Horvat & Juric
[2022] FedCFamC1F 206
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Horvat & Juric [2022] FedCFamC1F 206
File number(s): SYC 5613 of 2017 Judgment of: ALDRIDGE J Date of judgment: 1 April 2022 Catchwords: FAMILY LAW – INTERIM – Where the applicant seeks the sale of a property and an order for payment of interim costs – Where the property is owned by the respondents – Where the seeks an interim costs order to continue prosecuting the hearing and she has no other funds – If the interim costs order is made, it will not be able to be adjusted – Order sought by the wife is not just in all the circumstances – Application dismissed. Legislation: Family Law Act 1975 (Cth) s 117 Cases cited: Salvage & Fosse (2020) FLC 93-966 Division: Division 1 First Instance Number of paragraphs: 24 Date of hearing: 15 February 2022 Place: Sydney Counsel for the Applicant: Mr Eardley Solicitor for the Applicant: S & R Lawyers Counsel for the First Respondent: Mr Doupe Solicitor for the First Respondent: Garry Pickering Solicitors ORDERS
SYC 5613 of 2017 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS HORVAT
Applicant
AND: MR JURIC
First Respondent
D PTY LTD
Second Respondent
ORDER MADE BY:
ALDRIDGE J
DATE OF ORDER:
1 APRIL 2022
THE COURT ORDERS THAT:
1.The applicant’s Further Amended Application in a Case filed on 12 November 2021 is dismissed.
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 the pseudonym Horvat & Juric has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALDRIDGE J:
This is an application by Ms Horvat (“the wife”) under s 117 of the Family Law Act 1975 (Cth) (“the Act”) for the sale of K Street, Suburb J (“the Suburb J property”) and an order for the payment of interim costs. The Suburb J property is owned by D Pty Ltd and that company has been joined as a party to the proceedings and opposes the sale. The wife did not press the other orders sought in her Further Amended Application in a Case filed on 12 November 2021.
The wife and Mr Juric (“the husband”) are engaged in property settlement proceedings which have been fixed for hearing on 18 July 2022.
All of the assets to be divided in the proceedings are owned by the husband, either in his own right or with others, often through a corporate and trust structure. Consequently, the wife submits that it is just in all of the circumstances that there be an interim costs order so as to provide her with the means to prosecute the hearing as she has no other source of funds to do so.
As was explained by the majority in Salvage & Fosse (2020) FLC 93-966 (“Salvage”), such litigation funding orders have a long history and are made to alleviate the obvious unfairness of a party with control of the assets the subject of property division proceedings being able to marshal them to pay lawyers to act on their behalf and leaving the other party to attempt to pursue the proceedings without being able to resort to property that might subsequently be transferred to them (at [3]–[9]).
However, each application must be looked at according to its own particular facts and circumstances and the Court must, before the order can be made, be satisfied that the order is in those circumstances, just (s 117(2) of the Act).
There is little in dispute between the parties. The husband holds three properties in his sole name, which are 1 F Street, Suburb G (the former matrimonial home and where the wife presently lives), 2 F Street, Suburb G (collectively known as “1 & 2 F Street”) and E Street, Suburb L (which was described as the “family farm”). The husband also has interests in a number of other properties which are owned by him along with third parties or by corporations in which he is one of the shareholders. The value of each of these properties has been agreed and the parties have also agreed on a percentage division of the total net assets. The wife will receive 57.5 per cent of the net assets.
What is not agreed is the value of H Pty Ltd, which is a company wholly owned by the husband.
Whilst the company has been valued by independent valuers, the wife’s contention is that the accounts of the company do not accurately record its trading activities. This is because the wife asserts that the husband has paid company funds to himself, but recorded them as payments of debts to third parties in the accounts. She also asserts the husband has carried out building projects entirely for cash. Thus, the main issue for the hearing is whether or not the husband has acted in this way, and if so, what effect that may have on the assets available for division and the parties’ liabilities. Essentially, the wife has indicated that she will seek to have the amount of the cash dealings “added back” as a nominal asset already distributed to the husband.
As I have said, in this present application the wife seeks the sale of the Suburb J property. It was not in contention that the shares in D Pty Ltd are equally held by the husband and his brother, Mr B Juric. The company is the trustee of a unit trust in which the husband and Mr B Juric each own half of the units. At present, the property is vacant land and presumably it has been purchased for the purposes of development in due course.
