Halsted & Baughan
[2021] FedCFamC1A 65
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1) APPELLATE JURISDICTION
Halsted & Baughan [2021] FedCFamC1A 65
Appeal from: Baughan & Halsted [2021] FCCA 1626 Appeal number(s): SOA 42 of 2021 File number(s): MLC 10907 of 2020 Judgment of: STRICKLAND J Date of judgment: 16 November 2021 Catchwords: FAMILY LAW – APPEAL – LEAVE TO APPEAL – INTERIM ORDERS – Where the applicant asserts that the primary judge fell into error by confusing the requirements of an interim property settlement order made pursuant to s 90SM of the Family Law Act 1975 (Cth) with the requirements of a litigation funding order made as a costs order pursuant to s 117 of the Family Law Act 1975 (Cth) – Where the applicant argues that the primary judge concluding that she was satisfied that there was an “arguable case” erred by effectively determining the application on that basis and failing to consider the reversibility of the interim property settlement order – Where there is no merit in these arguments – Application dismissed.
COSTS – Where the respondent sought an order for costs in the event the application for leave was refused – Where that application was not opposed – Where the applicant has been wholly unsuccessful in her application – Where the disparity in the parties’ financial resources is a factor to be taken into account – Costs ordered in the amount sought by the respondent.
Legislation: Family Law Act 1975 (Cth) s 74, s 79 s 90SM, s 117 Cases cited: Gronow v Gronow (1979) 144 CLR 513; [1979] HCA 63
Lao & Zeng [2021] FedCFamC1A 17
Medlow & Medlow (2016) FLC 93-692; [2016] FamCAFC 34
Salvage & Fosse (2020) FLC 93-966; [2020] FamCAFC 144
Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466; [2011] FamCAFC 126
Zschokke and Zschokke (1996) FLC 92-693; [1996] FamCA 79
Number of paragraphs: 46 Date of hearing: 22 October 2021 Place: Adelaide via Microsoft Teams to Melbourne Counsel for the Applicant: Dr Ingleby Solicitor for the Applicant: Lander & Rogers Counsel for the Respondent: Dr R Smith Solicitor for the Respondent: Savage & Co Pty Ltd ORDERS
SOA 42 of 2021
MLC 10907 of 2020FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MS HALSTED
Applicant
AND: MR BAUGHAN
Respondent
ORDER MADE BY:
STRICKLAND J
DATE OF ORDER:
16 NOVEMBER 2021
THE COURT ORDERS THAT:
1.The application for leave to appeal be dismissed.
2.The applicant wife pay the costs of the respondent husband fixed in the sum of $10,729.20.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
INTRODUCTION
By Notice of Appeal filed on 16 July 2021, Ms Halsted (“the wife”) seeks leave, and if leave is granted, to appeal from interim orders made on 21 June 2021 by a judge of the Federal Circuit Court of Australia (now known as the Federal Circuit and Family Court of Australia Division 2), which orders were made in property settlement proceedings between herself and Mr Baughan (“the husband”).
The interim orders require the wife, upon settlement of the sale of a property, to pay the sum of $45,000 by way of interim property settlement, and the sum of $80,000 in litigation funding, to the husband and his solicitors respectively.
For the reasons that follow, the application for leave to appeal must be dismissed.
BACKGROUND
The parties separated in June 2018, having lived in a de facto relationship for some eight years. In these reasons for judgment, for ease of reference, the parties are referred to as husband and wife, despite the fact they were never married.
There are no children of the relationship, but both have children from previous relationships.
The financial position as between the parties is stark. According to the wife’s Financial Statement filed in May 2021, she had net assets valued at approximately $4.7 million, whereas the husband had net property of approximately $35,000 according to his Financial Statement, also filed in May 2021.
On 7 October 2020, the husband commenced the property settlement proceedings in the Federal Circuit Court of Australia, seeking final orders calculated on a 70/30 per centum adjustment of the parties’ net assets in the wife’s favour.
On 5 May 2021, the husband applied for an interim property settlement of $45,000 and litigation funding of $80,000.
The wife’s overall position in the proceedings is that no orders for property settlement should be made due to her overwhelming contributions, and accordingly, the husband’s application for property settlement should be dismissed. The wife sought the husband’s interim application be dismissed in line with her overall position.
It is not in dispute that the wife’s initial financial contributions to the relationship were overwhelming, and included five investment properties. It is also not in dispute that the husband’s initial contributions were relatively minimal.
