Millman & Millman
[2021] FamCA 556
•2 August 2021
FAMILY COURT OF AUSTRALIA
Millman & Millman [2021] FamCA 556
File number(s): ADC 30 of 2020 Judgment of: BERMAN J Date of judgment: 2 August 2021 Catchwords: FAMILY LAW – PROPERTY – Interim distribution – Where the wife seeks a lump sum payment on account of litigation funding – Where the husband seeks that the application be dismissed – Where an order for litigation funding has previously been made – Where the matter has been listed for final hearing – Where the wife has an arguable case – Where the wife has been unable to pay legal fees as and when they have been incurred – Where the husband has been able to pay his legal fees – Where the amount sought is not irreversible – Orders. Legislation: Family Law Act 1975 (Cth) ss 79, 80(1), 117(2) Cases cited: Bede Polding College v Limit (No. 3) Limited & Anor [2008] NSWSC 887
Dempster v National Companies and Securities Commission (1993) 9 WAR 215
General Steel Industries Inc. v Commissioner for Railways(NSW) (1964) 112 CLR 125
Jackamarra v Krakouer & Anor (1998) 195 CLR 516
Medlow & Medlow (2016) FLC 93-692
Rakete v Rakete (2012) 48 Fam LR 325
Salvage & Fosse (2020) FLC 93-966
Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466
Number of paragraphs: 81 Date of hearing: 30 June 2021 Place: Adelaide Counsel for the Applicant: Ms Lewis Solicitor for the Applicant: Jacqui Ion Lawyers Pty Ltd Counsel for the Respondent: Ms Nelson QC Solicitor for the Respondent: Angela Ferdinandy Counsel for the Second Respondent: Mr Bullock Solicitor for the Second Respondent: Douglas Hoskins Legal ORDERS
ADC 30 of 2020 BETWEEN: MS MILLMAN
Applicant
AND: MR MILLMAN
Respondent
AND: MR FAZIL
Second Respondent
ORDER MADE BY:
BERMAN J
DATE OF ORDER:
2 AUGUST 2021
UPON NOTING that all applications for final orders are listed for hearing on 1 November 2021
THE COURT ORDERS:
1.That the respondent husband do pay or cause to be paid to the trust account of the applicant wife’s solicitors the sum of $77,000 by way of interim property settlement within 30 days of the date of this order.
2.That by 4.00 pm on 3 September 2021 the applicant file and serve upon all other parties:-
(a)an amended application setting out with precision the orders to be sought;
(b)the affidavits of evidence in chief of all witnesses including the applicant relied upon (noting the affidavits relied upon for previous hearings cannot be relied upon as evidence in chief); and
(c)a financial statement that complies with chapter 13 of the Family Law Rules.
3.That the applicant and the respondent do each pay one half of all setting down and trial fees by 4.00 pm on 22 October 2021.
4.That by 4.00 pm on 13 October 2021 the first and second respondents do each file and serve upon all other parties:-
(a)an amended response setting out with precision what orders are being sought;
(b)the affidavits of evidence in chief of all witnesses including the respondents relied upon (noting that affidavits relied upon for previous hearings cannot be relied upon as evidence in chief);
(c)a financial statement that complies with chapter 13 of the Family Law Rules.
5.That by 4.00 pm on 27 October 2021 the applicant file and serve any affidavit in reply to that of the affidavits of the respondents.
6.That no party file any further material other than as provided by these orders without leave of the Court.
7.That prior to the commencement of the trial, the parties determine whether there are to be any rulings required arising out of objections to evidence and such objections be referred to in the parties’ outline of case.
8.That all parties have liberty to approach the registrar responsible for the management of the court file to vary the obligations under these orders to ensure readiness for trial.
9.Liberty is granted to each party to relist the matter at short notice in relation to trial directions or any application for leave for subpoena to issue.
