DALENA & LAFFERTY
[2020] FCCA 1446
•5 June 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| DALENA & LAFFERTY | [2020] FCCA 1446 |
| Catchwords: FAMILY LAW – Parenting – interim litigation funding order sought as security for costs or as spousal maintenance – where a final property order has already been made –whether it is proper to make an order for spousal maintenance. |
| Legislation: Family Law Act 1975 (Cth), ss.72, 74, 75, 79, 83, 117 |
| Cases cited: Breen v Breen (1990) 65 ALJR 195 |
| Applicant: | MR DALENA |
| Respondent: | MS LAFFERTY |
| File Number: | HBC 1 of 2020 |
| Judgment of: | Judge Baker |
| Hearing date: | 14 May 2020 |
| Date of Last Submission: | 14 May 2020 |
| Delivered at: | Hobart |
| Delivered on: | 5 June 2020 |
REPRESENTATION
| Counsel for the Applicant: | Self-represented |
| Solicitors for the Applicant: | N/A |
| Counsel for the Respondent: | Mr Foster |
| Solicitors for the Respondent: | Murdoch Clarke |
ORDERS
The interim orders sought in the wife’s response filed 30 January 2020 be dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Dalena & Lafferty is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT HOBART |
HBC 1 of 2020
| MR DALENA |
Applicant
And
| MS LAFFERTY |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an interim litigation funding application by Ms Lafferty (“the wife”) in relation to parenting matters. She sought interim orders as follows:
1. That by way of litigation funding for the respondent in these proceedings that the applicant pay to the respondent the sum of $10,000.00 within 28 days of the date of this order OR IN THE ALTERNATIVE that the applicant pay to the respondent the sum of $10,000 by instalments of $2,000.00 in each calendar months commencing seven days after the date of this order.
2. That by way of disclosure in relation to the issue of litigation funding that the applicant provide to the respondent copies of statements for all bank accounts and investments held by him, such accounts to be in relation to the period from six months before the date of this order until the date of this order.
The husband opposed this application.
Background
The parties married in 1995 and separated in December 2018.
The wife commenced property proceedings in 2018 seeking orders for property settlement, spousal maintenance and child support. The parties entered into final orders by consent in December 2019. The orders provided for the husband to transfer $100,000 to the home loan account for the benefit of the wife; the husband pay spousal maintenance to the wife in the sum of $700 per week, to increase to $1,000 per week upon the matrimonial home being sold, and until such time the wife obtains an interest in real property, after such time the sum will return to $700 per week; that the matrimonial home be sold; and various other orders.
In January 2020, the husband initiated parenting proceedings seeking various orders in relation to the parties’ children, including schooling. The husband is self-represented in these parenting proceedings.
In her response filed 30 January 2020, the wife sought interim orders for litigation funding. That application was listed for interim hearing and orders were made for the filing of material. The husband pointed out that the wife’s financial statement and affidavit was ordered to be filed by 27 April 2020, but she did not file her financial statement until 7 May 2020.
On 14 May 2020, I asked counsel for the wife under which power the application was being made. His answer was that the litigation funding order was being sought as security for costs pursuant to s.117 of the Family Law Act 1975 (“the Act”), and in the alternative as spousal maintenance pursuant to s.74 of the Act. The hearing was then adjourned to 18 May 2020 to enable the husband to update his financial statement with the relevant information.
Consideration
I turn first to consider whether an interim costs order should be made pursuant to s.117 of the Act.
Section 117(1) provides that subject to certain other provisions, including s.117(2), each party to the proceedings under the Act shall bear his or her own costs. Section 117(2) provides the Court with a general discretion to make an order for costs if it is of the opinion there are circumstances that justify it in doing so.
Section 117(2A) comprises the factors that the Court must consider in determining what costs order, if any, should be made. Those factors are as follows:
(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.
The weight to be given to a particular consideration under s 117(2A) is a matter for the discretion of the trial judge. The court must take into account all the relevant matters in s 117(2A) and balance them in order to determine whether the overall circumstances justify an order for costs.[1]
[1] I and I (No 2) (1995) FLC ¶92-625.
