HITCHENS & HITCHENS

[2020] FamCA 423

FAMILY COURT OF AUSTRALIA

HITCHENS & HITCHENS [2020] FamCA 423

FAMILY LAW – PROPERTY – Where the wife brings an application for litigation funding – Where the Court is not satisfied that an identifiable and available fund or source for the payments sought has been established – Where the Court is also not satisfied that circumstances exist to justify an order for costs under s117 – Where the Application is dismissed

Family Law Act 1975 (Cth) ss 79, 80(1), 117(2)

Esdale & Schenk [2012] FamCA 111
Atkins & Hunt and Ors [2018] FamCA 14

Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466

Zschokke & Zschokke (1996) FLC 92-693
Harris & Harris (1993) FLC 92-378

APPLICANT: Ms Hitchens

RESPONDENT: Mr Hitchens

FILE NUMBER: BRC 8051 of 2018

DATE DELIVERED: 29 May 2020

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Baumann J

HEARING DATE: 12 May 2020

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Mr D Madsen,
Madsen Law

COUNSEL FOR THE RESPONDENT: Mr S Williams QC

SOLICITOR FOR THE RESPONDENT: Barry Nilsson Lawyers

Orders

1. That the wife’s Application in a Case filed 9 April 2020 for litigation funding be dismissed.

2. That the parties’ costs of the Application in a Case filed 9 April 2020 be reserved.

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 Hitchens & Hitchens 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 BRISBANE

FILE NUMBER: BRC 8051 of 2018

Ms Hitchens

Applicant

And

Mr Hitchens

Respondent

REASONS FOR JUDGMENT

1. Substantive property and parenting proceedings in this matter are set to commence final hearing before me on 29 June 2020. Despite proceedings having been commenced by the husband in July 2018, the wife, with the assistance of recently retained new solicitors, filed an Application in a Case on 9 April 2020 seeking a number of orders, yet relevantly for the purpose of these Reasons, an order that (by an Amended Application in a Case filed 11 May 2020) that:

   “10. That the husband pay or in his capacity as director of any entity referred to in order 1 cause to be paid to the wife by way of a partial property settlement the sum of $129,607.98 within 14 days of the date of this order with this payment to be made to Madsen Law, Law Practice Trust Account.

   10A. In the alternative to making an interim property order pursuant to Section 79 of the Family Law Act for the sum of $129,607.98, a lump sum interlocutory costs order be made in the wife’s favour pursuant to Section 117(2) of the Family Law Act in the sum of $110,000.00.

   10B. In the alternative to making an interlocutory costs order that the Court make a dollar for dollar order in the terms set out below.

   (1) Pursuant to Section 117 of the Family Law Act 1975 (Cth), from the date of these Orders and within 7 days after payment by or on behalf of the husband of any moneys in payment of accounts: -

   (a) rendered by Lawyers (Solicitors or Counsel) for the husband in connection to these proceedings;

   (b)    Rendered by Accountants engaged by the husband or the Solicitors for the husband to value the interests of the husband and wife in any business, company, trust or entity; or

   (c)    Rendered by Valuers (apart from the Valuer referred to in order 13 engaged by the husband or the Solicitors for the husband to report on and value the real estate and personal property of the husband and any business, company, trust or entity in which he has an interest.

   (2)The husband pay or cause to be paid the same amount of money to the trust account of the Lawyers for the wife (Madsen Law, Law Practice Trust Account BSB … Account Number …03).

   (3)Within 24 hours after the payment by or on behalf of the husband of any money referred to in order (2), the husband shall cause to be given to the wife’s lawyers a memorandum stating the amount or amounts so paid to the lawyers.

   (4)The husband instruct his lawyers that all money paid to them including on his behalf, as referred to in order 2, shall be held in trust by them and not applied in payment until such time as the same amount has been paid by or on behalf of the husband to the lawyers for the wife on the record from time to time in these proceedings.

   (5)In the event the payment to the wife referred to in order (2) is not paid within 7 days thereafter, the husband is to direct his lawyers to pay 50% of whatever is received (as referred to in order (4) and held by them in trust), to the Lawyers for the wife.

