Hegarty and Hegarty
[2017] FamCA 1074
•21 December 2017
FAMILY COURT OF AUSTRALIA
| HEGARTY & HEGARTY | [2017] FamCA 1074 |
| FAMILY LAW – LITIGATION FUNDING – Interim property distribution under s 79 – Where husband has not established the amount required for funding – Order made for husband to receive partial litigation funding. |
FAMILY LAW – PRACTICE & PROCEDURE – Disclosure – Notice to produce – Where husband seeks further discovery from wife – Where order made dismissing the husband’s order sought for further discovery – Consideration of notice to produce under the Rules – Where no specific order made in respect of the notice to produce
| Family Law Act 1975 (Cth) s 117 Family Law Rules 2004 (Cth) r 15.76 Federal Court Rules 2011 (Cth) r 20.31 |
| In the Marriage of Zschokke (1996) 20 Fam LR |
| APPLICANT: | Mr Hegarty |
| RESPONDENT: | Ms Hegarty |
| FILE NUMBER: | ADC | 3260 | of | 2014 |
| DATE DELIVERED: | 21 December 2017 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Berman J |
| HEARING DATE: | 19 December 2017 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Heinrich |
| SOLICITOR FOR THE APPLICANT: | Boylan Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr McGinn |
| SOLICITOR FOR THE RESPONDENT: | Barnes Brinsley Shaw Lawyers |
Orders
That the husband be at liberty to withdraw from his B Superannuation Fund (account number POO124863S) the sum of SIXTY THOUSAND DOLLARS ($60,000) for the purpose of meeting his legal fees.
That paragraph 3 of the Application in a Case dated 15 December 2017 be dismissed.
That there be no order in relation to the Notice to Produce.
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 Hegarty & Hegarty 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 ADELAIDE |
FILE NUMBER: ADC 3260 of 2014
| Mr Hegarty |
Applicant
And
| Ms Hegarty |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
By Amended Initiating Application filed 19 April 2017 Ms Hegarty (“the wife”) seeks orders that in full and final settlement of matrimonial property the assets of the parties be adjusted between them as may be just and equitable.
The wife also seeks that the husband pay by way of spousal maintenance the sum of $500 per week.
Mr Hegarty (“the husband”) filed a Response on 15 December 2014 seeking detailed orders for settlement of property.
The parties have not been able to resolve their difference and by trial direction orders made 26 April 2017 all applications for final orders were initially listed for hearing on 6 November 2017, but by later order on 10 October 2017 the final hearing is now set for 5 February 2018.
It is common ground that the wife complied with orders and her trial affidavit material has been filed.
The husband was required to file his trial affidavit material by 17 November 2017.
Because of his absence from Australia he was unable to comply and on 22 November 2017 the proceedings were further adjourned to 19 December 2017 to enable the husband time to file and serve his trial affidavit material and in default for the Court to consider any application as may be filed by the wife for the matter to proceed on an undefended basis and the husband’s response struck out.
The husband filed an Application in a Case on 15 December 2017 seeking the following orders:-
(1) That time is extended for the husband to file and serve his trial affidavit material and amended response by 20 December 2017;
(2)That the husband be at liberty to withdraw from his [B] Superannuation Fund the sum of $115,000 to meet his legal expenses;
(3)That within 7 days the applicant wife disclose how all monies withdrawn from any account in her name with [C] Bank on and from 1 December 2012 have been spent or dealt with; and
(4)That the parties appoint a licensed valuer to value the contents of the former matrimonial home at [D Street, E Town Town], South Australia (“the [E Town] property”) and the husband’s home at [F Street, G Town], Queensland (“the [G Town] property”).
At the hearing, whilst not yet filed, the husband was able to satisfy the wife’s solicitors that his trial material would be filed by 20 December 2017. The wife conceded the application and the Court was invited to make an order by consent in terms of paragraph 1 of the husband’s application.
The parties also agreed for an appointment of a licensed valuer to value the contents of the homes in which each of the parties reside.
During the period of the adjournment the husband’s solicitors caused a notice to produce to issue from the Registry on 8 December 2017. That document was received by the wife’s solicitors only a few days prior to the hearing.
For reasons that will be discussed, I was not prepared to entertain any complaint on behalf of the husband that the documents to which the notice to produce refers were not produced in time for the hearing.
The matters for determination arise from paragraphs 2 and 3 of the husband’s application and the notice to produce.
The wife opposes the husband’s application for a lump sum to meet his legal expenses of $115,000, that she should be obligated to explain monies withdrawn from a C Bank account and produce documents as requested in the notice to produce at any time other than as may arise and be required during the trial.
During the hearing the Court raised the concern as to whether the proceedings would be ready for trial.
The significant (but not only) contention between the parties centres upon the value of the husband’s shareholding in H Pty Ltd (“HPL”).
