Dowbell and Muscatidis

[2009] FamCA 1277

FAMILY COURT OF AUSTRALIA

DOWBELL & MUSCATIDIS [2009] FamCA 1277

FAMILY LAW – PROPERTY – De facto relationship – interim lump sum maintenance and property settlement to satisfy litigation funding need

Family Law Act 1975 (Cth)

Strahan and Strahan [2009] FamCAFC 166
Zschokke and Zschokke (1996) FLC 92-693

APPLICANT: Ms Dowbell

RESPONDENT: Mr Muscatidis

FILE NUMBER: MLC 9983 of 2009

DATE DELIVERED: 31 DECEMBER 2009

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: THE HONOURABLE JUSTICE CRONIN

HEARING DATE: 22 DECEMBER 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: MR BARTFELD QC

SOLICITOR FOR THE APPLICANT: FORTE FAMILY LAWYERS

COUNSEL FOR THE RESPONDENT: MR BROWN SC

SOLICITOR FOR THE RESPONDENT: WMB LAWYERS

Orders

1. That by way of interim property settlement, by 4.00pm on 15 February 2010, the respondent pay to the solicitors for the applicant, the sum of $90,000.

2. That the application for interim orders filed 10 November 2009 and the response thereto filed 8 December 2009 be otherwise dismissed.

3. That any application for costs arising out of these orders be by way of written submission filed and served by 4.00pm on 25 January 2010 and any response thereto be filed and served by 4.00pm on 5 February 2010 and the matter otherwise be adjourned for determination in chambers unless the parties otherwise agree on the terms of any such order.

IT IS NOTED that publication of this judgment under the pseudonym Dowbell & Muscatidis is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 9983  of 2009

MS DOWBELL

Applicant

And

MR MUSCATIDIS

Respondent

REASONS FOR JUDGMENT

1. Ms Dowbell and Mr Muscatidis lived together in a defacto relationship from November 1996 until 23 March 2009.

2. No issue of jurisdiction to make orders under Part VIIIAB has been raised. There are two children of the relationship aged 10 and 12 years.

3. Before the Court were a variety of issues brought by Ms Dowbell as the applicant but most were resolved between the parties. The unresolved issues which are dealt with in these reasons are:

   a)a litigation funding order; and

   b)a lump sum maintenance order.

4. The applicant filed her application seeking orders on 10 November. It was supported by two affidavits; the first by Ms Dowbell and the second by her solicitor. The respondent filed a response on 8 December 2009. That was supported by the respondent’s affidavit.

5. On 16 November 2009, interim arrangements were agreed and the matter was adjourned into the judicial duty list on 22 December 2009.

6. On 22 December, both parties were represented by senior counsel and I was invited to read the material and I heard argument. Because of the list, I reserved judgment. These are my reasons.

7. The applicant’s position was that she initially sought a litigation funding order of $200,000 but because the respondent agreed to pay for all of the valuations which are estimated at $100,000, she reduced her litigation funding request to $100,000. As Senior Counsel for the respondent pointed out, the material upon which the applicant relied also included her solicitor’s affidavit in which it was estimated that the expenses would be between $80,000 and $90,000. There is therefore no basis to seek $100,000.

8. Although the applicant put the case on the basis of a litigation funding order, she was “content” to have the Court make the order for a partial or interim settlement of property.

9. The second issue was similarly put that although the initial application was for $25,000 by way of maintenance, the agreement on 16 November had meant that the applicant received $10,000 and therefore, she reduced her current claim to $15,000.

10. The parties did not have an opportunity to test any of the evidence because of time constraints and the determination is now being made on the papers. That creates the dilemma of only being able to make findings on uncontentious issues.

11. The applicant’s relevant evidence relating to the two issues was as follows. In respect of maintenance, the applicant said that after separation, the respondent paid her a “wage” from one of the corporate entities and a weekly sum of $500 from one of the restaurants. In addition, he paid all utility bills, house maintenance and telephone accounts. There are significant private school fees, and the respondent was paying those. The respondent also paid for a significant overseas holiday for the applicant and the children. All of that came to an end in November when in a heavy-handed way, the respondent terminated the flow of money and refused to pay accounts. The applicant said that she incurred costs of necessary car tyres and had to arrange car insurance through her father’s policy. She said she was concerned that she and the children did not have health insurance and their living expenses had been supplemented by having meals at the respondent’s restaurants. She pointed to the various expenses previously associated with the parties’ affluent lifestyle including expensive holidays and dining out. It was in that context that the applicant sought the lump sum to assist her to meet the sort of expenses referred to above.

12. On 16 November 2009, the parties appeared before Senior Registrar Fitzgibbon. In addition to consenting to what I might describe as a resumption of the money flow, the parties consented to orders that the respondent pay to the applicant $10,000 to be characterised as either spousal maintenance or interim property settlement as the ultimate trial judge saw fit. Nothing in the order indicates what was still in dispute but it reads that the unresolved issues were adjourned to the judicial duty list.

13. The respondent’s position was that he had made the payment of $10,000 and was not otherwise obliged to pay further having regard to the other payments that he was making to the applicant.

