NICKSON & KESSELL

[2020] FamCA 931

FAMILY COURT OF AUSTRALIA

NICKSON & KESSELL [2020] FamCA 931

FAMILY LAW – LITIGATION FUNDING – Application for litigation funding for the applicant to pursue proceedings filed out of time – Where the application for funding falls under section 117 of the Family Law Act 1975 (Cth) – Where it is likely the applicant would be granted leave to file out of time – Where the applicant’s case is sufficiently arguable to justify a payment of $100,000 towards her litigation funding – Orders made for litigation funding – Orders made for specific disclosure – Orders made restraining the respondent from using funds in a specific bank account.

Family Law Act 1975 (Cth) s 117

Salvage & Fosse [2020] 61 Fam LR 45

APPLICANT: Ms Nickson

RESPONDENT: Mr Kessell

FILE NUMBER: SYC 3399 of 2019

DATE DELIVERED: 5 November 2020

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Rees J

HEARING DATE: 2 November 2020

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Campton SC

SOLICITOR FOR THE APPLICANT: Millls Oakley Lawyers

COUNSEL FOR THE RESPONDENT: Ms Christie SC

SOLICITOR FOR THE RESPONDENT: Holmes Donnelly & Co Solicitiors

Orders

IT IS ORDERED, UPON THE APPLICANT GIVING THE UNDERTAKING AS TO DAMAGES WHICH IS ANNEXURE “A”

1. That within seven days of the date of these Orders, the respondent provide to the applicant’s lawyers, the documents listed in Paragraphs 1(a) to (s) of the Amended Application in a Case filed 28 February 2020.

2. That, other than for the purpose of complying with Order 3, the respondent is restrained from dealing with the funds held in his name in the ANZ Bank account ending #…52 without first giving the applicant 28 days’ notice.

3. That within seven days the respondent pay to the applicant the sum of $100,000 by way of costs pursuant to s117(2) of the Family Law Act 1975 (Cth).

Annexure “A”

Undertaking Given By Ms Nickson

1. I undertake to the Court:

To abide by any Order the Court may make as to damages should the Court in future find that the Respondents, or either of them, has sustained any damage by reason of the Orders sought by me in my Amended Application in a Case filed 2 February 2020 for which I should accept responsibility.

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 Nickson & Kessell 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 3399 of 2019

Ms Nickson

Applicant

And

Mr Kessell

Respondent

REASONS FOR JUDGMENT

1. Ms Nickson (“the applicant”) and Mr Kessell (“the  respondent”) commenced a de facto relationship in June 2013 and separated either in October 2016 (according to the respondent) or in March 2017,  (according to the applicant).

2. These proceedings, wherein the applicant seeks an adjustment of property, were commenced on 29 May 2017, more than two years after the separation.

3. It is immediately apparent that the applicant needs leave to institute proceedings and, as yet, that application, which is found in the Amended Application in a Case filed 28 February 2020, has not yet been determined.

4. By an Amended Application in a Case, the applicant seeks the following interlocutory relief:

   ·    The provision of specific disclosure.

   · Litigation funding in the sum of $100,000 pursuant to s117 of the Family Law Act 1975 (Cth) (“the Act”).

   ·    If an order for litigation funding is not made, an order that the respondent provide security for costs in the sum of $100,000.

   ·    An order requiring the respondent to pay the sum of $500,000 into a controlled monies account.

5. Some factual background is necessary to understand the issues.

6. When the parties commenced living together in 2013, the applicant asserts she had savings of $100,000, a share portfolio of about $15,000 and superannuation of about $40,000. She was conducting a business in the name of B Pty Ltd and also employed full time, earning $120,000 per annum.

7. The respondent owned a unit at Suburb J with an equity of about $50,000 and superannuation of about $60,000 and was employed as a manager, earning about $100,000 per annum.

8. They lived in the respondent’s Suburb J unit.

9. There is a dispute about their respective contributions to their living expenses. The respondent asserts the applicant did not pay rent which I infer to mean that she did not contribute to mortgage payments and utilities.