10.That the practitioners for the parties file and serve electronically to … by 4.00 pm on 29 October 2021 the following:
(a)a concise set of orders to be sought if different from those already filed;
(b)a list of the applications and affidavits to be read out and if not the whole affidavit, the relevant paragraphs relied upon;
(c)a list of assets and liabilities;
(d)a list of objections to evidence upon which rulings are required; and
(e)a bullet-point summary of argument in relation to the issues in dispute.
11.That each party provide to the Court at the commencement of the hearing, a statement setting out the costs incurred to that date and from what source those funds have been paid and what costs are expected to be incurred until the completion of the hearing.
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 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Millman & Millman has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).REASONS FOR JUDGMENT
BERMAN J
INTRODUCTION
By Amended Application in a Case filed 15 June 2021, Ms Millman (“the wife”) seeks that the husband do pay to her solicitors the sum of $233,055 on account of litigation funding on or before 31 July 2021 and in default then the parties shall do all things necessary to effect the sale of the property situate at N Street, Suburb F (“the Suburb F property”).
The wife also seeks that each party provide a costs advice pursuant to rr 19.04(3) and 19.04(5) of the Family Law Rules 2004 (Cth) (“the Rules”) and that the husband produce a copy of his DD Bank Account ending …40 from 22 September 2020 to date and his CC Bank Mastercard Account ending …77 from 27 August 2020 to date.
By Response to Amended Application in a Case filed 18 June 2021, the husband seeks that the application for litigation funding be dismissed and that both parties produce their bank statements for the period 22 September 2020 to date.
Orders were made on 8 December 2020 that the husband pay or cause to be paid to the wife’s solicitors’ trust account the sum of $50,000 by way of litigation funding payable within 30 days and that if the lump sum payment was not made then the husband is subject to a “dollar for dollar” order.
The source of power for the interim costs order was s 117 of the Family Law Act 1975 (Cth) (“the Act”). Whilst not the basis of the order made, I considered that it was open to consider whether an order should be made under ss 79 and 80(1)(h) of the Act. It is also possible to rely upon s 74 as a possible source of power.
I propose to rely upon the reasons for judgment delivered on 8 December 2020.[1] It is relevant to observe that by the Further Amended Initiating Application filed 25 May 2021, the wife particularises the orders that she seeks pursuant to ss 79, 80(1) and 106B(1) of the Act. Should the wife be successful in setting aside the transfer of the husband’s interest to Mr Fazil in the following entities:
(a)The companies known as E Pty Ltd, T Pty Ltd, U Pty Ltd and Millman Group Pty Ltd;
(b)In the name of the trusts but under the control of the trustees in respect of the W Trust, T Trust, U Trust and Millman Investment Trust;
then the wife seeks the non-superannuation assets be divided 70/30 in her favour and that the superannuation interests of the parties be adjusted to equality.
[1] Millman & Millman and Anor [2020] FamCA 1042
The final orders sought by the wife are opposed by the husband and the second respondent, Mr Fazil.
The proceedings remain listed for final hearing to commence on 1 November 2021.
LEGAL COSTS OF THE PARTIES
As at the date of judgment on 8 December 2020 and by reference to the parties’ costs statements which comprised exhibit “1” in the proceedings, the wife’s total costs were in the sum of $116,451.66 of which $33,343.56 were paid whereas the husband’s costs were in the sum of $200,474.33 with further unbilled solicitor and counsel fees of $40,515.
The costs both incurred and anticipated for each of the parties have increased exponentially. The wife’s costs to date total $182,031.59 of which $95,943.56 has been paid, predominantly from the litigation funding order of $50,000 and the sale of the wife’s motor vehicle in the sum of $11,000.
The wife has incurred outstanding fees and disbursements of $20,000 and the further costs to the hearing on 30 June 2021 are in the sum of $10,200.
The wife seeks to engage Mr Tom Cox QC to represent her at the final hearing. His fees including preparation are anticipated to be in the sum of $77,000. In addition, there will be solicitors’ fees and a disbursement for junior counsel.
