Gaulit and Bunker
[2010] FamCA 232
•18 March 2010
FAMILY COURT OF AUSTRALIA
| GAULIT & BUNKER | [2010] FamCA 232 |
| FAMILY LAW – PROPERTY – interim property settlement – for payment of legal expenses – application granted |
| Family Law Act 1975 (Cth) ss 79, 80(1), 117 |
| Strahan & Strahan (Interim Property Orders) [2009] FamCAFC 166 |
| APPLICANT: | Ms Gaulit |
| RESPONDENT: | Mr Bunker |
| INTERVENOR: | Ms B |
| INDEPENDENT CHILDREN’S LAWYER: | Mr M Finn |
| FILE NUMBER: | MLC | 3776 | of | 2008 |
| DATE DELIVERED: | 18 March 2010 |
| PLACE DELIVERED: | MELBOURNE |
| PLACE HEARD: | MELBOURNE |
| JUDGMENT OF: | BENNETT J |
| HEARING DATE: | 15 FEBRUARY 2010 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr M Bartfeld QC |
| SOLICITOR FOR THE APPLICANT: | Meerkin & Apel |
| COUNSEL FOR THE RESPONDENT: | Ms M Vohra |
| SOLICITOR FOR THE RESPONDENT: | Pearsons |
| COUNSEL FOR THE INTERVENER | Ms K Southey |
| SOLICITOR FOR THE INTERVENER | David Joseph & Co |
Orders
The husband pay or cause to be paid to the wife the sum of $135,000 such sum to be paid within 30 days into the wife’s lawyers’ trust account to be utilised:-
a. As to $60,000 in payment of outstanding legal expenses associated with these proceedings;
b. As to $75,000 to be used for future legal costs and disbursements of the wife in these proceedings and, subject to further or other order of the court to the contrary, not otherwise.
That the parties’ costs of and incidental to this application be reserved and, in the event that any party seeks a determination of such costs prior to the final hearing of the financial matters, that party has liberty to approach Registrar Riddiford to have the matter listed before me for that purpose.
The applications of the wife filed 30 October 2009 and 3 February 2009 and the husband’s response filed 10 November 2009 be otherwise dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Gaulit & Bunker is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 3776 of 2008
| MS GAULIT |
Applicant
And
| MR BUNKER |
Respondent
REASONS FOR JUDGMENT
Applications
The principal applications between the husband and the wife seek a final alteration of property interests and parenting orders regarding the parties’ child, a son born in March 2000. The parenting matters were to have been heard but have been adjourned for hearing before me on 10 May 2010 as the first case in that rolling list. Pursuant to an order made by me on 13 November 2009, the property matters are to be dealt with as a separate trial. The property proceedings also involve an intervenor, Ms B, who is one of two daughters from the husband’s previous marriage relationship.
The interim application requiring determination was filed by the wife on 30 October 2009. It is an application in a case in which the wife seeks an order that the husband pay the sum of $180,000, such sum to be paid to the wife’s solicitors’ trust account and utilised by her to meet her legal costs and disbursements and to later be categorised by the trial judge. There is an order in the nature of an enforcement which was not pursued. In addition, an order that the husband be restrained from ‘selling, transferring, encumbering or reducing the value of any real estate, company or any asset or financial resource in which he has an interest’ was not pursued.
A further application was filed by the wife on 3 February 2010 in which she applies for an interim property settlement in the same sum of $180,000. It is the wife’s intention to invoke the court’s jurisdiction either under the property power or the costs power but she only seeks the single sum of $180,000 and she deposes to her need to pay the past and future legal expenses for the conduct of the proceedings.
The wife’s outstanding legal expenses are $169,000. The court raised with senior counsel for the wife the implications for future preparation of the wife’s case if the majority of funds sought were applied in payment of outstanding expenses. Counsel for the wife advised that the wife, and significantly his instructing solicitors, agree that the sum of $100,000 can be quarantined to pay for future legal expenses and only $80,000 will be applied in payment of the outstanding liability.
