Mendicino and Mendicino and Ors

[2015] FamCA 270

FAMILY COURT OF AUSTRALIA

MENDICINO & MENDICINO & ORS [2015] FamCA 270

FAMILY LAW – PROPERTY – Interim – Application for further litigation funding where the wife gives evidence that there was a shortfall between necessary litigation expenses and the previously ordered amount – Order for further litigation funding pursuant to the costs power in s 117(2) of the Act – Where the wife has been assessed as having a taxation liability arising from distributions made to her in circumstances where the wife never received the funds upon which the assessment has issued – Order that the husband indemnify the wife for her assessed taxation liability.

Family Law Act 1975 (Cth)

Strahan & Strahan (2011) FLC 93-466

APPLICANT: Ms Mendicino

FIRST RESPONDENT: Mr Mendicino

SECOND RESPONDENT: Mr D Mendicino

THIRD RESPONDENT: Ms E Mendicino

FOURTH RESPONDENT: Mr F Mendicino

FIFTH RESPONDENT: G Pty Ltd

FILE NUMBER: BRC 875 of 2013

DATE DELIVERED: 14 April 2015

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Kent J

HEARING DATE: 14 April 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Looney QC with
Mr SJ Williams of Counsel

SOLICITOR FOR THE APPLICANT: Cooper Grace Ward

COUNSEL FOR THE FIRST RESPONDENT: Dr Ingleby of Counsel

SOLICITOR FOR THE FIRST 

RESPONDENT:

Hopgood Ganim Lawyers

COUNSEL FOR THE SECOND, THIRD AND

FIFTH RESPONDENTS:

Dr J Brasch QC

SOLICITOR FOR THE SECOND AND

THIRD RESPONDENTS:

Phillips Family Law

COUNSEL FOR THE FOURTH 

RESPONDENT:

Mr M Kearney SC with Mr Alexander of Counsel

SOLICITOR FOR THE FOURTH AND

FIFTH RESPONDENTS:

Emanate Legal

Orders

IT IS ORDERED UNTIL FURTHER ORDER THAT:

1. Trial Affidavits

   1.1Within fourteen (14) days of the day upon which any Amended Defence is to be filed in accordance with order 6.1(b) below, the Second Respondent, Third Respondent, Fourth Respondent and Fifth Respondent shall file and serve any affidavits they wish to rely upon for the final hearing.

2. Interim Funds

   2.1Within fourteen (14) days of the date of these Orders the Husband shall pay or cause to be paid to the Wife the amount of $200,651.67 by way of partial property settlement, on account of outstanding legal and accounting expenses relating to these proceedings.

3. Taxation Liability

   3.1The Husband shall indemnify the Wife in respect of the Notice of Assessment by the Australian Taxation Office issued on 24 March 2015 in the amount of $14,433.95, which relates to the Wife’s taxation liability for the financial year ended 30 June 2013.

4. Notice to Admit

   4.1Pursuant to Rule 11.07 of the Family Law Rules 2004 (“the Rules”), the Wife serve on each of the First, Second, Third and Fourth Respondents any Notice to Admit Facts and/or Authenticity of Documents within fourteen (14) days of the date of these Orders.

5. Disclosure

   5.1Within fourteen (14) days of the date of these Orders each of the Husband and the Second, Third and Fourth Respondents as applicable shall provide a true copy of the following documents to the Wife or give a written explanation (including any claim for legal professional privilege) as to why they are unable or unwilling to do so:

   (a)The Husband, Second Respondent, Third Respondent and Fourth Respondent shall provide all documents evidencing or relating to the transfer of the shares in H Pty Ltd from Mr B Mendicino in his personal capacity, to Mr B Mendicino in his capacity as trustee of the C Investment Trust.

   (b)The Husband, the Second Respondent, Third Respondent and Fourth Respondent shall provide all legal advice provided to or obtained by those parties in relation to the ownership or holding of Mr B Mendicino’s shares in:

   (i)H Pty Ltd; and

   (ii)I Pty Ltd

   after Mr B Mendicino’s death.

   (c)The Husband, Second Respondent, Third Respondent and Fourth Respondent shall provide all legal advice obtained by or provided to the Respondent parties in relation to the transfer of H Pty Ltd shares in their capacity as Executors to themselves as trustees of the C Investment Trust.

   (d)The Husband, Second Respondent, Third Respondent and Fourth Respondent shall provide the accounting entries showing the transaction for the 100 shares in H Pty Ltd being brought into account as an asset of the C Investment Trust, together with any other related documents related to that asset being accounted for as an asset of the C Investment Trust.

