CALHOUN & MERCIER

[2018] FamCA 846

FAMILY COURT OF AUSTRALIA

CALHOUN & MERCIER [2018] FamCA 846

FAMILY LAW – PROPERTY – Interim – Application for an interim property distribution pursuant to s 90SM for future legal costs – Where this is not a “proper case in all the circumstances” to make an interim property distribution – Application dismissed.

FAMILY LAW – COSTS – Where the factors in s 117(2A) do not justify the making of a costs order – Application dismissed.

Family Law Act 1975 (Cth) ss 79, 90SM, 90SS, 117, 117(2A)

Harris & Harris (1993) FLC 92-378
Marchant & Marchant (2012) FLC 93-520
Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578
Strahan & Strahan(Interim Property Orders) (2011) FLC 93-466
Wenz v Archer (2008) 40 FamLR 212
Zschokke and Zschokke (1996) FLC 92‑693

APPLICANT: Ms Calhoun

RESPONDENT: Mr Mercier

FILE NUMBER: SYC 3053 of 2018

DATE DELIVERED: 22 August 2018

PLACE DELIVERED: Parramatta

PLACE HEARD: Sydney

JUDGMENT OF: Le Poer Trench J

HEARING DATE: 30 July 2018

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Richardson SC

SOLICITOR FOR THE APPLICANT: Karras Partners Lawyers

COUNSEL FOR THE RESPONDENT: Mr Campton SC

SOLICITOR FOR THE RESPONDENT: Santo Family Lawyers

Orders

1. The applicant’s Amended Application in a Case filed 12 June 2018 is dismissed.

2. Any application for costs of the hearing is to be made in writing within 21 days of the date hereof, accompanied by any affidavit in support and a written submission of no longer than two A4 pages. Each party is to respond to any application for costs made by the other within seven days of service of such application and the response is to be accompanied by any affidavit in support together with written submissions of no longer than two A4 pages. Any application for costs or response made to same, is to be accompanied by a copy of any offer of compromise made in relation to the applicant’s Amended Application in a Case determined by this order.

3. In the event of no application for costs being filed as required by order (2) hereof, then each party’s costs of the application are reserved to be determined by the trial judge should an application be pressed.

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 Calhoun & Mercier 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  PARRAMATTA

FILE NUMBER: SYC 3053 of 2018

Ms Calhoun

Applicant

And

Mr Mercier

Respondent

REASONS FOR JUDGMENT

Introduction

1. Before the Court is an amended Application in a Case filed by Ms Calhoun (“the applicant”) on 12 June 2018 in which she seeks orders against Mr Mercier (“the respondent”).

2. The applicant seeks the following order: “That by way of interim costs the respondent … do all acts and things necessary to pay to [the applicant] a bank cheque in the sum of $487,750.00 within 14 days.” Although framed as an application for interim costs, the applicant submitted that the application was primarily brought under s 90SM of the Family Law Act 1975 (Cth) (“the Act”) as an interim property application. If that application is unsuccessful then the applicant pursues the order under s 117 of the Act.

3. The applicant has titled herself as “the wife” and the respondent as “the husband” in her Amended Application in a Case, in circumstances where it is common ground that the parties were never married. Although this action may have annoyed the respondent, it is, in my view, of no consequence to this determination and if the applicant chooses to so describe the parties to this litigation in those terms, for my part, I am content to accommodate that desire.

4. The applicant commenced proceedings in this court by filing an Initiating Application on 16 May 2018. Her substantive application seeks, inter alia, that the respondent pay her “a bank cheque in the sum of $40 million.” The applicant seeks another order for a trust, controlled by the respondent (the B Trust), to assign to the applicant “all funds held to the credit of the Trust in the accounts of the [C Trust].” The C Trust is an entity controlled by the applicant.

5. The respondent filed a Response to Initiating Application on 8 June 2018. The final orders sought are in simple terms, namely, that the applicant’s application for property settlement filed on 16 May 2018 be dismissed and that the applicant pay the respondent’s costs.”

6. On 8 June 2018 the respondent also filed a Response to the applicant’s Application in a Case seeking a dismissal of that application and the payment of his costs. Each party supported their case with an affidavit. The applicant relied on her affidavit filed 17 July 2018 and the respondent relied on his affidavit filed 8 June 2018. Each tendered the documents referred to in their affidavit as a “tender bundle”.

7. Part of the determination of this dispute calls for consideration of matters of public policy and the use of the court resources in a manner which best caters for the public demand. It is now common knowledge among lawyers who practice Family Law in the Sydney registry of the court, that there are extensive delays in having cases heard due to the demand for the services of the court. This Application in a Case calls for consideration of whether it is a proper case for the court to consider in exercising its discretion to make an order under ss90SM and 90SS(1)(h), or any of the other sub-sections of s 90SS(1), or is it possibly akin to an abuse of process?

