Ming & Dao

[2020] FamCA 726

FAMILY COURT OF AUSTRALIA

MING & DAO [2020] FamCA 726

FAMILY LAW – PROPERTY – Interlocutory – Application for a litigation funding order – Where the lump sum payment sought by the applicant is pressed on alternate bases as either a property settlement order or as a costs order – Where the applicant has the financial capacity to meet his own legal costs – Where there is no persuasive reason to fragment the exercise of power under Part VIII of the Family Law Act 1975 (Cth) – Where the application of various factors prescribed by s 117(2A) of the Family Law Act 1975 (Cth) does not entitle the applicant to a costs order – Where the application lacks merit – Application dismissed – No order as to costs.

FAMILY LAW – PROPERTY – Single expert fees – Where previous orders were made appointing single experts but no order was made allocating responsibility to meet their fees – Where the applicant seeks that the respondent pay the fees of any single expert appointed in the first instance – Where the respondent is in a superior financial position – Where the use of a single expert to value corporate interests is imperative to the respondent retaining the corporate structure – Where the respondent shall pay the costs of all retained single experts in the first instance – Application granted.

Family Law Act 1975 (Cth) Pt VIII, s 117

Family Law Rules 2004 (Cth) rr 1.04, 1.06, 1.07, 1.08, 5.08, 15.47

Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466; [2009] FamCAFC 166

APPLICANT: Mr Ming

RESPONDENT: Ms Dao

FILE NUMBER: SYC 8463 of 2017

DATE DELIVERED: 12 August 2020

PLACE DELIVERED: Newcastle

PLACE HEARD: Newcastle

JUDGMENT OF: Austin J

HEARING DATE: 12 August 2020

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Campton SC

SOLICITOR FOR THE APPLICANT: Pigdon Norgate Family Lawyers

COUNSEL FOR THE RESPONDENT: Mr Lethbridge SC

SOLICITOR FOR THE RESPONDENT: Diamond Conway Lawyers

Orders

BY CONSENT AND PENDING FURTHER ORDER, IT IS ORDERED THAT

1.In supplementation of the orders made on 5 February 2019, appointing single expert witnesses:

a.The instructions to Ms P of Q Company shall be amended to require her valuation report to include a valuation of the husband’s interests in the following corporations:

i.S (NSW) Pty Limited;

ii.R Pty Ltd;

iii.T (Australia) Pty Limited; and

iv.T (Suburb M) Pty Limited.

b.The instructions to Ms P of Q Company shall be amended to require the date of her valuation of corporate entities to be current as at 30 June 2020.

c.The parties shall provide to Ms P of Q Company no later than Friday, 4 September 2020, financial reports for the year ended 30 June 2020 in respect of all the corporate entities Ms P is asked to value.

d.The wife shall respond to Ms P’s outstanding request dated 1 May 2020 within seven days.

2.Subject to the husband providing to the wife in writing an Undertaking as to damages, the wife is restrained from causing or permitting to be done, including through any servant or agent, any of the following without providing 14 days prior notice in writing to the husband:

a.Entering into any arrangement with the Australian Taxation Office, or making any payments, in relation to any assessed tax liability as a result of the audit conducted on:

i.V (Suburb J) Pty Ltd;

ii.V (Suburb C) Pty Ltd;

iii.V (Suburb W) Pty Ltd;

iv.V (Suburb L) Pty Ltd;

v.V (Suburb M) Pty Ltd;

vi.V (U Centre) Pty Ltd; and

vii.X Pty Ltd.

b.Taking any steps to close any of the hospitality businesses on a final basis.

PENDING FURTHER ORDER, IT IS FURTHER ORDERED THAT

3.The parties shall forthwith take all necessary steps to sell the real property situate at and known as Y Street, Suburb B, NSW, and use the proceeds of sale to meet all costs and expenses of the sale and to discharge the mortgage encumbering the property.

4.The wife shall be responsible in the first instance for payment of all costs to the single expert witnesses appointed in these proceedings (including Ms P of Q Company, any single expert appointed to value the Chinese real property, and any single expert appointed to value the Australian real property), including the costs incurred in any further or updated valuations that the parties agree should be procured, with the ultimate responsibility for the payment of such costs reserved to final trial.

5.Otherwise:

a.The Application in a Case filed on 29 July 2020 is dismissed;

b.The Response to an Application in a Case filed on 6 August 2020 is dismissed; and

c.Any and all other outstanding applications for interim relief are dismissed.

6.        No order as to costs.

NOTATION

A.Upon sale of the Suburb B property pursuant to Order 3 hereof, the husband will become entitled to 30 percent of the net proceeds of sale and the wife will become entitled to 70 percent of the net proceeds of sale. These Orders do not estop the husband from making an application (made in accordance with the Family Law Rules) for an injunction to restrain the wife’s use of her share of the net proceeds of sale if so inclined or advised.

