Rakete v Rakete

[2012] FamCA 267

FAMILY COURT OF AUSTRALIA

RAKETE & RAKETE [2012] FamCA 267

FAMILY LAW - PROPERTY – Costs – Where application for an interim Order for costs under s 117(2) of the Act – Where application is ancillary to an application to overturn a Binding Financial Agreement made between the parties – Where the Applicant Wife has a low income and the care of the parties' children – Where the Husband has a substantially greater income and retained all of the assets of the matrimonial pool – Whether “justifying circumstances” and whether costs Order “just” – Amount of Order

FAMILY LAW - PROPERTY – Mediation – Whether power to order mediation under the Act

Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)

Breen v Breen (1990) 65 ALJR 195
Hogan & Hogan (1986) FLC91-704
Penfold & Penfold (1980) 144 CLR 311
Potter v Dickinson (1905) 2 CLR 668
Re JJT & Ors; ex parte Victoria Legal Aid (1998) FLC 92-812
Strahan & Strahan(interim property orders)  (2011) FLC 93-466
Wall v Mitchell [2010] FamCA 1194
Zschokke & Zschokke (1996) FLC 92-693

APPLICANT: Ms Rakete

RESPONDENT: Mr Rakete

FILE NUMBER: BRC 5842 of 2010

DATE DELIVERED: 27 April 2012

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Kent J

HEARING DATE: 30 January 2012

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Jones Mitchell Lawyers

COUNSEL FOR THE RESPONDENT: Ms J Brasch

SOLICITOR FOR THE RESPONDENT: Evans & Company Family Lawyers

Orders

1. If, within fourteen (14) days of the date of these Orders, the parties submit for filing a consent Order for them to attend private mediation of their dispute, then within forty-five (45) days of the date of this Order, the Respondent cause to be paid to the trust account of the solicitors for the Applicant, Jones Mitchell Lawyers, the sum of $28,498.00 on account of the Applicant’s costs.

2. If paragraph 1 of these Orders does not take effect, then within forty-five (45) days of the date of these Orders, the Respondent cause to be paid to the trust account of the solicitors for the Applicant, Jones Mitchell Lawyers, the sum of $52,000.00 on account of the Applicant’s costs.

3. If paragraph 1 of these Orders takes effect, but the parties are unable to resolve their dispute at mediation, then within fourteen (14) days of termination of the mediation process (termination including that the mediation does not, for any reason, proceed) the Respondent cause to be paid to the trust account of the solicitors for the Applicant, Jones Mitchell Lawyers, the further sum of $23,500.00 on account of the Applicant’s costs.

4. The Applicant be authorised to use the funds held in the trust account of her solicitors, Jones Mitchell Lawyers, from time to time, pursuant to these Orders, only in respect of meeting costs of and incidental to these proceedings.

5. Pursuant to r 10.14 of the Family Law Rules 2004 (Cth), the Applicant’s claims pursuant to s 90K of the Family Law Act 1975 (Cth) be heard and determined as a discrete issue and that the proceedings be adjourned to a Registrar for the making of further directions to facilitate the listing of the matter for such discrete hearing and determination.

6. The parties’ costs of and incidental to this application be reserved to the trial judge who hears and determines the discrete issue.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Rakete & Rakete 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 BRISBANE

FILE NUMBER: BRC 5842 of 2010

Ms Rakete

Applicant

And

Mr Rakete

Respondent

REASONS FOR JUDGMENT

Introduction

1. By her Amended Application in a Case filed on 18 November 2011, Ms Rakete (“the Wife”) sought Orders for the payment of $28,498.00 by Mr Rakete (“the Husband”) to her in the form of a “Hogan” order for costs; that the Husband file a Financial Statement; and that the Husband pay the Wife’s costs of and incidental to these proceedings. This was amended through further affidavit material and the written and oral submissions of the solicitor for the Wife, Mr Jones, to an application for an Order for either $28,498.00 if the parties were ordered to attend mediation, or $52,000.00 if the parties were given leave to have the question of the validity of the subject binding financial agreement heard and determined as a discrete issue prior to attending mediation.

2. The Husband, in his written submissions filed 30 January 2012, submitted that the Wife’s application for an interim costs Order should be dismissed on either the basis that the Court has no jurisdiction to make such an Order until the validity of the binding financial agreement has been decided in the negative or on the basis that it would not be ‘just’ within the meaning of s 117(2) to make the Order requested by the Wife.

Brief Background

1. The Wife was born in 1970, and is thus currently 41 years of age. The Husband was born in 1970, and is thus similarly 41 years of age. It is agreed by the parties that they commenced cohabitation in 1990, married in March 1992 and, although the parties contest the exact date of separation, both parties agree that final separation occurred sometime in January or February of 2010, ending a relationship of some twenty years’ duration.