   (6)The wife instruct her Lawyers that the sum paid or caused to be paid by the husband to the Lawyers for the wife pursuant to the preceding orders be applied by the Lawyers for the wife in the conduct of these proceedings, included but not limited to the reasonable costs and disbursements: -

   (a)   Rendered by Solicitors or Counsel for the wife;

   (b) Rendered by Accountants engaged by the wife or Solicitors for the wife to value the interests of the husband in any business, company, trust or entity; or

   (c)  Rendered by Valuers (apart from the Valuer referred to in order 13 engaged by the wife or the Solicitors for the wife to report on and value the real and personal property relevant to these proceedings.

2. Other Applications heard on either 29 April 2020 or 12 May 2020 have been dealt with by the Court. Whilst this litigation funding order is raised close to the trial, an earlier Application filed by the wife on 12 April 2019 for a lump sum payment of $60,000 was not, it seems, ultimately pressed and was formally dismissed by Hogan J on 22 May 2019.

The applicable Principles

1. Although the wife seeks to invoke the power in s79 (with s80(1)) of the Family Law Act 1975 (“the Act”) for an interim property order in the sum of $129,607.98, she also seeks, as an alternate order, $110,800 as a lump sum interlocutory costs order (under s117(2) of the Act) paid as a lump sum or as a “dollar for dollar” order.

2. I deal with the claim under s79 first below, because as Murphy J correctly observed in Esdale & Schenk (2012) FamCA 111 and was adopted by Watts J in Atkins & Hunt and Ors (2018) FamCA 14

   “… that certainly since the Full Court’s decision in Strahan [& Strahan (Interim Property Orders) (2011) FLC 93-466] it is usual for a financially disadvantaged party to rely upon s 79 as the power to obtain a lump sum interim property settlement order for the purposes of funding litigation.”

3. The Full Court in Zschokke & Zschokke (1996) FLC 92-693, which was adopted by the Full Court in Strahan (supra) indentified three primary factors relevant to the exercise of the discretionary power under s79, namely:

   a)a position of relative financial strength on the part of the Respondent;

   b)the Respondent’s own capacity to meet legal expenses;

   c)an inability on the part of the Applicant to pay her own costs.

4. It is not necessary to establish compelling reasons and the “overarching consideration” is the interest of justice. The exercise of the discretion must be appropriate with the power to be exercised within the framework of s79 but exercised conservatively (see Harris & Harris (1993) FLC 92-378).

5. As the Applicant relies also upon s117, the authorities make it clear that even on an interlocutory basis, before the Court can allow a departure from the usual rule in s117(1) (that each party bear their own costs), it is necessary to establish that pursuant to s117(2A) there are circumstances which justify the departure. If those considerations are met the order made must be just.

Wife’s submissions and husband’s response

1. Whilst Counsel for the husband, Mr Williams SC, asserts with some foundation that “the wife does not depose to a proper evidentiary basis for the making of the order, and fails to engage with relevant principles by which the application is to be determined”, rather than dismissing the Application at the first hurdle, I choose to deal with some of the facts asserted by the wife to maintain her claim – the conclusion reached from such examination being the same – namely that the Application should be dismissed.

2. I rely upon the following findings:

   a)At paragraph 52, the wife sets out withdrawals from the M Bank home loan account by the husband which the wife alleges were for “his own purposes” totalling $119,607.98. It needs to be recalled that the husband made payments to the home loan account from separation until December 2019. Whilst there may be submissions at trial whether some withdrawals may be “added back” (e.g. the husband’s criminal law solicitor’s fees), as is identified at paragraph 17 of the husband’s submissions, most of the payments were consent withdrawals and or pursuant to interim orders.

   b)The wife asserts that the husband had identified funds in the various corporate entities in which he had an interest, but to which third parties also have a claim. Furthermore, without delving into the complexities of the various related corporations within the husband’s broad property development business, it is in my view overly simplistic to merely look at a Bank Statement and say funds are available and not required for the legitimate business activities of the entity which holds those funds. As much is apparent when a comparison is made between the “available funds” identified at paragraph 61 of the husband’s Affidavit filed 28 April 2020 and the wife’s submissions at paragraph 5.1(b) that from “bank accounts the husband provided yesterday afternoon” the aggregate sum of $110,800 has “shifted” to a reduced figure of $86,748.00. The husband says that the funds are necessary for corporate activities that he would require the consent of the other parties to any withdrawal and further that adverse taxation implications could arise. On an interlocutory application I can not easily dismiss this sworn evidence and do not do so.

