Bergman & Bergman
[2008] FamCAFC 207
•18 December 2008
FAMILY COURT OF AUSTRALIA
| BERGMAN & BERGMAN | [2008] FamCAFC 207 |
| FAMILY LAW - APPEAL – SPOUSAL MAINTENANCE – INTERIM – where the trial judge dismissed an application to discharge an earlier interim spousal maintenance order – whether the trial judge adequately considered the evidence which was before him concerning the change in the appellant’s financial position – reference to Family Law Act 1975 (Cth) s 83(2) – no adequate reasons for trial judge’s decision – error of principle established which caused substantial injustice to the appellant – leave to appeal granted – appeal allowed – application remitted for rehearing. FAMILY LAW - APPEAL – INTERIM COSTS ORDER – where the trial judge ordered that the appellant pay the respondent $100,000.00 “by way of security” for costs of the litigation – reference to principles relating to interim costs orders (also termed “Barro orders”) – whether the trial judge erred in making interim costs order against the husband personally – leave to appeal granted – appeal allowed – application remitted for rehearing. FAMILY LAW - APPEAL – REIMBURSEMENT OF TAX – where the trial judgment does not include a determination or mention of the appellant’s application for reimbursement of tax – no reasons provided – leave to appeal granted – appeal allowed – application remitted for rehearing. |
| Family Law Act 1975 (Cth) s 83(2) |
| Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 Bennett & Bennett (1991) FLC 92-191 Barro & Barro (Unreported, Family Court of Australia, Strauss J, 15 September 1980) Barro & Barro (Unreported, Full Court of the Family Court of Australia, 6 March 1981) Rutherford & Rutherford (1991) FLC 92-255 Zschokke (1996) FLC 92-693 |
| APPLICANT/APPELLANT: | Mr Bergman |
| RESPONDENT: | Ms Bergman |
| FILE NUMBER: | MLF | 5245 | of | 2003 |
| APPEAL NUMBER: | SA | 94 | of | 2007 |
| DATE DELIVERED: | 18 December 2008 |
| PLACE DELIVERED: | Canberra |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Bryant CJ, Faulks DCJ and Finn J |
| HEARING DATE: | 5 May 2008 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 21 September 2007 |
| LOWER COURT MNC: | [2007] FamCA 1122 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr St John SC |
| SOLICITOR FOR THE APPELLANT: | Caroline Counsel Family Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Geddes QC with Ms Johns |
| SOLICITOR FOR THE RESPONDENT: | Marshalls & Dent |
Orders
That leave to appeal Orders 1, 2 and 3 of the orders of the Honourable Justice Mushin made on 21 September 2007 be granted.
That the appeal be allowed.
That Orders 1, 2 and 3 of the orders of the Honourable Justice Mushin made on 21 September 2007 be set aside.
That the application of the husband for the orders sought in paragraphs 1 and 4(a) of Part D of the Application in a Case filed on behalf of the husband on 20 July 2006 and the application of the wife for the order sought in paragraph 6 of Part B of the Response to an Application in a Case filed on behalf of the wife on 15 August 2006, be remitted for rehearing before a judge other than the Honourable Justice Mushin.
(a)That within 28 days of the date of these orders all parties be at liberty to file and serve any written submissions in relation to the costs of the appeal.
(b)That each party have a further 28 days in which to file and serve any written submissions in answer to any submissions filed by the other party.
(c)That each submission have endorsed on the cover sheet the date on which a copy of that submission was served on the other party.
IT IS NOTED that publication of this judgment under the pseudonym Bergman & Bergman is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT MELBOURNE |
Appeal Number: SA 94 of 2007
File Number: MLF 5245 of 2003
| Mr Bergman |
Applicant/Appellant
And
| Ms Bergman |
Respondent
REASONS FOR JUDGMENT
This is an application for leave to appeal, and if leave be granted, an appeal by the husband, Mr Bergman (conducted through a Case Gaurdian, who is the husband’s daughter), against orders made by Mushin J on 21 September 2007.
By Order 1 of those orders his Honour dismissed an application by the husband to discharge an order made on 22 December 2005 which required the husband to pay interim spousal maintenance of $1,600.00 per week to the wife, Ms Bergman. By Order 2 his Honour ordered that the husband pay the wife $100,000.00 “by way of security” for her costs of the litigation between the parties.
Although the wife concedes certain of the errors on the part of his Honour asserted by the husband, she nevertheless seeks that the application for leave to appeal be dismissed on the basis that there was no error of principle in the making of the orders, nor substantial injustice caused to the husband by the orders. It was accepted on behalf of the husband that these were the matters that had to be established if he was to be granted leave to appeal (Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170; Rutherford & Rutherford (1991) FLC 92-255).
relevant background
The husband (who was born in 1933) and the wife (who was born in 1944) separated in August 2003 after a marriage of some eight years and an overall cohabitation period of some fifteen years.
