FOSSE & SALVAGE
[2019] FamCA 385
•14 June 2019
FAMILY COURT OF AUSTRALIA
| FOSSE & SALVAGE | [2019] FamCA 385 |
| FAMILY LAW – PROPERTY – Interim relief – Where the wife seeks an order for litigation funding together with spouse maintenance – Where the husband seeks that the wife’s application be dismissed – Where Cohabitation Agreement – Where the court satisfied that the husband has the capacity to meet his litigation costs – Where the wife does not have any ability to meet her litigation costs – Where the husband argued that the cohabitation agreement is binding until set aside – Where the terms of the cohabitation agreement do not prevent the wife from seeking litigation funding orders under s 117 – Where just in circumstances for litigation funding in favour of the wife – Where the court satisfied that the cohabitation agreement came into effect after separation, potentially engaging s 90UI – Where at the time the cohabitation agreement came into effect the wife was unable to support herself – Order that the husband pay maintenance at the weekly rate claimed by the wife. |
| Acts Interpretations Act 1901 (Cth) ss 15AB Family Law Act 1975 (Cth) ss 72, 74, 79, 80, 117, 71A, 90B, 90C, 90D, 90F, 90UC, 90UF, 90UG, 90UH, 90UI, 90SA, 90SF Family Law Amendment Act 2000 Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008 (Cth) Property Law Act 1974 (Qld) ss 264, 266 |
| Zschokke & Zschokke (1996) FLC 92-693 Stanton & Brook [2012] FamCA 230 |
| APPLICANT: | Ms Fosse |
| RESPONDENT: | Mr Salvage |
| FILE NUMBER: | CSC | 563 | of | 2018 |
| DATE DELIVERED: | 14 June 2019 |
| PLACE DELIVERED: | Cairns |
| PLACE HEARD: | Cairns |
| JUDGMENT OF: | Tree J |
| HEARING DATE: | 13 December 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Firth |
| SOLICITORS FOR THE APPLICANT: | Damien Greer Solicitors |
| COUNSEL FOR THE RESPONDENT: | Mr Linklater-Steele |
| SOLICITORS FOR THE RESPONDENT: | Hopgood Ganim |
Orders
Within 14 days from the date of this order, the husband is to cause to be paid into the trust account of the wife’s solicitors the sum of $100,000.00, which monies are only to be used to meet the wife’s legal costs of these proceedings.
Until further order, the husband pay the wife interim spouse maintenance in the sum of $516.05 per week.
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 Fosse & Salvage 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 CAIRNS |
FILE NUMBER: CSC563/2018
| Ms Fosse |
Wife
And
| Mr Salvage |
Husband
REASONS FOR JUDGMENT
INTRODUCTION
In her Amended Initiating Application filed 5 November 2018, Ms Fosse (“the wife”) sought interim relief in the form of a litigation funding order in the sum of $135,000.00, together with orders for lump sum, or periodic, spouse maintenance. By his Amended Response to Initiating Application filed 26 November 2018, Mr Salvage (“the husband”) sought that those parts of the wife’s application be dismissed.
On 13 December 2018, I heard the parties’ competing arguments and reserved my decision in relation to the wife’s applications. This is that decision and the reasons for it.
THE FACTS
The wife was born in Asia in 1948, and hence is presently 71 years of age. The husband was born in Australia in 1946 and hence is presently 72 years of age.
In 1970 the wife relocated from Asia to Australia. She thereafter undertook a range of employment. In April 2000 she moved into the husband’s home and the parties accept that thereafter, until their first separation in May 2004, they were in a de facto relationship.
On 19 October 2006 the wife returned to live in the husband’s home.
In early 2008 the husband commenced discussions with the wife about entering into a cohabitation agreement. In due course, each of the parties sought legal advice in relation to a draft agreement, and it was ultimately executed by then both and dated 20 March 2008. On its face, the cohabitation agreement purported to be pursuant to ss 264 and 266 of the Property Law Act 1974 (Qld).
On 21 November 2008, the Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008 (Cth) (“the 2008 Amending Act”) commenced. It was common ground before me that the effect of that legislation was to give the Family Court of Australia jurisdiction in relation to disputes between de facto couples in participating jurisdictions. Included within that jurisdiction was the determination of the validity or otherwise of cohabitation agreements made under state legislation.
By 2015, the wife was retired and no longer working. She received a pension of $265.00 every two weeks. In consequence, the husband commenced paying her $1,000.00 per calendar month.
On 1 September 2016 the wife moved out of the husband’s home. The parties appear to concede that their de facto relationship ceased at about that time, as did the husband’s $1000.00 monthly payment to the wife.
On 13 July 2018 the wife commenced these proceedings in the Family Court of Australia. By her Amended Initiating Application, she seeks a suite of final orders, including the setting aside of the cohabitation agreement which, if made, would then lead to her being required to file a Further Amended Initiating Application setting out her claim for property adjustment and spouse maintenance. She also sought a variety of interim relief, including the payment to her solicitors of $135,000.00 to her solicitors within 7 days on account of her legal costs, and either lump sum spouse maintenance in the sum of $26,834.60, or alternatively weekly payments of spouse maintenance in the sum of $516.05.
By his Amended Response to Initiating Application filed 26 November 2018, the husband seeks the dismissal of the wife’s Amended Initiating Application, and declarations that the cohabitation agreement is a recognised agreement under the Property Law Act, and a Binding Financial Agreement under Part VIIIAB of the Family Law Act. He also sought a variety of interim relief which it is not necessary to traverse in these reasons.
