Mitchell and Mitchell (No. 4)

[2017] FamCA 1044

FAMILY COURT OF AUSTRALIA

MITCHELL & MITCHELL (NO. 4) [2017] FamCA 1044

FAMILY LAW – LITIGATION FUNDING – costs order under s 117 – interim property distribution under s 79 – lump sum spousal maintenance under s 72 – INJUNCTION

In the Marriage of Zschokke (1996) 20 Fam LR 766

Strahan & Strahan (Interim Property Orders) (2009) 42 Fam LR 203

Family Law Act 1975 (Cth) ss 68B, 72, 79, 114, 117, 121

APPLICANT: Mr Mitchell

RESPONDENT:	Ms Mitchell
INDEPENDENT CHILDREN’S LAWYER	Ms Garwell

FILE NUMBER: AYC 255 of 2013

DATE DELIVERED: 19 December 2017

PLACE DELIVERED: Canberra

PLACE HEARD: Canberra

JUDGMENT OF: Gill J

HEARING DATE: 27 October 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT:	Ms Dart
SOLICITOR FOR THE APPLICANT:	Rama Myers Family Lawyers

SOLICITOR FOR THE RESPONDENT:	Farrar Gesini Dunn
SOLICITOR FOR THE INDEPENDENT CHILDREN’S LAWYER:	Legal Aid NSW Albury

Orders

1. The husband’s application for litigation funding is refused and his application is dismissed;

2. The wife’s application for costs is refused;

3. Mr Mitchell, born … 1974, be and is hereby restrained by injunction from publishing, broadcasting or otherwise posting in any public forum including on the internet or any social media website any information or comment concerning:

   (a)       Ms Mitchell, born … 1979;

   (b)Ms Mitchell’s business, N Family Trust trading as Company O previously known as Company N;

   (c)       The children who are the subject of these proceedings;

   (d)       These proceedings; and/or

   (e)       Any allegation or evidence in these proceedings.

4. Mr Mitchell be and is hereby restrained by injunction from doing any act or thing to cause any loss or detriment to Ms Mitchell’s business N Family Trust trading as Company O previously known as Company N.

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 Mitchell & Mitchell (No. 4) 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 CANBERRA

FILE NUMBER: AYC 255 of 2013

Mr Mitchell

Applicant

And

Ms Mitchell

Respondent

REASONS FOR JUDGMENT

Introduction

1. This matter has come before me in relation to an application in a case filed by the father on 31 August 2017 for an interim litigation funding order to the value of $102,000. This order is based on three alternatives, namely, an interim property distribution under s 79 of the Family Law Act 1975, lump sum spousal maintenance under s 72, or a costs order under s 117(2). Order 9 of the father’s application in a case provides that the sum be held on trust by the father’s solicitors, and only applied to legal costs and disbursements.

2. By her response to an application in a case, filed 4 October 2017, the wife seeks that the father’s application be dismissed, and that the father pay the mother’s costs incurred in relation to appearances on 11 September 2017 and 27 October 2017 on an indemnity basis. 

3. The mother further seeks that the father be restrained from publishing, broadcasting or posting in any public forum material relating to her, her businesses, the parties’ children or the proceedings, and that the father be restrained from contacting any current, former or future clients of the mother’s businesses, and doing any act to cause any loss or detriment to that business. 

RELEVANT LAW

1. The impetus for making a litigation funding order such as the order sought here was recognised in Strahan as coming from the desirability of both parties having access to legal representation, even where it is one party who has the control over the property of the marriage to the exclusion of the other.  That is, it is driven by the interests of justice.

2. As indicated by the case law, it is important to first identify the relevant source of power when considering any interim order for litigation expenses.[1] The conditions that govern the exercise of power pursuant to s 79, s 72 and s 117 each differ.

   [1]In the Marriage of Zschokke (1996) 20 Fam LR 766.

3. While there is no need for compelling reasons, in considering an application under s 79, there is a need to establish a sufficient basis to counter the benefits of dealing with the matter in a single exercise of the discretion. The mere fact of establishing a likelihood that the interim claim will be met within the final distribution is insufficient.[2]

   [2]Strahan & Strahan (Interim Property Orders) (2009) 42 Fam LR 203 per Thackray J at [222] ff.

4. In this case, establishing the need to obtain funds in this manner to secure legal representation would provide such a reason.