Within a few days of their separation, the wife commenced proceedings for property settlement and spousal maintenance. According to Mushin J (in his reasons for judgment delivered in relation to the orders now sought to be appealed), the husband asserts that the net value of the property available for distribution between the parties is approximately $5 million, while the wife asserts that it is $8.5 million.
It appears that since late 2005 the husband’s case has been conducted by a Case Guardian, being a daughter from a previous relationship.
On 22 December 2005 Young J made a range of interlocutory orders which included orders that:
·“… until further order the husband pay or cause to be paid to the wife for her maintenance the sum of $1,600.00 per week (clear of deduction or expense), commencing 26 December 2005” (Order 1), and that:
·“… each of the parties’ solicitors be paid the sum of $50,000.00 from the moneys transmitted from the ANZ joint account in Fiji, such sum to be used on account of the reasonable costs of each of the parties in prosecuting his or her claim in these proceedings, the balance then remaining, being the sum of approximately $152,783.00 to be held in an interest bearing trustee approved account in their joint names and controlled by the wife's solicitors … and held until further order of the Court” (Order 2).
On 20 July 2006 an application was filed on behalf of the husband seeking relevantly for present purposes:
·the discharge of the interim spousal maintenance order made by Young J on 22 December 2005;
·that a jointly owned property in Sweden be sold with the net proceeds of sale to be paid into the trust account of the wife’s solicitors (referred to in Order 2 of Young J’s orders of 22 December 2005) and that from that trust account the husband be “paid or reimbursed:
(a)$51,042.81, being tax paid to the Australian Taxation Office by the Husband as advised to the Wife’s solicitors by letter of [VP], Accountants, dated 18 May, 2006; and
(b)all costs and disbursements previously incurred by him and/or [B] Pty Ltd, or hereafter incurred by him, in pursuit of the Court proceedings described in paragraphs 10(a), 12, 19, 21 & 22 of the affidavit of the Case Guardian sworn 19 July, 2006.”
On 15 August 2006 the wife filed an application seeking a range of orders including that the husband’s application filed on 20 July 2006 be dismissed and that the sum of $50,000.00 be released to the wife’s solicitors “by way of a Barro order”. The amount of $50,000.00 sought by way of “Barro order” was amended to $100,000.00 during the course of the hearing of the application before Mushin J on 22 September 2006. (We will explain in due course the term “Barro Order”).
In advance of the hearing of these applications on 22 September 2006, outlines of submissions were filed on behalf of the husband on 19 September 2006 and on behalf of the wife on 20 September 2006. It is clear from those outlines that both parties understood that the matters to be determined at the hearing on 22 September 2006 were the husband’s applications for the discharge of the interim spousal maintenance order and for the reimbursement of tax paid, and the wife’s application for an advance of monies to fund her litigation costs.
At the hearing before Mushin J on 22 September 2006 there were opening submissions by senior counsel for both parties and then cross examination of the wife. Because of the limited time available for closing submissions, his Honour made directions for the filing of further written submissions.
Such further submissions were filed on behalf of the wife on 13 October 2006 and on behalf of the husband on 3 November 2006. Again it is clear from both parties’ further submissions that both regarded the issues before his Honour for determination as being the wife’s application for litigation funding, and the husband’s applications for reimbursement of tax and the discharge of the interim spousal maintenance order.
The orders sought to be appealed and orders subsequently made on 11 december 2007
On 21 September 2007 Mushin J delivered his reserved judgment. We will later when considering the submissions in support of the husband’s application for leave to appeal, examine in greater depth some aspects of his Honour’s reasons for his orders. It is sufficient here to say that his Honour determined that on the limited evidence before him he could not disturb the interim maintenance order, and he therefore dismissed the husband’s application for the discharge of that order.
He also determined that there should be an order that the wife receive $100,000.00 from the husband to fund the litigation, and he further determined that the parties should be entitled at the final hearing of the proceedings to make submissions as to how the amounts received by the wife by way of maintenance and on account of her litigation costs should be treated.
The terms of his Honour’s orders (other than procedural orders) made on 21 September 2007 were as follows:
1. The husband’s Form 2 Application in a Case filed on 20 July 2006 seeking a discharge of paragraph one of the orders made on 22 December 2005 be dismissed.
2. The husband pay to the wife the sum of $100,000 by way of security for her costs of this litigation.
3. Liberty be reserved to both parties to make submissions at the trial of the applications for final orders in these proceedings with respect to all matters in paragraphs one and two herein.
These are the orders which the husband now seeks leave to appeal. In addition, the husband complains that it is unclear whether his Honour intended to dismiss his application for an order that he be reimbursed for tax paid or whether his Honour simply overlooked that application. At the hearing before us, we were informed that his Honour had subsequently determined that he was functus officio with respect to the tax reimbursement matter.
