CHATTERJEE & WOODBY-CHATTERJEE

[2015] FamCA 947

FAMILY COURT OF AUSTRALIA

CHATTERJEE & WOODBY-CHATTERJEE [2015] FamCA 947

FAMILY LAW – INTERIM COSTS – Application by the wife for provision of funds for litigation expenses pursuant to s 117(2) of the Family Law Act 1975 (Cth) – Where there is no fund of money available to pay the amount sought by the wife – Where the orders sought by the wife would require the parties to make further borrowings on an existing joint credit facility secured against the former matrimonial home – Where this would increase the joint liabilities of the parties and may diminish the prospective entitlement of the husband in the substantive proceedings – Wife’s application dismissed.

Family Law Act 1975 (Cth) s 117

Strahan & Strahan (2011) FLC 93-466

APPLICANT: Mr Chatterjee

RESPONDENT: Ms Woodby-Chatterjee

FILE NUMBER: SYC 3822 of 2013

DATE DELIVERED: 4 November 2015

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Rees J

HEARING DATE: 28 October 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Bridger

SOLICITOR FOR THE APPLICANT: G & D Lawyers

COUNSEL FOR THE RESPONDENT: Mr Eardley

SOLICITOR FOR THE RESPONDENT: Bricknell Legal Solicitors

Orders

IT IS ORDERED

1. That the Amended Application in a Case filed by the respondent wife on 7 October 2015 be dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Chatterjee & Woodby- Chatterjee 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 SYDNEY

FILE NUMBER: SYC 3822  of 2013

Mr Chatterjee

Applicant

And

Ms Woodby-Chatterjee

Respondent

REASONS FOR JUDGMENT

1. Before the Court is an application by the wife, Ms Woodby-Chatterjee for the payment of a sum of $50,000 towards her legal costs. The application is opposed by the husband, Mr Chatterjee.

2. Counsel for the wife relied upon s 117 of the Family Law Act1975 (Cth) (“the Act”) as the source of power for the making of the order. As will be demonstrated from the short history of the proceedings, s 79 was not available.

3. In 2003 the parties entered into a Binding Financial Agreement (“BFA”). That agreement remains on foot and therefore the Court has no power to make any order for adjustment of property interests between the parties.

4. Relevantly, for the purpose of these proceedings, the BFA provides that, on the breakdown of the marriage, any joint property is to be divided equally “in terms of net value” between the parties.

5. On 6 November 2004, the wife and the husband purchased a property at Suburb B for their residence. Suburb B is joint property for the purposes of the BFA.

6. A portion of the purchase price was borrowed from the Westpac Banking Corporation (“Westpac”) and a mortgage dated 1 December 2004 in the parties’ joint names to Westpac was registered on the title of the Suburb B property. An amount of $1,200,000 was also provided by the husband’s father, Mr V Chatterjee, in order to fund the purchase of Suburb B. The parties executed a mortgage in registrable form to the husband’s father in respect of this advance, which included the provision for payment of interest on the principal sum if, so demanded, on 13 December 2004. Stamp duty was paid on the mortgage.

7. There is no dispute that the funds were advanced by the husband’s father, however the wife disputes that the money was lent, and she relies on a Statutory Declaration that was signed by the husband’s father on 10 November 2004 stating that the advance of $1,200,000 was a gift and not repayable at any time.

8. The parties separated in August 2012. The husband commenced parenting proceedings on 9 July 2013.

9. On 31 October 2013, the husband filed an amended application which sought orders for the enforcement of the BFA pursuant to s 90KA of the Act and consequential orders that the wife execute a Contract for the Sale of the Suburb B property.

10. In January 2015 the husband’s father instituted proceedings in the Supreme Court of New South Wales (“the Supreme Court”) seeking to enforce his rights pursuant to the mortgage. The wife is defending those proceedings.

11. On 31 December 2013, by way of a response to the husband’s application for the enforcement of the BFA, the wife filed a response which sought, inter alia, orders setting aside the BFA and consequential orders pursuant to s 79.

12. The wife’s application to set aside the BFA was listed for hearing before Le Poer Trench J for three days, commencing on 11 August 2015. Unfortunately, the parties chose to use those three days in an unsuccessful attempt to negotiate a final settlement and the preliminary issue of the setting aside of the BFA was therefore not dealt with. The matter has been referred back to the pool of matters awaiting allocation to a docket.

13. It is conceded that there is no fund of money available to pay the amount sought by the wife in her application for interim costs. Rather, she relies on the fact that there is an existing loan facility with Westpac in the parties’ joint names with an available amount in excess of $300,000. She asks the Court to make an order that the husband permits her to draw on the loan facility to pay her legal fees, or, as will be seen, a portion of them. The Westpac loan facility is secured against the Suburb B property. Any funds paid from this account will accordingly increase the parties’ joint liability pursuant to the mortgage to Westpac.

14. The wife’s application for interim costs is governed by s 117(2) of the Act and the matters to be taken into account are set out at s 117(2A). Section 117(2) and (2A) provide as follows:

    (2)If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.