8. The respondent’s case is that on any objective view, there is no requirement for the applicant to pursue this application at this time, or at all. The respondent further says that even were there an identified need for the applicant to pursue this case at this time, the jurisprudence of the court, attending the issue of interim property orders, whether sought under s 79 or 90SM of the Act, when applied, would defeat such a claim. The respondent further says that any consideration of the application under s 117 will also see it dismissed.

9. As will be seen in these reasons, it is the first aspect of considering an application for an interim property order which is the principal focus of this determination.

10. In Harris & Harris (1993) FLC 92-378, the Full Court, in considering the exercise of the Court’s power pursuant to s 79, stated, “As a generality, the interests of the parties and the Court are better served by there being one final hearing of sec 79 proceedings…”

11. The Full Court in Zschokke and Zschokke (1996) FLC 92‑693 (at 83,217) identified three factors as being relevant to the making of orders for interim property settlement or interim costs, namely:

    ·a position of relative financial strength on the part of the respondent;

    ·the respondent’s capacity to meet his own litigation costs; and

    ·an inability on the part of the applicant to pay her costs.

BACKGROUND

1. The applicant says the parties cohabited between about June 2011 and 14 January 2018. The respondent contends for a cohabitation of shorter duration (January 2012 to 28 December 2017). The applicant is almost 44 years of age. The respondent is 43 years of age. There are no children of the relationship although the applicant says the parties participated in multiple “rounds of IVF procedures” in an attempt to have children. Each party had been previously married and they each have children from those relationships. The applicant’s children are X born in 2000 (now 18) and Y born in 2004 (now 14).

2. The applicant works as a “director”. The respondent specifies “company director” as his stated occupation.

3. The applicant in her affidavit sworn 17 July 2018 set out the contributions she asserts she made at the commencement of and during, the cohabitation period. I do not repeat the detail of same here, however, for the purpose of this determination, I accept she has identified contributions which, if proved at trial, would probably lead to a conclusion that her contributions were significant and possibly capable of the descriptive “substantial”. It is also clear that the applicant will press a case which relies heavily upon s 90SM(4)(e).

4. The respondent in his evidence and submissions, makes clear he does not accept the contributions of the applicant were significant or substantial. It seems his case is that even if it be concluded the applicant did make contributions of the nature capable of being measured by the criteria set out in s 90SM, such are infinitesimal when compared to the contributions made by him.

5. The applicant is the sole director and shareholder of the company C Pty Ltd. The documents in the tender bundle, relied upon by the applicant, show that C Pty Ltd is the trustee of The C Trust.

6. The applicant disclosed in her affidavit the financial circumstances of the C Trust and included in her tender bundle documents which verified her evidence. She included her 2017 individual tax return. That showed a taxable income for that year of $387,239. However, other documents show that the applicant caused the C Trust to distribute $200,000 to her son in that year which reduced the amount of income the trust could have distributed to her.

7. The performance of the C Trust for the financial year ended 30 June 2018 is set out in the profit and loss accounts provided by the applicant and which became Exhibit R7. That document shows net profit for the year of $587,411. However, within the expenses shown for the year, is a “Donation” of $69,536. If that sum was added back to the available income for distribution to the applicant, it would provide her with a predicted taxable income of $656,947 (some $12,634 per week). The respondent submits there are other aspects of the accounts for the C Trust which mean the amount of income tax the applicant will be required to pay will be discounted by franking credits. I will address that matter later in these reasons.

8. In her Financial Statement sworn 15 May 2018 the applicant disclosed receipt of income from the C Trust of $7,447 per week ($387,244 per annum) and tax payment of $2,422 per week ($125,944 per annum). Clearly those figures were drawn from the applicant’s 2017 tax return.

9. Paragraph 40 of the applicant’s affidavit is as follows:

   The trust distributions received by me from [C] are sufficient to meet my routine living expenses and I do not seek any financial assistance from [the respondent] in relation to any form of periodic support. I am aware however anticipating that the legal fees in these proceedings will be substantial.

10. Paragraph 40 of the applicant’s affidavit really encompasses the cause of her application for $487,750 in interim costs.  It is the information provided to her by her solicitor as to her anticipated future cost, should the matter run to a final hearing. That causes the applicant to be concerned she will not be able to meet those costs in a timely manner. The applicant annexed to her affidavit copies of retainer agreements she had signed with her solicitor and her senior counsel of choice.

11. The applicant anticipates, clearly based on advice, that the future proceeding will require engaging valuers of real estate and commercial interests.

12. The applicant set out details of the “standard of living” enjoyed by her with the respondent during the course of their cohabitation. That evidence can reasonably be seen to be addressing considerations under s 90SM(4)(e) of the Act.

