Madigan and Madigan

FAMILY COURT OF AUSTRALIA

MADIGAN & MADIGAN

[2019] FamCA 73

FAMILY LAW – PROPERTY – Interim orders for litigation funding and exigencies

Family Law Act 1975 (Cth)

Strahan & Strahan (interim property orders) (2011) FLC 93-466

APPLICANT:

Ms Madigan

RESPONDENT:

Mr Madigan

FILE NUMBER:

SYC

4431

2014

DATE DELIVERED:

20 February 2019

PLACE DELIVERED:

Sydney

PLACE HEARD:

Sydney

JUDGMENT OF:

Watts J

HEARING DATE:

18 February 2019

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Richardson, SC

SOLICITOR FOR THE APPLICANT:

Barkus Doolan

COUNSEL FOR THE RESPONDENT:

Mr O’Ryan, SC

SOLICITOR FOR THE RESPONDENT:

Pearson Emerson Meyer

Order

(Made 18.2.19)
1.1.Within 7 days from the date of these orders and by way of partial property settlement, the husband shall pay the sum of $1,000,000 as follows:
1.1.1.The sum of $600,000 to the trust account of the wife’s solicitors to be applied until further order in payment of the costs and disbursements incurred or to be incurred by the wife in the conduct of these proceedings, including but not limited to the costs and disbursements:
1.1.1.1.Rendered by solicitors or counsel for the wife;
1.1.1.2.Rendered by accountants engaged by the wife or the solicitors for the wife to value the interests of the husband and the wife in any business, company, trust or entity; or
1.1.1.3.Rendered by valuers engaged by the wife or the solicitors for the wife to report on and value the real estate and personal property of the husband and the wife and any business, company, trust or entity in which the husband and the wife have an interest;

Orders

Within 7 days from the date of this order, and by way of further partial property settlement, the husband shall pay the sum of $400,000 to the wife.

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 Madigan & Madigan 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 SYDNEY

