Selena & Montez and Ors
[2017] FamCA 583
•11 August 2017
FAMILY COURT OF AUSTRALIA
| SELENA & MONTEZ AND ORS | [2017] FamCA 583 |
| FAMILY LAW – PROPERTY – INTERIM PROCEEDINGS – Where the Wife sought orders in relation to litigation funding, spousal maintenance, injunctions and disclosure – Where the wife’s application for an order for costs pursuant to section 117 in the form of a lump sum amount or on a dollar for dollar basis is dismissed – Court finds that the amount sought by the wife by way of interim property distribution in the sum of $175,000 is excessive – Orders made for a further distribution of property to the wife to be conditional upon the wife agreeing to facilitate the husband borrowing the amount from one of the parties’ jointly owned properties – Orders made for the amount of $44,922 to be paid to the wife – Where the wife has failed to satisfy the Court that she is unable to support herself adequately and therefore she does not meet the gateway requirement set out in section 72 of the Act – Wife’s application in the alternative, for the payment of a lump sum amount pursuant to sections 72 and 74 of the Act is dismissed – Where the wife has not established a basis of injunctions beyond those agreed to by the husband – Parties’ agreement in respect to production of documents noted – further orders made to facilitate mutual disclosure – No orders made for expedition. | |
| Family Law Act 1975 (Cth) ss. 72, 74, 75, 79, 80(1)(h), 90AF, 106B, 117 Family Law Rules 2004 (Cth) r 12.07(2), sch 1, cl 6(1)(c) | |
| Beach Petroleum Nl and Claremont Petroleum Nl v Malcom Keith Johnson and Others[1995] FCA 1250 Breen & Breen (1990) 65 ALJR 195 Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403 Casley & Casley (Costs) [2010] FamCAFC 189 Esdale & Schenk [2012] FamCA 111 Jamine & Jamine (Costs) [2010] FamCAFC 191 G and T (2004) FLC 93-176 Giumelli v Giumelli (1999) 196 CLR 101 Hall and Hall [2016] HCA 23 Hogan & Hogan (1986) FLC 91-704 Kelleher & Anderson [2007] FamCA 137 I Limited & Chester and Ors (Costs) [2011] FamCAFC 51 Martiniello and Martiniello [1981] FamCA 21 Oscar & Traynor [2008] FamCAFC 158 Re JJT; Ex parte Victoria Legal Aid [1998] HCA 44; (1998) 195 CLR 184 Stephens & Stephens and Anor (Enforcement) (Costs) [2010] FamCAFC 172 Stoian & Flemming (Costs) [2014] FamCA 9446 Strahan & Strahan (Interim Property Orders)[2009] FamCAFC 166 Sully & Sully(No. 2) [2016] FamCA 706 Tang & Fei (Costs) [2011] FamCAFC 29 Tamaniego & Tamaniego (Costs) [2011] FamCAFC 30 Wilson v Wilson (1989) FLC 92-033 Zschokke & Zchokke [1996] FamCA 79 | ||
| APPLICANT: | Ms Selena | |
| FIRST RESPONDENT: SECOND RESPONDENT: THIRD RESPONDENT: FOURTH RESPONDENT: FIFTH RESPONDENT: SIXTH RESPONDENT: | Mr Montez Montez Discretionary Trust G Pty Ltd H Pty Ltd J Pty Ltd Mr Gentili |
| FILE NUMBER: | SYC | 939 | of | 2014 |
| DATE DELIVERED: | 11 August 2017 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | McClelland J |
| HEARING DATE: | 19 May 2017 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Miller |
| SOLICITOR FOR THE APPLICANT: | Gordon & Barry Lawyers |
COUNSEL FOR THE FIRST RESPONDENT: | Mr Schonell SC |
| SOLICITOR FOR THE RESPONDENT: | Karas Partners Lawyers |
| COUNSEL FOR THE SECOND RESPONDENT: | Mr Schonell SC |
SOLICITOR FOR THE SECOND Australian Business Lawyers & RESPONDENT: Advisors Pty Ltd
| COUNSEL FOR THE THIRD RESPONDENT: | Mr D Hand |
SOLICITOR FOR THE THIRD Australian Business Lawyers &
RESPONDENT: Advisors Pty Ltd
| COUNSEL FOR THE FOURTH RESPONDENT: | Mr D Hand |
SOLICITOR FOR THE FOURTH Australian Business Lawyers &
RESPONDENT: Advisors Pty Ltd
| COUNSEL FOR THE FIFTH RESPONDENT: | Mr Schonell SC |
SOLICITOR FOR THE FIFTH Australian Business Lawyers &
RESPONDENT: Advisors Pty Ltd
| COUNSEL FOR THE SIXTH RESPONDENT: | Mr D Hand |
SOLICITOR FOR THE SIXTH Australian Business Lawyers &
RESPONDENT: Advisors Pty Ltd
Orders
THE COURT ORDERS THAT:
That pending further Order the Husband in his capacity as trustee of the Montez Discretionary Trust, provide the Wife within 72 hours of receipt of written notice of the payment of any income or capital received by the Montez Discretionary Trust including amount of payment, date of payment, source of the payment and purpose of the payment.
That pending further Order the Husband, in his capacity as Director of J Pty Ltd, be restrained by injunction from doing any actual thing to:
a.cause the constitution of J Pty Ltd to be amended;
b.issue any further shares in J Pty Ltd; and/or
c.transfer, encumber or otherwise deal with the existing share capital of J Pty Ltd,
Without first giving the Wife 28 days’ notice in writing.
That to the extent that such documents have not been provided to date the Husband, as Director of J Pty Ltd, provide to the Wife within 21 days of the date of these Orders copies of the following documents in relation to each of the entities referred to:
a.Financial Statements (including drafts if final have not been prepared including balance sheet, profit and loss accounts, and appreciation schedules);
b.Tax Returns;
c.Management Accounts:
d.Loan Account Ledger;
e.Business Activity Statements
f.Shareholder Agreement/s together with any schedule;
g.Minutes of meetings of members/directors resolutions and Minutes of board meetings;
h.Documents relating to the issue of shares; and
i.Documents relating to any share transfers,
issued for all within the period 1 January 2014 to date, together with the Constitution for each entity.
That to the extent that such documents have not been provided to date the Husband as trustee for Montez Discretionary Trust, and the Husband as Director of K Pty Ltd as trustee for K Trust, provide to the Wife within 21 days of the date of these Orders copies of the following documents in relation to each of the entities referred to:
a.Financial Statements (including drafts if final have not been prepared including balance sheet, profit and loss accounts, and appreciation schedules);
b.Tax Returns;
c.Management Accounts;
d.Loan Account Ledgers;
e.Business Activity Statements
f.Shareholder Agreements together with any schedules;
g.Minutes of meeting of members/directors resolutions and Minutes of board meetings;
h.Documents relating to the issue of shares; and
i.Documents relating to any share transfers,
issued for the period 30 June 2016.
That the Wife is permitted to provide to the joint expert Mr L the further information and documents to be disclosed in accordance with Orders 2 to 4 inclusive.
That the timeframe of 21 days in Part 15.65(1)(b) of the Family Law Rules 2004 is dispensed with and the Wife is permitted to issue questions to Mr L following the provision of the further information and documents to Mr L in accordance with Order 5.
Pending further Order, to the extent that such documents have not been provided to date, the Husband provide within 14 days to the Wife all documents relating to the share transfer of the 10 ordinary shares held by the Husband as trustee for the Montez Discretionary Trust in H Pty Ltd to J Pty Ltd on or about 17 February 2016 including but not limited to documents evidencing any consideration received, stamp duty paid and valuations obtained.
That, to the extent that such documents have not been provided to date, the Husband provide all documents evidencing the source of the payment made by the Husband to Wife in the amount of $136,881.15 paid by ANZ cheque … dated 4 November 2016.
Subject to order 10, the Husband shall within 90 days of the date of these orders, pay the amount of $44,922 into such bank account as the Wife shall nominate as payment for interim property distribution.
10.In order to facilitate the Husband borrowing funds to provide the amount of $44,922 to the Wife pursuant to order 9, the Wife shall, at the written request of the Husband, sign all necessary documents and do all things necessary to enable the property which the parties jointly own at M Street, Suburb D, NSW … to be used as security for the loan.
11.In the event that either party seeks further disclosure from the other not provided for in these orders, then, within 14 days of the date of these orders, that party shall serve on the other party’s legal representative a request, in writing, in which the party nominates the specified document(s) or class of documents that he or she seeks to be disclosed.
12.The party receiving the request for further disclosure pursuant to Order (11) above must, within 21 days after receiving notice, serve on the requesting party a list of documents identifying:
a.The document(s) in that party’s possession that are within the class of documents sought by the other party;
b.The document(s) no longer in the disclosing party’s possession or control with a brief statement about the circumstances in which the document(s) left the party’s possession or control; and
c.The document(s) for which privilege from production is claimed.
13.Within 14 days of receiving the list of documents referred to in Order (12) above, the requesting party must, in writing, ask the disclosing party to:
a.Produce the document(s) for inspection; or
b.Provide a copy of the document(s).
14.The disclosing party must within 14 days after receiving a notice under Order (13), give the requesting party, at the requesting party’s expense, the copies requested, other than copies of document(s):
a.In relation to which privilege from production is claimed; or
b.That are no longer in the disclosing party’s possession or control.
15.In the event that a party disputes an assertion as to the non-existence or non-possession of a document or documents, or disputes a claim for privilege, that party must, within 28 days of receipt of the list of documents referred to in Order (12) file and serve an Application pursuant to Rule 13.22 of the Family Law Rules 2004 supported by an affidavit addressing those matters set out in Rule 13.22(3) and any other relevant matter.
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 Selena & Montez and Ors 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 939 of 2014
Ms Selena
Applicant
And
| Mr Montez |
First Respondent
And
| Montez Discretionary Trust |
Second Respondent
And
| G Pty Ltd |
Third Respondent
And
| H Pty Ltd |
Fourth Respondent
And
| J Pty Ltd |
Fifth Respondent
And
| Mr Gentili |
Sixth Respondent
REASONS FOR JUDGMENT
Introduction
This matter concerns an application for interim orders in the context of property proceedings arising from the breakdown of the parties’ marriage of approximately eight years. There are no children of the marriage.
The background to the application is that the wife questions the bona fides of the husband’s disclosure of his income. The wife is also of the opinion that the husband has engaged in tactics to minimise or disguise his actual wealth. The husband believes that the resources being absorbed by this litigation are disproportionate to the likely outcome of the litigation in circumstances where the parties had a relatively short marriage and they have no children. The husband asserts that the wife’s application is to obtain additional resources from the husband with a view to causing disruption to his business relationships and to prejudice the viability of those interests.
The application filed by the wife on 22 February 2017 and as amended on 21 April 2017 seeks forty-seven different orders including orders against third parties that are involved in business relationships with the husband. The applications in respect to a number of the third parties were resolved on the morning of the interim hearing.
In essence, the proposed orders sought by the wife, in respect to the husband, concerned an application for additional litigation funding, an application for preservation injunctions, an application for further production of documents and an application for expedition.
Applications
The respondent husband did not press the orders sought in his response. Accordingly, it is only necessary to consider those orders proposed by the wife.
Orders sought by the wife
As noted, as a result of discussions on the morning of the hearing, the wife resolved the issues she pressed in respect to a number of third parties. That resolution was reflected in consent orders made on that day.
Those matters which were resolved by the interim orders and accordingly were not pressed were as follows:
·paragraphs 3 to 8 dealing with G;
·paragraphs 9 to 12 dealing with H Pty Ltd;
·paragraph 20;
·paragraph 21 in respect to Mr O and Mr Gentili;
·paragraph 22 in respect to Mr O and Mr Gentili;
·paragraphs 27.2 and 27.3 in respect to Mr Gentili; and
·paragraph 28.