The husband’s case is that during the relationship he made financial contributions, homemaker contributions (including assisting in caring for the wife’s children from time-to-time and caring for the wife during her treatment for breast cancer), and undertook maintenance on the wife’s various investment properties. The wife disputes the extent of the husband’s contributions and the weight to be given to them in light of her overwhelming initial contributions, and contributions made during the de facto relationship, such that it is not just and equitable for there to be any division of the parties’ assets by way of property settlement.
THE APPLICATION FOR LEAVE TO APPEAL
This being an appeal against interim orders, leave is necessary. The test to be applied in applications for leave to appeal is whether, in all of the circumstances, the decision is attended by sufficient doubt to warrant it being reconsidered by the appellate court, and whether substantial injustice would result if leave were refused, supposing the decision to be wrong (Medlow & Medlow (2016) FLC 93-692). However, that is a guideline which does not fetter the wide statutory discretion of the court.
The wife contends leave to appeal ought be granted, relying on the following:
5. The errors of principle were that the primary judge:
(a.)Made an interim determination that it was just and equitable for an order to be made without specifying whether this finding related to an interim or final order;
(b.)… omitted consideration (or at the very least gave insignificant weight) to the requirement that an interim order be capable of correction at trial, in circumstances where it was clear that:
i. the interim orders could not be reversed if the [wife] was successful at trial; and
ii. the [wife] had a serious case to that effect;
(c.)Did not sufficiently distinguish the requirements for the 2 separate payments;
(d.)and therefore made the part property settlement order, despite such issue [was] required to be determined at a final trial.
6.The injustice is that the [wife] is required to pay sums of money totaling [sic] $125,000 with the prospect that she will never be able to reclaim them.
The husband submits that leave ought to be refused as it cannot be said that the decision is attenuated by sufficient doubt to warrant leave to appeal being granted.
As is not uncommon, the merits of the proposed appeal will be determinative of the application for leave to appeal, and thus it is appropriate to consider that first.
THE PROPOSED APPEAL
Ground 1 – The learned trial judge erred in law by determining that it was just and equitable for an order to be made pursuant to section 90SM of the Family Law Act 1975 for a part property settlement in the sum of $45,000.
Despite the terms of this ground, the argument ultimately advanced by the wife at the hearing before this Court was that her Honour failed to consider the reversibility of the interim property settlement order. The wife contended that it was not enough when considering an application for an interim property settlement order for her Honour to be satisfied that the husband had an arguable case for an adjustment, and her Honour needed to go on to consider the reversibility of the interim property settlement order.
As her Honour correctly recorded at [34] and [35], about which there is no dispute:
34 In relation to a part property distribution, there is a two-stage process:
(d)firstly, the Court must consider whether it is appropriate to exercise the power; and,
(e) secondly, if so, how that power should be exercised.
35The overarching consideration is the interests of justice. The party seeking the order does not need to establish compelling reasons. I need only be satisfied that it is appropriate to make the interim division.
(Emphasis as per original)
However, the wife asserted that the question of whether there is an arguable case is primarily a question to be addressed at the first stage referred to above, and that still leaves the second stage to be addressed, where primarily the question is the reversibility of the order for interim property settlement.
The wife contends that the primary judge fell into error as a result of confusing the requirements of an interim property settlement order made pursuant to s 90SM of the Family Law Act 1975 (Cth) (“the Act”), with the requirements of a litigation funding order made as a costs order pursuant to s 117 of the Act.
With the latter, it can be enough that there was an arguable case, and it is not strictly necessary to address the reversibility of the order (Salvage & Fosse (2020) FLC 93-966 at [13] and see Lao & Zeng [2021] FedCFamC1A 17 at [17]).
The wife asserts that her Honour’s confusion in this regard stemmed from a misreading of [141] of the Full Court decision in Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466, where the Full Court said this:
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.
It is argued that the “various matters” referred to by the Full Court are the requirements for a litigation funding order where the order is made pursuant to either s 74 or s 117 of the Act, and that [141] does not refer to the requirements for an interim property settlement order.
Thus, it is said that in [40] and [50], where her Honour concludes that she is satisfied that there is an “arguable case”, her Honour has erred by effectively determining the application on that basis, and failing to consider the reversibility of the interim property settlement order. Her Honour said this in those paragraphs:
40In my view, I am satisfied that the [husband] has adduced evidence which is reasonably able, at this interim stage, to satisfy the Court that this is a case in which justice and equity would require the making of an order. The evidence will no doubt be tested before the Court can finally determine that issue. I am not making any findings about that at this stage beyond stating that in light of the contributions and the circumstances to which the [husband] has deposed, that indicates, in my view, that he has an arguable case. In my view, his application is not weak, fanciful or misguided.
