Finau and Finau

[2018] FamCA 49

FAMILY COURT OF AUSTRALIA

FINAU & FINAU [2018] FamCA 49

FAMILY LAW – PROPERTY – INTERIM – Where the wife seeks that the parties’ investment property be sold and a portion of the proceeds of sale be paid to her in litigation funding – Where the husband seeks to retain the investment property – Where the wife has no capacity to fund the litigation – Where the husband is in a stronger financial position than the wife – Where the husband controls the vast majority of the parties’ assets and finances – Where the husband has evidenced no capacity to buy out the wife and retain the investment property – Orders made as sought by the wife.    

Family Law Act 1975 (Cth) ss 75, 79, 80, 117

Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578
Poletti & Poletti (Unreported, Family Court of Australia, Nygh J, 2 March 1990)
Strahan & Strahan [2009] FamCAFC 166
Wilson & Wilson (1989) FLC 92-033
Zschokke & Zschokke (1996) FLC 92-693

APPLICANT: Ms Finau

RESPONDENT: Mr Finau

FILE NUMBER: PAC 4871 of 2017

DATE DELIVERED: 6 February 2018

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Hannam J

HEARING DATE: 17 November 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Stapleton

SOLICITOR FOR THE APPLICANT: Armstrong Legal

COUNSEL FOR THE RESPONDENT: Mr Ford

SOLICITOR FOR THE RESPONDENT: Paramonte Legal

Orders

1. That the parties forthwith give requisite notice to the tenants of the properties known as and situate at 1 and 2 B Street, Suburb C NSW … (“the B Street property”) pursuant to the terms of the Residential Lease Agreement.

2. That the parties forthwith do all things necessary to list for sale at the best price reasonably attainable the B Street property and for that purpose the following shall apply, unless otherwise agreed in writing between the parties:

   (a)       That the property be listed for sale by public auction;

   (b)       That the parties do all things necessary to engage D Real Estate (“the agent”) as listing agent for the auction;

   (c)       That the public auction is to be conducted on a date nominated by the Agent;

   (d)       That the auctioneer shall be appointed by the agent;

   (e)       That the marketing campaign is to be guided by the agent;

   (f)       That the parties shall instruct a conveyancing solicitor to act on the conveyance of the property as agreed between them, and failing agreement Ms E, Conveyencer of F Lawyers;

   (g)       The parties will give such instructions as necessary to the conveyancing solicitor to prepare a Contract of Sale and provide it to the agent and/or the auctioneer prior to the auction and no later than the date sought by the agent and/or the auctioneer;

   (h)       The parties shall execute all documents required by the agent and/or the auctioneer;

   (i)        The reserve price for the property shall be such an amount as agreed between the parties or failing agreement, as recommended by the agent and/or the auctioneer no less than seven (7) days prior to the public auction; and

   (j)        The parties shall do all things necessary to cause all payments requested for auction advertising expenses to be paid upon settlement of the property.

3. That in the event that the B Street property is not sold by public auction in accordance with Order (2) then the parties shall do all things necessary to cause the property to be listed for sale by a second public auction no later than eight (8) weeks after the date of the first public auction as provided for in Order (2) and with a reserve price of 5 per cent less than as agreed for the first auction.

4. That in the event the B Street property is not sold by public auction in accordance with Order (2) or Order (3) the parties cause the property to be listed by way of private treaty for a period of eight (8) weeks.

5. That upon the settlement of the sale of the B Street property the proceeds of sale be distributed as follows:

   (a)       To pay all costs associated with the sale of the property including the agent’s commission, conveyancing costs and advertising expenses;

   (b)       To pay out the mortgage secured over the property held with G Bank Account Number ...38;

   (c)       To pay the amount of $80,000 be paid to the wife’s solicitor’s trust account by way of interim costs order;

   (d)       To pay the amount of $5,741 in full satisifaction of the credit card liability currently held as Commonwealth Bank Visa Gold Credit Card Account Number …92 in the wife’s sole name;

   (e)       To pay the invoice of H School dated 25 July 2017 for the amount of $2,534 and the invoice of J School dated 1 September 2017 for the amount of $1,638; and

   (f)       The balance of funds be held in controlled monies account on trust for both parties with Armstrong Legal pending further order with each party to provide all information requested in order for such account to be established.

6. That from the date of these Orders and pending the sale and settlement of the B Street property any surplus rental income received is to be applied to the ongoing home loan repayments associated with the property.

