Candlin & Candlin
[2017] FCCA 2211
•13 September 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| CANDLIN & CANDLIN | [2017] FCCA 2211 |
| Catchwords: EVIDENCE – Parties had agreed to joint valuation – valuation incomplete by reason of failure to value three parcels of land comprised in titles to the property – valuer instructed by husband not to value water rights – inference that evidence as to value of additional land and water rights would not have assisted husband in opposing application for interim relief. |
| Legislation: Evidence Act 1995 (Cth), s.140 Family Law Act 1975 (Cth), ss.72, 74, 77, 79, 80, 117 Matrimonial Causes Act 1959 (Cth), s.125 |
| Cases cited: Anthony Horden & Sons Ltd v Amalgamated Clothing and Allied Trades Union of Australia (1932) 47 CLR 1 Bing v Bing (2007) FamCA 418 Breen v Breen (1990) 65 ALJR 195 Celestin v Celestin [2007] FamCA 74 Coal & Allied Operations Pty Ltd v AIRC (2000) 203 CLR 194 Elton & Batey-Elton [2008] FamCAFC 175 Farnell v Farnell (1996) FLC 92-681 Flynn v Flynn [1972] 2 NSWLR 303 Hall v Hall (2016) 257 CLR 490 Harris v Harris (1993) FLC 92-378 Hogan v Hogan (1986) FLC 91-704 Iphostrou v Iphostrou [2011] FamCA 20 In the Marriage of Wilson (1989) FLC 92-033 Klein v Domus Pty Ltd (1963) 109 CLR 467 Kyriakos v Kyriakos [2013] FamCAFC 22 Magna Alloys & Research Pty Ltd v Coffey [1981] VR 23 Medlow & Medlow (2016) FLC 93-692 MIMIA v Nystrom (2006) 228 CLR 566 Murkin & Murkin (1980) FLC 90-806 Re JJT; Ex parte Victorian Legal Aid (1998) 195 CLR 184 Seitzinger & Seitzinger [2014] FamCAFC 244 Selena & Montez [2017] FamFC 583; FLC 91-704 Stanford & Stanford (2012) 247 CLR 108 Strahan v Strahan (2011) FamCA 49 Sully v Sully [2016] FamCA 706 Wilson v Wilson (1989) FLC 92-033 Zschokke v Zschokke (1996) FamCA 79; FLC 92-692 |
Texts cited:
Pearce and Geddes, Statutory Interpretation in Australia 8th Ed (2014)
| Applicant: | MS CANDLIN |
| Respondent: | MR CANDLIN |
| File Number: | MLC 1637 of 2016 |
| Judgment of: | Judge A Kelly |
| Hearing date: | 1 September 2017 |
| Date of Last Submission: | 1 September 2017 |
| Delivered at: | Melbourne |
| Delivered on: | 13 September 2017 |
REPRESENTATION
| Counsel for the Applicant: | Ms Wheeler |
| Solicitors for the Applicant: | Kennedy Partners |
| Counsel for the Respondent: | Mr Nicholson |
| Solicitors for the Respondent: | Beswick Foulkes Family Law |
THE COURT ORDERS THAT:
Until further order, the husband pay to the wife by way of financial support, the sum of $1,000 per week commencing on 5 July 2017.
By 4:00pm on Wednesday, 18 October 2017, the husband pay or cause to be paid to the lawyers for the wife, Kennedy Partners, the sum of $100,000 to be applied towards the wife's outstanding and anticipated legal costs and disbursements.
The ultimate characterisation of the payment pursuant to paragraph (2) above is reserved to the trial judge.
By consent, the husband do all such acts and things as may be necessary to facilitate the valuation of the property situate at and known as Property A, in the State of Victoria (including the water rights thereon), by Mr J of (omitted) Real Estate or such other expert as may be engaged by the wife.
Paragraph 6 of the orders made by consent on 9 June 2016 is vacated and in lieu thereof, the parties are directed to confer within 14 days hereof as to the content of a template for their outline of submissions that are to be filed in advance of the final hearing.
The parties file and exchange their outline of submissions (of no more than 15 pages), no later than 4:00pm on Friday, 10 November 2017.
The parties annex to their outline of submissions a minute of the order that they propose be made upon the final hearing of this proceeding.
The costs of and incidental to this application are reserved.
IT IS NOTED that publication of this judgment under the pseudonym Candlin & Candlin is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 1637 of 2016
| MS CANDLIN |
Applicant
And
| MR CANDLIN |
Respondent
REASONS FOR JUDGMENT
Introduction
By application in a case filed on 5 July 2017, the wife seeks interim relief by way of spousal maintenance and for litigation expenses. The application is made in the context of the parties having, by consent, vacated orders for a final hearing of property proceedings that were fixed for 24 May 2017. Their proceedings are now re-fixed for hearing on 20 November 2017.
It was common ground that, being an interim application, the Court was called upon to determine the application upon disputed issues of fact and without the benefit of testing or resolving those issues as will occur at trial. For those reasons I have concluded that it is inimical to the disposition of this interim application that I should delay publication of these reasons so as to rehearse in detail all of the matter as addressed by the evidence relied upon. The parties have filed extensive affidavits in relation to the application which, together with their trial affidavits and financial statements, I have examined.
I have concluded that the wife’s application should be granted and that she is entitled to relief. My reasons for those conclusions follow.
Background
The parties commenced living together in 1987, were married in 1998 and separated in 2014. The husband and wife are presently aged 48 and 46 years respectively. They are not yet divorced. The husband owns and operates a (omitted) business. The wife, who works part-time as a (occupation omitted), resides in the former matrimonial home in (omitted). The four children of the marriage are now aged from 15 to 21 years. The two elder children are engaged in work. The youngest child presently resides with the father.
On 26 February 2016, the wife filed an initiating application in which she sought final relief by way of alteration of property interests. In addition, the wife claimed for interim relief including spousal maintenance of $1,253 per week, child support and injunctions concerning the transfer, encumbering or dissipation of assets comprised in the husband’s businesses (which appear to have been operated via various companies).
On 26 April 2016, the father filed a response by which he also sought an adjustment of property interests, parenting orders and injunctions to restrain the wife from attending within 200 metres of certain designated properties.
Beyond the proceedings in this Court, there have been other proceedings instituted with respect to family violence and business disputes.
On 2 May 2016, consent orders were made regulating parenting arrangements together with orders directed toward the ongoing preparation of the matter. It was agreed that the children live with their respective parents on a ‘week about’ basis. Injunctions were agreed with respect to the transfer, encumbering and dissipation of the husband’s business assets.
At an interim hearing on 9 June 2016, the proceeding was set down for trial on 24 May 2017. On that date, certain consent orders were also made including orders permitting the husband to withdraw monies from a designated bank account and providing for the husband to pay $60,000 to the wife as a sum that was agreed to be “characterised at trial.”
In advance of the proposed trial, on 30 January 2017, the parties agreed in further orders upon questions of discovery. The parties further agreed that, forthwith, they would do all acts and things as necessary to enable completion of the valuation of their property and the husband’s businesses.
In late April 2017, the parties filed their trial affidavits.
On 2 May 2017, consent orders were made vacating the final hearing of their property applications and refixing the matter for 20 November 2017.
On 4 July 2017, the wife filed her application in a case seeking the interim relief that is the subject of this judgment. In substance, the wife sought orders for: (1) spousal maintenance of $1,500 per week; (2) payment of $120,000 to her lawyers in respect of litigation expenses (past and future). The application was supported by affidavits sworn by the wife and her solicitor.
Although the application was listed for 28 August 2018 in a duty list, on that date the matter was adjourned to 1 September 2017 with the object that more time might be available within which to conduct the hearing.
In the intervening period, on 30 August 2017, the wife’s solicitor affirmed an affidavit deposing to the following: (1) the parties joint retainer of a valuer; (2) the engagement of the valuer to provide a valuation of a rural property located at Property A; (3) her receipt and examination of that valuation; (4) her raising a query with, and obtaining confirmation from, the valuer that the supposed valuation omitted to provide a valuation of:
(a)three hectares of land comprised in the Property A property;
(b)all of the water rights attaching to the Property A property.
The wife’s solicitor deposed to her communications with the valuer in the period before 29 August 2017, during which he told the wife’s solicitor that the instructions given by the husband not to value the water rights had been given to him during the valuer’s inspection of the Property A property. The wife’s solicitor exhibited an email from the valuer’s office stating that:
Gavin [the valuer] was told by Mr Candlin not to value the water, as he would work it out.
Quite how it was to be ‘worked out’ or why the husband felt entitled to change unilaterally the joint instructions of the valuer was not explained. This may be a matter for trial.