We were informed when the matter was before us (initially in the written submissions of senior counsel for the wife, and then in the course of the oral submissions of both counsel), that as a result of an application on behalf of the husband for a stay of his orders of 21 September 2007, Mushin J made the following orders on 11 December 2007:
1.The operation of paragraphs 1 and 2 of the orders made on 21 September, 2007 be and are hereby stayed pending the outcome of the Appeal to the Full Court of this Court by the Case Guardian of the husband against such orders.
2.The stay provided by paragraph 1 hereof be on terms that until further order the wife be and is hereby entitled to draw the following sums from the monies held in the Trust Account of the wife’s solicitors Marshalls & Dent presently standing in the sum of approximately $482,000:-
(a) the sum of $1,600 per week;
(b) the sum of $100,000 being on account of the wife’s litigation funding expenses herein.
3.All applications returnable this day be and are hereby dismissed.
4.All questions of costs of and incidental to this application be reserved to the Full Court.
Issues to be raised by the proposed appeal
The husband’s draft notice of appeal on which he would rely if leave to appeal was to be granted, contains 21 grounds of appeal.
The first two proposed grounds are non specific, asserting only that his Honour made errors of fact and of law, and as such need not be further considered. The third ground asserts a failure to give proper reasons for the orders made and can be assumed to be directed to all orders sought to be appealed, as also does Ground 21, which can be read as being directed specifically to the tax reimbursement issue.
Grounds 4 to 10 would seem to be directed to his Honour’s dismissal of the husband’s application for the discharge of the spousal maintenance order, with Grounds 11 to 20 being directed to the litigation funding order.
The dismissal of the husband’s application for the discharge of the interim spousal maintenance order
The issue concerning Mushin J’s refusal to discharge (or vary in any way) the interim spousal maintenance order made by Young J on 22 December 2005 must be considered against the following provisions of s 83(2) of the Family Law Act 1975 (Cth) (“the Act”) which govern the variation (including discharge) of an existing spousal maintenance order:
s 83(2) The court shall not make an order increasing or decreasing an amount ordered to be paid by an order unless it is satisfied:
(a) that, since the order was made or last varied:
(i) the circumstances of a person for whose benefit the order was made have so changed;
(ii) the circumstances of the person liable to make payments under the order have so changed; or
(iii) in the case of an order that operates in favour of, or is binding on, a legal personal representative--the circumstances of the estate are such;
as to justify its so doing;
(b) that, since the order was made, or last varied, the cost of living has changed to such an extent as to justify its so doing;
(ba) in a case where the order was made by consent--that the amount ordered to be paid is not proper or adequate;
(c) that material facts were withheld from the court that made the order or from a court that varied the order or material evidence previously given before such a court was false.
In his reasons for judgment of 21 September 2007, Mushin J began his consideration of the husband’s application for the discharge of the maintenance order by referring to Young J’s finding in paragraph 43 of his reasons for judgment of 22 December 2005 (in relation to that order), that the wife at aged 61 was unable to engage in employment, and that husband at 71 had been “an active investor and property developer throughout his lifetime”.
Mushin J then observed (at paragraph 10) that before him there was “no challenge to the proposition that the wife is unable to earn income from employment”. His Honour then set out (at paragraph 11) the following paragraphs from Young J’s reasons which related to the husband’s future income prospects:
44.[I]t is difficult without the aid of a crystal ball to actually understand the specific income that the husband might hereafter receive. The current evidence affords an income of approximately $10,000 per week subject to significant financial caveats. I understand that income for the husband is not paid in the usual sense but … otherwise [is] received by way of capital sums from various developments.
45. At the husband’s age and in his current poor state of health, there must be a very real issue as to whether that income will continue in the next financial year and thereafter at that level. The husband has significant assets. They are invested. There are luxury resort developments in Fiji. There are other investments. The husband no doubt expects to maintain a very good income therefrom, but the reality of that will only be seen in time…
46. Ultimately what I’m satisfied is that, by weekly income through pension, superannuation entitlements or dividends on shares or capital project sums, the husband has always derived a substantial income and enjoyed a substantial lifestyle.
Mushin J then continued with regard to the husband’s financial position:
12.On the evidence before me, Young J’s findings with respect to the husband’s financial position appear, in general terms, to have been maintained. The husband would appear to have received a sum approaching $4.5 million since the separation although a detailed analysis of that is not possible in the present circumstances. In particular, the husband has investment interests in Fiji and the reliability and potential return from those interests would need to be explored in the circumstances which a full trial of these applications will afford in due course. On any view, the husband’s business interests resulted in turnovers of very large amounts of money.