Although the parties appear to agree that there should be a pleadings regime in relation to the validity of the cohabitation agreement, which has not yet been undertaken, counsel for the wife advised me that claims for unconscionability and undue influence would be advanced as the basis for impugning the agreement.
THE COHABITATION AGREEMENT – RELEVANT PROVISIONS
Relevant parts of the cohabitation agreement include the following:
RECITALS
A.Mr Salvage and Ms Fosse lived together in a de facto relationship between the period approximately 2001 to 2004. Mr Salvage and Ms Fosse recommenced a de facto relationship in or about September 2006 and live together on a genuine domestic basis.
…
R.Mr Salvage and Ms Fosse have made plans for their financial future, which they intend to be enforceable. Further, while they do not intend for the relationship to end, the husband and wife have planned for that contingency and agreed about how financial matters between them are to be resolved at the end of the relationship.
S.The parties intend that, at the end of the relationship, each will retain to the exclusion of the other their Separate Property and will share equally all Joint Property.
…
U.The parties have contemplated that after entering this agreement, there may be significant changes in the circumstances of each of them or any of their dependents, including, without limitation, changes caused by illness, incapacity or loss of employment. The parties have reached this agreement in contemplation of such changes in circumstances, and intend it to be binding notwithstanding the occurrence of any such change of circumstance.
OPERATIVE PART
Dictionary
1.1In this deed, the following expressions have the meanings set forth in this Clause:
…
“Separation” means the irretrievable breakdown of the de facto relationship such that the parties have been living separately and apart for twelve (12) weeks other than by reason of illness, business or holidays.
…
“Operative date” means the date on which this deed is executed by each of the parties, being the date stipulated at the commencement of this deed.
Cohabitation Agreement
2.1 Mr Salvage and Ms Fosse acknowledge and agree that:
2.1.1They have entered into this deed to facilitate the resolution of all financial matters between them at the end of their de facto relationship; and
2.1.2It is their intention that this deed will exclusively regulate the resolution of such financial matters.
2.2This deed is a “Cohabitation Agreement” for the purpose of Part 19 of the Property Law Act 1974 (as amended).
Significant property, financial resources and liabilities
As at the operative date, all significant property, financial resources and liabilities of both Mr Salvage and Ms Fosse are as set forth in the first and second schedules.
…
Separation
5.1 Neither will be required to pay maintenance to the other.
…
5.4That save as otherwise herein provided assets and resources accumulated in the name of one, other or both of the parties during the course of the relationship (“the Joint Property”) shall be deemed to be owned by the parties in the proportions described in any document evidencing title and if none then in accordance with their respective contributions thereto.
5.5If either party acquires assets and/or financial resources after the date of this agreement in their own name then that party will be entitled to the benefit of that property or financial resource.
…
Legal Fees
Mr Salvage and Ms Fosse agree to each pay their own legal costs of and incidental to this Agreement and all actions taken in negotiations preceding this Agreement.
General Provision
8.1Neither party will make any further claim against the significant property, financial resources and liabilities of the other party, other than as stipulated in this Agreement.
…
8.3Sanae has no entitlement to and will not make any claim against the husband in respect of any property, income, financial resources or liability which Mr Salvage may acquire after the date of signing this Agreement.
8.4Mr Salvage has no entitlement to and will not make any claim against Ms Fosse in respect of any property, income, financial resources or liability which Ms Fosse may acquire after the date of signing this Agreement.
…
Cumulative Rights
The rights and remedies of a party to this Agreement are in addition to the rights or remedies conferred on the part(y) at law or in equity.
…
This Agreement
Recitals form part of this deed of Agreement and the parties warrant their truth and accuracy.
Costs/Stamp Duty
The parties must bear their own costs of and incidental to the negotiation, preparation and execution of this agreement. Any stamp duty chargeable upon or in respect of this deed or an instrument prepared pursuant to this Agreement shall be paid by the transferee who shall indemnify the transferor in respect of such stamp duty.
Pleading this Agreement as a Bar
Mr Salvage and Ms Fosse agree and acknowledge the terms of this deed may be pleaded as an absolute bar and estoppel to further proceedings, commenced now or taken at any time in the future.
Interpretation
20.1In this deed, except to the extent that the context otherwise requires:
…
20.1.3Headings are for the convenience of reference only and do not affect the construction or interpretation of this deed.
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THE LITIGATION FUNDING ORDER
Relevant statutory provisions and legal principles
There are at least three sources of power to make litigation funding orders. The first is s 117 of the Family Law Act which relevantly provides as follows:
117(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.
117(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.
117(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.
…
The second source of power is under s 79, which is the general power of the court to alter property interests of parties to a marriage. Section 80(1) articulates the powers of the court in exercising, amongst other things, the discretion under s 79. Those powers include the order of a payment of a lump sum or periodic sums.
A further source of power is under the maintenance power created by ss 72 and 74 of the Act.
Many cases have now emphasised the importance in applications such as this of identifying the relevant source of power for the proposed order, as that determines the necessary preconditions and relevant considerations for making the order.[1] However irrespective of which power is in play, there are three relevant matters common to each source of power, namely:[2]
·A position of relative financial strength on the part of the respondent;
·A capacity on the part of the respondent to meet his or her own litigation costs;
·An inability on the part of the applicant to meet his or her litigation costs.
[1]Zschokke & Zschokke (1996) FLC 92-693; Paris King Investments Pty Ltd v Rayhil [2006] NSWSC 578 and Strahan & Strahan (interim property orders) (2011) FLC 93-466 at [84].
[2]See Zschokke (supra) at 83,217, Paris King Investments (supra) at [30], and Strahan (supra) at [90]-[91].
