Hawthorn and Hawthorn (No 2)

[2012] FamCA 1141

FAMILY COURT OF AUSTRALIA

HAWTHORN & HAWTHORN (NO. 2) [2012] FamCA 1141

FAMILY LAW – PRACTICE & PROCEDURE – Leave to make oral application refused – orders sought for access to invested funds for litigation funding

APPLICANT: Ms Hawthorn

RESPONDENT: Mr Hawthorn

SECOND RESPONDENT S Pty Ltd

FILE NUMBER: MLC 2447 of 2011

DATE DELIVERED: 11 July 2012

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Bennett J

HEARING DATE: 11 July 2012

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Stoikovska

SOLICITOR FOR THE APPLICANT: Leanne Cain & Associates

COUNSEL FOR THE RESPONDENT: Mr D. Brown SC

SOLICITOR FOR THE RESPONDENT: Campbell & Shaw

SOLICITOR FOR THE SECOND RESPONDENT McPherson & Kelley Lawyers

Orders

BY CONSENT IT IS ORDERED THAT:

1.This matter be fixed for final hearing before me on 5 February 2012 estimated to take 4 days.

2.This matter be listed for mention in court before me on 8 November 2011 at 9.00 am for the purpose of  checking on the readiness of the matter for the private mediation to which the parties have agreed and, in particular, that the single expert witness valuations have been published and no party seeks to adduce further expert evidence.

3.Until further Order the husband and the second respondent be and are hereby restrained from dealing in any manner whatsoever with the balance of consideration for the transfer of the husband’s units in the T Unit Trust, whether the sum of $2,576,288 (or any other sum) save for withdrawing the sum of $200,000 to be paid:-

a)      to the husband as to $120,000 by way of partial property settlement; and

b)     $80,000 to be characterised at trial and, in the meantime, to be paid by to the wife on account of his obligation to pay spousal maintenance and mortgage instalments on the former matrimonial home. 

4.The husband forthwith do all acts and things necessary to comply with paragraph (5) of the Orders made on 22 May 2012 and until further order he be, and is hereby, restrained from dealing in any manner whatsoever with the income tax refund and interest thereon and any further refunds due to him pending trial.

5.The husband, wife and the second named Respondent forthwith execute the letter of authority attached to the wife’s Further Amended Application in a Case dated 9 July 2012 (such letter as amended this day) to appoint as single expert Mr P of Accounting Firm N, to value the husband’s interest or entitlement in:

(a)    the T Unit Trust prior to the redemption and as if the redemption had not occurred;

(b)    the husband’s interest in the Hawthorn Family Trust; and

(c)    any other valuable interest, entitlement or perquisite held or enjoyed by the husband arising from his interest and/or entitlements in the T Unit Trust and/or the Hawthorn Family Trust and/or his employment by S Pty Ltd:-

and the husband shall be responsible for the cost of the valuation at first instance.

6.The parties do and hereby appoint Mr K as single expert property valuers to value such real property as Mr P may require to be valued for the purpose of his valuation pursuant to paragraph 5 and the husband shall be responsible for the cost of the valuation at first instance.

7.The second Respondent pay the wife the sum of $105,000 to be debited against her credit loan account in the Hawthorn Family Trust, such payment by electronic funds transfer to the account which has been nominated by the wife and be made within 7 days, subject to the notation herein.

8.The $105,000 referred to in the preceding paragraph is an interim property settlement.

NOTATION:

In the event that the source of funds for interim property settlement is derived from monies which need to be borrowed (rather than from the tax refund in the sum of about $460,000) the second Respondent reserves the right to submit that the nett cost of borrowings be reimbursed at trial.

IT IS FURTHER ORDERED THAT:

1. By not later than 7 November 2011 each party file and serve an updated financial statement.

2. In respect of the private mediation which has been arranged by the parties on 3 December 2012 to be convened by Mr Mawson of Senior Counsel at 10.00 a.m.:-

   a)The parties do all acts and things necessary to require the mediator to contact my Associate at the conclusion of the mediation, to advise if the matter is resolved in its entirety and:-

   i.if the matter is resolved, the mediator specify the manner in which the parties seek to formalise the settlement and my Associate list the matter as appropriate; and

   ii.     in the event that the matter is not resolved the parties and their practitioners proceed to court for directions before me.

   b)The parties do all acts and things necessary to ensure at the private mediation he/she is represented by counsel who is to be retained by him/her/them at the trial, being Mr Brown SC with Mr Holmes for the husband, Ms Stoikovska for the wife and Dr Ingleby for the Second Respondent;

   c)I DIRECT that a sealed copy of this Order be forwarded to the mediatior by my Associate under cover letter which draws his attention to the contents of this Order insofar as it pertains to the mediation.

3. I DIRECT that my Associate have the file to hand on 3 December 2012 in anticipation of being contacted by the mediator and list the matter in Court on that day.