13.The Case Guardian’s Financial Statement shows a total average weekly income for the husband of $3,291 and personal expenditure of $9,854 per week. However, without making any negative finding against the husband, the affidavit of Mr [F], the wife’s consulting forensic accountant in these proceedings, sworn on 13 September 2006, refers to paragraph 45 of the Case Guardian’s Financial Statement showing the [husband’s] Superannuation Fund as having a gross value of $ 1,602,0632. Mr [F] deposes that based on that balance, the minimum draw down on the pension would be “approximately $127,193 per annum and the maximum approximately $276,316 per annum (or $5,314 per week). Mr [F] deposes that:
[I]f the husband were to draw a maximum pension from the fund, this would continue to support … [him] based on the life tables for approximately 5.8 years.
His Honour then turned again to the wife’s position, recording his understanding of the husband’s case in this regard:
14.Senior Counsel for the husband submitted that not only had the husband’s circumstances changed but the wife’s had also. In support of that proposition, senior Counsel submitted that “the financial assets and resources available to the Wife consist primarily of her entitlements in … [her] Superannuation Fund, a self-managed fund controlled by the Wife and her ownership of the [EY] premises.” It was submitted that the premises were owned in equal shares by the wife personally and in the name of the fund. It was submitted that the wife could, and should, draw on those funds, thereby at least reducing any claim which she might otherwise have on the husband.
His Honour then referred to a letter from the wife’s accountant dated 16 June 2006 (Exhibit B) which stated that, in the view of the accountant, it was not wise for the wife to draw on the fund at this stage because of the tax implications. His Honour observed that this was a matter of some criticism of the wife by Young J in his judgment (at paragraph 49), and he indicated that he would adopt Young J’s comments, saying that it “may well be unreasonable for the wife not to be required to draw on the fund to provide for her own maintenance”. But he then continued:
16.…However, in order to make that finding, it is necessary to consider more than the limited evidence which has been put before me in these applications. It would appear that there are competing expert views with respect to the consequences on the wife of drawing on that fund. Certainly, the wife’s own consulting accountant advises against it, at least at this stage. I do not regard the state of the evidence to be sufficient to enable me to make the findings sought by senior Counsel for the Case Guardian.
His Honour then turned to the difficulty which he perceived to exist on account of the fact that those representing the husband had sought only the total discharge of Young J’s orders and not a variation to a lesser amount, saying:
17.Section 83 of the Family Law Act 1975 ("the Act") empowers me to vary or discharge the order in specified circumstances. For the purposes of these applications, senior Counsel for the husband seeks a total discharge of the order made by Young J, first, on the basis that the husband's financial circumstances have deteriorated and secondly, on the basis that the wife's circumstances have improved, such as would warrant such discharge. Despite several invitations from both myself and senior Counsel for the wife, senior Counsel for the husband declined to specify a lesser amount to which the order might be varied if I were to find that it was appropriate to vary but not totally discharge the present order. Senior Counsel submitted that were I to find that a ground had been established for the variation or discharge of the order, I would then be "at large" in determining the appropriate amount. While I do not accept the submission of senior Counsel for the wife that the only options open to me are either the dismissal of the husband's application, thereby continuing the present order, or the total discharge of the order, the absence of a submission on behalf of the husband as to an alternative amount has not been of assistance to me.
His Honour’s concluding reasons for dismissing the husband’s application to discharge or vary the existing maintenance order were then as follows:
18.On the limited evidence before me, as well as the lack of options in terms of alternate figures to which I may decrease the sum, I find that I am unable to disturb the current spousal maintenance order. The husband has not persuaded me that a total discharge of the order is warranted on the basis of a change to either the husband’s or the wife’s circumstances. The husband continues to have very significant assets and investments from which he derives income and there is no evidence that the income derived from these assets and investments has altered since the making of the spousal maintenance order. Clearly the husband’s age and health affect his ongoing capacity for employment, however, the primary basis for his income is his current assets and investments. Indeed on the evidence of Mr [F] the husband’s superannuation alone could support a comfortable lifestyle for himself for the rest of his days.
19.In contrast, the wife has no capacity to earn income and while she does have superannuation assets I am unable, on the evidence before me, to find that this superannuation negates the wife’s need for spousal maintenance.
20.There is insufficient evidence before me which could support my varying the order by increasing or decreasing the payment sum. It is not appropriate in these circumstances for me to simply pick a figure out of the air. The trial judge hearing the substantive proceedings in this matter will be best placed to assess the question of spousal maintenance and will take spousal maintenance payments into account in making a final determination as to the alteration of the parties’ property interests. I will reserve the right of both parties to argue accordingly.
If leave were to be granted to the husband to appeal his Honour’s refusal to discharge or vary the existing maintenance orders, his grounds of appeal would, in addition to the complaint concerning adequacy of reasons, be as follows:
· that the Trial Judge erred in fact in finding:
- that the Husband’s financial position had been maintained since the Orders made 22 December 2005 (Ground 4);
- that for the financial year commencing 1 July 2006 the Husband’s business interests resulted in turnover of large amounts of money (Ground 5);
- that there were competing expert views with respect to the consequences of the Wife drawing upon her own superannuation fund (Ground 6);
- that the Husband’s superannuation entitlements alone would support a comfortable lifestyle for the Husband for the rest of his life, particularly when ordering a continuation of the prevailing maintenance Order (Ground 9).