As a consequence, the wife’s application for interim relief was expanded to facilitate the obtaining of an independent valuation of the Property A property. Despite request of the husband to facilitate inspection of the Property A property, the husband had not consented to such inspection in the period immediately preceding the interim hearing. At the interim hearing, the husband consented to the further inspection of the Property A property.
Apart from an ancillary issue concerning discovery, the application turned upon whether the wife was entitled to interim relief. At the commencement of oral submissions, the wife’s counsel, Ms Wheeler, confirmed that the wife sought orders for: (1) spousal maintenance of $1,500 per week commencing on 5 July 2017; (2) payment of $81,212 to her lawyers in respect of past litigation expenses; (3) a ‘dollar for dollar’ order (in addition to payment of $81,212), respecting future litigation expenses.
Applicable principles
The parties’ summaries of argument were of assistance in refining the ambit of the application. During argument, Mr Nicholson for the husband agreed as to the principles as had been articulated by Ms Wheeler. In particular, they were agreed in the importance of identifying the source of power upon which interim of the kind sought here might be granted: Zschokke v Zschokke (1996) FLC 92-692 (FC) (Zschokke); Bing v Bing (2007) FamCA 418, [15] (FC) (Bing); Kyriakos v Kyriakos [2013] FamCAFC 22 (FC) (Kyriakos).
The wife identified the sources of power under the Family Law Act 1975 to grant the relief sought as being pursuant to: (a) ss 72 and 74; (b) ss 79 and 80(1)(h); (c) s 117(2) respectively. She advanced her applications upon each basis. For the avoidance of doubt, I confirmed that the application was not advanced as being for the provision of urgent spousal maintenance under s 77.
The ultimate classification of any interim relief granted was also a matter that attracted discussion irrespective of whether interim relief by way of spousal maintenance, interim property settlement or costs (see below).
In the seminal decision of Zschokke (1996) FamCA 79, the Full Court, in granting leave to appeal, saw utility in reviewing three Full Court authorities which diverged upon the source of power for interim relief concerning litigation expenses. I address each head of power in turn.
Ground 1 – Spousal Maintenance: ss 72 and 74
Part VIII of the Family Law Act 1975 concerns the subjects, Property, Spousal Maintenance and Maintenance Agreements, and is comprised of ss 71 – 90. The provisions in Part VIII are augmented by an extensive series of further provisions contained in Parts VIIIA – Part VIIIB, ss 90AA – 90MZH.
Section 72, which addresses the topic, Right of spouse to maintenance, expresses the circumstances in which a party to a marriage is liable to maintain the other party to that marriage. The liability is not expressed in unqualified terms. The section is not engaged, and no liability to maintain arises, unless the criterion stipulated by the section is met. The criterion upon which the liability to maintain arises is stipulated in sub-s 75(1) as being “if and only if, that other party is unable to support herself or himself . . .” The scope of the liability imposed by s 74 is itself qualified. Where the liability to maintain a party is engaged, the obligation is then limited “to the extent that the first mentioned party is reasonably able to do so . . .”
The determination of whether a party is unable to support themself adequately turns upon the consideration of the factors identified in para’s 72(1)(a)-(c), having regard to any of the matters in sub-s 75(2) (if relevant). The three matters stipulated in para’s 72(1)(a)-(c) respectively allow that the question whether a party is unable to support themself adequately may be answered affirmatively: (a) by reason of that person having the care and control of a child of the marriage; (b) by reason of the age, physical or mental incapacity for gainful employment of that person, or; (c) for any other adequate reason. In each case, those matters may be answered affirmatively “having regard to any relevant matter referred to in sub-s 75(2).” Sub-section 75(2) identifies some 19 matters to be taken into account (see below).
Section 73, which concerned maintenance of children, was repealed in 1987.
Section 74 addresses the topic, Power of Court in spousal maintenance, and provides, relevantly by sub-s 74(1), that in proceedings with respect to the maintenance of a party, the Court may make such order as it considers proper for the provision of maintenance in accordance with Part VIII. The remaining provisions in s 74 relate to insolvency events and are of no relevance.
Obiter dicta in several appeals has left open the question whether s 74 afforded a supportable basis for the making of an order for litigation expenses: e.g. Zschokke (1996) FamCA 79, [66] and [75] per Baker, Finn and Hannon JJ citing Breen v Breen (1990) 65 ALJR 195 (Breen). Section 74 was not applied in the determination of Zschokke’s appeal: (1996) FamCA 79, [96].
Whether s 74 afforded a basis for the making of an order for litigation expenses also remained an open question in Re JJT; Ex parte Victorian Legal Aid (1998) 195 CLR 184, [39], [41.4] (Kirby J) (Re JJT). While Gaudron J had no doubt that the power to award maintenance under s 74 extended to orders that a party to a marriage provide the other with funds to conduct proceedings under the Act, Kirby J considered that to be unconvincing: see Re JTT, (1998) 195 CLR 184, [3], [41.4].
In Elton & Batey-Elton, the Full Court again reserved the question whether the maintenance power enabled the Court to make a litigation funding order: [2008] FamCAFC 175 at [84] (Finn, Boland and Murphy JJ).
By contrast, other authority of a single Justice considered that the power to grant relief by way of urgent spousal maintenance was the more appropriate head of power than resort to the power to grant interim orders for property or costs: Celestin v Celestin [2007] FamCA 74, [16]-[19] (Cohen J).
Where an application for litigation funding is advanced on alternative bases, it seems axiomatic that the relief should not allow double recovery: Selena & Montez [2017] FamFC 583 at [166].
Section 75 concerns matters that are to be taken into consideration in relation to spousal maintenance. Sub-section 75(1) provides that in exercising jurisdiction under s 74, “the Court shall take into account only the matters referred to in sub-s 75(2).” The matters in sub-s 75(2) are an exhaustive checklist: Hall v Hall (2016) 257 CLR 490, [5]. Equally, in that appeal, the plurality stated that sub-s 72(1) seemed “to imply that each party should attempt to support himself or herself where that is reasonable having regard to the matters referred to in s 75(2):” Hall v Hall (2016) 257 CLR 490, [8] (French CJ, Gaegler, Keane and Nettle JJ). Their Honours further held that an interim order could not be made under s 74, “without finding, on the balance of probabilities on the evidence before it, that the threshold requirement in s 72(1) is met having regard to any relevant matter referred to in s 75(2)” : (2016) 257 CLR 490, [52].
Although sub-para’s 75(2)(a)-(q) prescribe the only matters that may be taken into account, it was common ground at the interim hearing that the Court was not required to separately evaluate each of the matters referred to in those provisions. Instead, the Court was entitled to have particular regard to such of the matters contained in sub-s 75(2) as were relied upon by the parties. In that connection I note also sub-para 75(2)(o) which provides that the Court may have regard to any fact or circumstance which, in the opinion of the Court, the justice of the case requires to be taken into account.
Finally, as to spousal maintenance it should be recognised that an interim order of this kind is not an order upon a matter of practice and procedure: In the Marriage of Wilson (1989) FLC 92-033 (FC). Rather, an interim order for spousal maintenance is an order affecting substantive rights. It entails the immediate imposition of liability upon one person to maintain another.
Ground 2 – Interim Property Orders: ss 79 and 80(1)(h)
Sections 79 and 80(1)(h) are also contained within Part VIII of the Act. Sub-section 79(1) relevantly authorises the Court to make an order for the settlement or transfer of property as the Court considers to be appropriate in the circumstances of the particular case. Section 80, which concerns general powers of the Court, confers a range of specific powers with respect to the exercise of powers under Part VIII including that, by para 80(1)(h), the Court may make an order pending the disposal of proceedings or until further order.
Where property proceedings are pending, para 80(1)(h) confers power on the Court to require a party who controls most of the assets of the parties to provide their opponent with funds to conduct their case, “with the provision of such funds then being a matter to be taken into account in the final settlement of property”: Zschokke (1996) FamCA 79, [67] citing Wilson v Wilson (1989) FLC 92-033 (FC); Poletti v Poletti (1990) 15 Fam LR 794 (FC); see also Zschottke at [71] citing Harris v Harris (1993) FLC 92-378. Accordingly, their Honours held that it was an essential part of an order that the advance of funds be a matter that the trial judge must take into account, or at least have regard to, in the determination of the final property settlement. The Full Court underlined the importance of doing so as to ensure that due regard was paid to the interests of justice of each party: (1996) FamCA 79, [68]-[69]; see also Strahan v Strahan (2011) FamCA 49 at [94] (Strahan).
