Cao & Trong (No 2)
[2024] FedCFamC1F 103
•28 February 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Cao & Trong (No 2) [2024] FedCFamC1F 103
File number: MLC 2555 of 2016 Judgment of: CARTER J Date of judgment: 28 February 2024 Catchwords: FAMILY LAW – COSTS – Litigation funding – Where the wife sought the husband pay her legal costs on a dollar for dollar basis – Where the Court is not satisfied it is just to make an order pursuant to s 117 of the Family Law Act 1975 (Cth) – Application for dollar for dollar order dismissed. Legislation: Child Support (Assessment) Act 1989 (Cth) s 136(2)(b)
Family Law Act 1975 (Cth) ss 117, 117(2), 117(2A)
Cases cited: Atkins v Hunt (2018) 57 Fam LR 128
Cao & Trong [2023] FedCFamC1A 40
Hurford & Hurford [2016] FamCA 328
Salvage & Fosse (2020) 61 Fam LR 45
Division: Division 1 First Instance Number of paragraphs: 65 Date of hearing: 15 February 2024 Place: Melbourne Counsel for the Applicant: Mr Smith Solicitor for the Applicant: Fernandez & Johnson Counsel for the Respondent: Dr Ingleby Solicitor for the Respondent: Westminster Lawyers ORDERS
MLC 2555 of 2016 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS TRONG
Applicant
AND: MR CAO
Respondent
ORDER MADE BY:
CARTER J
DATE OF ORDER:
28 FEBRUARY 2024
THE COURT ORDERS THAT:
1.The wife’s Application in a Proceeding filed 6 December 2023, and all extant interim applications are otherwise dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUSTICE CARTER
The application before the Court is the wife’s Application in a Proceeding, filed 6 December 2023. She seeks inter alia orders pursuant to s 117 of the Family Law Act 1975 (Cth) to the effect that for each dollar the husband pays to his solicitors by way of costs, the husband pay a dollar to her solicitors for costs. She seeks that any such order be backdated to 29 August 2023.
That is opposed by the husband.
The substantive proceedings are to commence before me on 13 May 2024. At that time the court will be asked to determine the following matters:
(a)whether the binding child support agreement should be set aside, and the applications that then flow from the determination of that issue; and
(b)the wife’s spousal maintenance application.
This matter comes before me having been remitted after an appeal.
The orders that were made by the primary judge dealt with the sum of approximately $3,100,000 held in a controlled monies account. Those funds were the proceeds of sale of the parties’ former matrimonial home, and the only asset remaining as at the hearing before the primary judge. The orders provided for the Commissioner of Taxation be paid $2,824,336 and the balance of the monies were to be paid to the Child Support Registrar. At the time the matter was before the primary judge, the husband owed $762,000 by way of child support pursuant to the binding child support agreement and about $7,000,000 in tax. According to their Honours Austin and Williams JJ, at [23], “it was common ground as between the Commissioner of Taxation and the Child Support Registrar that the respective debts should be paid rateably from the matrimonial assets”.
The husband appealed the decision by the primary judge in relation to his refusal to set aside the binding child support agreement. Prior to the husband filing his appeal (and notwithstanding being on notice that an appeal and stay application were to be filed) the wife’s previous solicitors distributed the balance of the monies in the controlled monies account to the Child Support Registrar. The wife has now received $248,435 from the Child Support Registrar.
At this interim hearing the wife relied upon:
(a)her Application in a Proceeding filed 6 December 2023;
(b)her affidavit filed 6 December 2023;
(c)her affidavit in reply filed 9 February 2024;
(d)an affidavit of Mr AJ, solicitor, filed 19 January 2024; and
(e)her Financial Statement filed 6 December 2023.
The husband relied upon:
(a)his Response to an Application in a Proceeding filed 1 February 2024;
(b)his affidavit filed 1 February 2024; and
(c)his Financial Statement filed 1 December 2023.
Both parties also provided outlines of case, and costs notices.
THE LAW
Relevantly, s 117 of the Family Law Act provides that each party shall bear his or her own costs unless the Court is of the opinion that there are circumstances that justify the Court departing from that general rule. In determining what, if any order is to be made, the Court is directed to consider a number of matters set out in s 117(2A), with the Court to give such weight as it considers relevant to any factor. It is well settled law that no one factor must be present, and that the presence of one factor can provide the sole foundation for an order for costs.
A number of the s 117(2A) considerations are not relevant in the extant case. What is relevant to my consideration are the financial circumstances of the parties. As set out in the case law, when making a dollar-for-dollar order pursuant to s 117(2), the focus of the Court is generally on the disparity of the parties’ financial resources, and on their ability, or lack of such ability to meet their legal fees.
