Elton & Batey-Elton (Interim costs appeal)
[2008] FamCAFC 175
•21 November 2008
FAMILY COURT OF AUSTRALIA
| ELTON & BATEY-ELTON (INTERIM COSTS APPEAL) | [2008] FamCAFC 175 |
| FAMILY LAW - APPLICATION FOR LEAVE TO APPEAL – Where proposed appeal against interlocutory orders – Where error of principle or substantial injustice established – Leave to appeal granted. FAMILY LAW - APPEAL – INTERIM COSTS – Where wife applied at first instance for interim costs – Where wife’s previous application for urgent maintenance and interim costs was dismissed – Where wife is an undischarged bankrupt – Where interim costs application in context of s 79A application rather than s 79 application – Where trial Judge ordered the husband to provide a bank guarantee to the wife’s solicitors to be applied for legal costs – Where trial Judge failed to appropriately consider matters under s 72, s 74 and s 75(2) – Appeal allowed. FAMILY LAW - APPLICATION TO ADDUCE FURTHER EVIDENCE – Where respondent wife sought to adduce further evidence to buttress the findings made by the trial Judge – Where application not filed within time – Where evidence sought to be adduced was incomplete – Where prima facie the evidence sought to be adduced would not assist the wife’s case – Application rejected. FAMILY LAW - COSTS – Where error of law established – Costs certificates granted to both parties. |
| Bankruptcy Act 1966 (Cth) – s 58, s 269 Family Law Act 1975 (Cth) – s 74, s 75(2), s 79, s 79A, s 80(1)(k), s 117 |
| Acworth v Acworth [1943] P 21; [1942] 2 All ER 704 |
| APPELLANT: | Mr Elton |
| RESPONDENT: | Ms Batey-Elton |
| INTERVENOR: | Official Trustee in Bankruptcy |
| FILE NUMBER: | TVF | 2250 | of | 2004 |
| APPEAL NUMBER: | NA | 63 | L | of | 2007 |
| DATE DELIVERED: | 21 November 2008 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Finn, Boland, Murphy JJ |
| HEARING DATE: | 5 March 2008 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 4 September 2007 |
| LOWER COURT MNC: | [2007] FamCA 1024 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Page SC |
| SOLICITOR FOR THE APPLICANT: | Mr Madsen |
| ADVOCATE FOR THE RESPONDENT: | Ms Batey-Elton in person |
| SOLICITOR FOR THE OFFICIAL TRUSTEE IN BANKRUPTCY: | Ms Connole |
Orders
That the application for leave to appeal the orders made by the Honourable Justice Jordan on 4 September 2007 be granted.
That the appeal be allowed.
That Order 1 of the orders made by the Honourable Justice Jordan on 4 September 2007 be set aside.
That the Court grants to the appellant husband a costs certificate pursuant to s 9 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by him in relation to the appeal.
The Court grants to the respondent wife a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by her in relation to the appeal.
IT IS NOTED that publication of this judgment under the pseudonym Elton & Batey-Elton (interim costs appeal) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NA 63L of 2007
File Number: TVF 2250 of 2004
| Mr Elton |
Applicant
And
| Ms Batey-Elton |
Respondent
REASONS FOR JUDGMENT
Introduction
This application, which is an application by Mr Elton (“the husband”) for leave to appeal, and if leave is granted, to appeal against an interlocutory order made by Jordan J on 4 September 2007 allowing a claim for spousal maintenance, had as its genesis an application by Ms Batey-Elton (“the wife”) for interim costs sought in the course of proceedings under s 79A of the Family Law Act 1975 (Cth) (“the Act”).
The order sought to be appealed is in the following terms:
That the applicant Husband within twenty-one (21) days provide the respondent Wife’s nominated solicitors with an irrevocable bank guarantee by the National Australia Bank for a sum of $30,000.00 which may be drawn upon by those solicitors upon the following trusts:
(a)To be applied solely for the purposes of providing to the respondent Wife legal professional services in relation to these proceedings; and
(b)At the completion of these proceedings, the Wife’s solicitors to formally advise the bank that any undrawn funds otherwise available under the guarantee will not be called upon and the guarantee is thus discharged.
The husband seeks to rely on proposed grounds of appeal which are dated 20 September 2007. The wife who was self represented before us, but had the assistance of a McKenzie friend, opposed the husband’s application for leave to appeal and also sought to adduce further evidence to buttress the findings of the trial Judge.
Background
There is understandably, given the way the matter was conducted before the trial Judge, little background material in his Honour’s reasons. The following material is contained in the appeal book and is not, so far as we are aware, controversial.
The husband was born in September 1944. The wife was born in January 1951.
The parties married in December 1972 and were divorced in April 2004.
There are three children of the marriage, two sons born respectively in 1974 and 1989 and a daughter born in 1994.
On 10 September 2004 the property and parenting orders were made by consent by Monteith J. At the time of the making of the consent orders the husband was legally represented and the wife was self represented. Pursuant to the parenting orders the son was to live with the husband and the daughter to live with the wife.
The property orders provided for the wife to transfer (impliedly to the husband) all of her right, title and interest in a property known as “H” and that the husband pay to the wife the sum of $200,000.00 by instalments:
(a)$26,000.00 within 60 days of the date of the order;
(b)$44,000.00 within 12 months of the date of the order;
(c)$30,000.00 within 2 years of the date of the order;
(d)the balance within 4 years of the date of the order.
