PETERS & JENSEN

[2011] FamCA 1073

FAMILY COURT OF AUSTRALIA

PETERS & JENSEN [2011] FamCA 1073

FAMILY LAW – PROPERTY – Interim property settlement – where applicant seeks interim property settlement to fund his litigation – where each party receives either a pension or investment income – whether jurisdiction regarding interim property settlement is enlivened only be a requirement for money to fund or defray the costs of litigation – whether it is necessary to identify what the particular costs of litigation might be – where the respondent has no capacity in immediately available funds to satisfy orders sought by the applicant – where amount sought by the applicant is less than the amount offered by the respondent by way of final property settlement – where respondent required to prematurely withdraw investments to meet interim property settlement – whether costs associated with premature withdrawal should be borne by the applicant – matter of discretion

FAMILY LAW – COSTS – Whether one party was wholly unsuccessful

Family Law Act 1975 (Cth), ss 90SM(4), 117, Part VIIAB Div 2

Strahan & Strahan (2009) 42 Fam LR 203
Harris & Harris (1993) FLC 92-378

APPLICANT: Mr Peters

RESPONDENT: Ms Jensen

FILE NUMBER: CAC 1384 of 2011

DATE DELIVERED: 22 December 2011

PLACE DELIVERED: Canberra

PLACE HEARD: Canberra

JUDGMENT OF: Faulks DCJ

HEARING DATE: 22 December 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Bartfeld QC

SOLICITOR FOR THE APPLICANT: Farrar Gesini & Dunn

COUNSEL FOR THE RESPONDENT: Mr Hodgson

SOLICITOR FOR THE RESPONDENT: Nicholl & Co

Orders

1. (a)      The respondent pay to the applicant on or before noon on 31 January 2012 the sum of $300,000 by way of interim property settlement.

   (a)Notwithstanding the last suborder, any costs as agreed between the lawyers for the applicant and the respondent as properly and reasonably associated with the withdrawal of the sum of $300,000 from the investments of the respondent will reduce the sum payable to the applicant and such sum shall not be taken into account in the division of property between the parties in due course.  (By way of clarification the applicant will receive the net sum of $300,000 less the costs of early termination of that part of the investment of the respondent as may be agreed upon between the solicitors for the parties as being an appropriate part of the investments to be liquidated.)

2. The second order sought in the applicant’s Minute filed this day in Court is refused. 

3. Each party to these proceedings will pay his or her own costs of and incidental to this application this day. 

IT IS NOTED THAT:

1. A Conciliation Conference is to occur in February 2012 upon completion of that conference the Registrar will if the parties have not agreed on a joint balance sheet in relation to the matters to be an issue between the parties in relation to the pool make directions for the listing of the matter before me as soon as possible so that directions can be given to assist in the early disposal of the matter finally before the Court.  Such a directions hearing may properly occur by telephone rather than by counsel’s personally attending.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Peters & Jensen 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 CANBERRA

FILE NUMBER: CAC 1384  of 2011

Mr Peters

Applicant

And

Ms Jensen

Respondent

REASONS FOR JUDGMENT

1. The proceedings before the court this date, relate to a part of an initiating application filed in this court on 27 September 2011.  The part of the original application invoked is item 3, which seeks the following interim or procedural orders:

   a)First, a disclosure of documents under the Rules.  That order is not the subject of argument before me this day;

   b)The second is simply a broad statement that to be agreed as an ambit claim for a division of property between the parties under the provisions of the Family Law Act1975 (Cth) in Division 2 of Part VIIIAB; and

   c)The third matter, which was the focus of the litigation before me this day, is that the applicant seeks, by way of “interim property settlement”, the respondent pay to the applicant within 14 days the sum of $300,000. 

2. The matter has been comprehensively reviewed by counsel before me today, and it is probably apposite to mention, by way of introductory comments, that in a response to the initiating application filed on 3 November, the respondent indicates that, by way of final orders, she, within 28 days, pay to the applicant the amount of $500,000 by way of adjustment of property in conjunction with the transfer within the same period by her to the applicant of any interests she may have in the sailboat which appears to bear the name “B”.  The balance of the orders she seeks, in essence, mean that each of the parties would retain those assets otherwise in the possession or control of that person.  I note, simply for the sake of completeness at this point, that the respondent would retain the property that is currently the residence of the applicant.  It is also common ground that he occupies that residence (which is in her name) rent free at this point.