In addition, the husband agreed to the following orders:
· paragraph 12;
· paragraph 15;
· paragraph 19;
· paragraphs 24 and 25 to the extent that each paragraph is amended by the qualification “to the extent not already provided” and which was agreed to by the wife;
· paragraph 26, which was not pressed by the wife on the basis that it had previously been dealt with by the Court;
· paragraphs 29 and 30;
· paragraph 34 to the extent that the paragraph is amended by the qualification “to the extent not already provided” and which was agreed to by the wife; and
· paragraph 35, subject to clarification by inclusion of the words “the husband provide” prior to the words “all documents” and with the addition of the words “to the extent not already provided”, and which was agreed to by the wife.
Counsel for the wife indicated that the wife was not, in these interim proceedings, pressing paragraphs 31 and 32 of her application which concerned applications pursuant to section 106B of the Family Law Act 1975 (Cth) (“the Act”). The wife indicated, however, that she did not abandon her application for those orders which she intended to press at final hearing.
The relevant orders proposed by the wife, noting in bold those which were agreed to, therefore are as follows:
13. Pending further Order, the husband as trustee of the [Montez] Discretionary Trust be restrained by injunction from distributing any of the proceeds of the sale of the units in the development known as [Property R] at [P Street, Suburb Q], received by it save and except as follows:
13.1 to first pay secured third party creditors, trade creditors, contractors, estate agents and taxation obligations; and
13.2 after payment of the amount referred to in order 13.1 to do any act or thing necessary to pay all such funds being funds received by the [Montez] Discretionary Trust into the trust account of Gordon and Barry Lawyers Pty Ltd on behalf of [Montez] Discretionary Trust.
14. Pending further Order, the husband as trustee of the [Montez] Discretionary Trust, be restrained by injunction from repaying any loans, save and except for loans obtained from a financial institution and secured by way of mortgage or charge.
15. That pending further Order the husband in his capacity as trustee of the [Montez] Discretionary Trust, provide the wife within 72 hours of receipt written notice of the payment of any income or capital received by [Montez] Discretionary Trust including amount of payment, date of payment, source of the payment and purpose of the payment.
[J Pty Ltd]
16. Pending further Order – [J Pty Ltd] be restrained by injunction from distributing any of the proceeds of the sale of the units in the development known as [Property R] at [P Street, Suburb Q], save and except as follows ;
16.1 to first pay secured third-party creditors, trade creditors, contractors, estate agents and taxation obligations; and
16.2 after payment of the amount referred to in Order 16.1 to pay the balance of funds being funds due to [J Pty Ltd] to the trust account of Gordon & Barry Lawyers Pty Ltd on behalf of [J Pty Ltd].
17. Pending further Order, [J Pty Ltd] be restrained by injunction from repaying any loans, save and except for loans obtained from a financial institution and secured by way of mortgage or charge.
19. That pending further Order the Husband, in his capacity as director of [J Pty Ltd], be restrained by injunction from doing any actual thing to:
19.1 cause of the constitution of [J Pty Ltd] to be amended;
19.2 issue any further shares in [J Pty Ltd]; and/or
19.3 transfer, encumber or otherwise deal with the existing share capital of [J Pty Ltd].
Without first giving the wife 28 days’ notice in writing.
[Montez] Discretionary Trust
21. That pending further Order the Husband, in his capacity as director of [H Pty Ltd], do all acts and things necessary to cause to be paid into the trust account of Gordon & Barry Lawyers Pty Ltd on behalf of [Montez] Discretionary Trust:
21.1 any monies payable whether by way of loan repayment or otherwise to the Husband and/or any entity associated with the Husband including [Montez] Discretionary Trust;
21.2 any monies payable to [Montez] Discretionary Trust whether by way of loan repayment or dividend or otherwise, and
21.3 including any monies payable pursuant to Order 13.2;
as and when such payments are due and payable whereupon such legal incorporated practice will pay such funds to the power money account to be held pending further Order of this Court.
[J Pty Ltd]
22. That pending further Order the Husband, in his capacity as director of [H Pty Ltd], do all acts and things necessary to cause to be paid into the trust account of Gordon & Barry Lawyers Pty Ltd on behalf of [J Pty Ltd]:
22.1 any monies payable whether by way of loan repayment or otherwise to the Husband and/or any entities associated with the Husband including [J Pty Ltd];
22.2 any monies payable to [J Pty Ltd] whether by way of loan repayment or dividend or otherwise, and
22.3 including any monies payable pursuant to order 16.2;
as and when such payments are due and payable whereupon such legal incorporated practice will pay such funds to the Power Money Account to be held pending further Order of this Court.
Disclosure
23. That the Husband and [Mr Gentili] as Directors of [K Pty Ltd] as trustee of [K Trust] provide to the wife within 21 days:
23.1 The complete name and contact details of the recipient/s of moneys described as “[T] Loan Account” of a value of about $258,000 in the Financial Statement for the QTM Trust for the financial year ending 30 June 2015 (“the [T] loan”);
23.2 if the [T] loan is an accrual of outstanding sub-contractor payments then copies of invoices and like documents recording the amounts owing;
23.3 all documents evidencing steps taken to recover the [T] loan;
23.4 in the event that no steps have been taken to recover the [T] loan, all documents evidencing the reason/s for not pursuing the repayment of the said loan including but not limited to communications received from the recipient of the [T] loan;
23.5 relating to any agreement in relation to the repayment of the [T] loan; and
23.6 all documents evidencing the repayment or part repayment of the [T] loan
24. That [to the extent that such documents have not been provided to date]:[1]
[1] Insertion of words agreed to at the interim hearing.
24.3 the Husband as director of [J Pty Ltd] provide to the Wife within 21 days of the date of these Orders copies of the following documents in relation to each of the entities referred to:
24.4 Financial Statements (including drafts if final have not been prepared including balance sheet, profit and loss accounts, and appreciation schedules);
24.5 Tax Returns;
24.6 Management Accounts:
24.7 Loan Account Ledger;
24.8 Business Activity Statements
24.9 Shareholder Agreement/s together with any schedule;
24.10 Minutes of meetings of members/directors resolutions and Minutes of board meetings;
24.11 documents relating to the issue of shares; and
24.12 documents relating to any share transfers,
issued for all within the period 1 January 2014 to date, together with the Constitution for each entity.
25. That: [to the extent that such documents have not been provided to date]:[2]
[2] Insertion of words agreed to at the interim hearing.
25.1 The Husband as trustee for [Montez] Discretionary Trust, and
25.2 The Husband as director of [K Pty Ltd] as trustee for [K] Trust,
provide to the Wife within 21 days of the date of these Orders copies of the following documents in relation to each of the entities referred to:
25.3 Financial Statements (including drafts if final have not been prepared including balance sheet, profit and loss accounts, and appreciation schedules);
25.4 Tax Returns;
25.5 Management Accounts;
25.6 Loan Account Ledgers;
25.7 Business Activity Statements
25.8 Shareholder Agreements together with any schedules;
25.9 Minutes of meeting of members/directors resolutions and Minutes of board meetings;
25.10 documents relating to the issue of shares; and
25.11 documents relating to any share transfers,
issued for the year ended 30 June 2016
Issued for the period 30 June 2016;
27. That:
27.1 the husband as trustee for the [Montez] Discretionary Trust
27.4 the Husband as director of [J Pty Ltd]
provide to the Wife within 21 days of the date of these Orders copies of the following documents in relation to the development at [P Street, Suburb Q];
27.5 real estate agency agreement for the sale of the units of the plan;
27.6 complete copy of the executed share subscription agreement;
27.7 applications for finance and documents supporting any application for finance included but not limited to the CBA loan secured upon the property located at [X Street] and loan from [U Pty Ltd];
27.8 any loan offers:
27.9 the construction report submitted to the bank or financial institution for the purposes of receiving stated/periodic payment;
27.10 any stamp duty valuations with respect to any transfers of shares;
27.11 contracts for the sale of any units and documentation provided to purchasers or potential purchasers in relation to the development and completion date;
27.12 budget and profit forecast;
27.13 all documents provided to [V Pty Ltd] regarding the progress of the development and amounts due and payable including but not limited to Investors Report; and
27.14 all documents provided to the quantity surveyor, including but not limited to documents provided to [W Pty Ltd],
issued for all within the period 1 January 2014 to date.
Provision of information and documents to the joint expert [Mr L].
29. That the wife is permitted to provide to the joint expert [Mr L] the further information and documents to be disclosed in accordance with Orders 23 to 28 inclusive.
30. That the timeframe of 21 days in Part 15.65(1)(b) is dispensed with and the wife is permitted to issue questions to [Mr L] following the provision of the further information and documents to [Mr L] in accordance with Order 29.
Order setting aside Share Transfer
33. Pending further Order the Husband be restrained by injunction from transferring any shares held by the Husband whether personally or as trustee for the [Montez] Discretionary Trust in [H Pty Ltd] and/or [J Pty Ltd] without first giving the wife 28 days’ notice in writing
34. Pending further Order, [to the extent that such documents have not been provided to date [3]], the Husband provide within 14 days to the Wife all documents relating to the share transfer of the 10 ordinary shares held by the Husband as trustee for the [Montez] Discretionary Trust in [H Pty Ltd] to [J Pty Ltd] on or about 17 February 2016 including but not limited to documents evidencing any consideration received, stamp duty paid and valuations obtained.
[3] Insertion of words agreed to at the interim hearing.
35. [The husband provide to the extent that such documents have not been provided to date][4] all documents evidencing the source of the payment made by the husband to wife in the amount of $136,881.15 paid by ANZ cheque 9501047 dated for November 2016.
[4] Insertion of words agreed to at the interim hearing.
36. That the husband pay the wife’s costs of and incidental to this application on an indemnity basis.
Interim Financial
37. Pursuant to section 117(2) of the Family Law Act the Husband shall, within 28 days of the date of these Orders, pay into the trust account of the Wife’s solicitors the sum of $175,000 to the provision of the Wife’s further costs in these proceedings.
38. Until further Order and without concession in the alternative to interim Order 37 the Husband shall within 28 days of the date of these Orders, pay the amount of $175,000 into such bank account as the Wife shall nominate as payment for interim property distribution.
39. Without concession and in the alternative to Orders 37 and 38 the Husband shall, within 28 days of the date of these Orders, pay into such bank account as the Wife shall nominate the amount of $175,000 by way of lump sum spousal maintenance pursuant to section 72 and a section 74 of the Family Law Act.
40. Without concession and in the alternative to interim Orders 37, 38 and or 39, Until Further Order:
40.1 Within 5 business days after the payment by or on behalf of the First Respondent, [Mr Montez], of any money in payment of accounts:
40.1.1 rendered by the Husband’s lawyers in respect of these proceedings; or
40.1.2 rendered by an accountant, valuer or other expert engaged by the Husband in respect of these proceedings,
40.1.3 the Husband pay or cause to be paid the same amount of money to the trust account of the Wife’s lawyers.
41. Within one (1) business day after the payment by behalf of the Husband of any money referred to in Order 40.1, the Husband shall cause to be given to the Wife’s lawyers a memorandum stating the amount or amounts so paid and the source of payment.
42. All money paid to the Husband’s lawyers by or on behalf of the Husband referred to in Order 40.1 shall be held in trust by the Husband’s lawyers and shall not be applied in payment of his legal costs and disbursements until such time as the same amount has been paid by or on behalf of the Husband to the Wife’s lawyers and, in the event that such payment to the Wife’s lawyers has not been made within 5 business days after the payment by or on behalf of the Husband or any money referred to in Order 40.1, the Husband direct his lawyers shall pay 50% of the amount or amounts so held by them in their trust account to the Wife’s lawyers.