   (e)The Husband, Second Respondent and Third Respondent shall provide documents evidencing the date, amount and terms of any loans related to or made in contemplation of Division 7A of the Income Tax Assessment Act 1997 since 13 August 2012 to the Husband by any entities or trusts which comprise the C Group or Mr B Mendicino Group (the C Group entities) including but not limited to the following entities and trusts:

   (i)J Pty Ltd;

   (ii)J Trust;

   (iii)K Pty Ltd;

   (iv)K Trust;

   (v)M Holdings Pty Ltd;

   (vi)L Corporation Pty Ltd;

   (vii)L Corporation Trust;

   (viii)L House Pty Ltd;

   (ix)L House Trust; and

   (x)N Nominees Pty Ltd.

   (xi)C Investment Trust;

   (xii)C Pty Ltd;

   (xiii)C Trust;

   (xiv)O Pty Ltd

   (xv)O Trust;

   (xvi)H Pty Ltd;

   (xvii)C Holding Company Pty Ltd;

   (xviii)C Pastoral Company Pty Ltd;

   (xix)P Pty Ltd;

   (xx)Q Pty Ltd;

   (xxi)Mendicino Pastoral Company Pty Ltd;

   (xxii)C Mining Pty Ltd; and

   (xxiii)C Asia Pte Ltd.

   (f)The Husband shall provide:

   (i)NAB Classic banking account number … from:

   (A)1 January 2013 to May 2013;

   (B)July 2013;

   (C)October 2013;

   (D)January 2014;

   (E)November 2014; and

   (F)December 2014.

   (ii)NAB Qantas Rewards card account number … from 1 January 2013 to 11 April 2014;

   (iii)NAB Qantas Rewards card account number … from 27 August 2014 to 24 September 2014;

   (iv)NAB Corporate Cheque account number … in the name of L Corporation Pty Ltd from 25 January 2014 to 30 November 2014;

   (v)NAB Corporate Cheque account number … held in the name of M Pty Ltd Pty Ltd from 4 January 2014 to 30 November 2014;

   (vi)NAB Corporate Cheque account number … held in the name of N Nominees Pty Ltd from 1 January 2014 to 30 November 2014;

   (vii)All American Express Centurion card accounts ending … …, and … from 1 January 2013 to 30 November 2014;

   (viii)American Express Centurion card account ending … from 1 January 2013 to 4 November 2013 and 6 October 2014 to 30 November 2014;

   (ix)RaboDirect Premium Saver account number … held in the name of L Pty Ltd ATF The L Trust from 1 August 2014 to 30 November 2014;

   (x)RaboDirect Savings account number … held in the name of L Pty Ltd ATF The L Trust from 1 June 2014 to 30 November 2014;

   (xi)Rabobank Loan account number … held in the name of L Corporation Trust from 1 February 2013 to 28 February 2013, 1 August 2013 to 31 December 2013 (previously provided copies are illegible) and from 1 January 2014 to 30 November 2014; and

   (xii)cheque butts from 1 February 2013 to 30 November 2014 for NAB Corporate account number 86-198-0960 in the name of L Corporation Pty Ltd ATF L Trust.

   (g)The Husband shall provide documents showing that the property at R Street, Suburb L is comprehensively insured.

   (h)The Husband, the Second Respondent and the Third Respondent shall provide all testamentary dispositions made by them from 2 December 2005 to the present which make specific provision for any interest in the C Group or Mr Mendicino Group or any of the C Group entities.

1. Procedural Orders

   6.1In relation to pleadings:

   (a)The Wife have leave to file a Further Amended Statement of Claim within twenty-one (21) days of the date of these Orders.

   (b)The Respondent parties have leave to file an Amended Defence to the Wife’s Further Amended Statement of Claim within twenty-eight (28) days of paragraph 6.1(a).

   (c)Any denial or non-admission in a Defence to be filed by the Respondents of an alleged fact be accompanied by a specific explanation for such denial or non-admission.

6.2The Husband have leave to issue a subpoena to Mr S of PriceWaterhouseCoopers to give evidence before the Honourable Justice Kent on 5 June 2015 and that Mr S give evidence in chief on that day pursuant to Rule 15.72 of the Rules.

6.3In the event that there is no objection by the recipients of the three subpoena returnable on 28 April 2015:

(a)The First, Second, Third and Fourth Respondents alone be at liberty to inspect any documents produced under the subpoena.

(b)The First, Second, Third and Fourth Respondents each identify any documents to which they make claim of privilege within fourteen (14) days of inspection of the documents, and each be permitted to segregate those documents in a sealed envelope not to be released without order of the Court.

(c)Upon receipt of the list of privilege claims (if any) the Wife:

(i)be at liberty to inspect the balance of the documents to which the Respondents make no claim for privilege; and

(ii)provide a response to the Respondents’ claims for privilege within fourteen (14) days;

(d)Any matters of privilege still at issue be adjourned for determination at 10.00 am on 5 June 2015 subject to the parties having liberty to apply to seek an earlier mention before His Honour.

