Castle and Castle

[2020] FamCA 136

FAMILY COURT OF AUSTRALIA

CASTLE & CASTLE [2020] FamCA 136

FAMILY LAW – PROPERTY – Interim distribution – Where the wife sought a payment from the husband to put towards her legal costs – Where the wife is in receipt of litigation funding – Where there is a substantial matrimonial asset pool – Where the majority of that pool is currently in the hands of the husband – Where the Court is of the view that the wife’s final property settlement claim is comfortably greater than her interim property settlement claim – Where it is likely that the legal costs of the wife will be greater than those of the husband – Where it is just and equitable to make orders about the parties’ property – Orders made – Husband to make a payment to the wife’s solicitors for her legal costs

Family Law Act 1975 (Cth) ss 79, 117

Harris & Harris (1993) FLC 92-378.
Strahan & Strahan (2011) FLC 93-466.
Stanford v Stanford (2012) 247 CLR 108

APPLICANT: Ms Castle

RESPONDENT: Mr Castle

FILE NUMBER: SYC 4519 of 2019

DATE DELIVERED: 29 January 2020

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Loughnan J

HEARING DATE: 29 January 2020

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Fowler

SOLICITOR FOR THE APPLICANT: Lander & Rogers

SOLICITOR FOR THE RESPONDENT: The Law Man

Orders

1. Orders are made in accordance with the document titled ‘Short Minutes of Orders’ (Exhibit 1 dated 29 January 2020) as amended, as set out hereunder:

   (1)    That by 5.00 pm on 3 February 2020 the husband pay into the trust account of the wife’s solicitors Lander & Rogers, the sum of $75,000 by way of interim property settlement. It is noted that for the purposes of this Order, the trust account details of the wife’s solicitors are:

   Lander & Rogers Trust Account
   CBA
   BSB: …
   Account number: …41
   Swift code: …

   Ref:  Castle …35.

   (2)    That by no later than 5.00 pm on 17 February 2020 the husband provide to the wife’s solicitors originals or copies of the documents set out in the Consent Orders made on 16 December 2019 at the following paragraphs:

   ·1.1;

   ·1.2.1(c) and (e);

   ·1.2.2(a) and (b);

   ·1.3.1(d)

   ·1.3.2(a), (b), (c) and (d);

   ·1.4.1;

   ·1.4.2;

   ·1.4.3;

   ·1.5.1;

   ·1.5.2

   ·1.6.1; and

   ·1.6.2.

   (3)(a)     That by no later than 5.00 pm on 17 February 2020 the husband provide to the wife’s solicitors originals or copies of the following documents in relation to the sale of all lots of land sold at B Street, C Town, F City, Queensland, the contracts for sale, sales advices from real estate agents, letters/communications from the solicitor and conveyancer in relation to the sales including, but not limited to, the final settlement letters and settlement statements, letters from real estate agents in relation to deposits and fees, and bank statements showing the receipt and disbursement of the sale proceeds.

   (b)Thereafter the husband shall provide to the wife’s solicitors by continuing disclosure, the documents referred to in (a) for each future sale of land at B Street, C Town, F City, by D Pty Ltd within seven days of receipt of each relevant document.

   (4)    The Court notes that in relation to the land at B Street, C Town, Queensland, the husband, through his solicitor, provided the following oral disclosure to the wife’s legal advisers today:

   (a)D Pty Ltd has recently sold three out of ten lots of land it owns;

   (b)the sale prices for the lots were $65,000, $85,000 and $7,000 and after payment of selling costs,, rates and land tax, D Pty Ltd received net sale proceeds of between $60,000 and $65,000 for each lot; and

   (c)the husband has utilised some of the sale proceeds and has a remaining amount available of about $75,000.

   (5)    That the time in which the husband was required to file and serve an Undertaking as to Disclosure as ordered on 3 September 2019 and extended on 31 October 2019 be extended to no later than 5.00 pm on 17 February 2020.

2. The Court notes that the orders and notations in paragraphs 2 – 5 inclusive are made by consent.

3. The parties’ costs of and incidental to the proceedings today are reserved.

Note: The form of the order is subject to the entry of the order in the Court’s records.

