Erington and Erington

[2018] FamCA 67

FAMILY COURT OF AUSTRALIA

ERINGTON & ERINGTON [2018] FamCA 67

FAMILY LAW – PROPERTY – partial property settlement and litigation funding – where the wife seeks orders without comprehensive evidence – where the court cannot make a determination – application fails.

Family Law Act 1975 (Cth)

Strahan and Strahan (interim property orders) (2011) FLC 93-466

APPLICANT: Mr Erington

RESPONDENT: Ms Erington

FILE NUMBER: MLC 9064 of 2015

DATE DELIVERED: 15 February 2018

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 9 February 2018

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Smallwood

SOLICITOR FOR THE APPLICANT: Lander And Rogers

COUNSEL FOR THE RESPONDENT: Mr Korfiatis

SOLICITOR FOR THE RESPONDENT: Webb Korfiatis Family Law

Orders

1. That paragraph 3 of the response to the application in a case filed by the wife on 5 December 2017 is dismissed.

2. To the extent that the application in a case filed by the husband on 17 November 2017 and the balance of the response of the wife filed 5 December 2017 have not been otherwise determined, they are dismissed.

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

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

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 9064  of 2015

Mr Erington

Applicant

And

Ms Erington

Respondent

REASONS FOR JUDGMENT

1. The court has before it an outstanding application for litigation funding and these reasons and the orders made this day, deal with that issue. 

2. The dispute between the parties arises out of the marriage between Mr Erington (“the husband”) and Ms Erington (“the wife”).  Until recently, the wife represented herself but the court now has the benefit of her position being put by her solicitor who has generously to date, undertaken the matter on a pro bono basis.

3. The response that gives rise to the application was filed on 5 December 2017 by the wife.  It was in response to an application in a case by the husband the details of which are no longer relevant.  The response also sought a number of other orders but those too were not pressed.

4. The order sought by the wife is in the following terms:

   The wife receive an interim property settlement from the proceeds of sale of the real property situate at and known as [EE Street, Suburb FF] in the sum of $100,000.

5. That order is opposed by the husband.

6. In my view, there is not sufficient evidence to enable me to make any order here.

7. The affidavit upon which the wife relied was filed by her at the same time that the response, just mentioned, was also filed.  It also contains material that is not relevant to the present dispute.  Her relevant evidence therefore is that the husband had failed to effect orders for the sale of real properties in his capacity as a trustee for their sale.  The wife observed that EE Street, Suburb FF was registered in her name solely and was currently vacant and uninhabitable. She said she had not been presented with any documents to list it for sale notwithstanding the following was made on 24 August 2017:

   [11]Each of the parties forthwith place the following real properties on the market for sale:

   (a)…

   (b)…

   (c)…

   (d)[EE Street, Suburb FF].

   [12]Forthwith, the husband as trustee for sale of the real properties, may appoint estate agents and conveyancers and, for the purposes of giving effect to the sales, do all other acts and sign all other documents necessary.

   [13]To give effect to paragraphs 11 and 12, if the wife refuses or declines to sign any necessary document to give effect to the sale, then pursuant to s 106A of the Family Law Act 1975 (Cth), the husband may sign such document in the name of the wife to give effect to the sale.

8. The wife through her solicitor expressed ignorance of what was said to be an auction for 10 February 2018 of EE Street.  Counsel for the husband dismissed that but there is concern about how the husband has the capacity either in his own name, or as trustee, to sell the property if there is no evidence that the wife has refused or declined to sign the necessary documents as outlined above.  There was no application before the court to alter those orders or to delay the auction said to be about to occur.  It is disconcerting that the practitioners disagree as to what they have done between themselves let alone their clients.  All of this dispute was unfortunately argued out in the court room but it did not address the critical issue of what power was being sought to be exercised in relation to the discrete application that the wife had filed last December.  It seemed to be suggested by the wife that her ignorance of the sale was a basis to somehow make the orders relating to the litigation funding.  In my view, that basis is not made out.

9. The wife went on to say that she had a market appraisal of EE Street which shows its “realistic value” (according to an estate agent) was in the range of $875,000 to $925,000.  That was a kerbside perspective and without the benefit of internal inspection.  It is said that the husband has given instructions to the selling agent that the reserve price is $680,000.  Although there was some argument about it, I do not intend to conflate the value with the reserve price.

10. EE Street in any event is encumbered by a mortgage which was $470,000 and has been unpaid for a while so may be as high as $490,000.  By orders that have already been made by the court, a friend of the wife is to be repaid $260,000.  On top of those amounts, there will undoubtedly be sale costs.

11. It can readily be seen that there may be some necessity to pay out something in the vicinity of $770,000 and as such, a sale at $680,000 would leave a shortfall.  On the other hand, if the agent who wrote the appraisal in September 2017 is right, the net outcome would be somewhere around $100,000.

12. That snapshot puts into focus what the wife seeks to do.  It seems common ground that sometime in 2017, the husband offered to transfer EE Street to the wife on the basis that she was responsible solely for the mortgage but the wife rejected that.  In my view, that is irrelevant now.

13. Other assets of the parties have already been sold and some of them have found their way to creditors.  On the husband’s position, there is a judgment outstanding to the Australian Taxation Office of $800,000, a debt to the ANZ Bank of $4.7 million and credit card debts of about $100,000.  From the husband’s perspective, there is a substantial shortfall.  From the wife’s perspective, any shortfall depends upon whether or not the court accepts that what the husband did with a car business was at arm’s length and is no longer his asset.  The investigation into that very exercise forms the foundation for the claim by the wife for litigation funding. 