2. There are two children of the marriage; L and C, aged 18 and 15 years respectively at the time of the hearing. The parties have previously made an agreement as to the parenting of their children and neither L nor C are the subject of any present Court proceedings. The Husband asserts in his Financial Statement filed 17 January 2012 that there is a child support agreement in place at present whereby the Husband pays to the Wife a sum of $630.00 per week in child support for the benefit of C. However, the Wife asserts, in paragraph 80(f) of her affidavit filed 6 July 2011, that she receives no child support from the Husband, albeit that the Husband does pay for 80% of C’s school fees. The Wife’s assertion that the Husband does not pay child support is repeated in paragraph 12 of the Wife’s affidavit filed 15 November 2011. The Wife has not filed any updating affidavit since that time.

3. The substantive proceedings concern a binding financial agreement that was made between the parties on 22 June 2010. The Wife is contesting the validity of that agreement on three grounds; first, that the agreement is void or voidable having been vitiated by duress; second, that the agreement is void or voidable on the ground of non est factum; and third, that the Husband’s conduct in entering into the agreement was unconscionable.

4. Regarding the first and third grounds, the Wife deposes in her affidavit filed 6 July 2011 that, during the drafting of the binding financial agreement (on 10 or 11 June 2010), the Husband threatened her when she suggested amendments to the then-draft agreement, and said to her, “I’m not changing a fucking thing,” and, “You’ll sign it. You deserve a bullet in the head. If I don’t do it, I know someone who can.” The Wife also deposes in the same affidavit that, “…[The Husband] harassed me daily and pressured me to sign,” and that she felt that she:

   …had no choice but to sign the Agreement given;

   (a)[The Husband’s] assertions that I would get nothing from the property settlement;

   (b)[The Husband’s] threats to  “leave everything to the bank” if I did not sign; and

   (c)My genuine fears for my safety given [the Husband’s] threat to “put a bullet in me.”

5. Subparagraph (b) refers to the Wife’s concern that the Husband would cease to pay mortgages on some of the parties’ investment properties for which the Wife had given a personal guarantee.[1] Subparagraph (c) is asserted by the Wife in the context of her further allegations in the affidavit of domestic violence in the form of threats, intimidation, verbal abuse and physical altercations.

   [1] See paragraph 6 of the Wife’s affidavit filed 6 July 2011.

6. In his affidavit filed 9 September 2011, the Husband denies the Wife’s allegations as follows:

   10. [The Wife] has made a raft of allegations concerning abuse, threats and domestic violence.

   11. I deny her allegations.

   12. At this point in the proceedings, I reserve my right to respond in detail to the allegations in a trial Affidavit.

7. The Husband provides some more detail in his affidavit filed 17 January 2012, stating that he disputes the Wife’s allegations of, “…bullying and conduct…” and denies that the Wife was anything but a willing participant in the making of the binding financial agreement as follows:

   In relation to the part of the file maintained by the Applicant’s solicitors which has been disclosed, her email to me of 17.06.2010 at 12.09pm is evidence of the type of role the Applicant played in the process, which I assert was as active participant and contributor. There, she seeks changes and inclusions and comments on terms and goes to some length to comment to ensure that my solicitor included particular things in the agreement.

8. The Husband further deposes in his earlier affidavit that the agreement was made in the context of the Wife having unsuccessfully invested the parties’ funds into a child care centre in circumstances where:

   [The Wife] consistently related to me [the Husband] that this was her risk and if it failed, that this was her entitlement.

9. The Husband also alleges that:

   31. The business required direct investment of capital from our relationship.

   32. The business also consumed funds by way of monies for renovations and servicing debt.

   33. [The Wife] hid the poor performance of the centre from me and withdrew funds in secret from our personal finances to prop up the centre and meet payments on loans.

   34. Contrary to the actual performance which [the Wife] could have reported to me, she chose to paint a rosy picture of what was happening and to tell me that the centre was going ok.

10. It is in that context, it was submitted on behalf of the Husband that the Wife signed the binding financial agreement which gave the Wife access to some $102,000.00 in superannuation, a lump sum maintenance payment of $28,000.00 and a gift of money of just under $5,000.00 in the context of a net pool of, on the Wife’s submission, somewhere between $3,580,000.00 and $4,780,000.00 or, on the Husband’s submission, $1,663,729.00 (excluding superannuation).

11. In respect of the second ground, the Wife also now submits that the binding financial agreement, as it stood on the date she signed it (21 June 2011), did not reflect the actual agreement between the parties; an argument of non est factum. The evidentiary basis for this submission was not made clear to me in either the oral or written submissions of the Wife.