…
50I take all of those matters into account. In my view, on balance, this is a matter in which the interests of justice and equity require that the Court exercise its power under section 90SM and make a partial property order as sought by the Applicant in the sum of $45,000 to be paid to him. On the basis of all the evidence and taking into account all relevant matters, I am satisfied to the extent that I need to be at this interim stage that there is an arguable case for orders to be made under section 90SM and that there is an arguable case that the [husband] would be entitled to receive an adjustment of at least one per cent.
Her Honour does of course refer to the issue of the reversibility of the order in [46] and [47], and even describes it in the latter paragraph as “the major issue facing the Court in this matter”. However, the wife contends that her Honour, despite referring to it, did not in fact consider it, and reverts in [50] to relying on there being an arguable case.
There is no doubt that her Honour does create confusion in her reasons for judgment by not always distinguishing between the requirements for an interim property settlement order and for a litigation funding order, but as the husband contends, it is apparent from her Honour’s reasons for judgment that, despite the confusion, her Honour does undertake the task she identified in [34], namely addressing the two stage process.
Her Honour in [38] frames her consideration of the application as whether there is an arguable case, first, that it is just and equitable that any order be made, and secondly, whether the interim order can be varied or reversed.
Her Honour at [39]–[42] undertakes the required brief consideration of the husband’s contributions, including relevant concessions made by the wife, concluding at [40] as referred to above. And her Honour then says this at [42] and [43]:
42Taken as a whole, as I have already said, in my view, the [husband] is able to make out a reasonable case that he has made contributions to the property such that it would be appropriate that there may be an adjustment in his favour. Again, the quantum of that adjustment cannot be determined at this early stage.
43I also accept that the [husband] has a need for litigation funding and a part property distribution. He has very limited income and very modest assets. In those circumstances, it seems to me that in terms of the first limb, whether it is appropriate to exercise the power, I can be satisfied that it is.
Then, her Honour duly recognises in [44] that that was not the end of the matter, and she needed to consider what she described as the “second limb”, namely, “if the power to make an interim property order is to be exercised, how should it be exercised”, and as already adverted to, in [46] her Honour identified the need to consider the question of the reversibility of any order that was made, and proceeded to do that in the context of what the husband might be entitled to by way of interim property settlement. Her Honour’s analysis in that regard is as follows:
47As already observed, this is the major issue facing the Court in this matter. The [wife’s] submission is that the Court will ultimately be satisfied that orders not ought be made at all. However, as I have already said without making definitive findings, I am satisfied at this interim stage that the [husband’s] case for the making of an order has reasonable prospects of success. If the Court is ultimately satisfied an order should be made, on the wife’s evidence, that adjustment would need to be, clearly, modest.
48The [husband] seeks $45,000 by way of partial property settlement and a further $80,000 by way of litigation funding. His application for final orders seeks an adjustment to him of 30 percent. It does seem to me, on the basis of the evidence he has adduced to date, that may be a somewhat ambitious application. The sum of $45,000 he seeks at this stage as a partial property distribution represents less than one per cent of the current pool.
49I note the [wife’s] position is that there ought be no order at all. I also note that she would say that he has had the benefit of the balance of his compensation moneys and has also transferred moneys overseas and spent moneys in overseas travel, all of which need to be taken into account. I also note that if I am incorrect and if, ultimately, the Court determines that no order should be made, the moneys are unlikely to be able to be clawed back.
50I take all of those matters into account. In my view, on balance, this is a matter in which the interests of justice and equity require that the Court exercise its power under section 90SM and make a partial property order as sought by the [husband] in the sum of $45,000 to be paid to him. On the basis of all the evidence and taking into account all relevant matters, I am satisfied to the extent that I need to be at this interim stage that there is an arguable case for orders to be made under section 90SM and that there is an arguable case that the [husband] would be entitled to receive an adjustment of at least one per cent.
Her Honour’s analysis in [47]–[49] and finding at [50] reflects what the Full Court said in Strahan in relation to reversibility:
136.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.