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

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

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

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

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

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

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

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

15. In Strahan & Strahan (2011) FLC 93-466 at 85,635(“Strahan”), the Full Court cited with approval the statement of Brereton J in Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578 in relation to s 117:

    ·an applicant should have “at least an arguable case for substantive relief which deserves to be heard”: Chester v Chester (1995) FLC 92-612 (“Chester”) at 82,107 per Moss J;

    ·there should be evidence of the applicant’s “likely costs of the litigation”: see Wilson and Chester;

    ·“it is not an essential precondition” that the applicant’s legal representatives will not continue to act unless the costs are paid or secured on an ongoing basis: Columb and Columb (unreported, Family Court of Australia, Fogarty J, 27 November 1987); see however Coomes and Coomes (1995) FLC 92-558 per Cohen J;

    ·an order may “make a provision for litigation expenses at a rate that appears reasonable in all the circumstances”;

    ·an order can be made “in respect of costs already incurred as well as of future costs”;

    ·whether the order is to be in respect of costs already incurred or costs to be incurred, and whether the applicant’s lawyers will continue to act in the absence of provision for costs to be incurred, may be relevant to the discretion to make an order, and its’ quantum”;

    ·any such order should be framed to protect the parties from any risk of injustice arising from the manner in which the funds are expended” and this may be done “by requiring that the funds be administered solely by the applicant's solicitors 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 the exercise of its discretion in the substantive property proceedings or on the final determination of the issue of costs”.

16. I propose to consider each of the relevant factors mandated by s 117(2A).

The financial circumstances of the parties

1. Each party relied on a recent Financial Statement. The wife, although she holds a number of qualifications, has not worked in paid employment since the birth of the parties’ first child who is now ten years old. She receives income from Centrelink, spousal maintenance and child support. Her income from all of those sources is $760 per week. However, the husband pays a substantial amount towards the fixed expenses of the property at Suburb B, where she and the children live, and towards private school fees.

2. The husband’s income is $1,757 per week. He deposed to expenses of $3,302 per week. His non-discretionary expenses are tax of $366, rent of $750, child support of $209, spouse maintenance of $191, mortgage payments on Suburb B of $620, insurance and utilities for Suburb B of $91, registration and insurance of the car driven by the wife of $49 and school fees for the two children of $480. Those expenses total $2,756.

3. The husband meets the shortfall and his discretionary expenses by drawing against a loan facility secured over Suburb B.

4. Although the husband earns an income which substantially exceeds that of the wife, his relative financial position, having regard to the expenses he pays for her benefit and those of the children, is no better than hers.

5. The expenses necessarily incurred by these parties far exceed their combined incomes.

6. Further, unlike the exceedingly large asset pool in Strahan where it was uncontested that the wife would receive the amount sought by her by way of interim costs in the property settlement, in this instance the only joint asset of the parties is Suburb B with a value of about $3,300,000, encumbered by the mortgage to Westpac, presently in the sum of $761,000. In an Amended Statement of Claim filed in the Supreme Court on 22 May 2015, the husband’s father sought orders that the parties give to him possession of Suburb B, or alternatively that trustees be appointed for the sale of the property and that the net proceeds from the sale be held on trust until further order. In the event that the husband’s father is successful in the proceedings in the Supreme Court then the interest on his advance of $1,200,000 since 2004 will be substantial and costs will follow the event.

7. In these circumstances, how much equity the parties will ultimately have in Suburb B is not certain and may be minimal. As to the quantum of the wife’s interests in Suburb B, the legal title to the property is held by the parties in unequal shares as tenants in common as to 87.5 per cent to the husband and 12.5 per cent to the wife. While the mortgage to the husband’s father provides that the wife has no personal liability under the security, the wife is listed as a co-borrower on the mortgage and her interest in Suburb B is expressed to be subject to the right of the husband’s father as a lender to exercise a power of sale in respect of the property.

8. Whilst not fatal to the wife’s application, the uncertainty as to the amount that she will be entitled to receive from the substantive family law proceedings and as to whether she will be entitled to retain possession of Suburb B after the conclusion of the Supreme Court proceedings is a matter to be balanced in the exercise of my discretion.

9. In relation to the husband, his financial circumstances will be materially affected if his father is successful in enforcing his rights pursuant to the mortgage in the Supreme Court proceedings. The mortgage to the husband’s father executed by the parties provides that the husband is liable to pay his father the principal sum and interest if so demanded.

10. I do not consider that it is proper, given the husband’s precarious financial position in light of the pending Supreme Court proceedings, that an interim order be made which would require the husband to further increase his liability to Westpac for the purpose of effecting payment to the wife’s solicitors. Whilst I acknowledge that the uncertainty as to the outcome of the proceedings, particularly in relation to the competing interests of the wife, the husband and the husband’s father in the Suburb B property, is not in itself determinative of the wife’s application, this factor militates against the exercise of my discretion in her favour.

The conduct of the parties in relation to the proceedings

1. Annexed to the affidavit of the husband is an email from the wife, in response to the husband’s proposal that Suburb B be sold, which reads, relevantly:

   I will never move out of the house, no matter what the market is doing, no matter the risks….Now don’t bother me with your crap…We have to go to court of which I am happy to do so…I am happy that the kids get to spend some more years in their home and that is more valuable than anything!