In Penfold v Penfold,[2] the High Court of Australia held that the general principle that each party shall bear his or her own costs must yield if the court finds that there are circumstances which justify an order. The Court rejected the proposition that an order can only be made in a clear case. The court has a wide discretion, subject to the requirement that the order must be just.
[2] (1980) FLC ¶90-800.
Not only is the question of costs a discretionary one, but so is the quantum.
I shall now consider the relevant factors pursuant to s.117(2A).
Section 117(2A)(a)
the financial circumstances of each of the parties to the proceedings;
The Wife
In her financial statement, the wife deposed that she has a weekly income of $2,284. She deposed that this is comprised of $700 child support and $719 spouse maintenance both paid by the father. The correct amount is $700 spouse maintenance and $717 child support, resulting in a total weekly income of $2,282 ($118,664 gross per annum). Her weekly income also includes $805 Centrelink payments; and $60 board paid by the parties’ son X. X’s average weekly income is $800. She did not explain why he pays such a small amount per week to her for board.
The wife’s weekly expenditure is estimated at $2,142. Her fixed expenses are $402 per week. She started paying the mortgage, rates, and water payments on 7 May 2020 pursuant to the final property order. The husband paid those expenses prior to that date.
The wife’s weekly discretionary expenses were totalled incorrectly at Part N of the wife’s financial statement as $2,005, $1,140 of that sum for the wife and $865 for the children. The correct total is $1,740, $1,015 for the wife and $725 for the children, a total of $265 less per week.
Counsel for the wife submitted that her finances are “finely balanced,” she has just enough to make ends meet and does not have any spare for litigation. The husband submitted that the wife’s expenses are not finely balanced. He criticised the listed expenses, such as hairdressing ($100 per week), holidays ($150 per week), and entertainment ($110 per week) as examples of the wife’s “extravagant lifestyle”.
In relation to property, the wife owns the former matrimonial home at Suburb A. The property is valued at $460,000, and has equity of $298,560. The husband contributed $100,000 of that equity as part of the property settlement. The wife has a total of $6,533 in savings. She owns a motor vehicle with a value of $8,000; and estimates the house contents at $5,000. She has superannuation of $203,732 with Super Fund B; $62,467 with Super Fund C; and $2,700 with Employer D. She therefore has total net property of $287,580 and total superannuation of $268,899.
She has $191,953 in liabilities comprised of $161,440 mortgage to Pepper; $21,069 HECS debt; and $9,444 Centrelink debt.
The Husband
In his financial statement, the husband deposed that he has a weekly income of $6,719 AUD ($349,388 AUD gross per annum) from employment with Employer E. He is paid in US dollars, and clarified that his salary is $254,000 USD gross per annum, and that the exchange rate has been contractually fixed. He deposed that since the sale of the US property, he has been subject to a larger withholding taxation in the US, including assessment for back taxes. His net income this year will be nowhere near $350,000 AUD.
His weekly fixed personal expenditure is $6,091, including $1,668 AUD ($1,175 USD) income tax; $560 compulsory superannuation contribution, which is he says is the minimum that is required to be paid to avoid financial penalty; and $1,417 maintenance paid to the wife ($700 per court orders and $717 child support assessment). If the sums of $282 for mortgage payments and $33 for rates are deducted from the total, as he is no longer paying these sums, his total fixed weekly expenditure is $5,776.
The husband’s weekly discretionary expenditure is estimated as $1,709, with $1,402 per week for him and $307 per week for the children.
The husband maintains two rental properties, one in Melbourne where he works, and one in Hobart where he resides on weekends, to spend time with the children. He said he is in a relationship with Ms F, but he does not live with her.