12. It is in the context of this dispute that the Wife is requesting from the Husband what is known in Queensland as a “Hogan” Order.[2]

    [2] Hogan & Hogan (1986) FLC91-704.

Applicable Law and Principles

1. The Husband disputes the Wife’s application on two alternative bases. First, the Husband submits that as the Order requested by the Wife is properly characterised as an Order for interim spousal maintenance under s 74, the Court has no jurisdiction to make such an Order given the existence of a binding financial agreement between the parties which covers several matters including the payment of spousal maintenance, the validity of which has not yet been decided upon by this Court. However, the Wife is applying for an Order solely under the power of the Court to Order costs expressed in s 117(2) of the Family Law Act 1975 (Cth) (“the Act”).[3] The Husband further submits that even if the Order sought is expressed to rely upon the power in s 117(2) of the Act, the Court does not have jurisdiction as that provision is ancillary to the power of the Court to make Orders under Part VIII of the Act, the operation of which is suspended by s 71A of the Act when a binding financial agreement exists.

   [3] See paragraph 8.2 of the Wife’s submissions filed 30 January 2012.

2. In the alternative, the Husband submits that if an Order can properly be made under s 117(2) of the Act, the Order requested by the Wife should nonetheless not be made as such an Order would not be “just” within the meaning of s 117(2) given that the Wife does not provide evidence of a capacity to repay the amount sought to the Husband in the event that she does not succeed on her substantive application to set aside the binding financial agreement.

3. I find that the Husband does not succeed on those grounds for the following reasons.

Jurisdiction

1. The Husband squarely raises the question of this Court’s jurisdiction to make the Order requested by the Wife. In the submissions on his behalf filed 30 January 2012 it is submitted that:

   12. Section 71A FLA provides that Part VIII FLA does not apply to financial matters to which a BFA applies. Thus, unless and until the BFA is set aside per s90K, the Court should not entertain or make Orders in relation to financial matters dealt with by the BFA – one such matter is that each party bear their own costs and others that the husband keep his cash at bank and two cars.

   13. Breen v Breen (1990) 65 ALJR 195 and Re JJT & Ors; ex parte Victoria Legal Aid (1998) FLC 92-812 leave open the question as to whether the power to make an order for interim costs is derived from FLA s 117 (costs) or s 74 (maintenance).

   14. If it be s 74, then s 71A precludes such an Order and the matter ends there until the Binding Financial Agreement is set aside.

   …

2. This submission is somewhat misleading. In Breen v Breen (1990) 65 ALJR 195, the plurality of the High Court (Brennan, Dawson and Gaudron JJ) held at 195-196:

   The order made in this case may be unusual but it cannot be said to be beyond the jurisdiction of the Family Court under either s 117(2) or under s 74 of the Family Law Act 1975 (Cth).

   It is unnecessary to determine whether the power to make the order falls under s 117(2) rather than under s 74 (as the decision in Wilson v Wilson [1989] FLC 92-033 suggests). Nor is it necessary to determine whether the order in the present case is to be characterised as an order as to costs or an order as to security for costs.

   The order seeks to ensure that, in the circumstances of the present case, the wife should be able to prosecute the pending matrimonial proceedings and should have the funds required to do so. Such an order made for such a purpose, though it falls within one or other of the powers conferred on the Family Court, should be so framed as to protect the parties from any risk of injustice arising from the manner in which the funds are expended.

   (emphasis added)

3. What that passage makes clear is that although the High Court did not decide in that particular case the specific source of power relied upon, it was held that either of those sources were valid sources of power for the Family Court to make an Order for one party to pay the other party a sum of money for their legal costs to enable the latter party to prosecute a claim in the Family Court.

4. Similarly, an analysis of the judgments of each of the judges in Re JJT & Ors; ex parte Victoria Legal Aid (1998) FLC 92-812 makes it clear that s 117(2) is a valid source of power to make an Order such as the Wife requests in the case at hand, if not the only source of such power.

5. Gaudron J, at 85-181, held as follows:

   2. The power conferred by s 117(2) of the Family Law Act 1975 (Cth) (“the Act”) is a power to “make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.” That power is not simply a power to make an order for costs. Were it so, it would only authorise orders to indemnify for “costs actually incurred in the conduct of litigation”. However, a power to make an “order as to costs” is a broader power. And when regard is had to the consideration that s 117(2) expressly authorises interlocutory orders, that sub-section must, in my view, be construed as authorising orders requiring a party to proceedings under the Act to provide another party with funds to conduct those proceedings.