It may be taken as settled that para 80(1)(h) is a source of power to make an interim property order respecting litigation costs: Strahan (2009) FamCAFC 166, [106] (Boland and O’Ryan JJ), [209] (Thackray J). Paragraph 80(1)(h) has been described as an enabling provision and not an independent source of power: Strahan (2009) FamCAFC 166, [213] (Thackray J).
The manner of treating funds paid pursuant to an order made under para 80(1)(h), should as a general rule, be addressed in the final determination of the parties’ property proceedings.
In Strahan, the Full Court both eschewed the idea that only one property order could be made in exercise of the power conferred by s 79, and expressly agreed that a two staged approach was required on an interim application under ss 79 and 80(1)(h): (1) first, the adjectival task of resolving whether to exercise the power before a final hearing; (2) secondly, if so, the exercise of the discretionary power on an interim basis: [2009] FamCAFC 166 at [113]-[119], [226]. The Full Court held that that approach was required where the subject matter of the interim property order was litigation costs.
Adjectival Question – Interim Exercise of the Power
In resolving this question (whether to exercise the power before a final hearing), the plurality in Strahan rejected the proposition that compelling circumstances must be demonstrated before it was appropriate to exercise the power on an interim basis:
. . . in our view, when considering whether to exercise the power under s 79 and s 80(1)(h) of the Act to make an interim property order the “overarching consideration” is the interests of justice. It is not necessary to establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power. In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing. (emphasis added) (2011) FamCA 49 at [132]
Further, as to the first stage of analysis, the Full Court endorsed earlier statements that:
(a)the power might be exercised in circumstances where the parties had agreed in the disposal of some assets, or where the urgency of the situation required the Court’s intervention. The Full Court added that the need to provide a party with funds to assist in defraying costs of litigation (without which funds an injustice may be caused), as being a further example where interim property relief may be appropriate: [2009] FamCAFC 166 at [133], [138];
(b)in relation to the possibility of re-adjustment (or claw-back), the Court must consider the prospect whether the grant of interim relief would have the result of giving the applicant: (i) more than they would obtain by way of final orders, or; (ii) a sum, the quantum of which, may preclude a proper re-adjustment on a final hearing.
See Strahan, supra, [2009] FamCAFC 166 at [99], [136].
Substantive Question – Discretionary Considerations
Concerning the second stage of analysis, in Strahan the Full Court endorsed the need for consideration to be undertaken of the matters in sub-s 79(4) and, by reference to para 79(4)(e), the matters in sub-s 75(2) so far as they were applicable. The Full Court also endorsed the principle that a Court was entitled to undertake a brief analysis of those matters such that:
. . . if it is established that ‘it seems likely to the Court that . . . the applicant will be likely (sic, to) receive by way of property settlement a sum sufficient to cover the advance, that would seem to be sufficient to enable the order sought to be made’: [citing Zschokke, Poletti, Wenz v Archer]; Strahan [2009] FamCAFC 166 at [137]
For an applicant to demonstrate that they will likely receive a sum by way of final adjustment of property rights in excess of the sum being sought is a necessary – but not sufficient – condition for the grant of relief: Strahan [2009] FamCAFC 166 at [139] (Boland and O’Ryan JJ); [224] (Thackray J).
As to the other discretionary considerations addressed in Zschokke, the Full Court also agreed that: (1) the comparative financial positions of the parties was of central relevance; (2) the applicant should at least have an arguable case; (3) there may need to be evidence as to the likely costs of the litigation: [2009] FamCAFC 166 at [140]-[141] citing Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578 (Paris King Investments).
In Paris King Investments, Brereton J reasoned that determination of the parties’ entitlements to property would entail the determination of complex and contentious issues such that – if the parties adhered to their current attitudes – it would involve lengthy litigation. His Honour held that each party was entitled to nothing less than competent legal representation, the cost of which he quantified as being ~$200,000. On that premise, Brereton J concluded that each party would at least establish an entitlement from a net asset pool of ~$2m to at least $200,000 concluding that there were, in all of those circumstances, sufficient grounds for making an order under s 80(1)(h) that each party would receive on account of their ultimate property entitlement, a sum equivalent to ~$200,000: [2006] NSWSC [35]-[39]. Orders were then framed to achieve that result (below).
In making an order under para 80(1)(h), regard should be had to the overarching requirement that an order under s 79 be just and equitable. The Court is required to give, at least brief consideration of the matters in sub-s 79(4), including those in sub-s 75(2). In Zschokke, their Honours held:
If on a brief consideration of those matters, it seems likely to the Court that the party who is the applicant for the interim order for an advance of funds from the other party will be likely to receive by way of property settlement a sum sufficient to cover the advance, that would seem to be sufficient to enable the order sought to be made (cf Wilson and Poletti) (1996) FamCA 79 at [70]
See also Strahan (2011) FamCA 49 at [87].
Expressed in negative terms, an interim order would generally not be made where the applicant would be unlikely to obtain final relief in a sum sufficient to cover such an advance payment. The result of the appeal in Zschokke illustrates the point. The Full Court entertained significant doubt whether the wife would ultimately receive a sum by way of property settlement that would exceed the aggregate of the amounts already advanced and any sum advanced under the interim order sought. Although the Full Court considered such a conclusion would be fatal to an application under para 80(1)(h), as will appear below, it also recognised that it might not be fatal to a claim under sub-s 117(2): (1996) FamCA 79 at [97], [103].
Principles that have been considered applicable to the exercise of power in making an interim property order include: (1) as a general rule, the exercise of power should be confined to cases where the circumstances presented at that time were compelling; this view – which served to emphasise the desirability of conducting only one hearing in relation to a property application – was later rejected (Strahan); (2) the power might be exercised, for example, in circumstances where the parties had agreed in the disposal of some assets, or where the urgency of the situation required the Court’s intervention (such as erosion or dissipation of assets); (3) the power fell to be exercised within the parameters of s 79 albeit that final findings were not available at that time; (4) the determination of the interim application was, of necessity, an imprecise task; (5) for that reason, a conservative approach was warranted; (6) the Court was required to be satisfied that the remaining property would be adequate to meet the legitimate expectations of both parties or alternatively, that the interim order being contemplated was capable of being reversed or adjusted if it was later recognised as being necessary to do so: Zschokke (1996) FamCA 79 at [71], citing Harris (1993) FLC 92-378 (Nicholson CJ, Fogarty and Moore JJ); Strahan [2009] FamCAFC 166, at [87], [137], [152].
In an interim application under para 80(1)(h), what is required of the Court?:
All that [the Court] was required to consider was whether it was an appropriate case to make an interim order for property settlement because the Wife needed 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.
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.
Strahan (1996) FamCA 79 at [144]-[145], and see [147]-[149].
In Strahan, Boland and O’Ryan JJ held that once the adjectival and procedural questions had been answered, it was not part of an interim property application to embark upon an inquiry that fixed the amount of the applicant’s costs: (1996) FamCA 79 at [150], [227]. Similarly, once it is determined that the circumstances are appropriate to grant interim relief, then it is, “wrong to take an approach that a part of a legitimate entitlement of an applicant should be deferred until the final hearing”: Strahan (2006) FamCAFC 166, [155].
Ground 3 – Interim Costs Orders: s 117
Section 117 lies within Part XV of the Act, which contains a series of miscellaneous provisions comprised in ss 115 – 125. Sub-section 117(1) provides that, subject to sub-s 117(2) (and certain other provisions, none of which were relevant in this case), each party to proceedings under the Act shall bear their own costs. In Zschokke, the Full Court left open whether such interim orders were only available in pending proceedings which related to financial or property matters: (1996) FamCA, 79, [73]-[74].
Sub-section 117(2) provides, relevantly, that the Court may make such order as to costs by way of interlocutory order or otherwise as it considers just. This is a wider power than a power to make an order for costs: Re JTT, (1998) 195 CLR 184, [1]. However, as that judgment confirms, the power is not unconfined: see at [5], [11], [73], [89]-[92], [133]. In the view taken by Hayne J, with whom Gaudron J agreed generally, ‘costs’ had a well settled meaning and was properly confined to costs that had been actually incurred. Although the case did not concern an interim application for litigation costs by one party to a marriage against the other, his Honour observed at [98] that:
. . . the list of matters set out in sub-s (2A) to which the Family Court is directed to have regard in making orders under s 117(2) indicates clearly that the subject-matter of the orders to be made under s 117(2) is the costs which a person may be ordered to pay another as indemnity for that other's liability for [costs] reasonably incurred in the litigation, that is, ‘costs’ as that expression is ordinarily understood in the law. (emphasis added)
In my view, while Hayne J was concerned to emphasise that sub-s 117(2) did not authorise the making of orders other than as to costs (as defined), his Honour was not deciding and did not hold that an interim order could not be made with respect to the future litigation costs of a party to a marriage.
