The Estate of Salmon and Salmon

[2017] FamCA 541

FAMILY COURT OF AUSTRALIA

THE ESTATE OF SALMON & SALMON [2017] FamCA 541

FAMILY LAW – PRACTICE AND PROCEDURE – Joinder of parties – disclosure – valuation and payment of superannuation

FAMILY LAW – LITIGATION FUNDING – Where the Applicants seek an order for litigation funding – Where an expert report about the parties’ financial affairs has already been completed and the parties agree about the preparation of a further report and the manner in which this will be funded – Whether the Applicants lack capacity to meet the Estate’s litigation costs at first instance – Whether the Estate will be able to meet some of the litigation costs

Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)
Fair Work Act 2009 (Cth)

Bing & Bing (2007) FLC 93-218
Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578
Strahan & Strahan (2011) FLC 93-466
Zschokke & Zschokke (1996) FLC 92-693

APPLICANTS: Mr Simpson and Ms Simpson as Executors of the Estate of Ms Salmon

RESPONDENT: Mr Salmon

FILE NUMBER: BRC 10433 of 2015

DATE DELIVERED: 28 July 2017

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Hogan J

HEARING DATE: 23 January 2017

REPRESENTATION

COUNSEL FOR THE APPLICANTS: Ms Black

SOLICITOR FOR THE APPLICANTS: Hartley Healy

COUNSEL FOR THE RESPONDENT: Mr Page QC with Ms McLennan of Counsel

SOLICITOR FOR THE RESPONDENT: Williamson & Associates

Orders

IT IS ORDERED THAT

1. B Pty Ltd (ACN …) be joined as the Second Respondent to these proceedings.

2. Mr C Salmon, Ms D Salmon and Mr E Salmon as trustees of the B Pty Ltd Superannuation Fund be joined as the Third Respondent to these proceedings

IT IS ORDERED BY CONSENT BY WAY OF INTERIM ORDER THAT

1. Pursuant to Rule 15.45 of the Family Law Rules 2004, Mr F of F Accountants (or any other expert as agreed to in writing by the parties) be appointed the joint expert in this matter to prepare a report in relation to the following:

   (a)the superannuation entitlements that Ms Salmon was entitled to be paid during her employment with B Pty Ltd based on her gross salary or wages as evidenced in her income tax returns; and

   (b)the leave entitlements that Ms Salmon was entitled to be paid during her employment with B Pty Ltd; and

   (c)the death benefit that the Estate of Ms Salmon would have received had she held a superannuation account into which superannuation was to be paid by B Pty Ltd; and

   (d)any interest that would have accrued on these monies from when they were payable.

2. Within 14 days of the date of this Order, the parties do all things and acts necessary to forward to Mr F a joint letter of instructions to value those matters referred to in Order (3) above.

3. In the event the Respondents’ solicitors do not sign the joint letter directed to Mr F prepared by the Applicants’ solicitors within seven (7) days of receiving the same from the Applicants’ solicitors, the Applicants’ solicitors are at liberty to unilaterally sign and send the letter to Mr F.

4. All parties comply with all reasonable directions of Mr F so as to facilitate the completion of his report.

5. The costs associated with the preparation of the report referred to in Order (3) above shall be paid by B Pty Ltd.

6. The Second and Third Respondents comply with the duty of disclosure and, in particular, provide copies of any relevant documents requested by the Applicants’ solicitors within 14 days of such request and, in particular, provide the following documents to the Applicants’ solicitors within 28 days of the date of this Order:

   (a)B Pty Ltd Financial Statements for the financial years ended 2008, 2009, 2012 and 2016 (if any); and

   (b)B Pty Ltd general ledger for the period 1 July 2015 to the date of this Order; and

   (c)B Pty Ltd bank statements for the period from 1 July 2014 to the date of this Order; and

   (d)B Pty Ltd Superannuation Fund Financial Statement for the financial year ended 30 June 2016; and

   (e)B Pty Ltd Superannuation Fund General Ledger for the period 1 July 2015 to the date of this Order; and

   (f)The Salmon Unit Trust Financial Statements for the financial year ended 30 June 2016; and

   (g)The Salmon Unit Trust tax return for the financial year ended 30 June 2016; and

   (h)The Salmon Unit Trust General Ledger for the period 1 July 2015 to the date of this Order; and

   (i)the Financial Statements of the Salmon Family Trust for the 2008 to 2011 financial years.

