SUMMERFIELD & SUMMERFIELD

[2015] FamCA 368

FAMILY COURT OF AUSTRALIA

SUMMERFIELD & SUMMERFIELD [2015] FamCA 368

FAMILY LAW – PROPERTY – INTERIM – Where the wife seeks an interim litigation costs funding order – where the wife seeks an order that the husband pay an additional sum to meet ongoing expenses for their daughter – order for interim litigation costs is made – where the application for an additional sum should properly be made under the Child Support (Assessment) Act 1989 (Cth) – application for expenses for the child dismissed.

Family Law Act 1975 (Cth)

APPLICANT: Ms Summerfield

RESPONDENT: Mr Summerfield

FILE NUMBER: BRC 7225 of 2009

DATE DELIVERED: 19 May 2015

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Forrest J

HEARING DATE: 11 May 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr George of Counsel

SOLICITOR FOR THE APPLICANT: Parker Family Law

COUNSEL FOR THE RESPONDENT: Mr Page of Queen's Counsel

Orders

1. That by way of further interim litigation costs funding, pursuant to s 117(2) of the Family Law Act 1975 (Cth), the husband pay or cause to be paid to the trust account of the solicitors for the wife, Parker Family Law, the sum of fifty thousand dollars ($50,000).

2. That the payment required to be made by paragraph 1 hereof be made within twenty one (21) days of the date hereof.

3. That the solicitors for the wife shall only disburse that sum of $50,000, when received by them, in payment of any outstanding amounts owed by the wife to them for legal costs and outlays already incurred in these proceedings BRC7225 of 2009 and in payment of any further liability incurred by the wife to them for legal costs and outlays in the same proceedings as and when such liability is incurred.

4. That the solicitors for the wife shall provide to the husband, as requested by him from time to time, written details of the disbursement of any of the money received by them pursuant to these orders.

5. That the characterisation or treatment of the money received into the trust account of the wife’s solicitors pursuant to these orders is a matter reserved to the Trial Judge. 

6. That the wife’s further application for an order that the husband pay to the trust account of the solicitors for the wife, Parker Family Law, the sum of $6,916.75 is dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Summerfield & Summerfield has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 7225 of 2009

Ms Summerfield

Applicant

And

Mr Summerfield

Respondent

REASONS FOR JUDGMENT

1. The Applicant wife and the Respondent husband are parties to property adjustment proceedings that remain pending in this Court.  On Monday, 11 May 2015, I heard the wife’s application for an interim litigation costs funding order in the judicial duty list. By Application in a Case filed 23 March 2015, the wife seeks a number of orders, but specifically her application for the husband to pay $50,000 to the trust account of her solicitors as a contribution to her costs of the property adjustment orders proceedings was listed for hearing by me that day. Also listed for hearing was her application for the husband to pay $6,916.75 to her solicitors and her application for the characterisation of the payments of $50,000 and $6,916.75 to be determined by the trial judge.

2. At the hearing, the wife was represented by Mr George of counsel and the Husband was represented by Queens Counsel, Mr Page. The husband opposed the wife’s application.

Some Background

1. The husband commenced proceedings for property adjustment orders in the Federal Magistrates Court, as it then was, in December 2009. The matter was transferred to this Court at some point. It has already been listed for trial in this Court on a number of occasions but adjourned for various reasons.

2. The property of the parties or either of them includes their former matrimonial home said, by the wife, to have an agreed value of $450,000. The wife says they also have furniture and household items valued at $5,000 and they also have superannuation interests of around $100,000 each. However, the most significant interest in property that creates complexity in the case is the parties’ interests in the company B Pty Ltd (“B Pty Ltd”).

3. B Pty Ltd is the corporate trustee of the Summerfield Family Trust. The husband is the sole director of B Pty Ltd. The company, as trustee for that family trust, holds a minority parcel of shares in a company, C Pty Ltd (“C Pty Ltd”). C Pty Ltd operates a business in which the husband has been involved.