Paragraph 2A of the orders provided:
In the event that the wife acquires property and encumbers same to the extent of the amount required to be paid by the husband to the wife pursuant to clause 2 hereof then the husband shall meet all mortgage payments on that property to the extent of the amount outstanding pursuant to clause 2 hereof until such time as the moneys payable by the husband have been paid in full.
The orders also provided for the husband to indemnify the wife in respect of various liabilities, including a mortgage to Suncorp, as well as for any tax and liabilities of the parties, including trade creditors in respect of the business conducted by the husband and wife upon H.
On 6 August 2005 the husband entered into a contract for the sale of H. The sale was completed on 30 September 2005. The husband deposed he received $2.85 million from the sale.
The husband deposed to the sum of $1.5 million from the net proceeds of sale being used to enable the Elton Family Trust (“the family trust”) to acquire “DB”, a rural property located near Jundar, Queensland. The husband deposed to obtaining a mortgage from the National Australia Bank to complete the purchase “and the National Bank advanced the sum of $600,000.00” (husband’s affidavit sworn 17 May 2007, para 10).
At some time after the making of the property orders caveats were placed over the title of H and proceedings instituted in the Supreme Court of Queensland. On 28 September 2005 orders were made by de Jersey CJ in that Court as follows:
1.Upon the First Respondent undertaking, by her counsel, to commence an application under s 79A of the Family Law Act to set aside or vary Orders made in the Family Court of Australia on 10 September 2004 within seven (7) days from today and to proceed expeditiously in the prosecution of that application the Caveats referred to in the application before this Court be removed forthwith.
2.For a period of seven (7) days from today or until 4:00 pm on the first hearing date of the application under s 79A of the Family Law Act, whichever is the later:
a. The Applicant retain at least on half (sic) of the net proceeds of the sale of the properties referred to in the caveats when received.
b. That he be restrained from dispersing or otherwise dealing with that proportion of any such proceeds received.
…
On 4 October 2005 the wife filed an amended application seeking relief under s 79A of the Act.
Proceedings for further parenting orders in respect of the children were subsequently instituted, and a trial commenced before O’Reilly J on 16 February 2007. That trial was aborted when her Honour disqualified herself from further hearing the matter.
On 19 March 2007 the wife filed an application seeking orders that the husband pay the sum of $10,000.00 to the wife by way of interim costs.
On 25 May 2007 an application by the wife for urgent maintenance and an interim costs order in the sum of $60,000.00 was heard by Jordan J. That application was dismissed by his Honour on 11 July 2007. A further application by the wife was heard by Jordan J on 4 September 2007, and his Honour made orders and delivered ex tempore reasons on that day.
Submissions by the Official Trustee in Bankruptcy (“the Official Trustee”) provided to the trial Judge on 25 May 2007 assert that the wife was made bankrupt pursuant to a debtor’s petition filed in November 2006, and that the filing of such petition constituted an act of bankruptcy. (There was no evidence before us of the date of any sequestration order made in respect of the wife’s bankruptcy.) On 16 December 2006, O’Reilly J had made orders joining the wife’s Trustee in Bankruptcy as a party to the proceedings.
Reasons for judgment of the trial judge
As just mentioned, the trial judge delivered ex tempore reasons for judgment and made orders on 4 September 2007, which orders are the subject of this application for leave to appeal.
As his Honour noted in his ex tempore reasons, he had earlier delivered reasons for judgment in respect of an interim costs application in July 2007. His Honour incorporated by reference into his reasons of 4 September 2007 his earlier reasons. For convenience, we propose to refer to his Honour’s original reasons for judgment delivered 11 July 2007 as “the first judgment” and the reasons published on 4 September 2007 as “the second judgment”.
The first judgment – 11 July 2007
In his first judgment his Honour noted that the wife’s application for an interim costs order came before him on 25 May 2007. His Honour explained that the wife relied on the earlier material placed before the Court and an affidavit filed on 12 February 2007 (reasons, para 3). His Honour noted that the wife had been without legal representation for some time and explained “she had previously been medically assessed as being emotionally incapable of representing herself in the legal proceedings”.
His Honour went on to record that the wife’s application was further complicated by the fact that she remained an undischarged bankrupt, and that the Official Trustee had been made a party in the proceedings.
His Honour then explained that he had received submissions from both the Official Trustee and the husband’s counsel to the effect that there “may be legal and practical impediments to an order for a lump sum payment on account of costs as a result of the wife’s bankruptcy” because any payment made to the wife would, pursuant to the bankruptcy laws, vest in the trustee.
His Honour then commented on the wife’s lack of legal representation and set out the history of how, because of the wife’s inability to represent herself, she received pro bono assistance from the Queensland Bar Association with the consequence that the barrister who appeared for the wife had sought the Court’s indulgence to rely on written submissions after the May hearing. His Honour noted that for various reasons he did not receive final submissions until 4 July 2007.
At paragraph 16 of his reasons his Honour set out the relief then sought by the wife which was as follows:
“1.That by way of urgent maintenance for the Wife the Husband forthwith pay or cause to be paid to First Mortgage Company Home Loans Pty Ltd the sum of $15,105.00, being the arrears owing in respect of the mortgage repayments in respect of the Wife’s residence.
2.That further by way of urgent maintenance for the Wife the Husband pay or cause to be paid to First Mortgage Company Home Loans Pty Ltd the sum of $1,507.84 on or before the 1st of each month commencing 1 August 2007 being the monthly mortgage repayments in respect of the Wife’s residence.