   3. Doubtless, the power to award maintenance under s 74 of the Act also extends to orders that a party to the marriage provide the other with funds to conduct proceedings under the Act. …

   (emphasis in original; footnotes omitted)

6. Gummow J made the following comments regarding s 117(2) of the Act at 85,182:

   Secondly, the basic concept that orders as to costs provide for or towards an indemnity does not deny the competency of an interlocutory order whereby one party is obliged to make available to another funds towards that indemnity. Such an order may be made quia timet, in advance of the indemnity being called upon after the making of final orders. …

7. Hayne J did not specifically decide on the issue of the ability of this Court to make the Order in dispute before me, referring only to the issue of whether such an Order could be made against unrelated third parties. However, his Honour did not hold that s 117(2) did not provide such a power as regards parties to the proceedings. Callinan J similarly did not rule on s 117(2) generally, but rather dismissed the application on similar grounds to those outlined by Hayne J.

8. Kirby J, although dissenting as to the substantive issues, nonetheless agreed with Gaudron and Gummow J at 85,192 that s 117(2) of the Act permitted this Court to make Orders as to the future costs of a spouse in family law proceedings.

9. That approach seems to have been supported by the Courts as early as the decision of Griffith CJ in Potter v Dickinson (1905) 2 CLR 668, where at 678-9, his Honour held:

   The term ‘costs’ was first introduced in a Statute of Edw I, and it clearly means the expenses to which a party is put in litigation. … In a court of law no doubt the term ‘costs’ is used often in a limited sense, and no doubt in connection with an action in a court of law, in which a party can only be represented by a solicitor, the meaning is to a certain extent limited. But in a court of law the term ‘costs’ includes not only payments for proceedings in court, and other matters which can only  be done by a solicitor, but also payments out-of-pocket, such as for court fees, and for securing the attendance of witnesses. All these are ‘costs’. The term also includes the expenses of commission to foreign countries to take evidence. It includes all the necessary expenses of a party in establishing his case.

   (emphasis added)

10. The Full Court of this Court, acknowledging the uncertainty which existed on the case law, addressed this issue more recently (in a case where the wife was seeking a similar Order to the Wife in the present case) in detail in the case of Zschokke & Zschokke (1996) FLC 92-693. The plurality held at 83,215:

    Accordingly, while the present state of the law remains somewhat unclear, it can be asserted with some confidence in light of Brennan J’s comments in Breen that there is at least power under s 117(2) (the costs power) for the Court to make an order which seeks to ensure that one party should be able to prosecute pending matrimonial proceedings and that the other party should provide the first mentioned party with the funds required to do so.

    The question as to whether such an order can be supported under s 74 (the maintenance power) must be considered in the light of the High court’s comments in Breen (and notwithstanding Wilson) to remain open. However, we do not have to consider that question further in this case because we did not understand Counsel for the wife to rely on s 74. Similarly we need not consider further as a source of power s 114 (the injunction power) which, although referred to by Counsel for the wife, was not relied on by him. Again in light of Poletti, the question of s 114 must remain open.

11. The authorities referred to make it clear that an Order as sought by the Wife here can be made under s 117(2). This was confirmed by the Full Court in the more recent case of Strahan & Strahan(interim property orders) (2011) FLC 93-466, where the plurality of Boland, Thackray and O’Ryan JJ held:

    81. In Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578 (“Paris King Investments”) Brereton J observed at [29], “[t]he juridical bases for an order for preliminary provision for litigation costs in matrimonial proceedings are diverse”. As Brereton J said, an order may be made as a maintenance order under ss 72 and 74 of the Act or a property settlement under under s 79 and s 80(1)(h) or a costs order under s 117. The spouse maintenance and costs jurisdiction to make such an order was recognised by the High Court in Breen v Breen (1990) 65 ALJR 195 (“Breen”) per Brennan, Dawson and Gardron JJ, when dismissing an application for special leave to appeal against such an order. In Paris King Investments Brereton J at [20] described such an order as an “order for interim provision for litigation expenses” and this may be a more appropriate description than an “interim costs” order so as to more accurately reflect the various sources of jurisdiction.

    82. In Zschokke the Full Court at 83,211 said that there was “some uncertainty as to the source of jurisdiction to make orders of the type… sought” and that it “would be useful to review existing authority in relation to the issue of the power or powers to make such orders under the Family Law Act”. In Zschokke the Full Court considered Hogan and Hogan (1986) FLC 81-704 (“Hogan”); Wilson; Poletti and Poletti per Nygh J; and Breen, and at 83,215 concluded that there is power under s 117(2) of the Act to make such an order and that it remained open whether such an order could be made under the spouse maintenance power in s 74. The Full Court at 83,215 said that it did not have to consider if such an order could be made pursuant to the injunctive power in s 114 of the Act. The Full Court however was of the opinion that the decisions in Wilson and Poletti are authority for the proposition that where there are pending proceedings under s 79 for property settlement an order for the provision of funds may be made pursuant to s 80(1)(h) and independently of the power in s 117(2).