AND IT IS FURTHER ORDERED THAT

1. Within fourteen (14) days of this order, B Pty Ltd pay the amount of $87,691.50 to the Estate of Ms Salmon in part payment of the late Ms Salmon’s unpaid superannuation entitlement.

AND IT IS FURTHER ORDERED THAT

1. Clauses 12 and 17 of the Application in a Case filed 22 November 2016 are dismissed.

2. Each party’s costs of and incidental to the Application in a Case filed 22 November 2016 are reserved to the trial judge.

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 The Estate of Salmon & Salmon 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 BRISBANE

FILE NUMBER: BRC 10433 of 2015

Mr Simpson and Ms Simpson as Executors of the Estate of Ms Salmon

Applicants

And

Mr Salmon

Respondent

REASONS FOR JUDGMENT

1. By Application in a Case filed 22 November 2016[1], the Applicants seek an order:

   [1]At paragraphs 1-3 and 10-17 which were listed for hearing by Order made by Senior Registrar Spink on 20 December 2016.

   a)that B Pty Ltd and Mr C Salmon, Ms D Salmon and Mr E Salmon in their capacity as Trustees of the B Pty Ltd Superannuation Fund be joined to the proceedings; and

   b)that the Respondent husband and various entities related to or under his control (and if joined, the joint parties) make disclosure; and

   c)for the payment to the Estate of $87,691.50 which sum is described as being part of the unpaid superannuation entitlements owing to the late Ms Salmon (and, now, to her Estate); and

   d)for the appointment of Mr F as a single expert witness to assess and report on:

   i)the quantum of the superannuation to which Ms Salmon was entitled to be paid during her employment by B Pty Ltd, given the information contained in her tax returns; and

   ii)the quantum of the leave entitlements which Ms Salmon was entitled to be paid during her employment by B Pty Ltd; and

   iii)the quantum of the death benefit the Estate would have received if Ms Salmon had had a superannuation account into which superannuation had been paid by B Pty Ltd; and

   iv)the quantum of any interest that relates to, and would have accrued on, the funds referred to above,

   e)that, within 14 days of the provision by Mr F of the report referred to above, B Pty Ltd pay the amount calculated by him (less any amount already paid) to the Estate; and

   f)in summary – that the parties engage in a process of providing joint instructions to Mr F and, if there is no agreement about this, the Applicants be solely at liberty to provide instructions to him; and that the parties are compelled to comply with Mr F’s reasonable directions so as to enable him to complete the report; and

   g)that B Pty Ltd pay Mr F’s costs of preparing the report; and

   h)pursuant to ss 117(2) or 80(1)(h) of the Family Law Act 1975 (Cth), the Respondent, or an entity he controls, pay the Applicants’ solicitors the amount of $195,222.50 on account of legal fees to date and into the future.

2. Such relief is opposed by the Respondent, B Pty Ltd and those persons sought to be joined in their capacity as Trustees of the B Pty Ltd Superannuation Fund.

3. I accept that B Pty Ltd and Mr C Salmon, Ms D Salmon and Mr E Salmon in their capacity as Trustees of the B Pty Ltd Superannuation Fund have all been served with the Orders dated 20 December 2016 and 23 December 2016.[2]

   [2]See: affidavits of service which establishes that the Respondent's parents were each served by hand on 6 December 2016 and the Respondent's brother was served by hand on 12 December 2016.

4. Despite service of the material, they have not filed any affidavit material in response to that relied upon by the Applicants in support of the relief sought in the Application in a Case.