3.That on or before Friday 21 July 2007 by way of maintenance for the Wife the Husband pay or cause to be paid to the trust account of Nita Stratten-Funk Lawyers on account of the Wife’s legal fees the sum SIXTY THOUSAND DOLLARS ($60,000.00).”
Later his Honour recorded part of the wife’s barrister’s submissions, namely:
“It is conceded by the Husband and the Trustee in Bankruptcy that provided a Hogan type order is made for the maintenance of the Wife it is not subject to attack by the Trustee.” (paragraph 17)
and expressed his concern about that submission, first on the basis that it was not clear such a concession had been made and secondly, his Honour said he was not necessarily satisfied that “the Court has power to make such an order bypassing the bankruptcy legislation and the obligations it creates upon the Trustee”. His Honour concluded his discussion of the jurisdiction issue saying that he was not certain exercising the power in the way suggested by the wife’s counsel was appropriate. However, he then went on to explain:
… I am prepared to accept the effect of Mr Baston’s contention to firstly consider the question of whether there is any prima facie merit in the application and consider issues relating to jurisdiction and power only if I am satisfied that a claim is properly made out on behalf of the wife. (reasons, para 18)
His Honour then made the following findings:
·that the wife did not have the capacity to obtain legal representation;
·that the wife had effectively been impecunious since May 2004 and was dependent upon social security;
·that the wife was an undischarged bankrupt; and
·that the wife was in arrears in meeting her mortgage payments.
His Honour then considered the capacity of the husband to make the payments sought. His Honour set out details from the husband’s Financial Statement and referred to the husband’s capacity, pursuant to a borrowing facility, to obtain funds of $600,000.00, but then explained that the husband’s affidavit “indicates that the full amount of that facility has now been drawn down and the husband has sought to account for those monies” (reasons, para 21). His Honour concluded at paragraph 22:
On the face of the papers, at the present time, there is no clear capacity beyond contention that the husband has the capacity to pay, or to borrow to pay, all or any part of the funds sought by the wife in her amended application.
Having referred to the matters in issue in the s 79A proceedings commenced by the wife, his Honour recorded the husband’s assertion that consent orders made under s 79 should not be set aside. His Honour then expressed his concern about his ability to “go beyond” the affidavit material in light of the agreement between counsel that the matter should be “determined on its papers”, but went on to explain his more fundamental concern to otherwise deal with the matter as it would have the effect of “pre-empting the very complicated trial process which has been listed before me for ten days commencing 27 August 2007”.
His Honour went on to explain the difference between dealing with an interim costs application in the context of s 79 proceedings where he noted a trial Judge could be “much more robust” (reasons, para 26) and s 79A proceedings, and reminded himself that in the present case he had to proceed on the basis the wife may be entirely unsuccessful, and that he could be led into making an unjust order.
His Honour concluded his findings at paragraph 28 of his reasons and said:
I have concluded that, on the evidence as it presently stands, the wife has not discharged the onus which falls upon her to demonstrate that the husband has the capacity to make the payments sought.
Thereafter his Honour made a number of procedural orders which are not relevant for the purposes of this application for leave to appeal.
The second judgment – 4 September 2007
On 4 September 2007 his Honour orally delivered the second judgment.
As we have already indicated, his Honour referred to his earlier reasons, which we have précised above, and recorded the assistance he had received by counsel acting on a pro bono basis for the wife.
Thereafter his Honour briefly recorded the circumstances when the matter was last before him and then noted “[t]he application filed on this occasion adopts a different course and seeks from the husband a bank guarantee sufficient to enable the wife to obtain access to some funds.” (reasons, para 6).
His Honour then, referring to the wife’s earlier application, said that he had “as it were, ticked six of the seven boxes that might be necessary to provide [the wife] with some financial assistance to obtain justice and be reasonably heard”.
His Honour then referred to the option of the bank guarantee, noting that this mode of providing funds to the wife had not been argued on the last occasion. His Honour said “I am satisfied that this new application and proposed order addresses some of the earlier difficulties in a way which swings the balance in favour of making the orders sought by the wife”. His Honour also noted that the amount of funding sought to be guaranteed under the arrangement ($30,000.00) was a “comparatively modest sum of money” (reasons, para 11).
His Honour also referred to the potential prejudice to the husband in the event that the wife was entirely unsuccessful in the s 79A application, and said, on that basis, that the husband may be exposed to the risk of not being able to recover all or any part of the $30,000.00 if called upon by the bank to discharge the guarantee. His Honour said “[t]hat is clearly a risk and potential prejudice for the husband” (para 12).
His Honour thereafter considered the prejudice to either party if the order was, or was not made. He expressed the view that absent such an order the wife would be severely prejudiced. In respect of the wife’s s 79A application, his Honour noted he was satisfied the wife had established a prima facie case, and that any adjustment that was required to be made could be covered by any adjustment to the “varied property settlement orders”.
Thereafter his Honour made the order which is now sought to be appealed.
Identifying the application before the trial judge
In paragraph 6 of his written submissions to us, senior counsel for the husband asserted that the wife had relied upon the maintenance power (s 74) for the order which she sought, and submitted the use of such power was “a fiction” to ensure that any sum paid would not vest in the Official Trustee.
In oral submissions before us, the husband’s senior counsel submitted that the wife’s application before the Court, and determined by the trial Judge in his orders published on 21 July 2007, was an application for urgent maintenance and payment of $60,000.00 for legal costs, both of which applications were dismissed by the trial Judge. He submitted therefore in September 2007 there was no application before the Court for final orders for maintenance.