5. If this reason is established, any subsequent order must be just and equitable, and must form an integral part of the ultimate distribution.[3] Accordingly, in order to make the order it must be able to be characterised, within the known limitations of interim proceedings, as falling within an ultimate distribution to that party.

   [3]Strahan per Boland and O’Ryan JJ at [92].

6. If the power exercised is pursuant to s 117, the controlling factor is that the order be just, and that the considerations identified in s 117(2A) be taken into account insofar as they are applicable. The ability of the sum to be taken into account in a final property distribution is a relevant consideration, although inability does not necessarily foreclose the matter.[4]

   [4]Strahan per Boland and O’Ryan JJ at [94].

7. If the power is exercised pursuant to the maintenance power, then the order must be as the court considers proper for the provision of maintenance, and can only be made to the extent that the applicant is unable to support himself or herself adequately and the respondent is reasonably able to do so.

8. Whatever the head of power, the Full Court held in In the Marriage of Zschokke that there are at least three relevant matters to consider before making such an order.  Firstly, a position of relative financial strength by the respondent, secondly, a capacity of the part of the respondent to meet his or her own litigation expenses;  and thirdly, an inability by the applicant to meet her or his litigation expense from his or her own income assets or financial resources.  These factors must be considered noting that the requirements of justice remain a basic underlying condition to the exercise of the power. 

9. Insofar as the application is pursuant to the costs or maintenance power, consideration should also be given to whether there is an arguable case for substantive relief, the likely costs of litigation, what would constitute reasonable costs for the litigation, whether the funding is necessary for the lawyers to continue to act (although such willingness does not preclude an order) and an ability to protect the parties from injustice arising from the manner of the spending of the funds.[5]

   [5]Strahan per Boland and O’Ryan JJ at [96].

THIS CASE

1. In this case the reason for the order sought is the inability of the husband to fund legal representation.

2. The father indicates that he is currently unemployed, and with little money.[6]  No details were provided as to the circumstances in which the father finds himself unemployed, nor steps taken to find employment. 

   [6] Affidavit of the father filed 31 August 2017 at [2].

3. To date, he indicates that he has paid $64,613.34 in legal fees, with $19,071.45 still owing, and with approximately $6,000 in unbilled fees.  The father states that all of his previous legal fees have been paid by his parents, but that his ability to borrow money from his parents, or from friends, has been exhausted.  The father sets out his other estimated future legal costs as:

   a)Trial preparation fees - $30,000;

   b)Solicitor instructing fees - $16,000 (based on an assumed four day trial);

   c)Counsel fees - $21,000;

   d)Expert fees - $5,000.

4. Taking into account the current fees owing of approximately $20,000 and the unbilled fees of $10,000 (incl. costs of the current application) this arrives at an approximate figure of $102,000. 

5. The father indicated that his financial position is still well described by his affidavit filed 21 July 2015.  That affidavit indicated that he possesses a motorbike subject to finance, negligible bank accounts and superannuation.  The father indicates that this superannuation is currently valued at $56,280.

6. His current financial statement dated 31 August 2017 indicates net assets of E$500 worth of personal household items. 

7. He is in receipt of the NewStart Benefit of $666 per fortnight, and contends that he has no other source of income.  He lists his liabilities (excluding legal fees) as $348 per week in child support, E$6,000 for a motorbike, E$6,000 owing to the child support agency, and $8,000 owing to P Loans, with interest accruing.  He indicates that all his personal expenses are paid by his parents. 

8. The fact of the father’s unemployment does not of itself answer the question of capacity.  Absent some evidence about inability to secure employment, the husband’s case on this point is deficient.  The onus of establishing the incapacity rests upon him.

9. The wife is in an ascertainable position.  She works as a self-employed professional, having commenced business in August 2014.  The mother states that she earns approximately $850 per week, and receives $242 per week in family tax benefits, totalling $1,092.  Against this, she gives a weekly expenditure of $1,277, resulting in a $185 deficit. 

10. The wife also has a home, worth approximately $465,000 with $83,000 owing.  She says that there is around $67,000 available on a redraw facility.  The wife indicates an outstanding debt for legal fees of $4,454.59, with future estimated costs of approximately $73,000.  She can, she believes, borrow an additional $21,500, based on her income.  However, additional drawings against the house mean that her expenses outweigh her income by an increased margin.