13. The affidavit of the applicant sets out details of costs incurred by her in the proceeding to date.  During the hearing the Court was informed that the applicant has paid $41,155 in legal costs and provided a further $19,500 to her solicitors, which sum is held in trust.  The total amount paid is $60,655.  The court was informed that the respondent’s costs paid to date were $37,036 and there are no funds held in trust.

14. In paragraph 53 of her affidavit the applicant sets out details of the costs she has been quoted in respect of the ongoing conduct of these proceedings.  The costs are calculated on the basis that the matter will proceed to a five day trial.  The total amount of costs which she lists in paragraph 53 is $267,400.  In addition to that cost the applicant says in paragraph 49 she anticipates the cost of forensic accounting fees to be $100,000 to $150,000. In paragraph 50 she estimates property valuation fees at $30,000. In paragraph 51 she states the anticipated cost of attending the conciliation conference is $8,000 to $10,000. A mediation could cost her $47,500. All that cost amounts to a maximum of $504,900. The applicant says she does not have the funds available to meet that anticipated legal cost.

15. In paragraph 55 of her affidavit the applicant sets out her “average weekly expenses” for herself and her two children.  She states that the total of her average weekly expenses for her two sons and herself is $2,545. Additionally she has income tax of $2,422, rental payment of $1,600 per week and credit card payments of $177 per week (those figures set out in her Financial Statement). The total of those expenses therefore being $6,744. 

16. Although her Financial Statement sworn 15 May 2018 was signed approximately eight weeks before her affidavit, she had estimated in that document that her additional costs (item number 32 in her Financial Statement) at only $1,500 per week.  She said that since signing her Financial Statement she had undertaken a detailed analysis of her expenses.  Her Financial Statement also disclosed that her son X has an income of $456 per week.  She has not indicated in her affidavit or her Financial Statement whether he makes any financial contribution to her household.

17. As can be seen from the information set out above, the applicant’s income is now $12,634 per week. Her revised expense list is now $6744 per week (including her stated tax payment of $2,422 per week), without any contribution from her son X.  With a greater income for the 2018 financial year her income tax liability will be greater. The Australian Tax Office publishes income tax payment tables. The publication on the Australian Tax Office web site discloses that on a weekly income of $12,634 the tax payable is $5,422.

18. In the 2017 Tax Year the applicant received part of her income as “Franked distributions from trusts”. The amount she received was $165,505. The franking credits amounted to $23,937 (see page 29 of the applicant’s tender book exhibit A1). The full accounts for the C Trust for the 2017 tax year (page 57 of exhibit A1) show part of the income of the trust consisted of $255,862 being “Dividends Received –Associated Companies”.

19. The document tendered by the respondent and marked as exhibit R7, is a “thumbnail sketch” of the performance of the C Trust for the financial year ended 30/6/2018. That document does not show a dissection of the sources of income for the trust in the same detail as the annual accounts did. It is therefore not possible to determine whether any of the income for the trust was “franked dividend”. In that same document there is a figure under the Liabilities column titled “Income Tax Payable (151,022)”. In accounting terms the use of brackets around a figure in a Liabilities column indicates a credit rather than a debit.

20. Of greater assistance in understanding the applicant’s tax obligation is annexure “J” to her affidavit (page 89 and 90 of exhibit A1). That is a document provided to the applicant by her accountant and explains how the applicant was able to state her tax liability for the 2018 tax year as $108,861. That document shows that the estimated income for the applicant for that year will be $722,798 (including a capital gain figure of $124,687 if small business provisions do not apply). The document shows that the applicant will be credited with $174,086 for imputation credits and $30,000 as PAYG instalments as against her tax liability. Assuming such advice is accurate the following calculation can be made. The tax payable by the applicant applying the Australian Tax Office tax guide figure is $5,422 per week or $281,944 annualised. The imputation credits and PAYG instalments total $174,086. The difference is $107,858 being $2,074 per week.

21. Assuming the best evidence of the 2018 financial year, weekly tax liability of the applicant, is $2,074 (after the imputation credits are applied) then she will have a surplus of income over expenses of $6,238 per week. That figure is calculated as follows: Weekly income $12,634. Less weekly expenses calculated from the evidence in the applicant’s affidavit and Financial Statement, not including the figure claimed in the Financial Statement as “Total income tax”, $4,322 ($6,744 less $2,422).  Less the estimated tax liability of the wife as calculated from the other evidence specified above, $2,074 per week.

22. The wife deposed (paragraph 88 of her affidavit) that her estimated tax liability for the year ended 30 June 2018 is $108,861 (which equates to $2,093 per week). If that is correct then she would be left with a weekly surplus of $6,219 (together with a one-off amount of $4,500 GST).