In her Application in a Case filed 29 August 2007, that is subsequent to the first judgment, the wife sought orders, including Order 1 which was framed as follows:
1.The Applicant husband is to within 14 days provide the Respondent wife’s nominated solicitor/s with an irrevocable banker’s guarantee for a sum as determined by this court which may be drawn upon by those solicitor/s upon the following trusts:
To be applied solely for the purposes of providing to the respondent wife legal professional services in relation to these proceedings AND
At the completion of these proceedings, the wife’s solicitor/s to formally advise the bankers that any undrawn funds otherwise available under the guarantee will not be called upon and the guarantee is thus discharged.
Prior to that application being filed counsel who appeared for the wife on a pro bono basis on 25 May 2007 foreshadowed to the trial Judge:
MR BASTON: …deliver to your Honour, with any amended application for final orders and interim relief, on Tuesday afternoon a set of submissions that deal with the issue, and subject to your Honour wishing to hear oral argument out of that have the matter proceed on the papers. (Transcript, 25 May 2007, p 3)
Submissions subsequently filed contained in paragraph 2 a foreshadowed amendment to the wife’s application under s 79A as follows:
The Wife seeks leave to amend her Application for Final Orders to include in addition to her Section 79A claim a claim for lump sum spousal maintenance and for an order that any monies outstanding to applicant arising by virtue of the Orders of Court made 10th September 2004 together with any further order for property settlement or lump sum spousal maintenance be forthwith paid to the trust account of the solicitors for the Official Trustee in Bankruptcy.
When the matter was before the trial Judge on 4 September 2007 counsel then appearing on a pro bono basis for the wife said:
MR BASTON: Your Honour, I understand that – I have seen an application that my client filed directly for – but I shouldn’t use that expression – [Ms Batey-Elton] filed directly for provision of assistance for costs in the form of a bank guarantee. (Transcript, 4 September 2007, p 1)
Counsel then went on to explain that “[t]he financiers of the husband’s property are the National Australia Bank, and we obtained from the bank their blank form bank guarantee … [s]o that would be the form of guarantee that we would require the husband to – and to arrange for [the husband] and his bankers to execute in favour of [the wife]” (Transcript, 4 September 2007, p 2).We note the bank document was not included in the appeal book.
The husband’s solicitor then, in response to a question from the trial Judge about the proposed application, said:
MR MADSEN: Your Honour, we got incomplete material from the wife last week. To the best of my knowledge we haven’t received that bank guarantee. I understood, from speaking to Mr Page, that [Ms Batey-Elton] was seeking lastly something like a commitment that the husband would pay the bills of the wife’s chosen legal representatives as and when they fall due, so what I have just heard now is something a little bit different.
But I think having said that, at the end of the day the essence of what [Ms Batey-Elton] is seeking to do is [sic] her application is the same as what she was trying to do when she sought the Hogan application, and that the effect of any type of guarantee arrangement where it deals with moneys that are to be paid under those orders before his Honour, Monteith J, and will prevent moneys being paid to the Trustee in Bankruptcy, and that hasn’t - as a result it is not something that could and should happen, and I am sure [counsel for the Trustee in Bankruptcy] will have something to say about that. (Transcript, 4 September 2007, p 2)
Counsel for the Official Trustee objected to an application to provide the wife a guarantee if funds obtained pursuant to the guarantee were subsequently deducted from payments due under the property orders. He submitted such a procedure was objectionable on the same basis as the trial Judge rejected the wife’s earlier application for an interim costs order.
The wife’s counsel then sought to clarify the nature of the application and said:
MR BASTON: Your Honour, the application is made really under the maintenance power. The Hogan application was successfully resisted on the basis that there was no income readily available to the husband from which he had money to pay on a periodic basis a lump sum or any other sum towards the wife’s legal expenses, but he did identify - and what is identified in the material is the significant equity held in the property secured by the bank, and what this order does is seek to utilise that resource and/or asset and the provisions of the guarantee as a maintenance type order to facilitate the trial. (Transcript, 4 September 2007, p 3)
Notwithstanding the complaint raised by senior counsel for the husband that no formal application was made for periodic, lump sum, or other order by way of maintenance before the trial Judge, from our examination of the transcript it is plain that what was being sought was an order to be made under s 74 on an interim basis, and that, although leave may not have been formally granted, the wife’s application seeking s 79A relief be amended to include a final order for maintenance.
Applicable principles – leave to appeal
There was no issue before us other than that the order of 4 September 2007 could only be appealed with leave. The test for the grant of such leave is that there be an error of principle and/or a substantial injustice (see Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170; Rutherford & Rutherford (1991) FLC 92-255; (1991) 15 Fam LR 1, Tudor & Tudor (1992) FLC 92-273).