43. The amounts paid by or at the direction of the Husband to the Wife’s lawyers pursuant to this Order shall be applied by them in the payment of the Wife’s legal costs and disbursements incurred and to be incurred by the Wife in the conduct of these proceedings, including but not limited to the costs and outlays:
43.1 rendered by the Wife’s lawyers to date in the future in respect of these proceedings; and
43.2 rendered by any accountant, valuer or other expert engaged by the Wife in respect of these proceedings.
44. In default of any party doing any act or thing and executing any such document necessary to give effect to these Orders, the Registrar of the Family Court of Australia at Sydney the appointed to execute all such documents in the name of the defaulting party (including but not limited to a contract of the agent, legal services agreement of the lawyer, marketing proposals of the agent, transfer, discharge of mortgage, resolution and minutes) and do all acts and things necessary to give validity and operation to such documents and the defaulting party shall pay the costs of the non-performing party in relation thereto.
45. The Wife shall have leave to relist the proceedings before the Registrar on 48 hours’ notice in writing to the case coordinator.
46. That the final hearing of these proceedings be and is hereby expedited.
47. That the Husband pay the costs of and incidental to these proceedings on an indemnity basis.
The Issues
Accordingly, the issues to be determined in these proceedings are as follows;
A.Should an order be made pursuant to section 117 of the Act requiring the husband to pay a lump sum in respect to the legal fees the wife anticipates incurring until finality of these proceedings?
B.In the alternative, should a dollar for dollar costs order be made?
C.In the alternative, should an order be made for an additional partial distribution of property in respect to legal fees the wife anticipates incurring until finality of these proceedings?
D.In the alternative, should an order be made by way of lump sum spousal maintenance to enable the wife to support herself and pay her legal fees?
E.Should the injunctions sought by the wife be granted?
F.Should orders be made for the husband to provide further disclosure?
G.Should an order for expedition be made?
Evidence
The wife relied upon the following material:
a)Application in a Case filed 22 February 2017;
b)Financial Statement of Ms Selena filed 22 February 2017;
c)Affidavit of Ms Selena filed 22 February 2017;
d)Undertaking as to Damages of Ms Selena filed 22 February 2017;
e)Amended Initiating Application filed 21 March 2017;
f)Amended Application in a Case filed 21 April 2017; and
g)Affidavit of Ms Selena filed 21 April 2017.
The husband relied upon the following material:
a)Affidavit of Mr Montez filed 21 March 2017;
b)Supplementary Affidavit of Mr Montez filed 16 May 2017; and
c)Financial Statement of Mr Montez filed 16 May 2017.
Background
The wife was born in 1971 and is 45 years of age. The husband was born in 1970 and is 47 years of age.
The wife is currently unemployed as a result of being made redundant from her employer in February 2017. The husband is a self-employed tradesman and businessman.
The wife submits that the parties’ relationship commenced in December 1995, although it is agreed that they did not live together until they were married in 2003. The date of the parties’ separation is in dispute. The husband asserts that the parties separated in 2009, whereas the wife asserts that the parties separated in 2011. The husband acknowledges that he physically left the matrimonial home on 6 January 2011. The parties were divorced on 16 May 2014.
On 11 April 2000, the wife purchased B Street, Suburb C (“the Suburb C property”) for $295,000. The wife contends that the mortgage was approximately $210,000.[5] The wife also contends that, at the commencement of cohabitation, the property was worth $435,000.
[5] Affidavit of the Wife sworn on 22 February 2017 at [16.5].
The wife contends that she added value to the Suburb C property by utilising her own funds and other funds provided by her family.
The wife also contends that, at the commencement of cohabitation, she owned a motor vehicle, shares and cash totalling approximately $40,000. The wife also contends that she had superannuation of approximately $21,500.
On 1 February 2002 the husband purchased a property at X Street, Suburb F (“the Suburb F property”). The wife contends that the purchase price was $565,000 and the property had a mortgage debt of $549,000.
On 1 September 2002 the husband, as Appointer of the Montez Discretionary Trust, removed K Pty Ltd as trustee and appointed himself as trustee of the Montez Discretionary Trust. The trustee of the Montez Discretionary Trust is now J Pty Ltd. That company was registered on 29 January 2016.
Also on 1 September 2002, the K Trust was established. K Pty Limited is the trustee of the K Trust. The units are held equally by the Montez Discretionary Trust and the Gentili Discretionary Trust.
The husband deposes that K Pty Limited on behalf of the K Trust’s income varies from year to year. The income derived by the Montez Discretionary Trust is, in part, generated by the work undertaken by the K Trust.
The wife contends that the Montez Discretionary Trust is the “alter ego” of the husband and that its value should be included in the pool of property available for adjustment between the parties.
In June 2003 a company Z Pty Ltd was registered. The Directors and Shareholders are the husband and his business partner, Mr Gentili.
Towards the end of 2003 the husband transferred a half interest in the Suburb F property to Mr Gentili. It is unclear whether the husband was paid anything for the share of the property that was transferred to Mr Gentili. The husband and Mr Gentili have developed that property by constructing apartments on it.
Also, in late 2003 the husband and Mr Gentili purchased a property at Suburb AA. That property was fully financed.
The wife contends that, on 4 May 2007, the wife and husband obtained a mortgage over the Suburb C property in the amount of $807,500 in order to purchase a property at M Street, Suburb D (“the Suburb D property”) and $344,000 to refinance the Suburb C Property.
The wife contends that, after purchasing the property at Suburb D, the parties undertook renovations to the property and subsequently leased it.
On 5 November 2012 H Pty Ltd was registered. At the time of registration the Shareholders were the husband and his business partner Mr Gentili who each held 10 shares.
The husband deposed that H Pty Ltd was incorporated to development projects. This was through locating suitable land for development, arranging for third parties to syndicate the funding of the land, the purchase and then arranging finance to undertake the construction works. As will be discussed, H Pty Ltd is involved in the development of an apartment complex at P Street, Suburb Q.
On 26 November 2012 the husband became a Director of K Pty Ltd.
On 16 December 2014 G Pty Ltd was registered. The wife contends that the Shareholders are H Pty Ltd with 100 ordinary fully paid beneficially held shares and V Pty Ltd with one redeemable preference share.
On 10 March 2015 G Pty Ltd became the registered proprietor of P Street, Suburb Q. The wife contends that the purchase price of the property was $2,020,000.
On 29 January 2016 J Pty Ltd was registered. The husband is the sole Director and Shareholder.
On 24 February 2016 the husband transferred his shares in H Pty Ltd to J Pty Ltd. The husband contends that this occurred in the context of J Pty Ltd becoming the trustee of the Montez Discretionary Trust.
On 11 April 2016 Rees J made interim financial orders which required the husband to:
·pay the wife spousal maintenance of $500 per week;
·pay the mortgage instalment on the wife’s home at Suburb C which, at the date of the order, was $423.96 per week; and
·pay to the wife by way of partial property settlement the capital sum of $135,000.
On 12 April 2016 the solicitors for the husband advised Mr L that the husband and Mr Gentili were both managers for both H Pty Ltd and G Pty Ltd.[6] Mr L recorded advice from the husband’s solicitors that the development at P Street, Suburb Q had stalled and was unfunded.
[6] Report of Mr L dated 25 May 2016 at [85].
On 18 April 2016 the solicitors for the husband wrote to the solicitors for the wife indicating that the husband needed to “offer the title of the Suburb D property as security” to enable him to borrow the funds necessary to pay [the capital sum of $135,000] as ordered by Rees J on 11 April 2016. That proposal was rejected by the solicitors for the wife.
In November 2016 the St George Bank Ltd approved funding for the post demolition stage of the P Street development. The husband acknowledges that he is identified as a borrower of funds from the St George Bank. This, he asserts, is a result of the fact that the properties that the husband owns with Mr Gentili at Suburb F and Suburb AA have been provided as securities for the loan.
On 25 May 2016 the solicitors for the husband wrote to the solicitors for the wife inviting the wife to attend a mediation with a view to attempting to resolve the issues in dispute between the parties. The husband asserts that, while there has been some without prejudice communication between the parties, the wife has not as yet acceded to his request to participate in mediation.
On 14 October 2016 the husband was served with a bankruptcy notice in respect to his non-payment of the amount of $135,000 to the wife in accordance with the orders of Rees J made on 11 April 2016.
On 18 October 2016 the husband was served with an enforcement warrant in respect to the non-payment of the capital sum ordered by Rees J.
On 4 November 2016 the husband made the payment to the wife of $135,000 together with interest of $1,881.15.
On 10 November 2016 the husband entered into a Deed with his business partner Mr Gentili and H Pty Ltd whereby it was agreed that the husband is the “registered, legal and beneficial owner of 10 ordinary shares” in H Pty Ltd and that he agreed to transfer those shares, for the sum of $20,000, to Mr Gentili.
On 30 November 2016 the solicitors for the husband wrote to the solicitors for the wife in respect to the action taken by the husband to raise the amount of $136,891.15 to pay to the wife in accordance with orders made by Rees J on 11 April 2016. In that letter it is stated that:
A further $20,000 was raised by the [Montez] Discretionary Trust selling its 10 shares in [H Pty Ltd] for a Value of $2,000.00 per share. The price was negotiated with [Mr Gentili] on a “distress” basis because our client had no choice. We note that, in any event, the sale price was significantly more than the value attributed to the shares by the single expert forensic accountant, [Mr L].
That being the case, our client no longer has an indirect interest in [H Pty Ltd].
On 3 February 2017 the wife ceased her employment with Company BB.
major areas of factual controversy
The major factual controversies in this matter include those which commonly occur in respect to property matters concerning the identification of the parties’ marital property, the valuation of that property as well as the parties’ respective contributions. In addition, the following matters are issues of controversy;
·The transfer of the husband’s shares in H Pty Ltd to J Pty Ltd in February 2016.
·The transfer of the husband’s beneficial interests in the shares in H Pty Ltd to Mr Gentili in November 2016.
·Distributions from the Montez Discretionary Trust to the husband’s parents.
·The status of the debt payable by T Pty Ltd.
It is not possible in interim proceedings for the Court to resolve matters of factual controversy. However, it is necessary to identify the substance of those issues to determine whether an order for provision of further litigation funding is appropriate.
The transfer of the husband’s shares in H Pty Ltd to J Pty Ltd in February 2016.
The wife questions the relationship between the apparent share transfer of the shares the husband held in H Pty Ltd to J Pty Ltd that occurred on 24 February 2016 and the Deed entered into by the husband on 10 November 2016 to transfer those same shares to Mr Gentili.
In his written submissions, the husband contends that the following occurred:
F 2. The husband’s indirect interest in [H Pty Ltd] was held through the [Montez] Discretionary Trust (“[MDT]”), the trustee of which was formerly the husband but is now a corporate trustee, [J Pty Ltd] It is common ground that the husband controls [J Pty Ltd] and he is the sole director and shareholder of the company. The appointment of [J] was implemented in February 2016 it did not affect the assets of the Trust or the husband’s capacity to control the trustee (now through the corporate trustee).
…
F 15. The actual disposition of the husband’s indirect interest in [H Pty Ltd] took place in November 2016 and the wife should cease conflating what occurred in February 2016 (in relation to change of trustee of [MT]) with the actual transaction that took place in November 2016 to raise the capital sum [of $20,000].
The transfer of the husband’s beneficial interests in the shares in H Pty Ltd to Mr Gentili in November 2016.
The reference to the husband’s disposition of his indirect interest in H Pty Ltd by way of Deed entered into on 10 November 2016 is also an issue of significant controversy.
The wife challenges the bona fides of this transaction and seeks an order to set it aside. As a result the wife contends that the husband remains a one third Shareholder of H Pty Ltd and that company owns 100 per cent of the issued shares in G Pty Ltd. As result, the wife submits that the husband has a one third interest in the development taking place at P Street, Suburb Q.
The wife submits that the net profits of the development at P Street, Suburb Q are likely to be in the vicinity of $9,100,000 to $12,900,000.