3. Each of the parties is superannuated.  The husband receives a pension from his previous employment of the order of $29,000 a year.  The wife’s income derives from a substantial portfolio of investments which have been generated almost exclusively from inheritances she has received.  These produce a higher income, but nevertheless an income which is dissipated in her ordinary day-to-day expenses.  There is no capacity in immediately available liquid funds to satisfy the order being sought on an interim basis by the applicant. 

4. I do not review and repeat the arguments that have been advanced and dealt with in dialogue between counsel and me during the course of the proceedings.  The argument advanced on behalf of the applicant might be conveniently summarised as this. For the purpose of a court making a determination about what interim sums might be paid there is a two step process.  The first is the enlivenment of the jurisdiction to overcome the ordinary practice[1].  In this matter, if one order were to be made, that would obviously follow the finalisation of the property hearing between the parties, and this can not immediately occur. 

   [1] which is that there should be only one order made about the division of property

5. The present circumstances would move outside the ordinary situation and would require the respondent to liquidate some of her investments.  The question is, to what extent should this occur? 

6. It is clear that the application is made on the basis of an interim property settlement and is not sought under s 117 of the Act as a preliminary provision of money for the purposes of costs[2]. 

   [2] In accordance with principles that have been considered some time ago in the matters of Polenti, Barro, and Hogan.  In those matters, if such an order for preliminary costs is sought, it is common ground that there should be a very clear and unqualified enunciation of the sorts of funds that are required.  It is clear also that no such enunciation has occurred in this matter to the extent of particularity that would ordinarily excite that jurisdiction.

7. In this matter, it was submitted on behalf of the applicant that their Honours (in the majority) in the matter of Strahan & Strahan[3] had indicated that the ordinary presumption that [the need for] a once only order would be overcome in circumstances where it was appropriate for the court to exercise the power.  That somewhat circular reasoning appears in paragraph 133 of the decision.

   [3] (2009) 42 Fam LR 203.

8. Their Honours rejected the broader proposition in the matter of Harris & Harris[4] that there should be exceptional circumstances in order for this jurisdiction to be exercised, and gave, in [133], some examples of where it would be appropriate to move away from the primary position.  These were, as their Honours suggest, “where both parties agree to the disposal of some assets pending the trial”, and “urgent situations” to avoid injustice.  Another example is where, as in the case they were determining, one party requires funds to assist in defraying the costs of litigation, without which funds an injustice may be caused. 

   [4] (1993) FLC 92-378.

9. Mr Bartfeld, QC on behalf of the applicant, argues that it is not necessary, in these circumstances, for the applicant to identify, with great particularity, what the costs of litigation might be.  To enliven the jurisdiction, it is enough that there should be a requirement in the interests of justice that there should be funds available to the applicant to defray the costs of litigation.

10. In this matter it would appear that there are no liquid funds immediately available to the respondent, to meet the costs of his litigation.  Mr Hodgson argues, with some force, that it is open to the applicant, first to dispose of the boat if he is prepared to do so, or alternatively, for him to perhaps reduce his capital investment associated with his superannuation, for the purposes of providing a lump sum to draw upon for his litigation.

11. No particular evidence is given by the respondent (who would not necessarily have that information, I concede) in any event, as to the practicability of those matters. 

12. What is agreed before me, however, in respect of the present application itself is that the respondent could raise the money by paying out, or withdrawing from one of her investment funds - the Perpetual Trustee Company Limited, trading as “Perpetual”.  The funds could be released by about 9 January, but there would be some – what were described by Mr Hodgson as “breakout costs” associated with that. 

13. Mr Bartfeld argues that such costs should be reserved as a matter “for consideration” in the broader sense of the word, in the division of the property of the parties or either of them, in due course.  Mr Bartfeld argues, I think, with some force, that the second step proposed by their Honours in Strahan is that once the jurisdiction to make a partial or interim order is enlivened then it is necessary that there should be sufficient funds left in the pool of property to enable a proper division to be made in accordance with the provisions of, in this case, s 90SM (4) of the Family Law Act. 