    (emphasis in original)

1. Thus, it is clear that this Court has jurisdiction under s 117(2) to make an Order for the interim provision for litigation expenses as requested by the Wife in this matter.

2. However, the complicating factor in this case, as submitted on behalf of the Husband, is the presence of a binding financial agreement signed by the parties on 22 June 2010. It is contended in the written submissions filed on behalf of the Husband on 30 January 2012 that that agreement means that s 117(2) does not give this Court the power to make the Order sought by the Wife. That is so, the Husband submits, because as any Order under s 117(2) would affect property covered by the contested binding financial agreement, the Court’s power under s 117(2) is ancillary to its power under Part VIII of the Act to make property Orders which is suspended under s 71A of the Act until the Court holds that the binding financial agreement is invalid.

3. Section 71A of the Act (which falls within Part VIII of the Act) is as follows:

   (1) This Part does not apply to:

   (a) financial matters to which a financial agreement that is binding on the parties to the agreement applies; or

   (b) financial resources to which a financial agreement that is binding on the parties to the agreement applies.

   (2) Subsection (1) does not apply in relation to proceedings of a kind referred to in paragraph (caa) or (cb) of the definition of matrimonial cause in subsection 4(1).

   (emphasis in original)

4. It is clear that what s 71A does is to suspend the ability of this Court to otherwise make Orders under Part VIII of the Act. It does not affect the Court’s ability to make Orders under s 117(2) of the Act (which lies outside Part VIII). To contend otherwise would be to defeat the very purpose of s 117(2).

5. As I raised with Counsel for the Husband, Ms Brasch, during the hearing, if her argument regarding the suspension of s 117(2) by s 71A was accurate, that would result in this Court being unable to make any costs Order, even in her client’s favour, when a binding financial agreement was still on foot. That would include a scenario where the Wife’s application to have the binding financial agreement overturned was rejected. Such a conclusion would undermine the purpose of s 117(2), which is to permit this Court to order one party to pay another party’s costs where that is just in the circumstances. As highlighted in the cases referring to this power, the power is broad and fettered only by the requirement that there be “proceedings” and that the Order made by the Court be “just”.

6. I note in passing that the Husband’s response filed 9 September 2011 seeks, inconsistently with the argument advanced, an Order that the present application be dismissed and an Order, “That the Wife pay the Husband’s costs.” On the approach advanced on behalf of the Husband there would be no power to make the Order for costs he seeks on this application.

7. The definition of “proceeding” in s 4 of the Act is broad, referring to, “…a proceeding in a court, whether between parties or not, and includes cross-proceedings or an incidental proceeding in the course of or in connexion with a proceeding.” It is self-evident that the term “proceeding” is not limited to referring to proceedings under Part VIII. Therefore, s 117(2) is clearly not limited to being ancillary to the Court’s powers under Part VIII. If that were so, then s 117(2) could never be used by this Court to make an interim or final Order for costs in a parenting proceeding.

8. In the submissions made on behalf of the Husband, reference was made to the case of Wall v Mitchell [2010] FamCA 1194 (“Wall”), where Johnston J held:

   25. The first such stream, as indicated above, is to the effect that s 117 of the Act is an ancillary power, rather than an independent power. I am inclined to accept this submission because the very wording of s 117(1) and s 117(2) of the Act makes it clear that in order for these subsections to have application there need to be “proceedings under this Act”. …

   26. I accept that because of these words “proceedings under this Act” a person cannot ask the Court simply to make an order for costs in the absence of some other proceedings under the Act. So the power in s 117(2) is ancillary.

   27. The next part of the submission is to the effect that in order for s 117(2) to be able to have application, the “proceedings under the Act” need to be properly constituted primary proceedings. It is submitted that the present proceedings are not yet properly constituted because the Court has not made a finding that the parties have been in a de facto relationship, let alone a de facto relationship of two years (sic) duration.

   28. I am unable to accept this part of the submission. As indicated above, learned Senior Counsel has conceded that there is ample authority to support a court which is under jurisdictional challenge having power to make interlocutory orders during the period prior to it making a finding that it does, or does not, have jurisdiction.

   29. In my view, at this stage, the present proceedings fall within the words in s 117(1) and s 117(2) “proceedings under this Act”. As was submitted by learned Counsel for the applicant there is nothing in the sub-sections or elsewhere in the Act to indicate that the provisions should be interpreted in the restrictive way submitted on behalf of the respondent. I do not propose to interpret s 117 in this way.

   30. Moreover, if I was to do so, then this Court would not have jurisdiction to make a costs order in relation to the present stage of these or similar proceedings in the event that ultimately it was to find that there is no jurisdiction to make the substantive orders sought. In my view this could cause considerable unfairness and can hardly have been intended by Parliament.