HPL GROUP OF COMPANIES
By reference to the wife’s trial affidavit of 25 August 2017, the wife identifies the history and shareholding of the husband in HPL, being a company incorporated on 1 July 2013.
The parties separated in December 2013.
By reference to various documents, the wife clearly considers that the husband’s interest in HPL has substantial value and potentially is the single most valuable asset that will comprise the pool of assets available for division between the parties.
The wife sets out the various HPL entities in which the husband holds what she considers to be a valuable shareholding.
The wife contends that the husband has been reluctant to readily make discovery of documents generally, but in particular documents that would assist in the valuation of the husband’s interest in HPL.
Orders made 10 October 2017 gave leave to the wife to issue a subpoena directed to the company secretary of HPL seeking financial records and other documents that had been identified by the single expert necessary to complete a valuation of the husband’s interest in HPL.
The wife’s counsel advised the Court that the single expert valuer would likely publish his valuation report by 4 pm on 22 January 2018.
Counsel for the husband submitted that there were matters raised in the husband’s yet to be filed trial affidavit material which may present an uncertain environment for any valuation of the husband’s interest in HPL to be reliable. Without the benefit of the husband’s trial affidavit, little more was able to be said.
Given that the wife considers the husband’s interest could be worth in excess of $8 million, determined by way of recourse to a small tranche of shares recently sold by him, any gap in the evidence would be an important consideration as to whether the matter was ready to proceed for final hearing.
It appears from submissions of the husband’s counsel that whatever information or assertion is contained in his trial affidavit, it has not been forwarded to the single expert.
Whilst the information that relates to the uncertainty of either the husband’s interest or the value that should be attributed to that interest in HPL is clearly known to him (but not to the wife), an opportunity was given to the husband’s counsel to apply to adjourn the proceedings, or to at least foreshadow such an application may be made and if so when it was likely to be filed. The husband’s position is that no application was either to be made or foreshadowed with the implication being that the proceedings remain as listed. The parties are aware that if the trial date is vacated the Court would not be able to list another matter. The expectation of the Court is that the trial will run as listed.
LITIGATION FUNDING
The husband seeks to withdraw the sum of $115,000 from his B Superannuation Fund to meet his legal expenses. The application is opposed.
The amount is determined by the sum of $105,000 to meet existing and future legal costs and $10,000 being the husband’s contribution towards the preparation of the costs of the single expert valuation of the husband’s interest in HPL.
The husband relies upon the affidavit of his instructing solicitor filed 15 December 2017 which annexes an affidavit yet to be filed by the husband.
By reference to “SCH1” of the affidavit, the husband asserts that he does not have the funds to pay his share of the anticipated fees of the single expert in the sum of about $10,000.
He further contends that if he does not pay his solicitors the sum of $105,000 then they may terminate his instructions after 19 December 2017.
The husband sets out his litigation funding history and confirms that from January 2016 his income is in the sum of $150,000 before tax.
Notwithstanding invoices totalling $122,481 there remains presently outstanding $8,130.69. There is a further invoice amount of $4,440. The amount sought by the husband is based on the anticipated legal costs inclusive of the single expert and the shadow expert of between $97,216 to $106,181.
By way of comparison the husband refers to correspondence dated 5 December 2017 by the wife’s solicitors that as at 17 November 2017 she had paid legal costs of $161,827.
The parties each refer to what they consider to be profligate and unrestrained legal costs incurred by the other.
The husband refers to the wife’s expenditure derived from her C Bank investment accounts. He alleges that at separation the wife’s investment accounts totalled $1 million, by 8 September 2014 the cumulative value of the C Bank accounts was $785,274 and by reference to the wife’s trial affidavit the amount in the C Share portfolio (comprehensive of all accounts) had a value as at July 2017 of $349,357.
The wife argues that orders made on 8 August 2017 provided the husband with $60,000 to pay his legal costs and disbursements. The evidence does not assist in understanding whether those monies were used for the purpose for which they were ordered.
Additionally, the husband sold 53 shares on 21 June 2017 and received $203,255.
Without reference to the wife or taking into account any issue of priority in terms of the husband’s outstanding liabilities, he used $188,500 to repay a debt to his daughter, with the balance used to pay personal debts and other outgoings.
It is not contented by the wife that were the husband to receive the lump sum that he seeks, there is a risk that he will have received an amount in excess of that which he is likely to retain following a resolution of the proceedings.
The argument enunciated by the wife’s counsel was underpinned by the strong submission that the husband has remained reluctant to make discovery, has not complied with orders for discovery and now presents the spectre of uncertainty in relation to the HPL Group generally and the husband’s interest in particular.
