Fernie and Mercer

[2014] FCCA 1502

FEDERAL CIRCUIT COURT OF AUSTRALIA

FERNIE & MERCER [2014] FCCA 1502

Catchwords:
FAMILY LAW – Property – costs – application for interim orders – application for interim property order to defray legal costs – where costs already incurred – costs of Independent Children’s Lawyer.

Legislation:

Family Law Act 1975 (Cth), ss.62G, 68L, 79, 80

Cases cited:
Re K (1994) 17 Fam LR 537; FLC 92-461
Strahan & Strahan [2009] FamCAFC 166; (2009) 241 FLR 1; (2011) FLC 93-466

Applicant: MS FERNIE

Respondent: MR MERCER

File Number: SYC 7344 of 2012

Judgment of: Judge Scarlett

Hearing date: 8 July 2014

Date of Last Submission: 8 July 2014

Delivered at: Sydney

Delivered on:  17 July 2014

REPRESENTATION

The Applicant: In person

Counsel for the Respondent: Ms McIntosh

Solicitors for the Respondent: JNT Legal

ORDERS

1. The Applicant and the Respondent must forthwith do all such things and sign all necessary documents and give all authorisations to cause the sum of $25,000.00 to be released to the Respondent from the controlled moneys account that is being held by [M] Lawyers on behalf of the parties and which holds the net proceeds of sale of the parties’ former home at Property L in the State of New South Wales such sum to be paid by a bank cheque to the Respondent’s solicitors JNT Legal.

2. The Applicant and the Respondent must forthwith do all such things and sign all necessary documents and give all such authorisations to cause the sum of $1,650.00 to be released to the Respondent from the said controlled moneys account that is being held by [M] Lawyers on behalf of the parties such sum to be paid by a bank cheque payable to the Legal Aid Fund and forwarded to the Respondent’s solicitors.

3. The Respondent’s solicitors must forward the bank cheque for $1,650.00 payable to the Legal Aid Fund referred to in the immediately preceding Order to Legal Aid New South Wales at 323 Castlereagh Street, Sydney forthwith upon receiving the said bank cheque.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYC 7344 of 2012

MS FERNIE

Applicant

And

MR MERCER

Respondent

REASONS FOR JUDGMENT

Application

1. This is an Application by the Respondent for interim orders providing that a total sum of $26,500.00 may be paid out of joint funds held in a controlled moneys account by a firm of solicitors to be applied towards the following purposes:

   a)as to the sum of $25,000.00, to his solicitors to go toward his legal fees; and

   b)as to the balance of $1,650.00 to be paid to Legal Aid New South Wales as his initial contribution towards the costs of the Independent Children’s Lawyer in respect of the parenting proceedings between the parties.

2. The Applicant opposes this Application.  

Background

1. The parties have been engaged in litigation since December 2012.

2. The parties commenced living together in January 1997. They separated on 1^st July 2011. They have three children, two daughters and a son. The children live with their mother and spend time with their father.

3. The children were born on [omitted] 2002, [omitted] 2004 and [omitted] 2006.

4. The Applicant and the Respondent had been the owners of a property at Property L, New South Wales. They sold that property on 1^st May 2012. The net proceeds of sale, which now stand at approximately $419,843.00, are being held in a controlled moneys account by the Applicant’s former solicitors, [M] Lawyers.

Litigation History

1. The Applicant commenced proceedings by filing an application for property orders in the Family Court on 6^th December 2012. The Application was returnable on 22^nd January 2013.

2. The Respondent filed a Response on 14^th February 2013, seeking only property orders.

3. A Registrar transferred the proceedings from the Family Court to this Court on 21^st May 2013. The proceedings were first mentioned before this Court on 17^th June.

4. The Respondent filed an Amended Response on 21^st August 2013, in which he sought parenting orders as well as property orders.

5. On 2^nd September 2013 the parties were directed to attend a Child Dispute Conference with a Family Consultant. They attended the conference on 26^th November 2013.

