted. In this regard, the submissions made on her behalf are more persuasive than those made for the husband.
I certify that the preceding fifty six (56) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Ryan delivered on 30 October 2012.
Associate:
Date: 30 October 2012
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