Rittman & Rittman (No 4)

[2011] FamCA 361

FAMILY COURT OF AUSTRALIA

RITTMAN & RITTMAN (NO 4) [2011] FamCA 361

FAMILY LAW – COSTS – Where the wife has been ordered to pay the husband’s costs on an indemnity basis, assessed at $225,000 – Wife seeks a stay of the costs order against her – Whether the sum of money deposited in the husband’s solicitors’ trust account should be frozen pending determination of appeal – Whether grant of stay would cause hardship to the respondent husband – Merits of the appeal – Where strong findings were made at trial against the wife – Where costs include those necessarily incurred in a nine day trial with counsel – A sum of $100,000 to be frozen in the trust account pending appeal – Remaining $125,000 in the trust account to be released to the husband.

Wife’s Application for Stay of Costs Order Filed 28 April 2011

APPLICANT: Mr Rittman

RESPONDENT: Ms Rittman

FILE NUMBER: BRC 2571 of 2009

DATE DELIVERED: 20 May 2011

PLACE DELIVERED:

Brisbane

Published from Chambers

PLACE HEARD: Brisbane

JUDGMENT OF: Barry J

HEARING DATE: 12 May 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Galloway of Counsel appearing for the Applicant Wife

SOLICITOR FOR THE APPLICANT: Pippa Colman & Associates

SOLICITOR FOR THE RESPONDENT: Mr Page, Solicitor appearing for the Respondent Husband

Orders

IT IS ORDERED:

1. The sum of $100,000 be held in the Trust Account of the Husband’s solicitors pending the determination of the Wife’s appeal or agreement by the parties.

2. The Husband is at liberty to instruct his solicitors to invest the sum of $100,000 for the best rate obtainable at call or on term deposit provided the term deposit does not exceed six (6) months at any one time.  The Wife is to sign any authorisation to allow such investment to be made.  In the event the Wife fails to forthwith sign the necessary documentation to allow such investment to be made, a Registrar of this Honourable Court at Brisbane is authorised to sign such documentation on behalf of the Wife.

3. The balance of $125,000 be released forthwith to the Husband.

IT IS NOTED that publication of this judgment under the pseudonym Rittman & Rittman (No 4) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 2571 of 2009

Mr Rittman

Applicant

And

Ms Rittman

Respondent

REASONS FOR JUDGMENT

1. On the 25 February 2011, for reasons given at the time, I made orders by way of property settlement and on child related issues.  The property settlement orders provided for the Husband to receive $393,446 and for the Wife to receive $432,884.

2. On the 1 April 2011, for reasons given at the time, I ordered the Wife to pay the Husband’s costs of and incidental to the lengthy proceedings on an indemnity basis fixed at $225,000.

3. On the 27 April 2011 the Wife lodged an appeal against this costs order.  She seeks an order that the Husband’s application for costs of the litigation be dismissed.

4. I am informed and I accept that from the moneys held in the Wife’s solicitor’s trust account, being the net proceeds of the sale of the former matrimonial home, the sum of $393,446 has been paid to the Husband’s solicitors in satisfaction of the order for property settlement.

5. The sum of $225,000 has been lodged in the Husband’s solicitor’s trust account.

6. On the 28 April 2011 the Wife filed the present application seeking a stay of the order for indemnity costs.  The consequence of granting the stay is that the sum of $225,000 will be effectively frozen in the Husband’s solicitor’s trust account, although the parties would have the right to invest the money pending the determination of the appeal.

7. Counsel for the Wife made enquiries of the Registry and ascertained the appeal will not be heard before November this year and more likely in February next year.

8. Written submissions were received from each party.

9. The principles to be taken into account when considering a stay application include:

   ·The period of delay.

   ·The merits of the appeal including an assessment whether the

   appeal is bona fide.

   ·Whether a successful appeal would be rendered nugatory if the

   stay is not granted.

   ·Whether the grant of a stay will cause loss to the Respondent.

   ·The issue of hardship.

Summary of Financial Circumstances of the Parties at the Present Time

1. The Wife filed an affidavit on the 28 April 2011 in support of her application for a stay.  At paragraph 10 she deposes to the fact she still owes her solicitors $76,891.  I was informed and I accept there are no moneys left in the Wife’s solicitor’s trust account.

2. Pursuant to the property settlement orders, as noted, the Wife was to receive $432,884.  Where the Wife still owes her solicitors $76,891, I infer it is unlikely the Wife received any portion of the $432,884.  Whether she received any portion of previous distributions totally $320,000, I am unable to say.  It is likely that the $225,000 lodged in the Husband’s solicitor’s trust account came from the Wife’s share of the property settlement.