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

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 4519 of 2019

Ms Castle

Applicant

And

Mr Castle

Respondent

EX TEMPORE REASONS FOR JUDGMENT

1. These are proceedings for interim costs.  The matter was before the Court – I think it was in October last year – and ultimately the parties reached agreement about a number of issues, including interim spousal maintenance, albeit in similar terms to the parties’ arrangement prior to separation.  However, the parties were unable to resolve an issue about interim costs and that issue came over to today.

2. As the matter was presented in the documents, the wife wanted a payment of $100,000 and the husband proposed that he deposit $75,000 into an account that both parties could draw on for their legal costs.

3. As to the background facts: The wife is 47 years of age and the husband is 53.  The parties continue to reside in the same premises at Suburb E.  They met in 2005, started living together later that year, and were married in 2007.  They separated on 23 February last year.  They have no children. 

4. The wife’s application was for a payment of $100,000, but if necessary, she sought the sale of a property at G Town in order to provide those funds.  The husband responded to the effect that he wanted to retain G Town and he had his plan for $75,000.

5. The parties were both present today.  Unfortunately the husband became ill and had to leave.  Unfortunately, the situation has changed with the husband proposing that he pay the wife $30,000 by way of interim costs, and the wife seeking a payment of $75,000 for her costs. 

6. The wife says that her lawyers will cease to act if they are not paid.  She says that she has litigation funding in place for $124,000, that she has already spent $64,000 and has been given estimates of as much as $150,000 to take her to the conclusion of the litigation.

7. The wife worked originally in retail, but her only paid employment during the marriage was in the husband’s business.  She has made attempts to obtain paid employment since separation.  Without being dismissive, I think those efforts involved projects that would take some time to get up and running.  She gives evidence about two businesses.  The husband runs a building business and he has run sports related businesses.  The wife has some concerns about the husband dissipating assets through gambling. 

8. It is going to be asserted in the wife’s case that independent of the fencing business, there may be assets of the order of $12 million.  The wife understands that the business in which the husband has a one-half interest may turn over something like $18 million a year.  The wife’s evidence is that the parties lived reasonably well, enjoying first class travel, comfortable accommodation and so on.

9. In relation to interim property settlement and interim costs, the following propositions come from the authorities. While orders may be possible under the maintenance or costs powers, interim costs is most often awarded under s 79 of the Family Law Act 1975 (Cth) (“the Act”). As an interim or partial order, the power is to be exercised conservatively. There is one exercise of power under s 79 but there can be separate orders, whether made on the same day and separate orders made over time. The ultimate obligation is to make a just and equitable distribution of property. Where practicable, the Court has been enjoined not to do something on an interim basis that cannot be undone on a final basis or clawed back.

10. There is a preliminary aspect to the power in s 79(2). It must be just and equitable that there be a property settlement and any order for property settlement must itself be just and equitable. The overarching consideration in an application for interim costs is the interests of justice. The applicant need not establish compelling circumstances, but there has to be a reason.

11. Those propositions come from Harris,[1] Strahan[2] and Stanford.[3]

    [1]Harris & Harris (1993) FLC 92-378.

    [2]Strahan & Strahan (2011) FLC 93-466.

    [3]Stanford v Stanford (2012) 247 CLR 108.

12. As things stand, the overwhelming proportion of matrimonial funds is held by the husband.

13. The wife points to the case she will make for property settlement. She has a case to make about the balance sheet. She identifies something of the case she will make about contributions of various sorts, while acknowledging the overwhelming financial contribution of the husband. The wife refers to her role in the businesses and her work on the home front, managing the household and so on. Even with what seems to be a fairly conservative estimate by the husband of his own circumstances, he will go forward with a healthier income expectation, than the wife. That suggests that there may be an adjustment in her favour for the non‑contribution aspects of s 79(4) to the outcome based on contributions alone.

14. In my view the wife has a property settlement claim which is comfortably greater than her claim for interim property settlement.  