Broad chronology and overview of circumstances within which the application is to be considered

1. Ms Salmon and Mr Salmon married in 1988. They separated on a final basis on 25 March 2015. Consequently, theirs was a marriage of about 22 years in duration. They had two children together: G (who is about 16 years of age) and H (who is about 14 years of age). Both children live with their father in the former matrimonial home at Suburb J.

2. Ms Salmon commenced property settlement proceedings in the Federal Circuit Court on 28 October 2015. She proposed that just and equitable orders were those which would see her receive property valued at 60 per cent of the total value of the property of the parties. She filed an Amended Initiating Application on 17 December 2015. By this, she sought a superannuation splitting order in respect of the Respondent’s entitlement to superannuation in the B Pty Ltd Superannuation Fund. The sum sought to be accorded to her by way of the splitting order was $600,000.00.

3. On 14 December 2015, the Respondent agreed to pay the late Ms Salmon the sum of $65,000.00 by way of partial property settlement and this amount was paid before she died.

4. Ms Salmon passed away in 2015.

5. On 6 April 2016, the Executors[3] were substituted for Ms Salmon in the property proceedings.

   [3]          Who are the late Ms Salmon's parents.

6. On 18 August 2016, the matter was transferred to this Court.

7. Whilst the parties participated in mediation on 18 October 2016, no agreement was reached.

8. B Pty Ltd conducts a business which trades as “Company K”. The Respondent’s parents (Mr C Salmon and Ms D Salmon) are directors of the company. The Respondent is employed by the company to manage the business. He is responsible for the daily operations of the business, including general decision-making. He also owns 30 E class shares[4], one ordinary share[5] (held jointly[6] with his father and sister) and one ordinary share (held jointly with his father and brother) in the company. His shareholdings have been valued by Mr F (the jointly appointed single expert witness) at $1,350,000.00. [7]

   [4]          Which do not have any voting rights but do appear to participate in any surplus of capital.

   [5]          Which has voting rights.

   [6]The senior shareholder of those who jointly own shares overrides the other owners with the consequence that Mr Salmon Senior exercises the voting rights associated with the share he owns jointly with the Respondent and the Respondent’s sister.

   [7]Affidavit of Ms L filed 20 January 2017, Annexure “DAE-01” at [100] and [111], Schedule 6.

9. According to the report prepared by Mr F, B Pty Ltd is controlled by the Respondent’s parents.[8] The company appears to have a history of paying cash dividends, the quantum of which is paid in proportion to the number of shares (excluding ordinary shares) held by each shareholder.

   [8]Although neither individually has control of the entity.

10. It is uncontentious that the late Ms Salmon was employed by B Pty Ltd between about 2001 and 2015.

11. The Respondent, his parents (Mr C Salmon and Ms D Salmon) and his brother (Mr E Salmon) are the trustees of the self-managed superannuation fund which is the B Pty Ltd Superannuation Fund. It seems that whilst each trustee has a vote, the chair is accorded the casting vote.

12. By way of broad summary, according to the report prepared by Mr F:[9]

    a)the substantial value of the Fund arises from three units it owns in the Salmon Property Unit Trust[10] (which owns and leases out various commercial and retail buildings, asserted to have a value of approximately $4.2 million, in Suburb M and Suburb N); and

    b)75 per cent of the units in the Unit Trust are owned by the Fund and the value of the Fund’s interest in the Unit Trust is $3,269,482;[11]

    c)the market value of the nett assets in the Fund is about $3,343,303.00; and

    d)no one individual controls the Fund; and

    e)the Respondent’s entitlement in the Fund is $767,521.00; and

    f)the Respondent’s superannuation (and that of his brother) is in the accumulation phase, whilst that of his parents are in the pension phase; and

    g)the Respondent is a beneficiary of the Salmon Family Trust, a discretionary trust which is controlled by his parents.

    [9]Affidavit of Ms L filed 20 January 2017, Annexure “DAE-01” at [100] and [111], Schedule 6.