3. As part of her material in the current application, the Wife relied on a financial statement filed on the 9 November 2010. 

4. I proceed on the basis at the present time the Wife has no assets, owes at least $76,891 and in all likelihood owes a further $15,000 as a HECS debt (refer paragraph 54 of her financial statement).  She may also still owe $24,000 for sums borrowed for payment of L’s 2009 school fees (refer paragraph 53 of her financial statement).  Her only income consists of government benefits.

Husband’s Financial Position

1. The Husband’s legal fees as at 2 November 2010 were said to be $375,691 of which he had paid a significant part largely through borrowing from family members but also presumably from previous distributions to the parties from the proceeds of sale of the former matrimonial home.  The Husband’s share from such distribution was $270,000.

2. The Husband’s legal fees have now been paid in full and presumably the balance of the $393,446 has been paid to the Husband although the actual amount received by him has not been disclosed.  The net effect is that if the stay is not granted the $225,000 will be paid to the Husband and he is free to deal with that money as he wishes.

3. There is no evidence placed before the Court what assets, if any, the Husband has nor what he intends to do with the $225,000.

4. The Husband’s concern is that in circumstances where the Wife is impecunious, in the event the appeal is dismissed he would suffer financial loss in that:

   ·He would be unable to recoup his costs incurred in the appeal.

   ·He would be unable to recoup the costs of this application, if

   successful.

   ·He would be unlikely to be paid lost interest.  Interest on unpaid

   money accrues at 9.5 per cent under the Court’s rules.  The loss of

   entitlement to interest could be mitigated by a Court order that in

   the intervening time the money be invested, but there would still be

   in all likelihood a significant amount that would not be recouped.

5. Other submissions on the Husband’s behalf included:

   ·There was no merit in the appeal where there has been no appeal

   from the findings in the primary judgment.

6. At paragraph 1.5 the legal representative for the Husband submitted:

   “It is contended, inter alia, on the part of the Husband that the Wife seeks the stay to protect her solicitors for costs owing of $76,189.”

7. This was described by the Wife’s Counsel as “an unjustifiable slur” in circumstances where the Husband elected to file no material.

8. In view of the findings made in the primary judgment, it is conceivable the Full Court would allow the appeal against the order for indemnity costs, but order the Wife to pay the Husband’s costs on a party and party basis, which would be expected to be an amount less than $225,000 but still a significant sum.

9. A further submission on behalf of the Husband was that the length of time for the appeal to be heard heavily prejudices the Husband.  It was contended he is entitled to the benefit of the order and should be free to deal with the funds as he wishes.

10. The Husband’s solicitor made reference to a decision of the Queensland Court of Appeal (McMurdo P, Keane JA and White AJA) in Cooks Construction Pty Ltd v Stalk Foods Systems Aust Pty Ltd [2008] QCA 322. At paragraph 12 of that judgment the Court noted:

    “12.It will not be appropriate to grant a stay unless a sufficient basis is shown to outweigh the considerations that judgments of the trial division should not be treated as merely provisional, and that a successful party in litigation is entitled to the fruits of its judgment.  Generally speaking, courts should not be disposed to delay the enforcement of court orders.  The fundamental justification for staying judicial orders pending appeal is to ensure that the orders which might ultimately be made by the courts are fully effective; the power to grant a stay should not be exercised merely because immediate compliance with orders of the court is inconvenient for the party which has been unsuccessful in the litigation.”

11. I accept the force of the reasoning of the Queensland Court of Appeal.

12. At paragraph 5.2 of the Husband’s written submissions the point is made:

    “5.2.In relation to an assessment of the Wife’s bona fides in respect of the application for a stay, it is submitted that the Wife has not led any cogent evidence that would indicate that the Husband would not have the capacity to meet any order should the Wife be successful in her appeal (which is opposed by the Husband);”

Submissions on Behalf of the Wife

1. At paragraph 4 of these submissions Counsel notes a sum of $20,000 was quarantined under the original orders to provide for the winding up of a company previously operated by the parties.  It is common ground that there is likely to be additional funds from this source as the winding up is not expected to cost anything like the quarantined amount.

2. At paragraph 10 of the submissions, Counsel for the Wife compares the payment to the Husband’s solicitor’s trust account of the sum of $225,000 to:

   “…the same position as a litigant in civil proceedings who receives a stay by payment of the disputed sum into Court.”

3. At paragraph 11 of the submissions Counsel noted:

   “11.There is no material filed by the respondent to indicate a preparedness on his part to hold the money intact until appeal and thus, should it be spent either wholly or in part, is likely to be impossible or impractical to restore the fund to its present state.”