Counsel for the wife criticised the husband for including $519 for fares to and from Tasmania and $95 for car parking. He submitted that those expenses are not being incurred at present, due to coronavirus restrictions, and it is not known what will happen in the future. Counsel for the wife also criticised the husband for the following: mortgage payments, as he does not currently pay the mortgage; $52,000 per year on the Virgin credit card when he owes $238; $2,600 per year on the Bank G credit card when he owes $290; $420 per week on food; $92 per week on maintenance of a car worth $2,000; $33 per week on cleaning.
In relation to property, the husband has savings of $110. He owns a motor vehicle valued at $2,000, household contents worth $500, and he has a nominal interest in a business called the H Trust. He deposed that the Trust has generated $15,373 in debts, fees, tax owed and charges due to the property settlement, which are to be paid from his income.
The husband has liabilities of $25,606: $238 Virgin Money credit card; $290 Bank G credit card; $1,055 personal liability with J; $20,778 Employer E Tax Liability; and $3,245 accountant’s fees for the H Trust. He has paid legal and accounting fees of around $49,000 for the property proceedings. He paid these sums and $10,000 interim litigation costs to the wife’s solicitors, which the wife received as part property, from the proceeds of sale of the house in the US, and the remainder from savings he had in 2019.
The husband therefore has property worth around $2,610 and liabilities of $25,606. He has a savings plan with his employer Employer E in the sum of $434,280, which cannot be accessed until retirement. His access to that sum is subject to US tax and retirement legislation, and may also be subject to Australian taxation and retirement legislation.
The husband deposed that the property settlement and sale of the Suburb A home has led to significant tax consequences for him in the US. He also expressed concern about the stability of his employment as a result of the COVID-19 pandemic, which has resulted in the company making significant losses and laying off thousands of staff in the US location where he is employed.
The husband has gross income of $6,719 per week. He has fixed expenditure of $5,776 per week and $1,709 per week discretionary expenditure, a total of $7,485 per week. Even if some of his discretionary expenditure is deducted, for example $1,000 per week for Virgin credit card and $60 per week for car maintenance, he has excess income over expenses of around $300 per week. Whilst he may not have the cost of airfares currently, he will have them once the travel restrictions are lifted. He has debt which he has to pay from his income and he may have further tax liabilities from the US.
The husband is in a superior income position to that of the wife, but he has large expenses, including the payment to the wife of $73,684 per annum for spouse maintenance and child support. He has greater expenses than her. The wife is in a better position in respect of property and superannuation. The husband has a significant financial resource which he cannot access until retirement.
Section 117(2A)(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;
Neither party is in receipt of legal aid. This sub-section is not relevant.
Section 117(2A)(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
This sub-section is not relevant.
Section 117(2A)(d)
whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
This sub-section is not relevant.
Section 117(2A)(e)
whether any party to the proceedings has been wholly unsuccessful in the proceedings;
This sub-section is not relevant.
Section 117(2A)(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
This sub-section is not relevant.
Section 117(2A)(g)
such other matters as the court considers relevant.
The husband is self-represented in the parenting proceedings. He cannot afford legal representation. He deposed that he paid $39,558.04 in his own legal costs after the final property orders were made.
The wife is entitled to instruct solicitors. In Zschokke,[3] the Full Court noted the desirability of representation for one or both parties. But it is a matter of balancing this desirability “against the availability of money to fund such representation and the manner in which the necessary funds could justly be made available.”[4]
[3] (1996) FLC ¶92-693.
[4] Ibid 83,220.
An Independent Children’s Lawyer has been appointed in the parenting proceedings. Whilst it was pointed out by the Full Court in Zschokke,[5] that the interests of the children and the parents are not the same, this is a relevant factor for the court in reaching its decision.
[5] Ibid.
Having regard to all the above considerations, the financial circumstances of the parties and the lack of funds available, I am not persuaded in the wide exercise of my discretion to make a costs order in favour of the wife. I do not consider that there are circumstances justifying a costs order.
Spousal Maintenance
I turn now to consider whether a litigation funding order should be made pursuant to s.74 of the Act. The wife is seeking a lump sum payment in addition to the periodic maintenance order already made on 18 December 2019, which provides that the husband pay the wife the sum of $700 per week after the transfer of the home to her, which occurred in May 2020.