6. The Applicant filed a Reply on 30^th September 2013, in which she, too, sought parenting orders as well as property orders. On 8^th October 2013 she filed an Application in a Case, seeking interim parenting orders.

7. The Respondent filed a Response to the Application in a Case, in which he not only sought parenting orders but an order:

   that the Applicant Mother do all acts and execute such documents to pay the Respondent Father the amount of $25,000.00 from the controlled monies account held by [M] Lawyers being the Mother’s former solicitors.

8. On 3^rd December 2013 an order was made that the interests of the children should be separately represented by a lawyer under the provisions of s.68L of the Family Law Act 1975 (Cth). The parties were also directed to attend a Child Inclusive Conference with a Family Consultant. That conference took place on 17^th March. The three children all attended, with their parents.

9. The Respondent filed an Application in a Case on 14^th February 2014, seeking the Orders referred to in paragraph [1] above. The Applicant filed a Reply on 24^th April, opposing the orders sought in the Application.  

10. On 28^th April 2014 an order was made for the preparation of a Family Report under the provisions of s.62G of the Family Law Act.

11. The Respondent filed an Amended Application in a Case on 2^nd May 2014, in which he sought not only the Orders referred to above but a number of parenting orders. However, at the hearing on 8^th July the Respondent sought to argue only the orders relating to the release of funds.

Evidence and Submissions

1. The Respondent relied on his affidavits of 25^th November 2013 and 13^th February 2014.

2. The Applicant relied on her Reply, which contained an Annexure A, which consists of 6 paragraphs in the form of a submission, setting out why the Applicant opposes the orders sought.

3. The Respondent’s affidavit of 13^th February 2014 essentially sets out why he seeks the release of the amounts totalling $26,500.00.

4. The Respondent annexes to his affidavit a copy of a letter dated 19^th December 2013 from Legal Aid New South Wales to his solicitors in which the writer, Ms Maureen Power, advised that she had been appointed as Independent Children’s Lawyer for the children. The letter refers to the representation of only the two older children, and it appears that the name of the youngest child was inadvertently omitted from the Order made on 3^rd December 2013. This will be remedied by an order under the “slip” rule.  The letter sets out the basis upon which Legal Aid NSW will undertake the representation of the children:

   Please advise your client that this is a matter in which Legal Aid NSW will be seeking reimbursement for the entire cost associated with providing the representation of the children. In the first instance we will be seeking that the costs be reimbursed as to one half from each of the parties. This, of course, can be subject to a disciplinary costs order as between the parties or otherwise within the context of the proceedings. In the event that I seek a Single Expert Report, the entire costs of the consultation, report and any attendance at court must be paid for by the parties.

   Accordingly, you are requested to forward no later than 14 days from today your client’s cheque in the sum of $1,650 inclusive of 10% GST, payable to the Legal Aid Fund. This sum represents one half of the basic composite amount and will cover the costs up to and including preparation of the matter for final hearing h. This amount will not cover the costs associated with interim hearings, applications for reports or disbursements such as transcript or barrister’s fees.[1]

   [1] Affidavit of Mr Mercer 13.2.2014 Annexure “A”

5. The Respondent also annexes to his affidavit:

   a)a copy of his solicitors’ letter to the Applicant of 29^th January 2014 seeking her consent to the release of $25,000.00 to cover the Respondent’s outstanding legal fees, and the amount of $1,650.00 as the Respondent’s initial contribution to the costs of the Independent Children’s Lawyer; and

   b)a copy of the Applicant’s letters of 24^th January and 4^th February 2014.