Proposed grounds of appeal
The husband sought, in the event that leave was granted, to rely on grounds of appeal in a draft Notice of Appeal dated 20 September 2007. The grounds set out in that Notice are:
1.That in purporting to exercise or otherwise rely on the maintenance power under s.74 of the Act in making order 1 relevant to the provision of a bank guarantee by the appellant husband to the respondent wife, the learned Judge:
2.Failed to consider or adequately consider, as the Court was bound to do, the relevant threshold tests for the making of an order for spouse maintenance including the wife’s financial relationships with any third party or the up-dated valuation evidence relevant to the husband’s financial circumstances;
3. Failed to identify, as the Court was bound to do, either the amount of periodic or lump sum spouse maintenance payable or, in the event the order is deemed to represent periodic maintenance, the time frame to which the periodic maintenance is referable;
4.Failed to consider the implications for the wife’s estate in bankruptcy or for the wife's trustee in bankruptcy of potentially creating a preferred or preferential payment which could be lost to the wife at the election of her trustee in bankruptcy (which issue was both a relevant consideration in the exercise of discretion and one identified by the parties);
5.Failed to consider the implications for abuse of process constituted by making the order given the refusal on an earlier occasion, by the same learned Judge, to grant the wife’s application for an interim costs order under s.117 of the Act (which issue was a relevant consideration and one which arose by necessary implication);
6. (5) [sic] Failed to consider, as the Court was bound to do, the implications of the evidence before the learned Judge of the wife’s confessed inability to properly manage or direct her own legal affairs (which issue was a relevant consideration and one which arose by necessary implication [sic].
Submissions in support of the proposed grounds
At the hearing before us, the principal challenge raised by the husband’s senior counsel was directed to issues arising in proposed grounds 1-3 inclusive. The husband’s senior counsel submitted in his written submissions:
·that any sum to be provided to the wife was for her costs of the proceedings under s 79A;
·that an order for payment of costs cannot and should not be made under the maintenance power but rather must be made under s 117 of the Act;
·the use of the maintenance power was a fiction to assure that if paid as maintenance the sum would not vest in the Official Trustee. (husband’s submissions, para 4-6, p 3)
In his oral submissions before us, senior counsel for the husband submitted that even if the application was validly made under the maintenance power, which was not conceded, that his Honour had failed to properly address the statutory requirements in s 72, s 74 and s 75(2) of the Act, and thus the foundation for the order made was not established.
Senior counsel for the husband also asserted a lack of procedural fairness, or deficiency in the evidence, on the basis there was no evidence the National Australia Bank had notice of the application, or that the bank would accept a guarantee from the husband sufficient to advance the sum of $30,000.00 to the wife.
In her written submissions under the heading “LEAVE TO ADDUCE FURTHER EVIDENCE” the wife addressed the question of the evidence before the trial Judge noting “[h]er body of Further Evidence was all on the record at the relevant time and certainly within the purview of the court at first instance” and “[h]ad she been represented, the Further Evidence now presented would have been included in the appeal books originally” (wife’s submissions, para 12).Later, at paragraph 16 of her written submissions, the wife said:
The record shows that at hearing then, Justice Jordan found five of the six grounds needed to make orders to give the wife more than $ 100,000 under the maintenance power were made out. The only reason the orders she sought were not made, which is apparent in His Honours [sic] Reasons at paragraphs 20 to 22, is that the sixth ground - that the order was affordable for the payer, to grant the wife’s application for sorely need [sic] relief, relief which would have accorded her a mere modicum of the Fairness this court is duty bound to provide, was not found.
Relevant statutory provisions
At this point it is useful for us to set out those sections of the Act relevant to making an order for spousal maintenance.
Section 72 provides:
(1) 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).
(2) The liability under subsection (1) of a bankrupt party to a marriage to maintain the other party may be satisfied, in whole or in part, by way of the transfer of vested bankruptcy property in relation to the bankrupt party if the court makes an order under this Part for the transfer.
Section 74 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.
(2) If:
(a) an application is made for an order under this section in proceedings between the parties to a marriage with respect to the maintenance of a party to the marriage; and
(b) either of the following subparagraphs apply to a party to the marriage:
(i) when the application was made, the party was a bankrupt;
(ii) after the application was made but before the proceedings are finally determined, the party became a bankrupt; and
(c) the bankruptcy trustee applies to the court to be joined as a party to the proceedings; and
(d) the court is satisfied that the interests of the bankrupt’s creditors may be affected by the making of an order under this section in the proceedings;
the court must join the bankruptcy trustee as a party to the proceedings.
(3) If a bankruptcy trustee is a party to proceedings with respect to the maintenance of a party to a marriage, then, except with the leave of the court, the bankrupt party to the marriage is not entitled to make a submission to the court in connection with any vested bankruptcy property in relation to the bankrupt party.
(4) The court must not grant leave under subsection (3) unless the court is satisfied that there are exceptional circumstances.
(5) If:
(a) an application is made for an order under this section in proceedings between the parties to a marriage with respect to the maintenance of a party to the marriage; and
(b) either of the following subparagraphs apply to a party to the marriage (the debtor party):
(i) when the application was made, the party was a debtor subject to a personal insolvency agreement; or
(ii) after the application was made but before it is finally determined, the party becomes a debtor subject to a personal insolvency agreement; and
(c) the trustee of the agreement applies to the court to be joined as a party to the proceedings; and
(d) the court is satisfied that the interests of the debtor party's creditors may be affected by the making of an order under this section in the proceedings;
the court must join the trustee of the agreement as a party to the proceedings.
(6) If the trustee of a personal insolvency agreement is a party to proceedings with respect to the maintenance of a party to a marriage, then, except with the leave of the court, the party to the marriage who is the debtor subject to the agreement is not entitled to make a submission to the court in connection with any property subject to the agreement.
(7) The court must not grant leave under subsection (6) unless the court is satisfied that there are exceptional circumstances.
(8) For the purposes of subsections (2) and (5), an application for an order under this section is taken to be finally determined when:
(a) the application is withdrawn or dismissed; or
(b) an order (other than an interim order) is made as a result of the application.