6.4The Wife’s application for leave to issue specific questions pursuant to Rule 13.26 of the Rules be adjourned to 5 June 2015.

6.5Otherwise the Wife’s Application in a Case filed 27 March 2015 shall be dismissed.

6.6The parties’ costs of and incidental to the Wife’s Application in a Case filed on 27 March 2015 be reserved.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Mendicino & Mendicino & Ors 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 BRISBANE

FILE NUMBER: BRC 875 of 2013

Ms Mendicino

Applicant

And

Mr Mendicino

First Respondent

And

Mr D Mendicino

Second Respondent

And

Ms E Mendicino

Third Respondent

And

Mr F Mendicino

Fourth Respondent

And

G Pty Ltd

Fifth Respondent

EX TEMPORE REASONS FOR JUDGMENT

Litigation funding

1. The applicant Ms Mendicino, whom I will refer to for convenience as the wife and the first respondent Mr Mendicino, whom for convenience I will refer to as the husband married in 2000 and separated in August 2012.  Their marriage produced four children.  They are engaged in substantive property and parenting proceedings which are set down for a 10 day trial in July of this year. 

2. The fact that the trial is set for 10 days reflects some complexity about the financial aspects attending property settlement.  With respect to the claims for property settlement, joined to the proceedings are four other respondents being the siblings of the husband and a trustee company in which the husband and his siblings are the directors, that company being the fifth respondent said to be the trustee of the Mr B Mendicino Family Trust. 

3. The complexity in the case arises because the husband’s father Mr B Mendicino died on the 2 December 2005 and one of the essential contentions within the property proceedings is the wife’s contention that Mr B Mendicino beneficially owned, at the time of his death, all of the shares in a company known as H Pty Ltd which is the ultimate holding company of a series of companies and trusts within what is conveniently described as the C Mendicino Group. 

4. The contention by the husband, and essentially the other respondents save for some qualification about the fourth respondent, is that as at the time of his death Mr B Mendicino held the shares in H Pty Ltd on trust for the C Investment Trust.  The difference is obvious in that on the wife’s contention the husband effectively inherited ultimately a 25 per cent beneficially owned share in the C Group. Whereas the husband’s contention is that he has only a beneficial interest or the interest of a beneficiary in discretionary trusts and does not beneficially own the interest. 

5. There is yet to be a valuation provided to the Court of the C Group or of the parties’ interests in that group, but there is reference in the material to the wealth of the group being very substantial indeed. 

6. This is the wife’s further application for litigation funding, an application having been dealt with by way of orders made in December of last year.  Substantial funding was provided for by those orders.  The wife now says that there is a shortfall on the funding that has been provided to date of some $200,000.00 in order for her to be able to progress this matter to the completion of the trial in July. 

7. I am satisfied on the wife’s evidence via her two affidavits to which reference has been made that there is a shortfall of about $200,000.00 in the legal fees and expenses that she will need to complete the trial of the proceedings. 

8. The application currently is framed by reference to two sources of jurisdiction, either the property power pursuant to ss 79 and 80 of the Family Law Act 1975 (Cth) (“the Act”) or alternatively pursuant to s 117(2), the so-called costs power.

9. On the authority of Strahan & Strahan (2011) FLC 93-466 common to both sources of jurisdiction there are three requirements that need to be shown. First, a position of relative financial strength of the respondent. Secondly, a capacity of the respondent to meet his or her own litigation costs, and thirdly, an inability on the part of the applicant to meet his or her litigation costs.

10. I am satisfied on the evidence before me that the husband is in a position of relative financial strength as compared to that of the wife.  She is entirely dependent upon the husband for support at present, it being the case that she has not been employed since some time either prior to or early in the marriage. 

11. The husband on the other hand holds property of substance on his financial statement and on his affidavit separate to whatever may be his interest in the C Group.  It is not agitated before me that the husband would not have the capacity to meet his own litigation costs if the order sought by the wife were made.  I am satisfied that the wife has an inability to meet those costs from her own resources.  On the pleaded case it seems to me that the wife has an arguable case for relief if she makes out the claim she agitates in her amended statement of claim. 

12. The wife has provided by her affidavit, evidence of her likely costs to completion that being the reference point for the $200,000.00 shortfall.  Whilst it is not an essential pre-condition that lawyers will not act for a party if the litigation funding is not provided, it seems clear enough on the evidence of the wife that her lawyers are insisting upon funds being in trust for them to continue to complete the proceedings to a completed trial.  The costs thus far incurred in this case are, in relative terms, extraordinary, but so too it seems are the issues involved and the extent of disclosure and other steps to be taken given the competing cases. 