As at 23 June 2021 the husband has paid legal fees, disbursements and counsel fees in the total sum of $340,234 noting that about $48,000 has been paid to the husband’s previous solicitors from 6 January to 6 March 2020.
The estimate of the total future costs of completing the proceedings including the costs of trial will be at least a further $300,000 which may not include unpaid and anticipated counsel fees, the husband’s share of the family assessment report, the cost of single expert valuations and the anticipated cost of the hearing on 30 June 2021 totalling a further $44,365.
Whilst not relevant to the issues between the husband and wife, the legal fees and counsel fees incurred by Mr Fazil are in the sum of $81,886.23 with the anticipated solicitor and counsel costs to the conclusion of trial being a further $292,260 which includes $159,160 for senior and junior counsel.
INTERIM COSTS
As discussed, it is open to consider an order for litigation costs under ss 79 and 80(1)(h) of the Act.
There are essentially two stages to the consideration of an application for interim property orders.[2]
(a)The first stage is a “procedural step” which requires an analysis of whether the circumstances of the case triggers the Court’s power to invoke s 80(1)(h) of the Act to make an order for interim property settlement before a final hearing. At this stage the “overarching consideration” is the interest of justice.
(b)The second stage is the “substantive step” where the provisions of s 79 of the Act must be considered and applied but with limitations, given that it is not a final hearing.
[2] See Strahan & Strahan(Interim Property Orders) (2011) FLC 93-466
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”.[3]
[3] Medlow & Medlow (2016) FLC 93-692 at 81,088 [69].
In circumstances where a party seeks interim property orders, the onus is upon the applicant to establish that there are sufficient assets available for an interim distribution to be made.
The very nature of an interim hearing is such that the Court is not in a position to properly evaluate the evidence and accordingly, the Court should take a conservative approach, including in respect of determining whether there is likely to be sufficient resources of the parties available at the final hearing to accommodate what could be considered any “adjustment”.
I consider that it is open for the wife to seek an order by way of partial settlement of property with the purpose to be directed to litigation funding.
The husband argues that it would not be just for the Court to make a further interim costs order in circumstances where an earlier order was made on 8 December 2020.
I do not consider that the wife should be estopped from bringing an application for interim costs. The source of power is either by way of partial settlement of property or a costs order pursuant to s 117 of the Act.
I do not cavil with the proposition that the Court should discourage the re-litigation of matters already determined.
The interim proceedings determined on 8 December 2020 were limited to the wife’s application that the husband pay or cause to be paid the sum of $50,000 by way of litigation funding. As discussed, at that time the wife’s total costs were in the sum of $116,451.66 with total costs paid to that date of $33,343.56.
The husband’s total costs were in the sum of $200,474.33 with the anticipated future costs to be in the sum of $300,000.
It is regrettable that the total costs of the parties both incurred and anticipated to the conclusion of the proceedings will significantly exceed even the most pessimistic assessment of the parties.
The application and response seeking final orders are listed for hearing to commence on 1 November 2021. The focus of the parties is now upon trial preparation.
The proceedings are properly to be considered as complex. Both the husband and Mr Fazil consider that the issues to be resolved require the involvement of both senior and junior counsel. The wife seeks a similar level of representation.
Throughout the proceedings to date, the wife has retained her solicitors and counsel although it is apparent that unlike the husband she has not been able to pay her legal fees, costs and disbursements as and when they have been incurred.
I consider that the material change which justifies the Court’s consideration of a further interim costs application is the wife’s assessment of the future sum likely to be incurred up to and including the conclusion of the final hearing.
The wife is not in a position to pay the fees as required and in particular the component of $131,450, being the fees to secure senior and junior counsel.
There was no challenge to the detail of the wife’s financial situation other than to suggest that the wife may have the ability to borrow funds necessary to pay her legal fees upon the security of the freehold property at B Street, Suburb C (“the Suburb C property”) in which the wife currently resides.