    [10]The trustees of which are Mr C Salmon and Ms D Salmon.

    [11]         Inclusive of the $131,667.00 in its beneficiary loan account.

Provisional property

1. The Applicants submit that the property of the parties amendable to these proceedings is as contained in the Exhibit 1 and has a nett value of approximately $3,000,000.00. In stark contrast, the Respondent submits that the property of the parties is as contained in Exhibit 2 and has a nett value of $98,762.26.00.

2. The competing contentions are summarised below:

Asset	Ownership	Applicants’ Value	Respondent’s Value
Real Property
O Street, Suburb J	Tenants in common	$2,100,000.00	$2,100,000.00
Interests in Companies and Trusts
B Pty Ltd Directors:  C and D Salmon	Directors:  C and D Salmon Respondent’s interest via share ownership	$1,350,000.00	$1,350,000.00
The Salmon Family Trust	D Salmon and C Salmon	$Nil
The Salmon Property Unit Trust	D Salmon and C Salmon Unit holders:  3,367,3030 units B Pty Ltd Superannuation Fund – 75 per cent of units 1,122,434 units – NH & CM Salmon Pty Ltd 25 per cent	$Nil
Bank Accounts
Suncorp Everyday Options	Respondent	$349.00	$623
Westpac Choice …57	Applicants	$Nil
Westpac Choice …82	Applicants	$Nil
Westpac	Applicants	$1,900.00
Commonwealth Bank	Applicants	$Nil	$11,000.00
Household Furniture, Effects and motor vehicles
Furniture – P Street, Suburb Q	Applicants	$15,315.00	$15,315.00
Bond P Street	Applicants	$5,150.00
Furniture and chattels from O Street, Suburb J (including Sedan 1… and 4WD1 …	Respondent	$89,705.00
4WD2	Respondent	$Nil
Sedan 2	Joint	$32,000.00
Jewellery	Applicants	$5,661.00	$82,410.00
Bikes, electrical equipment	Respondent	$46,705.00
Other
Partial property settlement to Ms Salmon (legal fees)	Applicants	$65,000.00	$65,000.00
Notional add back for Ms Salmon’s leave entitlements	Applicants	$36,400.00
Notional add back for Ms Salmon’s life insurance benefit	Applicants	$152,000.00
AAA	Applicants – 50 per cent	$2,629.00
TOTAL ASSETS	$3,814,430.00	$3,712,732.00
Liabilities
St George Loan encumbering O Street, Suburb J	Joint	($1,606,014.43)	($1,599,533.00)
American Express Credit Card	Joint	$unknown	$Nil
Estate expenses	Applicants	($94,455.54)
Loan in B Pty Ltd	Respondent	($139,943.00)
Loan to C & D Salmon	Joint	($732,461.00)
Loans St George Bank (purchase shares B Pty Ltd)	Joint	($1,300,000.00)
Loan to B Pty Ltd from Mr Salmon	Respondent	($432,557.22)
Loan to B Pty Ltd owed to other shareholders	Respondent	($381,438.00)
Rates - O Street	Joint	($4,069.28)
Utilities - O Street	Joint	($439.74)
Mr F	Joint	($10,936.00)
Mediator Mr S	($14,158.00)
R Valuation	($1,600.00)
TOTAL LIABILITIES	($1,840,412.97)	($4,477,192.24)
Superannuation
B Pty Ltd Superannuation Fund	D Salmon, C Salmon, the Respondent, E  Salmon	$767,521.00	$767,521.00
Superannuation: B Super	Applicants	$87,691.50
Australian Eligible Rollover Fund	Applicants	$8,358.93	$8,000.00
Ms Salmon’s superannuation entitlements	Applicants	$163,105.68
TOTAL SUPERANNUATION		$938,985.61	$863,212.50
Nett Assets (excluding superannuation)		$1,974,017.03	($764,460.24)
Nett Assets (including superannuation)		$2,913,002.64	$98,752.26

Principles Applicable to consideration of application for joinder

1. Rule 6.02 of the Family Law Rules 2004 provides that a person whose rights may be directly affected by an issue in a case, and whose participation as a party is necessary for the Court to determine all issues in dispute in the case, must be included as a party to the case.

