FAZARRI & HSIAO
[2018] FamCA 1159
•31 JANUARY 2018
FAMILY COURT OF AUSTRALIA
| FAZARRI & HSIAO | [2018] FamCA 1159 |
| FAMILY LAW – PROPERTY – Litigation funding – Contentious issues about duration of relationship, how the entitlement of the wife is to be calculated, and whether spousal maintenance considerations should affect litigation funding. Orders made for some funding but not what wife seeks as trial expenditure not necessary. FAMILY LAW – SPOUSAL MAINTENANCE – matter adjourned as wife had not complied with discovery orders. |
| Family Law Act 1975 (Cth) |
| Stanford & Stanford (2011) FLC 93-483 Strahan & Strahan (interim property orders) (2011) FLC 93-466 Zschokke & Zschokke (1996) FLC) 92-693 |
| APPLICANT: | MR FAZARRI |
| RESPONDENT: | MS HSIAO |
| FILE NUMBER: | MLC | 11418 | of | 2016 |
| DATE DELIVERED: | 31 JANUARY 2018 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | CRONIN J |
| HEARING DATE: | 22 JANUARY 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | MR NORTH SC |
| SOLICITOR FOR THE APPLICANT: | TAUSSIG CHERRIE FILDES |
| COUNSEL FOR THE RESPONDENT: | MR WILSON |
| SOLICITOR FOR THE RESPONDENT: | BSA LEGAL |
Orders
That by 28 February 2018, the husband pay to the solicitors for the wife the sum of $80,000 by way of litigation funding to be held by them for and on behalf of the wife to meet her costs of these proceedings as and when they fall due.
That paragraph 6 of the interim orders sought by the amended response filed 7 September 2017 is otherwise 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 Fazarri & Hsiao 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 11418 of 2016
| MR FAZARRI |
Applicant
And
| MS HSIAO |
Respondent
REASONS FOR JUDGMENT
By her response filed in the Federal Circuit Court on 7 September 2017 and before the matter was transferred to this Court, Ms Hsiao (“the wife”) sought orders that Mr Fazarri (“the husband”) pay interim spousal maintenance of $3266 per week along with the sum of $200,000 to be applied towards her legal costs and disbursements of this proceeding.
The substantive proceedings relate to property division and spousal maintenance which were commenced by the husband on 22 November 2016.
The December 2017 order
Having been transferred to this Court, it was listed before me on 11 December 2017 in the Judicial Duty List. On that occasion I made orders listing it for a specific hearing on 22 January 2018. In addition, I made the following order:
That by 4.00pm on 22 December 2017, the wife provide to the husband a copy of the electronic messages in her possession, power or control.
That order was made upon the oral application of senior counsel for the husband who asserted that these messages over a period of four years were relevant to the proceedings and that although the husband had been a participant in the electronic communications, they had all been deleted from his apparatus by the wife.
On 11 December 2017, the wife was represented by counsel who did not oppose the making of the order.
The stay application
When the hearing began on 22 January 2018, senior counsel for the husband alleged that compliance had not been fulfilled with that order and he tendered a letter from the solicitor acting for the wife sent only days prior to the hearing indicating that some of the messages were enclosed. He sought that the proceedings be stayed.
Counsel for the wife informed the court that his client had “swopped phones” about three months ago and the new phone created a problem of “software incompatibility”. It is significant that there was no evidence of such a problem nor was it mentioned in the letter to which I have just referred.
Counsel for the wife valiantly argued that even if the wife had not complied with the court order, there was no indication as to the relevance of the documents and by inference, their importance to the husband’s case. Senior counsel for the husband submitted that the court ought not permit the wife to proceed with her application (and he accordingly sought a stay of that application) because she was in breach of the order.
The spousal maintenance proceedings are hotly contested. It is unnecessary for me to set out why that is so but they have been extant for the best part of a year as this case has wandered through the court system. The relevance of the documents was sufficiently important in December for them to be raised at that time and for the wife not to have taken exception to (or oppose) the order being made at that time. The lateness of the partial compliance does not assist the wife and the lack of indication as to why she was having a problem complying was not mentioned in the letter from her solicitor. In my view, the court ought accept the submission of senior counsel for the husband that there is some relevance in these documents in circumstances where a long period of time has expired since the application was filed, the wife’s ability, activity and capacity for employment is very much in issue and she had written in 2016 that she had possession of all of those text messages.
To force the husband to proceed in the absence of those documents even in circumstances where the wife could be cross-examined about those matters, would not create a fair opportunity for him to test the evidence properly. It is of some significance also that these proceedings have been before the court on a number of occasions and although the wife’s responding document suggests that there is some urgency about the matter, for reasons that follow, the prejudice to her is modest. For those reasons, I made an order at the time staying her application until such time as she produced the necessary documentation as she was so ordered. If that occurs, she can have the opportunity to approach the case management judge to have that particular part of her application relisted.