· that the Wife failed to establish the level of maintenance proper for her support (Ground 8).
· that the Trial Judge erred in his analysis of the conflicting evidence given by the Wife as to her living expenses (Ground 10).
· that the Trial Judge erred in law in taking into account the fact that, other than seeking a total discharge of the spousal maintenance order, no alternative amounts were advanced on behalf of the Husband as being appropriate to be paid to the Wife when the Trial Judge determined the appropriate level of interim spousal maintenance to be paid to her (Ground 7).
It is fair to say that the essential submission put in support of the first three of the above grounds, or groups of grounds, was that his Honour did not traverse the evidence which was before him concerning the change in the husband’s financial position.
In paragraphs 27 and 28 of his written submissions to us, counsel for the husband provided references to the evidence which was before Mushin J and which was asserted to be “uncontradicted” concerning the “substantial diminution in the Husband’s prospective income for the financial year commencing 1 July 2006”.
In his responding submissions, senior counsel for the wife denied that such evidence was in fact “uncontradicted”, and he also provided references to the material before Mushin J to support the wife’s position, with the overall submission on behalf of the wife being that in the circumstances of the limited hearing before his Honour, he was entitled to reach the conclusions which he did regarding the financial positions of both parties.
We are of the opinion that given the content of the written submissions made to his Honour on behalf of the husband’s case guardian following the hearing before his Honour, and the extensive references in those submissions to the evidence before his Honour which was asserted to establish a change in the husband’s income position, it was necessary for his Honour at least to canvass the evidence. This was so even if his Honour was ultimately to conclude that because of the challenges to the evidence, he was unable to make the findings which were sought on behalf of the husband.
Indeed, it was particularly necessary in this case for his Honour to canvass the evidence concerning the change in the husband’s financial position in view of what can be described as the cautions contained in paragraphs 44 and 45 of Young J’s reasons for judgment concerning the husband’s future financial circumstances. It should also be noted that in paragraph 61 of his reasons for the interim maintenance order, Young J said:
61.What I consider just and appropriate is $1600, and I will order that sum in substitution for the current payment. It will be made until further order and not any specific date. It may be that in the year 2006-2007 financial that the husband's income from capital sums is depleted and this might have to be revisited. I do not invite the parties to come back to Court because the cost of relitigating these issues are extensive, but I provide that qualification to this ongoing spousal maintenance order.
While we see little value in a discussion by us of each individual matter which was raised on behalf of the husband in support of his claim of a change in his circumstances for the purposes of an application of s 83(2), we will refer to one particular matter which highlights the concerns which we have regarding the adequacy of his Honour’s reasoning. We refer here to paragraph 13 of his Honour’s reasons where he referred to the evidence of the husband’s weekly income of $3,291.00 and weekly personal expenses of $9,854.00, and then went on to refer to a maximum possible pension “draw down” of $5,314.00 apparently as a method of bridging the gap between the income and expenses of the husband. It would seem, as was submitted by the appellant’s counsel at paragraph 29 of his written submissions, that even if the maximum figure was drawn, it “would not permit spousal maintenance to continue at the current level”.
His Honour’s failure to provide adequate reasons for dismissing the husband’s claim for a discharge (or indeed even a variation) of the interim spousal maintenance order must, in our view, amount to an error of principle.
It was, however, submitted by senior counsel for the wife that even if this Court was to conclude that there was such an error of principle, we should not grant leave to appeal for the reason that the husband will not have suffered a substantial injustice “as the payments of periodic maintenance are being sourced from moneys held on trust for the parties which can be adjusted by a trial Judge at the final hearing”. We understood this to be a reference to the orders made in relation to the stay application on 11 December 2007.
It was further submitted on behalf of the wife that to remit the matter for rehearing would cause substantial injustice to both parties given the further delays and legal costs that would be occasioned by that course.
We are extremely conscious of, and concerned about, the burden for both parties of a further hearing of the husband’s application for a discharge or variation of the interim spousal maintenance order. However, we do not regard those considerations as outweighing the injustice to the husband of not having had his application to discharge, or vary, the existing order adequately considered, particularly given Young J’s observations at the time when he made that order. Further, we are not persuaded that any injustice suffered by the husband by the continuation of the existing maintenance liability would necessarily be in some way compensated, or adjusted for, in the final property settlement between the two parties.