6. The solicitors stated in their letter to the Applicant:

   We note that whilst you are self-represented at present, you previously had legal representation and you paid your solicitors fees from your redundancy monies you withdrew and or from the re-draw from the joint home loan. These payments by you along with any payments to our client, will be add-backs to be considered and adjustments made in the final property settlement.[2]

   [2] Ibid Annexure A

7. The solicitors’ letter went on to make these points:

   1. You paid your solicitors fees from assets which form part of the joint relationship asset pool;

   2. Our client presently does not have the economic means to pay the outstanding accounts detailed above; and

   3. Any payment to our client will not prejudice a final property settlement with you…[3]

   [3] Affidavit of Mr Mercer 13.2.2014 Annexure “B”

8. In her letter of 4^th February 2014, the Applicant gives her reasons for her refusal to consent:

   …I do not consent to the release of funds as these funds are to be preserved for the future medical, educational and other needs of the children and as they are still young these needs will be many and ongoing for some 10 or more years.

   The debt your client has accrued and owes you is a matter to be settled between yourselves. Also, it should be noted, it was your client who insisted on the two eldest children being appointed an ICL and was made aware of the costs involved on the day.[4]

   [4] Ibid Annexure “D”

9. It is the Respondent’s evidence that he does not have the funds to meet his solicitors’ outstanding legal costs or the amount of $1,650.00 required by the Independent Children’s Lawyer.

10. In her Reply, the Applicant asserts that releasing money to the Respondent would only permit him to prolong the litigation against her. She states:

    I hold a genuine concern that releasing funds now would not be conducive to any settlement of this matter. The respondent has had ample opportunity to settle this matter but he has refused to.[5]

    [5] Reply, Annexure A at 2.

11. In her Case outline, the Respondent’s counsel, Ms McIntosh, sets out a summary of the Applicant’s reasons for her refusal, a summary with which the Applicant did not disagree:

    a) an anxiety that his legal fees are paying for a campaign or vendetta against her,

    b) that the Husband has not settled and any release of funds is not conducive to settlement,

    c)  withdrawal of funds by the Husband unaccounted for,

    d) an intention by the Husband to reduce his income and reduce child support,

    e)  the funds are for the children’s future needs,

    f)  that the Husband’s legal costs are ‘no concern of mine’.[6]

    [6] Respondent’s Case Summary part 6

The Law to be Applied

1. In the decision of the Full Court of the Family Court in Strahan & Strahan (Interim Property Orders)[7], which dealt with an application for an interim property order to put the wife in funds to enable her to meet her legal costs of continuing the litigation in which she and her husband were involved, it was held that the principles which apply are that:

   132 …(W)hen considering whether to exercise the power under s. 79 and s. 80(1)(h) of the Act to make an interim property order the “overarching consideration” is the interests of justice. It is not necessary to establishing compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power.

   133 … Another example is where, as in this case, one party requires funds to assist in defraying the costs of litigation without which funds an injustice may be caused.[8]

   [7] [2009] FamCAFC 166; (2009) 241 FLR 1; (2011) FLC 93-466

   [8] Ibid at [132]-[133] per Boland and O’Ryan JJ

2. It is relevant to consider whether an order would give the applicant[9] “more than they would be indubitably entitled to on a final hearing” or alternatively “would it give them so much that it could not be adjusted on a final hearing?”[10]. Their Honours went on to say in that same paragraph:

   We accept the submission and observe that this matter is relevant because the discretion conferred by the power in s 79 is to make such order as the Court considers appropriate provided it is just and equitable to make the order in circumstances where the power will not be exhausted by the interim order…(T)he interim order must be capable of variation or reversal without resort to s.79A of the Act or appeal.[11]

   [9] i.e. the Respondent in this matter

   [10] [2009] FamCAFC 166 at [136] per Boland and O’Ryan JJ

   [11] Ibid at [136]

3. Once the Court proceeds to exercise the power in s.79 of the Act, it is required to undertake consideration of the matters in s.79(4) including by reference to s.79(4)(e) the matters in s.75(2) so far as they are relevant. Consideration of such matters may be brief.

4. Further, it was held that an applicant should have at least an arguable case for substantive relief which deserves to be heard. There may be need for evidence of the applicant’s likely costs of litigation, but it is not an essential precondition that the applicant’s legal representatives will not continue to act unless the costs are paid or secured on an ongoing basis.