11. While it was identified that she has a cash amount at bank, this appears to be working capital for the business, potentially representing her future ability to draw income from the business.

12. On the figures provided by the wife, she is in a current position to all but fund the estimated amount of her legal fees, without resorting to obtaining any fresh loans or selling the home.

13. For the wife to fund the husband’s litigation as well as her own would require either disposal of assets such as her home, or borrowing against that home.

14. An assessment of the parties’ contributions is set out below.

15. The parties commenced living together in 2001and married in 2004.  At the time they commenced cohabitation neither party held significant assets or owed any liabilities.  The mother studied at university, before working at Company Q, leaving to do private work, then joining Company R.  Throughout this period the father worked full time. 

16. In 2003 the parties purchased a house together in S Town for $131,000, which was sold in 2008 or 2009 with the parties receiving a net value of $31,000.  This sum was used for living expenses. 

17. In September 2007 the mother suffered a brain injury by way of infection, and returned to minimal work in January 2008 with Company R.  At this time the father worked full time with T Pty Ltd, then with U Pty Ltd.  In mid-2012 the father left to work for V Pty Ltd, and later Company W.  In late 2013 the mother left Company R to work for Company X, before leaving to start her business, Company N.

18. At the time of separation, 17 August 2012, the mother estimated the property pool as comprising a Japanese motor vehicle, subsequently traded, home contents, the father’s golf cart valued at E$2,500, debts of approximately  $37,000, and the parties’ respective superannuation. 

19. In April 2015 the mother received personal injury compensation in the sum of $1,300,000, resulting in a net entitlement of $744,694.80.  Of this, the mother used $370,000 to purchase a property at Y Street, Suburb Z, approximately $170,000 to purchase a property at B Street (the balance of which was ultimately paid for by sale of the Suburb Z property), $110,000 to discharge debts owed to her parents, $20,000 to purchase a motor vehicle, and $5,000 on discharging school fees and credit card debts.  The funds have also been used for living expenses and for the setting up of the business.

20. In summary, at the end of the relationship the parties had no net non-superannuation property.  Since the end of the relationship the mother has received compensation which, a face value is a sole contribution on her part.  To the extent that there may be seen to be a current pool, it is solely the product of the wife’s contribution after the end of the relationship.

21. In respect of the s 75(2) factors, the wife operates her own business.  The husband is currently out of work.  It is not at present possible to assess the strength of a s 75(2) claim on his part. 

22. Given the circumstances of the parties a genuine question may emerge as to whether it is just and equitable to make any alteration of property interests.[7] There is no presumptive right on the part of the husband to adjustment of property interests in his favour or at all.  However, given the wife’s current position that does not seem to yet be in issue. 

    [7]Stanford & Stanford (2012) 247 CLR 108.

23. If the order was to be made pursuant to s 79, it must be necessary to conclude that the amount is within the amount to be finally received by the father. Her final application provides for the husband to receive a payment of $40,000. No application is made in relation to his superannuation meaning that presumably it will stay with him. On the wife’s application he would thereby receive from the joint property of the parties a total of approximately $96,000 including superannuation. The husband says that the superannuation held by the husband could be used to make good an overpayment now to the husband.

24. It may be seen that what the husband seeks at present significantly exceeds what the wife asserts he should receive in current assets, but approximates the total the wife suggest he should receive.  In making this observation it should be recognised that there is a significant difference between current property and superannuation.

25. An order for the amount of $40,000 would match the wife’s final orders sought.  However, in the event that the wife sought costs, or as foreshadowed, sought a lump sum of Child Support (noting there is a current Child Support debt alleged), payment of this amount to the husband now would see the wife potentially out of pocket.

26. This tells against an interim adjustment pursuant to s 79. It would not be just or equitable to make the interim adjustment under s 79.

27. In considering the s 117 application, the starting point is that each party should bear his or her own costs. The factor relied upon pursuant to s 117 is that it is in the interests of justice to make the order, based in large part upon the disparity of financial position between the parties.

28. The husband also bases it upon the benefit the wife has already taken from her property in funding her lawyers to date, for the previous proceedings that led to final orders and for the current proceedings.  Significant weight should not be given to this matter at this stage, given that it is the use of the wife’s property, which, although it forms part of the property of the parties, was acquired after the end of the relationship by the wife.