The husband submits that he is neither a Director nor Shareholder of G Pty Ltd and, as a result of the share transfer that occurred in November 2016, he is no longer a Shareholder of H Pty Ltd. Accordingly, the husband asserts that he is not entitled to a distribution of the profits of the P Street development. Instead the husband contends that, as result of incurring the risk in being identified as a borrower of funds from the St George Bank, in relation to the project, he will receive a payment of $400,000 on its completion which is anticipated to be in November 2017.
Distributions from the Montez Discretionary Trust to the husband’s parents
The wife also questions the bona fides of distributions from the Montez Discretionary Trust, by the husband, to his parents which she states includes the following;
·In the financial year ending 30 June 2015 - a combined distribution of approximately $209,000.
·In the year ending 30 June 2016 - a combined distribution of $301,972.
The husband asserts that the distributions are book entries for accounting purposes and that the funds have remained in the Montez Discretionary Trust.
Status of the debt payable by [T] Pty Ltd
The wife questions why the husband has not pursued a debt of approximately $258,177 recorded in the financial statements of K Pty Ltd as a debt due from T Pty Ltd.
In his single expert report Mr L records receiving conflicting advice regarding the recovery of that debt.[7]
[7] Report of Mr L dated 25 May 2016 at paragraphs [92 –94] and [112].
At paragraph 71 of his affidavit sworn on 21 March 2017 the husband states: “that debt has not been recovered. I’m not aware that [T] has assets to satisfy the debt. There are no funds readily available to [K] from that source”.
Consideration of issues
A. Costs order pursuant to section 117
Submissions of the wife
Counsel for the wife characterised the wife’s application for an order for costs in the sum of $175,000 as being “about provision now for the wife’s costs yet to be incurred”.[8]
[8] Transcript of proceedings dated 19 May 2017 at page 47.
In seeking what the wife described as an interim costs order, counsel for the wife referred to the various factors that the Court is required to consider pursuant to section 117 of the Act. The wife acknowledged that the Court cannot do more than speculate in respect to whether one of the parties may be wholly unsuccessful however, she argued that other criteria are relevant and justify the order which she seeks.
One such criteria, it was submitted, is the financial circumstances of the parties which, in the case of the wife, are set out in her Financial Statement. That document details that the wife’s expenditure of $892 per week exceeds her average weekly income of $500 per week which she receives by way of maintenance pursuant to an order made on 11 April 2016.
As against the wife’s financial circumstances, counsel for the wife refers to the fact that the husband has been able to “put away for himself, at least on paper, some $400,000 of money to his parents in those two years” ending 30 June 2015 and 30 June 2016.[9]
[9] Ibid at page 23.
In summary, it was submitted that the wife is in a much weaker financial position and this favours making an order pursuant to section 117 in favour of the wife.
Further, the wife submits that the Court should have regard to the conduct of the husband during the course of the litigation. This includes failure to make proper disclosure and failing to tell the wife about the transfer of his shares in H until after the transactions occurred.
In the alternative to a lump sum amount, in the sum of $175,000, the wife sought an order for costs on a dollar for dollar basis as detailed in paragraph 40 of her amended application.
Submissions of the husband
The husband submitted that the starting point for any order for costs, pursuant to section 117 of the Act, is that each party pay their own costs. Starting from that position the Court then examines whether there are circumstances that justify an order pursuant to section 117(2) of the Act.
The husband submitted that the Court is unable, in these interim proceedings, to make findings regarding inappropriate conduct on the part of either party and, further, the evidence more generally does not enable the Court to make findings that warrant the making of an order for costs.
Insofar as section 117(2A) of the Act sets out matters that the Court is required to consider before making an order for costs it was submitted that:
·the wife owns a property with at least $500,000 worth of equity in it; and
·the husband also has a property which he jointly owns with the wife and he is living in at Suburb D. He otherwise has property which he owns with another person.
It was submitted that, in any event, the Court should reject the wife’s application that the husband be ordered to pay costs in the sum of $175,000 on the basis that it would amount to an order for indemnity costs. The facts of this matter, it was submitted, are not such that they justify the exceptional step of making an order for indemnity costs.
It was further submitted that the same arguments apply in respect to the wife’s application for an order for costs on a dollar for dollar basis. A further difficulty with a dollar for dollar costs order, it was submitted, is that the Court would not be in a position to make an order whereby the costs were “either certain and/or ascertainable”, in accordance with the decision of the Full Court in Hogan & Hogan (1986) FLC 91–704.
Consideration
Section 117 of the Act relevantly provides:
(1) Subject to subsection (2) and section 118, each party to proceedings under this Act shall bear his or her own costs.
(2) If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsection (2A) and the Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
(2A) In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(a) the financial circumstances of each of the parties to the proceedings;
(b) whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance of that party;
(c) the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f) whether either party to the proceedings has, in accordance with section 117C or otherwise, made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g) such other matters as the court considers relevant.
In Zschokke & Zschokke[10] the Full Court extensively reviewed the power to make an interim costs order. Under the subheading “The position in light of existing authority” the Full Court said:
Accordingly, while the present state of the law remains somewhat unclear, it can be asserted with some confidence in light of Justice Brennan’s comments in [Breen & Breen][11] that there is at least power under section 117(2) (the cost 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 (emphasis added).
[10] (1996) FLC 92-693 at [65].
[11] (1990) 65 ALJR 195.
The relevant comments of Justice Brennan, to which their Honours referred, were made in the context of his Honour rejecting an application for special leave to appeal to the High Court and were as follows:
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. However, in the circumstances of this case, it is not appropriate to grant special leave to appeal to consider the form of the order (emphasis added).Having regard to the highlighted text, it is apparent that the primary basis upon which the Full Court in Zschokke & Zschokke[12] asserted “with some confidence” that section 117 of the Act empowers the Court to make a litigation funding order, were the less than definitive views expressed by Brennan J in Breen & Breen.[13]
[12] (1996) FLC 92-693.
[13] (1990) 65 ALJR 195.
However, it is also to be observed that, in a decision of the High Court postdating Zschokke & Zschokke,[14] two members of High Court, Gaudron and Kirby JJ, also expressed the view that section 117 empowers the Court to make a litigation funding order. That decision, Re JJT; Ex parte Victoria Legal Aid,[15] upheld an appeal against an order of the trial Judge requiring the Victoria Legal Aid Commission to fund an Independent Children’s Representative. Gaudron J stated that section 117 is “not simply a power to make an order for costs” but rather it was a power to make an “order as to costs”.[16] This, her Honour stated, was a broader power then one that only authorised orders “to indemnify for “costs actually incurred in the conduct of litigation””.[17]
[14] (1996) FLC 92-693.
[15] [1998] HCA 44.
[16]Re JJT; Ex parte Victoria Legal Aid [1998] HCA 44 at [2].
[17] Ibid at [2].
Kirby J, on the other hand stated that the word “costs” as used in section 117(2) “is broad enough to include future, as well as past, costs”.[18] His Honour was, however, in the minority in holding that the order made for a third party, Victoria Legal Aid Commission, to provide litigation funding, was within the jurisdiction of the Family Court.
[18] Ibid at [60].
Hayne J noted the use of the phrase “as to” costs in section 117(2) “may well enable a broad range of orders to be made”.[19] His Honour, however, clarified that “the subject-matter of those orders must, however, be ‘costs’: a power to make orders "as to" costs does not enable the court to make orders dealing with something other than costs”.[20]
[19] Ibid at [91].
[20] Ibid.
Hayne J further explained that the intended operation of section 117 needs to be viewed in the context of the matters that the Court is required by the Act to have regard to in considering whether to make an order for one party to pay the costs of the other. In that respect his Honour said:
Indeed, the list of matters set out in sub-s (2A) to which the Family Court is directed to have regard in making orders under s 117(2) indicates clearly that the subject-matter of the orders to be made under s 117(2) is the costs which a person may be ordered to pay another as indemnity for that other's liability for professional fees and out of pocket expenses reasonably incurred in the litigation, that is, "costs" as that expression is ordinarily understood in the law (emphasis added).[21]
[21] Ibid at [97].
The reference to costs being those which are “actually incurred” is significant in that in Cachia v Hanes,[22] Mason CJ, Brennan, Deane, Dawson and McHugh JJ said:
It has not been doubted since 1278, when the Statute of Gloucester ((4) 6 Edw.I c.1.)introduced the notion of costs to the common law, that costs are awarded by way of indemnity (or, more accurately, partial indemnity) for professional legal costs actually incurred in the conduct of litigation (emphasis added).[23]
[22] [1994] HCA 14.
[23] Ibid at [11].
Several decisions of the Full Court have applied the statement of principle adumbrated by Hayne J in Re JJT; Ex parte Victoria Legal Aid[24] that section 117 empowers the Court to make an order in respect to costs as ordinarily understood. That is, for costs actually incurred. For example in I Limited & Chester and Ors (Costs) [2011] FamCAFC 51, the Full Court, in referring to Re JJT; Ex parte Victoria Legal Aid,[25] explained that “costs in the conventional sense and thus to the payment by one party to litigation of money by way of a partial indemnity for professional legal fees and expenses actually incurred by another party in the course of the litigation” (emphasis added).[26]
[24] [1998] HCA 44.
[25] Ibid.
[26] I Limited & Chester and Ors (Costs) [2011] FamCAFC 51 at [40]; see also Paul & Kylie (Costs) [2010] FamCAFC 190 (23 September 2010) at [16], Casley & Casley (Costs) [2010] FamCAFC 189 (23 September 2010) at [14], Oscar & Traynor [2008] FamCAFC 158 (27 October 2008) at [75], Stephens & Stephens and Anor (Enforcement) (Costs) [2010] FamCAFC 172 (9 September 2010) at [67], Tang & Fei (Costs) [2011] FamCAFC 29 (24 February 2011) at [22], Jamine & Jamine (Costs) [2010] FamCAFC 191 (23 September 2010) at [10], Tamaniego & Tamaniego (Costs) [2011] FamCAFC 30 (24 February 2011) at [22].
An examination of the reasoning of Brennan J in Breen & Breen[27] and the separated decisions of Gaudron and Kirby JJ in Re JJT; Ex parte Victoria Legal Aid[28] suggest that each of their Honours were motivated by an understandable desire to achieve an outcome that evens up the litigation playing field in the context of family law litigation. This is in circumstances where it is recognised that, in family law matters, it is common for one party to retain control over the majority of the marital assets.
[27] (1990) 65 ALJR 195.
[28] [1998] HCA 44.
As will subsequently be discussed, the merit of that objective has been noted in a number of decisions of the Full Court of the Family Court. However, the pursuit of that meritorious objective does not, in my view, justify adopting a construction of section 117 that results in it being applied at a point prior to the time when it is possible for the Court to fulfil its obligation to consider the matters referred to in section 117(2A). Most significantly, it is clearly not possible to determine whether the party seeking costs has been successful in the litigation, nor is it possible to consider the conduct of the party in circumstances where that conduct is yet to occur. Nevertheless, despite the significant doubt that I have expressed, I recognise that it is generally accepted that section 117 empowers the Court to make a litigation funding order. Accepting that to be the case, it is necessary to follow the clear legislative direction set out in section 117. This includes applying the presumption set out in section 117(1) that each party is to bear their own costs unless, having regard to those matters set out in section 117(2A), the Court is satisfied that it would be just to make such an order.
This is made clear in in Esdale & Schenk[29] where Murphy J said:
While the cases in respect of matrimonial causes reveal multiple heads of power for the making of any order, those same cases also emphasise that each is much more than a convenient vehicle for achieving the same end. If the property power is relied upon, the relevant requisites of justice and equity must be complied with; if the maintenance power is to be relied upon, the relevant requisites of need, capacity and propriety must be met. So, too, where the costs power is relied upon. The majority in Strahan emphasise this very point by pointing out clearly that the relevant head of power under which the order is sought must be clearly identified.