14. To be entitled to an order for maintenance of the kind sought by the applicant, the provisions of s 90SF have to be satisfied. The threshold test is clear that the applicant has to show that she is unable to support herself adequately for any of a number of reasons set out in the section. If the threshold test is met, the court must examine whether the respondent is reasonably able to pay.

15. On the evidence to which I have referred, although it is clear that the parties have lived an affluent lifestyle, I could not find that the payment of a lump sum of the nature described fell into the category just mentioned. I do not know whether the $10,000 received adequately covered the expenses incurred in the period when the respondent did not pay any money or accounts. I am also unable to find on the evidence whether the “shortfall” as described by the wife is sufficient to cover the sort of expenses she is anticipating into the future. I do not find that it is appropriate to make an order for $15,000 for the purposes of anticipating covering those expenses.

16. I do not find therefore that in respect of a lump sum at this time and on this evidence that the applicant meets the threshold.

17. In respect of the lump sum property settlement, the applicant pointed to a number of corporate entities conducted by the respondent. She referred to various real properties and businesses along with boats, a boat berth, number plates, expensive cars, fishing equipment and various kiosks. All of the enterprises had contributed to the parties’ affluent lifestyle.

18. The applicant said that before separation, the respondent told her he was worth many millions of dollars.

19. The applicant’s position was that she wanted all of these entities and enterprises valued and although the respondent was agreeing to the valuations at his expense, there would still be significant legal expenses.

20. The applicant acknowledged that there were mortgages and charges over the properties but she said there was usually several hundred thousand dollars cash in the respondent’s control. She pointed to his expenditure on a luxury car and extensive overseas holidays.

21. The respondent acknowledged that there was a significant debt at the time the parties began their relationship but went on to say that the assets were not heavily encumbered. I am not sure what either of those statements means.

22. The respondent said that their lifestyle was funded by debt and it was beyond their means.

23. The respondent set out the extensive enterprises and referred to the entities as being companies with which he was “associated”.

24. In a statement which cannot be anything more than his estimate, the respondent said his assets totalled $24.8 million. That amount was apparently provided by valuers and acquaintances. It is not expert evidence. I do not understand the basis upon which the businesses were valued. I can understand why the applicant might want to pursue that line of inquiry.

25. According to the respondent, all of his assets were heavily encumbered to the extent of $25.75 million. There is evidence of where those figures were ascertained.

26. The respondent said that he had been trying to dispose of various assets on the market for months and there were others such as number plates that he had sold.

27. Importantly, the respondent said that he has negotiated with his bankers to allow a “limited extension of funding” to pay out the applicant and only on the basis that terms of settlement were finalised. He said that he was unable to raise the sorts of money that the applicant pursued in her interim application but I can find that he has a bank eager to give him money to resolve the matter. It must be that he has accepted that the applicant is entitled to some amount of money because of that. Senior Counsel said that the inference could not be drawn that the applicant was entitled to anything just because an offer to settle was being made.

28. The respondent’s counsel said that the position was financially poor for the respondent and there was no guarantee that the obligations under any order I made could be met.

29. There are a number of issues associated with all of this that leave me with disquiet. First, the correspondence shows that the respondent was not only keen to settle but that he was pressuring the applicant to take what he was offering. It is one thing for a litigant to cut off the supply of funds but it is another to do so through legal correspondence. In the latter, the court is entitled to conclude that the litigant gave careful thought to that course and was given advice upon it. It is not an appropriate course of action in a case such as this where there is clearly an imbalance of economic power.

30. The second matter is that there are substantial assets albeit encumbered but the extent of their encumbrances is unclear. I cannot see on the evidence whether all assets are affected and where the various business valuations fit in with the encumbrances and liabilities. A disposal of businesses may reduce both capital and debt and I am unsure whether such a course would have any impact on the respondent’s pool of assets.

31. There is much to be said for the view that the applicant can have her order but then has to enforce it. The respondent declined to say what his offer was or what finance had been made available to him. All of those matters leave me in the dark as to whether the equity as he claims is realistic or not.

32. I find however that there are significant assets and significant liabilities but on the evidence having regard to the respondent’s lifestyle, I could not conclude that the applicant is not entitled to some property nor could I conclude that the respondent does not have access to significant funds.

33. The source of power to make an order for a payment of the nature sought lies in 90SM of the Act. The factual considerations are similar to those to be dealt with in s 79 of the Act.

34. As was said by the Full Court in Zschokke and Zschokke (1996) FLC 92-693, notwithstanding particularly s 79 is best used as a once-only exercise of power, it can be used to require the party who controls most of the assets of the parties to provide the other party with funds to conduct his or her case. The understanding if not specifically ordered is that such a payment would be taken into account in the final settlement.

35. The applicant needs to be able to point to the various aspects of s 90SM to ensure that there is evidence to justify the court making such an order.

36. In this case, there are children of the relationship and evidence, albeit limited, that the applicant has worked in the businesses. She claims as a contribution, her role as a homemaker.