The husband opposes any further monies being paid to the wife for litigation funding under any head of power. His response filed on 11 November 2009 stands as his response to both applications of the wife. He seeks the dismissal of those applications and that the wife pay his costs of these interim proceedings. Essentially the husband’s case is that the wife has already received $45,000 by way of litigation funding orders and that to provide the wife with a further $180,000 would outstrip her legitimate expectation to an alteration of property interests by $180,000. That is, he contends that the wife should receive no more than that which she already has including the $45,000 already paid.
Background
The husband was born in Italy and is 66 years old. He has re-partnered. He is a self funded retiree in receipt of a passive income of approximately $60,000 per annum.
The wife was born in the USSR and is 38 years old. She has re-partnered with a man of very modest means and there is a baby of that relationship. The wife is entitled to, and does, receive an income tested pension benefit. She is not employed outside the home.
The husband and wife married in 1997.
The husband brought all assets into the marriage including a business. The wife worked in that business. The husband alleges that the wife’s participation in the business led to him losing his industry licence, particularly by her argumentative nature, alienation of Russian clients and some court proceedings. Subsequently and with the husband’s support, the wife took out an industry licence in her own name and continued to run the business. The husband’s case will be that the second incarnation of the business failed miserably also through the fault of the wife.
As part of the alteration of property interests, the husband seeks that there be an adjustment in his favour for the wife’s “negative contribution” of $300,000 to $400,000. Although this was not a concept which counsel for the husband had legal authority to support, she submitted that the argument contextualises her client’s position that the wife made no worthwhile direct or indirect financial contribution during the marriage.
The husband also claims that the wife is responsible for him incurring a loss of $86,000 by lodging and then unreasonably refusing to withdraw caveats over the title to certain property.
The period of cohabitation is in issue. The husband alleges that he and the wife separated in May 2000 with the consequence that it was a short marriage of less than three years. He deposes that “[t]he property which exists has been valued historically as at May 2000.” On the husband’s case they cohabitated separately under the one roof for years including for the period during which the business was in difficulty. On the other hand, the wife alleges that she and the husband separated on 5 January 2006 after nearly 10 years of cohabitation. The court was informed that at the final property hearing evidence by the husband and wife and a number of witnesses will be called to establish the date of separation for which each party to the marriage contends.
The son is the only child of the marriage. Both parents seek primary residence of the child. The husband alleges that from 2003, when he stopped working in the business and the wife took employment in sales, he was the primary carer for the child. The wife’s case is that she was the primary carer. In any event, they were residing under the one roof. The issue of the child’s residence will be determined prior to the property hearing.
The husband is assessed to pay the wife about $260 per month in child support. At the time of this hearing, he was about $400 in arrears of his obligation.
The husband holds effectively all of the assets divisible between the parties.
For the purpose of this application it is agreed that the asset pool is somewhere between $900,000 and $2.4 million. The difference is attributable to a few issues but, principally, to a third party claim by the eldest of the husband’s two adult daughters, Ms B. Ms B asserts that the husband by himself and through AW Pty Ltd holds various properties on trust for her and her sister or, alternatively, her, her sister and himself. If the intervener’s claim succeeds, assets up to the value of approximately $1.5 million may be quarantined from the pool of assets divisible between the parties. Counsel for the husband informed the court that the husband opposes Ms B’s claim but it is not apparent on what basis he does so because he has not yet been required to articulate his response (defence) to the statement of claim. The wife opposes the intervener’s claim.
The husband owns some property in his own right and some property is held under corporate and trust structures. However, there are no issues about the husband’s control or, subject to determination of the intervener’s claim, his entitlement to assets held in a trust or company.
There has already been one litigation funding order which was made on an application of the wife filed 21 November 2008 in which the wife’s costs to complete the proceedings were estimated by her previous solicitor at $55,000.