9. It is submitted on behalf of the Husband that this case, where Johnston J reached similar conclusions to my own, is distinguishable on the basis that the respondent in Wall did not have the protection of s 71A of the Act.

10. As already noted, I do not find that s 71A of the Act prevents this Court from making Orders under s 117(2) before a binding financial agreement has been set aside. As Johnston J concluded above, to do so would be to deprive the successful party of the opportunity to seek costs should the other party’s jurisdictional application ultimately fail. Further, although Johnston J finds that s 117(2) is “ancillary”, I note that that is only in the context of the fact that “proceedings” must be on foot, not that the provision is ancillary to the provisions in the Act governing the substantive proceedings and is affected by any provisions relating only to the substantive proceedings.

11. I therefore find that s 117(2) is a source of power for this Court to make an Order for the interim provision for litigation expenses as requested by the Wife.

Husband’s Alternative Submission

1. It is submitted on behalf of the Husband that, in the alternative, even if the Court has jurisdiction to make the Order the Wife requests, such an Order would not be “just” within the meaning of s 117(2). Specifically, the Husband submits that the Wife presents to this Court with, “…meager (sic) means.” Therefore, the Husband submits, the Court cannot be satisfied that the Wife would ever be able to repay the Husband the amount awarded to her should she fail in her application to have the parties’ binding financial agreement overturned which, the Husband contends, is a possible outcome.

2. In support of this submission, Counsel for the Husband relied upon the decision of Johnston J in Wall. In that case, Ms Wall was applying for an Order for the interim provision of litigation expenses from Mr Mitchell in circumstances where the fact of the parties’ de facto relationship was in issue and had not yet been heard. There, Johnston J concluded in relation to the question of whether the Order sought was “just” under s 117(2):

   43. Would it be just within the meaning of s 117(2) to order the respondent to pay money to the applicant to be used by her to fund the costs of her litigation with the respondent when it is far from clear that there is at least some likelihood that the Court would make any substantive order in her favour? In my view, if the Court was to make a preliminary costs order, and ultimately it turned out to be the Court’s finding that there was no basis upon which the respondent could be required to make a substantive payment to the applicant, this would be most unjust to the respondent. This is because it is clear that the applicant has no means by which any such preliminary payment could be refunded to the respondent.

   44. Having considered the relevant matters in s 117(2A) of the Act I find myself unable to conclude that it would be just within the meaning of s 117(2) of the Act to make any preliminary costs orders in favour of the applicant at this stage of the proceedings.

   (emphasis in original)

Justifying circumstances – would an Order be just?

1. There must be justifying circumstances as a prerequisite to the making of an Order under s 117(2). This does not mean that there must be a “clear” or “exceptional” case before justifying circumstances exist.[4]

   [4] See Penfold & Penfold (1980) 144 CLR 311 (Stephen, Mason, Aitkin and Wilson JJ).

2. Nothing in these reasons should be taken as an assessment or determination by this Court at this stage of the merits of the Wife’s substantive application, or the merits of the Husband’s response or defence to that application. It may ultimately prove to be that the Wife’s application is without merit. However, the question of justifying circumstances necessarily involves consideration of the potential outcomes of the claims advanced, and comparison of the competing considerations so far as the effect of that upon the parties.

3. Here, the justifying circumstances centre upon the nature of the Wife’s allegations in the substantive proceedings; the nature of that case; and the fact that due to the Wife’s impecuniousness, it appears unlikely that the Wife will be able to prosecute a case which is of complexity, at least with legal assistance to so do, absent an Order.

4. The allegations advanced by the Wife in the substantive proceedings are of a most serious kind. On the Wife’s allegations, the subject financial agreement was obtained by fraud and is not binding within the meaning of the Act. If those allegations are made out ultimately, it follows that:

   a)The public policy behind Part VIIIA of the Act to oust the Court’s jurisdiction under s 79 of the Act by the making of a binding financial agreement only in compliance with and under the strictures of that Part; has been subverted by the Husband;

   b)The Wife has thereby been, wrongly, denied her proper entitlement under s 79 of the Act;

   c)The Wife’s impecuniousness relative to the Husband (which the Husband relies upon in defence of the present application) has been brought about by the Husband’s wrongful conduct;

   d)There is not, and never was, an “agreement” or “financial agreement” within the meaning of Part VIIIA of the Act, let alone a “binding financial agreement”. That is, s 71A has never had operative effect in this case to oust the Court’s jurisdiction.

5. Against that, if an Order is now made for costs in favour of the Wife, and the Husband’s case in the substantive proceedings ultimately succeeds, it would seem likely that the Husband will be unable to recover those costs, given the Wife’s financial position.

6. Thus, the justice of the case, in respect of an Order for costs being “just”, devolves into a balance between those two centrally competing considerations.

