Farhat and Maroun

[2016] FamCA 581

FAMILY COURT OF AUSTRALIA

FARHAT & MAROUN [2016] FamCA 581

FAMILY LAW – SECURITY FOR COSTS – Property settlement – Where the wife seeks that the husband provide security for her costs – Where the substantive proceedings relate to an application by the husband to have consent orders set aside pursuant to s 79A of the Family Law Act 1975 (Cth) – Consideration of the factors in s 117(2A) of the Family Law Act 1975 (Cth) – Where the husband submits that he has mental health problems – Where to make an order for security for costs against the husband may be oppressive to the husband and stifle the litigation – Where the circumstances do not justify a departure from the usual position as to costs – Application dismissed.

Family Law Act 1975 (Cth) s 79A, 117(2A)
Family Law Rules 2004 (Cth) r 19.05(2)

Barker v Barker (2007) 36 Fam LR 650
In the marriage of Clifton and Stuart (1991) FLC 92-194
Luadaka and Luadaka (1998) FLC 92-830

APPLICANT WIFE: Ms Farhat

RESPONDENT HUSBAND: Mr Maroun

FILE NUMBER: SYC 5370 of 2014

DATE DELIVERED: 19 July 2016

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Loughnan J

HEARING DATE: 29 June 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Shaw

SOLICITOR FOR THE APPLICANT: Cambridge Law

COUNSEL FOR THE RESPONDENT: Mr Givney

SOLICITOR FOR THE RESPONDENT: Argyle Lawyers

Orders

1. The Amended Application in a Case filed on behalf of the wife on 10 May 2016 is dismissed.

2. No order is made as to costs.

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 Farhat & Maroun 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 SYDNEY

FILE NUMBER:  SYC 4095 of 2014

Ms Farhat

Applicant

And

Mr Maroun

Respondent

REASONS FOR JUDGMENT

Introduction

1. By his Initiating Application filed 26 April 2016, Mr Maroun sought orders to set aside or vary pursuant to s 79A of the Family Law Act 1975 (Cth) (“the Act”), orders for property settlement made on 29 October 2014 in proceedings between him and Ms Farhat. By her Amended Application in a Case filed on 10 May 2016 Ms Farhat sought orders that Mr Maroun provide security for her costs of the s 79A proceedings and consequential orders. Although the parties are divorced, for convenience I will refer to them as the wife and the husband.

The Hearing

1. At the hearing both parties were represented. The hearing was conducted on the papers. The parties’ counsel identified the material relied on, documents were tendered, submissions were made and judgment was reserved.  

The Parties

1. The wife was born in 1983. She is 33 years of age. The husband was born in 1977 in the Country G. He is 38 years of age. They were married and commenced to live together in 2005. They separated on 1 August 2010. They lived together under one roof at Suburb A until the wife left on 18 February 2013.

2. The parties have  three daughters:

   B born … 2006;

   C born … 2007; and

   D born … 2009

Background Facts

1. Final orders were made by consent on 29 October 2014. As to property settlement the orders provided as follows:

   …

   Property

   15.The parties shall divide the items of furniture and white goods purchased during their marriage by mutual agreement outside of these orders.

   16.The wife shall retain the motor vehicle being a … (Registration Number …) and the husband shall do all things necessary to ensure that the registration of the vehicle is transferred to the wife's name forthwith in the event that it is not so registered already.

   17. The parties are to equally divide the cash sum of $280,000 currently held in their joint account with the Commonwealth Bank of Australia as follows:

   a.$130,000 to the wife; and

   b.$150,000 to the husband.

   18.The parties acknowledge in relation to clause 17 above that the husband has already accessed and utilised a sum of $70,000 from that joint fund and will in actual fact be receiving the balance of his share upon the execution of this agreement, which will be a sum of $80,000.

   19.That the parties retain all their right title and interest in and to their superannuation entitlements and have no further claim on such entitlements of the other.

   20.That within 28 days of the making of these orders, the Husband do all such acts and things and sign all necessary documents so as to transfer to the wife all of his right, title and interest in the property situated at [E Street, Suburb F] NSW

   21.That contemporaneously with the transfer set out above in Order 20, the parties do all such acts and things and sign all necessary documents so as to discharge the mortgage on the subject property and replace it with a mortgage to the party acquiring the property alone.

   22.The husband agrees to provide the wife with financial assistance in the form of three (3) month's rent and rental bond money when she presents him with the details of a proposed rental premises where she shall reside with the children.

