Cartwright and Manzetto

[2013] FamCA 1015

FAMILY COURT OF AUSTRALIA

CARTWRIGHT & MANZETTO [2013] FamCA 1015

FAMILY LAW – PROPERTY – Interim distribution – Where the parties each seek orders for interim property settlement – Litigation funding – Just and equitable – Where an order had been previously made for the sale of an interest of the parties.

Family Law Act 1975 (Cth) ss 90SM, 90SS(1)(h), 117(2),
Family Law Rules 2004 (Cth) rr 13.01, 13.04, 13.07.

Marchant & Marchant (2012) 49 Fam LR 1.
Strahan & Strahan (2009) 42 Fam LR 203.
Weir & Wier (1992) 16 Fam LR 154.

APPLICANT: Ms Cartwright

RESPONDENT: Mr Manzetto

FILE NUMBER: BRC 9426 of 2011

DATE DELIVERED: 20 December 2013

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Justice Hogan

HEARING DATE: 30 October 2013

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Ms Southwood

COUNSEL FOR THE RESPONDENT:

SOLICITOR FOR THE RESPONDENT: Mr Reardon

INDEPENDENT CHILDREN’S LAWYER: Ms Chan

Orders

IT IS ORDERED BY WAY OF INTERIM ORDER

1. That any proceeds received by the Applicant in her capacity as trustee for the sale of the interests of the Respondent, B Pty Ltd ACN … as trustee for Manzetto Family Superannuation Fund and Mr Manzetto as trustee for Manzetto Family Trust in C Group be paid into the trust account of her solicitors, Wiltshire Lawyers, to be held and invested on behalf of the parties until further order or agreement of the parties.

2. That from the proceeds referred to above, the Applicant do all things and sign all documents to ensure that the following payments are made:

   (a)payment of the current debt outstanding to D Accountants;

   (b)       payment to the Applicant of the sum of $300,000.00;

   (c)payment to the Respondent of the sum of $50,000.00 by way of deposit of such amount into the Trust account of his solicitor.

3. That the question of the categorisation of any payments made pursuant to this Order shall be a matter for determination by the trial Judge.

4. That each party comply, on an ongoing basis, with the duty of disclosure imposed by Rules 13.01, 13.04, 13.07 of the Family Law Rules 2004.

5. That the Respondent be permitted to request the single expert witness, Mr E from D Accountants, to value the interests of the Respondent, B Pty Ltd ACN … as trustee for Manzetto Family Superannuation Fund (if applicable) and Mr Manzetto as trustee for Manzetto Family Trust (if applicable) in C Group as at 27 November 2002.

6. In order to quarantine the costs of the work referred to in subparagraph (5) above, the parties are hereby directed forthwith to require the single expert to prepare a separate account of the costs associated with the valuation of the interests of the Respondent, B Pty Ltd ACN … as trustee for Manzetto Family Superannuation Fund (if applicable) and Mr Manzetto as trustee for Manzetto Family Trust (if applicable) in C Group as at 27 November 2002.

7. That, save as is otherwise provided for, the Amended Application in a Case filed 17 September 2013 and the Further Amended Response to an Application in a Case filed 14 October 2013 are dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Cartwright & Manzetto has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 9426 of 2011

Ms Cartwright

Applicant

And

Mr Manzetto

Respondent

REASONS FOR JUDGMENT

1. The property settlement proceeding between the parties is listed for final hearing before me commencing 10 February 2014. The proceedings arise out of the end of an approximately 10 year de facto relationship during which two children were born.

2. There is no dispute that the geographical requirement prescribed by s 90SK of the Family Law Act 1975 (Cth) (“the Act”) and those matters prescribed in s 90SB of the Act have been met.

3. Any perusal of the history of the matter, as evidenced by Orders previously made and appearances before me, will reveal that, in the period since their separation in about June 2011, the parties have been engaged in selling an interest (however held) in C Group (“the interest”).

4. Most recently, on 30 October 2013 the applicant was appointed as trustee for the purpose of selling the interest.

5. In order to determine the outstanding issues, pending final hearing, I proceed on the basis that the net sale proceeds arising from the disposition of the interest will be in the vicinity of $1,995,500.00[1] which will be received by way of cash payment.

   [1]Exhibit 1: the "worst-case scenario" referred to by Mr Stephen Holmes of D Accountants.

Interim property and litigation funding orders sought

1. The parties agree that fees outstanding to D Accountants, being a joint liability, should be met from the net sale proceeds of the interest. An Order is made accordingly.

2. Whilst each party seeks an order directing the payment of part of the net sale proceeds to that party prior to final hearing, the applicant opposes any distribution to the respondent being made on an interim basis because she asserts he has:

   a)had significant funds available for his use post separation;

   b)spent significant funds overseas; and

   c)removed $250,000.00 from a mortgage account in circumstances where he has failed to disclose the manner in which such funds were expended, if indeed they have been expended – the applicant suggests that such funds, in fact, remain available to the respondent.