However when s117 is under consideration, other matters arise, particularly:[3]
·An applicant should have “at least an arguable case for substantive relief which deserves to be heard”;
·There should be evidence of the applicant’s likely costs of the litigation;
·It is not an essential precondition that the applicant’s legal representatives will continue to act unless the costs are paid or secured on an ongoing basis;
·An order may make a provision for litigation expenses at a rate that appears reasonable in all the circumstances;
·An order can be made in respect of costs already incurred as well as future costs;
·Whether the order is to be in respect of costs already incurred or costs to be incurred, and whether the applicant’s lawyers will continue to act in the absence of provision for costs be incurred, may be relevant to the discretion to make an order, and its quantum;
·Any such order should be framed to protect the parties from any risk of injustice arising from the manner in which the funds are expended, and this may be done by requiring that the funds be administered solely by the applicant’s solicitors and applied only to meet the expenses referred to in the order, with detailed records being maintained to permit review by the court at the time of the exercise of its discretion in the substantive property proceedings or the final determination of the issue of costs.
[3]Strahan (supra) at [96] quoting from Paris King at [30] and [31], with relevant citations omitted.
The wife’s arguments
The wife expressly advances her claim for litigation funding under s 117 of the Family Law Act, and no other basis.
She says that in the substantive proceedings she has an arguable case, and at paragraphs 24 to 27 of her written outline, explained it as follows:
24. This is a matter in which the following factors are relevant, and deposed to by the Applicant:
(a)The Agreement was offered on the basis of it being non-negotiable, with the Applicant feeling she had no choice but to sign, and no ability to negotiate;
(b)The Applicant felt pressured over a period of time, and made to feel she had to sign the Agreement to stop the Respondent from pressuring her, and berating her to sign the Agreement;
(c)The meeting with the Applicant’s solicitor was for approximately 30-45 minutes, with no ability to reflect upon the meeting, or any advice given to the Applicant, prior or during the short meeting with the solicitor;
(d)The Respondent’s financial position was far superior to that of the Applicant; and
(e)The Applicant’s English comprehension was limited to basic English;
(f)The Applicant had limited understanding of the meaning and effect of the agreement as a consequence of her limited English comprehension.
25. Taking the Applicant’s evidence at its highest in this regard, a case in relation to unconscionable conduct or undue influence can be made out, and there is clearly an arguable case as to these matters. As such, the Court should consider the provision of litigation funding to allow the Applicant to continue to pursue her application to have the Agreement set aside in the interests of justice.
26. If the Agreement were to be set aside, the Applicant’s evidence if accepted as to the relationship is as follows:
(a)Although the Respondent’s financial contributions exceeded that of the Applicant, the parties were in a de facto relationship for over 16 years;
(d)During the relationship, the Applicant made significant contributions to the home, including home maker duties;
(c)The Applicant cared for the Respondent whilst he was unwell;
(d)The Applicant was financially supported by the Respondent who was responsible for the mortgage, and other living expenses, whilst the Applicant also contributed to some extent to living expenses;
(e)The Respondent further financially supported the Applicant by providing her additional income each month to assist with covering living expenses;
(f)The Applicant currently only receives a pension, and has no other assets of value, and as such has a greater future needs, in that regard, compared to the Respondent;
(g)Post separation the Respondent has provided financial support to the Applicant. The Applicant received $6,057.00 from the Respondent following her request for support on 22 May 2017. The funds were requested on account of expenses including urgent repairs to her car and the purchase of new dentures.
27. In such circumstances, if the Court were to set aside the Agreement, it is contended that the Applicant would receive an adjustment in her favour of the current property interests.
The husband’s material contradicts many of the wife’s assertions, however, I cannot determine whose evidence is preferable in any application such as this. However I accept the wife has an arguable case, both in relation to impugning the BFA, and if successful, for a property division in due course.
The wife’s solicitor says that the likely costs of the litigation, up until the conclusion of the separate hearing of the preliminary matter as to whether or not the cohabitation agreement should be set aside, will be in the range of $100,806.58 to $132,056.58.
Also in her solicitor’s affidavit there is at paragraph 5 the following:
I do not generally undertake work on a deferred payment basis and I may not be able to continue to do so should [the wife’s] interim application for funds of her legal fees be unsuccessful…
Part of the wife’s costs claimed are for work already incurred, as well as future costs.
There is no suggestion that the funds would be used for anything other than to meet the wife’s likely costs of the litigation.
I then turn to the parties’ financial circumstances. The wife’s are somewhat parlous; the total of her assets are said to be worth $6,800.00 and her only present income government benefits totalling $453.80 per week. In contrast the husband concedes that he has a property with a value of $560,000.00, $335,804.00 cash in one account, $5,769.00 in another account, $439,409.90 worth of shares, and a motor vehicle worth approximately $20,000.00. He has a weekly income of $483.14.
I am therefore satisfied that the husband enjoys far better financial circumstances than the wife. Further, I am satisfied that the husband has the capacity to meet his litigation costs, whereas the wife does not have any ability to meet her litigation costs. That said, there is at least some prospect that her solicitors, and perhaps her counsel, will continue to act for her on a deferred fee basis.
The husband’s arguments
The primary defence which the husband advanced to oppose a litigation funding order involved a relatively novel argument (at least by reference to the decided authorities on this point). The uncontroversial starting point for that argument was that, unless and until the cohabitation agreement has been set aside, it must be presumed to be legally binding, and the parties bound by it. Next, he contended that in consequence, here clause 8.1 was engaged on the facts, because by necessity, a payment of $135,000.00 by him to the wife would only be pursuant to a “claim against the significant property [and] financial resources” of the husband, other than as stipulated in the cohabitation agreement. Further, he said that the effect of clause 19 of the agreement was to estop and absolutely bar the wife from making such a claim.