   23.That other than as otherwise set out in this agreement the parties have the sole right title and interest in any other property or financial resource which is at the date hereof in their possession title or name and they shall be solely liable for and indemnify the other against any personal liabilities.

   24.That the respondent and applicant do all acts and things and give all consents and execute all documents and writings necessary to give effect to the orders made herein.

   25.That in the event that either party refuses or neglects to execute any deed or instrument, the registrar of the court be appointed pursuant to section 106A, to execute such deed or instrument in the name of such party and to do all acts and things necessary to give validity to the operation to the deed or instrument.

   26. That unless otherwise specified in these orders and except for the purposes of enforcing the payment of any moneys under these or any subsequent orders:

   (a)Each party be solely entitled to the exclusion of the other to all property (including choses-in-action) in the possession of such party as at the date of these orders;

   (b)Any money standing to the credit of the parties in a bank account are to be retained by the party in whose name the account appears;

   (c)Each party hereby foregoes any claim they may have to any superannuation benefit that is belonging to or owned by the other save as provided for in these orders;

   (d)All insurance policies are to become the sole property of the owner named hereon;

   (e)Each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders; and

   (f)Any joint tenancy of the husband and wife in any real or personal estate is hereby expressly severed.

   NOTATION

   A.That the parties agree that as far as it is practicable to do so that the orders are made having regard to the provisions of section 81 of the Act with a view to determining for all time the financial relationship between the parties and avoiding further proceedings between them.

   B.The court notes that the parties have for the purpose of finally determining the financial relationships between them and to avoid further proceedings between them agreed as follows:

   1.Subject to the approval of the Supreme Court of New South Wales pursuant to the legislation relating to the release of rights to apply for a family provision order, the respondent and the applicant each releases their rights to make an application in relation to the estate of the other pursuant to such legislation;

   2.The respondent and the applicant each gives that release in consideration of the other terms of this agreement;

   3.The respondent and the applicant acknowledge that it is to their advantage in the light of the terms of this agreement to grant the release;

   4.The respondent and the applicant acknowledge the terms of this agreement and that they have taken into account the position of the other in the event of the death of the other;

   5.The respondent and the applicant accept that for the purposes of the Act the provisions of this agreement including this release are fair and reasonable;

   6.At any time after the execution of this agreement the respondent or the applicant or their legal representative may request the other party or their legal representative to join in at the cost of the one requesting an application to the court for the approval of this agreement to relinquish all claims under the Act. If such a request is made the other covenants to comply with such a request and to do all things reasonably necessary to obtain the approval of the Supreme Court at the cost of the one requesting.

2. On 30 October 2014 the wife sent the husband a text message as follows:

   “Consent orders approved.”

3. He responded by text message:

   “Congratulation for u. Let me know when u ready to go to the bank.”

4. On 3 November 2014, funds in a joint account were distributed as to $80,000 to the husband and $130,000 to the wife.

5. Later that year the husband forwarded to the wife a letter from a Local Court in relation to a claim for unpaid Strata fees in respect of the Suburb F apartment. The husband forwarded the claim to the wife for her to pay and she made the payment.

6. In late 2014 the parties reached a verbal agreement that the husband could remain in the Suburb F apartment provided he paid $550 per week into the wife’s account to cover the mortgage instalments. The wife had difficulty in obtaining finance to give effect to the orders and discharge the husband’s obligations under the Suburb F mortgage but in June 2015 she secured that finance. She wrote to the husband on 15 June 2015 to tell him about the finance and asking that he sign documents for the change of title. He refused to sign, saying that he knew nothing of the orders of 29 October 2014. Copies of the relevant documents were sent to the husband in July 2015 for him to sign. On 19 August 2015 the relevant documents were signed on behalf of the husband by a registrar under s 106A of the Act. On 30 September 2015 the new loan was approved.

7. At the end of October 2015, the husband stopped paying into the wife’s account. As I understand his case, he could no longer pay on the old mortgage as it was discharged and he did not know the details of the new mortgage.

8. On 29 April 2016 the wife and children returned to live at the Suburb F property. The husband contends that while he was out of the property the wife change the access codes and he was unable to get in. The wife contends that the husband refused to leave and made aggressive threats to her. The wife called the police and they obtained an Apprehended Violence order against the husband for her protection. A final order was subsequently made by the Local Court at Suburb F.

Relevant Law

1. In relation to costs, the Family Law Act 1975 (Cth) (“the Act”) provides as follows:

   Section 117

   Costs

   (1)Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.