   In respect of B Pty Ltd

2. By way of broad overview, the Applicants submitted that B Pty Ltd should be joined to these proceedings because the Estate contends that the company failed to pay superannuation and leave entitlements to Ms Salmon during her employment by it between 2001 and 2015 and the asserted unpaid entitlements are “property” for the purpose of these proceedings. In addition, as I appreciate the thrust of the Applicants’ argument, it was submitted that, as a consequence of B Pty Ltd’s failure to comply with its statutory obligation, by virtue of its status as the late Ms Salmon’s employer, to pay her superannuation entitlements into a superannuation fund, the Estate was denied the opportunity to receive a death benefit payment and, consequently, suffered loss.

3. It was also submitted that, as the company had a statutory obligation to pay superannuation to employees such as the late Ms Salmon, its failure to have done so may render it liable to penalties assessed by the Australian Taxation Office and that the directors of the company are personally liable to pay any amount equal to the unpaid amount of the Superannuation Guarantee Charge liability if the same is not paid by the relevant due date.

4. The application for joinder was opposed on a number of bases. First, it was submitted that there was no basis for the company to be joined because it does not contest its obligation to pay superannuation to the Estate. However, I note that the Estate and the company do not agree as to the quantum of any unpaid entitlements and, thus, this issue is unresolved.

5. Secondly, it was submitted that this Court does not have “the power” to enforce the payment of unpaid entitlements to employees such as the late Ms Salmon. I have interpreted this submission to amount to a contention that this Court does not have jurisdiction to adjudicate this aspect of the Estate’s claim against the company.

6. I am not persuaded by this argument.

7. Rather, I consider that, by virtue of s 33 of the Family Law Act (1975), this Court has jurisdiction in relation to such claim[12], because I consider this claim sufficiently associated with the property settlement proceedings commenced by the late Ms Salmon in October 2015.

   [12]         Which arises pursuant to the provisions of the Fair Work Act 2009 (Cth).

8. In addition, despite opposing the joinder of B Pty Ltd to the property settlement proceedings, the Respondent asserted that the company paid the late Ms Salmon’s mortgage payments since separation; and, after about 28 October 2015 when she severed the joint tenancy with him in relation to real property situated at O Street, Suburb J, paid her $160,900.00 and $88,221.52 to meet her credit card expenses (a total of $249,121.52). He asserts, therefore, that the Estate is accountable to the company for such asserted debts. He also appears to assert that he and the Estate have various liabilities to Mr C Salmon and Ms D Salmon, although they have not applied to intervene in the proceedings in respect of the same.

1. Given the matters to which reference has been briefly made above, I am persuaded that the company’s rights may be directly affected by an issue in the proceedings and that its participation as a party is necessary for the Court to determine all issues in dispute in the case.

   In respect of B Pty Ltd Superannuation Fund

2. The Applicants submitted that, given the nature of the assets which constitute the Fund and that the Estate seeks a superannuation splitting order (as particularised in paragraphs (4)-(10) of the Amended Initiating Application filed 17 December 2015), the Trustees of the Fund should be joined in that capacity to the property settlement proceedings. It was submitted that, at final hearing, it may be necessary (in order to give effect to any superannuation splitting order) to make further orders against the Trustees of the Fund so as to ensure that there are cash assets available in the Respondent’s member benefit account to facilitate the implementation of the splitting order: it is not “plausible”, it is said, for the Court to make an order for an in specie transfer of real property in the circumstances of this case.

3. The Applicants also submitted that, as any order made by the Court splitting the Respondent’s superannuation interest will, because of the nature of the assets which underpin the Fund, affect the Trustees of the Fund, they should have the right to participate in the proceedings.