37. When dealing with an interim dispute, the Full Court in Zschokke referred to the need to examine the financial position of the respondent and his capacity to meet his own litigation costs and then consider whether there is an inability on the part of the applicant to pay her costs. It is the applicant’s evidence that she does not have the capacity to pay her costs. It is also clear on the evidence that the respondent has control of the assets and in particular, the businesses. I can also conclude that the respondent can afford to pay his own legal expenses having regard to the importance with which he attached to the seniority of his legal representation.

38. The obvious difficulty here is the conflict in the evidence. The applicant’s position is that the respondent has significant assets and an affluent lifestyle funded by significant income. The respondent’s position is that he is in effect, insolvent and struggling to meet commitments which he sees as being beyond the parties’ means. He raises the question of whether or not he can afford the continuation of the private school fees of the children.

39. The dilemma is whether the evidence enables me to draw any inferences.

40. There is nothing in the Family Law Act 1975 (Cth) (“the Act”) to assist in determining what is an appropriate approach to an interim property division; if the power is recognised then the matter becomes one of the exercise of discretion.

41. In Strahan and Strahan [2009] FamCAFC 166, the Full Court clarified some of the aspects that had caused difficulty in making interim property orders.

42. In Strahan, Thackray J agreed with the outcome determined by Boland and O’Ryan JJ. His Honour said:

    In every defended case one of the parties will claim they are entitled to a payment or transfer of property from the other party.  In many cases the other party will acknowledge they are likely to be ordered to transfer property or make a payment.  That, however, could not of itself be sufficient to make it appropriate for the Court to make an interim order.  Circumstances may change radically during the course of proceedings, as has been seen with recent severe fluctuations in the market.  The personal circumstances of the parties may change dramatically.  Furthermore, although a party may anticipate ultimately being ordered to transfer property or make a payment, they may legitimately expect to obtain an order for costs against the other party which will be satisfied from funds or property that would otherwise have been transferred.   

    These sorts of considerations provide a strong basis upon which the Court should maintain its traditional stance that there should ordinarily be only one hearing of disputes concerning alteration of property issues. 

43. Thackray J then pointed to the appropriate approach to these types of application as being:

    (F)irst identify circumstances that make it appropriate to give consideration to exercising (the) power to make an interim order. It is at this stage that the Court has regard to the policy consideration that it is generally in the interest of the parties and the Court for there to be only one exercise of the s 79 power. However, once the Court has determined that the interests of justice require it to exercise the power, the conditions on which the power is to be exercised are governed only by the obligation to make an order that is “appropriate” and to ensure that the proposed order is “just and equitable” by reference to the matters set out in s 79(4).

44. In this case, I accept that it is appropriate to exercise the power because the applicant is facing significant legal costs. Notwithstanding the respondent is paying for the valuations, the legal work must be considered complex because of the number of businesses and entities involved.

45. There is no apparent avenue for the applicant to obtain an alternative form of litigation funding. Where the respondent has all of the control and was willing to fund a buy out of the applicant, I can be satisfied that he has the capacity to pay.

46. I am satisfied therefore that as the application for an interim order has been made, I should exercise the relevant power.

47. I am also satisfied as I earlier said that there is sufficient evidence albeit limited, to say that the applicant is entitled to a property order.

48. The final step then is to determine what is appropriate.

49. The respondent simply asserts that there is no equity to divide but that does not mean that the applicant will not receive any entitlement. It may be that the valuation evidence produces a different outcome. It may be that a court might find it just and equitable to give the applicant an asset and the respondent debt. There are many options open to a court to find the outcome just and equitable.

50. Having regard to the limited evidence but substantial assets, combined with the availability of finance, I find that there is every probability that there is an entitlement for the applicant to receive at least $80,000 or $90,000. I take into account that the respondent is prepared to pay all of the valuations which the applicant has estimated will be in the vicinity of $100,000. All of that enables me to infer that the respondent accepts that the applicant has a reasonable entitlement from the assets notwithstanding his assertion as to the equity.

51. In respect of the clawback issue, it is clear that the proposed funds will be used for legal costs purposes. Those sums could not therefore be clawed back but having regard to the significant nature of the provision of monies to the applicant for herself and the schooling expenses for the children, those sums could be clawed back by an adjustment to maintenance provisions over time.

52. I find that a payment by way of interim settlement is just and equitable in the circumstances.

53. I am satisfied on the evidence of Ms Kayler-Thomson that subject to the case proceeding as she anticipates, the applicant will incur costs in the range of $80,000 to $90,000. However, the respondent makes his position abundantly clear on the issue of the case proceeding. He said that not only had efforts been made to negotiate a resolution but that it had reached a point where entry into a financial agreement was contemplated. If that is right, then the prospect of the case resolving might be better than normal. That being the case, I agree with Senior Counsel for the applicant that an interim property order is more appropriate than a litigation funding order.

54. I propose to make an order by way of interim property settlement in the sum of $90,000 to be paid within 60 days.

I certify that the preceding Fifty Four (54) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate:  Elizabeth Hore

Date:  31 December 2009