He further sought to rely upon clauses 7 and 18 as specifically dealing with the costs of these proceedings, but I can peremptorily reject that argument. In my view, both clauses 7 and 18 are directed towards the costs relating to the drawing and execution of the agreement, not proceedings taken to impugn it.
Counsel for the husband supported his primary argument by reference to two Full Court decisions, being Norton & Locke [2013] FamCAFC 202; (2013) 50 FamLR 517; (2013) FLC 90-567 and Holden & Wolff [2014] FamCAFC 224; (2014) FLC 93-621; (2014) 52 FamLR 60. Those were cases which, although not involving a cohabitation agreement or binding financial agreement, nonetheless, he said, provided assistance to this court, in that they dealt with the capacity of the court, in advance of the establishment of a relevant jurisdictional fact, to make orders which went beyond the preparation for the determination of the existence or otherwise of that jurisdictional fact.
Norton & Locke involved an injunction restraining a contended de facto partner from interfering with the other alleged partner’s exclusive occupancy of the former home of the parties. The question of whether or not there was a de facto relationship was in dispute. The Full Court said that, unless and until the fact of the relationship was established, the capacity to make such an injunction was extremely limited, and largely restricted to cases where the remedy was necessary to prevent an abuse of the court’s process: at [50](b).
To like effect was the later Full Court decision in Holden & Wolff, where again, in the context of a disputed de facto relationship, orders had been made requiring the husband to file current financial evidence. The Full Court held that there was no power to make those orders, unless and until the finding of a de facto relationship had been made: at [42].
The husband emphasised that the argument he was making in this regard had not been advanced before Kent J in Rakete & Rakete [2012] FamCA 267, which case involved a successful application for a litigation funding order in the context of proceedings which sought to impugn the validity of a BFA. In that case, one of the arguments advanced by the husband was that s 71A of the Family Law Act precluded the application of part VIII of the Act in circumstances where there was a BFA.
At [15] Kent J identified the arguments before him as follows:
15. The Husband disputes the Wife’s application on two alternative bases. First, the Husband submits that as the Order requested by the Wife is properly characterised as an Order for interim spousal maintenance under s 74, the Court has no jurisdiction to make such an Order given the existence of a binding financial agreement between the parties which covers several matters including the payment of spousal maintenance, the validity of which has not yet been decided upon by this Court. However, the Wife is applying for an Order solely under the power of the Court to Order costs expressed in s 117(2) of the Family Law Act 1975 (Cth) (“the Act”). The Husband further submits that even if the Order sought is expressed to rely upon the power in s 117(2) of the Act, the Court does not have jurisdiction as that provision is ancillary to the power of the Court to make Orders under Part VIII of the Act, the operation of which is suspended by s 71A of the Act when a binding financial agreement exists. (Footnotes omitted).
His Honour later continued as follows:
31. Section 71A of the Act (which falls within Part VIII of the Act) is as follows:
(1) This Part does not apply to:
(a) financial matters to which a financial agreement that is binding on the parties to the agreement applies; or
(b) financial resources to which a financial agreement that is binding on the parties to the agreement applies.
(2) Subsection (1) does not apply in relation to proceedings of a kind referred to in paragraph (caa) or (cb) of the definition of matrimonial cause in subsection 4(1).
(emphasis in original)
32. It is clear that what s 71A does is to suspend the ability of this Court to otherwise make Orders under Part VIII of the Act. It does not affect the Court’s ability to make Orders under s 117(2) of the Act (which lies outside Part VIII). To contend otherwise would be to defeat the very purpose of s 117(2).
33. As I raised with Counsel for the Husband, Ms Brasch, during the hearing, if her argument regarding the suspension of s 117(2) by s 71A was accurate, that would result in this Court being unable to make any costs Order, even in her client’s favour, when a binding financial agreement was still on foot. That would include a scenario where the Wife’s application to have the binding financial agreement overturned was rejected. Such a conclusion would undermine the purpose of s 117(2), which is to permit this Court to order one party to pay another party’s costs where that is just in the circumstances. As highlighted in the cases referring to this power, the power is broad and fettered only by the requirement that there be “proceedings” and that the Order made by the Court be “just”.
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35. The definition of “proceeding” in s 4 of the Act is broad, referring to, “…a proceeding in a court, whether between parties or not, and includes cross-proceedings or an incidental proceeding in the course of or in connexion with a proceeding.” It is self-evident that the term “proceeding” is not limited to referring to proceedings under Part VIII. Therefore, s 117(2) is clearly not limited to being ancillary to the Court’s powers under Part VIII. If that were so, then s 117(2) could never be used by this Court to make an interim or final Order for costs in a parenting proceeding.
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39. I therefore find that s 117(2) is a source of power for this Court to make an Order for the interim provision for litigation expenses as requested by the Wife.
I respectfully adopt that reasoning,[4] which is compelling.
[4] As did Forrest J in O’Rorke & O’Rorke [2017] FamCA 626.
Turning then to the husband’s specific argument, it seems to me that there are at least two responses to it. The first is that clause 15 of the cohabitation agreement expressly preserves rights or remedies conferred on the parties under law. The right to bring these principal proceedings must necessarily therefore contractually survive, including seeking antecedent and ancillary relief. The second is that clause 19 cannot be read so as to preclude proceedings seeking to impugn the cohabitation agreement. In fairness, the husband does not contend the latter, but rather hones his argument that the estoppel and bar is in relation to any claim against significant property or financial resources of the husband. However as to that, I am not satisfied that by invoking her right to seek an order under s 117, the wife is thereby making “any further claim” in relation to property, but rather is seeking an order for costs in relation to proceedings antecedent to making a potential claim against property. She is not thereby asserting a beneficial entitlement to any of the property of the husband arising out of the relationship, but rather only seeking that an order that her costs be met by him.