Section 75(2), which has a dual function, namely in the determination of applications for adjustment of property under s 79 of the Act, and in spousal maintenance applications, provides as follows:
(2) The matters to be so taken into account are:
(a) the age and state of health of each of the parties;
(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;
(c) whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;
(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;
(e) the responsibilities of either party to support any other person;
(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;
(g) where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable;
(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;
(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;
(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;
(l) the need to protect a party who wishes to continue that party’s role as a parent;
(m) if either party is cohabiting with another person--the financial circumstances relating to the cohabitation;
(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;
(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.
Discussion
Before us no issue was raised by either party that challenged his Honour’s earlier determination that, by reason of the wife’s bankruptcy, payment of a lump sum by way of interim costs under s 117 to the wife would constitute “after acquired property” for the purposes of s 58 of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) and which, if paid, would vest in her trustee.
In Zschokke & Zschokke (1996) FLC 92-693 at 83,215 the Full Court extensively reviewed the power to make an interim costs order, and in discussing the maintenance power to support such an order, said:
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 because we did not understand Counsel for the wife to rely on s 74. Similarly we need not consider further as a source of power s 114 (the injunction power) which, although referred to by Counsel for the wife, was not relied on by him. Again in light of Poletti, the question of s 114 must also remain open.
In Re JJT & Ors; ex parte Victoria Legal Aid (1998) 195 CLR 184; (1998) FLC 92-812 Gaudron J said:
Doubtless, the power to award maintenance under s 74 of the Act also extends to orders that a party to the marriage provide the other with funds to conduct proceedings under the Act. I mention this matter because, as between parties to a marriage who are also parties to litigation, an order to provide funds for the conduct of litigation as to their mutual rights and obligations is as aptly described as a maintenance order as an “order as to costs”.
Although the husband’s counsel raised the issue of whether s 74 of the Act supported the making of an order to provide a sum of money to fund legal costs in an application under s 79A as a starting point for his argument in support of leave to appeal being granted, we prefer to defer our consideration of that issue and to first consider whether, without determining whether the relevant power exists, the trial Judge undertook, or adequately undertook, the task required by the Act in considering an application for spousal maintenance.
Section 74 enables the Court to make an order for spousal maintenance which may be by way of periodic payments, lump sum, provision of services such as payment of utilities or medical benefits cover, transfer of property, or if reliance is able to be placed on s 80(1)(k), “make any other order which is necessary to do justice”.
Authorities prior to the introduction of the Act stressed that maintenance was a term of wide scope (see Acworth v Acworth [1943] P 21 at 22). In Branchflower & Branchflower (1980) FLC 90-857 Evatt CJ and Opas J also adopted a wide definition of what could constitute the provision of maintenance. The party liable to provide maintenance may satisfy the obligation from income or any resources available to him or her (see Slattery & Slattery (1976) FLC 90-110 where the Full Court quoted with approval the judgment of Windeyer J in Sanders v Sanders (1967) 116 CLR 366 at 380).
Section 72 imposes two threshold requirements which must be satisfied before an order for spousal maintenance can be made:
·that the party seeking maintenance is unable to support himself or herself adequately (having regard to any relevant matter under s 75(2)); and
·that the party liable to pay maintenance is reasonably able to do so.
Factors under s 75(2) likely to have been relevant in this case include (a), (b), (c), (d), (e), (f), (i), (g), (h), (ha), (j), (k), (l), (m), (n) and (o). In determining a spousal maintenance application the Court shall disregard any entitlement of the applicant to an income tested pension or benefit (s 75(3)).
In this application the pivotal question becomes did his Honour determine the application by reference to the relevant statutory provisions?
We accept in his first judgment the trial Judge, at paragraph 19 of his reasons, made findings that the wife was impecunious and unable to support herself being dependent on social security.
As his Honour incorporated his reasons given in his first judgment into the second judgment we accept, although his reasons were brief, that he was entitled to find the first “limb” of s 72 satisfied on the basis there were “other circumstances” which precluded the wife supporting herself adequately. We also accept there was no impediment to his Honour making the order by reason of s 74(2) as the trustee had been joined as a party to the proceedings.
We turn then to consider whether the wife, who carried the onus of proof, established, on the balance of probabilities, that the husband had the capacity to pay and that the proposed order would have no adverse effect on the wife’s creditors (see s 75(2)(ha)).
At paragraphs 21 and 22 of his first judgment the trial Judge found that neither the husband’s affidavit nor his Financial Statement, on their face, suggested any capacity to pay the costs sought existed, beyond the wife’s contention that “the husband has the capacity to pay, or to borrow to pay, all or any part of the funds sought by the wife in her amended application”. According to the appeal book, by the time the matter was next before the trial Judge no further affidavit material or updated Financial Statements were filed by either party, although his Honour had the benefit of written submissions before delivering his first judgment on 11 July 2007.
We are conscious of the difficulties the trial Judge faced in a situation where the wife received generous, but limited, legal assistance from the Queensland Bar pro bono scheme, and though it was foreshadowed that an amended application for final orders would be filed, this did not occur prior to the September trial.
Whilst criticism is raised by the husband’s senior counsel about his Honour’s lack of findings about the wife’s present living arrangements and whether she is in a de facto relationship, we accept that in dealing with this interim application on the papers his Honour was limited in the findings he could make in that regard. As we have already noted, we accept that, within this structure, it was open to his Honour to rely on the wife’s receipt of social security payments, her bankrupt status and mortgage arrears, to infer that she lacked the capacity to adequately support herself.