7. That in the event that either party refuses or neglects to execute any documents necessary to give effect to these Orders then the Registrar of the Court be appointed pursuant to Section 106A of the Family Law Act 1975 (Cth) to execute such documents in the name of the defaulting party.

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 Finau & Finau 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 PARRAMATTA

FILE NUMBER: PAC 4871  of 2017

Ms Finau

Applicant

And

Mr Finau

Respondent

REASONS FOR JUDGMENT

Introduction

1. The Applicant Wife, in proceedings with her former husband for a property settlement under s 79 of the Family Law Act 1975 (Cth) (“the Act”), seeks interim property orders that would see her receive $80,000 for the payment of her legal costs. To facilitate that payment she proposes orders that an investment property of the parties be sold, that various liabilities be discharged and that the balance of proceeds of the sale be held in a controlled monies account.

2. The Respondent Husband opposes the order sought by the Applicant.

Background

1. The parties who are both aged 39 married in 2002 and began living together from that date.

2. Throughout the parties’ 12 year marriage they had three children who are now aged 14, 10 and 8.

3. During the course of their marriage the parties acquired two properties which comprise the main assets available for distribution in the property proceedings.

4. The parties first purchased their family home (in which the wife currently resides with the children) in about October 2007. 

5. The equity in the family home was then used by the parties in about November 2015 to obtain a loan to purchase an investment property.  This property was then redeveloped into two premises (a main home and a “granny flat”) both of which were then leased. 

6. Both the family home and the investment property are held in the parties joint names.

7. The husband contends that the parties separated in about January 2014 but both continued to live within the same home.  The wife does not clearly identify when the parties separated but said that they “led very separate lives” from about September 2016. 

8. It appears that the parties physically separated in late March 2017 following an incident which resulted in police seeking an Apprehended Violence Order (“ADVO”) against the husband for the protection of the wife.  Since this time the children have lived with the wife at the former family home and spend time with the husband at his rented home. 

9. The wife alleges a significant history of family violence perpetrated by the husband against her throughout the marriage.  In addition to alleging that the husband physically assaulted her on a number of occasions the wife alleges that the husband engaged in controlling behaviour including assuming complete control of financial matters.  The wife alleges that the husband gained control of all bank accounts including accounts in the parties’ joint names and that she had no access to accounts herself and only received money that the husband gave to her at her request. The allegations of physical violence and controlling behaviour are disputed by the husband.   

10. The wife commenced the proceedings in September 2017.  The final orders sought by her would see the husband transfer his interest in the former family home to her and that he discharge the mortgage secured over that property and refinance the home loan in order to transfer the property unencumbered.  The wife also seeks orders that she receive the entirety of the funds held in the controlled monies account (if the interim orders are made as she seeks) and that she receive 60 per cent of the value of the husband’s superannuation entitlement.  The effect of the orders sought by the wife has not been quantified in terms of a percentage of the assets available for distribution and the only assistance provided by the wife’s counsel at the hearing was that she contends she is entitled to “more than 50 per cent” of the matrimonial property.

11. The husband seeks final orders that would require him to pay to the wife a sum equal to 40 per cent of the total equity held in the family home and the investment property and that the wife transfer to him all her entitlement in both properties.  According to this proposal he would receive 60 per cent of the non-superannuation matrimonial assets.

12. Although there are some disputes between the parties concerning the value of some assets (for example a $50,000 dispute over the value of the investment property and a $9,000 dispute over the value of a share holding) and some minor discrepancies concerning liabilities, there is general agreement that the net value of the matrimonial property pool excluding superannuation is between $880,000 and $920,000.  The parties also have modest superannuation interests to the value just over $75,000 in the case of the husband and just under $10,000 in the case of the wife. 

The Interim Application

1. The wife seeks orders that the parties’ investment property be sold (and various ancillary orders in relation to the sale) and that after payment of costs associated with the sale and payment of the mortgage $80,000 be paid into her solicitor’s trust account by way of an interim costs order.  She seeks orders that the proceeds also be utilised to pay various liabilities such as credit card debt and children’s school fees and that any balance be held in a controlled monies account on trust for both parties and be used for the purpose of any capital gains tax liability arising as a result of the sale.

2. It is the wife’s contention that she has no access to finances to fund her legal representation for the property dispute and does not have any other assets which could be sold to fund the litigation.

3. It is the wife’s position that the husband continues to control the parties’ finances and it can be inferred that he has been able to afford his own legal fees. It is contended on her behalf that it is necessary in the interests of justice to make orders that would permit her to present her case for a property settlement on an even footing with the husband. 