I do not consider that at this stage of the proceedings it would be reasonable for the wife to be required to obtain a loan to cover her legal fees secured over the Suburb C property. I am not assisted by any evidence as to whether the wife would be successful upon such an application, however I note from her financial statement filed 25 May 2021 that her salary from her employment is in the modest sum of $350 per week. The wife relies significantly upon the order of spousal maintenance currently in the sum of $1,000 per week.
The ability of each of the parties to have recourse to legal representation is a matter of justice and equity. I do not consider that the wife’s application is oppressive to the husband or is likely to bring the administration of justice into disrepute.
DOES THE WIFE HAVE AN ARGUABLE CASE
In Bede Polding College v Limit (No. 3) Limited & Anor [2008] NSWSC 887 the Supreme Court of New South Wales considered the decision of General Steel Industries v Commissioner for Railways (1962) 112 CLR 125 and a further case Dey v Victorian Railway Commissioners (1949) 78 CLR 62 in determining whether a party had an arguable case. Grove J said as follows:
9.… I would … follow the guidance of General Steel Industries v Commissioner for Railways (1962) 112 CLR 125. That case and Dey v Victorian Railways Commissioners (1949) 78 CLR 62 were focused on summary dismissal but as Dixon J observed in the latter “once it appears that there is a real question whether of fact or law and that the rights of the parties depend on it, then it is not competent for the Court to dismiss the action”.
The case of Dempster v National Companies and Securities Commission (1993) 9 WAR 215 considered the meaning of “arguable” by reference to s 187(1) of the Justices Act 1902 (WA) where the court held the following at 262:
It was contended on behalf of the appellant that the expression “arguable case” in s 187(1) meant “capable of being arguable”: see The Shorter Oxford Dictionary. In my opinion, having regard to the context, an arguable case is one that is not merely capable of being argued, but one that is reasonably capable of being argued in the sense that it has an argument which has some prospect of success. In this context, “arguable case” necessarily has the same meaning as “reasonable case” …
The wife’s case must be one which has some chance of success.
In Jackamarra v Krakouer & Anor (1998) 195 CLR 516 at 527 [32] reference was made to the following consideration by Barwick CJ in General Steel Industries Inc. v Commissioner for Railways(NSW) (1964) 112 CLR 125 at 129:
The test to be applied has been variously expressed; “so obviously untenable that it cannot possibly succeed”; “manifestly groundless”; so manifestly faulty that it does not admit of argument”; “discloses a case which the Court is satisfied cannot succeed”; “under no possibility can there be a good cause of action”; “be manifest that to allow them” (the pleadings) “to stand would involve useless expense”.
At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or “so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument”; “so to speak apparent at a glance”.
In my earlier judgment I considered that there was at least a prima facie case that the wife had an entitlement under s 79 of the Act and that it was reasonable for her to explore and investigate the financial arrangements that had taken place between Mr Fazil and the husband. Whilst the dispute between the parties centred upon the wife’s application under s 106B that the purported disposition of property by the husband to Mr Fazil be reversed and restored to the asset pool, it cannot be ignored that a significant component to the proceedings rises from the parties’ inability to agree the future parenting arrangements for the children.
The husband challenges the ability of the wife to prosecute her claim in that she has made no challenge to the evidence of the husband and Mr Fazil as to the debt owing by the husband to him. It is asserted that the wife’s case is to deny knowledge of the debt.
In the wife’s affidavit filed 10 August 2020, the following appears:
5. When I read the husband’s Affidavit filed 21 July 2020, this was the first time I was informed of the following:
(a) The alleged loan extended to the husband by Mr Fazil.
(b)The alleged requirement for the husband to repay the alleged loan to Mr Fazil (with interest).
(c)The payment of $600,000 by the husband to Mr Fazil on 17 January 2020.
(d)The proceedings issued against the husband by Mr Fazil in the Supreme Court of Queensland.
(e)The alleged agreement reached between the husband and Mr Fazil as to repayment of the alleged loan.
(f) The Deed of Agreement signed 8 June 2020.