4. At some point in the past in these proceedings, an accountant retained by the wife valued the family trust’s shareholding in C Pty Ltd to be worth something in excess of $2,000,000, whilst an accountant retained by the husband valued that shareholding at something in excess of $500,000. Senior counsel for the husband told the Court the difference was attributable to each accountant’s opinion as to the discounting of the value of the shares having regard to the fact that they form a minority ownership parcel in the company.

5. In late 2013, B Pty Ltd commenced proceedings against C Pty Ltd and the other shareholders in C Pty Ltd seeking relief from oppression pursuant to the Corporations Act 2001 (Cth).C Pty Ltd and some of the other respondents to that action have brought a counter claim against B Pty Ltd and the husband. Those proceedings are pending in this Court in conjunction with the property adjustment proceedings between the husband and the wife. They are yet to be listed for hearing. Ultimately, the outcome of those proceedings will determine the value of B Pty Ltd’s shareholding in C Pty Ltd.

6. On 26 June 2013, an order was made by a Registrar with the consent of the husband and the wife for the husband to pay or cause to be paid to the wife the sum of $85,000 by way of interim property settlement.

7. On 16 October 2013, Kent J ordered that the husband pay or cause to be paid to the wife’s solicitors the sum of $75,000 by way of partial property settlement and that amount, or such proportion of it as was necessary, was to be utilised by the wife solely in respect of her legal costs and outlays of these proceedings.

8. On 16 December 2013, by consent, Kent J made a further order discharging a paragraph of the earlier October order and made another order permitting the wife to use some of the $75,000 to pay other expenses associated with the parties’ daughter’s education and orthodontic treatment with the balance to be used to pay legal costs and outlays in the proceedings in this Court.

The Evidence 

1. In November 2014, the wife requested the husband pay her a further $50,000 for ongoing legal costs and outlays in these proceedings as well as an additional sum of $6,916.75 to meet ongoing expenses for their daughter. The husband responded in writing informing that any payments were subject to advice from accountants in terms of the current financial position and taxation liability of B Pty Ltd and the family trust. He advised that he would be able to consider the wife’s request upon receipt of final financial statements and tax assessments and further accounting advice in relation to B Pty Ltd’s financial position. The wife’s solicitors wrote back in early December 2014 and told the husband that if he did not make the payment previously requested that an application would be made to this Court for the payment sought.

2. The wife filed the application on 23 March 2015 along with a supporting affidavit. She deposed to owing her solicitors $9,948.81 and having been advised by her solicitors that a further sum of at least $40,000 would be required to meet her ongoing legal fees and outlays in the matter, including $20,000 for barrister’s fees to the finalisation of the matter. She deposed that her solicitor had informed her that the firm he was employed by cannot defer payment of its fees until the conclusion of the matter. She deposed to having no capacity to meet her ongoing legal expenses.

3. An affidavit of the wife’s solicitor was filed by leave at the hearing. He deposed to being informed by counsel that his fees for this application and to represent the wife at the trial, including preparation, would be $19,635 including GST if the trial was to be a one day trial.

4. The solicitor deposed that his firm’s further costs would be $20,000 including GST, on the basis of a one day trial.

5. The husband deposed to previously having paid or caused to be paid the total of $160,000 to the wife by way of interim part property settlement. He said that $40,000 of that, paid in October 2013, was “calculated to be required by Ms Summerfield to finalise the matter to trial” and that he is now not aware of any requirement compelling the wife to expend further money in the proceedings since October 2013. That does not accord with her solicitor’s current evidence.

6. The husband also deposed that B Pty Ltd was also a vehicle by which he provided management services to C Pty Ltd and as it no longer provides those services to C Pty Ltd and is not receiving dividends from C Pty Ltd it has no income from these sources.