The exercise of the costs power does not merely involve a consideration of the s 117(2A) matters. It also involves paying proper regard to s 117(1). That is, the Application must be judged by reference to the primary position that “each party shall bear his or her own costs”.
Even where proceedings involve a matrimonial cause and jurisdiction is not in issue and even where, within those proceedings, an applicant for litigation expenses can establish an entitlement to ultimate relief, it by no means follows that litigation expenses will be awarded by reference to s 117 as the head of power. Section 117(1) remains, as it were, an obstacle that must be overcome. Indeed, it might be thought that this consideration explains why it is almost invariable that applications of this type are brought in reliance upon the power to make interim property orders and not the costs power (emphasis added).
[29] [2012] FamCA 111 (12 March 2012) at [66] – [68]; see also Klearchos & Klearchos and Ors [2015] FamCAFC 217 (17 November 2015) at [85] – [91].
Counsel for the wife acknowledged that he was not, at this stage of the proceedings, in a position to address all of the matters set out in section 117(2A). He focussed his argument on section 117(2A)(a) and 117(2A)(c) as justifying the making of an order for costs.
Dealing first with section 117(2A)(c), I am not, at this stage of the proceedings, in a position to make a determination in respect to the competing contentions by the parties regarding the appropriateness or otherwise of their conduct in relation to the proceedings.
In considering section 117(2A)(a), it is accepted that the wife has access to less financial resources than the husband, although it is agreed that she has equity of approximately $500,000 in the Suburb C property. Counsel for the wife argued, however, that the wife will not be able to borrow funds against the security of the Suburb C property because she is currently unemployed.
The wife has not, however, presented evidence of any attempt to borrow such funds nor has the wife presented evidence regarding attempts that she has made to return to the workforce.
Accordingly, on the basis of the available evidence, at this stage of the proceedings, I am not satisfied that an order should be made that displaces the presumption set out in section 117(1) of the Act.
The wife’s application for an order for costs pursuant to section 117 in the form of a lump sum amount or on a dollar for dollar basis is therefore dismissed.
For completeness, I note that, even if I had been satisfied that the presumption set out in section 117(1) should not be applied, I would not have made the orders sought by the applicant for the payment of a lump sum amount of $175,000 in respect to costs. This is because the amount sought is effectively in the nature of an order for indemnity costs. The Court has not been addressed on why such an “exceptional” order[30] should be made on the facts of this case.
[30]Medlon & Medlon (No. 6) (Indemnity Costs) [2015] FamCAFC 157 at [27].
Further, even if the order sought by the wife is not appropriately categorised as an order for indemnity costs, in circumstances where a trial has not taken place, I am not satisfied that the approach taken to estimate the lump sum amount sought by the wife is “logical, fair and reasonable”.[31] In that respect, there is merit in the submission of senior counsel for the husband that, having regard to funds held in the wife’s solicitors Trust Account, the amount sought by the wife, even if her contentions are otherwise accepted, is excessive.
[31] Beach Petroleum Nl and Claremont Petroleum Nl v Malcom Keith Johnson and Others[1995] FCA 1250; (1995) 57 FCR 119 at [16] referred to in Stoian & Flemming (Costs) [2014] FamCA 9446.
Finally, I would not have made an order for costs on a dollar for dollar basis as such costs would not be “certain and/or ascertainable” in accordance with the decision of the Full Court in Hogan & Hogan.[32] In that case the Full Court held that the trial judge was in error in making an open ended order for the husband to pay the wife’s costs. In so deciding the Full Court stated:
Whilst recognising that the court has unlimited discretion in relation to costs, in our view, the whole tenor of the legislative provisions and the history of costs orders whether interim or final requires them to be either certain and/or ascertainable and any order must be just.[33]
[32](1986) FLC 91-704.
[33] Ibid at 75,096.
In my view the time at which the costs must be certain and/or ascertainable is the time at which the order is made. To decide otherwise would prevent review of any such order requiring the costs to be paid. An order for the payment of costs on a dollar for dollar basis is necessarily not certain and can only be ascertained by the occurrence of subsequent events which, in this case, are the payment of legal costs by the husband.
B. Additional partial property distribution
Submissions of the wife
The wife submits that it is in the interests of justice for there to be a further interim distribution of the parties’ property to her over and above the $135,000 that the husband was ordered to pay by the orders made by Rees J on 11 April 2016. The payment is sought to enable the wife to meet her future legal expenses.
The wife also submits that such a distribution is just and equitable having regard to the matters set out in section 79(4).
In that respect the wife submits that each of the parties have made a direct and indirect contribution to marital property and that the wife has made an indirect contribution in terms of undertaking duties as a homemaker. The wife contends that, at the commencement of the parties’ relationship, she had a greater equity in the Suburb C property than the husband had in the Suburb F property. The wife contends that the husband was able to utilise that equity to engage in successful property development projects.
The wife contends that the parties continued to make contributions in the period subsequent to their separation; The husband, by way of his development activities, and the wife, by way of her income which she received until she was made redundant in February of this year. The wife has been unemployed since that time.
The wife notes that, in his amended response to the wife’s application dated 3 April 2017, the husband acknowledges that an appropriate distribution of property is one where he pays the wife the sum of $309,760 and that she should retain the Suburb C property after discharging the mortgage. It was submitted that the debt on the Suburb C property is approximately $260,000.[34]
[34] Affidavit of the Wife sworn 22 February 2017 at [47].
During the period that the parties lived together both were in full-time paid employment. The wife also contends that she was the principal homemaker.
Taking into consideration the previous partial property distribution of $135,000, the additional $175,000 sought in the current application would take the total amount received by the wife by way of partial property distribution to $310,000. It was submitted that this amount is equivalent to the amount that the husband has identified in his response as being the amount that he would be prepared to pay to the wife.
It was contended that, even if the amount identified in the husband’s amended response is ignored, a worst-case scenario for the wife at final hearing would be that she retains the Suburb C property and the equity in that property is approximately $500,000.
The wife submitted that the husband has the capacity to pay the amount sought by the wife by way of further partial property distribution. In that respect the wife submitted as follows;
· The financial statements for the year ended 30 June 2016 for the K Pty Ltd as trustee for the K Trust shows a net income for the financial year ended 30 June 2016 as $603,944.17.[35]
· The assets of the K Trust, as at 30 June 2016, include total chequing/savings of $251,987.13.[36]
· The liabilities of the Trust include liabilities to the Unit Holders loan accounts as follows:
o Gentili Discretionary Trust $585,858.53; and
o Montez Discretionary Trust $585,858.52.
[35] Affidavit of the Husband 15 May 2017 at page 66.
[36] Ibid at page 67.
It was submitted, therefore, that the husband has the capacity to call for a repayment in respect to the loan account of the Montez Discretionary Trust at least to the extent of the amount of available cash identified as being $251,987.13.
The wife acknowledges that the basis of her submission is the financial statement of the K Trust as at 30 June 2016. The wife submits, however, that the husband has the power to produce more up-to-date financial information and the wife should not be disadvantaged by the fact that the husband has not provided that information.
It was further submitted that the Court should infer, that, in the event of the Montez Discretionary Trust receiving funds from the K Trust, that the Montez Discretionary Trust would have the capacity to pay the sum of $175,000 as sought by the Wife in her orders. The wife contended that distributions made by the Montez Discretionary Trust in the financial years ending 30 June 2015 and 30 June 2016 confirmed that capacity. Specifically, the wife referred to the following distributions;
·the tax returns of the husband’s parents, Mr and Mrs Montez for the year ending 30 June 2015 show that, combined, they received a distribution of approximately $209,000 from the Montez Discretionary Trust.[37]
·the tax returns of the Montez Discretionary Trust for the year ending 30 June 2016 establish that the husband’s father received a distribution of just under $162,000 and the husband’s wife received a distribution of $65,845, making of total of $301,972.[38]
[37] Annexure GS 19 and GS 20 to the Affidavit of the Wife sworn 21 April 2017.
[38] Affidavit of the Husband sworn 15 May 2017 at pages 46 and 83.
It was submitted that, in the circumstances of this case, it is appropriate that the wife receive additional funds to enable her to properly prepare her case. In that respect it was argued that the husband has engaged in questionable business transactions including a failure to acknowledge progress in respect to the property development that he is engaged in at P Street, Suburb Q. The wife also expressed concern in respect to distributions that the husband has made from the Montez Discretionary Trust to himself and his parents and the fact that the husband appears to have forgiven a loan from T Pty Ltd.
The wife also refers to what she alleges to be inadequate or incomplete disclosure which, she submits, has resulted in her incurring additional legal costs. These have included costs associated with her solicitors issuing subpoenas and undertaking other interlocutory processes to ascertain information regarding the husband’s financial circumstances.[39]
[39] Transcript of proceedings dated 19 May 2017 at page 23.
In circumstances where the husband has the control of the bulk of the parties’ assets it was submitted that it is in the interests of justice for there to be an order for the partial distribution of property and that, in the context of the wife’s contributions, it would be just and equitable to do so.
Submissions of the husband
The husband disputed the wife’s claim regarding the value of the parties’ property. It was further submitted that insofar as the husband’s response to the wife’s Initiating Application filed on 3 April 2017 refers to an amount payable to the wife of $301,672, that amount is to be seen in the context of the wife transferring her interest in the Suburb D property to the husband. The husband did not dispute the wife’s claim that the equity in the Suburb C Property is about $500,000.[40]
[40] Ibid at pages 15 and 37.
Senior counsel for the husband argued that there should not be an order for a further partial property distribution in favour of the wife in order to enable her to pay her legal fees. In that respect, it was submitted that the costs that have been incurred are disproportionate to the subject matter to the litigation. It was noted that the parties had a short marriage of 6 years, according to the husband, and 8 years according to the wife. It was further noted that there has been a long period of separation since 2009 or even, as contended by the husband, January 2011.
In terms of considering the matters set out in section 79(4) it was submitted that the wife has made no contribution to the bulk of the matrimonial assets. In that respect it was noted that the development at P Street, Suburb Q did not commence until 2013 and did not crystallise until 2015.
By reference to the draft balance sheet proposed by the wife at paragraph 46 of her affidavit dated 22 February 2017, it was submitted that the wife made no contribution to the following assets;
·Item 25 – amount owed as at 30 June 2015 from the Montez Discretionary Trust to the husband – $416,193.
·Item 26 – value of the Montez Discretionary Trust interest in H Pty Ltd – $6,200,000.
·Item 33 – distributions from the Montez Discretionary Trust to the husband’s parents – $333,088.
It was submitted that even if, for the purpose of argument, the wife’s estimations of values are accepted, that more than $7,000,000 of the total of $10,969,609 that she asserts is the net value of the parties’ property has been received in the period post separation.
It was further submitted that the other item of significant value is item 8 which is identified as the husband’s 50 per cent interest in the Suburb F property, valued at $3,000,000. The husband notes that asset was brought into the relationship by the husband.
It was submitted that, apart from the wife’s initial contribution of her equity in the Suburb C property as well as “some homemaker contributions”, the wife’s contributions can be identified as follows:
·the parties lived in the wife’s Suburb C property for a period of time;
·the wife paid for some renovations to the Suburb C property from her pre-cohabitation savings;
·the wife also undertook some minor renovations to the Suburb D property;
·the wife undertook some work in respect to the development of the husband’s Suburb F property by way of assisting with cleaning and taking the husband some meals for sustenance while working on the project; and
·contribution of her income up until January 2011.
In summary, it was argued that the wife’s costs of approximately $147,000 spent to date, together with the additional amount of $175,000 which she seeks in these proceedings, are unreasonable and disproportionate to a likely outcome at final hearing.
It was submitted that if an order is made for the wife to receive an additional distribution of $175,000 that she is likely to continue with the litigation in circumstances where “there is no responsibility on her part because it’s not coming from her”.[41]
[41] Transcript of proceedings dated 19 May 2017 at page 30.