4. Although submissions made on behalf of the wife were directed to s 117 of the Act as the appropriate head of power it is the wife’s case that the interim orders would not compromise the final property settlement as the remaining property would be adequate to meet the claims of both parties at the final hearing.

5. The husband’s case was approached principally on the basis that the wife’s application should be characterised as an interim property settlement and that it would not be in the interest of justice for the court to make an order that 10 per cent of the matrimonial property be utilised in payments to a party’s lawyers.

The Law and Discussion

1. It was observed in Paris King Investments Pty Ltd v Rayhill[1] that there are a number of juridical bases for orders of the type sought.  The Full Court in Zschokke & Zschokke[2] were of the opinion that the decisions in Wilson & Wilson[3] and Poletti & Poletti[4] established that where there are pending proceedings under s 79 of the Act for property settlement, an order for funds for litigation expenses may be made pursuant to s 80(1)(h) or s 117(2).

   [1] [2006] NSWSC 578

   [2] (1996) FLC 92-693

   [3] (1989) FLC 92-033

   [4] (Unreported, Family Court of Australia, Nygh J, 2 March 1990)

2. In Strahan & Strahan[5] at [84] the Full Court said:

   In Paris King Investments Brereton J, with whom on this point we agree, at [30] said that Zschokke “establishes that it is important, when contemplating an order for interim provision for litigation expenses, to identify the relevant source of power because it is the source of power that determines the necessary preconditions and relevant considerations for making the order”.

   [5] [2009] FamCAFC 166

3. Although the Applicant approached the matter only on the basis of s 117(2) it was submitted on behalf of the Respondent that it is in reality an application based upon s 80(1)(h) utilising s 79. In circumstances where one of the proposed orders is for sale of an asset of the parties both provisions will be considered.

A two-step process

1. According to Strahan (supra) where the power is to be exercised pursuant to s 80(1)(h) a two-stage approach is to be taken to the hearing of an application. The Full Court said at [118]:

   … This is recognised by the fact that although the power under s 79 should ordinarily be exercised on a once only basis, “circumstances may arise before there can be a final hearing” where the power is exercised. Thus the first step is to resolve whether to exercise the power before a final hearing and if it is resolved to do so then the second step involves the exercise of that power.

2. So far as the first step is concerned, it is settled in Strahan (supra) that the Applicant is not required to establish that there are compelling circumstances at the time for making an order for interim property settlement.  The test so far as the exercise of the power is concerned is that it be an appropriate case in order to do justice between the parties.

3. It is submitted on behalf of the wife that she requires funds to pay the costs of litigation and it would be unjust if she did not have the capacity to fund legal representation. 

4. An important consideration to bear in mind is that any interim property order not compromise the outcome of the final hearing.  This was observed in Strahan (supra) at [136] when the court said:

   … 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. As Bryant CJ and Coleman J observed in Gabel v Yardley at [69] and [72] the interim order must be capable of variation or reversal without resort to s 79A of the Act or appeal. …

5. The orders sought by the wife would see her receive $80,000.  This represents approximately 10 per cent of the net value of the matrimonial property.  Although the wife does not identify the percentage entitlement she contends for at the final hearing other than to say it would be more than 50 per cent, the husband contends that she is entitled to about 40 per cent of the matrimonial property at the final hearing.  In these circumstances it could not be said that the payment sought by the wife would result in her receiving “more than [she] would be indubitably entitled to on a final hearing”.[6]

   [6]Strahan & Strahan [2009] FamCAFC 166

6. Although the Applicant did not approach the application on the basis that it would involve an exercise of power under s 80(1)(h) and s 79 the arguments put forth with respect to s 117 are equally applicable to the application on this basis.

7. In particular it is submitted on behalf of the wife that her current income is insufficient to cover both the necessary expenses for herself and the children and that she has very limited other assets which in any event are not easily or conveniently liquidated such as her car, a small shareholding and around $10,000 in superannuation.  It is also not disputed that although the investment property is leased the wife receives none of the income from the rent.  In summary the wife has no funds available to her in order to fund her property application. 

8. Notwithstanding the husband’s wish to retain the investment property in the property proceedings that property is available to meet the wife’s claim.  The wife submits that an injustice would arise if this property were to remain in the pool until the final hearing when it could be accessed to give her an equal opportunity to present her case.

9. In opposing the exercise of the power it is submitted on the husband’s behalf that it would be an extraordinary proposition to order the sale of one of the principal assets owned by the parties and which amounts to 10 per cent of the total property pool in order to fund one party’s legal costs.  The husband submits that the present case is not a complex property case and that if the wife is unable to fund the litigation then the matter should be capable of settlement.