We, therefore, reluctantly conclude that we must grant leave to appeal the dismissal of the application to discharge the interim spousal maintenance order, and allow the appeal against that order on the basis of the ground which asserts a failure to give proper reasons for the making of the order. That order must therefore be set aside and the relevant application remitted for rehearing. (Such rehearing would, of course, be at the option of the husband or his case guardian).
The order that the husband pay the wife $100,000.00 by way of security for her litigation costs
As earlier mentioned, the wife in a response document filed on 15 August 2006 had sought the following order:
“That the sum of $50,000.00 be released to Marshalls Dent [the wife’s solicitors] by way of a Barro Order”.
In the written submissions filed on behalf of the wife in advance of the hearing before Mushin J, this application by her was expressed to be for “payment out of the moneys now held upon trust for or on behalf of the parties by the solicitors for the wife for the purposes of … the payment of the litigation funding order to the wife …”.
Then in the submissions filed on her behalf subsequent to the hearing before his Honour, it was said that the wife:
…seeks an order for the release of the sum of $100,000 from the funds held upon trust for the parties by Messrs Marshalls & Dent, that sum to be applied by her towards the costs of the litigation.
We mention here that the expression “Barro order” is the term used in Victoria (as was explained by Young J in paragraph 52 of his reasons for judgment of 22 December 2005) to describe an order which provides a party with funds for the purpose of pursuing family law litigation and with the ultimate characterisation of those funds being left to the Judge who finally determines the litigation between the parties. The name apparently comes from the unreported decision of Strauss J in Barro v Barro (15 September 1980) which was the subject of the subsequent unreported Full Court decision (6 March 1981). The principles to be applied in the determination of an application for such an order are explained in the subsequent Full Court decision of Zschokke (1996) FLC 92-693 and the earlier authorities there referred to.
We also mention that in the submissions filed on behalf of the wife prior to the hearing before Mushin J (which submissions were then expressly relied on in the submissions filed subsequent to the hearing before his Honour), senior counsel for the wife argued her case by reference to the principles in Zschokke.
As will have been seen, it was clear in the submissions filed on behalf of the wife (both before and after the hearing before him) that for the purpose of funding the litigation, the wife was seeking that such funds be released from the funds held by her solicitors in trust for both parties. However his Honour’s order for the provision of such funds to the wife was made against the husband, with its terms being that “the husband pay to the wife the sum of $100,000 by way of security for her costs of this litigation”.
This, as will shortly be seen from the proposed grounds of appeal directed to the litigation funding order, was one of the husband’s principal challenges to that order.
This error on his Honour’s part was conceded before us on behalf of the wife. However it was the wife’s position that this error would not justify the grant of leave to appeal because under his Honour’s subsequent orders of 11 December 2007, the wife had received the necessary funds from the monies held in trust for the parties, and any necessary adjustments could be made when the final orders for property settlement were made.
The wife’s position in this regard was not accepted by the case guardian, on whose behalf the application for leave to appeal the “litigation funding” order continued to be pressed before us. It is thus necessary that we consider his Honour’s reasons for the order which he made against the husband.
At the commencement of his reasons in relation to the wife’s application which he described as being “for interim costs in the sum of $100,000 to enable her to conduct these proceedings”, but without indicating against whom the order for such funding was sought, his Honour set out the following as being the bases for the application:
22. …
·the disparity in the financial circumstances of the parties;
·the husband has income, assets and resources with which to meet his ongoing legal costs which the wife does not have;
·there is evidence to establish the costs incurred by the wife to date and the need to incur further costs in prosecuting her application;
·the evidence of the Case Guardian as [to] the significant amount expended by the husband in relation to these proceedings to date. In an affidavit filed on 9 August 2006, the husband's solicitor swore that her client had paid her firm the sum of $503,191 in respect of his costs to that time; and
·the applications are complex, the husband controls the majority of the relevant assets, is in possession of the relevant documents and independent expert valuations are required.
These matters were largely the matters relied on by senior counsel for the wife in his submissions filed in advance of the hearing in the context of his reliance on the principles in Zschokke (supra), and were recognised as such by his Honour in paragraph 23 of his reasons.
His Honour then explained that it was the husband’s position that no order should be made on the wife’s application, and he explained the reasons for that position:
24.It is submitted on behalf of the husband that no order should be made on the wife's application. Part of the basis for that submission is that the wife should seek to recover loan monies owed to her by her sister. The husband sued both the wife and her sister in the Supreme Court of Victoria. He obtained judgment in his favour in a sum of a little over $90,000. Both the wife and her sister sought a stay of execution of the judgment. The wife was successful in her application but the sister was unsuccessful. The husband appears to have threatened to serve a Bankruptcy Notice on the sister, as a result of which the wife regarded herself as having at least a moral obligation to assist her sister by paying her share of the debt.