The power conferred by sub-s 117(2) is expressed in qualified terms. The Court may only exercise the power so conferred where the proceedings are proceedings under the Act and the Court is of the opinion that it is just to make such an order. The power is expressly made subject to other provisions of the Act and the Rules of Court and relevantly, is subject to sub-s 117(2A). By sub-s 117(2A), the Court is required, when considering what order, if any, should be made under sub-s 117(2) to have regard to the matters enumerated in para’s (a) – (g) as may be applicable (see below).
Section 117 may be traced to s 125 of the Matrimonial Causes Act 1959 (Cth) under which a general rule had evolved whereby the husband was ordered to pay the wife’s costs of a matrimonial cause: see Penfold v Penfold (1980) 144 CLR 311, 317. However, under that Act, interim orders for costs were also made: see Zschokke (1996) FamCA 79, [65]. For example, in Flynn v Flynn, Woodward J made orders for the husband to pay maintenance pending determination of the suit and that he pay to the wife’s solicitor her preliminary costs incurred in obtaining title particulars and securing inspection of a rural property: [1972] 2 NSWLR 303. In making that order, his Honour considered that as a matter of practicality, all the husband had to do was to ask for his father’s permission to secure a response to those requests. An order was also made for the payment of a further sum in respect of the trial. Self-evidently, the present case bears some similarity to Flynn’s case.
In Penfold, consideration was given to the proper construction of s 117. Reversing the decision of the Full Court, the plurality held that while sub-s 117(1) expressed a general rule that each party should bear their own costs, such construction did not confer paramount status to sub-s 117(1) over the power conferred by sub-s 117(2) to make such order as to costs as the Court considered just, including by way of interlocutory order. To the contrary, Penfold is authority for the proposition that, because sub-s 117(1) is expressed as being ‘subject to sub-s 117(2)’, the general rule above must yield whenever a judge finds in a particular case that the circumstances justify an order for costs being made. Their Honours further held that sub-s 117(2) did not as a matter of law require the judge to specify the circumstances which justified the making of the costs order. The plurality observed that sub-s 117(2) did not expressly require that the judge was to specify such circumstances or that, in the context of a provision relating to costs orders, there was any sufficient basis for an implication to that effect: (1980) 144 CLR 311, 315-316. Rather, it was not inappropriate for a judge to so specify such circumstances (as to do so may facilitate re-examination of the issue by an appellate court).
In Penfold, the High Court held that the wife was entitled to an interim order for such costs in circumstances where the husband had misrepresented his financial position, including by not revealing certain valuable assets, and then admitted his capacity to pay. Those circumstances had compelled the applicant to establish the respondent’s true financial position, thereby providing ample material justifying the order made: (1980) 144 CLR 311, 316-317 (Stephen, Mason, Aickin and Wilson). Murphy J observed at 318 that the presentation of material, in a form that put the opponent to the trouble and expense of disproving it, constituted a circumstance that justified the exercise of the power conferred by sub-s 117(2).
Stephen, Mason, Wilson and Aicken JJ also held that there was nothing in the subject matter or interrelationship of sub-ss 117(1) and (2) to indicate that an applicant for costs was subject to some special onus or that a costs order could only be made in a clear case: (1980) 144 CLR 311, 315.
It is settled that sub-s 117(2) confers power to make an order of the kind here sought. Sub-section 117(2) authorises the Court to make an order which seeks to ensure that one party should be able to prosecute a proceeding and that the opponent should provide the funds required to do so: Zschokke (1996) FamCA 79, [65] citing Breen (1990) 65 ALJR 195; see also Re JJT (1998) 195 CLR 184 at [2], [10], [59], [92], [125]. In Zschokke, the Full Court recognised that care was required in relation to comments made in the refusal of an application for special leave to appeal. However, their Honour saw utility in doing so in circumstances where three successive Full Courts had expressed their reasons for judgment in terms which had the collective result of producing some ongoing uncertainty as to the source of jurisdiction to make orders which required an adversary to pay monies to their opponent respecting the costs of the subject litigation.
In Breen, Brennan, Dawson and Gaudron JJ observed that it could not be said to be beyond the jurisdiction of the Family Court to make such costs orders. Their Honours found it unnecessary to determine whether the power to do so arose under ss 117(2) or 74. In refusing special leave to appeal, it was sufficient to observe that the order sought to ensure that the wife should be able to prosecute the pending property proceeding and that she should have the funds required to do so. However, the High Court emphasised that:
Such an order made for such a purpose, though it falls within one or other of the powers conferred on the Family Court, should be so framed as to protect the parties from any risk of injustice arising from the manner in which the funds are expended. (emphasis added)
The need to protect the interests of both parties is well recognised.
Where an interim order is made under sub-s 117(2) it is open to order or direct that sums paid pursuant to such order be taken into account, or at least had regard to, in the final determination of the parties’ property proceedings: Zschokke (1996) FamCA 79 at [69] citing Hogan v Hogan (1986) FLC 91-704 (Bulley J). In Hogan, caution had been expressed in the appeal of the need to ensure that the order was not framed in terms that were open ended. Hogan has been frequently applied in declining an open ended ‘dollar for dollar’ type order: e.g. Selena & Montez [2017] FamCA 583, [94]-[95]. Costs orders, by their nature, should be certain and ascertainable and for that reason the quantum of costs should be sufficiently certain at the time the order is made.
Those considerations support a conclusion that it may well be necessary when deciding to make an order under sub-s 117(2) to consider whether it will be possible to take into account at the time of final orders, any sum that might be payable under an interim order: Zschokke, [1996] FamCA 79, [101]; Strahan [2009] FamCAFC 166, [94]-[95]. Again, those considerations underline the importance of paying due regard to the interests of justice of each party.
In the making of an order under sub-s 117(2), regard should be had to such of the matters in sub-s 117(2A) as are applicable, including such other matters as may be relevant to the instant case: see also Strahan (2011) FamCA 49 at [89]. The implications for any final relief also require consideration when deciding whether to make such an order. The requirement of serving the interests of justice remains a basic condition in the making of such an order: Zschokke (1996) FamCA 79 at [72] citing Poletti, Hogan and Breen, supra.
As noted above, a conclusion that there was considerable doubt as to whether an applicant for interim relief might not ultimately receive a sum by way of property settlement that would exceed the total of the amounts already advanced including by way of an interim property order would seem fatal to an application under para 80(1)(h): Zschokke (1996) FamCA 79 at [103]. Yet, that conclusion might not be fatal to a claim under sub-s 117(2). The Full Court recognised that not all of the considerations under para’s 117(2A)(a)-(g) were applicable to each case and emphasised that other matters may fall for consideration if justice was to be achieved. The decisive consideration that weighed against the grant of interim relief in Zschokke was that it would not have been just to make an interim order respecting costs, the effect of which could well “ultimately lead to the sale of the home in which the husband and child now reside for the sole purpose of meeting the wife’s legal costs. . .” Particularly was that so where, in the assessment of the Full Court, there was the considerable risk of a scenario eventuating in which the home would be sold, but the husband being successful in his custody claims, such that the pre-emptive sale of the home was ultimately shown not to be required for settlement of the wife’s claims for property or costs: (1996) FamCA 79, [104].
The two-stage approach to the determination of an interim property order for litigation costs under para 80(1)(h) may not be required under sub-s 117(2). That is because the making of an order under sub-s 117(2) turns on the Court having formed an opinion that there are circumstances that justify such an order being made: Penfold (1980) 144 CLR 311, 315; Re JJT (1998) 195 CLR 184, [11], [91]; Strahan (2009) FamCAFC 166, [119].
It must be accepted that s 117(2) empowers the Court to make a litigation funding order. However, some authority approaches the application of that provision, beginning from the presumption in sub-s 117(1) that the parties should ordinarily bear their own costs. Accordingly, the considerations identified in sub-s 117(2A) fall to be assessed beginning from that presumption. On that approach, in order to displace the presumption that parties should bear their own costs, sufficient of the matters identified in sub-s 117(2A) must be engaged to warrant a favourable exercise of the discretion as to costs. The trend of authority appears to confine the exercise of power in sub-s 117(2) to cases in which costs have been actually incurred. Further, on an interim basis, it is rarely possible to determine whether the party seeking litigation funding had been successful, or to form a sufficiently concluded view as to the parties conduct: Selena & Montez [2017] FamCA 583, [77], [84], [90] citing Re JJT and cases that followed it.