These are parenting proceedings and not s.79 proceedings where there is a property settlement to occur. A final property order has already been made. Counsel for the wife was unable to and did not cite any authorities in support of the reliance on s.74. It was conceded that spousal maintenance is already being paid by the husband, but that this litigation funding would be a once off payment. It was submitted that the power under s.74 is not restricted in a way that would prevent an order being made. The order was not sought pursuant to s.83 of the Act, which provides the power to vary a spousal maintenance order. The order being sought is a new order in addition to the order for payment by the husband of weekly maintenance of $700 per week.
In Breen v Breen,[6] a decision of the High Court of Australia, Brennan J stated that it was unnecessary “to determine whether the power to make an order for costs or security for costs falls under s 117(2) or s 74 (as the decision in Wilson v Wilson [1989] FLC 92-033 suggests).” This decision and the decision of the High Court in Re JJT & Ors; ex parte Victoria Legal Aid,[7] left open whether the source of power to make an order for litigation funding can be found in s.74 of the Act.
[6] (1990) 65 ALJR 195.
[7] (1998) FLC ¶92-812.
In Zschokke & Zschokke (“Zschokke”),[8] which was an appeal in respect of an interim costs order, but involved substantive proceedings of financial matters and children’s matters, the Full Court stated:
… while the present state of the law remains somewhat unclear, it can be asserted with some confidence in light of Brennan J’s comments in Breen that there is at least power under s 117(2) (the costs power) for the court to make an order which seeks to ensure that one party should be able to prosecute pending matrimonial proceedings and that the other party should provide the first mentioned party with the funds required to do so. The question as to whether such an order can be supported under s 74 (the maintenance power) must be considered in the light of the High Court’s comments in Breen (and notwithstanding Wilson) to remain open. However, we do not have to consider that question further in this case…[9]
[8] (1996) FLC ¶92-693.
[9] Ibid 83,215.
The decision of Selena & Montez & Ors[10] involved substantive property proceedings and an interim application for litigation funding. After discussing the authorities about whether the maintenance power can be used, McClelland J cited the decision of the Full Court in Elton & Batey-Elton (Interim Costs Appeal) (“Elton”),[11] in which the Court expressly reserved the question as to whether the maintenance power empowered the Court to make a litigation funding order. That matter involved an interim costs order in the context of a s.79A application. The issue of s.74 being a source of power was reserved in respect of proceedings under s.79 or s.79A.
[10] [2017] FamCA 583.
[11] [2008] FamCAFC 175.
Justice McClelland stated:
In that case it was unnecessary to determine the issue because the Full Court found that the trial Judge’s “failure to consider relevant matters under s 72, s 74 and s 75(2) constitute[d] error of principle”.[12]
[12] Selena & Montez & Ors [2017] FamCA 583, [165].
Justice McClelland noted that:
Any judicial discretion created by legislation must be exercised in the context of the criteria set out in the legislation for the exercise of that power. It is clear that those matters identified by the Full Court in Elton’s case must be considered in this case.
Although I have considerable doubts that the maintenance power can be used to make a litigation funding order as a form of maintenance order in circumstances such as this parenting matter, the issue seems to be open. I will therefore consider relevant matters under ss.72, 74 and 75(2).
Section 72(1) of the Act provides:
A party to a marriage is liable to maintain the other party to the extent that the first‑mentioned party is reasonably able to do so if and only if that other party is unable to support herself or himself adequately whether:
(a) by reason of having the care and control of a child of the marriage who has not attained the age of 18 years;
(b) by reason of age or physical or mental incapacity for appropriate gainful employment; or
(c) for any other adequate reason
having regard to any relevant matter referred to in subsection 75(2).
Section 74(1) provides:
(1) In proceedings with respect to the maintenance of a party to a marriage, the court may make such order as it considers proper for the provision of maintenance in accordance with this Part.