4. The parties do all acts and things necessary to ensure that any expert witness whose evidence is relevant to an asset in dispute is available to the mediator and the parties, at least by telephone, on the day of the mediation.

5. By way of compliance with Rule 19.04 of the Family Law Rules 2004 by not later than 12.00 noon on Thursday 29 November 2012, the practitioner for each of the husband and the wife provide notice in writing to his/her client of:-

   a)the actual costs incurred by the client up to and including that date;

   b)any expenses paid or payable to an expert witness or, if those expenses cannot be ascertained, after the making of all reasonable enquiries, an estimate of any expenses;

   c)the costs payable for the private mediation;

   d)the costs payable for each day of the trial;

   e)the estimated length of the trial; and

   f)the date of payments made and the source of the funds for the costs paid or to be paid so that:-

   i.      if costs have been paid by cheque, details must be provided of the account on which the cheque was drawn;

   ii.     if costs have been paid by credit card, the details must identify the finance provider and number and name of the credit card facility; and

   iii     if costs have been paid in cash, the details must identify the payer.

6. Contemporaneously with compliance by the practitioner concerned with paragraph 13 of this Order, the practitioner provide to my Associate by email - a copy of the notification given to his/her client pursuant to paragraph 13 of this Order AND IT IS DIRECTED that my Associate send a copy of the notification to:-

   a)the mediator; and

   b)to the other parties to the proceedings.

7. All interim applications in a case be otherwise dismissed.

AND IT IS FURTHER NOTED BY THE COURT that, in the event a party fails to comply with their obligation to prepare the matter for the private mediation to which they have agreed, the orders made in relation to the private mediation and the final hearing may be vacated.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Hawthorn & Hawthorn has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 2447 of 2011

Ms Hawthorn

Applicant

And

Mr Hawthorn

Respondent

And

S Pty Ltd

Second Respondent

REASONS FOR JUDGMENT

ex tempore

1. On this mention day, the parties have had extensive discussions and I congratulate them and their counsel on the extent to which they have been able to adjust interim matters in four pages of handwritten minutes which I will ultimately make as orders sought by consent.  My impression is that the parties and their practitioners have placed significant importance on keeping “all the balls in the air” and issues alive to be argued at the final hearing rather than today.  That is sensible.  Piecemeal hearings are frequently unsatisfactory.  At the final hearing, they and the court should be in possession of all of the evidence of the case. 

2. The one issue upon which the parties cannot agree is whether the husband ought to have leave to make an oral application to take from invested funds amounts which he says will be required to pay single expert witnesses who are contemplated to make assessments and prepare reports in this matter in time for a private mediation to which the parties have agreed.  IF I grant leave, I am asked to determine this issue on the papers.  I have specifically offered counsel the opportunity to cross-examine; they have not indicated that they would take up that opportunity and nor have they taken up the opportunity of a longer hearing on Friday of this week which could necessarily entail cross-examination.  Accordingly, I will assess the issue of leave and the matter on what is before me.  I have made known to counsel that I have not read all of the documents so they have been able to take me to the parts of the evidence upon which his/her client relies.

3. The units which the husband owned in the T Unit Trust were, he says, compulsorily acquired in January 2012 for a consideration of $2,570,000 in odd figures.  Pursuant to orders which I made on 22 May 2012, the husband was restrained from dealing with those monies save for withdrawing the sum of $30,000 for his own support.  My assessment was that the husband could then meet all of his obligations statutorily for child support and pursuant to orders of this court for spousal maintenance, mortgage payments and the like[1]. 

   [1] See [2012] FamCA 785

4. Today, the parties agree that those invested funds will be further dipped into:-

   a)to meet a partial property settlement in favour of the husband;

   b)to meet a further payment to the husband which will be characterised at trial which he will pay immediately to the wife on account of her spousal maintenance and mortgage payments which we have calculated roughly could accrue before about April of next year. 

5. The wife is also to receive the sum of $105,000 from a discrete source and this is also by way of a part property settlement. 

6. The husband seeks payment of the experts’ fees.  The arrangements agreed to by the parties and implemented by the minutes of order which they have handed up (and which I will make), contemplate and provide for a single expert report by Mr P of Accounting Firm N as to the value of the husband’s interest in the Unit Trust prior to that interest being redeemed and as if the redemption had not occurred.  That is, his interest – whatever that may be – in the Hawthorn Family Trust and:

   any other valuable interests, entitlement or prerequisite held or enjoyed by the husband arising from his interest and/or entitlements in the [T] Unit Trust and/or the [Hawthorn] Family Trust and/or his employment by [S] Pty Limited.

7. The orders also provide for a property valuation to be undertaken by Mr K of CK Valuers. 

8. Both the real property and trust valuations are said by Mr Brown, who appears for the husband with Mr Holmes, to be potentially expensive or at the “upper end”.  He cannot, however, say how much they will be.  Mr Brown suggested at some point about $50,000 but made clear that was a guesstimate and I don’t know if Mr Brown was referring to the fees payable to Mr P or to CK Valuers or to both. 