On 2 March 2009 Young J made orders by consent that $35,000 be paid to the lawyers for the parties (there was no intervener at that stage) and that a further $20,000 was set aside to pay for certain valuations. Those moneys included borrowings. Accordingly, each party has already had the benefit of $45,000 by way of litigation funding. The husband says that he paid a shortfall in valuation expenses of $6,800 of which he seeks the wife pay him one half.
The husband has applied the $35,000 received under Young J’s order to his legal costs. His lawyers and counsel have agreed to conduct the litigation on the basis that his costs and disbursements will be paid at the conclusion of the case.
Counsel for the intervener did not wish to be heard on the merits of the application. Her client’s position is that, come what may about litigation funding, she seeks that the shops in B and a property at E be preserved pending the final determination of her client’s claim. Mr Bartfeld did not press his client’s application as to the source of whatever litigation funding is ordered. Ms Vohra sought that her client have time to consider his options to raise funds in the event that I make orders contrary to his application but semaphored that the husband seeks to retain the home at which he spends most of his time with the child, at least until a final hearing. It is premature to consider the need to preserve particular property.
Legal principles
The applicant’s claim is made first as an application pursuant to s 79 and 80(1)(h) of the Family Law Act 1975 (Cth) (‘the Act’) for an interim property order and second, and by way of a fall back position, under the costs jurisdiction of the Court in s 117.
In Strahan & Strahan (Interim Property Orders) [2009] FamCAFC 166 the Full Court considered the preconditions and relevant considerations for exercise of the court’s power to make an interim property order. The overarching consideration is the interests of justice and that the result is just and equitable within the meaning of s 79. In real terms, the amount ordered should be capable of re-adjustment at a final hearing, having regard to the court’s preliminary and necessarily limited assessment of the ultimate entitlement of the person seeking the funds. The three stage process was described by the Full Court in the following terms:-
130 In relation to the first stage, in our view, when 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 establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power. In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.
131 In Harris at 79,930 the Full Court gave some examples of circumstances where it may be appropriate to exercise the power being “where both parties agree to the disposal of some assets pending the trial” and “[u]rgent situations” to avoid injustice. 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.
132 Then turning to the substantive step we adopt what the Full Court said in Harris at 79,930 in relation to the second and third matters which we will now discuss.
134 In relation to the second matter, as the jurisdiction under s 79 of the Act is being exercised the provisions of that section must be considered and applied but with limitations given that it is not the final hearing. There is also no requirement of compelling circumstances in relation to the substantive step.
135 As to the third matter identified at 79,930 by the Full Court in Harris, in discussion before us it was described as the “adjustment issue” or “claw-back issue”. It was submitted by senior counsel for the Wife that it is relevant to consider whether an order would give the applicant “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?” As we have observed the Full Court in Zschokke at 83,220-221 stressed the importance of consideration of the “adjustment issue” if the power in s 80(1)(h) of the Act is being exercised. 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. As Finn J said at [126] the interim order must be “capable of alteration at any time prior to, or as part of, the final exercise of the s 79 power”.
137 Once a court proceeds to exercise the power in s 79 of the Act, being in the substantive phase, a court 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. However 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 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”: Zschokke; Polletti and Polletti per Nygh J and Wenz v Archer. As senior counsel for the Wife submitted, “provided scope can be found within the assets of the parties for an order of the size sought ... then that should be the end of the matter”. In other words, in such circumstances the applicant would only be receiving what he or she was entitled to receive when the power was exhausted.
138 The legislation does not prescribe what the Full Court in Zschokke at 83,218 described as “preconditions” and nor would we seek to exhaustively prescribe matters that may be relevant to take into account in the exercise of the discretion under s 80(1)(h) of the Act. As to the three “criteria” identified by the Full Court in Zschokke, we accept that an inability on the part of an applicant for an interim property order to defray the costs of litigation to meet his or her litigation costs would be a relevant matter to take into account at the procedural or first stage. Senior counsel for the Wife submitted that it may be relevant at the substantive or second phase in reviewing the “necessarily limited and impressionistic budget for costs” to ensure that the application is bona fide. We are of the view that it may be that any issue about the bona fides of an application is relevant at the procedural phase in the context of considering if in the interests of justice it is appropriate to make an order before the final hearing.