In terms of additional matters that are relevant, the case law suggests I should have regard to whether the applicant has at least an arguable costs for substantive relief. I should also know the likely costs of litigation.
It is not in dispute that the Court has the power to make the orders sought by the wife notwithstanding there is no application pursuant to s 79 of the Family Law Act now before the Court. The purpose of such an order was set out by Watts J in Atkins v Hunt (2018) 57 Fam LR 128, namely;
31.… to ensure that for any dollar the financially advantaged party spends on legal costs and disbursements on the case, the disadvantaged party is also provided a dollar to spend on their case…
In that same case, his Honour noted that orders as sought by the wife could be made in circumstances where a financially advantaged party has relatives or associates who can fund the litigation, and where the other party is unable to access similar supports from third parties. The case his Honour refers to in support of an order in those circumstances is that of Hurford & Hurford [2016] FamCA 328. I will turn later to that case and set out how it is factually very different from the extant matter.
The dollar-for-dollar order as sought by the wife has often been described as ‘levelling the playing field’, and an order that is usually made as a last resort.
SUBMISSIONS OF THE WIFE
It is the wife’s case that she will be unable to afford her legal costs if no costs order is made, and she will appear unrepresented at trial.
The wife’s lawyers have provided a costs notice which sets out that they anticipate invoicing the wife a further $28,500 to complete these proceedings. This will bring her total costs of the hearing before me and this Application in a Proceeding to $39,694. She has already paid $11,193.
The wife says she has no assets she can sell to meet those future legal costs, and no ability to borrow further from friends or family. She says her financial situation is far more compromised than the husband’s circumstances, who is apparently able to access additional funds to meet his outgoings. According to her Financial Statement, the wife sets out that her income is $1,475 from her employment in the defence forces. She is also in receipt of modest government supports and $462 a week in child support. She deposes that her weekly expenses for herself and the children are $3,385, eclipsing her income.
Counsel for the wife emphasised that notwithstanding the husband’s assertion that he generates only a very modest income, he has demonstrated an ability to meet legal fees, and to meet various other costs as follows:
(a)the husband has continued to pay rent of $1,000 a week for an apartment in Suburb AK where the parties’ oldest (and now adult) son resides,
(b)the husband has continued to meet the costs of school fees at D School for the parties’ other two sons; and
(c)the husband has been able to meet his legal fees to date.
The wife does not accept the husband’s explanation as to why in late 2019 he apparently renounced his interest in his late father’s estate and has seemingly transferred control of the monies to his mother. The wife says the discovery provided regarding the husband’s entitlements by way of inheritance has been insufficient.
The wife says in circumstances where the husband is readily able to rely on family members to provide him with funds, and in the face of the husband’s failure to provide proper discovery regarding the terms of his father’s will, orders should be made as sought by her for dollar for dollar costs. She says this is particularly so in circumstances where under the terms of the binding child support agreement – that remains currently in full force and effect – she is owed a considerable amount of child support. She said if the husband had met his obligations under that agreement, she would be able to meet her legal fees.
The wife concedes she has received $854,845 – being:
(a)606,412 she received by way of interim orders made on 20 March 2018 and on 27 May 2019; and
(b)a further $248,435 from the controlled monies account via the Child Support Registrar pursuant to the November 2022 order.
The wife deposed to having expended the bulk of the $606,412 on legal fees. According to the wife, her previous lawyers – AL Lawyers – invoiced her a total of $1,611,873. I am unaware if the wife continues to owe those lawyers funds. Given the ambit of the dispute, those legal fees appear, at first blush, to be somewhat disproportionate.
The wife deposed that she has expended the $248,435 on a number of expenses including in particular paying a further $100,000 to her previous lawyers, meeting credit card expenses, paying her current lawyers, and repaying the following personal debts:
(a)$60,035 to Ms AM;
(b)$50,035 to Ms AN; and
(c)$13,000 to Mr AO.
As best as I understand it, those third parties loaned monies to the wife which she used to fund her legal proceedings. I do not know when those persons were repaid.
The wife says she has no funds left, and no ability to raise more funds, from which to pay lawyers. She says the husband remains able to draw on resources to meet his fees, leaving her at a significant disadvantage.
SUBMISSIONS OF THE HUSBAND
The husband says he is unable to personally meet his own legal fees and must rely on his family for the payment of those. He also denies he has the capacity to meet any costs on behalf of the wife, and does not accept she has demonstrated an inability to meet her own costs.