9. The wife, through Ms Stoikovska, submits that $2.5 million investment, being the alleged proceeds of the acquisition of the husband’s shares in T, will be eroded and not be available at the final stage to meet the wife’s legitimate claim to an alteration of property interests.  On this basis she opposes the husband having recourse to the invested funds to pay for the experts’ valuations.

10. Counsel for the wife points specifically to some inconsistencies in the husband’s material.  For instance the husband deposes at paragraph 10 of his affidavit sworn on 15 June 2012 that his only income is $3311 per week made up of basic income and motor vehicle allowance and rental assistance paid by S Pty Ltd.  He points to his expenses in paragraph 11 of the affidavit and details in paragraph 12 that his expenses exceed his income by $2168 per week, those expenses including mortgage payments and maintenance which he pays for the wife’s benefit and which total about $2,700 per month.. 

11. He says in paragraph 13:

    In order to comply with my obligations under the order of Senior Registrar FitzGibbon, my child support commitment and other necessary expenses, I have had to borrow money and draw against my loan account with [Hawthorn] Family Trust.  I say that I have not exceeded the $30,000 withdrawal limit allowed to me by her Honour Bennett J in compliance with paragraph 4 of the order made on 22 May 2012. 

    Apparently the husband deposed thus to meet the submission by counsel for the wife that, in addition to the husband’s income, the husband was continuing to receive monies from the S Pty Ltd loan account (which represents the proceeds of sale of the T Unit Trust shares in the sum of about $2.5 million).  However, the affidavit refers not to the $2.5 million investment or loan account or entitlement or whatever it is;  it refers to the “loan account with the [Hawthorn] Family Trust”. 

12. I accept that the husband’s narrative of his financial means and his income and monies that he has had and from what source is attended by some ambiguity and uncertainty.  It may be that that could be remedied by oral evidence but no one has sought to call any evidence from him.  In any event, I cannot be satisfied that the husband is in need of the further order that he seeks which would entitle him to dip into the $2.5 million entitlement in order to pay experts’ fees. 

13. The husband’s affidavit sworn on 15 June 2012 sets out the current liabilities and some capital liabilities.  One is to his solicitors.  He deposes in paragraph 14, “In addition I have legal fees currently outstanding in the sum of $12,890 and work in progress of approximately $15,000”.  That was sworn nearly a month ago.  Today he has junior and senior counsel representing him.  I can only assume that his legal costs have increased, but I do not know by how much they have increased. By operation of the orders that the parties have agreed to today the husband will receive, at least, $100,000 which he can put towards funding his litigation. 

14. If it was the case that Mr Brown as counsel for the husband or anyone else at the bar table, for that matter, could tell me how much the expert’s fees were going to be I could make an assessment.  However, as matters stand if I acceded to the oral application of the husband I would be allowing him to dip into invested funds on an open-ended basis and without further scrutiny by the wife or by the Court as to how much is expended of experts.  In the circumstances of the case, I will not give leave for the husband to make this application orally.  This means he can make it subsequently in proper form.

15. It seems to me unfortunate that counsel and parties have worked very hard to reach a solution to many problems today whilst preserving their rights to argue matters of principle and law and various things later on, but have not been able to resolve this issue of payment of experts’ fees. 

16. If the matter comes back on a litigation funding issue by the husband seeking payment of the single expert witness fees and I am satisfied that that money ought be accessed as he proposes, I caution the parties that there are likely to be cost consequences that flow.  Likewise, if he comes with that application and fails it will be because good reason and cost consequences will flow from that too.  I urge the husband and the wife to consider their respective positions on litigation funding before bringing the matter back to court and incurring further legal costs to do so. 

17. I note that the minutes of orders that I am asked to make provide that the husband will be responsible at first instance for the cost of both valuations to which I have referred.  I would expect an application for litigation funding to follow.  Otherwise, I would expect that the mediation will be delayed.  If the mediation is delayed the trial which I am about to give the parties will be vacated.  That is one further aspect which should encourage the husband and wife to resolve how each funds this litigation sensibly and soon.

18. I make orders in the terms of the minute as amended, which I mark exhibit A and direct remain on the Court file.

    RECORDED   :   NOT TRANSCRIBED

1. Returning to the reasons for judgment, Ms Stoikovska for the wife, correctly points out that the reference in my reasons initially to the husband’s entitlement being either $2.5 million or $2.7 million or thereabouts could be construed as being the gross value of the redemption payment which he received upon his shares being acquired as he says.  In fact, the gross redemption payment was significantly in excess of $2.7 million.  The moneys which were subsequently invested and which are dealt with by the orders that I have made today represent the net proceeds after repayment of finance taken to purchase the shares in the first place.

I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Bennett delivered on 11 July 2012.

Associate: 

Date:  29 January 2013