I am therefore not persuaded that the terms of the cohabitation agreement, notwithstanding that it remains effective unless and until it is set aside, preclude the wife from seeking litigation funding orders under s 117.
In the event that his primary argument was rejected, the husband advanced arguments as to why it was not just as between the parties to make an order under s 117. Particularly he said:
·That the wife’s application seeks “Rolls Royce” funding, including for senior and junior counsel;
·That in the event that the wife does not succeed in setting aside the cohabitation agreement, there is no prospect whatsoever that he will ever be able to recover these costs from her;
·That the parties never had joint resources, and this is not a case where the husband is using joint resources to fund the litigation;
·That it would be substantially and significantly unjust to the husband, whose conduct has not found to be anything other than lawful, to effectively prejudge the case in favour of the wife in the face of hotly contested facts.
He particularly distinguished the circumstances in Rakete (supra) from those here, which he said were more aligned to those in Norton & Wilkins [2017] FamCA 992. Like Rakete, that case involved proceedings impugning a BFA, in the context of which an application for litigation funding and maintenance was made.
However that was not a case in which the arguments advanced by the wife were an absence of voluntariness in entering into the agreement, but rather an absence of the requisite advice. With that in mind, at [28] Carew J referred to earlier comments by Johnston J in Wall & Mitchel [2010] FamCA 1194 at [43] as follows:
43. Would it be just within the meaning of s 117(2) to order the husband to pay money to the wife to be used by her to fund the costs of her litigation with the husband when it is far from clear that there is at least some likelihood that the Court would make any substantive order in her favour? In my view, if the Court was to make a preliminary costs order, and ultimately it turned out to be the Court’s finding that there was no basis upon which the husband could be required to make a substantive payment to the wife, this would be most unjust to the husband. This is because it is clear that the wife has no means by which any such preliminary payment could be refunded to the husband.
Having recited that paragraph, Carew J noted that, although there might be an arguable case in relation to challenges to the BFA, the prospect of the wife succeeding in the substantive property proceedings is not altogether clear, and particularly, the prospect that the funds could never be recovered by the husband needed to be given significant weight.
The exercise of the discretion
Ultimately I identify the points in favour for an order for litigation funding as sought by the wife to be as follows:
·The wife has an arguable case for substantive relief;
·There is a marked disparity in the assets and financial resources of the parties;
·Absent a litigation funding order, the wife will not be able to pay for legal representation (albeit that does not necessarily mean she will be without legal representation).
On the other hand I identify the following points as telling against the wife’s application:
·There is realistically no prospect of her ever being able to refund any sums to the husband in relation to litigation funding, unless she, firstly, succeeds in having the BFA set aside, and secondly, succeeds in proceedings for property division;
·There is an element of “Rolls Royce” in the level of funding which she seeks, including both for senior and junior counsel;
·It is not impossible, and indeed reasonably foreseeable, that pro bono counsel, and perhaps sympathetic solicitors, could represent her at the hearing.
Weighing all those factors in the balance to my mind tells in favour of there being an order for litigation funding in favour of the wife in this case. I am satisfied that such an order is, in the circumstances of this case, just. Particularly, the disparity of the parties’ financial positions deserves real weight. I should say that I have some difficulty in giving much weight to the “irreversibility” point (although I accept it is valid). This is an application explicitly under s 117; by what means a costs order might be reversed so as to effect repayment to the husband, is unclear. I can understand questions of reversibility if the claim for funding is advanced as an interim property order, but the issue would otherwise inevitably arise in every case involving an impecunious applicant under s 117.
In any event, the exercise here is exactly as confronted Kent J in Rakete (supra) at [54]-[55]:
54. On the basis that s 90K of the Act is statutory recognition of the potential for injustice in cases falling within one or more of the circumstances it identifies, it follows that it would be unjust if the protection it affords cannot, in practical terms, be accessed by a party seeking it by reason of impecuniousness occasioned in any way by one or more of the very circumstances s 90K identifies.
55. Put another way, the capacity to repay, whilst a relevant consideration, cannot be elevated to the status of an essential pre-condition to the making of an Order in cases involving s 90K. To do so would place a fetter on the discretion that is in conflict with the mischief s 90K is designed to address.
I am further satisfied that the range of estimated costs is reasonable, and whilst there is some merit in the assertion that there is a “Rolls Royce” aspect to the costs, by selecting the figure at the lower end of the range, which is about $100,000.00, those concerns can be accommodated.
THE SPOUSE MAINTENANCE CLAIM
Relevant statutory provisions and legal principles
In the decision of Stanton & Brook [2012] FamCA 230, Watts J said as follows:-
Interim spousal maintenance
18.Section 90SF(1) FLA requires a party to a de facto relationship to maintain the other party, to the extent that they are reasonably able to do so, and only if, that other party is unable to support herself or himself adequately because of certain reasons and having regard to factors set out in s 90SF(3) FLA. If the wife establishes a need and it is shown that the husband has a capacity to pay, then the court may make such order as it considers proper for the provision of maintenance (s 90SE(1) FLA).
19.In interim proceedings, the Full Court in Redman and Redman (1987) FLC 91-805 endorsed a statement made by Fogarty J in Williamson and Williamson (1978) FLC 90-505 as follows:
“Another consequence is that on an application for interim maintenance, the court conducts ‘not as final or exhaustive a hearing as would be the case if one were hearing the matter finally’ ... the evidence need not be so extensive and the findings not so precise.”