13. On that basis, I am satisfied that the provision for the expenses as set out by the wife in her material, as supported by her solicitor, is at a rate which appears to be reasonable. 

14. The touchstone for an order to be made pursuant to the costs power is essentially that it be identified as a case that it is necessary to do proper justice between the parties for an order to be made. The Court may make such order under s 117(2) as is considered just, provided there are justifying circumstances, and the matters contained in s 117(2A) must be addressed. Obviously enough, on an interim litigation funding application, many of the factors identified in subsection (2A) will not be of particular relevance.

15. What is of most relevance in this case, as it seems to me, is the relative financial strength of the parties.  The husband deposes in his material to holding substantial assets, and those assets include loan account funds owing to him from within the C Group, but in particular by G Pty Ltd which is the trustee of the Mr B Mendicino Family Trust. 

16. The husband filed an affidavit in April referring to the fact that he was owed a variety of intercompany loans, and in a financial statement sworn on 10 September 2014 deposed to G Pty Ltd owing him some $484,000.00 as at that date.  Those depositions were made without qualification as to the recoverability of those sums by the husband, that is, his estimate of the value of that asset was not qualified by any suggestion that the company would be unable to pay it.  The husband is one of the directors of G Pty Ltd and would obviously be in a position to know whether the company might be unable to meet that sum. 

17. There is also capacity identified, as it seems to me, in respect of the Rabobank facility that the husband negotiated following the orders made in December 2014.  That was a facility for $2.1 million and the husband refers to $100,000.00 of that sum being necessary to fund the facility, and otherwise the affidavit material to which I have been directed during submissions, identifies that there is a shortfall of about $400,000.00 so far as the husband accounting for the fully drawn amount of $2 million. 

18. Whilst it is said on behalf of the husband that fees for Mr T will need to be met from that facility, and that those fees might be in excess of $100,000.00, I am satisfied that there is, or was, capacity within that facility at least for there to have been met the provision for the wife.  The husband has not accounted for the total funds drawn. 

19. I do not intend to confine the husband in any particular way to how he might fund the further amount that is sought, that is, I do not intend to make orders directing him with respect to the company loans owed to him or with respect to the facility or how he might raise the further funds. 

20. However, I am satisfied that an order ought be made pursuant to the costs power in s 117(2) for the order that is sought by the wife. It seems to me it is therefore unnecessary, given that that is the source of power relied upon and established, to also consider whether the property power pursuant to ss 79 and 80H would also justify the order.

Wife’s taxation assessment

1. On 24 March 2015 the Australian Taxation Office issued a notice of assessment to the wife for the year ended 30 June 2013 in the amount of $14,433.95.  The notice of assessment confirms that payment for this notice was due on 21 November 2013.  The assessment comes about in circumstances where income has been distributed to the wife, at least on paper, in that the wife has not actually received the income that is the subject of the assessment.  Obviously enough, without such distribution to the wife the taxation liability would not have been incurred. 

2. Counsel for the husband contends that this is an issue that ought be left to the trial in July, that is, payment of the subject notice of assessment.  However, the concern obviously must be that an assessment has issued as noted and the assessment records payment being due as at 21 November 2013.  The wife, notwithstanding the order for litigation funding that has been made today, does not have available funds to meet both her litigation funding and this notice of assessment. 

3. There is no evidence before me that the distribution of income of some $80,000.00-odd to the wife which was caused to be made by the husband was a matter of consent or acquiescence by the wife.  In circumstances where there is obviously a significant risk that the Australian Taxation Office will take recovery action with respect to the assessment amount, and in any event in circumstances where the liability is not in contest, it needs to be met and it can only be met by the husband.  I am satisfied that he has sufficient resources available to him both in terms of his weekly income as currently declared and otherwise to meet the payment of the notice. 

1. Rather than an order that he pay that sum to the wife I propose to make an order that the husband indemnify the wife with respect to the amount of the assessment, and he might then make such arrangements as he chooses to make with respect to payment of the assessment over time or otherwise. 

2. I therefore formally order that the husband indemnify the wife with respect to the notice of assessment issued by the Australian Taxation Office on 24 March 2015 in the amount of $14,433.95. 

3. Otherwise, I will make orders in terms of the draft prepared by the parties in the course of submissions following my conclusions as expressed with the issues to be decided.[1]  I have made an order in lieu of paragraph 3 of the draft concerning the taxation liability.  Otherwise I will make orders in terms of the draft that has been submitted to me by the parties, now initialled by me and placed with the file.

   [1] Each party confirmed that formal reasons for judgment were not required for the other orders made and I incorporate reference to the transcript as a whole of the hearing as disclosing the reasons for such orders.

I certify that the preceding twenty-six (26) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Kent delivered on 14 April 2015.

Associate:

Date:  14 April 2015