14. In this regard, Mr Hodgson says that it is necessary for the court to consider a number of the matters under that section and in particular, the provenance of some of the funds that have come in to constitute the assets in the name of the respondent.  In this regard, he points out accurately, and without demur on this point from the applicant, that almost all of the funds in her possession and the assets in her possession were derived from inheritances that she has received, which have not been contributed to by the applicant.

15. However, attractive it may be to follow the line of reasoning espoused by Mr Hodgson, the reality is that the respondent has, in my opinion, properly identified in her response the sort of figure which she believes it would be appropriate for the applicant to receive in a final hearing.  If the amount sought by the applicant as an interim property settlement does not exceed that amount, it is in the circumstances perhaps unarguable that the amount that is being sought would fall within whatever the division of property might be made in favour of the applicant in justice and equity.

16. Mr Hodgson (figuratively speaking) wringing his hands, suggested I should take account of the fact that the floodgates of litigation would be irreparably opened by such a matter, and that there would be tactical filings of responses which would be lower than reasonable amounts, thereby reducing the prospects of settlement before litigation, if a respondent felt that such a nomination of a figure would, in the circumstances, lead to some financial disadvantage pending the hearing. 

17. All I can say in relation to that, is that if that were to be the case, the court will have to meet it with such equanimity as it is able to muster.  No doubt common sense about these matters will triumph in due course.  Orders for costs will be made if parties engage in a tactical battle of making claims that are unreasonable. 

18. In summary, therefore, it seems to me, in this matter, given the evidence before me and the arguments of counsel, that this is a matter in which it is appropriate that there should be an interim property order.  It seems to me that it is unnecessary for the court to be properly and absolutely convinced about the [quantum] of the costs that might be incurred.  I am satisfied that in a matter of this sort, there will certainly need to be costs incurred by the applicant in the preparation of this case.  Whether in the end he thinks this was money well spent is a matter which only time will tell. 

19. It will be sensible if the parties at the end did not spend far more money on litigation than they might on finding some basis for agreement between them.  However, if they insist on spending their money on lawyers and valuers, rather than on finding a sensible solution to their dispute, this court is constituted for the purposes of determining such dispute, and will do so. 

20. Having said that, I am satisfied that there are funds necessary to defray the costs of litigation, even if I am unaware of the totality of those costs, and accordingly, the jurisdiction is enlivened. 

21. And so far as the second step is concerned, as outlined by their Honours in the majority in the matter of Strahan& Strahan, it seems to me that it is reasonable that some three-fifths of the amount that the respondent concedes in [her response] could properly be made available by her.  In doing so, I note, and do so with some concern, that the applicant has not, in any of his evidence, given any suggestion as to why he would be unable to dispose of what is certainly not necessary - the boat. 

22. The boat does not constitute his source of income.  It does not constitute an asset which he says he must inevitably have for the purposes of spending the rest of his life sailing around the world or some other such thing.  It does not constitute something which he is necessarily committed to passing onto his child in an intact form.  It is, if I accept at least the informal submissions of his counsel, something which has decreased in value over what has been spent upon it.  Hence, it might well be sensible to dispose of it before it uses more money in its maintenance than is brought about by its sale.

23. Nevertheless, again, in the circumstances, I accept that it is perhaps appropriate, notwithstanding that it does not necessarily do equality between the parties, that the initial funding should come from the respondent.  My reason for making such a selection is only dictated by the fact that, in this matter, the amount that is being sought is less than that, which is conceded by the respondent as something that she has indicated she is prepared to pay, in addition to the applicant’s retaining of the boat.

24. Accordingly, I propose to make an order for an interim property settlement in the sum of $300,000. 

25. However, that leaves unresolved the issue of who should pay the costs associated with the premature withdrawal of such funds at this point to enable the sum ordered to be met.

26. This is a matter, as their Honours have pointed out in Strahan & Strahan and other decisions, of discretion.  It is not the case that a party comes to this court entitled by any provision of law, or otherwise, to receive a pre-emptive distribution of property prior to a proper consideration of all matters before the court.  It seems to me to follow that if one party wishes the other party to take a step which the other party does not wish to undertake[5] that party ought properly to bear the costs that would be necessarily required of the other party, to produce the money.