(My emphasis)
As the husband contended, her Honour was not precluded from reaching the conclusion at [50] by reason of the wife’s position that there ultimately ought be no adjustment in the husband’s favour (Salvage & Fosse at [20]–[21]). Her Honour was required to, and did, form her own view as to the likely outcome of the property settlement proceedings after assessing the evidence, including concessions made by the wife. And in any event, there is no challenge to her Honour’s finding at [50] that the husband would receive an adjustment of at least one per centum. The focus of the wife’s appeal was that her Honour had failed to consider reversibility.
During the appeal hearing, the wife expanded this submission to include the alternative proposition that her Honour gave insufficient weight to the reversibility consideration. The difficulties in such a challenge are well-known (for example see Gronow v Gronow (1979) 144 CLR 513 at 519–520 per Stephen J). This submission is not borne out in any event. At [47], when considering reversibility, her Honour said “…this is the major issue facing the Court in this matter”, and later at [50] in finding it was just and equitable to make an order for partial property settlement, her Honour expressly referred to the reversibility finding. Thus, it is apparent that her Honour gave adequate weight to the reversibility of the order.
I have observed that her Honour’s reasons were somewhat confused, and that related to her Honour not always distinguishing between the requirements for an interim property settlement order, and for a litigation funding order. However, I do not accept the wife’s criticism that her Honour misread [141] of Strahan.
It is correct that that paragraph dealt with the requirements of a litigation funding order made pursuant to s 74 or s 117 of the Act, and with respect, I consider that Ryan J in Lao & Zeng, in saying at [72] that the reference to “an arguable case” in [141] “concerns s 79 and not s 117(2)”, and which was adopted by the husband’s counsel here, is incorrect. The “various matters” discussed in that paragraph relate back to [96] despite [141] being in a section of the judgment headed “The approach to an application for an interim property order”. In any event, that does not demonstrate error by her Honour, given that her Honour did not specifically refer to or rely on [141] at all in her reasons for judgment.
This ground has no merit.
Ground 2 – The learned trial judge erred in law by determining that an order should be made pursuant to section 117 of the Family Law Act 1975 for litigation funding in the sum of $80,000.
Although un-particularised in the ground, it seems that the wife asserts two errors by her Honour. First, that the primary judge “conflated” the “distinct factors” in making the litigation funding order (paragraph 21 of the wife’s summary of argument filed on 27 September 2021), and secondly, that it is unclear whether her Honour concluded that the husband “would be awarded at least 2.6 per cent at trial”, or that the husband “has an arguable case” for that outcome (paragraph 26 of the wife’s summary of argument filed on 27 September 2021).
As to the first alleged error, although as referred to above there was some confusion in the reasons for judgment when her Honour addressed the application for an interim property settlement order as to the requirements for such an order compared to the requirements for a litigation funding order, that confusion does not exist in relation to her Honour’s consideration of the litigation funding order.
After first considering the application for interim property settlement, her Honour concluded at [50] that it was just and equitable to make an order in the terms sought by the husband.
Then, at [53] her Honour turns specifically to the question of the litigation funding order pursuant to s 117 of the Act.
At [54] her Honour considers the disparity in the financial circumstances of the parties, and their respective ability to pay legal fees, as required by the Full Court in Zschokke and Zschokke (1996) FLC 92-693.
Then at [55] her Honour addresses the relative strength of the husband’s case, and refers to her previous findings in that regard. Having found that the interim property settlement order was appropriate, her Honour was then required to consider whether the husband’s claim for a litigation funding order had sufficient merit, taking the interim property settlement order into account. In other words, as submitted by the husband, her Honour needed to consider whether the husband had demonstrated sufficient merit to justify the interim costs on top of the interim property settlement order her Honour had already indicated was appropriate (paragraph 42 of the husband’s summary of argument filed on 18 October 2021). And her Honour did that in [56].
Thus, there is no merit in this first complaint.
As to the second alleged error, the answer is again found in the plain and appropriate language of [56] and [57], and it is unnecessary to respond further to this issue. It too has no merit.
CONCLUSION
Having found no merit in any of the grounds of appeal, there is no basis to grant leave to appeal as the decision is not attended by sufficient doubt, and the application must be dismissed.
COSTS
The husband sought an order for costs in the event the application for leave was refused. The amount sought was $10,729.20.
The application was not opposed by the wife in the event that leave to appeal was refused.
An order for costs is appropriate given the wife has been wholly unsuccessful in her application (s 117(2A)(e) of the Act), and the disparity in the parties’ financial resources. Thus, there will be an order as sought by the husband.
I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Strickland. Associate:
Dated: 16 November 2021
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