4. At paragraph 13 under the heading “Hardship” it is noted:

   “13.The Respondent/Husband does not depose to any hardship should his access to the money the subject of the costs order be deferred until the determination of the appeal, whereas if it is not preserved and a successful appeal rendered nugatory then hardship to the Wife is manifest.”

5. It is an interesting question as to who bears the onus in this situation.  As I have previously quoted from paragraph 5.2 of the Husband’s submissions, it was submitted that the onus was on the Wife to lead cogent evidence to establish that the Husband would not have the capacity to meet any order should the Wife be successful in her appeal.  I do not accept this submission.

6. It would have been far preferable for there to have been some material from the Husband on this aspect along the lines of how much of the original disbursement has been made available to him, how much he has repaid relatives and what his plans are in dealing with the $225,000?

Merits of the Appeal

1. I have perused the grounds of appeal.  I accept that s 117 AB is a relatively recent amendment.  There appears to be no definitive appellate court ruling on how applications under that section should be approached.

2. I am reluctant to make any observation on the merits of the appeal other than to note I would have thought it unlikely the Husband’ s application for costs would be dismissed in its entirety, as sought in the notice of appeal.

3. The findings made were particularly strong findings and there has been no challenge to those findings.

4. In the course of submissions on the 12 May 2011, I drew Counsel’s attention to the fact that s 117AB made it mandatory for the imposition of a costs order where appropriate findings had been made.  Counsel indicated the critical words in s 117AB were, “a false allegation or statement, in the proceedings”.

5. I would have thought, at the very least, exhibit 2 was a false allegation or statement, “in the proceedings”, as it was annexed to the Wife’s own affidavit with a claim that the Husband was the author of that particular document.

6. It may not have been particularly spelt out in the costs determination, but in my view a finding is not irrelevant simply because its only relevance goes to the issue of credibility.  In this matter, particularly where it involved the welfare of a young girl, the findings of credibility had special significance.

7. The primary argument for the Wife is the risk of a successful appeal being rendered nugatory in the event the moneys have been dissipated by the Husband in the intervening period.

All or Nothing Approach

1. As the matter was argued on the 12 May 2011, it was a question of all or nothing for each party.

2. Counsel for the Wife contended to properly protect his client the whole of the costs of payment should be frozen.  To accede to this proposition I would have to be satisfied not only that the appeal would be partially successful, but successful in its entirety.  Having regard to the nature of the findings made as to the Wife’s conduct throughout the litigation I would be of a view such a result is unlikely, whether reliance is placed on s 117(2) or s 117AB.

3. For the Husband there was no proposal that he would retain the money in some form of investment.  There was no evidence of an undertaking to advise the Wife in the event he was to dissipate the funds in one way or another.

4. As Martin J as trial Judge noted in the Cooks Construction case:

   “It is relevant to consider whether, if a stay is granted, the disadvantage suffered by the applicant is outweighed by the competing disadvantage to the respondent.”

   The situation is reversed in the factual situation of this application.

5. I am not prepared to find the appeal is without merit or lacks bona fides although there is certainly a basis for the submission on the part of the Husband that a successful appeal would largely reward the Wife’s legal advisors rather than the Wife herself.

6. In the event the all or nothing approach is adopted one party or the other would be at risk of financial loss.

7. On my assessment of the character of the litigants I would assess the Husband as far more likely to comply with Court orders.  My overall impression of him was that he was both honest and honourable.  Regrettably I am unable to make similar observations about the Wife.

8. In summary, in the event the appeal is partially or wholly successful, there would be reasonable prospects the Husband would repay the amount even if it had been released to him and dissipated in various ways.

9. In the event the Husband’s costs were ultimately assessed at say $125,000, I expect he could claim some entitlement to deduct from the $100,000 to be refunded interest that had accrued on the balance of the $125,000.  That is likely to be an issue for the Full Court.

10. In the event the appeal is dismissed I expect the prospects of the Husband recovering costs of the appeal or lost interest would be virtually non-existent.

11. I am prepared to freeze the funds in the trust account to the extent of $100,000.  The consequence of this is that $125,000 can be forthwith released to the Husband.  The view that I have formed is that it is unlikely, having regard to the fact that it was a nine day trial, Counsel represented each of the parties, there was a large volume of affidavit material to be considered, the Wife was wholly unsuccessful in the proceedings and serious criticism was made as to her conduct throughout the proceedings, the prospect is that the Husband would receive a significant portion of his costs even though the Wife is impecunious.  I have taken an approach that the costs would be not less than $125,000 and accordingly will grant the stay limited to the sum of $100,000.

I certify that the preceding forty-nine (49) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Barry delivered on 20 May 2011.

Associate: 

Date:  20 May 2011