25.As a result of previous orders made by Young J, the wife was, at the time of the events described in the last paragraph, in the course of borrowing a sum of $200,000 from her bank. She had been authorised by order of the Court to borrow that money to assist in funding her litigation in these proceedings. The wife used the sum of approximately $46,000 from that borrowed money to pay her sister's share of the judgment debt which was owing to the husband.
His Honour then referred to criticisms made of the wife in the course of her cross-examination, for the use she had made of these bank borrowings, for representations which she had made to the bank, and for affidavit evidence which she had given in the Supreme Court.
His Honour concluded that he could not at this stage of the proceedings make findings regarding the wife’s credibility, but he then went on to criticise the husband strongly for his criticism of the wife’s payment of her sister’s debt, and indeed even for commencing proceedings in the Supreme Court against the wife and her sister when proceedings between the husband and the wife were pending in the Family Court. His Honour then concluded in relation to this issue of the wife’s use of funds to pay her sister’s judgment debt of $46,000.00 (emphasis added):
29.The wife, having obtained an order permitting her to use part of the borrowings for the expenses of this litigation, paid virtually the entirety of that sum to her sister for the benefit of the husband in the circumstances described above. The wife's actions have placed her in a financially disadvantageous position compared with the husband and it is appropriate that the husband should remedy that disadvantage. Accordingly, an order should be made in favour of the wife in the sum of at least $50,000 for the costs of this litigation.
In relation to the balance of the funds sought by the wife, his Honour said:
30.However, there remains the question of the wife's application for a further sum of $50,000 for ongoing costs of this litigation. In that regard, admissions on behalf of the wife as to the merits of her application lead me to the conclusion that the wife's application should be granted. This litigation is complex, costly expert evidence is required, the husband has control of the bulk of the relevant assets as well as documentation which will enable the Court to decide the final applications. The husband has already advanced a very large sum for his own legal costs and it would be most unjust if the wife did not have at least some proportion of the same opportunity.
Then having indicated that the wife should not be required to draw on her superannuation fund and also having said that the “opportunity will be reserved by both parties to argue the ultimate disposition of these monies”, his Honour concluded:
33.Accordingly, there will be an order for the husband to pay the wife the sum of $100,000 by way of litigation costs.
The proposed grounds of appeal against that order are as follows:
11.That the Trial Judge failed to accord the Husband procedural fairness in permitting the Wife to amend her application to seek $100,000 by way of security for her litigation costs.
12.That the Order made requiring the Husband to pay $100,000 by way of security for the wife’s costs had not been sought by the Wife, nor had the possibility of the making of an Order directed to the Husband personally been foreshadowed by the Trial Judge.
13.That in making an order requiring the Husband to pay to the Wife the sum of $100,000 the Trial Judge failed to accord the Husband procedural fairness.
14.That the Trial Judge erred in fact in finding that the Wife had been authorised by Order of Court to borrow $200,000 for the purposes of funding her litigation expenses.
15.That the Trial Judge erred in determining it was appropriate that the Husband pay to the wife $50,000 to reimburse to her $46,000 paid to meet a debt of her sister.
16.That The Trial Judge impliedly but improperly took into account when determining the application for litigation costs the fact that a debt was pursued by the Husband against the Wife and her sister in the Supreme Court of Victoria rather than in the Family Court and in doing so acted upon wrong principles and/or denied the Husband procedural fairness.
17.That the Trial Judge mistakenly believed the Wife had obtained an order permitting her to use part of her borrowings for her own litigation expenses and impliedly use this as a justification for requiring a payment to reimburse her for moneys paid to the Husband in respect of her sister’s debt.
18.That the Trial Judge erred in fact in finding that the Husband has control of the bulk of the relevant assets and documentation.
19.That the Trial Judge took no account, or no sufficient account, of the very substantial moneys already advanced to the Wife pursuant to Orders of Court and/or otherwise applied by her towards her legal expenses when finding that it would be most unjust for her not to have “at least some proportion” of the cost incurred by the Husband.
20.That the Trial Judge erred in his implicit finding that the Husband had advanced sums to meet his own litigation expenses well in excess of those advanced by the Wife.
We have already discussed the complaint contained in a number of these grounds to the effect that the wife did not, as indeed she conceded before us, seek an order against the husband personally, but only against the fund held in trust for both parties. It has to be said that his Honour misunderstood the application which was before him, as is clear from the passage in paragraph 29 of his reasons which we have emphasised.
As to the grounds which are directed to issues relating to the Supreme Court proceedings and the wife’s payment of her sister’s judgment debt to the husband, we are of the view that those grounds and the submissions made in support of them also have force. Put simply, these matters would not support what might be described as a “litigation funding” order. Moreover, it seems clear that his Honour was in error in his reference to a court order authorising the wife’s bank borrowings in paragraph 25 of his reasons.