It is difficult to see why the power conferred in sub-s 117(2) to depart from the general rule that each party bear their own costs should be construed as authorising the imposition of a personal liability for future costs. It may also be questioned whether, in the face of such specific provisions as ss 74 and 80(1)(h), a more general provision such as sub-s 117(2) should be construed as authorising the imposition of personal liability for costs on an interim basis before the costs have actually been incurred and before the facts have been investigated at trial: cf Anthony Horden & Sons Ltd v Amalgamated Clothing and Allied Trades Union of Australia (1932) 47 CLR 1, 7 (Gavan Duffy CJ, Dixon J). The alternative, and I think preferable, view is that each of ss 74, 80(1)(h) and 117(2) may be viewed as complementary but distinct sources of power: MIMIA v Nystrom (2006) 228 CLR 566, [59]-[61] (Gummow and Hayne JJ); Pearce and Geddes, Statutory Interpretation in Australia 8th Ed (2014) [4.36] at p 183. And it is because they are distinct sources of power, that the grant of interim relief depends upon the satisfaction of the discrete preconditions which apply to them respectively.
Overview
A significant aspect of family law proceedings is that they are not conducted on the same inter partes basis as other civil litigation. That is so because, following the breakdown of the relationship there will commonly arise a situation in which one party retains, to the effective exclusion of the other, substantive control of the assets that were accumulated over the period of the parties’ joint endeavours. The potential consequences are at least threefold: (1) the party in possession and control remains free to apply those assets as they see fit – with a correlative risk of transfer, dissipation or loss to the detriment of the other; (2) absent a Court order, the party in possession retains an ability to withhold from the other party, assets that are the subject of the property proceedings; assets that may have been accumulated during the joint endeavours of their marriage; (3) the party in possession may expend capital in defraying his or her legal costs and withhold such capital for an equivalent purpose by their opponent.
Considerations of this kind serve to explain why interim orders providing for the funding of litigation costs are made with the objective of allowing the litigants to contest the proceedings on a level playing field: Selena & Montez [2017] FamCA 583, [83], [133], citing Iphostrou v Iphostrou [2011] FamCA 20 at [60]. However, they also serve to highlight the importance of ensuring that the ultimate characterisation of the payment should be reserved to the final hearing. For otherwise, an interim order which is for:
(a)spousal maintenance under s 74, entails the imposition of an immediate liability for maintenance;
(b)property under para 80(1)(h), accelerates the transfer of capital between the parties to the marriage;
(c)costs under sub-s 117(2), entails the imposition of an immediate liability for costs; and
in each case, upon disputed facts that have not been fully investigated at trial. It can be seen then that the bases of liability in each case are very different. And that conclusion also underlines the importance of identifying the source of power before any interim order is made.
Once the power to grant relief is engaged, the statutory discretions to grant interim orders in respect of litigation costs, whether by way of spousal maintenance, property or as to costs, fall to be exercised having regard to the scope and purposes of the Family Law Act 1975: cf Klein v Domus Pty Ltd (1963) 109 CLR 467, 473 (Dixon CJ); Coal & Allied Operations Pty Ltd v AIRC (2000) 203 CLR 194, [19] (Gleeson CJ, Gaudron and Hayne JJ). The analysis of the various legislative bases to grant relief serves to confirm that those discretions are distinct and address quite different objects. Interim spousal maintenance is of an entirely different character to interim property relief. So too, at first sight, the making of an interim order for costs against one party necessarily entails a conclusion that the general rule that parties should bear their own costs, should be displaced by application of the power in sub-s 117(2) to order that one party should bear those litigation costs.
Nor should it be overlooked that, whether the power is derived from ss 72, 74, 79, 80(1)(h) or 117(2), in each case the power conferred to grant interim relief is a power conferred on a Court: Owners of “Shin Kobe Maru” v Empire Shipping Co Inc (1994) 181 CLR 404 at 421. The analysis in the authorities which emphasises the need to identify the relevant source of power is important because it is the specific power that determines the necessary preconditions to, and considerations relevant for, the making of an order: see Strahan (2009) FamCAFC 166, [84] (Boland and O’Ryan JJ) approving Paris King Investments (2006) NSWSC 578 at [30] (Brereton J); Kyriakos [2013] FamCAFC 22, [35] (Finn, Strickland and Forrest JJ).
These considerations reinforce conclusions that while it is essential to identify the relevant source of power upon which interim relief may be granted, the ultimate characterisation of the interim payment should be left for trial.
Criteria that have been identified as potentially relevant to the grant of interim relief whether by way of property, litigation costs or spousal maintenance include: (1) the complexity of the respondent’s financial affairs; (2) the need for an expert investigation into those affairs; (3) whether a position of considerable financial strength was held by the respondent; (4) the respondent’s capacity to meet their own litigation expenses; (5) an inability of the applicant to meet their own litigation expenses: see Zschokke (1996) FamCA 79, [26] and [76]. The Full Court accepted that criteria (3) – (5) inclusive would be relevant to an application for interim relief in respect of property, litigation costs or spousal maintenance, but observed that the first two criteria (while of potentially great relevance), were not necessary pre-conditions to the exercise of power to grant relief. I agree. See also Strahan (2011) FamCA 49 at [90]-[92].
In Paris King Investments, Brereton J referred to the criteria identified in Zschokke above. His Honour observed that other authorities considered that such interim orders should be made only if the applicant had at least an arguable case for substantive relief which deserved to be heard: [2006] NSWSC 578 at [30]. This reasoning was endorsed by the Full Court in Strahan: (2009) FamCAFC 166, [141]. The relative strength of the applicant’s case is a matter that will vary from case to case. But it falls to be evaluated in the balancing of all other discretionary factors: cf Magna Alloys & Research Pty Ltd v Coffey [1981] VR 23, 28 (FC). Perhaps this was the type of principle the Full Court had in mind in Zschokke when observing that in the present case a favourable exercise of discretion for interim relief required the applicant to demonstrate there were compelling circumstances: (1996) FamCA 79 at [71] citing Harris [1993] FamCA 49 at (79, 929).
These observations do not, however, ignore that compelling circumstances are not required to engage the power to grant such relief. Rather, they merely recognise that the discretion conferred by para 80(1)(h) is a free standing and unfettered discretion and that falls for consideration in the context that both the parties and the Court may be better served by there being only one hearing: Strahan (2009) FamCAFC 166, [220]-[223], [225] (Thackray J). Equally, it is wrong to contend that the power is not engaged unless or until compelling circumstances are shown. To approach the matter that way would entail error: Strahan (1996) FamCA 79 at [144]-[145], [158], [222], [229].
What the Court is required to do is:
. . . to consider whether it was an appropriate cases to make an interim order for property settlement because the Wife needed 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.
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.
Strahan (1996) FamCA 79 at [144]-[145], and see [147]-[149].
There should also be evidence as to the applicant’s likely costs of the litigation, but it is not an essential precondition to relief for the applicant to prove that the legal representatives would decline to act unless their fees were paid or secured: Paris King Investments [2006] NSWSC 578 at [30], [35]-[36]. Brereton J considered that the jurisdiction extended to both past and future legal costs. Yet the judgment indicates that there was a dearth of evidence as to the parties existing or future costs liabilities in that case.
One holding in Paris King Investments that I consider to be of significance was that Brereton J considered the criterion identified above to be of lesser importance (though nonetheless relevant) where the application was one pressed under ss 79 and 80(1)(h), as distinct from ss 74 or 117(2): [2006] NSWSC 578, [34]. These observations did not attract criticism in Strahan [2009] FamCAFC 166, [96]. The rationale for attaching lesser importance to those criteria in an interim application based upon ss 79 and 80(1)(h) derived from the holding in Zschokke that such interim property orders could be made in circumstances where it was shown that, “the applicant would likely receive by way of final property settlement a sum sufficient to cover the advance.” In other words, a Court might be more inclined to make an interim order where it could be demonstrated that the applicant was not making, in effect, a pre-emptive claim for more than an ultimate final property entitlement. This should not obscure the requirement that an applicant for interim relief must satisfy the civil standard of proof: Hall v Hall (2016) 257 CLR 490, [8]; s 140 Evidence Act 1995 (Cth).