(g)The transfer of the husband’s interests in our various business entities to Mr Fazil and/or his nominee.
6.I dispute that there was a debt owing to Mr Fazil in the amount of $5,467,459 or any amount whatsoever.
7. I dispute that there was a requirement for the husband to pay to Mr Fazil $600,000 on 17 January 2020 or any amount whatsoever on account of the alleged debt owing to Mr Fazil by the husband.
8. I dispute that there was a requirement for the husband to transfer to Mr Fazil and/or his nominee all of the husband’s interests in our various business entities.
9. I say that the husband has fabricated the existence of the debt owing to Mr Fazil in order to reduce the size of the matrimonial asset pool and manufacture an alleged justification for transferring to Mr Fazil and/or his nominee all of the husband’s interests in our various business entities (thereby further reducing the size of the matrimonial asset pool).
It cannot be said that the wife’s case simply rests upon an assertion that she did not have knowledge of the loan. It is not controversial that the husband did not inform the wife of his intention to transfer property of the parties to Mr Fazil. It appears that the wife’s claim is to dispute that there was any debt at all owing to Mr Fazil.
Even the less stringent test as provided for in s 45A of the Act still supports the proposition that summary dismissal should be sparingly granted.
EVALUATION OF THE QUALITY AND NATURE OF THE CLAIM
In Salvage & Fosse (2020) FLC 93-966 (“Salvage & Fosse”) the Court was asked to consider whether an order for litigation expenses should be made in a case where the claim was to set aside the cohabitation agreement. The import of that consideration is that if the cohabitation agreement was not set aside then there would be no property available to the applicant. Any order made for the payment of litigation funding would have little prospects of being repaid.
In Rakete v Rakete (2012) 48 Fam LR 325 at [55] Kent J considered that the interim costs order that may never be repaid was not necessarily a bar to an order being made in the first place.
The Full Court in Salvage & Fosse (supra) approved of Kent J’s reasoning and considered that the potential for an order to be “reversible” should be a relevant consideration and therefore it is encumbered upon the Court to consider the potential outcome of the proceedings if the wife’s case is made out.
Whilst I do not consider that the same considerations necessarily apply to an order by way of partial settlement of property, it is relevant to have regard to the potential outcome in order to place the quantum as sought by the wife into context.
The wife in any event, makes the point that whilst not her primary position, the Suburb C property which the husband concedes should be retained by the wife in any event, is available to redress any order that might be made by way of partial property settlement or interim costs.
By reference to the orders sought in the Further Amended Initiating Application filed 25 May 2021 and subject to a successful s 106B outcome, the wife seeks that in full and final settlement of the property interests of the parties the net non-superannuation assets be divided as to 70 per cent in favour of the wife and 30 per cent to the husband and their net superannuation entitlements shall be adjusted to equality.
For his part, the husband seeks orders as set out in his Amended Reply filed 27 October 2020 which seeks that he transfer his right, title and interest in the Suburb C property to the wife and that he retain his interest in the W Trust and the Millman Family Trust and that he indemnify the wife and keep her indemnified in relation to all debts and liabilities arising out of those entities.
Importantly, the husband seeks to further indemnify the wife in respect of all actions and claims or any debt or liability of the parties or either of them to any member of his family. Presumably it is intended that he will indemnify the wife in respect of any residual claim by Mr Fazil.
Having regard to the husband’s assessment of the assets and liabilities of the parties, by necessary implication there is likely to be a deficit of the assets of the parties. It is not clear as to the husband’s ability to provide the indemnity for the wife that he proposes.
The husband filed an affidavit on 21 July 2020 disclosing for the first time that the husband had transferred his interest and therefore control to Mr Fazil in the E Centre, T Practice and U Practice.
The husband explains his actions on the basis that he was under pressure by reason of litigation issued by Mr Fazil seeking $4,870,348.50.
The husband contends that between 1993 and 2020, Mr Fazil had loaned him the sum of $2,669,762 with interest in the further sum of $2,797,697.