20.So, upon an application for interim maintenance, an approach can be taken with a broader brush.
21.Any proposed interim property order must be taken into account when interim spousal maintenance is considered (see Bevan and Bevan (1995) FLC 92-600 and Oates and Crest (2008) FLC 93-365; 216 FLR 469).
I adopt that useful summary of principle.
It is also useful at the outset to note that s 90SF is in Division 2 to Part VIIIAB of the Act. Also in that Division is s 90SA, which provides:
90SA(1) This Division does not apply to any of the following matters to which a Part VIIIAB financial agreement that is binding on the parties to the agreement applies:
(a)The maintenance of one of the spouse parties;
(b)The property of the spouse parties or of either of them;
(c)The financial resources of the spouse parties or of either of them;
…
The wife’s arguments
The effect of s 90UI
Whilst implicitly acknowledging s 90SA(1), the wife’s argument commenced by referring to s 90UH of the Family Law Act, which renders void that part of a BFA which relates to spouse or child maintenance, unless it identifies the spouse or child, and specifies the amount of maintenance to be provided. However, the wife concedes that, as a result of item 93(1)(c) of schedule 1 to the 2008 Amending Act, s 90UH is not applicable here. That is because, although in the transitional provisions in the 2008 Amending Act, item 88 of schedule 1, which is applicable to this case, says that cohabitation agreements made before commencement of the 2008 Amending Act are, from commencement, taken to be financial agreements under the relevant part of the Family Law Act, nonetheless by item 93(1)(c), in relation to such an agreement “s 90UH… is taken not to have been enacted.”
However the wife then advanced an argument that item 93 of schedule 1 to the 2008 Amending Act is silent in relation to s 90UI, and therefore contends that it is taken to apply to transitioning agreements. Section 90UI is in the following terms:
Section 90UI .Certain provisions in financial agreements
(1) No provision of a Part VIIIAB financial agreement excludes or limits the power of a court to make an order under Division 2 in relation to the maintenance of a party to the agreement if subsection (2) applies.
(2) This subsection applies if the court is satisfied that, when the agreement came into effect, the circumstances of the party were such that, taking into account the terms and effect of the agreement, the party was unable to support himself or herself without an income tested pension, allowance or benefit.
(3) To avoid doubt, a provision in a Part VIIIAB financial agreement:
(a) made as mentioned in subsection 90UB(1), 90UC(1) or 90UD(1); or
(b) covered by section 90UE;
that provides for property or financial resources owned by a spouse party to the agreement to continue in the ownership of that party is taken, for the purposes of that subsection or section, to be a provision with respect to how the property or financial resources are to be distributed.[5]
[5]In this case, the relevant subsection referred to in s 90UI(3), is s 90UC(1), which covers financial agreements entered into during a de facto relationship. Section 90UC(2)(b) makes it clear that such an agreement, insofar as it deals with property, financial resources, or maintenance, is a Part VIIIAB financial agreement.
The wife identifies that the pertinent words in s 90UI(2) are “when the agreement came into effect,” and contends that this recognises a distinction between that point in time, and when the agreement was executed.
In further support of her argument, the wife refers to the explanatory memorandum, not to s 90UI, but rather to its sister provision, s 90F, which is relevantly in the same terms as s 90UI. The corresponding subsection to s 90UI(2) is s 9F(1A), which was introduced by an earlier amending Act in 2003. Particularly, at [129] of the Amended Explanatory Memorandum to the 2003 Act, it was said:
Item 1 amends the current sub-section 90F(1) to ensure that, at the time any financial agreement comes into effect, rather than at the time it was made, if a party is unable to support himself/herself without government income support, then the court may make a maintenance order, notwithstanding the agreement.
The wife particularly emphasised the first part of that sentence, in support of her argument. Contrary to the husband’s submission, I am satisfied that, pursuant to s 15AB(2)(e) of the Acts Interpretations Act 1901 (Cth), the explanatory memorandum pertaining to an otherwise identical provision inserted earlier in the same Act, may legitimately be had regard to in determining the proper construction of the other section, albeit that it was only enacted later, and is contained in another Part of the Act. That seems particularly the case as, according the Clause 11 of the Explanatory Memorandum to 2008 Amending Act Bill it “aims to replicate for parties to de facto relationships the financial regime” under those parts of the Act which apply to married persons.
It is instructive to consider the history of s 90F. It was introduced by the Family Law Amendment Act 2000, which was the first Commonwealth legislation dealing with BFAs. It recognised three species of such agreements: those entered before marriage (s 90B) during marriage (s 90C) and after the dissolution of marriage (s 90D).
The language of the original s 90F is informed by that background:
90F(1) No provision of a financial agreement (other than a financial agreement made under s 90B or a financial agreement made under s 90C in the event of the breakdown of a marriage) excludes or limits the power of a court having jurisdiction under this Act to make an order in relation to the maintenance of a party to a marriage if the court is satisfied that, when the agreement was made, the circumstances of the party were such that, taking into account the terms and effect of the agreement, the party would have been unable to support himself or herself without an income tested pension, allowance or benefit. (emphasis added)
Section 90F, therefore, in its original form only applied to BFAs made after dissolution of marriage. That is confirmed by the relevant explanatory memorandum:
Section 90 F – Certain provisions in agreements
The purpose of s 90F is to ensure that people can not agree away their obligation to maintain the other party, with the effect of increasing the burden on the social security system. Section 90F provides that an agreement that purports to exclude or limit the court’s jurisdiction in relation to the maintenance of a party to a marriage is of no effect where the party would have been unable to support themselves without an income tested pension, allowance or benefit. The assessment of whether or not the party would be able to support themselves without an income tested pension, allowance or benefit needs to be made at the time of the breakdown of the marriage. The court will be permitted to exercise jurisdiction only where the agreement was entered into after the breakdown or dissolution of a marriage. The jurisdiction of the court is not required where the agreement is made before the breakdown of the marriage. (emphasis added)
So initially s 90F only operated to post-marriage, agreements, and necessarily the time for determining the capacity of a party to support themselves independently was therefore post-marriage too.