14. From the husband’s perspective, the ANZ Bank may recovery about $1 million of its debt.  He owes his own lawyers $55,000.  It is said that the husband is continuing to negotiate with the Tax Office but more importantly, endeavouring to stave off bankruptcy by negotiating a particular repayment arrangement with the ANZ Bank which would see them write off a substantial portion of their debt.

15. EE Street on the other hand is a stand-alone property not affected by those creditors.  The debt save the mortgage on EE Street is directly related to the husband.  The question arises to whether the wife would receive the EE Street property proceeds on any of the potential scenarios set out above.  The husband’s position now is that he wants the wife to make a contribution towards his indebtedness and that her pursuit of the allegations of improper past dealings with the car business in these proceedings is “persecutory” and “on-going obsession”.

16. The court has not been assisted by the fact that up until late 2017, the wife was unrepresented and, the August orders to which I have earlier referred, were made over opposition by the wife but also without any assistance from her.  She had at all times maintained that the husband was not being candid with the court and she wanted an investigation into his financial dealings.  She pointed to a report by a forensic accountant which referred to substantial drawings being made by the husband.  The difficulty with these submissions is that the evidence was not before the court in respect of this discrete application but in any event, the expert to whom the solicitor for the wife referred, had raised those questions and opined accordingly prior to these various steps taking place and the judgment of the Australian Taxation Office being made.  Other transactions took place thereafter.

17. Counsel for the husband submitted that it was not correct for the wife to complain that she did not know what was happening.  It was submitted she had been a significant part of the financial arrangements including the business and well knew what the debt was.  I am not in the position to make those findings on the material before the court.

18. The wife’s argument is that she cannot do the investigation without litigation funding.  However, there is no evidence before me as to what it would cost and what is to be investigated.  There is no indication before the court of an expert nature as to what the lawyer will charge and why $100,000 might assist.  All of that sort of evidence would only be relevant if the order is being pursued on the basis other than an interim property settlement as the wife has pleaded her relief.

19. In Strahan and Strahan (interim property orders) (2011) FLC 93-466, Boland and O’Ryan JJ recognised that parties needed funds to participate in proceedings an issue not new for the courts. Peculiarly in family law cases, parties fight over what might often be described as common property in circumstances where one party controls the assets and income. The unusual feature here however is that only the position of the husband is before the court about the lack of assets and it remains unclear also what his claim is to the EE Street property bearing in mind that the wife brought the property into the marriage.

20. There is a distinction between the court making an order of the nature sought by the wife for a partial distribution of property and that relating to litigation funding to enable a “level playing field”. In the former, the parties assert the money is already theirs and that the other party has control of an asset to which they are entitled. In the latter case, the source of jurisdiction is s 117 of the Family Law Act 1975 (Cth) (“the Act”).

21. Section 117 provides that in proceedings under the Act, each party shall bear their own costs however s 117(2) of the Act permits the court to depart from that statutory principle if there are justifying circumstances to do so. It is conceivable therefore that the justifying circumstance here lies in the disparity between the parties’ financial circumstances if one accepts that the husband has control or had it, and has disposed of the assets. Whilst the wife asserts that, there is no evidence before the court that would enable me to make such a finding. Thus I am very cautious about giving any weight to the assertion that the husband had the assets and improperly disposed of them.

22. I am also conscious that the husband maintains he is still negotiating the opportunity to avoid bankruptcy and that that issue remains outstanding. Thus, in terms of a justifying circumstance to depart from the principle in s 117, the wife has difficulty in pointing to the justifying circumstance here absent some cogent evidence.

23. To the extent that the wife seeks to rely upon the s 117 power, as was described in Strahan (supra), an examination of the relevant evidence in s 79 including s 79(4)(e) must be undertaken.  Therein lies the next problem.  On the analysis that I have done above, from the husband’s perspective, EE Street will give rise to a shortfall and thus, Ms GG will not be paid her entitlement.  To the extent that the wife’s submissions is correct, there is $100,000 or potentially possibly a little bit more, and the husband maintains that if she is given that amount of money, and it is used for legal expenses, it could never be “clawed” back.

24. In Strahan (supra), Boland and O’Ryan JJ articulated the test at [132] that the court had to consider which power it was exercising.  Notwithstanding all of the matters that I have referred to above, the “overarching consideration” is the interests of justice.  It is important to note and I do so here, it is not necessary for the wife to establish “compelling circumstances”.  As their Honour’s observed:

    All that is required is that in the circumstances it is appropriate to exercise the power.  In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.

25. In my view, there is not enough evidence to enable me to know confidently that the wife is entitled to the equity (if any) in EE Street notwithstanding her ownership of it in circumstances where the husband asserts that he will be endeavouring to claw some of that money into his indebtedness. To the extent that the husband enters into bankruptcy, the wife has a much better argument to the EE Street property subject to anything that the bankruptcy trustee might say. If however, some sort of arrangement is made particularly with the Australian Taxation Office and the ANZ Bank, I would also be loathe to say that the wife was entitled to the net proceeds of EE Street without those two creditors being given the opportunity to be heard as they would be under s 79(10) of the Act.

26. Insofar as the purported exercise of power lies in s 117 of the Act, the only justifying circumstances I consider is of relevance, even allowing for the fact that the wife’s written application seeks a partial distribution of property, is that there is the need for a level playing field. No evidence was put before me as to the nature of the costs that might be incurred let alone the quantum, nor was it suggested that this is an appropriate case for a dollar for dollar type order.

27. In my view, the wife has not satisfied the burden of proof and the application must fail and is dismissed.

I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 15 February 2018.

Associate: 

Date:  15 February 2018