   c)The wife’s submissions at paragraph 5.1(d) to (f) refers to funds received by N Pty Ltd between 21 November 2019 and 9 March 2020 of $2,447,299 and poses the questions – “where did the 2,400,000 go in less than 6 months”. The wife inferentially asserts, the husband personally has retained the funds for his own purposes. The husband in his Affidavit filed 28 April 2020 sets out the disclosure he has made about his business activities and how funds move between entities. Capital receipts seem by the wife to be regarded as income. Whilst I accept that the wife has no direct access to information and must rely upon proper discovery made by the husband, it does seem that extensive discovery has been made to date, including in compliance with the Order made 9 April 2020. No doubt, once the forensic accountants’ examination is completed and a thorough analysis available, the wife will better understand the husband’s business activities. However, I am not satisfied at this stage that the wife has established that the husband has the extensive funds available to him that she claims.

   d)The wife’s Financial Statement sworn 9 April 2020 identifies the major personal asset of the parties to be the jointly owned former matrimonial home at Town P – with the wife asserting an equity of around $450,000 as being available. The wife resides in the home with the children. It is not agreed that the home be sold, such that the equity remains unavailable.

   e)The wife says (Item 53) that she has a debt for unpaid legal fees to her previous solicitors of $140,000, although at paragraph 54(bb) that figure is said to be $151,695.90. No direct evidence is given by the principal of her current solicitors as to the terms of his retainer and how the costs estimated by the wife at paragraph 54(e) of her Affidavit is calculated under the terms of the retainer. The evidence relied upon is properly identified by the husband’s Counsel as hearsay. The wife says her solicitor has told her that if this Application is unsuccessful he cannot represent her at the trial.

   f)Whilst in a matter where some complexity exists (particularly in respect of financial matters), it is desirable for parties to have legal representation, the husband also swears to being unable to fund his legal expenses without the benefit of loans from his parents (currently made of $102,862) and K Pty Ltd. Some of these loan funds have been expended on engaging L Company as forensic accountants to provide the report needed for the hearing. Over the husband’s initial opposition, the Court ordered him to pay the costs initially.

   g)The wife continues to receive the benefit of an earlier spouse maintenance order ($600 per week) and child support for the children totalling $2,581.85 per month. The husband, in his Financial Statement sworn 28 April 2020, estimates an income of $4,127 per week (which is superior to the wife’s income) and expenses (which of course include the payments to the wife and some additional expenses relating to the use of the Town P home as well as health insurance and car expenses), of $8,906. Even if his claimed contribution to legal expenses of $2000 per week are ignored, on the husband’s sworn evidence he has a weekly deficit of over $2,700. I accept the wife disputes these estimates, but that is ultimately a matter for the trial.

Conclusion

1. In light of the findings made it is not just and equitable to make an interim property order under s79 of the Act. No identifiable and available fund or source for the payments sought has been established. Whilst I accept (taking into account the wife’s claim and the nett assets), if a sum was paid as sought, justice and equity could probably be achieved through other interests that does not mean funds are now available. I should also note that it was quite inappropriate in the wife’s submissions, at paragraph 5.1(j), to assert the husband is dishonest and has misled the Court, and that the Court “ought to level the playing field when playing with a man like this”.

2. The credit of both parties may become an issue at the trial and, if required, the Court will make findings based on all the tested evidence offered.

3. For completeness, relying upon the earlier findings, I am not satisfied that circumstances exist to justify an order for costs under s117, on an interlocutory basis, or by way of some retrospective “dollar for dollar” order.

4. The wife’s Application is therefore dismissed. As the Application in a Case resulted in some Orders by consent, I will order that the costs of the Application be reserved to the trial, with arguments as to costs to be conducted in the usual way after final judgement is delivered.

I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Baumann delivered on 29 May 2020.

Associate:

Date: 29 May 2020