The litigation funding issue
Senior counsel for the husband sought that the litigation funding application by the wife be also adjourned for the same reason but as I indicated at the time, it is a different application entirely. Albeit that the wife had not complied with the court order, it may be that litigation funding will affect so many other issues including the pursuit of the necessary documents which she now submits are missing as a result of technological problems. Mr North of Senior Counsel for the husband could not point to any prejudice to his client but rather that the court ought enforce its orders in circumstances where someone was in breach. In my view, there is no prejudice to the husband here in the litigation funding application proceeding.
The wife’s application was for a payment of $200,000. Notwithstanding these proceedings have been extant for over 12 months, there are ongoing disputes about discovery and the accuracy of the husband’s financial position. Importantly, the wife has already spent in excess of $200,000 in legal fees. That sum was said to have come from money that she now claims belonged to relatives in circumstances under which she was holding the money on trust.
Background
The substantive proceedings arise out of a relationship which is controversial. The parties were married for one month. Prior to their marriage, the wife asserts that they were living in a de facto relationship for between three and four years. The extent of that relationship remains controversial and the husband does not accept its duration. He does not dispute that for periods of time, the wife travelled with him overseas whilst he pursued his business activities. From her perspective, the wife alleges that she was fulfilling a role supporting his activities. In addition, her evidence is that she fulfilled a non-financial role within the relationship. It is also apparently common ground that the husband had the relevant assets that he currently has when the relationship began.
The substantive relief
In the amended response filed by the wife, her substantive relief seeks 50 per cent of the husband’s assets. When pressed, counsel for the wife indicated that while she might seek that, he accepted that it was unlikely she would get that sort of order. Even on the husband’s financial material, he has assets in the vicinity of $9 million and as such, the wife purports to seek over $4 million. Included in that is the home that was the parties’ residence for a short period of time.
The home was originally purchased as tenants in common as to one tenth by the wife and nine tenths by the husband but it seems common ground that the money was provided by the husband. Subsequently, after the husband had a heart attack and was in hospital, the wife sought the transfer of the home into joint names as joint tenants out of fear that she and her family may not be protected; the husband complied with her wish. That does not mean that an argument cannot be advanced in relation to contributions but it may be relevant to the issue of the High Court’s approach in Stanford & Stanford (2011) FLC 93-483.
The immediate difficulty however is not knowing exactly what the wife’s entitlement is for the purposes of any preliminary order.
Counsel for the wife submitted that the relevant authority to guide the court was Strahan & Strahan (interim property orders) (2011) FLC 93-466 and that was not disputed by senior counsel for the husband.
The husband’s position is that it is by no means “fanciful” that a $200,000 payment now to the wife could “exceed her property entitlement”. That submission was made on the basis that if such a payment was made and she was not successful in exceeding that sum, the prospect of paying the sum back to the husband would be negligible.
Senior counsel for the husband went on to submit that if the wife obtained a settlement “at all” it would only be after the Stanford point was considered and contemplation of any entitlement thereafter may not necessarily be a determination made on a percentage basis. It was submitted that the court needed to be cautious here because different judges may take a different approach to any such entitlement.
The latter submission arose out of the wife’s case put by her counsel that it was “unthinkable” that she would not get more than $200,000 even if it was not a 50 per cent case.
Counsel for the wife pointed to the evidence showing the wife’s “sacrifice” made in favour of the husband (paragraph 40 of her affidavit filed January 2018) but against that, she had the benefit of travel and being with the husband in circumstances where she was not in paid employment in any event.
In her affidavit filed in 2017, she set out the various non-financial tasks that she fulfilled. If that was the limit of the evidence, and I make no such finding nor can I speculate on what evidence she will produce, it is hard to see an entitlement anywhere near 50 per cent of the extant assets being given to her in circumstances of those to which I have already referred.
Counsel for the wife repeated that it was “unthinkable” that she would not get more than $200,000 and consequently there was not a significant risk of her having to disgorge money. He submitted that this was not a case where the “clawback” argument should apply. That was because the husband’s financial position is overwhelmingly greater. The husband’s income position is significant and his expenses leave him money over each week after setting aside $2000 per week towards his lawyers.
In Strahan & Strahan (interim property orders) (supra) at [95 – 96], the Full Court observed that the uncertainty of the amount of an applicant’s eventual property settlement might be fatal in an application under s 80(1)(h) of the Family Law Act 1975 (Cth) (“the Act”) but it was not necessarily so to an application under s 117(2) of the Act because it was just one of the matters to be balanced in the exercise of the discretion. That quote was taken by the Full Court from a previous Full Court decision in Zschokke & Zschokke (1996) FLC) 92-693. Section 117 is the cost power in a court where the fundamental principle is that each party shall bear their own costs unless there are circumstances that justify a departure from that principle. It is submitted by the wife that the “level playing field” concept does justify a departure from the principle. The difficulty I have with that however lies in the fact that I am unsure just what the wife’s case is such as to be comfortable about the parameters of the dispute between the parties. I also consider there is a need to be cautious about the court endorsing an approach of parties spending significant sums of legal expenses in that vague environment.