Section 75(1) provides:
(1) In exercising jurisdiction under section 74, the court shall take into account only the matters referred to in subsection (2).
Section 75(2) provides:
(2) The matters to be so taken into account are:
(a) the age and state of health of each of the parties; and
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment; and
(c) whether either party has the care or control of a child of the marriage who has not attained the age of 18 years; and
(d) commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii) a child or another person that the party has a duty to maintain; and
(e) the responsibilities of either party to support any other person; and
(f) subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
(i) any law of the Commonwealth, of a State or Territory or of another country; or
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party; and
(g) where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable; and
(h) the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income; and
(ha) the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant; and
(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party; and
(k) the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration; and
(l) the need to protect a party who wishes to continue that party’s role as a parent; and
(m) if either party is cohabiting with another person—the financial circumstances relating to the cohabitation; and
(n) the terms of any order made or proposed to be made under section 79 in relation to:
(i) the property of the parties; or
(ii) vested bankruptcy property in relation to a bankrupt party; and
(naa) the terms of any order or declaration made, or proposed to be made, under Part VIIIAB in relation to:
(i) a party to the marriage; or
(ii) a person who is a party to a de facto relationship with a party to the marriage; or
(iii) the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv) vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
(na) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
(o) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(p) the terms of any financial agreement that is binding on the parties to the marriage; and
(q) the terms of any Part VIIIAB financial agreement that is binding on a party to the marriage.
Section 75(3) provides:
(3) In exercising its jurisdiction under section 74, a court shall disregard any entitlement of the party whose maintenance is under consideration to an income tested pension, allowance or benefit.
The parties have previously agreed that the wife is unable to support herself adequately without the assistance of an income tested pension. She has the care of three children under the age of 18 years. She is receiving $700 per week spouse maintenance from the husband to assist her to maintain herself.
The issue is whether a further order should be made pursuant to the maintenance power for the husband to contribute towards the wife’s legal costs in parenting proceedings.
I have already detailed the property, income and financial resources of the parties above.
In respect of the parties’ commitments, I consider that some of the wife’s expenses are unreasonable, such as $75 per week for hairdressing and toiletries, $20 per week for gardening, $60 per week for clothing and shoes, and $100 per week for house repairs and $60 per week repairs to furnishings and appliances.
If the wife’s discretionary expenses of $1,015 are reduced by around $200, her total fixed ($402) and discretionary ($815) expenses of $1,217 exceed her income of $760 by around $457 per week, when her pension is disregarded. The parties’ son X pays board of $60, when he earns $800 per week. This is not reasonable in the circumstances and could be increased by the wife. Nevertheless, her weekly expenses exceed her income.
The wife has commitments of $725 per week for the children’s expenses. I consider that some of those expenses are unreasonable, such as $100 per week for holidays, and a total of $110 per week for children’s activities and entertainment. The husband pays child support of $717 per week or $37,284 per annum. This covers the children’s reasonable expenses.
In respect of the husband’s discretionary expenses, as I discussed above some are unreasonable, and he has excess income of around $300 per week over expenses. However, he has debt which he has to pay from his income and he may have further tax liabilities from the US.
The wife has received property and superannuation pursuant to a property order. She also has liabilities. The husband has minimal property and liabilities. He has a financial resource, which he will not receive until retirement. The husband agreed to an order to pay periodic spousal maintenance of $700 per week or $36,400 per annum.
In the circumstances of these parties, I am not persuaded that the husband is reasonably able to pay the sum of $10,000 to the wife.
If I am wrong about this, in the exercise of my discretion I do not consider it proper pursuant to s.74 to make such an order for a lump sum of $10,000 for litigation funding. I do not consider it is appropriate in the parties’ circumstances, having regard to the s.75(2) factors, in particular sub-paragraph (n) and (na).
The wife did not pursue the disclosure order and no submissions were made about this.
I dismiss the wife’s application.
I certify that the preceding sixty-five (65) paragraphs are a true copy of the reasons for judgment of Judge Baker
Associate:
Date: 5 June 2020
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