139 We also emphasise that in order to establish an appropriate case for an interim property settlement order more is required than the mere fact that upon a final hearing the applicant would receive the property being sought (or an amount in excess of the funds being sought) from the other party.
140 As to the other matters being a position of relative financial strength on the part of the respondent to an application and the capacity of the respondent to meet his or her own litigation costs, there is no doubt that the financial circumstances of both parties are relevant at the substantive stage and may also be relevant at the procedural stage. Senior counsel for the Wife submitted that all of the matters discussed by the Full Court in Zschokke are self-evident and we accept that this is so in relation to at least two of the matters being the need for funds and the financial circumstances of both parties.
141 As to the various matters discussed by Brereton J in Paris King Investments which we have discussed above, we do not propose to deal with all of what his Honour said, however we make the following observations about some of the matters. Obviously the applicant should have “at least an arguable case for substantive relief which deserves to be heard”. Further, in determining at the procedural stage whether to exercise the jurisdiction there may need to be evidence of the applicant’s “likely costs of the litigation” given that the need for funds to defray litigation costs and expenses is the circumstance propounded as to why it is appropriate that an order be made. We also accept that “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.
Discussion
I will adopt the three stage process referred to in Strahan’s case.
Stage 1
In this case the wife’s need for funds is to properly conduct the litigation into the future. Given the concession that less than one half will be applied in payment of outstanding costs, it is apparent that monies will remain available for the wife to apply them to her future costs.
A further contention of the husband is that the wife is not conducting her litigation responsibly. Counsel for the husband was critical of the amount spent by the wife on legal costs, particularly in view of her claim which is for $500,000 by way of an adjustment of property interests and $30,000 by way of capitalised spousal maintenance. It was submitted by Ms Vohra that the husband “is being asked to pay well over the odds for the way the wife and/or her solicitors choose to run the application”.
I also have concerns about the proportionality of what the wife has spent. However, sometimes cases of small ambit are expensive to run. It does not follow that they cannot or ought not be pursued. Thackray J stated in Strahan & Strahan (Interim Property Orders) [2009] FamCAFC 166:
227. I accept the submission of senior counsel for the Wife that in applications designed to secure funds for legal costs it is appropriate for the Court to give consideration to whether the claim for costs is “genuine” – i.e. that a party is not bringing an interim application on a pretext. However, once the Court is satisfied the claim is genuine, it should not “take a narrow view of the costs budget”. I also agree that “it is dangerous for the Court to put itself in the solicitor’s chair [especially in a case where] there are 182 boxes of materials to go through”.
228. Finally, I accept the submission of senior counsel for the Wife that it is not appropriate to seek to control the extraordinary level of costs incurred in this litigation by denying only one of the parties access to funds.
Disproportionality is a dynamic to which both sides of litigation contribute. Whereas the wife pitches her entitlement at $530,000, the husband puts it at $45,000. Both parties may perceive that they have no option but to continue, particularly as the wife has already invested $35,000 in legal expenses and is liable for a further $169,000. On this basis, I am satisfied that the sum claimed by the wife is ‘genuine’ and it would not be appropriate for the court to seek to control the parties’ access to costs by denying the wife access to funds.
Stage 2
As indicated, the remaining assets divisible between the parties have a net worth of between $900,000 and $2.4 million.
The wife has already received the benefit of $45,000 which, when added to the funding she now seeks, would bring her interim property entitlement to $225,000. That is the equivalent of 25% of the smaller pool and less than 10% of the pool which is predicated on the failure of the intervener’s claim. The smaller asset pool is predicated on the total success of the intervener’s claim. The intervener’s claim seeks alterative relief by which the husband would be beneficially entitled to one third (or $500,000) of the relief claimed by the intervener.