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 Ming & Dao 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 NEWCASTLE

FILE NUMBER: SYC 8463 of 2017

Mr Ming

Applicant

And

Ms Dao

Respondent

EX TEMPORE REASONS FOR JUDGMENT

Introduction

1.The applicant husband and the respondent wife are engaged in property settlement proceedings under Part VIII of the Family Law Act 1975 (Cth) (“the Act”), commenced by the husband in December 2017.

2.The parties have already had a number of interlocutory skirmishes and this is another. The principal current irritant is the wife’s dilatory approach to the disclosure of financial information related to a plethora of corporations used to operate hospitality businesses and the consequential effects of her tardiness, being the impairment of the provision of proper and comprehensive instructions to the single expert appointed to value the corporations and the enormous legal costs the husband is incurring, and will likely continue to incur, while trying to move the proceedings forward towards trial.

3.Before the Court for determination are the husband’s Application in a Case, filed on 29 July 2020, and the wife’s Response to an Application in a Case, filed on 6 August 2020.

4.By comparing the parties’ interlocutory applications for relief and by taking into account their concessions during submissions, several aspects of their dispute were foreclosed. The parties agreed that orders could be made:

a)restraining the wife from taking certain steps on behalf of numerous corporations she controls, without first giving 14 days written notice to the husband (subject to the husband giving an undertaking as to damages);

b)compelling the wife to respond to the single expert’s outstanding request for further information dated 1 May 2020; and

c)compelling the parties to expand and alter the instructions to the single expert.

5.In addition, the husband abandoned his application for an order compelling the wife to serve upon her various professional advisers irrevocable written authorities directing them to disclose certain information to him.

6.Those areas of agreement and abandonment to which I have just referred cover the husband’s application for Orders 5, 6, 7, 8 and 9 in his Application in a Case and the wife’s application for Orders 2, 3 and 4 in her Response to an Application in a Case. 

7.The residual areas of dispute are, therefore:

a)the husband’s application for litigation funding from the wife (Orders 2 and 3 in his Application in a Case); and

b)the husband’s application for the wife to pay any appointed single experts’ fees in the first instance (Order 4 in his Application in a Case).

Evidence

8.In support of his application, the husband relied upon:

a)his affidavit filed on 3 July 2020, excluding the annexures which were not attached thereto;

b)his financial statement filed on 3 July 2020; and

c)Exhibits H1, H2, H3 and H4.

9.The wife relied upon:

a)her affidavit filed on 6 August 2020, excluding the annexures which were not attached thereto;

b)her financial statement filed on 6 August 2020; and

c)Exhibits W1, W2 and W3.

Litigation Funding

10.The husband pressed his application for the wife’s compulsion to pay him a lump sum of $390,000 for use towards his legal costs on alternate bases: either as part of a property settlement order or in the guise of a costs order. 

11.His fall-back position was an order compelling the wife to pay his legal costs in equal amounts to those she pays to her own lawyers (which he called a “dollar-for-dollar” order). The husband did not specifically say, but presumably such an order could only be characterised as a costs order. 

12.His application in all its variations was opposed by the wife.

13.As the Full Court said in Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466 at [85], [90]–[92] and [212]–[218], regardless of the head of power relied upon as the basis for a litigation funding order, there are three salient considerations, namely: a position of relative financial strength on the part of the respondent; a capacity on the part of the respondent to meet his or her own litigation costs; and an inability on the part of the applicant to meet to his or her own litigation costs.

14.It should be acknowledged at the outset that there was irreconcilable controversy at this hearing over the value of the corporate structure under the wife’s control and the quantum of the income stream it generates for her. Despite the husband trying to persuade that the corporate structure is much more valuable to the wife than she concedes, either as to its capital value or income, that dispute cannot be resolved at an interlocutory hearing. The evidence of the parties was not tested, there is no expert evidence yet available, and there are even conflicts in the documentary material tendered in evidence. All that can be safely said at this stage is the wife enjoys a handsome lifestyle. While she might enjoy a position of “relative” financial strength as against the husband, he is far from destitute. The recitation of some uncontroversial evidence serves to illustrate the point.

15.The husband owns 30 per cent of a real property at Suburb B, which the parties agree is worth $3.5 million and is encumbered by a mortgage of about $2.55 million, so he is entitled to 30 per cent of the net equity of about $1 million.

16.The husband owns 50 per cent of a real property at Suburb C in which the wife lives. The parties agree it is worth at least $3.8 million and is encumbered by a mortgage of about $2.88 million in total.

17.The husband owns 50 per cent of a real property in the Sydney in which he lives. The parties agree it is worth $1.65 million and is encumbered by a mortgage of around $350,000.

18.Pursuant to earlier interim orders, the wife meets the regular outgoings in the form of loan repayments and rates on both the Suburb C and the Sydney residences. The wife also pays the lease costs on the car possessed and driven by the husband. 

19.In May 2018, the wife paid the husband $121,730.

20.In June 2018, the wife paid the husband $100,000 by way of lump-sum spousal maintenance and began paying him $1,944 per week by way of periodic spousal maintenance. For ease of calculation, the periodic spousal maintenance payments total approximately $100,000 per annum.