23. As the evidence provided by the applicant, upon analysis, demonstrates she has a surplus of income over expense of not less than $6,219 per week then, such an outcome adds, in my view, to the difficulty faced by the applicant in succeeding in her application for an interim property order under s 90SM.

24. The applicant, in her affidavit from paragraph 58 onward, set out her evidence in reply to the evidence of the respondent contained in his affidavit of 8 June 2018. The Family Law Rules do not provide for such a reply to be filed or relied upon in the determination of an interim application such as this. Nonetheless, in response to my question “Why should I have regard to the paragraphs 58 to the conclusion of the affidavit” counsel for the applicant said that there was further important evidence in chief contained within those paragraphs. Counsel sought to rely upon paragraphs 58, 66, 67, 68, 79, 81, 82 and 88. I read those paragraphs.

25. In those further paragraphs the applicant detailed additional contributions which she said she made during the cohabitation. If such contributions are ultimately established, then her case for a property adjustment, on the basis she made valuable and substantial contributions of the kind the court is required to have regard to under s 90SM, increases in strength.

26. The applicant is required to establish her case on the evidence which she submits to the Court. I propose to proceed on the basis that I accept the applicant’s case at its’ highest.

27. I note in this case the respondent has filed an affidavit in which he disputes the claims of the applicant in relation to her contributions. Further, he sets out the contributions which he alleges he made. The respondent’s case must be that his contributions vastly outweigh those of the applicant and when considered with other relevant evidence the Court would not make orders which would see any property adjustment in favour of either party.

28. It is a submission of the applicant that the respondent has, in his affidavit, said that the value of the assets of the C Trust (specifically he addresses the businesses beneficially owned by the C Trust) have a combined value of $3 million. The applicant submits that given the vast resources of the respondent he should be required to make the partial property order she seeks and in exchange the applicant would give either an undertaking to the Court not to sell, dispose of or encumber the assets of the C Trust without giving 28 days’ notice to the respondent or, alternatively, she would subject herself to an order to that effect made as a condition of the payment.

1. Despite such a submission being made, it is the respondent’s case that the order should not be made, as there is a fundamental and far reaching question to be answered as to whether the Court should be prevailed upon by the applicant to consider an application for interim property orders in this, or any like fact case. 

Conclusion on Interim Property Claim

1. The respondent has opposed the application of the applicant for an interim property order under s 90SM on the principal ground that she has established no need for the funds which she has sought. The respondent says the evidence establishes clearly that the applicant will be able to fund her anticipated legal fees from the income generated by the trust which she controls. The applicant’s case is that the authorities do not require her to establish that she has a particular need in order to succeed in her application.

2. At the back of the applicant’s claim is a stated period of delay which will reasonably be anticipated before the Court can reach a time when it can hear the applicant’s application for final orders, given the heavy workload of this registry. The respondent submits that if the Court allows the application then it will “open the floodgates” in all property applications which are currently before this registry of the court (and probably the Federal Circuit Court in Sydney) to make similar applications. That is, for one party to seek an interim property order which is prompted by the anticipated delay between the date of filing an Initiating Application for property orders and the date of an expected hearing.

3. The delay from the filing of an application for property orders to a final hearing in the Sydney Registry of this court is approximately two years. That delay may grow as the judicial body able to hear the case diminishes. That delay is common knowledge among practitioners who regularly practice in this registry. There is no secret about that fact and information about the delay is no doubt readily available from reliable sources within the Court. I have, not infrequently over the last five years, shared my knowledge of the expected delay with litigants and practitioners in open court. It is a fact they are entitled to know when endeavouring to resolve their disputes. If they cannot resolve their cases then they face the debilitating ordeal of living through the anticipated delay.

4. The applicant’s case is stated simply. She says she has established sufficient to enable the Court to conclude that it would be “a proper case in all the circumstances” to make an interim property order should she satisfy the requirements of s 90SM and s 90SS as has been set out in the jurisprudence of this court. She contends that, if she has a case, established by the Court accepting she has made contributions of a relevant nature at the commencement of and during the established period of cohabitation, then with the facts which will be considered under s 90SM(4)(e), her case is one of substance given the uncontested enormity of the assets/resources which are available for the Court to adjust. Further the applicant’s case is that the authorities, which bind a trial judge of this court, do not require the applicant to establish a “compelling need for funds” in order to satisfy the criteria necessary for the Court to exercise its discretion and make an interim property order.

5. As a final plank to the applicant’s case she says that she is prepared to give an undertaking to the Court as a pre-condition to the payment of the funds sought by her, not to deal with the assets of the C Trust otherwise than in the normal course of business, without first providing 28 days’ notice in writing to the respondent. The applicant says that on the respondent’s own case the assets of the C Trust have a value of $3 million. That value is vastly greater than the sum sought by the applicant in this application for an interim property order.