2. It is necessary to consider the merits of the wife’s application to set aside the BFA, and her application to receive 75 per cent of the net proceeds of sale of Suburb B, in the light of her comments set out above.

3. The wife relies on affidavits which were filed in support of the application which was to be heard on 11 August 2015. A perusal of the affidavits does not suggest that her application is entirely devoid of merit. It is, at least, arguable. That is sufficient.

4. The wife owes her current solicitors $32,000 and there are unbilled fees of $22,000. $24,000 is owed to counsel. The wife deposed that she has been advised that the likely future costs will be in the vicinity of $60,000 to $75,000. No evidence is given by the wife’s solicitor about how that sum is calculated. In any event, a payment of $50,000 will be insufficient to pay her current debt, let alone cover expected future costs. I accept there is evidence of the “likely costs of the litigation”. If there were a fund of the parties’ money from which the money could readily be paid, the order sought by the wife would be reasonable. However there is no such fund.

5. There is no evidence that the wife will be left without representation if she does not succeed in this application. Since the application is for an amount which is less than the current amount outstanding for legal fees, and will not address the estimated future costs, it must be assumed that the solicitors for the wife will continue to act for her on the basis that there will be sufficient money available to her at the conclusion of the proceedings to cover her outstanding costs. Whilst this factor is not, as outlined by the Full Court in Strahan, determinative of these proceedings, it is a relevant factor going toward the exercise of my discretion.

Whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer

1. Annexed to the husband’s affidavit is an offer of settlement which demonstrates that the husband is prepared to pay a substantial sum, far in excess of $50,000, to the wife from the sale of Suburb B. If the order which the wife sought were an order for interim or partial property settlement, and there existed a fund from which it could be paid, then that fact alone would satisfy the Court that it is safe to make the order, knowing that she is likely to receive a substantially greater amount. In those circumstances, the wife would be free to use her own money, from the partial property settlement, in any way she chose, including towards the payment of her legal costs.

2. But this is not what she seeks here. The wife asks the Court to order that both parties draw down on a credit facility secured against the Suburb B property to pay her $50,000.

3. Whether the Court has the power to order that the parties borrow to make this payment to the wife was not argued. The provisions of s 80 are not available to Part XV proceedings. However, because of my ultimate conclusions, this is not an issue I am required to determine here.

4. In the event that the wife does not succeed in having the BFA set aside and the husband is successful in enforcing the terms of the BFA, then, as is conceded by counsel for the wife, increasing the liabilities secured over Suburb B by $50,000 would have the effect that the husband’s 50 per cent share of Suburb B will be reduced by $25,000.

5. There is no proposal from the wife to indemnify the husband in relation to that diminution of his prospective entitlement.

Such other matters as the Court considers relevant

1. On behalf of the wife, it was submitted that the fact that the husband is able to borrow money from his parents to pay his legal fees is a relevant consideration. It is her case that, because the husband is able to borrow from his parents, it would be just and equitable that the wife be permitted to borrow from Westpac, increasing the joint indebtedness of the parties.

2. The husband deposed that he owed a substantial sum of money to his father in relation to money lent to pay legal fees. The husband has no capability to pay his legal fees from his own income.

3. His borrowing from his father, if accepted, does not increase the joint indebtedness of the parties and remains a liability of the husband alone. In the circumstances of this case, I do not accept that the husband’s ability to borrow from his parents is an advantage for which the wife can be compensated by permitting her to diminish the available joint assets.

4. It was also submitted that, because the husband has recently commenced to pay his rent of $750 per week by drawing from a credit facility, the wife should also be permitted to draw from credit. There was no application by the wife to restrain the husband from drawing $750 per week against the credit facility secured against Suburb B. How the husband is to pay all of the outgoings he pays in relation to the wife’s occupation of Suburb B and the costs of the children, in addition to his own necessary expenses, without drawing from a line of credit is not explained by the wife. I do not accept that the fact that the husband draws on the credit facility, without seeking the wife’s permission, either confers on the Court the power to authorise the wife to do the same thing or makes it just and equitable that she should do so.

The “dollar for dollar” application

1. Although no submissions were addressed to this application, it was not formally abandoned.

2. The wife seeks an order that, for every dollar the husband pays to his solicitors, he pays the same amount to her solicitors.

3. The only money available to the husband to pay to his solicitors is the money he borrows from his father.

4. He has no capacity to comply with an order as sought by the wife except by either borrowing more money from his father or ceasing payments to his solicitors.

5. There is no evidence that the husband’s father would lend him money for the purpose of paying the wife’s costs. The only utility of making such an order would be to ensure that neither of the solicitors for the parties is paid and it is difficult to see how this benefits either of them.

1. Eventually this litigation will come to an end, with or without the parties being represented. Whether there will be anything left for them, with which to rebuild their respective lives and those of their children, will depend on the decisions they make about the course of this litigation. 

I certify that the preceding forty-six (46) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 4 November 2015.

Associate:     

Date:              4/11/2015