According to the husband’s Financial Statement he is receiving a very reduced wage of approximately $200 per week from his employer in Country DD, who is also meeting his rent, utilities and the costs of a live in carer. This is as a result of the husband having sustained a “major injury” in mid-2022, when he said he fell. He says he has undergone emergency surgery and then spent two days in an induced coma and three weeks in a high dependency unit in a Country JJ hospital. The husband says his injury has significantly affected his ability to work and earn an income, that his only now works two to three days a week, continues to suffer from ongoing fatigue, and has reduced functioning in his dominant hand. He says he is reliant on the assistance of a live-in carer to undertake basic household tasks.
No medical evidence was put before me at the interim hearing, but there was no challenge mounted to the submissions made by counsel for the husband in this regard.
The husband’s Financial Statement also sets out that the husband has no savings of significance, and no assets of value which could be sold and the proceeds used to fund either party’s costs. The husband says he continues to owe about $4,836,000 in income tax, and significant child support, as well as having outstanding legal fees to his previous solicitors, accountants’ fees and other personal loans totalling in excess of $700,000.
The husband says the wife’s income earning capacity exceeds his. She earns $1,475 per week. He does not accept the expenses outlined by the wife in her Financial Statement. He queries, for instance, the food bill, given one child is an adult and lives independently, one child boards at school during the week, which leaves only one child at home full time to provide for. He also queries her claimed expenses of about $18,000 per annum on holidays.
Notwithstanding the husband’s asserted limited cash income, the husband has continued to arrange the payment to the wife of some modest child support, the school fees for the two younger children at D School, rent for the parties’ oldest child’s apartment, and a payment to that oldest child of a monthly food allowance. The husband deposed he is reliant on gifts from his family to make these payments. He said his mother has sold shares to pay the children’s school fees.
The husband’s explanation regarding relinquishing his interest in his father’s estate is as follows:
(a)the husband said his father had advanced him funds during his lifetime, commencing in 2014 with the sum of $400,000, which was documented in a loan agreement. The husband said those monies were used in party to pay creditors and discharge the husband’s bankruptcy in Country DD, and the balance used towards the children’s school fees and the parties’ living expenses. He said further monies were provided by the husband’s father to meet the children’s school fees; and at the time of the husband’s father’s death in 2019, the husband owed his father $770,000. I do not know whether these matters are agreed;
(b)the husband’s father’s died intestate. An inventory of assets was prepared listing the husband’s father’s assets in Australia at about AUD$986,000 and in Country DD at about AUD$623,000. I note the documents provided by the husband do not appear to record the husband as owing any monies to the estate. No explanation was given for that omission;
(c)the husband says under Country DD law, his mother was entitled to one third of her husband’s estate and he and his sister, to the remaining two thirds. I do not have any expert evidence about that;
(d)the husband said it was agreed by him, his mother and his sister that given the funds advanced to the husband during his father’s lifetime, he would renounce any entitlement he might have to the estate, and in return, the estate would forgive the loans;
(e)the husband, his mother and sister entered into a deed reflecting that arrangement in December 2019, although that deed refers only to the assets in Country DD; and
(f)the husband said all the assets in Country DD have now been transferred to his mother. The assets in Australia (being shares) have been transferred into a trust for which the husband’s mother is the sole beneficiary. The husband said he is not the appointor of the trust, and is not a beneficiary of that trust. He says accordingly he has no claim to any assets that were within his father’s estate.
As set out, the wife does not accept that the husband has genuinely relinquished his inheritance. In the absence of cross-examination I am in no position to make findings at this time as to the veracity of the husband’s assertions.
The husband said his family have advised him they cannot continue to meet his legal fees, provide him with the funds for the children’s support and schooling and assist him while he recuperates in Country DD. He says accordingly, he may be unable to meet his own legal fees and he has no capacity to contribute to those incurred by the wife.
The husband also asserted the wife has not demonstrated she is unable to fund her own legal costs. Counsel for the husband said that, like his client, the wife has apparently been able to source funds from family and/or friends to meet her legal fees. He pointed to the loans the wife said she had from Ms AM, Ms AN and Mr AO, totalling $123,070. He pointed to the wife’s Financial Statement in which she asserts she owes a further $184,632 to friends. I note the wife has not deposed to the terms of repayment, if any, of those outstanding loans.
Counsel for the husband also emphasised that the wife has had the benefit of $854,845 being paid to her/to her solicitors in the course of these proceedings as already set out.