7. This is a case concerning what, on either party’s submission, was a relationship of some twenty years’ duration of which two children (the youngest of whom, at 16 years, is still dependent upon and residing with the Wife), at the end of which the Wife received, through the subject binding financial agreement, a property settlement and spousal maintenance lump sum payment worth approximately $135,000.00 (including superannuation but excluding a separately agreed $630.00 per week in child support) in the context of a total net asset pool which is, on the Wife’s case, between $3,580,000.00 and $4,780,000.00 (including superannuation), and on the Husband’s case, approximately $1,757,615.00 (including superannuation). Therefore, even on the Husband’s case, the Wife received around 7-8% of the total pool, and on the Wife’s case, she received less than 3%.

8. The relevant facts in Wall were that the substantive application in that case was for a de facto property settlement with the preliminary jurisdictional issue (for which the money to fund litigation was sought) was whether or not there had been a de facto relationship of two years’ duration where, even on the applicant’s best case, the relationship had lasted for a maximum of two years and five days and there were no children born of the relationship and she made no financial contribution to it.

9. Again, without deciding the merits of the substantive issues between the parties, in comparison to the factual situation in Wall, the facts in this case are very different. In Wall, even on the applicant’s best case, the parties’ relationship had lasted for two years and five days, there were no children born of the relationship and the evidence strongly indicated that the respondent had made the vast majority of the initial contributions to any such relationship. In that case, the potential injustice done to the applicant in denying her interim costs of $150,000.00 (as Johnston J did in Wall) was held by Johnston J to be lesser than the potential injustice done to the respondent in circumstances where the existence of the relationship had not yet been established and it was nigh-certain that the applicant would be unable to repay the respondent should her application be unsuccessful.

10. By way of contrast, in the present case, the parties’ relationship subsisted for some twenty years. It produced two children, the youngest of whom, at 16, is still a dependent and resides with the Wife. Under the financial agreement, the Wife received a very small percentage of the net assets then available.

11. In this context, it is also relevant to consider s 90K of the Act.

12. As part of the public policy behind Part VIIIA of the Act, s 90K specifies the circumstances in which a financial agreement may be set aside by the Court. Those circumstances, as identified, reflect the intention of Parliament to ensure that agreements tainted by some specific vitiating factor (or, for example, a material change in circumstances relating to the care, welfare and development of a child producing hardship) ought not be the product of injustice.

13. On the basis that s 90K of the Act is statutory recognition of the potential for injustice in cases falling within one or more of the circumstances it identifies, it follows that it would be unjust if the protection it affords cannot, in practical terms, be accessed by a party seeking it by reason of impecuniousness occasioned in any way by one or more of the very circumstances s 90K identifies.

14. Put another way, the capacity to repay, whilst a relevant consideration, cannot be elevated to the status of an essential pre-condition to the making of an Order in cases involving s 90K. To do so would place a fetter on the discretion that is in conflict with the mischief s 90K is designed to address.

15. Much of the foregoing addresses the relevant considerations expressed in s 117(2A) of the Act. The considerations particularly relevant in this case are the financial circumstances of each of the parties, and much of the foregoing addresses sub-paragraph (g), “…such other matters as the Court considers relevant.”

16. On the evidence before me, even putting the Husband’s evidence at its highest, the financial circumstances of the Husband are far superior to those of the Wife, and in particular his financial circumstances are sound whilst the Wife’s are not.

17. Thus, the balance is between the potential injustice to the Husband of being unable to recover up to $52,000.00 if he were to ultimately succeed in the substantive proceedings, and the potential injustice to the Wife of being unable to secure her proper entitlements under s 79 or to remedy the result (the binding financial agreement) brought about by, on her case, the fraud of the Husband.

18. Balancing these competing considerations, I am satisfied that there are justifying circumstances and that the justice of the case favours the Wife being able to prosecute the pending proceedings and to have funds to enable her to so do. The potential injustice to the Wife of being unable, in practical terms, to prosecute her case outweighs the potential injustice to the Husband of being unable to recover the amount now ordered on account of costs.

19. The amount of the Order and the Wife’s need depends upon whether there is to be a discrete hearing of the question of the setting aside of the binding financial agreement, and whether the matter is to proceed to a mediation.

Discrete hearing

1. Having regard to the main purpose of the Family Law Rules 2004 (Cth), as expressed in r 1.04; the way the main purpose is to be promoted in accordance with r 1.06; and how the main purpose is achieved as expressed in r 1.07; this seems to be an obvious case for an Order to be made pursuant to r 10.14 for the Wife’s substantive application for the setting aside of the binding financial agreement to be heard as a discrete issue.

2. I did not understand there to be significant opposition to that course on the part of the Husband, and in any event I propose to make that Order.