The nebulous nature of the HPL Group being an overseas entity and one in which the husband does not have control, prompts the wife to seek to retain in Australia as much of the pool as possible with the intention that the wife may seek to retain the bulk of the Australian held assets whereas the husband will retain the G Town property and his interest in HPL.
In Klearchos & Klearchos & Ors [2015] FamCAFC 217 the Full Court confirmed that a trial Judge in considering an application for costs is required to consider the matters as set out in s 117 and specifically s 117(2)(a).
In any application for interim property settlement, the Court is required to consider two stages:-
(1)The first stage is a “procedural step” which requires an analysis of whether the circumstances of the case trigger the Court’s power to invoke s 80(1)(h) to make an order for interim property settlement before a final hearing. At this stage, the “overarching consideration” is the interests of justice.
(2)The second stage is the “substantive step” where the provisions of s 79 must be considered and applied with limitations given that it is not a final hearing.
In Medlow & Medlow (2016) FLC 93-692 at 81,088 the Full Court confirmed that the starting point in respect to any property application, including an application for interim property orders, is “the identification of the parties’ property and of their interests in it”.
In proceedings where a party seeks interim property orders, the Full Court said at 81,090:-
[86]The onus was clearly upon [the applicant] to establish that there were sufficient assets available for the interim distribution and that the effect of any interim order was capable of being reversed as part of the final hearing or at least would not defeat [the respondent’s] property claim. The onus was not on the respondent to adduce such evidence.
In that context the Full Court in Medlow (supra) referred to Strahan & Strahan (interim property orders) (2011) FLC 93-466 at 85,646 and the authorities referred to therein confirming that an interim order for the distribution of property must be “amenable to adjustment on a final hearing”.
The very nature of an interim hearing is that the Court is not in the position to property evaluate the evidence and, accordingly, the Court should take a conservative approach, including in respect to determining whether there is likely to be sufficient resources of the parties available at final hearing to accommodate any “adjustment issue”.
The following principles are relevant to the Court’s consideration of whether it is just and equitable to make an order:-
(1)Together section 79 and section 80(1)(h) confer a power on the court to make orders for interim property settlement;
(2)Section 79 confers a discrete power to make orders for property settlement and the court may exercise the power conferred by s 79 through “a succession of orders until the power…is exhausted” or until a final order dealing with all known property of the parties is made;
(3)Section 80 is not in itself a source of jurisdiction for such an order to be made. Rather the section is an “enabling provision” that provides various ways in which the general power in s 79 may be exercised in individual cases.
Given that the applicant is effectively seeking access to his own funds, it is unnecessary for a “detailed enquiry as to the purpose for which the funds are used”.
Sufficient particulars must nonetheless provided to enable the Court to determine:-
(1)The application is genuine;
(2)To identify the circumstances that make it appropriate to give consideration to exercising its power; and
(3)To sufficiently weigh the identified need “against the benefit of having only one exercise of a s 79 power”.
While the majority of cases in which interim property orders have been made related to applications to obtain funds to conduct litigation, that is by no means the only instance where such an order can be made.
The Full Court in Strahan (supra) noted:-
In Poletti & Poletti Nygh J, when describing an application for “interim costs”, referred to the reasons of the Full Court in Wilson & Wilson and said it is a “situation where one party of a marriage controls almost exclusively what might be described as the patrimony of the parties and has control of the bulk of the assets and funds of the parties, where an order may be made to ensure that the other party, who does not have the fortune of controlling those funds, at least has equal or near equal opportunity to present his or her case”. (See also In the Marriage of Poletti at 796 per the Full Court (Ellis, Strauss and Butler JJ).
The Full Court in In the Marriage of Zschokke (1996) 20 Fam LR 766at 83,220 made a number of relevant remarks about the “desirability of legal representation for both parties in family law proceedings”.
Whilst a superficial consideration of the argument put forward by the husband would suggest that if the wife is able to access resources available to her, at least in part, for the payment of legal fees, there should be no good reason why the husband cannot do the same.
It could not be said that the husband is without resources. The history given by him is that of relatively recent date. He disposed of a relatively small parcel of shares in HPL which netted a substantial return enabling him to unilaterally discharge a liability to his daughter.
There is no evidence before the Court as to the extent to which the husband is able to dispose of his interest in HPL during the ongoing litigation.
The husband presents the Court with substantial difficulty in determining the merits of his application. Whilst he refers to the information contained in the wife’s trial affidavit as an indication of the asset pool, at the time of hearing the husband was not able to put forward his own balance sheet.
Whilst it is not a pre-requisite for a successful application either in respect of interim or partial settlement of property or litigation funding that solicitors will refuse to continue acting unless their fees are paid or secured, the only information available on the topic is the husband’s belief.
On balance, I consider that the husband’s application has merit, but I am not satisfied that he has established with certainty either the amount as required or that he is not able to supplement the payment of his legal costs from his own resources.