3. The respondent proposes that each party receive $300,000.00 from the net sale proceeds of the interest, with the characterisation of the same to be reserved until trial. The applicant seeks a payment of $300,000.00 to be used by her on account of the costs and disbursements incurred in prosecuting her claim. She seeks a further payment of $50,000.00 on the basis that the “nature” of this payment be determined at final hearing. Save for these disbursements, the applicant seeks an order that the balance of the proceeds of sale be held in the trust account of her solicitors pending further order of the Court or written consent of both parties.

4. Clearly, therefore, both parties advance that the circumstances are such that the Court would be satisfied that it is just and equitable to make an interim order permitting access to funds received from the sale of the interest.[2]

   [2]          Family Law Act 1975 (Cth) s 90SM(3).

5. Whilst enunciated in the context of a consideration of the situation applicable to parties who had been married, the principles contained in Strahan & Strahan[3] apply to the determination of the current application for interim property and/or litigation funding orders.

   [3] (2009) 42 Fam LR 203.

6. It is apparent that the applicant relies on ss 90SM, 90SS(1)(h) and 117(2), of the Act as the relevant sources of power for the making of the orders sought. Whilst preliminary identification of the source of power is necessary because this determines the necessary preconditions and relevant considerations for making the order sought,[4] it is also clear that many of these are common to the respective sources of power.

   [4]Strahan & Strahan where, at par [84] and [86] Boland and O’Ryan JJ agreed with what Brereton J in Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578 stated that Zschokke and Zschokke (1996) FLC 92-693 had established.

7. On the applicant’s case, the net property of the parties (exclusive of any asserted notional assets) has a value of between $2,113,936.90 and $2,621,436.00. The applicant seeks, at final hearing, that an order be made so that she receives 67 per cent of the net value of the property of the parties, together with a payment of $354,000.00 by way of lump sum child support. Using the lesser of the two values, a successful prosecution of her claim (exclusive of any entitlement to lump sum child support) would, therefore, see her receive property having a value of about $1,770,337.00 and the respondent receive property having a value of about $343,599.17.

8. The respondent seeks, at final hearing, an order which would see him receive 65 per cent of the net value of the property of the parties. A successful prosecution of his claim would, using the lesser of the two values referred to above, see him receive property having a value of about $1,374,058.90 and the applicant receive property valued at about $739,878.00.

9. Each party will, subject to an order to the contrary, be responsible for payment of the legal fees each has incurred in the course of conducting these proceedings. 

10. The applicant currently owes her solicitors more than $198,000.00. She has been provided with an estimate of further legal fees and outlays said to be likely to be incurred between the end of October 2013 and the trial in mid-February 2014 in the amount of $128,000.00. If this estimate proves to be accurate, the legal fees she has incurred associated with these proceedings will be in the vicinity of about $326,000.00 (or about 15.42 per cent of the asserted lower value of the net property of the parties).

11. The respondent has paid his current solicitors approximately $77,000.00, has an outstanding bill of $279,583.00 (referrable to the period from 1 July 2011 until September 2013) and has been provided with an estimate of likely further legal fees and outlays, inclusive of the costs of engaging Counsel, to trial in the amount of about $150,000.00. If this estimate proves to be accurate, the legal fees the respondent has incurred, associated with these proceedings, will be in the vicinity of about $506,583.00 (or about 23.96 per cent of the asserted lower value of the net property of the parties).

12. In addition to these legal fees, the respondent has incurred legal fees, associated with the sale of the interest, totalling some $89,000.00. The parties disagree as to the manner in which this expenditure should be regarded and, no doubt, this is one of the issues which will be ventilated at trial in February 2014.

13. As it stands, the evidence suggests that, in the event that the estimates provided to each party by their respective legal representatives proves to be accurate, the total legal fees and disbursements associated with this proceeding (exclusive of the $89,000.00 referred to above), will approximate $832,583.00 (or about 39.38 per cent of the asserted lower value of the net property of the parties).

14. The parties’ de facto relationship subsisted for about 10 years. At its commencement, the applicant had property of a limited value, whilst the respondent owned the interest – the value of which is unknown. The two children of the relationship remain living with the applicant who meets the majority of the costs associated with their support.

15. The applicant is currently in receipt of Government benefits which she applies to her support and that of the two children of the relationship. She cannot meet her legal expenses without access to the sale proceeds of the interest and is unable to fund her legal representation for trial without access to such funds.

16. Whilst the respondent, who lives with his parents in Perth, is employed he has, on his evidence, the responsibility of supporting his current partner and their child.