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

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

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

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

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

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

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

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

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

2. Therefore:

   ·the general position is that parties bear their own costs;

   ·relevantly, the Court can make such orders for security of costs as it considers just;

   ·in considering whether to make an order or what order to make, the Court must have regard to the matters identified in s 117(2A).

3. Dealing with the s 117(2A) matters:

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

1. The paucity of the husband’s financial circumstances is one of the main reasons for the wife’s application. It is her case that the husband’s application is likely to fail, that he is likely to be ordered to pay her costs and that he will not have the funds to meet such an order.

2. According to his Financial Statement filed 26 April 2016 the husband’s income is $1,190 per week in the form of workers compensation payments. He spends $1,314 per week, including $23 for motor vehicle registration, $143 in personal loan repayments, $188 for repayments in a Citibank Visa card, $460 on child support and $500 on all other expenses. Apart from his claimed interest of $680,000 in the Suburb F apartment, he has $2,500 in the bank, a motor vehicle worth $14,000 and about $2,000 in household contents. He has an interest worth $37,000 in a self-managed superannuation fund. The husband owed the Commonwealth Bank $17,258 on a personal loan, $38,000 on his Visa card account and although he is not legally liable, asserts that he owes about $300,000 on a mortgage in the name of the wife that is secured over the Suburb F apartment. By a late filed affidavit, the husband revealed that in addition to the interests disclosed in his evidence to date, he has more than $100,000 in a trust, largely made up of an interest in a property in Country G which he is engaged in buying.  

3. The wife’s June 2016 Financial Statement shows that she receives $690 per week, made up of $365 in the form of a single parent benefit and $325 by way of family tax benefit. The wife puts her occupation as law student. The wife deposed that she spends $626 per week including $388 paid to the St George Bank on a mortgage, $180 per week in rates and unit levies, $10 on home and contents insurance, $38 per week in car insurance and $10 per week on car registration. She owns the Suburb F apartment which she estimates to have a value of $500,000, has $2,000 in the bank, a motor vehicle worth an estimated $7,000 and household contents worth $3,000. The wife has a superannuation interest worth about $10,000. The wife owes $250,000 by way of mortgage on the Suburb F apartment and $15,000 on a loan from Ms H Farhat.

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

1. Neither party has a grant of legal aid.

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

1. Nothing comes to attention here.

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

1. The proceedings do not directly arise from a failure to comply with a Court order.

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

1. The proceedings are at an interlocutory stage and therefore the ultimate success of the parties’ applications cannot be assessed.

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

1. There is no evidence of written offers of settlement in relation to the proceedings for security for costs.

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

1. In Luadaka and Luadaka [1998] (1998) FLC 92-830 at 85,507 the Full Court said that the purpose of an order for security is to secure justice between the parties by ensuring that an unsuccessful party does not occasion injustice to the other. Noting the matters set out in s 117(2A), and without attempting to be exhaustive, the Court identified additional matters that may be relevant to the determination of an application for security for costs. No doubt with the benefit of authorities such as Luadaka the Family Law Rules 2004 (Cth) provide some guidance in this regard. Rule 19.05 (2) provides:

   (2)  In deciding whether to make an order, the court may consider any of the following matters:

   (a)  the applicant's financial means;

   (b)  the prospects of success or merits of the application;

   (c)  the genuineness of the application;

   (d)  whether the applicant's lack of financial means was caused by the respondent's conduct;

   (e)  whether an order for security for costs would be oppressive or would stifle the case;

   (f)  whether the case involves a matter of public importance;

   (g) whether a party has an order, in the same or another case (including a case in another court), against the other party for costs that remains unpaid;

   (h)  whether the applicant ordinarily resides outside Australia;

   (i)  the likely costs of the case;         

   (j)  whether the applicant is a corporation;

   (k)  whether a party is receiving legal aid.

2. The additional matters identified in Luadaka are:

   ·Whether there was a delay in bringing the application; and

   ·The difficulties of enforcing an order for costs and the amount of costs to be incurred.

3. I have referred above to the husband’s means. If he is unsuccessful in his application, it is likely that to meet a costs order he would need to resort to his equity in the property he is purchasing in Country G. The evidence does not permit a definitive finding about those matters but one would expect that at least it would be more difficult for the husband to realise that equity than would be the case if it was held in Australian property or if the interest in the property was not complicated by being subject to a partially performed contract to purchase. The authorities have it that poverty alone should not be a bar to access to the Courts. So too in relation to the consideration of applications for security for costs. 