As to what can be described as “the second component” of his Honour’s order, which was discussed and determined by him in paragraph 30 of his reasons, senior counsel for the wife endeavoured (particularly in paragraphs 4.4 to 4.7 of his written submissions) to support his Honour’s conclusions by reference to various passages in the evidence which was before his Honour. Senior counsel also sought to rely, particularly in resisting the grant of leave to appeal, on the fact that the parties would ultimately be able to argue the disposition or characterisation of the funds advanced to the wife.
While we recognise that there is some force in the submissions made on behalf of the wife in relation to “the second component” of the order, we nevertheless consider that the error in failing to recognise that the application was not against the husband personally is sufficiently serious, and indeed may well have contaminated, so to speak, the entire consideration of the application, that we must grant leave to appeal, and allow the appeal against, and set aside, the “litigation funding” order.
Again we will formally remit the wife’s application for re-hearing. But it is to be hoped that given the terms of Order 2(b) of the orders of 11 December 2007, which presumably the wife has already availed herself of, it will not be necessary for the wife to seek to have her application for “litigation funding” re-listed for hearing.
Before finally concluding on this second issue, we observe that the use of the expression “by way of security” for litigation funding as used in his Honour’s orders of 21 September 2007 would not seem to be entirely accurate, and may indeed be misleading.
the husband’s application for reimbursement of a taxation liability
As mentioned early in these reasons, the husband had in his application filed on 20 July 2006 sought an order that from the monies held in trust for both parties, he “…be forthwith paid or re-imbursed:
(a)$51,042.81, being tax paid to the Australian Taxation Office by the Husband as advised to the Wife’s solicitors by letter of [VP], Accountants, dated 18 May, 2006…”
Also, as earlier mentioned, the submissions filed by both parties both before and after the hearing before Mushin J on 22 September 2006 made it clear that the tax reimbursement issue was a matter requiring determination by his Honour. However, in his Honour’s reasons for judgment delivered on 21 September 2007, there is no determination, nor indeed any mention, of that issue.
Again, as earlier mentioned, those representing the husband have apparently been unsuccessful in having the matter re-listed before his Honour (presumably because his Honour considered that he had in some way determined the matter).
Thus by his last ground of appeal (Ground 21), the husband complains that his Honour “failed to give any or sufficient reasons why the Husband’s application for reimbursement of expenses incurred by him was impliedly refused”.
Prima facie, this ground would have to succeed on the basis that if it is accepted that his Honour refused the application for reimbursement, he has failed to give reasons for that refusal, and has thus offended the well-known authorities requiring a judge to give reasons for a decision (see Bennett & Bennett (1991) FLC 92-191 and the earlier authorities there cited).
However, whilst conceding that his Honour did not deal with this issue, senior counsel for the wife submitted that leave to appeal should not be granted on the basis that no substantial injustice has been visited upon the husband by his Honour’s omission given the lack of material available to support the claim, the relatively small amount of the claim in the overall circumstances of the case; and the capacity for this amount to be taken into account in the ultimate property division in this case.
Alternatively, it was submitted by senior counsel for the wife that should this Court grant leave and allow the appeal, then we should re-exercise the discretion ourselves rather than subject the parties to a further hearing.
While there is some force in these submissions made by senior counsel for the wife, we nevertheless consider that it is a significant error for a judge to fail to deal with an application which was clearly before him or her, at least without giving reasons for not dealing with the application. It is an error which requires our intervention by the grant of leave to appeal and the allowing of the appeal.
Again notwithstanding the submissions of senior counsel for the wife, we are not persuaded that it would be appropriate for us to determine the tax reimbursement issue. This is for the reason that, in the course of discussion before us, a number of uncertainties emerged regarding this issue which the parties ought have the opportunity to clarify. Such opportunity would be afforded to the parties in the context of any rehearing of one or both of the other two issues which we have determined should be remitted for rehearing (should the applicant party wish to pursue such a rehearing).
Conclusion
Therefore, for the reasons that we have given, our orders will be that there be leave to appeal Orders 1, 2 and 3 of the orders of 21 September 2007; that the appeal be allowed; that the orders be set aside; and that the application of the husband for the orders sought in paragraphs 1 and 4(a) of Part D of the Application in a Case filed on behalf of the husband on 20 July 2006 and the application of the wife for the order sought in paragraph 6 of Part B of the Response to an Application in a Case filed on behalf of the wife on 15 August 2006, be remitted for rehearing before a judge other than the Honourable Justice Mushin.
Costs of the appeal
At the conclusion of the hearing before us, we invited and received submissions in relation to the costs of this application for leave to appeal and appeal.
In the event that the appeal was to succeed, both counsel initially indicated that their client would seek the appropriate certificates under the Federal Proceedings (Costs) Act 1981 (Cth).
However, senior counsel for the wife subsequently informed us that there were reasons why there should be written submissions in relation to costs after the delivery of our judgment. We will therefore make directions for this to occur.
I certify that the preceding seventy-six (76) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court
Associate:
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