4. Counsel for the Respondent submitted that there was no proper basis for an order joining the Fund to the proceedings. I do not accept this submission. I consider that, given that it may be necessary to ensure that there is cash available to satisfy whatever splitting order might be made in these proceedings, the rights of the Trustees of the Fund may be directly affected by such issue and their participation as parties in the proceedings is necessary for the Court to determine all issues in dispute in the case.

payment of Superannuation entitlements to Estate

1. B Pty Ltd has previously offered to pay the Estate the sum of $87,691.50, in respect of Ms Salmon’s unpaid superannuation guarantee entitlements, in full satisfaction of the company’s statutory obligations to the late Ms Salmon.

2. The Applicants do not agree that this amount is the proper quantification of the late Ms Salmon’s full entitlement to superannuation payments and/or interest on the same; as noted earlier, they also assert that the Estate would have received a death benefit payment if the company had complied with its legal obligation as her employer to make superannuation deposits in accordance with its Superannuation Guarantee Charge liability.

3. It also appears that, on occasion, the Respondent has asserted that B Pty Ltd owed Ms Salmon no less than $163,105.68 in respect of unpaid entitlements: for example, in his December 2015 and March 2016 affidavits, he asserted that the late Ms Salmon was owed $163,105.68, whereas in the March 2016 affidavit he asserted that she was presently owed $172,105.68.

4. The significant difference between these respective assertions provides sufficient foundation for the agreed proposition that the parties engage Mr F as the single expert witness to ascertain and quantify the late Ms Salmon’s unpaid entitlements.

5. I accept the submission made by Counsel for the Applicants that, as B Pty Ltd previously acknowledged an indebtedness in the amount of $87,691.50, then the company should immediately pay that sum to the Estate.

6. I am not, however, persuaded that it is appropriate to order, at this time, that the company pay any additional amount determined by Mr F as representing the entirety of unpaid amounts owing to the late Ms Salmon. I arrive at this conclusion because I consider that to make such an order now would deprive the company and the Respondent of the opportunity to challenge Mr F’s opinion and/or calculations about such quantum – a right which is not removed simply by the engagement of a single expert witness.

Payment by way of Litigation Funding

1. The Applicants submit that this is an appropriate case to order the provision of funds by way of costs order, so as to enable the Estate to continue to participate in the proceedings.

2. Whilst preliminary identification of the source of power is necessary because this determines the necessary preconditions and relevant considerations for making the order sought,[13]  it is clear that many of these are common to the respective sources of power.

   [13]Strahan & Strahan (2011) FLC 93-466 where, at par [84] and [86] Boland and O’Ryan JJ agreed with what Brereton J in Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578 stated that Zschokke and Zschokke (1996) FLC 92-693 had established.

3. Counsel for the Applicants also submitted that, given the circumstances of the case (namely, the duration of the parties’ relationship and the various contributions made by the late Ms Salmon during it), justice and equity would require orders which would see the Estate receive property having the value of 60 per cent of the nett value of the property of the parties: on the Applicants’ case, this would be no less than about $1,747,801.58, from which any appropriate adjustment could be made at trial.

4. However, given the very significant disparity in the property of the parties contended for by the Applicants and the Respondent (as set out above), it is also relevant to note that, on the Respondent’s contended for property pool, the amount would be about $59,251.36.

5. It appears the Applicants’ solicitors have already been paid about $168,829.77 in relation to the proceedings. Despite this, they will only continue to act for the Applicants if they are paid those fees which are currently outstanding and money is paid into trust in respect of the future conduct of the proceedings.

6. As noted earlier, after an order was made by consent in December 2015, the Respondent paid $65,000.00 to the Applicants’ solicitors. This payment was characterised as being made by way of partial property settlement.