10. The respondent asserts that, from the commencement of their co-habitation, the applicant had a significant drinking problem such that his contributions throughout the relationship included managing her alcohol problem.

11. The respondent asserts that they separated for about four months in 2014 and again for a few weeks in 2015.

12. In 2013 (according to the applicant) or 2014 (according to the respondent), the respondent ceased employment and concentrated on the development of a business known as product supply business, both in Australia and in New Zealand. product supply business made syrups designed to be used with Soda Stream machines.

13. The respondent deposed that, in Australia, the business was run through a company, C Pty Limited which had been incorporated in 2010. The shares in C Pty Limited were wholly owned by the F Trust. The trustee of the F Trust is F Trust of which the respondent was the sole director and shareholder.

14. In New Zealand, the business was run through a company, C Pty Limited. The 1,000 shares in C Pty Limited were owned by:

    The respondent  90 shares

    The respondent’s father                 10 shares

    The G Trust  900 shares

15. The evidence does not disclose when the G Trust was established or the terms of the trust. The trustees are the respondent and both of his parents.

16. There is a significant dispute about the contribution that the applicant made to the development of product supply business. I note that, during the relevant period, the applicant was working and the Respondent was wholly involved in product supply business. The respondent concedes that the applicant provided some assistance both outside of her own working commitments and during short periods when she was not working. He concedes that she contributed about 90 hours of work to product supply business but contends that she was paid or otherwise financially compensated for that work.

17. The respondent deposed that he worked in the business six days each week for 12 to 14 hours each day.

18. In late 2014 the respondent sold the Suburb J unit and moved into rented accommodation. The proceeds of sale were used in the product supply business. The applicant moved into the rented apartment, whether immediately or after a period of separation is in dispute.

19. The respondent asserts that, although they agreed that the applicant would contribute 40 per cent of their joint living expenses, she thereafter contributed intermittently and not as agreed.

20. The respondent deposed that the relationship ended in October 2016 and that they continued to live separately at the rented apartment until March 2017 when the applicant moved out.

21. Whether the parties separated in October 2016 or March 2017, there is no evidence that product supply business had any value at the date of separation.

22. The respondent continued the business after separation.

23. In July 2017, the respondent gave the applicant $11,400 to buy a car.

24. In July 2018, the respondent commenced negotiations for the sale of product supply business.

25. The respondent deposed that, in October 2018, he received $1,500,000 for the sale of product supply business.

26. Of that sum, about $500,000 is retained in the respondent’s bank accounts. He continues to be employed by product supply business.

27. Where the remainder of $1,000,000 can be found is something of a mystery. It appears to have found its way into a trust, but whether that trust is the F Trust (in which case the respondent controls the trustee) or another creature described as “the H Trust” is entirely unclear.

28. It is also unclear whether the funds remain in the control of the respondent or whether they have been diverted to entities which he does not control.

Specific disclosure

1. It does not appear to be disputed that the respondent has not made available to the applicant all of the documents which would serve to illustrate where the proceeds of the sale of product supply business are and how they are controlled.

2. There did not appear to be any real opposition by the respondent to making orders requiring full disclosure other than that some documents which are specifically required, such as email correspondence from a particular email address, do not exist.

3. The position was complicated by the fact that it was discovered, in the course of the hearing, that a significant number of documents which had been thought to have been produced had not, in fact been produced and were produced in the course of submissions.

4. The orders will provide that the documents listed in Paragraphs 1(a) to (s) inclusive of the Amended Application in a Case be produced within seven days. Documents which have already been produced need not be produced again.

Litigation funding

1. On behalf of the applicant, senior counsel conceded that the application for litigation funding must be dealt with pursuant to the provisions of s117 of the Act.