FILE NUMBER: SYC 4431 of 2014

Ms Madigan

Applicant

And

Mr Madigan

Respondent

REASONS FOR JUDGMENT

By way of an Amended Application in a Case filed by the wife on 6 February 2019, the wife made an application for an interim property settlement order in the sum of $1 million with $600,000 to be quarantined for the future costs and disbursements in the litigation, including the costs of obtaining adversarial expert evidence in relation to two of the major assets of the parties and six of the other assets, with the additional $400,000 to be paid to the wife for future exigencies without any limitation being placed upon that payment to her.
The husband seeks to limit the interim property settlement order to a sum of $300,000 to be earmarked for litigation funding with no other amount to be provided to the wife.
On 18 February 2019, I made an order in the following terms:
1.1Within 7 days from the date of these orders and by way of partial property settlement, the husband shall pay the sum of $1,000,000 as follows:
1.1.1The sum of $600,000 to the trust account of the wife’s solicitors to be applied until further order in payment of the costs and disbursements incurred or to be incurred by the wife in the conduct of these proceedings, including but not limited to the costs and disbursements:
1.1.1.1Rendered by solicitors or counsel for the wife;
1.1.1.2Rendered by accountants engaged by the wife or the solicitors for the wife to value the interests of the husband and the wife in any business, company, trust or entity; or
1.1.1.3Rendered by valuers engaged by the wife or the solicitors for the wife to report on and value the real estate and personal property of the husband and the wife and any business, company, trust or entity in which the husband and the wife have an interest;
I reserved my reasons for making that order and I now provide those reasons.
I also provide reasons for judgment in relation to the remaining portion of the application with respect to the sum of $400,000.
Although valuations of assets remain a major issue in the case, the wife’s current estimate of the value of the net assets is in the sum of approximately $240 million. The husband’s estimate of the net assets is approximately $200 million. From the wife’s point of view, her estimate could move in an upwards direction and from the husband’s point of view, it could move downwards.
The wife is yet to be specific in relation to the terms of the property settlement order she seeks but in general terms, she seeks 50 per cent of the overall net value of the assets.
The husband’s current application for property adjustment would provide to the wife the home in which she lives, which the husband currently estimates has a value of $36 million, together with another amount of $2.65 million.
The wife has provided a case outline document which I mark as Exhibit 10. The husband has provided an outline of case document which I mark as Exhibit 11.
Counsel for the husband also provided a list of contentious issues which I mark Exhibit 12.
The jurisdiction to make the orders sought is contained in s 79 and s 81(1)(h) of the Family Law Act (Cth) 1975 (“the Act”).
In Strahan & Strahan (interim property orders) (2011) FLC 93-466, the Full Court indicated that consideration is required as to whether or not it is appropriate to exercise the power to make an order for interim property settlement before a final hearing. Any order needs to be made within the parameters of s 79 of the Act and the exercise of power needs to be appropriate in the circumstances. The Full Court emphasised that there was only one exercise of power under s 79 but that power could be exercised through a succession of orders until the power was exhausted. Axiomatically, whether or not it is appropriate to exercise the power in any particular case, will depend upon the facts of that case.
A detailed analysis of the s 79 considerations is not required. The court should take a conservative approach so that the ability to make an adjustment at the final hearing which is just and equitable to the respondent is preserved.
One reason for the making of an interim property order is to enable a party, without sufficient financial resources, to adequately prepare for trial. In this case, there is a complexity in the financial affairs of the respondent; a need for an expert investigation into the financial affairs of the respondent; a position whereby the respondent holds considerable financial strength compared to the applicant; and a capacity on the part of the respondent to meet his own ongoing litigation costs. The husband, whilst being required to make regular payments of support for the wife, has the entirety of the income earning assets available to him to meet his legal costs including employing his own adversarial experts.
There is a dispute between the parties as to the length of the cohabitation and marriage. The wife contends it was a period of 24 years with the husband saying that it was 15 ½ years. The parties have been separated for over 4 ½ years. There are two children of the marriage aged 18 and 17.
It is estimated that the hearing might take up to 10 days and the contentious issues (apart from those relating to valuations) are set out in Exhibit 12. The issues include an assertion that the wife’s contributions were made significantly more arduous as a result of family violence perpetrated by the husband (see Kennon). The husband has indicated that those allegations will be “strongly denied”. The wife also seeks to examine the husband about the recording of income and expenses in financial accounts of entities he controls.
Whilst the parties are agreed on the valuation of nine of the assets, they are not agreed on the value of the other nine assets. In respect of the two major assets which have an approximate value of $143 million (based on the valuation of agreed single experts), both parties wish to challenge the single expert’s report and an order has been made for both parties to file evidence from an adversarial expert. In relation to one of the other assets, the husband does not accept the single expert report and has been given leave to file adversarial expert evidence. The wife wishes to explore whether or not she will file adversarial expert evidence in relation to six of the other assets which, according to the single experts who have valued those assets, have a combined value of about $111 million.
The husband’s explanation as to why he seeks to have the wife’s payment limited to $300,000 is that he estimates that the wife might need $127,000 to pay adversarial experts and that the balance would then be available for her legal fees. Counsel for the husband submits that if that is insufficient the wife could make a further application to the court. That is an approach discouraged in Strahan. The fewer interim property settlement applications that are made the better, particularly, in the environment of stretched court resources.
The husband seeks to compare and contrast a Notice of Costs provided by the wife dated 27 November 2018 which gave an amount of $535,874 as the estimated total costs and disbursements to the end of a five day trial, with a Notice as to Costs dated 14 February 2019 which gave a new estimate for total costs and disbursements in the sum of $1,487,955 (that was on an estimate that the hearing would now take 20 days). I mark for convenience a copy of the two Notices of Costs prepared by the wife as Exhibit 13. The estimate for preparation of the hearing has increased from $70,000 to $300,000. The second Notice as to Costs indicates the wife currently has about $81,000 in her lawyer’s trust account.
The husband highlights that since the proceedings commenced in July 2014, the wife has received payments in excess of $5 million (not including amounts received on a periodic basis) and the husband has made other payments towards the joint costs of the litigation including payment of $250,000 for joint valuations to date.
The husband submits that at this stage there is no justification for an interim property order based on the wife’s future legal costs in the sum of $600,000.
The wife has filed evidence as to her estimate of costs. The amount offered by the husband is insufficient to meet those costs.
The amount sought by the wife is well within her entitlement for a property settlement order, a concession made by counsel appearing for the husband on 17 December 2018.
Given the unique features of this case, it is simply not appropriate to deprive the wife of being in a position to properly prepare the case for trial.
Based on the current projections, I am comfortably satisfied that if the litigation runs to its bitter end, the money that is sought by the wife will be expended by her. I am not attracted to the idea of confining the amount to be paid to the wife for legal costs and her having to return to court if those funds are expended. The amount ordered will be placed in trust and will be used as required and if the matter settles then the amount that the wife has to her credit in her lawyer’s trust account will be taken into account in that settlement.
In the meantime, the husband has no fetter upon him whatsoever in respect of the extent to which he can choose to fund the litigation. The husband does not raise any issue in respect of his ability to raise the funds sought by the wife.
For these reasons, I made order 1.1 on 18 February 2019.

The amount of $400,000

As indicated, the wife seeks a further $400,000 for exigencies, free from the husband’s approval, from time to time. The husband claims that an order for a lump sum payment to the wife of $400,000 cannot possibly be justified.
The wife currently receives an amount of periodic support that could at least be described as adequate. The husband also provides non-periodic payments including repairs to the former matrimonial home from time to time.
The husband points to the amounts of non-periodic sums that have been paid to the wife since the separation and to expenditure by the wife that the husband believes is excessively extravagant. For example, the husband calculates that between 3 August 2018 and 12 December 2018 the wife seems to have managed to expend the sum of $540,000 for which she has provided no accounting. The husband points to eyebrow raising amounts that the wife has spent on telephone hotlines which charge fees per minute for psychic readings.
Whilst it is clear that the husband will raise at trial the issue as to whether or not the wife has been reckless, negligent or wanton in her expenditure of funds, that will be a matter for the final trial. Prima facie, all the amounts to which the husband refers will be counted against the wife unless she can establish those funds have been legitimately used by her for living expenses, having regard to the lifestyles that each party could be expected to have after the separation.
In that context, the wife has foreshadowed that there will be an exploration as to the husband’s use of funds post separation, bearing in mind that he has had total control of all the income earning assets.
The wife asserts she has responsibilities relating to the adult child who is overseas and who has particular needs.
Again, the amount sought does not jeopardise the husband’s position at the final hearing. The husband does not raise any issue relating to his ability to raise the funds.
Given the net assets in this case and the wife’s potential claim, I find that it is appropriate and just and equitable for an interim lump sum order to be made in the wife’s favour in the sum of $400,000.

I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts delivered on 20 February 2019

Associate:

Date: 20.2.19

[2019] FamCA 73

20 February 2019

Key Legal Topics

Areas of Law

Family Law

Equity & Trusts

Legal Concepts

Remedies

Fiduciary Duty