Other considerations may include that: (1) the costs of the applicant for interim relief should not be taken into account for the purposes of addressing sub-s 75(2) matters; (2) the choice of a respondent not to be legally represented was generally not a relevant consideration (where that party was in possession of the bulk of the parties assets); (3) the extent of the effort made by an applicant to secure legal aid may be of relevance in a particular case; (4) the necessity for encumbering, or effecting a forced sale of, the property as a means of securing the funds necessary to provide the litigation costs sought by the applicant was a relevant consideration; (5) while a party had no right to legal representation, such representation was a desirable outcome for the conduct of the final hearing and remained a relevant factor to be weighed in the balance against the availability of money to fund such representation: Zschokke (1996) FamCA 79, [79]ff, citing Farnell v Farnell (1996) FLC 92-681, [82], [85], [88], [93] citing Hogan, Wilson, Poletti, Breen and Strahan [2009] FamCAFC 166, [99]-[103].
In addition, the Court is entitled not to accept at face value a contention of inability to pay by the party in control of the parties’ assets. Questions of the propriety of granting relief are anterior to and separate from questions of enforcement: Bing [2007] FamCA 418, [23], [27].
Reservation as to the ultimate classification of fund
While it is of primary importance that the Court identify the source of power being relied upon in the determination whether relief should go, the Court may reserve for consideration at trial what ultimate characterisation should be ascribed to the payment that is made: see for example, Bing v Bing (2007) FamCA 418, [15] per Kay, Coleman and Cronin JJ (quoting Mushin J at first instance) (Bing). The adoption of this practice does not however, negate the obligation to identify the source of power upon which the interim order is made: Kyriakos [2013] FamCAFC 22, [37].
It is perhaps useful to recognise some reasons why this practice obtains.
In Celestin v Celestin, Cohen J emphasised that to characterise a payment as being by way of partial property settlement seemed illogical inasmuch that, at a final hearing, the Court was required to divide what the parties had at that time: (2011) FamCA 74 at [17]. His Honour accepted that it was possible to regard an interim payment as constituting an advance on the ultimate entitlement to share in the parties’ property interests, yet such an approach was contrary to the principle that parties were entitled to spend reasonable sums on living without classifying such expenditure as a notional expenditure on capital entitlement, particularly where one party had effective control of the parties funds and when such funds were being applied before trial towards such expenditure. His Honour concluded that such funds, “should not be regarded as an advance on capital when funds of the parties are made available to discharge the debts incurred.” By contrast, Cohen J also recognised that, as concerned an interim payment respecting legal expenses (and notwithstanding the wife’s entitlement to such costs), it was necessary to recognise that such a payment properly bore the character of an advance on her capital entitlement; that was so because, to do otherwise would entail the risk of the husband bearing, from his capital entitlement, the wife’s legal costs, without s 117 having been applied upon a final decision to adjust the parties’ capital in her favour. Although Celestin was a case of urgent spousal maintenance, his Honour’s observations are of general assistance and in my respectful view, highly instructive of the need to recognise the potential effect of such orders. Cohen J concluded that something would have to be sold, transferred or borrowed to meet the wife’s entitlements and that there was no warrant to delay the inevitable to the wife’s very significant disadvantage. To do otherwise would have been a grossly unfair imposition on the wife merely by reason that the husband had virtually complete control of the parties’ funds and assets: [2011] FamCA 74, [13]-[15].
Accordingly, a further order is commonly made that liberty be reserved to the parties to contend as to the ultimate disposition of the lump sum payment.
As to this issue, Mr Nicholson submitted that the ultimate characterisation of the payment may be a matter of importance since the making of an interim order for partial property adjustment would, for example, mean that there had been some determination in the wife’s favour of her property entitlement that would have to be deducted from any final adjustment at trial.
Breen demonstrates that the Court will be concerned to frame an order in a manner that may protect the parties from injustice arising from the manner in which the sums are expended. In Paris King Investments, Brereton J observed that the order was commonly framed by requiring that the funds be administered by the applicant’s lawyers and applied only to meet the expenses referred to in the order, with detailed records being maintained to permit review by the Court at the time of its exercise of the discretion in the determination of the substantive property proceedings or at the time of determination of the question of costs: [2006] NSWSC 578, [32]. I note that Brereton J appeared as junior counsel in Breen.
Relatedly, the need for precision in such orders is a matter that has attracted comment on appeal: e.g. Re JJT (1998) 195 CLR 184, [70]-[71], [85]-[86].
In other circumstances, pre-emptive orders are made which provide additional relief that would become available by way of enforcement in default of compliance with the primary orders for payment. For example, an order may be made that empowers the recipient of interim relief to sell an asset of the marriage (Celestin (2011) FamCA 74 at [20]). In other cases, pre-emptive orders are made that require both parties to take all steps reasonably required to enter into and execute a financial transaction from which will be available the funds necessary to satisfy the primary liability for spousal maintenance (where to do so will entail the least injustice to both parties): Paris King Investments [2006] NSWSC 578, [40]-[53] (Brereton J).
In Seitzinger & Seitzinger [2014] FamCAFC 244, Thackray J refused leave to appeal in light of a proposal by the husband to make provision for the wife’s fees (the proposal was recorded in the Magistrate’s reasons at [41], which I have not located). His Honour considered at [67] that the husband’s proposal provided an entirely plausible and appropriate method by which the wife could meet her costs. While Thackray J recognised that the wife might not want to have the former matrimonial home used as security for borrowings to cover legal expenses; however, the property was unencumbered and provided the logical security for any borrowing. His Honour also, “recognised that, prima facie, each party should bear their own costs until such time as the court determines that there is some reason for an order for costs to be made.” Despite the refusal of leave, Thackray J left open that the wife might reopen her application if the husband did not adhere to the proposal for the wife’s litigation funding.
Consideration
As noted, the claim for interim relief arose for determination in a duty list. Although the matter was listed later in the week to allow the parties, and the Court, some greater latitude in the time that might be available for consideration of the issues, the challenge presented by such circumstances is well recognised: Bing [2007] FamCA 418 at [23].
It is convenient to address each of the interim applications in turn. In doing so, I record several of the matters that are in evidence on the application. However, I fully recognise that those matters have not been tested at trial and may be subject to challenge in the course of the final hearing. For that reason, none of the matters referred to below should be read as final findings.
Spousal Maintenance
In contrast with Selena & Montez, supra, it is apparent that in this case the wife pursues two distinct claims for interim spousal maintenance. The first is for weekly spousal maintenance while the second is for litigation expenses. They require separate consideration.
Spousal Maintenance of $1500 per week commencing 5 July 2017
I am satisfied that the wife has met the threshold requirement stipulated in sub-s 75(1) that she is a party who is unable to support herself adequately. I accept the submission that the wife is unable to support herself adequately by reason of her age and physical capacity for employment and for other adequate reason. I am also satisfied that, to a reasonable extent, the husband is able to maintain the wife: cf para’s 72(1)(b)-(c).
The wife identified the matters that she relied upon under sub-s 75(2). I have considered each of those matters together with the parties’ evidence and submissions on this application (and each of the other applications).
The wife is now aged 46 years, having left school in year 10. It appears that the parties’ respective families lived in adjoining properties and that their relationship began at an early age. The husband apparently moved into the wife’s family home when the wife was 16 years of age. After her secondary education, the wife undertook a (course omitted). Her evidence demonstrates that she has undertaken rudimentary types of work and that she now secures modest income from part time work as a (occupation omitted).
Contrary to the husband’s submissions, I accept the wife’s submission that she is not a skilled worker and does not share with the husband an equivalent earning capacity and that she was entitled to a reasonable standard of living appropriate to her circumstances. The husband points out that there is no concrete evidence of her actual receipt of income since mid-2016. This submission was perhaps qualified by the husband’s further submission that the wife had now filed an up to date financial statement. The husband’s submissions may be understood as being to the effect that the wife’s sworn evidence is not corroborated.
The husband submitted that the wife had not done enough to secure employment. As to this, I consider that the wife has taken some measures to obtain employment. The evidence of the wife’s income may not be wholly complete; however, I reject the submission that the wife has not taken sufficient steps to secure employ. The wife’s income is modest.
Since the breakdown of the relationship the wife has been locked out of the business. In the meanwhile, the husband has established a new company, apparently transferring from the original (omitted) business, both the business and thus income to that new company.
As noted above, on 9 June 2016, consent orders were made permitting the husband to withdraw monies from a designated bank account and providing for the husband to pay $60,000 to the wife. Those orders were made in the context that the proceeding was set down for trial on 24 May 2017. While the ultimate characterisation of that payment was left for trial, the parties later agreed that the trial date be vacated and refixed for 20 November 2017. The wife has only modest savings as disclosed in her financial statement.
While the wife deposes that the original payment of $60,000 was made in anticipation that the final hearing would occur in May 2017, she also deposes to having now substantially expended that sum of $60,000. Her weekly earnings of ~$100 gross, together with a family tax benefit of ~$119 do not enable her to maintain herself adequately.