In this case, there is no evidence from the wife’s present solicitors to indicate what they anticipate costs will be incurred over the ensuing months. The wife’s failure to comply with the December 2017 order and the necessity to grant the stay of the wife’s spousal maintenance application as I have indicated, are all matters that militate against making an order for $200,000 without knowing upon what it will be spent. Counsel conceded that over $200,000 had already been spent but, in fairness, since the application was filed, a number of different lawyers have been involved for the wife.
When I pressed counsel for the wife as to a better estimate of what his client’s entitlement was, he was reticent to give such an indication absent a clear instruction. Obtaining instructions is clearly difficult in circumstances where the lawyers have not done their due diligence. Here, there is a dispute even about whether assets owned by a trust are property of the parties. Here also, the husband says that the wife is not entitled to anything.
On the other hand, it is important that in addition to the property application, the wife also has an application for indefinite spousal maintenance before the court. Albeit that the marriage was a relatively short one, the court is entitled to take into account the nature and form of the relationship which goes beyond the period that the parties were together as a married couple. There is a contentious issue here also about the wife’s capacity to work as a result of pain management arising from a boat injury in 2010 which presumably precedes the parties’ relationship. That said, the husband would have known of the pain and the injury during the period of time that he was associated with the wife in the relationship.
Notwithstanding the amount of money that has been spent, I am satisfied that there is not presently a level playing field because of the significant financial disparity and that the wife ought to be given the opportunity to investigate matters with the assistance of lawyers. As counsel for the wife submitted, whilst the absence of lawyers is a difficulty for many clients, and many would then have to represent themselves, he submitted that the complexities here would prejudice the wife if she was obliged to be in that position. I consider he is correct here.
I am satisfied in the circumstances that the justifying circumstance to depart from the principle that each party pays their own costs here and therefore it is proper to use the s 117 power, lies in the fact that the wife should have the opportunity to investigate these matters with the assistance of professionals and the husband has the capacity to fund that order.
The main difficulty however lies in the quantum of such an order. In my view, it would be unreasonable to simply give the wife $200,000. That suggested sum comes from an affidavit prepared by her previous lawyers who said that the preparation for trial would be in the area of $100,000, there were costs already incurred and there was an estimated $50,000 for a mediation. In my view, none of that can be seen to be current evidence absent some specific affidavit from the solicitors for the wife setting out just how they propose to address what is currently an unclear parameter of this dispute.
I am also troubled about that the fact that there is still the spousal maintenance of an interim nature to be sorted out. It is trite to say that in December, I offered the parties a final hearing and the wife rejected that concept notwithstanding the husband was interested. The delays in this court would mean that the wife would have to seek a trial listing later in 2018 but with an outstanding interim issue, she cannot do so until that interim spousal maintenance issue is resolved. Accordingly, I have taken the view that the appropriate course of action is to provide limited funding to enable her to investigate the discovery aspects that she says are currently lacking, to deal with the outstanding spousal maintenance issue properly and to contemplate more significantly, the parameters of the dispute including (if necessary) a mediation. Whilst I have no evidence as to what any of those items would cost, I can immediately exclude $100,000 of the $200,000 because this case is not likely to be prepared for trial for months to come. Mr Wilson of counsel for the wife indicated that to take a staggered approach as contemplated would mean that the wife would have to come back for more funding if any order made was exhausted. Attractive as that submission is, this case needs to be managed and controlled and if it is necessary, the wife can make such an application and endeavour to justify not only what she needs but what she has spent the money upon.
There was also discussion about the possibility of a “dollar for dollar” type order but I accept that there are inherent problems in that concept including parties working out novel ways to avoid the obligation. I do not consider it would be just in the circumstances to make such an order here because it may very well defeat the purpose of the “level playing field” concept which is the foundation for the wife’s current application.
There is no evidence before me as to what the expected costs would be from her present solicitor and I can only rely upon an estimate of her previous solicitor to get some sense of what lies ahead. In that respect however, I at least had the benefit of a costs agreement knowing what the wife was being charged by that firm. I do not have that benefit here. In the circumstances, I shall work on the basis that the wife needs to conclude her spousal maintenance claim, consider the discovery issue comprehensively and make an assessment as to the parameters of the dispute. I reject the suggestion that looking at an entitlement in the future by consideration of a percentage is appropriate here when the nature, form and extent of the husband’s assets are said to be unclear from the wife’s perspective.
In my view, $80,000 ought be ample to fulfil the tasks just mentioned using the schedule to the Family Law Rules 2004 as a guide bearing in mind also that no cost agreement was tendered to indicate that the lawyers are charging the wife an amount inconsistent with that scale.
The husband has access to that sort of money as is evident from his banking statement which was tendered in evidence. In my view, that sort of a payment should give the wife every opportunity to prepare all but a final trial bearing in mind what appears on the face of the documents before me, a modest case. In my view, such an order is just in the circumstances.
I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 31 January 2018.
Associate:
Date: 31 January 2018