29. Given the reservations I have expressed about whether any order in favour of the husband would be able to be taken into account in the final proceedings, it may be seen that there is potential injustice to be done to the wife by the making of a costs order.

30. Where the husband’s case is also deficient in terms of his own capacity to fund litigation, an order should not be made under this head of power.

31. In considering the use of the maintenance power, the wife would need to be able to reasonably support the husband by means of a disposal of, or encumbering of, her home.  She currently has the sole care of the children of the relationship.  Her expenses currently outweigh her income; she could not be characterised as having a reasonable ability to support the husband in this manner.

32. The father’s application fails under this head of power, both on the failure to establish reasonable capacity on the part of the wife and in failing to establish his own incapacity.

INJUNCTIVE RELIEF

1. The wife sought injunctive relief. Heads of power for granting injunctive relief are contained in both s 68B and s 114 of the Family Law Act 1975.

2. The injunctions are directed to two objectives.  One is the protection of the wife’s business from damage potentially accrued by virtue of the husband’s social media posts.  The second is a protection of herself and the children of the relationship from the husband’s social media posts.

3. The social media posts are set out at [51]-[58] and annexure AP-20.  These are variously derogatory of the wife and of her business and identify the parties and children as being the subject of family law proceedings.  One of the posts implicitly acknowledges that the husband is aware that the post was improper by asserting that the post could get him “locked up”.

4. The posts, and the interaction between the husband and third-parties, appeared to be designed to spread the impact of the posts further as the husband says at p75 “thanks every time you comment there is a bing somewhere.”

5. The power at s 68B is conditioned upon the injunction being as the Court considers “appropriate for the welfare of the child.”

6. The power at s 114 is conditioned, where the proceedings are “between the parties to a marriage for an order or injunction in circumstances arising out of the matrimonial relationship”[8] the injunction being as the Court “considers proper with respect to the matter to which the proceedings relate.”

   [8] Section 4(1)(e) of the Act – definition of matrimonial cause

7. The injunction is sought as protective of the wife, who is being subjected to abuse, protection of the business, an aspect of the property of the parties to the relationship, which is being subjected to potential degradation, and protection of the children and parties by virtue of enforcement of the obligations contained at s 121 of the Act.

8. Insofar as the injunction relates to a restraint upon the identification of the parties and the subject matter of the proceedings, an order is appropriate for the welfare of the children. It is also proper. The children should not be the subject of identification. The evidence in the proceedings that concern them should not be identified with them in the public domain. Section 121 provides this protection. Injunctive relief provides an alternate remedy for this protection.

9. Insofar as the injunction relates to posts about the wife and her business, it is proper that the wife should not be subjected to such public abuse, and that the business should not be at risk of being degraded. 

10. However, the terms of the restraint sought in relation to the clients of the business, even as restricted to current clients of the business, are too broad.  Without identifying the persons who the husband would be enjoined from contacting, the scope of the injunction and the circumstances in which it may be breached are too uncertain.  To the extent that he may be enjoined from damaging the business such an injunction is available and proper.

11. It is convenient, then to rely on a single head of power, being s 114 for the grant of the injunctions.

COSTS

1. The wife sought her costs on a party-party basis against the husband for the hearing on 27 October 2017 and on an indemnity basis for 11 September 2017 in the sum of $3,000.

2. The indemnity costs were sought regarding both an application by the husband to vary interim orders regarding the children and a late filed application for litigation funding.  The interim orders were not varied and the application for litigation funding was adjourned on the wife’s application.  While the application was filed late, the wife was on some notice of the intention to file the application.

3. The costs of 27 October 2017 were sought on the basis that the husband would be wholly unsuccessful.  He successfully resisted part of the injunctive relief sought by the wife.  The wife was substantially successful.

4. The starting point pursuant to s 117 is that each party shall bear his or her own costs.

5. Examining the matters contained at s 117(2A), the lack of success of the husband is a factor tending toward an order being made in favour of the wife, as is the late filing of the application for litigation funding.

6. The notice given to the wife decreases the force of the late filing as a justification for costs.  What tells strongly against an award for costs is that the husband appears to have no means of meeting such an order.  While this is not a hard and fast barrier against an order for costs, it still constitutes a strong discretionary factor weighing against an order and in this case it is decisive.  No award for costs will be made.

I certify that the preceding sixty-one (61) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Gill delivered on 19 December 2017.

Associate

Date:  19 December 2017