Quite apart from her income, the wife’s personal expenses (as distinct from those associated with the children who also reside with her), far exceed her weekly income. Her weekly expenses of ~$1,400 do not appear extravagant. In my view, they represented a reasonable indication of her present needs. Based upon her income, I conclude that the wife cannot meet those needs from her own resources or earnings.
In addition, there is evidence that the husband via the Candlin Family Trust has made a notional distribution of $42,166 to the wife which has not in fact been paid to her. The consequence is however, that the wife will be subject to a taxation liability on the distribution. This notional distribution serves to reinforce the conclusion that the wife does have a present need for financial support that outstrips her present income.
The wife also deposes that the husband has in the same period relied upon the drawings from his business. The husband, aged 48 years, is self-employed. I find that he has some capacity to provide maintenance for the wife. I reject the husband’s submission that he does not have that capacity. His financial statement discloses a gross weekly income of ~$3,000. His expenses are said to be of that order also. It appears that the husband’s expenditure is borne at least in part out of his business. The evidence indicates that the husband’s drawings from his business may be well above ~$200,000 annually. In making that broad observation I accept the wife’s submissions which focussed upon entries in the draft accounts of the husband’s (omitted) company with respect to rental, director’s drawings, car payments and legal fees.
In the course of a duty list or interim hearing, I cannot undertake with adequate precision a minute examination of the parties’ relative incomes and expenditures. Nor can I undertake a minute examination of the full extent to which the husband could reasonably maintain the wife. On settled principles, I must evaluate these issues adopting a broad assessment of the matter: Seitzinger & Seitzinger [2014] FamCAFC 244, [51] (Thackeray J), citing Murkin & Murkin (1980) FLC 90-806 at 75,081 (Nygh J). To take that broad approach to the resolution of this interim maintenance application, I conclude that the wife is unable adequately to support herself and that the husband does have some ability to afford maintenance.
I consider that it is proper to make an order for interim spousal maintenance: s 74. I fix that interim spousal maintenance in the sum of $1,000 per week and do so with effect from 5 July 2017.
As raised with the parties during the hearing, in making an order for interim spousal maintenance I recognise that subject to the operation of s 81, the Court will be obliged so far as is practicable, to make orders so as to achieve two objects: (1) to finally determine the financial relations of the parties; (2) to avoid further proceedings between them. The spousal maintenance order is an interim order.
Spousal maintenance for litigation funding.
The original claim for interim relief in respect of funding was quantified as a global sum for payment of $120,000 in respect of litigation expenses (past and future). As noted, the claim was put at the hearing on an alternative basis; namely, for the payment of $81,212 to her lawyers in respect of past litigation expenses, coupled with a ‘dollar for dollar’ order (in addition to payment of $81,212), for future litigation expenses.
The claim was supported by reference to the affidavits of the wife and her solicitor. There is evidence that the wife has outstanding and unbilled costs liabilities to her lawyers of ~$34,000. There is also evidence that, in general terms, the costs of: (1) this application will be $20,000 (2) the final hearing will be $40,000 (3) counsel will be 20,000 (4) further valuation evidence of $6,000 (5) expert witnesses (and other disbursements) associated with the trial.
I do not consider the wife’s legal costs to be excessive in this case.
I repeat the matters above as to spousal maintenance. The wife has very little in the way of cash or an available liquid asset which she might convert to cash. I infer that the wife will be unable between the present date and trial to accumulate sufficient cash to meet her future liability for legal costs. Presently, she cannot fund the final hearing.
As required by statute, a costs agreement has been made between the applicant and her lawyers. The agreement is in evidence. I regard the fees to be charged by that firm and her counsel as being reasonable. In a matter of this kind it is also reasonable that the wife would seek the legal assistance of those lawyers in preparing her application for trial.
The wife’s solicitor gave evidence in sufficient detail as to the wife’s legal costs and disbursements of this proceeding. The solicitor deposed that her firm would not act on a deferred payment basis, particularly as the wife was unable to provide security for payment. Nor should they be required to do so in a case of this kind. The evidence is that the wife’s lawyers are entitled to cease acting or to terminate their retainer, including upon failure to pay outstanding fees. The wife submitted that her lawyers would not represent her if she could not secure payment of their legal fees. The husband fairly invited me to view that submission with some scepticism. Whatever force may be attached to that submission, the wife’s lawyers remain legally entitled to terminate their retainer according to its terms. In my view, it is to obscure consideration of the central issues to attach determinative weight to the consideration whether solicitors would cease to act unless reasonable arrangements were in place to provide for their fees and disbursements.
The wife does not qualify for legal aid.
By contrast, the husband appears to have no restriction on his ability to pay his lawyers on a monthly basis. I also accept the wife’s submissions that entries in the draft accounts of the husband’s (omitted) company with respect to legal fees indicate that the husband paid a total of $81,212 to his lawyers in the financial year ended 30 June 2017. One might infer that since 1 July 2017 he too has incurred liability for additional legal costs and will continue to do so unless the matter be resolved before trial. Evidence of the quantum of the husbands costs are of relevance when balancing the competing interests of the parties: Paris King Investments [2006] NSWSC 578, [35].
I reject the claim for interim relief for litigation funding by way of spousal maintenance. I do so, not by reason of the matters outlined above, but because I consider that it is plainly an open question whether s 74 does afford a proper basis for the making of an order for litigation expenses.
Although the matter proceeded as an interim hearing, there was no debate upon this point and I consider it is quite appropriate that I should determine the issue without full, let alone, any argument on the question whether s 74 does afford a proper basis for the making of an order for litigation expenses. It is clearly an open question.
Interim property order
On the analysis above, I agree in the submission that the wife does not need to establish compelling circumstances before being entitled to interim relief.
I proceed in an evaluation of this application upon the two staged analysis endorsed by the Full Court in Strahan, supra.
As to the first stage – adjectival analysis – I agree that interim property relief in this case is an appropriate basis upon which the power in ss 79 and 80(1)(h) may be engaged. I consider that it is engaged in this case because there is a need to provide the wife with funds to assist in defraying her costs of this litigation. Without such funds injustice may well be caused to the wife. The husband has effective control of the majority of the assets of the marriage.
The wife’s submissions emphasised that the proceeding involved the determination of a claim for an adjustment of property interests in what had been a long marriage which had produced four children and where the parties had contributed to their joint endeavour over that period. It was submitted that the parties had few assets at the commencement of their relationship. I did not discern the husband to be suggesting that the wife’s submissions on those topics should be rejected.
The wife pressed her application on the objective facts of the marriage being one in which she could conservatively expect final relief for no less than 50% of the asset pool. It was also put that a further allowance of 10% in her favour was not beyond the bounds of final relief. On either footing, the wife submitted that the grant of interim relief would not operate to the disadvantage of the husband. Furthermore, in oral submissions the wife canvassed the inverse consideration that there remained the capacity in the grant of final relief to adjust the orders should it later be held that the grant of interim relief required a readjustment of some kind. As I have concluded, disqualifying features of those kinds are not present in this application so as to deny the availability of the discretionary power to grant interim relief.
On the wife’s case the probable asset pool was in the order of $5 million (inclusive of superannuation). On the husband’s case it is less than $2.6 million (by reason of various contributions made by the husband’s parents and so it is said, because the wife’s evidence as to the value of water rights is pure speculation). The disparity in the pool is remarkable and must be determined at trial. As presently advised, contributions made by the husband’s parents might commonly, but not always, be treated as contributions by the husband.
The husband’s submissions appeared to recognise, at least for the purposes of this application, that the wife might reasonably expect to receive by way of an order adjusting the parties’ entitlements to property on a just and equitable basis ~50% of their assets. So much may be accepted. What the husband submitted was that, for reasons below, there is no sufficient certainty that the wife will receive any additional amount upon such order being made.
Where the husband focussed his resistance to the wife’s application for interim property relief was to fix upon a proposition that the asset pool was significantly less than that contended for by the wife and, upon this premise, to submit that: (1) the wife could reasonably be expected to want to retain the family home (a result he would not oppose for present purposes); (2) the wife would be given credit for savings that she had retained together with the $60,000 already paid; (3) the wife would therefore be in receipt of net assets of $1.420m or 54% of the asset pool; (4) this would be significantly in excess of her overall entitlement; (5) thus, it is said, the Court could not be satisfied that the wife would obtain any further sum on a final property settlement.
Without having referred in detail to the authorities, the husband’s submission may be taken to strike at the first stage of the analysis; that is, to submit that the power was not engaged by reason of the uncertainty surrounding the prospect that the wife would obtain any further sum by way of final property settlement than that which is represented by the net value of the matrimonial home and the monies referred to above. I reject that submission.