We turn then to consider whether his Honour adequately examined the husband’s ability to pay and relevant matters under s 75(2). Save and except for the discussion of the husband’s financial position in the first judgment there was, in his Honour’s second judgment, no consideration of the husband’s ability to obtain the bank guarantee or whether the National Australia Bank would be prepared to provide such guarantee supported by the equity in the DB property owned by the family trust. There was evidence before the Court that, on 5 January 2006, C Pty Limited, of which company the husband is a director, and which company is the corporate trustee of the family trust, had a line of credit limited to $600,000.00 drawn to $350,000.00. At paragraph 27 of his affidavit sworn 25 May 2007 the husband deposed to the family trust having an outstanding liability to the National Australia Bank pursuant to an overdraft of which he was a guarantor in the sum of $600,000.00. Other than his Honour noting that the facility provided by the bank was not relevant to the guarantee, his Honour’s reasons disclose no other consideration of the husband’s financial position.
We note there were some contradictions in the husband’s affidavit. He referred in paragraphs 29 and 32 of his affidavit respectively to “my property” and “my stock” notwithstanding that the property and stock are shown in his Financial Statement as assets of the family trust. The husband did not disclose any credit loan account in the family trust notwithstanding the evidence that $1.5 million from the sale of H “was used to enable [the family trust] to acquire ‘[DB]’” (husband’s affidavit filed 25 May 2007).
His Honour’s conclusions in relation to provision of a bank guarantee of $30,000.00 (or some lesser sum if not fully drawn) and the husband’s potential liability under such a guarantee are brief. His Honour’s reasons do not disclose a consideration of matters under s 75(2) relevant to the husband, or the wife’s creditors, nor do his Honour’s reasons discuss under s 72 the husband’s exposure to the bank pursuant to the guarantee and his capacity to meet such exposure save and except noting “[t]hat is clearly a risk and potential prejudice for husband”.
Although not argued before his Honour, we note that s 269 of the Bankruptcy Act, precludes an undischarged bankrupt either alone or jointly with another person obtaining credit to the extent of $3,000.00 or more (plus any increase as prescribed under s 304A) from a person without informing that person that he or she is an undischarged bankrupt. It appears to us that the provision of the bank guarantee by the husband was to facilitate provision of credit to the wife to enable her to pay legal costs, and likely to have required compliance by the wife, by her first giving notice to the bank of her status as an undischarged bankrupt, to ensure any guarantee provided was valid.
In Kendling & Kendling [2008] FamCAFC 70, at paragraph 23, the Full Court referred to the approach of a trial Judge in making a second interim costs order in proceedings between the parties under s 79, the earlier order having been made under s 117. The Full Court said:
While in his judgment of 25 May 2007 O’Ryan J can be seen as having adopted a more strictly costs-based approach (in the sense of an application of s 117 of the Act), in his judgment of 25 January 2008, his Honour adopted what might be described as the more broad-brush approach suggested by Nygh J in Poletti (supra) and approved by the Full Court in that case and inferentially in Zschokke (supra). There can be no doubt, in our view, that that approach was open to his Honour, and while the position of counsel for the husband before us was at times somewhat ambivalent, we understood that ultimately he did not challenge the correctness of the decision in Poletti (supra). Rather the challenge was to O’Ryan J’s application of that decision. (paragraph 23)
Earlier in their reasons, the Full Court had set out an extract from Nygh J’s decision in the judgment of the Full Court in Poletti (1990) 15 Fam LR 794. We think it is useful to set out that extract:
It might be worthwhile before I deal with the relevant facts, such as they are, to state the basis upon which I intend to proceed. In this case I will proceed along the lines indicated by the Full Court not so very long ago in In the Marriage of DJ and LL Wilson (1989) 13 Fam LR 205; [1989] FLC 92-033. As the Full Court, and on this particular point it was unanimous, pointed out in that case, although the application is commonly referred to as an application for interim costs, and no doubt it is convenient for everyone to refer to it as such, the issue on such an application is not the question of whether one party should be responsible for the costs of the other, nor is it a question of determining in advance whether any expenditure was reasonably or properly incurred. It is rather, as it certainly was in In the Marriage of Wilson, a situation where one party to the marriage controls almost exclusively what might be described as the patrimony of the parties and has control of the bulk of the assets and funds of the parties, where an order may be made to ensure that the other party, who does not have the fortune of controlling those funds, at least has an equal or near equal opportunity to present his or her case.
Such an order certainly will be made on account of costs but what ultimately will be the fate of the moneys paid, whether it is to be treated as an advance on the ultimate property order, or whether it is to be treated as an advance on any ultimate costs order or a mixture of the two, is a matter which must be left to the trial Judge. It is therefore not on an occasion like this for me to determine whether or not there is justification pursuant to s 117(2). Section 117(2) is not really applicable. This is an interlocutory order made pursuant to s 80 of the Family Law Act.
Having regard to the magnitude of the properties and the companies involved, as it appears from the husband's affidavits, I have no reason to doubt the general reasonableness of those estimates. It is then a question, if any order is to be made, to what extent she requires an immediate infusion of funds. It is my view that of that $161,000 a deduction can be made of the sum that her solicitor estimates he may require prior to the hearing. No doubt, if funds are made available to pay for the work already done, he can exercise patience until the hearing. A figure of approximately $120,000 would be appropriate.
