Simmons and Simmons and Ors (No. 2)

[2009] FamCA 340

FAMILY COURT OF AUSTRALIA

SIMMONS & SIMMONS AND ORS (NO. 2) [2009] FamCA 340

FAMILY LAW – PROPERTY – Partial distribution of property to enable party to pay legal fees for imminent final hearing – Dilemma where pool of assets for division is uncertain; conservative approach should be taken – Capacity of the trial judge to be able to make an adjustment from remaining assets of the parties

Family Law Act 1975 (Cth)

Zschokke (1996) FLC 92-693

APPLICANT: Mr Simmons

RESPONDENT: Ms Simmons

SECOND RESPONDENT: R Pty Ltd

THIRD RESPONDENT: L Pty Ltd

FILE NUMBER: MLF 1269 of 2005

DATE DELIVERED: 29 April 2009

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: THE HONOURABLE JUSTICE CRONIN

HEARING DATE: 29 April 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: MR MELILLI

SOLICITOR FOR THE APPLICANT: KENNA TEASDALE LAWYERS

COUNSEL FOR THE RESPONDENT: MR NORTH SC WITH MR SWEENEY

SOLICITOR FOR THE RESPONDENT: LANDER & ROGERS

COUNSEL FOR THE INTERVENOR: MS MACMILLAN

SOLICITOR FOR THE INTERVENOR: KENNEDY WISEWOULDS

Orders

1. That the application in a case of the husband filed 23 April 2009 and the response to that application by the wife filed 29 April 2009 be dismissed.

2. That the costs of each party of this application be reserved.

3. That the wife have leave to issue a subpoena to produce documents to the husband’s stepmother such subpoena be returnable at 10 am on 11 May 2009.

4. That the wife have leave to file an amended application for final orders in the form attached to the response to an application in a case filed 29 April 2009.

5. That the matter remain listed as the first case in the list to commence on 11 May 2009.

IT IS NOTED that publication of this judgment under the pseudonym Simmons & Simmons is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLF 1269  of 2005

MR SIMMONS

Applicant

And

MS SIMMONS 

Respondent

R PTY LTD
Second Respondent

L PTY LTD
Third Respondent

REASONS FOR JUDGMENT

1. By an urgent application in a case filed 23 April 2009, the husband seeks the release of $45,000 from a bank account containing $100,000 to pay his legal practitioners so that they can be paid for professional services necessary for a final hearing only two weeks away. He proposed that the sum be treated as a partial settlement of property.

2. The funds in the account total just under $100,000 and in July 2008, by consent of the parties, Watt J restrained the husband from accessing them. It is that order that the husband seeks to vary.

3. In her responding document filed by leave on 29 April 2009, the wife objects to the release of the funds on the basis that it might put her recovery of her entitlement in jeopardy.

4. This is a complex property case involving third parties who control a trust settlement over which the husband has no control. The husband said that he could not get access to funds from the third parties for the purpose now before the court.

5. There is another issue in the wife’s responding material in which she seeks an order that she have leave to issue a subpoena to the husband’s step-mother concerning the production of documents about her will(s). Objection was taken to that application but I propose to permit the subpoena to be issued. It will be returnable on the first day of the final hearing. It seemed to be agreed that the step-mother is not at all well and may not be conscious of what document is given to her. Whether there will be any objection by her or any other person on the grounds of relevance or something else is a matter that I will deal with on the return of the subpoena.

6. In respect of the litigation funding order, I have read the affidavit of the husband and received the submissions of his counsel.

7. I have read the affidavit of the wife’s legal practitioner and heard the submissions of her senior counsel. In addition, my attention was drawn to a sworn but as yet unfiled affidavit by the wife’s valuer relating to the interests of the husband in the trust settlement. The material about the valuation of the interest is a live and very much contested issue in the final hearing. Unfortunately, in the current application it has a significant impact.

8. The husband said that he had no means to pay his lawyers other than by using his credit card at between 19% and 21% interest. The preparation for trial has been estimated to require about $118,000.

9. In December 2008, a sum of $100,000 was received by the husband from which he repaid credits cards, a debt to his brother and some legal fees.

10. The husband pointed to the fact that there was equity of at least $550,000 in the home which is the name of the wife and some further funds of about $40,000 in an investment account.

11. Mr Melilli on behalf of the husband expanded on his client’s affidavit material. His submissions can be encapsulated in the following:

    (a)unlike the wife who had the borrowing capacity for her legal fees through a litigation lending company, the husband had no other means of funding the case;

    (b)the husband was already borrowing from his brother again;

    (c)the pool of assets without disputed “add backs” showed an equity of $1,022,000 before superannuation interests were considered and to deny the husband any funds meant that the Court was acceding to the wife’s case in which she was seeking 50% in the form of all of the current assets and more and that was unfair.