6. Before considering the authorities which bind me in the determination of this interim property case, I note that the facts of this case are, in my experience, extraordinary because the respondent, who holds or controls the bulk of the assets available for adjustment by the Court, seeks an order that no adjustment of property take place nor any payment of funds be required by him to the applicant.

7. I now address the binding authority relied upon to establish or otherwise the applicant’s claim.

8. In Strahan & Strahan(Interim Property Orders) (2011) FLC 93-466 the Full Court (Boland, Thackray & O’Ryan JJ) found that the trial judge had erred in determining that the applicant for an interim property order needed to establish “compelling circumstances” for the court to exercise its discretion and make such an order. In that case it was not a matter of contest that the applicant would ultimately be found to be entitled to an order which would be greater than the amount she sought as an interim order to cover prospective costs.

9. In the joint judgment of Boland and O’Ryan JJ their Honours said:

   144. The trial Judge approached the issues from the perspective that the Wife had to establish compelling circumstances. … However all that his Honour was required to consider was whether it was an appropriate case to make an interim order for property settlement because the Wife required funds to defray legal costs and expenses of the pending proceedings.  It did not require a detailed inquiry into the conduct of the litigation on the part of the Wife.  We accept that his Honour was in error in the approach that he adopted.

10. Their Honours continued:

    145. … Because his Honour was satisfied that the Wife had a need for funds to pay legal costs and that she did not have the funds to pay those costs it was an appropriate case to exercise the jurisdiction to make an interim order for property settlement.

11. At paragraph 147, their Honours said

    147. Although we are of the opinion that the trial Judge was in error in relation to the approach he took to consideration of the procedural step, we accept that there may be circumstances where there is a need to examine in some detail a claim for amounts to defray legal costs and expenses, if, for example, it was contended that an application lacked bona fides and was simply being used as a means of obtaining funds by way of an interim property settlement order.  However this was not such a case.

12. At paragraph 149 their Honours said:

    149.    Thus the trial Judge found:

    1.The Husband was able to pay his legal costs and expenses.

    2. The Husband was in a position of considerable financial strength.

    3.  If the order sought by the Wife was made there was no issue that the remaining property would be sufficient to meet the claims of the parties when an order was made exhausting the jurisdiction.

    As a result of these findings all that his Honour had to do was to determine whether in the circumstances it was an appropriate case to exercise the discretion to make an interim order. There was also no controversy about the impact the order sought by the Wife may have when the s 79 power was exhausted. It was contended by the Husband that the Wife could secure her costs other than by an interim property settlement. However, the trial Judge, for reasons which we need not repeat, rejected this contention.

13. Boland and O’Ryan JJ raised some criticism of one aspect of the trial judge’s process of determination when they said, at 152, “During his consideration of the amount to award to the Wife at no point did the trial Judge say anything about the provisions of s 79(4) of the Act or even give them ‘at least some brief consideration’: Zschokke at 83,216.”

14. At 155 their Honours said:

    155. Once it is determined there are appropriate circumstances then the substantive stage should ordinarily be readily capable of resolution for the reasons we have explained. As the jurisdiction is being exercised pursuant to s 79 of the Act it is wrong to take an approach that a part of a legitimate entitlement of an applicant should be deferred until the final hearing.

15. Their Honours concluded:

    158.For reasons we have already given we accept that the trial Judge “erred in principle in confining the circumstances of the discretion to order an interim property settlement to ‘compelling’ circumstances rather than simply to a proper case in all the circumstances”.

16. The third member of the bench was Thackray J. His separate judgment led to his conclusion that the order proposed by Boland and O’Ryan JJ should be made. He did, however, address at length the aspect of “compelling circumstances” which had been the subject of complaint by the appellant about the determination reached by the trial judge.

17. Thackray J referred to portions of the trial judges’ reasons. In particular, he stated as follows:

    177.His Honour recorded that the applicable legal principles were to be found in the decision of the Full Court in Harris and Harris (1993) FLC 92-378, from which he quoted the following passage… :

    …

    (1) The exercise of the power should be confined to cases where the circumstances presented at that time are compelling. As a generality, the interests of the parties and the Court are better served by there being one final hearing of s 79 proceedings. …

18. His Honour proceeded to identify that the trial judge had also referred to the decision of the Full Court in Zschokke and Zschokke (1996) FLC 92-693. He said:

    178. [The trial judge] went on to note that the Full Court in Zschokke and Zschokke (1996) FLC 92‑693 had identified three factors as being relevant to the making of orders for interim property settlement or interim costs, namely:

    ·a position of relative financial strength on the part of the respondent;

    ·the respondent’s capacity to meet his own litigation costs; and

    ·an inability on the part of the applicant to pay her costs.