In my view, the husband’s submission ignores the consequences that the present valuation leaves out of account some titles to the Property A land. It also leaves out of account that the husband procured that the valuer not undertake any valuation of the water rights attaching to that land. Further, the husband declined, until the hearing, to accede to the request for the wife’s new valuer to have access to the Property A property. In all of those circumstances, I consider that the husband may be taken by his own act to have brought about the result that the present valuation is incomplete and deficient. He should not be the beneficiary of a submission that the evidence is wanting in relation to the total value of the Property A land or the water rights attaching to it. On one view, he has brought about that very result: cfNew Zealand Shipping Co Ltd v Societe des Ateliers et Chantiers de France [1919] AC 1, 9.
By instructing the valuer not to value the water rights and in failing to respond in a timely way to the requests that a substitute valuer be permitted to inspect the Property A property, the husband created an evidentiary gap in relation to the value of those assets. To adapt the reasoning of Hall v Hall, the conduct surrounding valuation of the Property A property allows for an inference to be drawn more easily that evidence of the value of the property and associated water rights would not have assisted the husband’s opposition to this interim application: (2016) 257 CLR 490, [47]-[48].
I am satisfied that the grant of interim relief in a sum fixed by the orders that will be made would not have the result of giving the applicant more than she would obtain by way of final orders. Nor would the quantum of those orders be in a sum, which may preclude a proper re-adjustment on a final hearing. Accordingly, I conclude that there are no factors present which, at the first stage of analysis, require a conclusion that the power is not engaged.
As to the second and substantive stage – discretionary considerations – I also conclude that an order should be made. In assessing those considerations I adopt the cautious and conservative approach that is required.
I repeat and adopt the evidentiary considerations that I have identified above both with respect to the application for interim spousal maintenance and with respect to the analysis on the adjectival question whether the power to award interim property relief is engaged.
The level of dispute in this matter is such that determination of the parties’ entitlements to property will entail the determination of complex and contentious issues. In those circumstances, both parties and the Court will be assisted by the presence of competent and experienced legal representation.
As to other discretionary considerations, I have addressed above the parties’ comparative financial positions as being a matter of central relevance.
I consider that it is clear that the wife does, at the least, have an arguable case.
Consistent with the reasoning in Strahan, it is no part of this application to embark upon an inquiry that fixed the amount of the applicant’s costs. Subject to what follows, I regard the quantum of that legal representation – past and present – as reasonably quantified in the sum of $120,000. There are strong indications that the husband’s legal costs will exceed that sum.
There is nothing before me which presently requires a conclusion that real property must be sold if interim orders are made as sought by the wife. I am not prepared to infer that a sale is an inevitable result of such orders. There is a paucity of evidence respecting the question whether the husband’s bankers would decline him financial accommodation to satisfy such costs. No case of that kind was presented against the grant of interim relief.
As to the submission of delay, I do not consider that the wife should be disentitled from obtaining relief on account of delay. The order made on 9 June 2016 provided for payment of $60,000 in what appears to have answered her claim for interim spousal maintenance in exchange for the husband being able to obtain the use of certain bank accounts. The parties agreed that the ultimate characterisation of those monies would be left for trial. The parties also agreed in orders for the property proceeding to be set down for trial in May 2017 and then agreed to a further adjournment of that final hearing until November 2017. Some of the circumstances leading to the deferral of the final hearing may be gleaned from the husband’s unilateral decision to countermand the parties’ joint instruction for a valuation of the Property A property. Further, it is not to the account of the wife that the demands on the business of this Court prevented the application filed on 4 July 2017 from being listed for hearing until 2 September 2017.
A collective evaluation of those facts and circumstances supports a conclusion that the wife will be, at the least, inhibited in her ability to take decisions respecting the orderly preparation and conduct of her application. To adapt the conclusion in Celestin, the playing field should be levelled.
I am not however, persuaded that there should be a ‘dollar for dollar’ order of the kind sought by the wife. I am conscious that the authorities underline the caution that is needed to ensure that an order was not framed in terms that are open ended and that such orders should be certain and ascertainable at the time the order is made: Hogan; Re JJT; Selena & Montez.
In all the circumstances, I conclude that the grant of interim property orders by way of litigation funding in a sum of $100,000 will be just and equitable. I do not ignore that the wife’s financial statement discloses that the sum of $10,000 is standing to the credit of her trust account with her solicitors. As the husband has been on notice of this application since at least July 2017, it is appropriate to order that that sum be paid within 14 days of this judgment.
Costs application under sub-s 117(2) – litigation expenses
In light of the conclusion I have reached in relation to the grant of interim property relief, I can express my conclusions on this issue briefly.
It is unnecessary to reiterate the principles that I have analysed above in relation to the scope of the power under sub-s 117(2). I prefer the view that the power conferred by this provision is to be read with sub-s 117(1) and so with recognition that in general, the parties to proceedings under the Act should bear their own costs. I accept that sub-s 117(1) is not paramount or that a person seeking to invoke sub-s 117(2) bears some special onus.
As Penfold recognises, it because sub-s 117(1) is expressed as being ‘subject to sub-s 117(2)’, that the general rule must yield whenever a judge finds in a particular case that the circumstances justify an order for costs being made. However, the holding in Penfold thus requires a conclusion that the circumstances justify an order for costs being made.
I consider that while there are some circumstances in this case which bear comparison with those of Penfold and Flynn above, those circumstances in and of themselves do not suffice at this stage of the proceeding to support a conclusion that an order for costs – past and present – should be made against the husband. In my view, it would involve a premature exercise of the discretion conferred by sub-s 117(2) to make an order now that the husband be liable for the wife’s costs of this proceeding. On this basis, it would only obscure that conclusion to make an order under this sub-section and then to further order that the final characterisation of the fund to be paid await the final hearing and determination of the proceeding. I am not of the opinion that the Court should make an order as to costs under sub-s 117(2), an effect of which may subject the husband to liability for costs in a pre-emptive way. Whether any order for costs is appropriate must await the result of the trial.
Perhaps as importantly, I consider that in light of the trend of authority concerning the exercise of power under sub-s 117(2) respecting litigation costs, it is preferable to exercise power under ss 79 and 80(1)(h). To make an order under those provisions would secure the least risk of injustice to each of the parties because it would entail the acceleration of a property adjustment that was well within the bounds of the probable final outcome and would not entail the imposition on an interim basis of a personal liability for costs. Put another way, the making of an order under ss 79 and 80(1)(h) also carries the lowest risk that the Court will be called upon to reverse or re-adjust orders if instead relief be granted under ss 74 or 117(2).
Relief
The wife has demonstrated a case for interim relief both as to spousal maintenance and in respect of litigation expenses. As noted an order will be made that the husband pay spousal maintenance of $1,000 per week with effect from 5 July 2017.
In respect of litigation expenses, I am satisfied that the wife has established an entitlement to such relief by way of interim property relief which I have fixed in the sum of $100,000.
Other matters
Inspection – the parties were agreed that the wife was entitled in the circumstances to arrange a further valuation of the Property A property, including the water rights. The need to do so was an inevitable consequence of the unilateral, but undisclosed, decision of the husband to instruct the person who had been retained (on joint instructions) to value that property, not to value the water rights.
Discovery – the husband persisted in complaints that the wife’s discovery had been wanting. The evidence before me indicates that while the husband has been pressing for discovery, the wife’s solicitors have addressed those demands squarely. This is not a case in which the wife’s lawyers have prevaricated or obfuscated on the discovery issues. To the contrary, their correspondence suggests that they have responded with their instructions in relation to each of the issues that were raised for their consideration and supplied such documents as were in the power, custody or control of the wife. While it may well be that further discrete discovery issues may emerge before trial, the importance of such discovery at this stage would need to be demonstrated before orders were made. I decline the present application.
Costs – the parties were agreed that costs should fall for determination at trial and their submission should be accepted. However, I note that some authorities indicate that costs may follow the event in such applications, notwithstanding that an appeal has been partly successful: cf Bing [2007] FamCA 418, [30].
Case management – The parties agreed that it would be appropriate for their outlines of argument to be perhaps more detailed than might otherwise be required in a more straightforward case. They agreed that a topic based outline would be an approach that commended itself to the orderly presentation of their arguments. The parties should confer and attempt to at least agree on a template outline from which the parties may then work. The adoption of that course will secure the result that the parties’ case outlines follow a similar path.
I certify that the preceding one hundred and fifty (150) paragraphs are a true copy of the reasons for judgment of Judge A Kelly
Date: 13 September 2017
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