In addition, at the time, the husband contends that the E Centre had borrowings of $263,000 to V Bank, the T Practice carried rent liabilities of $120,000 and the U Practice carried rent liabilities of $104,000 per annum.
The husband sets out offers that were made to purchase the medical practices following a valuation that he had obtained in April 2020. The husband rejected the offers on the basis that if he had accepted an offer he may well have been required to remain in practice for a further five years in circumstances that were not possible given his then state of health.
The husband considers that he was on the precipice of bankruptcy and given the mounting debts and pressure from the litigation issued by Mr Fazil, an agreement was reached and the husband entered into a deed of agreement on 8 June 2020 to effectively transfer the husband’s interest in the medical practices.
At paragraph 131 of the husband’s affidavit he sets out that the agreement reached released the husband from various debts and liabilities.
The division 7A loans remain unchanged.
Whilst not the subject of agreement, at paragraph 136 the husband sets out the assets and liabilities held by each of them as at the date of separation in the sum of ($4,931,030). It is notable that included in the assets is a debt to Mr Fazil of $5,200,000.
Following the transfer of the husband’s interest in the medical practices and the repayment of the sum of $600,000 to Mr Fazil, at paragraph 138 of his affidavit the husband considers that the net property of the parties is in deficit to the sum of ($1,410,840).
It is apparent that whilst there may have been liabilities discharged by Mr Fazil following the deed of agreement entered into with the husband, the asset pool would be significantly different were the wife to be successful in her application to set aside the transactions.
It could not be said that the wife’s application at its highest would be a pyrrhic victory.
THE HUSBAND’S FINANCIAL CIRCUMSTANCES
The husband has resumed employment as a health care worker and for the period between November 2020 and the end of May 2021 his income was $423,237 gross.
The husband continues to pay mortgage payments in respect of the Suburb F property being premises that according to the husband has nil equity. For reasons that are not easily understood, the husband continues to remain in Suburb F even though by his own admission he is not able to fund its retention.
There is no suggestion that the wife’s financial position is anything other than parlous.
The husband also continues an involvement in the business known as EE Pty Ltd. He continues to subsidise the business through the use of credit card and overdraft facilities notwithstanding that in the 2020 financial year it made a loss of $158,000.
In my earlier judgment I found that the husband had effective control over the property of the parties.
He has been able to substantially pay for his legal representation although it is difficult to understand how his costs are estimated to be in excess of $600,000 should the proceedings run to trial.
CONCLUSION
The wife is currently represented by a solicitor and counsel. At present, the solicitors are unpaid but have indicated that they will continue to represent the wife through to the conclusion of the trial. They are not obliged to do so and if they ceased acting that is not necessarily a prerequisite before a litigation funding order could be made.
The husband and Mr Fazil both consider that the complexity of the proceedings warrants the involvement of junior and senior counsel.
I consider that there is merit in the wife’s claim but only in so far as it would cover the likely counsel fees for both senior and junior counsel.
The relationship between the wife and her solicitors is qualitatively different to that as between the solicitors and counsel who have and are to be instructed.
The amount sought by the wife for anticipated counsel fees is in the sum of $131,450. I consider that it is a reasonable sum in the circumstances and if paid is not irreversible. The wife will continue to be represented by junior counsel however Queen’s Counsel requires upfront payment.
The circumstances in which the parties find themselves and in particular the level of mistrust and inability to reach agreement is in part as a result of the control by the husband of the valuable property of the parties.
I propose to order that the husband pay the wife the sum of $77,000 so as to enable the wife to secure the services of senior counsel.
I do not propose to order that the Suburb F property be sold in default. In circumstances where the trial is listed to commence in November 2021, it is unlikely that there would be sale and settlement of the Suburb F property. The wife did not seek a “dollar for dollar” order in default.
There is no advantage to the wife in such an order being made.
I make orders as appear at the commencement of these reasons.
I certify that the preceding eighty-one (81) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Berman. Associate:
Dated: 2 August 2021
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