Significantly, the original s 90F(1) referred specifically to the time “when the agreement was made” rather than the time it came into effect. That was the state of the s 90F at the time of the 2003 Amending Act, which introduced s 60F(1) and (1A) in their current form. No specific explanation appears in the explanatory memorandum for the broadening of the operation of the s 60F to cover all BFAs, rather than just those made after dissolution of marriage, or of the reason for the change of the point in time in which a party’s capacity to support themselves is to be considered, namely, from “when the agreement was made” to “when the agreement came into effect.” But plainly, both of those changes flow from the 2005 changes, and there is no reason to doubt that the fundamental purpose of s 60F – protection of the social security system – remained.
It does not seem as though s 90F(1A) or s 90UI(2) have been the subject of much previous judicial attention. Section 90F(1A) was considered by Carter J in Millington & Millington [2007] FamCA 687, but it is not clear that the Court there was dealing specifically with the question of when the agreement under consideration came into effect.
More recently in Thorne & Kennedy [2017] HCA 49 (2017 ALR 1, (2017) ALJR 1260 at [19]-[20] the High Court said:
19. Another restriction upon pre-nuptial and post-nuptial agreements is s 90F, which, by ss 90F(1) and 90F(1A), prohibits the agreement from excluding or limiting the power of a court to make an order in relation to the maintenance of a party if:
when the agreement came into effect, the circumstances of the party were such that, taking into account the terms and effect of the agreement, the party was unable to support himself or herself without an income tested pension, allowance or benefit.
20. Despite Ms Thorne's extremely limited personal means, the agreements purported to provide for an "acknowledgement" that Ms Thorne was able to support herself without an income tested pension, allowance or benefit. It seems that this clause was an attempt to oust the operation of s 90F of the Family Law Act. However, no submissions were made about s 90F before the primary judge or before the Full Court. In this Court, it assumed significance only as a matter for contextual construction after it was drawn to the attention of the parties by the Court.
I do not read that passage as precluding the argument advanced by the wife here.
Although not relied upon by the wife, it seems to me that the construction contended for by her may also be, to a degree, supported by s 90UF, which was also inserted by the 2008 Amending Act. By subsection (1), it provides:
90UF(1). A Part VIIIAB financial agreement that is binding on the parties to the agreement, to the extent to which it deals with how, in the event of the breakdown of the de facto relationship, all or any or the property or financial resources of either or both of the spouse parties:
(a)At the time when the agreement is made; or
(b)At a later time and during the de facto relationship;
are to be dealt with, is of no force or effect until a separation declaration is made.
Note: Before the separation declaration is made, the financial agreement will be of force and effect in relation to the other matters it deals with (except for any matters covered by section 90UG).
The section goes on to prescribe the contents necessary for a valid separation declaration, including that it must state that “the spouse parties have separated…” Section 90UF is not referred to in item 93(1) of the first schedule to the 2008 Amending Act, and therefore its operation is not excluded in respect of transitioning agreements covered by item 88, such as the cohabitation agreement under consideration in this case.
Therefore, unless and until there is a separation declaration (as to which there was no evidence before me in this case) the relevant aspects of the cohabitation agreement specified in s 90UF(1) are of no force or effect. Logically, it will be only when the declaration is made that those provisions come into effect.
Whilst I did not have the benefit of any argument as to whether s 90UF is applicable here, what I do nonetheless glean from it is that the Act clearly does recognise a distinction between a BFA being made, on the one hand, and coming into effect, on the other. To that extent, it supports the wife’s construction (unless s 90UF applied, in which case it would not be separation per se, which saw the agreement come into effect, but the making of a valid separation declaration).
I acknowledge that there is some difficulty generated by the note to s 90UF(1), which although not part of the Act, seems likely to be able to be had regard to under s 15AB of the Acts Interpretation Act. However the note’s reference to s 90UG is interesting. That section provides as follows:
90UG A Part VIIIAB financial agreement that is binding on the parties to the agreement, to the extent to which it provides for matters covered by subsection 90UB(3) or 90UC(3) or paragraph 90UE(2)(b), is of no force or effect unless and until the de facto relationship breaks down.
The three provisions referred to in s 90UG, relate to matters incidental or ancillary to the distribution of the property, financial resources or spouse maintenance of the parties.
There are two noteworthy points to be drawn from s 90UG. The first is that it too, draws a clear distinction between the entering into a binding agreement, on the one hand, and it being of “force or effect” on the other. In the cases covered by s 90UG, force or effect only commences when “the de facto relationship breaks down” (a remarkably imprecise concept, the meaning of which only marginally assisted by the definition of “breakdown” in s 4A(1) of the Family Law Act).
The second is that there is no note to s 90UG which corresponds with the note to s 90 UF(1).
Upon balance, I read s 90UF(1) and s 90UG as supporting, and certainly not materially detracting from, an argument that, subject to their terms, BFAs dealing with maintenance generally come into effect at a time after the agreement was made, particularly in light of the guidance given by the explanatory memorandum relating to s 90F.