5. It was also held by Boland and O’Ryan JJ at [146] that if there is any concern about the way in which the litigation is conducted, that can properly be addressed through procedural directions. The proper way is not to limit the available funds of one of the parties and leave the party in control of the funds to spend such funds at their entire discretion.

Conclusions

1. In this case, the Respondent is not seeking any funds to meet ongoing legal costs but an amount to meet costs that he has already incurred. He is also seeking an amount of $1,650.00 to meet the payment required of him by the Independent Children’s Lawyer.

2. It is not in issue that the amount currently being held by [M] Lawyers in a controlled moneys account stood at $419,843.00 as at 31 May 2014. Accepting that fact, it is hard to understand the Applicant’s claim that this entire amount should be preserved as a fund to meet the children’s future medical, educational and other needs over the next ten years. There is no application before the Court for a departure from the administrative assessment of child support to have this amount set aside for that purpose.

3. The amount held in the controlled moneys account forms part of the assets that will be dealt with when the application for property orders is finalised. The Applicant herself, in the Reply which she filed on 30 September 2013, seeks a final order saying:

   1. that the Applicant and the Respondent do all things and execute such documents in order that the total of the proceeds of the sale of the property Property L in NSW together with the cumulative superannuation interests held by both parties, as set out in Attachment A, be distributed to the parties:

   70% to the Wife and

   30% to the Husband.

4. The Applicant gives the following values of the parties’ superannuation:

   a)Applicant’s [H] Superannuation                  $127,537.00

   b)Respondent’s [F] Superannuation            $176,650.00.

5. The Applicant states that there are no liabilities, so the total of the net assets amounts to $709,904.00. However, that calculation is based on the amount of the proceeds of sale being $405,717.00. The amount stands at present at $19,843.00, so, without any increase in the value of the parties’ superannuation, the net asset pool would appear to be at least $724,030.00.  

6. If the Court were to make the order sought by the Applicant, the Respondent would receive 30% of the asset pool, which amounts to $217,209.00. Assuming that the Respondent retains his superannuation intact, as would appear to be likely, he could expect to receive an amount of at least $40,559.00 from the proceeds of sale.

7. Thus, on the Applicant’s own case, the Respondent could expect to receive more from the settlement than the amount which he seeks.

8. This, then , leaves the Applicant’s argument that the Respondent should not receive an early distribution because it would not persuade him to settle either the parenting or the property matter. The Applicant may wish to “starve the Respondent into submission”, but this is not a ground to refuse the Respondent’s application.

9. I am also of the view that the sum of $1,650.00 to be paid to the Independent Children’s Lawyer is a proper use of the funds held in the controlled moneys account. The parenting matters are, in my view, more likely to settle with the assistance of an experienced Independent Children’s Lawyer than if the parties proceed to litigate the children’s matters as self-represented litigants. It was the Court who ordered that the children’s interests should be independently represented under s.68L, with a view to placing the children’s best interests as the paramount consideration. The Independent Children’s Lawyer was not appointed at the behest of the Respondent as a means of carrying out a campaign or vendetta against the Applicant.

10. In my view, the payment of the Respondent’s liability of $1,650.00 towards the costs of the Independent Children’s Lawyer represents money well spent. There is a long line of authority as to the assistance that can be provided by an Independent Children’s Lawyer, going back to Re K.[12]

    [12] (1994) 17 Fam LR 537; FLC 92-461

11. It should be made clear that the amount of $26,500.00 sought by the Respondent towards his legal costs will not “come off the top” of the joint asset pool. It will be regarded by the Court as a distribution to the Respondent that will have to be added back into the calculations when the final property orders are made.

12. I have considered the matters in s.90SM. I have also considered the requirements of s.90SM and I am satisfied that the proposed orders are just and equitable in all the circumstances. I intend to make the orders sought.                    

I certify that the preceding forty-five (45) paragraphs are a true copy of the reasons for judgment of Judge Scarlett

Associate: 

Date: 17 July 2014