17. An assessment of the competing proposals undertaken on a conservative basis reveals that the applicant is likely to be entitled to more than $300,000.00 of the property available to the parties. Given the quantum of funds which will remain in trust pending an order or agreement of the parties, I am satisfied that the remaining property will be adequate to meet the legitimate expectations of both parties at the trial which will take place early next year.

18. I am persuaded, in all the circumstances outlined above, that it is just and equitable and appropriate that the applicant be able to access funds in the amount of $300,000.00, should such funds become available prior to trial.

19. I record that, on my understanding of the value of the property of the parties, even if the applicant succeeds in her claim that $250,000.00 be notionally added back and apportioned to the respondent as funds already received by him by way of a unilaterally orchestrated interim property distribution, it is unlikely that her legitimate entitlement will be unable to be met should an order be made permitting the respondent to access a modest amount of the funds which will be held in trust following the sale of the interest.

20. I am persuaded that it is just and equitable and appropriate that the respondent be able to receive $50,000.00 from the funds held in trust. Such sum will enable some of the anticipated costs of the upcoming five day trial in February 2014 to be met and, in that way, I can be more confident that the respondent will have the benefit of legal representation at that time. Whilst this amount will not be sufficient to defray those fees currently owing to the respondent’s solicitor, such firm has, on the basis of receipt of about $77,000.00 thus far, represented him since July 2011. Whilst the respondent’s solicitor states that his firm “does not currently have the capacity to take on any further deferred matters,” the final hearing of the proceeding is not far off.

21. The applicant seeks that I characterise a portion of the sum to be received by her as received by way of a litigation funding order and reserve the characterisation of the remainder to trial. I remain a little unclear as to the respondent’s position on the issue of the characterisation of funds received by him or the applicant.

22. It does not follow from the need to identify the source of power exercised in making an interim order of the type sought by the applicant that the Court is required to “characterise” such money on an interim basis.[5]  I consider it is appropriate that an order be made reserving the question of the characterisation of the payments to each party to the final hearing before me in February 2014.

    [5]          Marchant & Marchant (2012) 49 Fam LR 1, [40]-[42] per May, Ainslie-Wallace and Kent JJ.

Orders for further disclosure sought by applicant

1. The applicant seeks an order that the respondent provide specific disclosure as particularised in the Further Amended Response to an Application in a Case filed 14 October 2013.

2. Rules 13.01, 13.04 and 13.07 of the Family Law Rules 2004 (Cth) clearly set out the disclosure obligations of parties in proceedings under the Act. Ongoing compliance with these Rules is an expectation, as is ongoing disclosure. Failure to comply with such Rules may expose a delinquent party to consequences, as has been made clear by authorities such as Weir  & Weir (1992) 16 Fam LR 154 where the Full Court said, at p 158:

   This court has pointed out in a line of cases leading up to the recent decision of the Full Court in In the Marriage of Black & Kellner (1992) 15 Fam LR 343; [1992] FLC 92-287, that it is the duty of a party involved in property proceedings in this jurisdiction to make a full disclosure of their financial affairs. [Citations omitted]

   …

   It seems to us that once it has been established that there has been a deliberate non-disclosure… then the Court should not be unduly cautious about making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this nature.

3. I do not intend to make an order in the terms sought by the applicant but the respondent should be left in no doubt whatsoever as to the potential consequences for his case should I be persuaded, at trial, that he has failed to comply with the ongoing obligation of disclosure. He can be left in no doubt at all as to the matters in respect of which it is sought that he provide further information and documentation. Whether he determines to do so is entirely a matter for him, cognisant of the potential consequences for his own case as outlined above.

Order that the parties jointly instruct the single expert witness to value the interest as at the date of cohabitation on 27 November 2002

1. The respondent seeks an order that the parties jointly instruct the single expert witness to value certain specified assets in paragraph 1. (a) –(l) of his Amended Application in a Case filed 17 September 2013.  He seeks that the interest be valued as at 27 November 2002 – the date the parties commenced cohabitation. He also seeks that the cost of this exercise be borne jointly. The applicant opposes this.

2. The respondent’s application falls to be considered against the factual reality that the parties jointly engaged the single expert (who valued the interest in about late May 2012) and received a Report from him in late May/early June 2013.

3. I am not persuaded as to the basis for the valuation of entities other than the interest and I decline to make an order in those terms. However, it seems to me that, as the single expert has already undertaken a significant amount of work in valuing the interest, the interests of justice and the balance of convenience both favour permitting the respondent to request that the single expert undertake the valuation of the same as at the commencement of cohabitation. The cost of this exercise should be quarantined and the apportionment of responsibility for the same can be a matter for evidence and submission at trial.

I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Hogan delivered on 20 December 2013.

Associate: 

Date:              20 December 2013