The next question is whether the wife has funds available herself from which she could meet the whole or part of that without having to call on the husband to provide it out of what I have described as joint patrimony.
Reference has been made to two sources of possible funds…
The second source that was referred to was the surrender of her life policy which I was advised had a value of some $55,000 which again would go some way towards meeting her expenditure. Certainly those options are available but I have to weigh them against the other options. The other option is that the husband has a considerable amount of assets under his control, assets in which the wife also has an interest and in respect of which clearly at some future date an adjustment of property has to be made. …
…
… The resources upon which the husband can call through the companies in which the wife has an interest are considerably more extensive and more flexible than any on which the wife can call.
For those reasons, therefore, I have come to the conclusion that I should make an order that the husband provide within one month of the date hereof the sum of $120,000 on account of the costs of the wife together with the rider, as I have indicated earlier, that the allocation of those sums towards either the ultimate receipt by the wife of her property settlement or her costs is to be determined later by the trial judge.
The matter before his Honour is readily distinguishable from the circumstances in Poletti and Kendling. In both those cases the proceedings were under s 79, and there was no doubt that any order to be made was capable of reversal by a trial Judge at final hearing obviating any potential prejudice to the party ordered to pay the interim costs. The instant case had unusual circumstances. The wife was an undischarged bankrupt, and although his Honour was satisfied she had established a prima facie case to invoke s 79A the outcome of those proceedings was uncertain. Further the guarantee to be provided by the husband was not a guarantee supported by equity in property owned by him, but a property owned by C Pty Ltd as trustee of the family trust, which company although joined to the proceedings, took no part in them. In these circumstances we consider that the “broad brush” approach, which may be available in appropriate circumstances where there are s 79 proceedings on foot, was not available in the unique circumstances of this case.
We are satisfied his Honour’s failure to consider relevant matters under s 72, s 74 and s 75(2) constitutes error of principle, and thus we would grant leave and allow the appeal, and set aside the order.
In light of these findings it is unnecessary that we determine whether or not s 74 is a source of power to make an order for interim costs, either in the proceedings under s 79, or s 79A.
Application to adduce further evidence
Before us, the wife sought to adduce further evidence. That application was not filed within the time prescribed in the rules and was opposed by senior counsel for the husband.
The further evidence sought to be adduced by the wife was an affidavit sworn by her on 3 March 2007 to which the wife annexed written submissions opposing the appeal, and also annexed a list of documents, being documents which were in existence prior to the hearing before the trial Judge save and except a letter from the husband’s solicitor dated 21 September 2007, addressed to the wife, annexing a copy letter from the National Australia Bank dated 13 September 2005 to the husband in which letter the bank referred to an application for finance and informed the husband that the application had been declined.
The principles to be applied to the admission of further evidence on appeal are explained in CDJ v VAJ (No 1) (1998) 197 CLR 172; (1998) FLC 92-828.
At paragraph 109 McHugh, Gummow and Callinan JJ said:
One consideration in construing s 93A(2) is its remedial nature. Its principal purpose is to give to the Full Court a discretionary power to admit further evidence where that evidence, if accepted, would demonstrate that the order under appeal is erroneous. The power exists to facilitate the avoidance of errors which cannot be otherwise remedied by the application of the conventional appellate procedures. A further, but in practice subsidiary, purpose is to give the Full Court a discretion to admit further evidence to buttress the findings already made.
Later at paragraph 111 their Honours said:
…Nevertheless, it is highly unlikely that Parliament in conferring jurisdiction on the Full Court to hear appeals intended that s 93A(2) should be construed in a way that would have the practical effect of obliterating the distinction between original and appellate jurisdiction. Nor can the availability of further evidence relevant to the issues in the appeal be treated as equivalent to a ground of appeal, proof of which prima facie entitles the appellant to a new trial. The power to admit the further evidence exists to serve the demands of justice. Ordinarily, where it is alleged that the admission of new evidence requires a new trial, justice will not be served unless the Full Court is satisfied that the further evidence would have produced a different result if it had been available at the trial. Without that condition being satisfied, it could seldom, if ever, be in the interests of justice to deprive the respondent of the benefit of the orders made by the trial judge and put that person to the expense, inconvenience and worry of a new trial.
We do not consider it is appropriate to admit the documents listed in the List of Documents numbered 1-9.
We reject the application on the basis that the documents 1-9 are incomplete and, prima facie, it does not appear to us that they buttress the order made by his Honour.
We are of the view there would be little utility in admitting the letter from the National Australia Bank as, without the application made to the bank, we consider it would be of little probative value and would not assist the wife’s case.
Before us the husband’s senior counsel informed us that the National Australia Bank had refused to provide a guarantee pursuant to his Honour’s order, but did not seek to put relevant documents before us.
Conclusion
Whilst the husband has succeeded on the appeal, and the trial Judge’s order should be set aside, we see no utility given the concession by both parties that the bank has refused the guarantee sought, in remitting the matter for re-hearing.
Costs
Before us the husband sought, in the event that the appeal succeeded, that he should receive a certificate pursuant to the provisions of the Federal Proceedings (Costs) Act 1981 (Cth). The wife also sought a certificate in the event the appeal succeeded.
As we have found error of law by the trial Judge, we propose to grant certificates as sought.
I certify that the preceding ninety seven (97) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court
Associate:
Date: 21 November 2008
Key Legal Topics
Areas of Law
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Family Law
Legal Concepts
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Appeal
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Costs
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Interlocutory Orders
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