In relation to the wife’s evidence that she repaid monies to Ms AM, Ms AN and Mr AO from the funds paid to her in March 2018 and May 2019, counsel for the husband said she did so without producing any evidence that the lenders required or had demanded repayment. Nor has she deposed more specifically as to when those monies were repaid. Counsel for the husband said had the wife not provided those monies to those third parties, she would have $123,070 remaining which she could have applied to these proceedings.
I do not agree that the wife is in the same position as the husband regarding accessing funds from third parties. The wife also deposes that she is unable to borrow further funds from friends. I also note the wife deposes that the monies she has sourced have been by way of loans, and in relation to at least some of those loans, loan agreements have been entered into. The husband did not suggest that the monies paid by his sister or mother on his behalf are loans, and instead he repeatedly described the funds he receives from his family as “gifts”.
DISCUSSION AND CONCLUSION
As identified by their Honours Ryan and Aldridge JJ in the case of Salvage & Fosse (2020) 61 Fam LR 45, as set out in s 117(2) of the Family Law Act, the critical question is whether in all the circumstances the costs order as sought by the wife is just.
In the case of Hurford, the Court made a dollar-for-dollar order in circumstances where the financially advantaged husband’s mother and accountant had been providing the husband with funds for his legal fees. The wife in that case did not have access to the same financial support from family or associates.
The facts in Hurford are however otherwise quite different from those in the matter before me. In Hurford, the Court was dealing with a complex property matter in which there was no dispute that the husband had all the information and knowledge about the complicated corporate structure operated by himself and his siblings, of about 48 companies and seven trusts. His Honour said that the husband, together with his siblings “controls the purse strings”, at [23].
Moreover, in the preceding year, the husband had received distributions from trusts in excess of $1,770,000. The husband had also failed to make proper disclosure, and there were demonstrable and significant inaccuracies in some of the documents he did disclose regarding his financial circumstances. The husband also appeared to have deliberately delayed informing the wife as to a payment made to him from the Australian Tax Office of over $530,000 until he had received – and disbursed – it. The husband also had an interest in a property held through one of the many trusts of $4,275,000.
The case before me is not one where the husband has control of the parties’ assets – there are none. If the husband’s evidence regarding his father’s will is correct, he has no control over – or entitlement to – those monies either. It was not suggested that the husband is able to control the purse strings of his mother or sister, and on the basis of the material before me, I could not form an impression that the husband has any control over structures or trusts to ensure payments or distributions are made to him. I have limited information about the financial position of the husband’s mother or sister – other than an assertion by the husband that they have advised him that they will be unable to keep funding his legal costs, whilst also meeting the children’s school fees and providing the husband with support whilst he recovers from his accident in Country DD. It is of concern that an order as sought by the wife could potentially impact on the children’s schooling.
On the material currently available, each party appears to be in significant financial difficulties, with little income, and significant outgoings. I note neither party sought to cross-examine the other, and accordingly I am unable to make findings of fact regarding matters in dispute.
Whilst the wife’s weekly income exceeds the $200 per week the husband asserts he receives, that does not wholly reflect the husband’s financial circumstances. The husband has the significant benefit of his accommodation, utilities, and car expenses being met by his employer. The wife has the expenses for the children to meet, as well as her accommodation costs, utilities, and other living expenses that she must meet herself. I note the wife’s financial circumstances would be substantially improved had the husband paid to the wife the considerable amount of child support to which she is currently entitled pursuant to the child support agreement.
On his evidence, the husband’s health is poor and his income has significantly declined. As already noted, the husband did not provide any medical evidence to corroborate his evidence in this regard, but there was no suggestion from counsel for the wife that the husband has inaccurately stated his medical issues.
Apart from funds gifted from his family, on the face of the material filed, the husband’s overall financial circumstances are reasonably modest. He is reliant on support from his family to meet the needs of the children. This is not a case in which the husband’s financial circumstances are substantially superior to those of the wife, save in so far as his family are able to provide him with assistance.
The wife has had the benefit of monies released to her in 2018 and 2019 totalling $606,412 to put towards her legal fee. She has also received the sum of $248,435 from the controlled money account, some of which went to legal fees. She says she has accounted for how those funds have been disbursed, and she has no money left from which to meet her future legal fees. As already set out, the wife appears to have repaid some funds to third parties. Had she not repaid those monies, she may have had funds available to meet her legal costs.
The husband has not received any monies by way of part property to put towards his legal fees. However, he has been in receipt of funds for his legal fees from his family. Unlike the wife, who has had to borrow funds from third parties, there is no suggestion the husband will be required to repay any monies to his family.