The husband points to his overwhelming initial direct financial contribution and there appears to be no dispute that the husband brought all of the assets into the marriage. The wife concedes that her significant contributions were in the nature of homemaker and parent and indirect financial contributions. The husband takes issue with both categories of contribution and says that, from 2003 until physical separation, he was the child’s primary carer and the wife’s involvement in his business resulted in high losses.
The husband contends that the marriage was of short duration. He says that the parties cohabitated for three, rather than ten, years albeit that they were involved in commercial activities for three or so years after the time at which he alleges they commenced to live separately under the one roof. The wife is not now in gainful employment but, as Ms Vohra submits, that is likely to be a consequence of the birth of the child of a subsequent relationship.
There are a number of obvious issues which cannot be resolved until trial. The husband’s main contention against the order sought is that it will provide to the wife considerably more than she can or should receive at the final hearing. The husband’s position is that “there be no further payment to [the wife] by way of property settlement. If there was to be any further interim payment to [the wife] by way of interim distribution or part property settlement, I would not be able to recover those funds from her.”
Determining a date of separation is perhaps less significant than assessing contributions which endured after May 2000, the date on which the husband alleges he began living separately from the wife. However, even on his case they shared a commercial relationship until about 2003 and lived within the same residence for years after that.
On the facts currently presented to me, and assessing as best I can the matters arsing under s 79, it seems that the applicant will likely receive by way of property settlement somewhere in the vicinity of 20% to 25% of the smaller asset pool and a smaller proportion but larger payment out of the larger asset pool in the event that the intervener’s claim fails. Accordingly, my preliminary assessment of the wife’s likely entitlement at a final hearing leads me to conclude that interim orders in the wife’s favour totalling $225,000 are not excessive.
It should be noted that this assessment is only for the purpose of this application and is necessarily limited by the fact that the court has not heard evidence let alone cross examination or submissions. This assessment does not represent a pre-judgment of the property case. For the purpose of this assessment, I have assumed that the husband will be successful in his contention that the parties separated under the one roof in May 2000 and that his businesses failed whilst the wife was working in them. I have allowed the intervener’s claim in terms least favourable to the husband. I assess the wife’s contribution based entitlement at between 15% and 20%, principally on home maker and parent contributions under s79(4)(c), and the adjustive factors under s75(2) at only 5% having regard to parenting matters still being in issue.
If ultimately the court is satisfied of facts for which the wife contends, the wife’s entitlement would increase. All this said, absent a significant change in facts these orders will probably exhaust the scope for any such further applications in the future.
Stage 3
It is envisaged that all of the money which the wife receives under interim property orders will be exhausted or committed by the time that this matter is adjusted on a final basis. Accordingly, there will be no asset of the wife from which any ‘claw back’ or re-adjustment could occur. Whilst I am satisfied that the amount sought by the wife is within the range of her likely entitlement to an alteration of property interests, I am mindful of the fact that there is no capacity for a claw back to occur. Having regard to this aspect, I propose to limit the wife’s entitlement by way of interim property settlement so that this payment and the benefits of $45,000 under the Order made on 2 March 2009 do not exceed an amount equivalent to 20% of the smaller asset pool, that is $180,000. Accordingly, I will require that the husband pay the wife the sum of only $135,000.
Having regard to the concession that $100,000 out of any $180,000 payment would be quarantined for future legal expenses, I will require that the similar proportion of the amount payable under this order be earmarked in the same way.
I did not receive submissions in relation to the payment sought by the wife being made in the exercise of the court’s jurisdiction as to costs. Having regard to my decision it is not necessary for me to consider it further.
Conclusion
I am satisfied that a payment to the wife of $135,000 is just and equitable and otherwise proper.
I have already discussed with counsel that costs will be reserved. That does not mean that they are reserved to the final hearing of the financial matters. If any party seeks to make application against any other party for that other party to pay some or all of their costs of this application, they can approach Registrar Riddiford and ask for the matter to be listed accordingly.
I certify that the preceding forty two (42) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Bennett.
Associate:
Date: 22 March 2010
0
1