12. The husband disputed several of the facts in the affidavit of the wife’s legal practitioner. One of them was about an “add back” of $440,000.  The wife asserts the husband had used the money received by him for his own purposes.  He said he used the money to pay for expenses associated with the maintenance of the home, car and various of the outgoings of the wife as well as his own.

13. The husband’s current financial position according to the material is that he receives a base amount of $130,000 per annum. Historically, he has also received bonus payments but it is said that there will be no such bonus in this financial year.

14. The wife’s evidence as portrayed by her legal practitioner was that the husband had “sufficient” income to meet his own commitments and those of the wife and thus, the “add back” issue would be put on the basis that the wife should not be paying herself those expenses from joint capital.

15. The wife’s counsel then turned to the most contentious issue which was the F SETTLEMENT.  She argued that if she was unsuccessful in adding back the Settlement trust entitlements as an asset, she would seek “substantially” in excess of 50% of the asset pool to which I have earlier referred.

16. As such, the concern of the wife was that a distribution may result in there being insufficient cash to satisfy an order.

17. Mr North SC on behalf of the wife handed me an unfiled copy of a valuer’s report into the trust settlement interest of the husband. It was put as low as $1.846mil and $2.939 mil depending upon how the stream was considered or the minority interest of the husband was viewed. That evidence is substantially disputed and a significantly different amount from that proposed by the husband. The husband’s valuation would make some, but not much, impact upon the pool of assets.

18. Mr North made three points:

    (a)The third parties were denying that the provisions of Part VIIIAA enabled the Court to make orders that they pay money as envisaged by the wife;

    (b)if the wife’s entitlement was 50% of the pool which included something like the $1.846 mil, then she was entitled to receive more than the non-settlement assets;

    (c)if I was to allow the husband to take the $45,000 now, the wife could not be guaranteed a payment into the pool from the husband’s income stream because the third party was arguing that they could not be forced to make the payment in the future.

19. Mr North pointed to the fact that the litigation funding commitment of the wife had come about because she could not obtain any capital from the husband and the interest component on her borrowing was large.

20. As this is an application for a partial distribution of property, the provisions of s 79 of the Family Law Act 1975 (Cth) (“the Act”) apply. Neither party argued otherwise. That is, where property settlement proceedings under s 79 are pending, a court may require a party who controls assets to provide the other funds to conduct his or her case. In this case, the husband says that although the funds are in his name, they are controlled by the wife by virtue of the injunction.

21. The applicable principles were set out by the Full Court in Zschokke (1996) FLC 92-693 where their Honours highlighted again the decision in Harris and Harris (1993) FLC 92-378. There the Full Court said that:

    (i)The exercise of the power should be confined to cases where the circumstances presented at that time are compelling;

    (ii)It is an exercise of the s. 79 power. Consequently it must be performed within those parameters; and

    (iii)The power must be exercised conservatively and the Judge must be satisfied that the remaining property will be adequate to meet the legitimate expectations of both parties at the final hearing.

22. As this is an exercise of the s 79 power, regard must be had to the requirement that the orders be just and equitable. That in turn means briefly examining the facts to be satisfied that the applicant for the partial distribution is likely to receive sufficient in the final orders to cover the advance.

23. The parties’ respective positions are clouded here by the inability to agree whether there is an entitlement of the husband in the trust settlement let alone its value. There does not seem to be a significant dispute about contribution but there is a distinct difference about their views concerning the s 75(2) factors. The difficult issue is the question of whether the husband has an entitlement that can be valued and put in the pool for division but even then whether that sum can be attached by an order in some way. If it cannot be said to be part of the “pool” then despite the wife’s proposal that she would seek more than 50%, the issue might be much easier except for the dispute about whether the husband’s use of the capital sum received from his loan account should be added back for division and ultimately attributed to his share. If the husband has no quantifiable interest in the Settlement and there is no add-back of the capital sum, he should be entitled to the advance now from what will clearly be his entitlement.

24. The only compelling feature of the case is that because of the closeness of the commencement of the final hearing, the husband may be unable to afford his lawyers. Whilst that may be difficult for him and probably the Court, legal representation is a privilege not a right. I could not find that to be a compelling reason here.

25. As an exercise of the s 79 power, I am satisfied that there is property for division and the parties have a dispute about the second and third steps in the process. The approach to those steps however and in particular the assessment and weight given to each, depends almost entirely upon whether there is a quantifiable entitlement in the Settlement and what should be done with the “add back” claim. In essence therefore, it is impossible to be confident about how each step would be so assessed.

26. Finally however, because of the matters to which I have just referred, I could not be satisfied that if I made the order sought, modest though it may be, that the remaining property will be adequate to meet the legitimate expectations of the wife if not both parties at the final hearing.

27. Accordingly, I have to dismiss the husband’s application.

I certify that the preceding Twenty Seven (27) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate: 

Date:  30 April 2009