It was submitted that, while the wife criticises the husband’s conduct, her criticism can be summarised as “sweeping generalisations” or “unsubstantiated allegations based on hearsay”. It was submitted that, in any event, the Court cannot, in these interim proceedings, make findings about the parties’ mutual allegations of misconduct in respect to this litigation.
Senior counsel for the husband submitted that even if the Court is satisfied that an order should be made for the wife to receive a lump sum, by way of partial property settlement, in order to pay her legal costs, that the amount of $175,000 that she seeks is excessive. In that respect reference was made to exhibit W1 which is the costs disclosure notice provided by the wife’s solicitors. It was submitted that the letter establishes that, after deducting amounts that the wife has already paid and the amount which is currently held in the wife’s solicitors Trust Account, that the maximum amount the wife would require would be the amount of $139,972 and not the $175,000 which she seeks.
It was further submitted that even if the Court accepts that, at final hearing, it is likely that the wife will receive a distribution that is in excess of the amount that she now seeks by way of a further partial distribution of property that “more is required than the mere fact that upon a final hearing the applicant would receive the property being sought or an amount in excess of the funds being sought from the other party”.[42]
[42] Ibid.
In terms of the exercise of discretion it was submitted that while there was a distribution of income from the K Trust in respect to the year ended 30 June 2016 of approximately $300,000, it cannot be assumed that the other unit-holder will be agreeable to a further distribution to the Montez Discretionary Trust. In that respect the husband referred to evidence set out in paragraph 54 of his affidavit sworn 21 March 2017 regarding the difficulty that he had in previously obtaining his business partner’s agreement for the husband to raise $90,000 through the K Trust. It was contended that agreement only occurred after he agreed for his business partner to take a similar amount from the Unit Trust.
It was further submitted that insofar as the wife referred to an amount of $250,000 being available in the K Trust as an amount that is held in the chequing and savings account, the wife has ignored other trading liabilities which include accounts payable of approximately $461,000. In that respect it was noted that the liabilities increased from the previous financial year ending 30 June 2015 by approximately $285,000.
Consideration
Sections 79 and 80(1)(h) of the Act confer power on the Court to make orders for interim property settlement.
The power of the Court to make orders for property settlement can be exercised prior to final hearing including through “a succession of orders until the power ... is exhausted” or until a final order dealing with all the known property of the parties is made.[43] Accordingly, the fact that an order for partial property distribution was made by Rees J on 11 April 2016 does not preclude a further order being made.
[43]Gabel & Yardley [2008] FamCAFC 162, cited in Strahan & Strahan (Interim Property Orders) [2009] FamCAFC 166 at [113].
I will consider the application in four stages which are as follows:
i.Firstly, insofar as it is possible in these interim proceedings, “the identification of the parties’ property and of their interests in it”.[44]
ii.The second stage is a “procedural step” which requires an analysis of whether the circumstances of the case trigger the Court’s power to invoke section 80(1)(h) of the Act to make an order for interim property settlement before a final hearing. At this stage, the “overarching consideration” is the interests of justice.[45]
iii.The third stage is the “substantive step” where the provisions of section 79 must be considered and applied but with limitations, given that it is not the final hearing.[46]
iv.The fourth stage is to consider whether it is just and equitable to make the order having regard to the impact of the order upon the respective parties at the point in time that the interim order is made.[47]
[44]Medlow & Medlow (2016) FLC 93-692 at 81,088.
[45] Strahan & Strahan (Interim Property Orders) [2009] FamCAFC 166 at [132].
[46] Ibid at [135].
[47]Sully & Sully (No. 2) [2016] FamCA 706 at [36].
In terms of the first stage, the Full Court in Medlow & Medlow[48] said:
The onus was clearly upon [the applicant] to establish that there were sufficient assets available for the interim distribution and that the effect of any interim order was capable of being reversed as part of the final hearing or at least would not defeat [the respondent]’s property claim. The onus was not on [the respondent] to adduce such evidence.
[48] (2016) FLC 93-692 at 81,090.
Further, consideration as to whether there should be an order for the interim distribution of property should not be commenced with the assumption “that one or other party has the right to have the property of the parties divided between them”.[49]
[49] Stanford v Stanford [2012] HCA 5 at [40]; Medlow & Medlow (2016) FLC 93-692 at 81,089.
As noted, at page 46 of her affidavit sworn 22 February 2017, the wife sets out a draft balance sheet in which she contends that the net value of the parties assets are $10,969,609. The husband disputes the accuracy of that assessment. Nevertheless, the husband’s Financial Statement dated 19 May 2017 states that the total value of property owned by the husband is $4,709,782 and that the total of his liabilities are $2,961,363. The husband also acknowledges that the wife has equity of approximately $500,000 in the Suburb C property. Accordingly, I am satisfied that the property of the parties exceeds the distribution previously made to the wife and the amount sought by the wife in these proceedings.
The Full Court in Medlow & Medlow[50] referred to Strahan & Strahan (Interim Property Orders) (“Strahan”),[51] and the authorities referred to therein, in confirming that an interim order for the distribution of property must be “amenable to adjustment on a final hearing”. On the facts of this case, I am satisfied that such an adjustment in respect to the order I propose making could comfortably be accommodated within final orders for the adjustment of the parties property.
[50] (2016) FLC 93-692.
[51][2009] FamCAFC 166.
In terms of that second step, as noted by the High Court in Stanford:[52]
…s 79(2) provides that “[t]he court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order”. Section 79(4) prescribes matters that must be taken into account in considering what order (if any) should be made under the section (emphasis added).
[52] [2012] HCA 5 at [35].
In considering the second step it has been observed that “cases involving complex commercial family disputes are often not a level playing field. It is important that if possible, an attempt is made to level that field”.[53] In the context of interim property orders, in Strahan,[54] Boland and O’Ryan JJ discussed relevant authorities and noted:
In Poletti and Poletti Nygh J, when describing an application for “interim costs”, referred to the reasons of the Full Court in Wilson and Wilson and said it is a “situation where one party to the marriage controls almost exclusively what might be described as the patrimony of the parties and has control of the bulk of the assets and funds of the parties, where an order may be made to ensure that the other party, who does not have the fortune of controlling those funds, at least has an equal or near equal opportunity to present his or her case”: see also In the Marriage of Polletti at 796 per the Full Court (Ellis, Strauss and Butler JJ). The Full Court in Zschokke at 83,220 made a number of relevant remarks about the “desirability of legal representation for both parties in family law proceedings” (citations omitted).[55]
[53] Iphostrou & Iphostrou and Ors [2011] FamCA 20 at [60].
[54][2009] FamCAFC 166.
[55] Ibid at [80].
In this matter I am satisfied that the wife will require additional funds to properly inquire into those matters which I have identified as being significant factual matters in dispute between the parties.
However, it is my view that the amount of $175,000 sought by the wife is excessive and it is not in the interests of justice to make an order for the further distribution of property in that amount.
In arriving at that conclusion I note that the costs disclosure notice provided by the wife’s solicitors[56] indicates that legal costs rendered to date total $147,141.60 and that amount has been paid. Anticipated future legal fees are identified as being $196,750. Those fees include an amount in respect to a five-day trial together with two days preparation which are identified as being;
· Legal Practitioner Director $4400 times seven – $30,800.
· Senior Counsel – $9900 per day times seven - $69,300.
· setting down fee and daily court fee $825 times six - $4950.
[56] Exhibit W1.
The total amount in respect to the final hearing and immediate preparation for the final hearing is therefore identified as totalling $105,050.
In my view, it is not in the interests of justice to require the husband, at this stage of the proceedings, to pay an amount to the wife on the assumption that the case will proceed to final hearing. In that respect it is of significance that the parties are yet to attend a mediation or conciliation conference. It is premature to make an order that necessarily assumes that either or both of those processes will fail.
In forming that view I note that, section 79(9) provides that, unless the Court is satisfied that an exception applies, final orders in respect to the distribution of the parties property are not to be made unless the parties to the proceedings have attended a conference in relation to the matter with a Registrar or Deputy Registrar of the court. Rule 12.07(2) of the Family Law Rules 2004 (Cth) (“the Rules”) requires the parties attending the conciliation conference to make “a genuine effort to reach agreement on the matters in issue between them”.
I further note that clause 6(1)(c) of Schedule 1 to the Rules provides that, subject to it being in the best interests of their client, lawyers are required to endeavour to reach a solution by settlement rather than to continue legal action.
Accordingly, I propose subtracting from the amount sought by the wife, those legal fees relating to the final hearing and preparation for the final hearing totalling $105,050. I further note that the wife’s memorandum of costs identifies that the solicitors for the wife are holding the amount of $46,778.44 in Trust. Therefore, from the amount of $196,750 as identified by the wife as being her anticipated future legal fees, the amount of $151,828 should be deducted, leaving a balance of $44,922.
As noted, this amount is in addition to the amount of $46,778.44 which is held in Trust by the wife’s solicitors. This therefore brings the total amount available to fund ongoing litigation to $91,700.44. This is in the context where approximately $147,000 has already been spent by the wife.
The next issue is whether an order requiring the husband to pay an amount of $44,922 to the wife by way of further partial property distribution is just and equitable having regard to those matters set out in section 79(4) of the Act.
In these interim proceedings a detailed consideration of the parties’ direct and indirect contributions is not possible. Clearly the husband has made a significant direct contribution to the net wealth of the parties.
The wife has also made an initial contribution in the form of the Suburb C property and also in respect to providing funds for the renovation of the Suburb C and Suburb D properties.
I am also satisfied, as best as I can be at this stage of the proceedings, that the wife has made a contribution in terms of her income and also by making an indirect contribution by undertaking responsibilities as a homemaker and, on occasions, attending development sites to provide some sustenance to the husband.
Accordingly, I am satisfied that, at final hearing, it is likely to be determined that it is appropriate, just and equitable for the Court to make an order adjusting the parties’ property interests and that the adjustment, in respect to the wife, will be in respect to property, the value of which, exceeds the amount of $179,922, that amount being the combination of the distribution that she has already received and the amount that I propose to order in these proceedings.
In terms of the fourth stage to which I have referred, in Sully & Sully(No. 2) (“Sully”),[57] Stevenson J accepted the argument of counsel for the husband that, in considering the wife’s application for orders for a partial distribution of property, it was necessary for the Court to consider the impact on the parties including the husband’s business “at the present time”[58] that is, at the time that the orders are made. I respectfully agree with Her Honour’s approach.
[57] [2016] FamCA 706.
[58] Ibid at [30].
One of the considerations that influenced Stevenson J to dismiss the wife’s application in Sully[59] was her Honour’s concern that, in the context of the interim proceedings, “the taxation and commercial operations consequences” of requiring the husband to satisfy an order for an interim distribution of property from his business interests were unknown.[60]
[59] [2016] FamCA 706.
[60] Ibid at [33].
In this matter the wife has identified the husband’s business assets as providing the potential source of funds to pay her the amount she is seeking by way of further partial property distribution. Specifically, the wife has referred to the financial statements of the K Trust which indicate that, as at 30 June 2016, there is an amount identified as chequing/savings totalling $251,987.13.
The husband, on the other hand, states that the wife ignores the fact that the financial statements also record the business as having trading liabilities of approximately $461,000. The husband further asserts that, in any event, the husband’s business partner Mr Gentili has an equal entitlement to any cash surpluses held by the business and that, based on past experience, any attempt by the husband to access cash reserves for the purpose of his family law proceedings would cause tension in his business relationship. Further, in that context, it is asserted that the husband could not withdraw an amount from the business without agreeing to Mr Gentili withdrawing a similar amount. This, it was submitted, would have the potential to impact upon the financial viability of the business.
In these interim proceedings it is not possible to resolve the competing factual contentions as to the potential impact of the husband withdrawing funds from his business in order to satisfy an order for him to pay a lump sum amount to the wife by way of further partial property distribution.