    [5] and which is not the subject of agreement as it might be in some cases, where the parties are agreed on the sale of property prior to a hearing to resolve issues of valuation or something of that sort

27. Let me point out, by way of contrast, that in this matter, if the applicant had wanted to do so, he could have come to court and said, “I am going to sell the boat, and I have got a problem with the costs associated with the sale of the boat.”  We do not know anything about the sale of the boat.  I do know about – because parties inquired during the course of proceedings – what the cost of the premature withdrawal of funds would be, at least to the extent that there will be a cost.  In my opinion, that cost ought properly to be met by the applicant on the basis that it would not be otherwise taken into account in the final hearing, (except as a pre-emptive distribution of property on his part).

28. In other words, he should receive the $300,000 net of the cost of breaking the investment.  It is reasonable, as was conceded by Mr Hodgson, that there should be some consultation between the lawyers for the applicant and the respondent as to the part of the investment to be broken for the purposes of the provision of the funds.  Whether there is a differential cost associated with that is a matter that should be the subject of agreement, or if the parties are unable to reach agreement (which may be the case), to determination by this court in due course.

29. The second part of the orders sought by the applicant today requires orders that the applicant have permission to adduce evidence from expert witnesses about some of the items in dispute between the parties.  For the reasons that I have articulated during the course of dialogue between me and counsel, it seems to me that the present application is really the husband’s seeking to collect evidence for the purposes of his litigation.  There is nothing stopping him from doing that at present, and he does not need permission to collect the evidence. 

30. What he does seek in the orders handed up to me by Mr Bartfeld, QC is to circumvent the ordinary Rules of the court about the introduction of expert evidence.  That application is premature until the parties are engaged in a sensible process of determining what matters are properly in issue.  Accordingly, the application contained in paragraph 2 is rejected. 

31. In this matter, there is an application on behalf of the applicant that the respondent pay his costs of and incidental to this application. The primary position, under s 117 of the Family Law Act, is that each party should bear his or her own costs. The exceptions, which are contained in s 117(2) is that the court may make such order as to costs if it considers to be appropriate or otherwise as it considers just.

32. The court must take into account the matters under s 117(2A). In this regard, the court is to take account of a variety of matters, including the financial circumstances of each of the parties; whether either party is in receipt of legal aid (not a relevant consideration in this matter); the conduct of the parties in relation to the proceedings; and whether the proceedings were necessitated by the failure of either party to comply with previous orders of the court (also not a relevant consideration in this matter).

33. Mr Bartfeld, QC argues that in relation to s 117(2A)(e), whether any party to the proceedings has been wholly unsuccessful in the proceedings, should permit his client to recover costs of this matter. In this regard, he refers to letters passing between the parties, which became Exhibits A1 and A2. Those letters suggest, on the part of his instructor, that the payment is, in the circumstances, inevitable, and that if it were so inevitable and they would seek costs of the proceedings.

34. The response was to suggest that there is no particular reason for the payment of the sum from the respondent to the applicant, as it was not demonstrated, (and I paraphrase, rather than quote) that the assets available to the applicant would not be sufficient to enable him to undertake the expert valuations referred to.

1. In addition, in the course of proceedings, the applicant handed up a minute of orders sought, which effectively depended upon the success of the first application for an interim property settlement.  This sought permission to adduce evidence in trial from expert witnesses about a number of matters, which are outlined in the minute, which has been placed on the court file by me and with the stamp indicating it is today’s date.  That issue was resolved contrary to the applicant, on the basis that he did not require permission for the purposes of obtaining the particular pieces of evidence, and that whether or not they are admitted into evidence is a matter that should abide the proper conduct of the proceedings in due course.  That part of the application, I have indicated, should be refused.

2. So far as the costs are concerned, while I accept that in substance, the order that is being made will reflect the interim application by the applicant, the order will also contain a proposition that he only receives the net part of the sum after deduction of the costs associated with the premature termination of the respondent’s investment. 

3. I do not believe, having listened to argument from very experienced and learned counsel about this matter for some three hours, that the issue was, as was originally suggested, something that was inevitable.  And in those circumstances, it seems to me that there is no proper displacement of the primary provision, that each party should pay his or her own costs.

I certify that the preceding thirty-seven (37) paragraphs are a true copy of the reasons for judgment of the Honourable Deputy Chief Justice Faulks delivered on 22 December 2011.

Legal Associate: 

Date:  28 March 2012