7. The Executors’ evidence is that these funds have been expended and the Estate has no money to continue to fund the litigation. It was also asserted that, at the time the parties reached agreement in relation to the provision of the $65,000.00 referred to above, it was not anticipated that the Respondent would contest the Application for the substitution of the Executors as parties to these proceedings. I infer that such opposition resulted in costs which were not taken into account in arriving at the agreement for the payment of $65,000.00. It was also submitted that further costs were thrown away in a sense, as a consequence of the Respondent’s (unsuccessful) Application in a Case (filed 16 August 2016) by which various injunctions and other orders were sought against the Estate.

8. The Estate’s only asset is the half interest in the Suburb J property – a property owned jointly with the Respondent, who lives there with the children of the marriage.

9. Each of the Executors are retired. The evidence before me is that they have no funds from which to make any further provision for the initial payment of legal fees on behalf of the Estate.

10. As at the time of the Application, the Applicants’ solicitors did not hold funds in trust on behalf of the Applicants. At that time, the Estate owed its solicitors $9,769.20 by way of billed but unpaid fees, and there was work-in-progress said to be at a cost of $7,278.50. That is, the total owing (in a broad sense) at that point was $17,047.70.

11. The estimate given for the future conduct of the proceedings is the amount of about $195,000.00. The quantification of future costs in this amount is supported by evidence which particularises the following, by way of breakdown of the same:

    a)$25,000.00 – for the preparation of evidence in chief and financial statement; and

    b)$10,000.00 – to consider the Respondent’s material; and

    c)$10,000.00 – to consider the third party material; and

    d)$20,000.00 – to prepare Case Outline, Minute of Order, objections to evidence and submissions; and

    e)$45,000.00 – provision for preparation for trial (including looking at discovered documents and those produced in answer to subpoenae, considering reports, making and responding to offers); and

    f)$10,000.00 – for preparing a brief to Counsel and conferring with Counsel; and

    g)$30,000.00 – provision for Counsel’s fees (to include the preparation of submissions and settling affidavits); and

    h)$25,000.00 – provision for the costs associated with preparing for and attending at a three day trial.

12. In my mind, some of these estimated costs involve a certain doubling-up; in any event, according to the costs agreement in existence between the Applicants and their solicitors, the hourly rates of those who may be involved in the carriage of the matter are no less than as follows: Director ($495.00 per hour plus GST), Senior Associate ($465.00 per hour plus GST), Solicitor (from $315.00 per hour for most junior to $375.00 per hour for most senior) and Legal Assistants ($195.00 per hour plus GST).

13. It is pertinent, I think, to pause to recollect the costs allowable pursuant to scale by reference to Schedule 3, Family Law Rules 2004 – for example: Time reasonably spent by a lawyer on work requiring the skill of a lawyer (except work to which any other item in this part applies): $241.74/hour; Chamber work (including preparing or settling any necessary document, opinion, advice or evidence and any reading fee (if allowed)): $464.92 - $797.02 per hour for Senior Counsel, and $277.56 - $395.86 per hour for Junior Counsel; Other hearings or trials: $2,191.80 - $6,642.16 per day for Senior Counsel, and $1,961.98 - $2,883.83 per day for Junior Counsel.

    The Respondent’s position

14. The Respondent’s position is that he cannot afford to pay to the Estate’s solicitors the amount sought by the Estate. He has already provided $65,000.00 for use by the Estate in meeting the legal costs associated with these proceedings and he says he does not have the cash resources to meet any order for the payment of further funds.

15. In considering this submission, it is relevant to note that it has previously been said that the mere assertion that there are no immediately available funds for a respondent to be able to provide to an applicant to enable the other party to continue with the proceedings cannot always simply be accepted at face value.[14]

    [14]         Bing & Bing (2007) FLC 93-218 at [23].

16. It was also submitted that there is no evidence before the Court to establish that the Applicants have unsuccessfully attempted to borrow funds using the late Ms Salmon’s equity in the Suburb J property, nor that they have made any efforts to borrow funds. That is, it is submitted that the Applicants have not established that they do not have a source of funds which could be utilised in meeting the Estate’s legal expenses because they have not established that the Estate cannot borrow against its legal interest in the Suburb J property.