21.In September 2019, the husband received another $100,000 from the wife when they equally split the contents of a safe deposit box.

22.Although the husband deposed having no income at all, he admitted he is self-employed in a hospitality business, which is set-up through a corporation. He deposed lending the corporation $80,000, but alleges the corporation cannot repay the loan to him. Regardless, it must follow that, while accepting the wife’s largesse over the past two years or more, he considered himself sufficiently well off to invest a substantial capital sum in the business venture.

23.The husband has incurred $267,267 in legal fees up to 30 June 2020. Of that sum, he has paid $236,147, which is more than amply covered by the capital payments of more than $300,000 he has so far received from the wife. There is a certain irony in the husband incurring $267,000 in legal fees to only get to the point of now asking for another $390,000 to cover even more legal costs. 

24.In my view, the husband’s application offends common sense. As I said during discourse with senior counsel, the parties should sell the Suburb B property, which they believe will yield net proceeds of about $1 million. The husband is legally entitled to 30 per cent of the net sale proceeds, without any order at all needing to be made by the Court. The property is leased and not occupied by either of them so there is no impediment to its sale. Nor does the husband make any final claim for relief on the Suburb B property. The wife was willing to sell it and the husband had no rational explanation for why he would not. Ultimately, he agreed he would. In my view, the husband should resort to the use of his own capital before calling on the wife for hers. This was, in my view, a misconceived application. The mere fact the wife may have more capital than the husband does not justify his application because, on his own evidence, he has the financial capacity to meet his own legal costs.

25.In the context of the application being one for property settlement, there is no persuasive reason to fragment the exercise of power under Part VIII of the Act. It would be far better to exercise the power once and for all at the final trial. That is especially so given the wide dispute over the value of the property interests to be ultimately adjusted and the wide disparity between the parties’ views about the quantum of the husband’s eventual overall entitlement. Those considerations are not overcome by the husband loosely contending that there is plenty of property to go around and, since his present application falls comfortably within the scope of his application for final relief, it should be granted.

26.In the alternate context of this being a costs application, then the application of the various factors prescribed by s 117(2A) of the Act to the evidence is not productive of a conclusion that, contrary to the ordinary rule in s 117(1) of the Act, the husband is entitled in advance to his costs from the wife.

27.If the husband’s lawyers now terminate their retainer agreement because of the husband’s consequent inability to progressively pay their costs and disbursements, then so be it. There will presumably be other competent solicitors and barristers willing to take on the husband’s representation in the proceedings, given his current lawyers’ contention he will ultimately be entitled to both the Suburb C and Sydney properties free of encumbrance: property worth $5.55 million unencumbered, on his own estimation. In such circumstances there seems little likelihood of the husband being left without competent legal representation to conclude this dispute with the wife in one way or another.

28.Lest it have been overlooked, the courts do not entertain these interlocutory applications for litigation funding to ensure the convenience of regular cash flow for legal firms. They are entertained to accommodate disadvantaged litigants, by levelling the litigious playing field for them.

29.This application for litigation funding, apart from the lack of merit to which I have already adverted, should be dismissed pursuant to the diligent application of the Family Law Rules 2004 (Cth) (“the Rules”), and in particular: rr 5.08(b), 5.08(c), 5.08(d), 1.04, 1.06(g), 1.07(c), 1.07(e) and 1.08(2).

Single experts’ fees

30.On 5 February 2019, orders were consensually made appointing single experts to value corporate interests, Australian real estate and Chinese real estate. 

31.No order was then made allocating responsibility between the parties to meet the single experts’ fees. That work is primarily done by the Rules, which stipulate the parties are equally liable for such fees (r 15.47), although, of course, that situation can be varied by procedural order. Such variation is what the husband now wants. He wants the wife to meet the entirety of the single experts’ fees in the first instance, with the question of his ultimate liability for a proportion of the fees postponed until later. In effect, the wife said little or nothing against the husband’s application, even though she formally opposed it.

32.While I have found the husband is in a reasonable financial position, not least because of his receipt of continuing periodic spousal maintenance of $1,944 per week, the wife is inferentially in a superior financial position. The husband’s capital is locked in the parcels of real estate to which I have referred, one of which he occupies.

33.The wife seeks to retain, rather than dismantle, the elaborate corporate structure she controls and through which she conducts business, so it is imperative to value the corporate interests through use of the single expert. Divestiture of the corporate interests by their sale at market value is not a viable alternative when the corporations are all privately owned and are used as business vehicles.

34.The wife should pay the costs of all retained single experts in the first instance. The question of the husband’s reimbursement of a proportion of such costs can be considered at, or following, the final trial.

Costs

35.No costs order was sought by one party against the other and so none is made.

I certify that the preceding thirty-five (35) paragraphs are a true copy of the ex tempore reasons for judgment of the Honourable Justice Austin delivered on 12 August 2020.

Associate: 

Date:  7 September 2020