15. The wife has in place, as I said, litigation funding.  There is a cost to litigation funding.  Of the two parties, the husband has complete control of the patrimony of the family and all the relevant information and the wife does not.  It is likely, for example, that the wife’s costs will be greater than those of the husband because she has to find things out rather than knowing them as a matter of course, and it is often the case that someone in her position will incur greater costs. 

16. In the circumstances, it should not be necessary for the wife to borrow money to fund her legal costs. Normally, for the purposes of identifying the pool of property, one would add back any moneys that the parties spend on legal fees. Normally the only time one party would be required to contribute to the costs of the other party would be under s 117 of the Act.

17. The order I am asked to make is an order whereby the characterisation of the payment be a matter for the trial judge.  I cannot do that because I am obliged to give reasons as to why I made the payment.  Of course it will be a matter for the trial judge as to the overall property settlement, but I need to explain why I have made an order.  In my view this is a classic case where the wife is asking for access to her own money for the purpose of paying her legal fees.  She will have a case to make later about whether there should be a costs order.

18. An aggravating feature of the case is that the husband has manifestly failed in his obligation of disclosure.  All of the obligation of disclosure falls to him in a case like this.  He is the one who knows about the business.  He has the assets in his name.  He has all of the records, and he has studiously avoided disclosing what is happening.  The day before the parties separated, the parties were in the same interest and the wife was entitled to rely on the husband to properly manage the financial affairs of the marriage.  However, after separation, the parties were in a different interest.

19. Now the husband is a trustee for the wife in respect of the assets he holds in his name.  Apparently unabashed by the conflict of interest in which he finds himself the husband goes about his business, without consulting or notifying her.  It is not enough that the decisions are sensible and proper decisions.  The husband now needs to tell the wife in advance of proposed decisions and if there is time, give her an opportunity to have input.  If he keeps up this behaviour, he will find and application that a receiver be appointed for his part of the business.  He may find that he cannot draw a cheque for $100 without the permission of the wife.  Therefore the husband needs to take a different attitude to financial decisions.  There will be a settlement and he will go on with his life, but until that happens he needs to consult and advise.  When the parties’ relationship broke down the husband was in charge of matrimonial assets and was responsible for accounting to the wife for those assets.

20. In a sense, the issue before the Court today is embarrassing.  There may be assets of the order of $12 million or more.  Here the parties are spending their own money to ask a judge whether they can use their money to pay their legal fees.  There are sillier things to do, but it’s a bit hard to imagine what they might be.

21. The issue about the source of funds for a payment is no longer relevant because the husband proposes a payment.  As to the quantum, as I have said to the parties, you would expect that they will resolve that issue but they’re making heavy weather of it.  It appears that there are sufficient funds to pay all of the legal costs.

22. It is likely that these proceedings will be resolved by agreement.  The parties need to assist their lawyers to give appropriate advice and then enter into negotiations.  About 85 percent of proceedings are determined by agreement.

23. The husband has demonstrated that he is able to get money for the things that he wants to do without reference or permission from the Court or the wife.  For that reason I am comfortable that he will be able to find the amount that the wife seeks.  I will make an order as sought, but it will be by way of interim property settlement.  Sensibly the parties have agreed to some things that will hopefully demonstrate that the obligations of disclosure and so on have been met and they can knuckle down and get some advice and hopefully get the matter resolved.

24. Just to repeat, the wife has a claim.  It is conceded that a payment is appropriate.  If the wife runs out of funds for legal costs, there is no impediment to her bringing the matter back and seeking a further payment of interim costs.  What we need to avoid is having one party litigating with one arm tied behind her back.  It is particularly bad, of course, where that is the same party who has a deficit of information and control.  The concern is that the weaker party might feel obliged to accept an inadequate offer.  I do not suggest that the husband set out to achieve that outcome but that is the effect of what he is doing.  At the least it is disrespectful. 

25. The document titled Short Minutes of Order is exhibit 1, and I make orders and notations in accordance with that document.  I note that the orders and notations at paragraphs 2 to 5 inclusive are made by consent.

26. I will take out the words from “with” to “final hearing” and insert “by way of interim property settlement”. 

I certify that the preceding twenty six (26) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Loughnan delivered on 29 January 2020.

Associate:

Date:  9 March 2020