I also note that the estimate of the husband’s costs includes the anticipated disbursement to the single expert. Even as presented by the husband, the amount required is $105,000 rather than $115,000.
Doing the best that I can and bringing to account the difficulties created by the husband in the paucity of evidence presented, I propose to adopt a cautious approach and order that the husband be permitted to draw down on his superannuation fund in the sum of $60,000 provided that the funds are used exclusively and at first instance for his legal costs.
That sum will enable counsel to be briefed, the contribution to the costs of the single expert and further preparation.
NOTICE TO PRODUCE
On 8 December 2017, the husband produced a notice to produce containing an extensive and wide-ranging request to the wife to produce documents.
Whilst the notice requested that the documents were to be produced at hearing on 19 December 2017, given its recent filing, it could not have been a serious contention.
Rule 15.76 of the Family Law Rules 2004 (Cth) provides:-
15.76(1)
A party may, no later than 7 days before a hearing or 28 days before a trial by written notice, require another party to produce, at the hearing or trial, a specified document that is in the possession or control of the other party.
15.76(2)
A party receiving the notice under sub-rule (1) must produce the documents at the hearing or trial.
The documents sought were not associated with the interim hearing. I am uncertain when the notice was served, but the documents specified were intended for the trial.
The list of documents that the wife is required to produce is extensive. Without attempting to confuse the obligations in respect of discovery and a notice to produce, by reference to the wife’s affidavit of 18 December 2017, I am satisfied that the wife has made extensive discovery as demonstrated by her list of documents current as at 20 October 2015.
Further documents have been provided.
It is difficult to understand the basis upon which the documents referred to in the notice to produce have been determined.
In the absence of the husband’s trial affidavit and his amended response, it is difficult for the wife to determine the husband’s case and therefore to have regard to documents that may be relevant.
It has been often remarked upon that there is uncertainty as to what is required following the receipt of a notice to produce. Counsel for the husband considered that a notice to produce is similar in effect to a subpoena. I do not agree with that analogy.
In the decision of Morgan v Badcock & Willcox Limited (1929) 43 CLR 163, the Court considered that at common law a notice to produce does not compel production of documents but rather, enables the provision of secondary evidence.
A document identified by a notice to produce which is not the subject of production, has a consequence for the recipient of the notice namely, that they would not then be able to tender that document later in the proceedings.
It has been held that at common law a notice to produce could not be used as a way of gaining access to documents without using them if they then turned out to be unfavourable.
If a document is called for by way of a notice to produce then the party is obliged to tender the document.
The rules do not contain any warning as to the consequences of a breach in respect of a document that is not produced.
Rule 20.31 of the Federal Court Rules 2011 (Cth) provide the following in respect of Notice to Produce documents:-
20.31
A party (the first party) may serve on another party (the second party) a Notice to Produce in accordance with Form 39 for the inspection of any document mentioned in a pleading or affidavit filed by the second party.
20.31(2)
A second party must, within 4 days after being served with a Notice to Produce, serve the first party with a notice:-
(a)Stating:-
(i)a time, within 7 days after service of the notice when the document may be inspected; and
(ii)a place where the document may be inspected; or
(b)Stating:-
(i)the document is not in the second parties control; and
(ii)the best to the second parties knowledge – where the document is and in whose control it is; or
(c)Claiming that the document is privileged and stating the ground of privilege.
20.31(3)
If the second party does not comply with paragraph 2(a) or (b) or claims that the document is privileged, the first party may apply to the court for an order for production for inspection of the document.
The manner in which the notice to produce has been formulated is intended to compel the production of documents in circumstances where their use as a tender document is not certain.
The notice to produce constitutes a wide-ranging enquiry without there being any forensic purpose other than the hope that if the net is cast sufficiently wide there may be something of use to assist the husband and adverse to the wife.
There is no application to strike out the notice to produce. On that basis I propose to do nothing further with the document other than it representing a category of documents that may be requested.
It is not to be expected that the notice to produce is intended as an alternative to an application for further and better disclosure or discovery. There was no indication by counsel that the husband intends upon each and every document the subject of the notice and in those circumstances I propose to do no more than to note the existence of the notice and deal with any issues that may arise during the course of the proceedings.
Specifically, in the absence of any application for discovery and given the length of time that this matter has been listed for hearing, time will not be permitted at the commencement of the trial to inspect documents that the wife may reasonably collate.
I make orders as appear at the commencement of this Judgment.
I certify that the preceding eighty-five (85) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 21 December 2017.
Associate:
Date: 21 December 2017
Key Legal Topics
Areas of Law
-
Family Law
-
Civil Procedure
Legal Concepts
-
Costs
-
Jurisdiction
-
Procedural Fairness
0
2
3