19. His Honour continued:

    180.… [The trial judge] therefore concluded that the only issue was whether the Wife had “established compelling circumstances”.  He went on to note that the Husband contended that even if the circumstances were “compelling”, a discretion remained to refuse to grant the relief sought.  

20. His Honour in addressing the “Proposed Grounds of Appeal” said:

    198.Although there were a number of grounds, the Wife’s senior counsel submitted that the fundamental error was that his Honour should not have applied a test of “compelling circumstances”, but instead should have determined whether this was a “proper case in all the circumstances” for an interim order to be made as requested”.

21. Under the heading “Discussion” Thackray J referred to particular portions of the decision by Brereton J in Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578, the Full Court decision in Zschokke, and the provisions of ss 79 and 80 of the Act.

22. At paragraphs 218 and 219 Thackray J considered what had been said in Harris outside of the phrase “compelling circumstances”. He noted that the Court had also used the words “appropriate circumstances” and “a proper case”. He stated:

    219.… It should also be observed that the Full Court in Harris used other, less rigorous, formulations in describing when an interim order might be made. For example, the Court referred to interim orders being made in “appropriate circumstances” (at 79,928) and in “a proper case” (at 79,929). Similarly, Nygh J in Burridge and Burridge (1980) FLC 90-902 at 75,679 referred to an order being made under s 80(2)(h) if the “justice of the case so requires”.

23. His Honour then said:

    220.Accordingly, I accept the submissions of senior counsel for the wife that:

    ·s 80 confers a “free standing and unfettered discretion to entertain an application for an interim property settlement”;

    ·it is “contrary to proper judicial practice to confine the jurisdiction … by artificial formulae”; and

    ·the only limits on the application of s 80 “are the usual limits on the exercise of a judicial discretion”.

24. In paragraph 222, Thackray J adopted the view expressed by Reithmuller FM in Wenz v Archer (2008) 40 FamLR 212 at [55] where his Honour said:

    Whilst the phrase “compelling circumstances” is often referred to, it appears to me that this is simply descriptive of the need for there to be matters that weigh sufficiently against the benefits of having only one exercise of a s 79 power, rather than generating a new test of “compelling circumstances” which is not referred to in s 79…

25. His Honour then reached the following conclusions:

    223. Riethmuller FM was alluding in this passage to the view expressed by the Full Court in Harris that “as a generality, the interests of the parties and the Court are better served by there being one final hearing of s. 79 proceedings”. In this regard it is important to note that s 80(1) is couched in the permissive. Hence, although the Court must give consideration to the matters set out in s 79(4) when hearing an application for an interim payment, it has no obligation to make an interim order. The Court “may” do so if it considers that it should in the exercise of its discretion.

    224.In every defended case one of the parties will claim they are entitled to a payment or transfer of property from the other party.  In many cases the other party will acknowledge they are likely to be ordered to transfer property or make a payment.  That, however, could not of itself be sufficient to make it appropriate for the Court to make an interim order.  Circumstances may change radically during the course of proceedings, as has been seen with recent severe fluctuations in the market.  The personal circumstances of the parties may change dramatically.  Furthermore, although a party may anticipate ultimately being ordered to transfer property or make a payment, they may legitimately expect to obtain an order for costs against the other party which will be satisfied from funds or property that would otherwise have been transferred.   

    225.These sorts of considerations provide a strong basis upon which the Court should maintain its traditional stance that there should ordinarily be only one hearing of disputes concerning alteration of property issues.  I accept the submission of senior counsel for the wife that something out of the usual course would need to be established before the Court could be expected to devote its resources to resolution of disputes about interim alteration of property interests.  However, once the Court has determined that it is appropriate to embark upon the hearing of an interim dispute, it has no alternative other than to exercise (or decline to exercise) the power to make an interim order by application of the relevant provisions of the legislation. 

    226.In my view, the two step approach advocated by senior counsel for the Wife aptly encapsulates the way the Court should approach an application for interim property settlement. The Court must first identify circumstances that make it appropriate to give consideration to exercising its power to make an interim order. It is at this stage that the Court has regard to the policy consideration that it is generally in the interest of the parties and the Court for there to be only one exercise of the s 79 power. However, once the Court has determined that the interests of justice require it to exercise the power, the conditions on which the power is to be exercised are governed only by the obligation to make an order that is “appropriate” and to ensure that the proposed order is “just and equitable” by reference to the matters set out in s 79(4).