7. He deposed that B Pty Ltd now has significant legal costs to bear in order to finalise the Corporations Act proceedings. He said as at 31 April 2015 it had incurred legal costs of $139,116.25 in those proceedings. The husband said:

   The Trustee for the [Summerfield] Family Trust cannot resolve to pay, or cause to be paid further funds to [Ms Summerfield] in respect to her legal costs and outlays in these proceedings until such time as the outcome of the corporations act (sic) and the counterclaim is understood.

8. The husband also deposed to paying child support of $753.42 per month.

9. The husband further deposed to having disclosed to the wife financial statements and tax returns for B Pty Ltd, the Summerfield Family Trust and himself for the 2013 financial year in March this year soon after they were completed. He deposed that he has not provided the returns for the 2014 financial year yet as their finalisation is dependent upon him obtaining disclosure of documents from C Pty Ltd and the other shareholders of C Pty Ltd and that is the subject of a further application. He deposed that accounts for the 2014 financial year remain interim accounts until that disclosure is provided.

10. Counsel for the wife, during the hearing of the application, read an affidavit of an accountant, Mr D sworn and filed on 15 October 2013. In that affidavit, Mr D deposed to identifying that as at 30 June 2013, B Pty Ltd had a bank account with Suncorp Bank that had a balance of $667,162 and that at that same date the family trust “held approximately a further $226,000”.  There was no further detail given in respect of the nature of what was “held” that was said to be worth that much.

The submissions of the parties

1. Counsel for the wife told the Court that the wife was relying on the Court’s power pursuant to s 117(2) of the Family Law Act 1975 (Cth) to make the order sought for the payment of the $50,000. There was no submission from senior counsel for the husband that such an order could not be made under that section. That position is understandable having regard to authority.

2. The Court has a discretion to make an order as to costs as it considers just if it is of the opinion that there are circumstances that justify it in doing so. In considering what, if any, order should be made the matters set out in s 117(2A) must, where relevant, be considered.

3. Counsel for the wife submitted that the circumstances do justify the Court in making the order sought. He submitted that the justification for the order lies in the fact that without any further funds the wife’s ability to prosecute her property settlement claim in this Court will be compromised. On the unchallenged evidence before me, I take it that refers to the fact that she is unlikely to continue to be represented by her current solicitors, who have represented her for some time, and counsel, at the trial of the matter due to her financial inability, on her own, to meet their costs as incurred. I accept that is a relevant matter for me to consider in the exercise of the discretion.

4. Counsel for the wife also told the Court that B Pty Ltd seeks $2,000,000 in the oppression claim and, whilst he conceded that it might be wishful thinking, he told the Court it is hoped the claim is settled. The provision of that information to the Court was not objected to by senior counsel for the husband, who went on to tell the Court that it was agreed that if the oppression action succeeds there will be no discount applied to the shareholding. I understood that to mean that the opinion of the wife’s accountant as to value would then more likely be the correct one.

5. Counsel for the wife further submitted that the husband does not depose to not having money to pay the wife the amount sought by her and he referred to the evidence of Mr D about the money the company had as at 30 June 2013 as showing what the trust had available to it just under two years ago. Counsel for the wife also submitted that in the absence of disclosure by the husband as to his current financial circumstances and that of B Pty Ltd and the family trust that the Court can act “robustly” in the exercise of its discretion in this matter and with regard to the fact that the family trust had $893,000 available to it at 30 June 2013, and that two previous consent orders totalling $160,000 had been paid to the wife, an order for payment of a further $50,000 would be justified and just.

6. Senior counsel for the husband submitted that consideration must be given in the circumstances to the fact that there is what he described as “a substantial counterclaim against B Pty Ltd for a large amount of money” and to the possibility that it might succeed. That is undoubtedly correct. It is something to consider. The Court was further told that the counterclaim is about the conduct of the husband through B Pty Ltd. However, whilst the Court was told about the financial consequence of success in the oppression action, there was no evidence before the Court, nor was the Court actually informed as to the financial consequence of the counterclaim being successful. In fact, when senior counsel was asked how much the counterclaim was for, he told the Court “they have not specified a figure”.