10. There is no dispute that the amount sought by the wife will not exhaust the assets of the parties.  There also appears to be no doubt that the husband has been able to meet his own litigation costs to date and it may be inferred that he can do so in the future.

11. So far as the legal costs are concerned, the wife relies upon a costs agreement entered into with her lawyers.

12. Although it is argued on behalf of the husband that there are inconsistencies between the affidavit of the wife and her lawyer as to the conditions in that costs agreement,  it is not suggested that the wife’s application lacks bona fides in the sense of being used as a means to obtain funds for some other purpose.

13. Having regard to legal costs which will be inevitably incurred by both parties in resolution of the dispute, the lack of funds available to the wife, the husband’s ability to pay his legal costs, and that the amount sought by the wife will not exhaust the property pool available to the parties, in my view it is appropriate for the power to be exercised in order that a just and equitable result may be achieved before the final hearing in the matter.

The second step

1. Having determined that the jurisdiction under s 79 should be exercised, I am required to undertake a consideration of the matters in s 79(4), including the s 75(2) matters. However, in Strahan (supra) the Full Court, quoting Zschokke & Zschokke (supra), observed at [137] that:

   … consideration of such matters may be brief and if it is established that “it seems likely to the Court that … the applicant … will be likely receive (sic) by way of property settlement a sum sufficient to cover the advance, that would seem to be sufficient to enable the order sought to be made” …

2. As touched upon earlier in these Reasons the wife’s contention as to her percentage entitlement of the net assets is unclear except that it should be more than 50 per cent.  It appears that the husband contends that the wife is entitled to 40 per cent of the net assets excluding superannuation.

3. It is not in dispute that when the parties married and began living together they had no assets of significance. They purchased their first home together about five years later. 

1. The husband contends that he made all mortgage payments in relation to the parties’ home and it is his contention that he alone made all financial contributions to the household.  The wife contends as previously indicated that the husband had complete control of the family finances.  She says that early in their marriage did not permit her to work and that all family allowances and benefits received through Centrelink were paid into a bank account controlled by the husband.  The wife says that when she did engage in employment, working in the family business run by her brother and the husband’s sister, the husband would require her to use her income to pay for her personal expenses and some expenses for the children such as the costs of tutoring.   

2. It is the wife’s contention that she had primary responsibility for the care of the children. She says that the husband’s contributions to caring for the children and maintaining the home were minimal.    

3. In a general sense taking into account the parties agreed evidence concerning the relative contributions of the parties and that the matters in s 75(2) are likely to result in an adjustment in favour of the wife I am satisfied that her entitlement could not be less than the 40 per cent for which the husband contends. 

4. Although significant weight was attached in submissions made on behalf of the husband that he wishes to retain the investment property in the property settlement proceedings he does not adduce evidence to support his capacity to pay the wife 40 per cent of the value of the family home and investment property (being around $280,000).

5. Taking the husband’s case at its highest, the wife’s share (40 per cent) of the value of the two principal assets) will still greatly exceed the sum she seeks by way of interim payment.

6. Being satisfied that the wife is required to meet ongoing legal costs, that there is an asset available to meet her interim claim, that the husband does not suggest he is unable to meet his legal costs from resources currently available to him and as the amount to be paid will not exceed the final settlement, it is just and equitable in my view to make the orders sought.

Section 117(2) of the Act

1. The alternative basis upon which this application may be considered (and the basis upon which is was put forth by the wife) is that there are justifying circumstances for the court to make an order as it considers just having regard to the matters set out in s 117(2A) of the Act.

2. The only matter within that section that is relevant and able to be considered at this stage in the proceedings is the financial circumstances of each of the parties.  As indicated previously I am satisfied that the husband is in a significantly better financial position than the wife. He has a far greater earning capacity, currently earning over $1,800 per week from his salary alone and he is able to pay his own legal costs while the wife earns just under $700 per week and has the substantial care of the children. Further, the husband has greater control over the matrimonial property and greater access to financial resources than the wife.  The orders sought by the wife could equally be made on this basis.

3. For the foregoing reasons the orders are made largely in terms as sought by the wife. Some small amendments have been made to the orders for greater clarity. The order in relation to the proceeds of sale being used to pay capital gains tax was not addressed in the hearing and is not made for this reason. Otherwise the orders are in the terms proposed by the wife.

I certify that the preceding forty-seven (47) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Hannam delivered on 6 February 2018.

Legal Associate: 

Date:  6 February 2018