    227.I accept the submission of senior counsel for the Wife that in applications designed to secure funds for legal costs it is appropriate for the Court to give consideration to whether the claim for costs is “genuine” – i.e. that a party is not bringing an interim application on a pretext.  However, once the Court is satisfied the claim is genuine, it should not “take a narrow view of the costs budget”.  I also agree that “it is dangerous for the Court to put itself in the solicitor’s chair [especially in a case where] there are 182 boxes of materials to go through”. 

26. In Marchant & Marchant (2012) FLC 93-520 the Full Court again visited the pathway to be taken in the determination of an interim property application under ss 79 and 80 of the Act. The Full Court stated:

    24. In Strahan & Strahan (Interim Property Orders) (2011) FLC 93‑466 (“Strahan”), the Full Court (Boland, Thackray and O’Ryan JJ) undertook a comprehensive review of the authorities and identified relevant principles and guidelines to be followed in respect of interim property orders pursuant to ss 79 and 80(1)(h) of the Act.

    25. It follows from the joint judgment of Boland and O’Ryan JJ in Strahan that there are two stages to the hearing of such an application and that the first question on an application for such an order is whether the Court should exercise its discretion to entertain the application. Whilst it is not necessary for an applicant to establish compelling circumstances for that question to receive an affirmative answer, it is necessary to establish that it would be appropriate for the Court to exercise the power and the, “…overarching consideration…” as to appropriateness is the interests of justice. Recognising that in the context of s 79 proceedings, the interests of justice will usually be best served by one single and final determination of property orders, it will not be appropriate to exercise the power merely because, on such a final determination, the applicant would receive the interim property sought or in excess of that sought. [Emphasis added]

Has the applicant satisfied the two stages set out by the Full Court in Marchant?

1. The applicant’s Amended Application in a Case seeks only one order: “That by way of interim costs the respondent husband do all acts and things necessary to pay to the wife a bank cheque in the sum of $487,750 within 14 days.”

2. On its face such an application gives all the indications that it is made invoking the Court’s power to make a costs order under s 117 of the Act. However, the case was argued by counsel for the applicant firstly as an application under s 90SM and, in the alternate, as an application under s 117.

3. The respondent has presented his case in opposing the application for an interim property order under s 90SM and then he has opposed the Court using s 117 to make the order sought by the applicant.

4. Turning then to consider the s 90SM application and whether the applicant has established a case for an interim property order which warrants the Court exercising its discretion to entertain the application.

5. The considerations cumulatively addressed by the Court must be relevant and unrestricted. The considerations recognise “that in the context of s 79 proceedings, the interests of justice will usually be best served by one single and final determination of property orders.”

6. The words “the interests of justice will usually be best served” must, within context, invoke for consideration an understanding that the workload of this court (and in particular the Sydney registry of the court) is now at such an extreme level that the court can only dedicate the scarce judicial hearing time it has to cases which really require determination and are proper cases to bring to a hearing.

7. The background facts to this dispute, as set out above, are, in my view and experience, quite extraordinary. The circumstance of the wealth of the respondent (including approximately $170 million in cash resources) and the applicant having an annual income of $656,947 for the 2018 financial year derived from an asset which may have a saleable value of up to $3 million, is an exceptional and probably extraordinary set of facts. Added to that circumstance, is a cohabitation which endured for either six and a half or  five and a half years (depending upon which version of fact is ultimately accepted) the applicant seeks a property adjustment order which would require the respondent to pay her $40 million. The respondent, in the same case, seeks an order that he make no property adjustment payment to her.

1. The reason which is said to require the applicant's case to be determined by the court is clearly stated as a need to meet legal expenses anticipated to be incurred over the possible length of the case which envisages a final hearing will be required. It further envisages that expensive expert evidence will be required from single experts. In the first place I have no confidence that the legal cost and litigation expense anticipated by the applicant will be actually required. Next, as stated later in these reasons, if the expense of single experts is required to be incurred then, at that time, if the applicant does not have the ability to contribute a lump sum to meet her share of the cost, then she can seek an order that the respondent meet the expense in the first place.

2. In addition to the above aspects of this case I am not satisfied that the applicant cannot meet the costs of the litigation she anticipates, from her own income and resources. The evidence establishes she will probably be able to do so without diminishing her reasonable living costs. If there was a particular expense, which she was required to pay and because of its magnitude she did not at that time have the savings to meet same, then she could approach the court for an order.

3. The conclusion I reach therefore is that this case is not one where the Court should exercise its discretion to entertain the application. I conclude that if the court was to exercise its discretion in this case and make the interim property order sought, then it ought not to refuse to entertain any application for an order for an interim property.