In terms of the merit of the parties’ claims, it is the husband’s case the binding child support agreement should be set aside as a result of unconscionable conduct on the part of the wife’s then solicitor. Counsel for the husband asserted the husband’s evidence provides a strong foundation for the agreement to be set aside. It is the husband’s case inter alia that he maintained to the wife’s solicitors during negotiations that he would be unable to meet the payments as set out in the agreement; that the wife’s lawyer made misrepresentations to him as to a binding child support agreement being flexible; and that the husband signed an amended version of the agreement without legal advice which the wife’s solicitor then registered. Counsel said this provided a strong case that the wife’s solicitor had engaged in “unconscionable or other conduct” to such an extent that it would be unjust not to set aside the agreement, as provided for in s 136(2)(b) of the Child Support (Assessment) Act 1989 (Cth).
Conversely, the wife asserted her claim to have the agreement upheld was strong. In support of that assertion, counsel emphasised the judgment of Howard J in the appeal, in which his Honour said he would have upheld the child support agreement, rather than remitting the matter as determined by the plurality. Indeed, his Honour goes through in detail the reasons why he would not have interfered with the binding child support assessment, and dismissed a number of the arguments advanced by the husband.
It is not known whether at the conclusion of the hearing before me the husband will owe the wife further funds by way of child support, and if so, the quantum of such debt, or whether the wife will be required to repay any monies to the husband. Under the terms of the binding child support agreement, the husband at as November 2022 had a child support liability of around $762,000. Presumably that amount owing decreased to about $513,000 as a result of the monies paid pursuant to the orders of the primary judge – although I note additional child support liabilities are still accruing, and have been doing so since judgment.
If the agreement is not set aside, the Registrar will seek to recover the child support from the husband. If, ultimately, I determine that the child support agreement is to be set aside, an assessment will issue, from which it is anticipated the wife will seek a departure order. It is impossible to know what amount of child support would be owed to the wife in those circumstances. I cannot know, for instance, whether the amount of $248,435 paid to the wife from the controlled monies account would exceed any assessment or amount determined pursuant to Part 6A of the Child Support (Assessment) Act.
In all the circumstances it is difficult to evaluate the quality and nature of the competing claims as to the child support agreement, or the likely outcome. At best I can say, it appears that neither parties’ case regarding the child support agreement is without merit.
It was conceded by the wife’s counsel that her spousal maintenance application is ‘not of the same strength’ in terms of merit. That is particularly so if the husband is able to establish the injury he has received and the impact on his earning capacity.
It was also conceded by counsel for the wife that recovery of costs against his client was unlikely in the event the husband’s application was successful. This is not a matter where at the conclusion of the proceedings the wife will receive a property settlement from which she can meet her costs; nor is there any other way in which such an order as is sought by the wife can be taken into account, adjusted or possibly reversed at the conclusion of the final hearing.
As their Honours Ryan and Aldridge JJ in Salvage noted at [33] and [34], the fact that an interim costs order may not be repaid does not prevent such an order being made. It is, however, a relevant consideration.
The husband does appear currently to have substantially met his costs with the solicitors now on the record. His costs notice includes work done prior to the appeal, the appeal and the remittal of the matter before me. In terms of the anticipated future costs, the costs for this hearing and those for the final hearing, it is anticipated the husband will be charged a further $59,798.
In relation to the wife’s current solicitors, the wife has paid for work billed to date of $11,193. According to the wife’s costs statement, it is anticipated she will be billed a further $28,500 to the conclusion of these proceedings.
On the face of the documents relied upon by the parties, neither party is able to meet their legal fees from their own income or resources. They are both in debt. The wife says her ability to borrow from friends is at an end.
On the evidence before me, I cannot be satisfied that the husband has the capacity to meet the wife’s legal fees. As already observed, the husband says his family have advised him they cannot keep funding his legal fees, whilst also providing for the children’s school fees and otherwise supporting him during his rehabilitation. As already noted, counsel for the wife did not seek to cross-examine the husband regarding these matters or his financial circumstances more generally.
As observed by Watts J in Salvage:
61.The requirement of justice must remain a basic condition in the making of an order of the type in question under s117(2) … That should be understood to mean justice when balancing competing considerations in favour of or against each of the parties.
(Citations omitted)
I understand that without a costs order in her favour, the wife may be unrepresented at the final hearing. That is regrettable. I note that the wife appeared unrepresented at the appeal as she was unable to afford counsel. This is a finely balanced case. However, balancing all the competing considerations as outlined, I am not satisfied that circumstances exists that justify the making of a costs order at this time.
For these reasons, I will dismiss the wife’s Application in a Proceeding.
I certify that the preceding sixty-five (65) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Carter. Associate:
Dated: 28 February 2024
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