Mediation

1. Whilst the Court obviously has power to make Orders by the consent of the parties, including Orders as to mediation, I consider that it is far from clear that, absent the parties’ consent, the Court has power to order them to attend mediation, other than a mediation conducted by a “family dispute resolution practitioner” within the meaning of the Act.

2. Part II of the Act deals with, “non-court based family services.” Within that Part, s 10F defines “family dispute resolution” and s 10G defines “family dispute resolution practitioner”. Part IIIB of the Act deals with the, “court’s powers in relation to court and non-court based family services.” Within that Part, s 13A sets out the objects as including, in subsection 13A(1)(b):

   To encourage people to use dispute resolution mechanisms (other than judicial ones) to resolve matters in which a court order might otherwise be made under this Act, provided the mechanisms are appropriate in the circumstances and proper procedures are followed;

   and in subparagraph 13A(1)(d):

   To give the court the power to require parties to proceedings under this Act to make use of court or non-court based family services appropriate to the needs of the parties.”

3. Section 13C sets out the Court’s powers to refer the parties to, “…family counselling, family dispute resolution and other family services.”

4. Section 13C(1) provides:

   A court exercising jurisdiction in proceedings under this Act may, at any stage in the proceedings, make one or more of the following orders:

   (a) that one or more of the parties to the proceedings attend family counselling;

   (b) that the parties to the proceedings attend family dispute resolution;

   (c) that one or more of the parties to the proceedings participate in an appropriate course, program or other service.

5. The substantive proceedings are obviously, “…proceedings under this Act…” within the meaning of s 13C of the Act, and s 13A(1)(b) refers to dispute resolution mechanisms (other than judicial ones) to resolve matters in which a Court Order might otherwise be made, “…under this Act.” Proceedings for property settlement under s 79 and proceedings such as the substantive proceedings here are obviously, “…proceedings under this Act…” within the meaning of these provisions and I reiterate that “proceedings” is given a wide definition in s 4 of the Act.

1. The definition of “family dispute resolution” in s 10F(a) of the Act is a process:

   in which a family dispute resolution practitioner helps people affected, or likely to be affected, by separation or divorce, to resolve some or all of their disputes with each other; …

   (emphasis added)

2. There would therefore appear to be power, under s 13C(1)(b) for the Court to order the parties to attend “family dispute resolution” as defined in s 10F.

3. No specific argument was addressed to me as to whether the Court’s power to order mediation extends to a power to order the parties to attend mediation with a mediator who is not also a “family dispute resolution practitioner”. Whilst it may be arguable that private mediation is a “service” within the meaning of s 13C(1)(c), it seems to me that if mediation is “family dispute resolution” within the meaning of s 10F, it is “family dispute resolution” within the meaning of s 13(1)(b) and that “service” in sub-paragraph (c) must be something different, and is to be read and interpreted with the words, “…participate in an appropriate course, program or other service.”

4. Thus, it seems to me that the power is confined to ordering parties to attend family dispute resolution performed by a family dispute resolution practitioner. Whilst it would not seem that the power is confined to make such an Order only in parenting proceedings, and it can be made and is available in property proceedings or proceedings involving financial matters, the power seems to me to be confined in the manner referred to.

5. I do not apprehend that the parties would contemplate an Order requiring them to attend a mediation performed by a family dispute resolution practitioner. In any event, unless the particular family dispute resolution practitioner proposed had expertise in financial matters and, in particular, had expertise in relation to the particular claims raised by the Wife in the substantive proceedings as to setting aside a binding financial agreement, I would hesitate to make such an Order, having regard to the objects of Part IIIB, as expressed in s 13A of the Act, which informs the exercise of discretion under s 13C(1), in particular the proviso expressed in s 13A(1)(b). In any event, I would have doubts about the efficacy of a mediation in the circumstances of this case being imposed upon the parties rather than being the result of the parties’ voluntary participation in such a process.

6. As I am unclear about the parties’ respective positions as to mediation, I therefore formulate the Order for costs taking into account the prospect that the parties may consent to a mediation of their dispute, but if that does not occur, or the mediation does not bring an end to the proceedings, the Orders ought be fashioned to take that into account.

Amount

1. I am satisfied on the evidence provided on behalf of the Wife that if the matter is to proceed to a discrete trial of the issue as to whether or not the binding financial agreement ought be set aside, an Order for the payment of $52,000.00 is reasonable. Likewise, I am satisfied that the lesser amount contended for on behalf of the Wife is reasonable if the matter proceeds to and can be resolved at a mediation.

2. For these reasons, I make the Orders set out at the commencement of these reasons.

I certify that the preceding seventy-five (75) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Kent delivered on 27 April 2012.

Associate: 

Date:  27 April 2012