4. At a perhaps base level, this case can, in my opinion, be stated as: “The respondent is enormously wealthy. The applicant is not nearly as wealthy. If the end result of the applicant’s property claim is that she will not be paid any money, as she seeks, by the respondent, or receive any asset from him, then she will have the capital (reposed in the value of her interest in the assets of the C Trust) to repay the $487,750 she is now seeking he pay her. The payment of that sum will work no hardship on the respondent and it may well save the applicant hardship in the future and/or spare the court having to hear a cost application from her at a later time.” If I am correct in such simplistic analysis of the applicant’s claim then, in my view, it is not a proper case for the court to “exercise its’ discretion to entertain”.

5. I propose to dismiss the application for an interim s 90SM property order.

The applicant’s s 117 claim

1. The applicant in submission said that if her claim for an interim order under s 90SM was not successful then she sought an order under s 117 in the same amount, namely $487,750.

2. An order under s 117 requires the court to consider s 117(2A). The primary provision of s 117(1) is as follows:

   Subject to subsection (2), subsection 70NFB (1) and sections 117AA, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.

3. Section 117(2) permits the Court to make an order for costs subject to subsection (2A).

4. Section 117(2A) provides as follows:

   (2A)  In considering what order (if any) should be made under subsection (2), the court shall have regard to:

   (a)  the financial circumstances of each of the parties to the proceedings;

   (b)  whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;

   (c)  the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;

   (d)  whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;

   (e)  whether any party to the proceedings has been wholly unsuccessful in the proceedings;

   (f)  whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and

                   (g)  such other matters as the court considers relevant.

5. Turning then to consider those matters required to be taken into account under subsection (2A) of the section, I make the following findings.

6. The financial circumstances of the parties are set out in their affidavit evidence and in their Financial Statements.  There is a large disparate financial gulf between the parties.  Clearly the respondent is in a position to meet from his capital, income and resources, the legal costs which he might reasonably anticipate being charged in the proceeding.  The applicant’s case is that should she be required to pay a significant portion of her anticipated costs as an up-front lump payment then at such a time she would not have capital or savings available to meet such a demand.

7. In paragraphs 49, 50, 51, 52 and 53 of her affidavit the applicant set out calculations as to costs.  She supports those calculations with annexures to her affidavit including costs agreements with her solicitor and her counsel.  In paragraph 49 the applicant says she anticipates that forensic accountancy fees to be incurred by a single expert forensic accountant could be between $100,000 and $150,000.  For my part I agree with the submission of the respondent that it is difficult to see why the expenditure of that order would be necessary to establish the net financial position of the respondent.  There is no issue that the respondent has cash and resources approximating $170 million together with other assets.  He does anticipate having to pay CGT, however, after such payment he will still have control of assets worth many millions of dollars.

8. In relation to the valuation of the assets of the C Trust, each of the parties is well experienced in trading businesses (including the purchase and sale of same) of the precise nature conducted by the C Trust.  It is hard to imagine circumstances in which the lawyers representing the parties could not reach an agreed figure for the value of the assets owned by the C Trust. In the circumstance of this case, a precise value (rather than a range of value) would probably not be necessary.

9. In the event if I am wrong and it becomes necessary to engage an expert forensic accountant as a single expert in the proceeding, then it would be open to the applicant to seek an order, in the absence of it being consented to, that the respondent meet the cost of such expert in the first place and that the trial judge then be required to determine whether any further contribution to such cost should be borne by the applicant.  Such an order is common in this jurisdiction and I am sure well known to those representing each of the parties.

10. The amount of cost which the applicant anticipates she will incur for attendance at a Conciliation Conference is, I conclude, well within her capacity to meet from her own income.  The anticipated fees of about $45,000 for a mediation are also, I conclude, within the capacity of the applicant to meet from her income.  To date the applicant has paid to her lawyers the sum of $60,655 from her income without complaint by her that it has seriously, or at all, curtailed her reasonable living expense.

11. The timing of a mediation is entirely within the hands of those representing the applicant and respondent.  It is unlikely that the Conciliation Conference and the proposed mediation would be in close proximity.  In any event, the timing of the mediation could be fixed to enable the applicant to accumulate sufficient funds from her savings to meet her costs.  Again if the respondent was seeking an urgent mediation date immediately following the conciliation conference, it would be open to him to advance to the applicant the costs she needed to meet her legal representatives charges on the basis that it would be taken into account in relation to any settlement reached or alternatively the subject of a determination which the trial judge would be asked to consider.

12. There is no evidence provided by either party upon which findings could be made in relation to the balance of the considerations required to be taken into account under section 117(2A).

13. I conclude in this case that the applicant has not made a case for the payment of costs for her benefit. I do not rule out that she may do so in the future, however, the timing of her application for costs is at this time premature.

14. I propose therefore to dismiss her application under s 117.

I certify that the preceding ninety-two (92) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Le Poer Trench delivered on 22 August 2018.

Associate: 

Date:  22 August 2018