4. The other main element of the wife’s case is her contention that the husband’s application under s 79A of the Act is doomed to fail. Turning then to the case the husband will be required to make, s 79A provides:

FAMILY LAW ACT 1975 - SECT 79A

Setting aside of orders altering property interests

(1)Where, on application by a person affected by an order made by a court under section 79 in property settlement proceedings, the court is satisfied that:

(a) there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance; or

(b)in the circumstances that have arisen since the order was made it is impracticable for the order to be carried out or impracticable for a part of the order to be carried out; or

(c) a person has defaulted in carrying out an obligation imposed on the person by the order and, in the circumstances that have arisen as a result of that default, it is just and equitable to vary the order or to set the order aside and make another order in substitution for the order; or

(d)in the circumstances that have arisen since the making of the order, being circumstances of an exceptional nature relating to the care, welfare and development of a child of the marriage, the child or, where the applicant has caring responsibility for the child (as defined in subsection (1AA)), the applicant, will suffer hardship if the court does not vary the order or set the order aside and make another order in substitution for the order; or

(e)a proceeds of crime order has been made covering property of the parties to the marriage or either of them, or a proceeds of crime order has been made against a party to the marriage;

the court may, in its discretion, vary the order or set the order aside and, if it considers appropriate, make another order under section 79 in substitution for the order so set aside.

1. In Barker v Barker (2007) 36 Fam LR 650 at 675, Full Court said:

   [120]A miscarriage of justice under s 79A(1)(a) will occur if circumstances exist which “for some significant reason, make the order contrary to law and justice according to law as it relates to the integrity of the judicial process” (Bigg v Suzi (supra) at 84,982). See also Suiker (supra); Public Trustee (as executor of the estate of Gilbert) v Gilbert (supra)).  While cases such as Suiker; In the Marriage ofHolland (1982) 8 Fam LR 233; (1982) FLC 91-243; and In the Marriage ofGebert (1990) 14 Fam LR 62; (1990) FLC 92-137 indicate that the words “miscarriage of justice” should not be construed narrowly and the phrase “integrity of the judicial process” should not be taken only to refer to the hearing in the court, the circumstances creating the miscarriage must nevertheless have been such as to have had an influence on the outcome of the litigation. As the Full Court said in Holland (above at 239):

   To succeed in an application under s 79A, the wife must show some circumstance leading to a miscarriage of justice. Agreement to a consent order which may not adequately reflect a party’s entitlements under s 79 does not, of itself, show that there has been a miscarriage of justice.  There may be cases where the order consented to is so far outside the ambit of what is just and equitable that the Court may infer that a party has acted under duress, in ignorance or as a result of incompetent advice.

   (See also In the marriage of Clifton and Stuart (1991) FLC 92-194)

2. For the husband it is submitted that he has an arguable case under s 79A. It is his case that he did not consent to the orders of 29 October 2014. In the terms of the section, I understand his case to be that there has been a miscarriage of justice in the making of those orders by reason of the fact that the orders were made of the basis of his consent whereas he did not in fact, consent.

3. Albeit that they are factually inconsistent, it the husband’s case that either he did not sign the consent orders and that his signature was forged or that if he did sign the document, that he was incapable of giving his consent to the orders because he was then suffering from a mental illness.

4. In relation to the first limb of his case, it is the husband’s evidence that the parties’ Application for Divorce and their Application for Consent Orders were both filed on 28 August 2014. He recalls signing the Application for Divorce but not the Application for Consent Orders. He deposed that in the s 79A proceedings he intended to instruct a single expert to analyse the signatures on the Application but had not done so as at the date of his affidavit (9 May 2016) because of the cost. In my view the husband’s application on this limb has no reasonable prospect of success. It is his evidence that he does not recall signing the document. He points to no evidence that, if accepted and tested, could establish that the wife forged his signature. Importantly and fatally, there is the evidence he relies on for the second limb of his argument. How could he be confident or ask the Court to accept, that he did not sign the application, let alone that the wife forged his signature, if he does not recall whether he signed the document and if at all relevant times he was suffering from a mental illness?

5. In aid of the second limb of his argument, the husband will call Dr I to give evidence. Dr I is a consultant psychiatrist who has treated the husband since 2013. The evidence of Dr I will be relied on by the husband in the proceedings under s 79A. In a report dated 20 June 2016[1] Dr I said that the husband was referred to him by his GP because of a severe anxiety stress disorder due to work related issues with insomnia. The history provided by the husband included a nine year career with company leading to the husband being the State Manager for New South Wales and the ACT. Denigration by a new National Manager who was appointed in 2012, about the husband’s work and his accent was unrelenting and together with onerous work responsibilities, Dr I considers that lead to anxiety, depressive conditions with insomnia, impaired appetite, poor concentration and on two occasions, suicidal thinking. The firm refused to allow the husband to travel to Country G in 2013 to visit his ill father. The husband ceased work in September 2013.