It was not disputed that the sale of the Suburb J property would trigger a capital gains tax liability, but there was no evidence as to the likely amount that would be payable. It is also possible that the distribution of funds by the trustee to the unitholders could create an income tax obligation.
The Suburb J property has a value of either $987,500 (according to the wife) or $1,052,500 (according to the husband).
According to the wife, the mortgage over the Suburb J property currently stands in the sum of $725,853, but according to the evidence of Mr B Juric, the amount owing on the mortgage as of 26 February 2022 was $1,451,707.11. On the wife’s figures, there is equity of some $260,747 in the property and a shortfall according to the husband’s figures.
The wife’s evidence as to her legal costs for the hearing is far from satisfactory. It appears that some $42,000 is already owed to her solicitor and counsel. The evidence of the wife’s solicitor then simply went on to say “[o]ur client will incur not less than approximately $420,000.00 in legal fees on account of costs and disbursements in preparing her case up to and including the final hearing” (Affidavit of Mr C filed on 5 October 2021, paragraph 2). No evidence was given as to how that sum was calculated or even given as to the hourly rates (or daily rates) of the solicitors or counsel involved. Further the estimate has turned out to be overly generous because the parties now agree that a two day hearing is all that is required.
Nonetheless, I can easily conclude that the wife will incur significant legal fees for the hearing which she does not presently have the means to pay.
There are however, a number of matters that point against the success of the application.
The wife seeks final orders that she retain both 1 & 2 F Street , which have a combined value of $5,800,000. If, as the husband contends, the net assets available for distribution are $8,105,869, such a distribution would exceed the agreed percentage of the assets to be retained by the wife, as 57.5 per cent of that figure is $4,660,874. The wife has no capacity to make an adjusting payment. That position will be exacerbated if a further property to be retained by the husband is sold.
The wife submitted that on her estimation of the net property available for distribution, which is $11,543,648, the sale of the Suburb J property would not prevent the distribution of 1 & 2 F Street to her as such a course would not exceed the agreed percentage of division, as 57.5 per cent of that figure is $6,637,597. However, that ignores the fact that two properties have already been sold and the net proceeds distributed between the parties (listed as items “10(a)” and “10(b)” in the wife’s Case Outline filed on 10 February 2022, Annexure A). These properties had a total value of $2,275,000, and accordingly, on the wife’s figures, the net assets available for distribution would now be $9,268,648. Thus the course proposed by the wife would, as the matter presently stands, see her exceed the agreed percentage division (57.5 per cent of that figure is $5,329,472).
Thus, the sale of the Suburb J property will have a significant effect on the assets available for distribution and the agreed percentage division.
The wife received $374,532.10 of the proceeds of sale of these two properties by way of an interim property settlement. Of this, $255,287.01 was paid towards her legal fees.
The question then arises as to whether the costs order, if made, is capable of satisfactorily taking into account, by being reversed or adjusted at a final hearing. As was explained in Salvage at [13], such a consideration plays a less significant role in applications for interim costs orders as opposed to interim property orders. Nonetheless it is a consideration that needs to be taken into account.
Here, there is no suggestion that in due course the wife will not receive the transfer of significant property. However, if the interim costs order is made and the Court considers it just that the wife receive both 1 & 2 F Street, the interim costs order will not be able to be adjusted and the husband will end up paying, at least in part, the wife’s costs.
Further, the fact that the property is held in part by a third party. Whilst the order made does not diminish his interest in the property, in the sense that Mr B Juric would be entitled to one half of the net proceeds of sale (assuming the necessary distributions are made), it does affect him in the sense that he wishes to retain the property and does not wish it to be sold. If, as the husband and Mr B Juric suggest, the amount owning on the mortgage exceeds the value of the property, there will be a shortfall on sale, which would work a considerable injustice.
At best, on the available figures, the amount to be received on the sale will be $260,000 less the costs of sale and less any capital gains tax payable. The husband’s 50 per cent share of that will therefore be significantly less than $130,000. Whether the amount the husband receives from the sale, in due course, will be sufficient to pay the wife’s costs for the hearing cannot be ascertained from the limited evidence in front of me.
Taking these matters into account, I am not persuaded that the order sought by the wife is just in all of the circumstances. It is to be recalled that the wife’s application is based only under s 117 of the Act and seeks only the sale of the Suburb J property. There is no room for considering other possibilities for providing funds for the wife for the hearing. There is therefore no option but to dismiss the application.
I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Aldridge. Associate:
Dated: 1 April 2022
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