I therefore propose to make the order for a further distribution of property to the wife to be conditional upon the wife agreeing to facilitate the husband borrowing the amount from a source other than his business interests. In that respect I note that the parties have equity in the property that they jointly own at Suburb D. In circumstances where the wife’s solicitors already hold a substantial amount in Trust in respect to the wife’s legal expenses I will allow a period of three months for the husband to raise the additional funds.
C. Lump sum spousal maintenance
Submissions of the wife
The wife confirmed that she is not seeking a variation of the order for spousal maintenance made on 11 April 2016 in the sum of $500 per week. In the alternative to the wife’s application for a further partial property distribution and in the alternative to the wife’s application for an order pursuant to section 117, she is seeking a lump sum amount of $175,000 in addition to her weekly maintenance in the sum of $500 per week. The wife acknowledged that a portion of those funds would be in respect to legal fees.
The wife submitted that she satisfies the threshold or gateway requirement set out in section 72 of the Act that she cannot support herself adequately. The reason for this, she asserts, is that she is currently unemployed, having been made redundant on 3 February 2017.
Counsel for the wife acknowledged that the sum sought by the wife in respect to lump sum spousal maintenance correlates to the amount of $175,000 that she is seeking by way of partial property distribution. When asked whether the Court could infer that the amount is sought for legal fees, counsel for the wife acknowledged that the amount sought is identical and stated:
… But necessarily it will be for the wife to determine how much of that she needs to apply for herself support, because we don’t know what period of time this is going to extend for until we get a final hearing. And not just the hearing, but, indeed, the judgement following the hearing. We could be looking at least 12 months. But I can’t say, your honour, that all of it would be applicable to support herself. There would be some element of it that will have to be applied for costs, in view of the level of investigation that’s going to have to be undertaken between now and the final hearing.[61]
[61] Ibid at page 26.
In response to a question seeking to clarify the extent to which the wife contends that she is unable to adequately support herself, counsel for the wife referred to the wife’s Financial Statement as indicating the difference between the maintenance which she currently receives, of $500 per week, and her weekly expenses of approximately $400 per week.
Submissions of the husband
Senior counsel for the husband submitted that there is an inconsistency and illogicality in the wife’s respective claims, which he summarised as being:
If I [the wife] get an order for $175,000 by way of partial property order or by way of interim costs order, then I don’t have a need for maintenance. But if you [the court] don’t give it to me under either of those things, I have a need for maintenance.[62]
[62] Ibid at page 27.
It was submitted that the wife’s claim for lump sum maintenance expressed, as it is, in the alternative, is a concession that she has no need for maintenance.
It was submitted that the wife has not established that she satisfies the gateway or threshold requirement for an order for maintenance. In particular, it was submitted that the wife has not presented any evidence of attempts to find work since she was made redundant in February 2017.
Further, the husband contended that, having regard to the wife’s property interests, she has not established a need for lump sum maintenance.
Consideration
In Zschokke,[63] the Full Court noted that the question as to whether a litigation funding order could be supported under section 74 of the Act (“the maintenance power”) “must be considered in the light of the High Court’s comments in Breen (and notwithstanding Wilson) to remain open”.[64]
[63] [1996] FamCA 79.
[64] Ibid at [66].
In Re JJT; Ex parte Victoria Legal Aid[65] Gaudron J was firm in her view that “doubtless, the power to award maintenance under section 74 of the Act also extends to orders that a party to the marriage provide the other with funds to conduct proceedings”.
[65] [1998] HCA 44 at [3].
Kirby J, however, doubted that to be the case stating;
The suggestion that such orders [for litigation funding] represent a form of "spousal maintenance", supported by s 74 of the Act, although expressly reserved by this Court in Breen v Breen, is unconvincing.[66]
[66] Ibid at [41.4].
In Elton & Batey-Elton (Interim Costs Appeal) (“Elton’s case”)[67] the Full Court expressly reserved the question as to whether the maintenance power empowered the Court to make a litigation funding order. In that case it was unnecessary to determine the issue because the Full Court found that the Trial Judge’s “failure to consider relevant matters under s 72, s 74 and s 75(2) constitute[d] error of principle”.
[67] [2008] FamCAFC 175 at [84].
Any judicial discretion created by legislation must be exercised in the context of the criteria set out in the legislation for the exercise of that power. It is clear that those matters identified by the Full Court in Elton’s case must be considered in this case. In considering those matters, there is merit in the submission of senior counsel for the husband that, in presenting her case in the alternative, the wife has created an irreconcilable inconsistency. That is, the wife argues that, in the event of the Court making an order for a further distribution of property or an order under section 117 for the purpose of meeting her legal fees, she does not require an order for lump sum maintenance. In other words, if an order is made for her legal fees to be met by the husband, then it is unnecessary for her to proceed with her application for maintenance in order to adequately support herself.
In presenting her argument in this way the wife has failed to satisfy the Court that she is unable to support herself adequately and therefore she does not meet the gateway requirement set out in section 72 of the Act.
Further, in Hall and Hall[68] the High Court said:
A court determining an application for an interim order under s 74(1) cannot make such an order without finding, on the balance of probabilities on the evidence before it, that the threshold requirement in s 72(1) is met having regard to any relevant matter referred to in s 75(2).
[68] [2016] HCA 23 at [8].
As the High Court also noted, in Hall and Hall:
The wording of s 72(1), it has been noted, seems to imply that each party should attempt to support himself or herself where that is reasonable having regard to the matters referred to in s 75(2).[69]
[69] Ibid at [52].
In considering the threshold requirement set out in section 72(1), I note that the parties do not have children and, while the wife has been unemployed since being made redundant in February 2017, no evidence has been presented as to why it is that the wife has remained out of the workforce since that time. In particular there is no evidence as to the wife having applied for even part-time employment in that period. Accordingly, even ignoring the inconsistency in the wife’s contentions earlier referred to, the wife has failed to satisfy the Court that she is unable to support herself adequately.
Moreover, even if I had been satisfied that the wife had met the gateway requirement of section 72 of the Act, I would not have considered it “proper,” in terms of section 74(1) of the Act, to make an order for maintenance in addition to the lump sum amount that I have ordered by way of a further partial property distribution.
In that respect, section 75(2)(n) of the Act requires me to consider “the terms of any order made or proposed to be made under section 79 in relation to the property of the parties”.
When asked to identify the wife’s needs, counsel for the wife referred to the wife’s Financial Statement dated 22 February 2017. Specifically, reference was made to the difference between the wife’s total average weekly income of $500 per week and the amount of $892 per week. The difference, it was claimed, represented the wife’s needs.
As indicated, I will make an order for the husband to pay a lump sum amount of $44,922. Characterising that figure as being a lump sum required by the wife to adequately support herself, it represents an amount which is equivalent to $400 per week for 113 weeks. This is considerably longer than the required period of approximately twelve months identified by counsel for the wife as the period during which the wife would require the sum of $400 per week to meet her needs.
Accordingly, I dismiss the wife’s claim, expressed in the alternative, for the payment of a lump sum amount pursuant to sections 72 and 74 of the Act.
D. Injunctions
Submissions of the Wife
The wife submits that the Court should make the injunctions she has sought because the husband has engaged in conduct that is “destructive of the wealth of the parties”.[70]
[70] Transcript of proceedings dated 19 May 2017 at page 50.
The wife submitted that there is a risk of funds being held by the Montez Discretionary Trust being disbursed prior to final hearing such that it has the potential to impact upon orders that the wife is seeking at final hearing. In that respect the wife refers to the following distributions that have been made from the Trust:
·30 June 2013 distribution of $57,625 to the husband;
·30 June 2013 distribution of $24,638 to the husband’s mother;
·30 June 2013 distribution of $24,638 to the husband’s father;
·30 June 2014 distribution of $35,237 to the husband;
·30 June 2014 distribution of $37,538 to the husband’s mother;
·30 June 2014 distribution of $37,538 to the husband’s father;
·30 June 2015 distribution of the $128,776 and further distribution of $239,012 to the husband;
·30 June 2015 distribution of 50,000 and $104,368 to the husband’s mother;
·30 June 2015 distribution of 50,000 and $104,368 to the husband’s father;
·30 June 2016 distribution of $161,960 to the husband;
·30 June 2016 distribution of $65,845 to the husband’s mother; and
·30 June 2016 distribution of $65,845 to the husband’s father.
The wife submits that orders 13 and 14 that she is seeking to restrain the husband, as Trustee of the Montez Discretionary Trust, from distributing any of the proceeds of the sale of the units in the P Street development are necessary as result of that history of distributions that have been made from the Montez Discretionary Trust.
The wife submits that the restraints she has sought against J Pty Ltd are necessary because, if, at final hearing, she succeeds in obtaining orders for the shares which were transferred to Mr Gentili’s company restored to J Pty Ltd then J Pty Ltd would then be a Shareholder entitled to receive dividends from H Pty Ltd.[71]
[71] Ibid at page 20.
The wife submits that proposed order 21 is necessary in order to protect funds received from H Pty Ltd from being diverted to the husband and the husband’s parents through the Montez Discretionary Trust. It was not disputed that H Pty Ltd is the Project Manager that runs the project on the property owned by G Pty Ltd at P Street, Suburb Q.
The wife submits that order 21, insofar as it applies to the husband, would not adversely impact upon the business operations of H Pty Ltd as it would only apply to monies payable to the husband, any entities associated with him and any monies payable to the Montez Discretionary Trust.
It was submitted that the order would not adversely impact upon the business operations of H Pty Ltd which would continue to be able to pay bills associated with its trading operations.[72]
[72] Ibid at page 21.
It was submitted that order 22 is necessary because J Pty Ltd is an entity which is totally owned by the husband and he is the sole Director of the company. As justification for the restraint, the wife again refers to funds distributed to the husband and his parents through the Montez Discretionary Trust.
The wife submits that proposed order 33 is necessary to restrain the husband from transferring any shares that are held by him either personally or as trustee for the Montez Discretionary Trust in H Pty Ltd or J Pty Ltd without first giving 28 days’ notice to the wife.
Submissions of the Husband
The husband submitted that the circumstances do not warrant the making of the injunctive orders sought by the wife. In that respect it was submitted that:
·the wife does not point to any threat or assertion made by the husband that he would do anything to defeat her application;
·the husband is present in the jurisdiction;
·the husband has assets in the jurisdiction;
·the Court has the ability to trace and “unpick transactions in the event that it is suggested that there’s something that goes awry”.[73] It was further submitted that it was significant that the injunction sought by the wife is directed only to the husband’s involvement in the development at P Street, Suburb Q. That fact, it was submitted, raises a question regarding the wife’s motivation and, specifically, that the wife has made the applications in order to “irritate the husband”.[74]
[73] Ibid at page 39.
[74] Ibid at page 40.
Insofar as the wife expresses concern regarding the Montez Discretionary Trust selling its shares in H Pty Ltd in November 2016, it was submitted that the wife has not explained her delay in not seeking injunctive relief until 22 February 2017.
In any event, it was submitted, that irrespective of the wife’s concerns regarding distributions relating to the P Street development, there is more than sufficient equity to protect the wife’s ultimate claim. In support of that argument reference was made to the wife’s contentions set out in the draft balance sheet as proposed by the wife at page 46 of the wife’s affidavit sworn on 22 February 2017.
Consideration
When proceedings are before the Court, the Court has broad powers to grant injunctive relief including for the purpose of preserving the status quo, and/or otherwise regulating the conduct of the parties, pending final hearing.[75]
[75] See G and T (2004) FLC 93-176 at [53] – [54] and where it is “just or convenient to do so”: see Mullen & De Bry (2006) FLC 93-293 applying section 114(3).
Before an injunctive order is made, pursuant to section 114(3) of Act, the Court must be satisfied that it is “just or convenient” to grant such an injunction or make an interlocutory order.