   [1] Exhibit 1

6. Dr I reported that the husband presented with symptoms of a major depressive illness. He recorded that there had been no earlier psychiatric illness and no consumption of alcohol or history of the use of illicit substances.

7. Importantly for present purposes, Dr I considered and considers that the husband would not have been able to independently manage his financial affairs in 2014. Later in the same report, that opinion was qualified by the addition of the words: “without the benefit of a legal adviser”. Dr I also opined that during 2014 the husband “… would not have been able to consider complex legal arguments regarding his financial affairs nor would he have been able to make a considered judgement about [the financial orders made 29 October 2014], due to the fact that he was suffering from a major depressive illness, …”.

8. It was submitted on behalf of the wife that the evidence suggests that the husband’s mental health was not compromised at the relevant times. As I understand her case, it is the wife’s contention that the husband is a malingerer and has falsely presented as if he had compromised mental health for these purposes and for the purpose of claims against his employer. She relies in part on the inconsistencies between in the husband’s conduct at the time of the orders and his case about mental illness. She refers to his SMS message of 30 October 2014. It is the husband’s contention that he was responding to her message about consent orders being made, in the belief that the message related to the parties’ divorce. His responding message was “Congratulation for u. Let me know when u ready to go to the bank.” It is submitted on behalf of the wife that the message is inconsistent with the husband’s contention and that he was clearly responding to something that bore on the financial arrangements between the parties and not about their divorce. Another example offered by the wife of the husband acting at the time in a way that was inconsistent with his case now, is the evidence about the Local Court claim for Strata levies. The question posed on behalf of the wife is: why would the husband have referred that claim to her if he did not believe that the Suburb F apartment was then her sole responsibility?  If it was the husband’s belief at the relevant time, that he continued to hold an interest in that property, would he not have accepted that he too had an obligation in relation to the debt?

9. In my view the husband’s case about his mental health and about his mental capacity during 2014, cannot be rejected out of hand. In the event that the opinion evidence of Dr I and of another expert, Dr J is accepted then there may be another explanation for the husband’s behaviour on 30 October 2014 and for him forwarding the Local Court claim to the wife. That explanation might mean that those actions were not corroborative of the wife’s contentions in these proceedings.  

10. It cannot be said that the husband’s case under s 79A on this argument, is doomed to fail. Of course, when the relevant evidence is tested and all of the circumstances are examined at trial, the husband’s claim might fail. However, that is not the relevant test today.

11. As to the husband’s bona fides, the wife contends that the husband can be controlling, threatening and abusive. She gives evidence about particular threats. It is impossible to exclude the chance that the husband is not sincere in his application. By the same token no finding could be made adverse to the husband in respect of the sincerity of his claim.

12. By way of the husband’s claim of forgery, it is presumably argued that his lack of financial means was caused by the wife's conduct. As is referred to above, in my view he has not identified evidence for that claim and it is inconsistent with the rest of his case.

13. Given the husband’s financial circumstances, the need to isolate the $20,000 sought by the wife as security for her costs, may well be oppressive and stifle the litigation.

14. The litigation does not involve any issues of public importance.

15. There are no costs orders in favour of the wife that remain unpaid.

16. I understand that the husband ordinarily resides in Australia. He came from Country G and he has an interest in property there.

17. There was a delay in the husband bringing his s 79A application but the delay must be seen in the context of his case about his mental state. On his case, he did not know of or appreciate the import of the property settlement orders. If there is substance in that case, it was understandable that he did not commence the proceedings until his rights in relation to the Suburb F apartment were directly challenged.

18. I have referred to the fact that the main asset of the husband is an interest in a property in Country G which, according to the husband, is the subject of a part completed contract to purchase. It would be difficult to enforce a costs order against that interest. Substantial costs could be incurred by the wife in a successful defence of the husband’s application.

Conclusion

1. Taken together those considerations do not justify a departure from the general position. Some matters, such as the husband’s lack of resources and the inconsistency of the arguments in his s 79A case, lend support to the wife’s application but on balance there should be no order. The wife’s application will be dismissed.

I certify that the preceding forty eight (48) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Loughnan delivered on 19 July 2016.

Associate: 

Date:  19 July 2016