2. The principles in such an application are set out in the judgment of the Full Court in Salvage & Fosse [2020] 61 Fam LR 45 as follows:

   14.The critical question therefore is whether the applicant has “any real prospects of obtaining justice unless the order sought is made” (Parker v Parker (1992) 16 Fam LR 458 at 461), or in terms of s 117(2) of the Act, whether in all the circumstances the costs order is just. That question raises, at least, consideration of the strength of the applicant’s case and the effect of the order upon the respondent.

   15.It would not be just, for example, for the respondent to have to pay the legal expenses of the applicant, where the case to be taken was weak, fanciful or misguided or where the effect on the respondent of such an order would work an injustice. We do not consider it helpful, however, for there to be a need to identify the applicant’s case as strong, persuasive or such like to justify an order. That invites a descent into semantics and an artificial characterisation of the strength of the proposed proceedings. The consideration should be whether the case to be raised by the applicant is sufficient, in all of the circumstances, as to its nature and prospects, to justify an interim order for costs. This conclusion accords with Zschokke at 83,217, where the Full Court said:

   … We agree that, as was submitted by [c]ounsel for the wife, the requirement of justice (which was expressly drawn to attention by the Full Court in Hogan and also implied by Brennan J in Breen) must remain a “basic” condition in the making of an order of the type in question under s 117(2).

   (See also Strahan at [124]).

3. The respondent’s case is that, having regard to the short period of co-habitation and the insignificant nature of the contributions made by the applicant to the product supply business, leave would not be granted to her to institute proceedings. Further, he argues, if leave were granted, and the applications determined, they would be dismissed with no order for payment to the applicant.

4. Thus it is squarely the position of the respondent that it would not be just and equitable to make any order in favour of the applicant for litigation funding because, firstly, there would be no adjustment in the substantive proceedings which could properly take the payment into account and, secondly, the substantive application will not succeed.

5. Is the case raised by the applicant “sufficient in all of the circumstances, as to its nature and prospects, to justify an interim order for costs”?

6. It is not disputed that the applicant made contributions to the product supply business. It is not disputed that she worked and earned income throughout the co-habitation. She discloses current income of $800 per week and her assets are about $5,000 in savings and about $5,000 in shares. The respondent discloses income of $4,362 per week and assets of $922,000.

7. Her application for substantive orders was filed two months out of time. I do not understand it to be in dispute that there were negotiations, between the parties directly, in the period after separation and offers of settlement were made to the applicant by the respondent.

8. On the information currently, albeit contested, it is likely that leave would be granted for the applicant to institute proceedings.

9. Has the applicant any real prospect of obtaining justice if an order for costs is not made?

10. The real issue is not what became of the sum of $1,500,000 which the respondent admits he received but what contribution the applicant made to the generation of that fund.

11. If, ultimately, a court finds that the applicant’s contribution to the development of product supply business, combined with her other financial contributions, is not balanced by the respondent’s contributions to her welfare, then an order will be made to recognise that contribution.

12. I accept, however, that she will not be able to run her case unless an order is made in her favour for litigation funding. She has already paid $65,191 in costs from her own resources. I accept that she has exhausted her own funds.

13. It follows that I accept that the applicant’s case is sufficiently arguable to justify a payment of $100,000 towards her litigation funding.

14. Whether, at the conclusion of the proceedings, she is likely to achieve significantly more than that sum is not a matter I am required to determine.

15. Having regard to the orders which will be made in relation to litigation funding, it is not necessary to determine the application for security for costs.

Restraining Orders

1. I accept that the respondent, having received $1,500,000 for the same of a business which was substantially built up during the relationship, has removed all but about $500,000 of those funds from the jurisdiction.

2. That circumstance is sufficient to warrant his being restrained from dealing with the funds remaining in Australia without notice to the applicant. It does not warrant requiring that the funds be paid into a controlled monies account as sought by the applicant.

3. The orders will restrain the respondent from dealing with the funds in the ANZ Bank account ending #…52 without first giving the applicant 28 days’ notice.

I certify that the preceding fifty (50) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 5 November 2020.

Associate: 

Date:  05/11/2020