Moreover, there are sound reasons of common sense supporting such an interpretation. Why would the inability of a party to support themselves without an income tested pension (etc) potentially many years earlier, justify the non-application of the BFA’s prohibition on maintenance, if the applicant was now wealthy? Conversely, why should a person’s ability to support themselves independently at the time of entry into the BFA, justify the continued prohibition on maintenance if, after separation, their only income then is a means tested pension? The purpose behind s 90F (and s 90UI) it seems clear, is to protect limited social security funds, and the construction contended for by the wife would achieve that, whereas the husband’s argument would not necessarily do so.
I am mindful that in Norton & Wilkins (supra) Carew J noted with approval counsel’s concession “that until there has been a determination as to the validity of the financial agreement the court does not have jurisdiction to determine the application for maintenance” and justified that statement by reference to s 90SA of the Family Law Act and Norton & Locke (supra). However it does not appear as though the facts of the case before her Honour engaged s 90UI.
The construction of the agreement
Against that background, I turn to consider when, on its proper construction, the cohabitation agreement, at least insofar as it deals with spouse maintenance, came into effect.
The wife says that clause 5 of the cohabitation agreement only came into effect at the date of separation, rather than the date of the deed.[6] In part, she seems to base that argument on the fact that clause 5 is headed “Separation,” although by clause 20.1.3, it is expressly said that “headings are for the convenience of reference only and do not affect the construction or interpretation of this Deed.” However, there is a curiosity to the deed, in that in the dictionary “separation” is a defined term, it is only thereafter deployed by the deed in the heading to clause 5.
[6] Even though the dictionary clause of the agreement defines “operative date” as the date of the deed, curiously that term is only used in one place thereafter, being clause 3, which only deals with the identification of property. I reject the husband’s argument that “operative date” means the date the deed commences to operate, because the deed simply does not say that.
It seems to me that either this is an occasion where the chapeau of clause 20.1 operates, in that the context of clause 5 “otherwise requires” the heading to affect the interpretation of the deed, of if I am wrong as to that, in any event, the construction of the deed as a whole reveals that clause 5.1 is intended to come into effect only upon separation, as that term is defined in clause 1.1. In reaching that latter conclusion I give particular weight to recitals R and S. Separation is defined as 12 weeks after cohabitation finally ceases.
The husband’s arguments
For his part, the husband repeats the arguments that he previously made, in relation to litigation funding, particularly by referring clauses 5.1, 8.1 and 19 of the cohabitation agreement. However that cannot survive the wife’s argument based on s 90UI, and the proper construction of the agreement.
Conclusion as to jurisdiction
I am satisfied the cohabitation agreement which is presently before me, insofar as it provides a prohibition on a claim for maintenance, came into effect no earlier than the time of separation, and most likely 12 weeks thereafter. Section 90UI is therefore potentially engaged.
I am therefore satisfied that I do have jurisdiction to make an interim spouse maintenance order in this case, if at the time that the cohabitation agreement (insofar as it provides for spouse maintenance) came into effect, the wife was unable to support herself without a means tested pension. As to that, I am so satisfied on the evidence, and particularly that, upon the husband ceasing to pay her $1000.00 per month at separation, her only income was the aged pension.
Section 90SF(3) considerations
The relevant considerations to the maintenance application are set out in s 90SF(3).
Both parties are in their 70’s although the wife is in a better state of health than the husband.
There are no children of the relationship.
The husband has expenses of $894.00 per week, but income only of $541.51. There is therefore a shortfall of approximately $352.49 per week. He says he meets this by drawing down on his assets.
The wife is only in receipt of a government pension. Under s 90SF(4) I am obliged to disregard such entitlements. Her expenses are presently about $516.05 per week.
Neither party has commitments in relation to maintaining a child.
Neither party has a responsibility to support any other person. The wife is eligible to receive pensions and other entitlements, but I must disregard those pursuant to sub-section (4).
It appears as though the expenditure being incurred by both parties is necessary to achieve a reasonable standard of living.
Any payment of maintenance to the wife would not increase her earning capacity.
It is not seriously contended that the wife has contributed to the income earning capacity, property or financial resources of the husband.
The duration of the de facto relationship is not said to have affected the capacity of the wife to earn.
Neither party is parenting any children.
I know little of the parties’ present cohabitation arrangements, if any.
It is not presently proposed to make any order under s 90SM.
There is not presently any order or declaration of the kind contemplated in sub-paragraph (o) being made. Likewise in relation to sub-paragraph (p).
There is no child support assessment.
There are some facts or circumstances which I do identify as being necessary to be taken into account. The first is that from January 2015 until, separation, the husband had been paying the wife $1,000.00 per calendar month. The second matter is that according to the husband’s affidavit, on 30 June 2017 he paid the wife a lump sum of $6,056.32 in spouse maintenance.
Evaluation
On the information which I am able to have regard to, I am satisfied that the wife is unable to support herself adequately, and that the husband is reasonably able to maintain the wife. In those circumstances, I am persuaded that it is proper, at least at present, that the husband pay maintenance. I am further satisfied that the weekly rate of payment should be as claimed by the wife, as reflecting her reasonable needs.
The justification for any lump sum capitalisation of spouse maintenance was unclear. I am not persuaded that it should be capitalised, in part because the husband uses his capital to earn income on which to live, but moreover, because there is presently no suggestion that he will not make weekly payments. I am therefore satisfied that the husband should be obliged to pay the wife the sum which she claims each week. I am satisfied that it should be payable until further order.
CONCLUSION
For these reasons there will be orders as set out at the commencement of this judgment.
I certify that the preceding one hundred (100) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Tree delivered on 14 June 2019.
Associate:
Date: 14 June 2019
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