In Kelleher & Anderson:[76]
[The applicant] for injunctive relief… bears the onus of establishing, on the evidence, a real risk of assets being disposed of and also that such disposal may cause [his or her] claim to be defeated or prejudiced. It would not be sufficient merely to show that there is a risk of disposal of assets, or the asset pool being diminished, without also establishing that there is a risk that the [party’s] claim may be defeated or prejudiced if the injunction is not granted.
[76] [2007] FamCA 137 at [195].
In considering the nature of the injunctive relief sought by the applicant, it is also important to be aware of the general principle that “equity intervenes to the minimum extent necessary to do justice”.[77]
[77] Giumelli v Giumelli (1999) 196 CLR 101 at [10] referred to in Norton & Locke [2013] FamCAFC 202 at [72].
In the context of family law proceedings, in Sieling and Sieling, the Full Court said:
The power to grant injunctions is, of course, a discretionary power, not to be exercised lightly. The Court must balance the hardship to each party of granting or refusing an order and frame its order in such a way to impose no further restriction than is necessary to achieve the protection of the applicant’s interest. It will not lightly interfere with the rights of an owner of property on the basis of a vague or uncertain claim.[78]
[78] (1979) FLC 90-627 at 78,265.
In Martiniello and Martiniello, it was suggested that a party should not be restrained from using their money for ordinary business purposes unless “it could be shown that there was a fear that [the party] would dissipate [the] funds”.[79]
[79] [1981] FamCA 21 at [31].
The wife’s proposed orders 13, 14 and 15 seek to restrain the husband in his capacity “as trustee of the Montez Discretionary Trust.” As so framed, those orders, as proposed by the wife, are a futility if it is the case that, as the husband contends, he is no longer the trustee of the Montez Discretionary Trust.[80]
[80] Affidavit of the Husband sworn 21 March 2017 at [74].
As noted, the wife carries the onus of establishing the factual basis of justifying the relief that she seeks. In the absence of evidence contradicting the husband’s assertion that he is not the trustee of the Montez Discretionary Trust I do not propose to make the orders 13, 14 and 15 as sought by the wife.
Insofar as it may be contended that it can be implied that the orders are intended to apply to the husband in his capacity as Director of J Pty Ltd or, alternatively, that the Montez Discretionary Trust is the “alter ego” of the husband, I would nonetheless have declined to make the orders because the wife has not established that the funds have been dissipated or disbursed from the Trust.
The husband contends that, insofar as the Financial Statements of the Montez Discretionary Trust record distributions to his parents, they are merely book entries and the actual funds have remained in the Trust. This is consistent with paragraph 48 of the wife’s affidavit sworn 21 April 2017. In that paragraph the wife states that she has inspected the bank statements in respect to the Montez Discretionary Trust and being ANZ account ending ***72, for the period 31 October 2014 to 29 January 2016 and of that “there are no entries in these bank statements to illustrate any payments to [Mr Montez’s] parents”.
Further, the focus of orders 13, 14 and 15 is upon funds received by the Montez Discretionary Trust from the P Street Development. The wife contends that the husband will be entitled to a one third share of a net profit of between $9,100,000 to $12,900,000, as a result of that development.[81] That is an amount of between $3,030,000 and $4,300,000 which the wife says will be payable to the husband. Even if that is the case and, it can be assumed for the purpose of argument, that the husband will not properly account for his share of any money he receives from the project, the wife has not established that “there is a risk that the [party’s] claim may be defeated or prejudiced if the injunction is not granted” in terms of the Full Court’s decision in Kelleher & Anderson.[82]
[81] Affidavit of the Wife sworn 22 February 2017 at [64.5].
[82] [2007] FamCA 137 at [195].
In that respect I note that the wife asserts that the value of the parties’ net assets are $10,969,609.[83] Any failure on the part of the husband to properly account for monies that he may receive from the P Street development can, on the basis of the wife’s contentions, be accommodated within that amount.
[83] Affidavit of the Wife sworn 22 February 2017 at annexure GS11.
Finally, the orders sought by the wife would require funds not falling within the permissible expenditure exemption to be paid into the Trust Account of the wife’s solicitor. There is no justification for such an order. The P Street development commenced well after the parties separated. The extent of the wife’s contribution to that project is understandably a significant issue in the proceedings. Even if I had determined that there were grounds for making a preservation order I would not have exercised my discretion to make the orders as sought by the wife as they go further than is reasonably necessary to protect her position at final hearing.
In that respect I note the husband has consented to an order to notify the wife when funds are received from the P Street development.
Orders 16 and 17, as proposed by the wife, seek orders against J Pty Ltd. It is accepted that the husband is the sole Shareholder and Director of that company and senior counsel for the husband indicated that he appeared on behalf of that company. Nevertheless, as a separate corporate entity, J Pty Ltd is a third party to the parties to the marriage and, in those circumstances, section 90AF of the Act applies. That section relevantly provides;
Section 90AF - Court may make an order or injunction under section 114 binding a third party
(1)In proceedings under section 114, the court may:
(a) make an order restraining a person from repossessing property of a party to a marriage; or
(b) grant an injunction restraining a person from commencing legal proceedings against a party to a marriage.
(2) In proceedings under section 114, the court may make any other order, or grant any other injunction that:
(a) directs a third party to do a thing in relation to the property of a party to the marriage; or
(b) alters the rights, liabilities or property interests of a third party in relation to the marriage.
(3) The court may only make an order or grant an injunction under subsection (1) or (2) if:
(a) the making of the order, or the granting of the injunction, is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage; and
(b) if the order or injunction concerns a debt of a party to the marriage--it is not foreseeable at the time that the order is made, or the injunction granted, that to make the order or grant the injunction would result in the debt not being paid in full; and
(c) the third party has been accorded procedural fairness in relation to the making of the order or injunction; and
(d) for an injunction or order under subsection 114(1)--the court is satisfied that, in all the circumstances, it is proper to make the order or grant the injunction; and
(e) for an injunction under subsection 114(3)--the court is satisfied that, in all the circumstances, it is just or convenient to grant the injunction; and
(f) the court is satisfied that the order or injunction takes into account the matters mentioned in subsection (4).
(4) The matters are as follows:
(a) the taxation effect (if any) of the order or injunction on the parties to the marriage;
(b) the taxation effect (if any) of the order or injunction on the third party;
(c) the social security effect (if any) of the order or injunction on the parties to the marriage;
(d) the third party's administrative costs in relation to the order or injunction;
(e) if the order or injunction concerns a debt of a party to the marriage--the capacity of a party to the marriage to repay the debt after the order is made or the injunction is granted;
Note: See paragraph (3)(b) for requirements for making the order or granting the injunction in these circumstances.
Example: The capacity of a party to the marriage to repay the debt would be affected by that party's ability to repay the debt without undue hardship.
(f) the economic, legal or other capacity of the third party to comply with the order or injunction;
Example: The legal capacity of the third party to comply with the order or injunction could be affected by the terms of a trust deed. However, after taking the third party's legal capacity into account, the court may make the order or grant the injunction despite the terms of the trust deed. If the court does so, the order or injunction will have effect despite those terms (see section 90AC).
(g) if, as a result of the third party being accorded procedural fairness in relation to the making of the order or the granting of the injunction, the third party raises any other matters--those matters;
Note: See paragraph (3)(c) for the requirement to accord procedural fairness to the third party.
(h) any other matter that the court considers relevant (emphasis added).
The Court has not been addressed in respect to section 90AF. This includes, for instance, the absence of information that enables the Court to consider the potential taxation consequences and impact upon the husband’s and J’s ability to meet their debts.
In those circumstances I do not propose making orders 16 and 17 as proposed by the wife.
Further, insofar as it may be contended that the orders are intended to apply to the husband in his capacity as Director of J Pty Ltd, for the reasons that I have provided, in respect to orders 13, 14 and 15, I would have declined to make orders 16 and 17.
Orders 21 and 22 as proposed by the wife seek orders against the husband in his capacity as a Director of H Pty Ltd to cause to be paid into the Trust Account of the wife’s solicitors on behalf of each of H Pty Ltd, the Montez Discretionary Trust, and J Pty Ltd:
·any monies payable whether by way of loan repayment or otherwise to the husband and/or any entities associated with the husband; and
·any monies payable to H Pty Ltd, the Montez Discretionary Trust, or J Pty Ltd, whether by way of loan repayment or dividends or otherwise; and
·monies payable pursuant to orders 9.2, 13.2 and 16.2 as proposed by the wife.
It is proposed, in turn, that the wife’s legal representatives would then pay those monies into accounts known as the Power Money Account 1, Power Money Account 2 and Power Money Account 3.
The evidence in respect to potential revenue and profits to be received and, in turn, distributed by H Pty Ltd related to its position as the Project Manager of the P Street development. In that respect I have previously noted that, insofar as the wife contends that the husband will be entitled to a one third share of a net profit of between $3,030,000 and $4,300,000 from the project, any failure on the part of the husband to properly account for monies that he may receive from the P Street development can, on the basis of the wife’s contentions, be accommodated within the net assets of the parties.
Further, even if I had been satisfied that there was a basis for the restraints as sought by the wife, for reasons previously discussed, the requirement for funds not falling within the identified category of acceptable expenditure, to be placed in the Power Money Accounts goes further than is reasonably necessary to protect the wife’s position at final hearing. In those circumstances I would have exercised my discretion by declining to make the orders as sought by the wife.
Accordingly, for these reasons I do not propose making orders 20, 21 or 22 as proposed by the wife.
Proposed order 33 seeks to restrain the husband from transferring any shares held by him either personally or as trustee for the Montez Discretionary Trust in H Pty Ltd or J Pty Ltd without first giving 28 days’ notice in writing to the wife. It was submitted by counsel for the wife that “warrant for making such an order is the apprehension that arises from the disposal of funds” to the [husband’s] parents.[84]
[84] Transcript of proceedings dated 19 May 2017 page 22.
For reasons previously provided, I have found that the creation of the book entries indicating distributions to the husband’s parents in the Financial Statements of the Montez Discretionary Trust does not justify a conclusion that the funds have been disbursed or dissipated by the husband such that they would defeat or prejudice the wife’s claim at final hearing.
Further, Orders 31 and 32 as proposed by the wife are predicated on the husband having a direct and/or beneficial interest in the shares that he had held in H Pty Ltd either personally or through J Pty Ltd. As a transfer of those shares has already occurred, order 33 as proposed by the wife, is a futility unless and until orders are made in accordance with proposed orders 31 and 32. As noted, the wife intends to press for those orders at the final hearing of the matter.
Accordingly, in these interim proceedings I will not make order 33 as proposed by the wife.
E. Further disclosure
Submissions of the wife
In support of her argument as to why it is necessary for there to be disclosure orders, the wife refers to her affidavit evidence regarding complaints she has made regarding the husband’s nondisclosure.[85]
[85] Ibid.
Submissions of the husband
The husband submits that he has complied with his obligations of disclosure under the Act and will continue to do so as and when documents become available.
Consideration
The issue of disclosure received little attention in the submissions of the parties who appear to have substantially agreed in respect to orders for further disclosure insofar as that disclosure may not have already occurred.
In any event I note that the Rules provide mechanisms for resolving any remaining disagreement in respect to disclosure.
Accordingly, insofar as there may remain outstanding issues in respect to disclosure I will make orders consistent with the operation of the Rules.
F. Expedition
The parties have not as yet attended a conciliation conference or mediation or considered utilising the provisions of the Act to facilitate a private arbitration. In those circumstances it is not appropriate for these parties to be given greater priority than other matters that are before the Court and an order for expedition will not be made.
I certify that the preceding two hundred and twenty (220) paragraphs are a true copy of the reasons for judgment of the Honourable Justice McClelland delivered on 11 August 2017.
Associate:
Date: 11 August 2017
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