7. Of course, as I have noted already, the husband deposed to B Pty Ltd having “incurred legal costs of $139,116.25” in the proceedings to the end of April this year. However, he did not give evidence as to whether those costs have been paid, where they might have been paid from or where they might yet be paid from. He did not say that they were able to be paid or whether they were not able to be paid. Counsel for the wife was correct in pointing out that the husband did not say anything about not having any money that he could access, either of his own or through the family trust. As such, I do not consider it is unreasonable to infer that the family trust has been able to meet its legal costs of $139,116 from its reserves. In addition, although senior counsel for the husband informed the Court that he was acting for the husband on a “direct access” brief, there was no evidence that the husband was not meeting his own legal expenses as well.

8. At the end of his submissions, senior counsel for the husband said that an order that the husband pay the wife $50,000 “cannot be made and there is none to be paid”. With respect though, having regard to what I have just discussed in the previous paragraph, that submission was simply unsupported by evidence that was before me. 

9. The husband’s principal argument in opposition to the wife’s case, is, in my view, seemingly based in his evidence that the family trust cannot resolve to pay, or cause to be paid, any further funds to the wife until such time as the outcome of the Corporations Act proceedings is understood.

10. I consider there would be some merit in that argument if there was evidence before me that the counterclaim, if successful, would leave the husband and the family trust with no assets to be considered as between the husband and the wife in their property adjustment proceedings, but, as I have already observed, there was no such evidence before me.

11. I am left satisfied that the wife has an inability to meet her litigation costs, that the husband has an apparent ability to meet his own litigation costs and that the trust, apparently controlled by the husband, has an apparent capacity to meet its litigation costs. I am left satisfied, on the evidence before me, that the husband is in a position of relative financial strength as compared to the wife.

12. I do not consider that it is fatal to the application for an applicant for an interim litigation costs funding order, who is relying on s 117(2) as the source of the power to make the order sought, not to be able to actually point to a certain fund of cash from which the money can be paid. When a respondent who has otherwise demonstrated that he is in a position of relative financial strength compared to the applicant does not put evidence before the Court of his own financial circumstances, including as to his own current assets and liabilities, and as to the financial circumstances of the family trust he apparently controls, including as to its assets and actual and contingent liabilities, in response to such an application, that the Court is left with some uncertainty about his actual position remains just one of the matters to be considered in the discretionary exercise and is not itself determinative.

13. Similarly, that there is uncertainty about the outcome of the pending property adjustment proceedings as between the parties and, therefore, as to whether payment of any amount ordered to be paid to the wife will be covered by what she is likely to receive by way of property adjustment at the end of the proceedings, or is able to be repaid if ordered, though relevant, is not singularly determinative against the application, particularly where s 117(2) is the source of power for the order.

14. Ultimately, I am satisfied that the circumstances in this case, as outlined, justify an interim litigation costs funding order to be made. I will make the orders set out at the commencement of these reasons for judgment. I am satisfied that they are just, in that they will allow the wife to continue to be represented in the proceedings through to the trial and because I will restrict their use solely to legal fees and outlays already incurred and yet to be incurred in these proceedings. That the characterisation or treatment of the receipt of the amount is reserved to the trial judge also contributes to my satisfaction that they are just in the circumstances.

What of the wife’s other application?

1. Little was said about the wife’s application for the husband to pay an additional $6,916.75 to the wife’s solicitors’ trust account.

2. The evidence about it was limited to the letter sent in November last year in which payment of the sum of $6,916.75 to meet ongoing expenses for their daughter was requested.

3. That being the only evidence, I must dismiss the application in my view. Such an order that is sought is a child maintenance order. Section 66E prohibits the Court from making a child maintenance order in relation to a child if an application could properly be made, at this time, by the wife under the Child Support (Assessment) Act 1989 (Cth) for the husband to be assessed in respect of the costs of the child.

4. The father deposed to paying monthly child support. I am satisfied that the prohibition applies and that the Court cannot make the order sought.

I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 19 May 2015.

Associate:

Date:  19 May 2015