17. However, given their status as retirees, their evidence that they do not have the financial capacity to meet the Estate’s fees at first instance and that the Estate assets are not readily realisable, I am persuaded by this argument.

18. It was further submitted that the amount claimed ($195,000.00) represents the full estimate of a full trial, in circumstances where the matter has not even reached the stage of it being listed for final hearing. As I understood it, the Respondent also submitted that the only way in which he could meet an order for the payment of such an amount is to borrow the funds and, if he does this, then the Applicants will have no interest in settling or finalising the proceedings.

Further Discussion

1. The criteria which are appropriate to consider in determining whether to make an order for litigation funding include the complexity of financial affairs; whether expert investigation into such affairs is required; that a respondent is in a position of comparative financial strength vis-à-vis an applicant; that a respondent has the capacity to pay his or her own legal fees and that an applicant has the inability to pay his or her own legal fees.

2. Where s 117(2) is relied upon as the source of power, it is, of course, a prerequisite to the making of any order for costs that the Court is satisfied that there are circumstances which justify it in making such order, subject to the considerations outlined, relevantly, in 117(2A) and that any order made is just.

3. The financial circumstances of the parties are outlined in the table above and the contents of the relevant Financial Statements. Neither party is in receipt of assistance by way of legal aid. Whilst the Applicants submitted that the Respondent’s conduct contributed to the speed with which the $65,000.00 previously provided was expended, I am not persuaded that it is possible on this interim hearing to arrive at such conclusion. I take into account that there has previously been an order for disclosure directed to the Respondent and consider, therefore, that there may be something in the contention that the aspect of the current Application which relates to disclosure by him may have been necessitated by his failure to comply with the terms of the previous order. Given the stage of the proceedings, it does not seem to me that it could be concluded that either the Applicants or the Respondent has been wholly unsuccessful in them. There is no evidence that any party has made an offer in writing to settle this Application or about the terms of such offer.

4. I accept there appears to be a degree of complexity in the financial affairs of the parties, but also note that an expert report has already been prepared by Mr F, in which he has valued the Respondent’s interest in the company and his superannuation entitlement. Further, the parties are agreed that Mr F will undertake further work (as outlined by the terms of the orders to be made by consent) and that the company will initially meet the costs of this.

5. As was made clear in Zschokke,[15] in pending s 79 proceedings, the Court may, pursuant to s 80(1)(h) of the Act – and independently of the power under s 117(2) to make a costs order – require the party whom controls most of the assets to provide the other party with funds to conduct the case, on the proviso that it is possible to take matters into account in the final settlement of property between the parties. In this case, the disparity in the assertions as to the nett value of the property of the parties makes it difficult to be confident that it will necessarily be possible to take the provision of such a significant amount of money into account at trial.

   [15]         Zschokke & Zschokke (1996) FLC 92-693.

6. I accept that the Applicants are unable to meet the total costs of the litigation in the sum estimated by their current legal representatives. However, once the Estate receives the payment of the funds owing by the company, it will have the ability to meet the immediate fees of its solicitors and will have a buffer of funds to utilise toward the further conduct of litigation.

7. Had I not been persuaded to make an order requiring the payment of these funds, such conclusion could not have been reached and I may well have considered the application for the provision of funds to use in continuing this proceeding differently.

8. For these reasons then, I am not, at this stage, persuaded that the circumstances justify the making of an order for costs requiring the Respondent to pay $195,000.00 to the Applicants.

9. Given the vast amount of money that has already been spent in these proceedings, it may simply be that, particularly prudent decisions have to be made about future expenditure.

A comment for consideration

1. On the Applicants’ evidence, the costs so far have been no less than about $178,000.00 (being $168,000.00 already paid and no less than $10,000.00 outstanding).

2. If the estimate provided by the Applicants’ solicitors is correct and the further sum of $195,000.00 is spent on legal fees, then the Estate will spend no less than about $373,000.00 in the property settlement proceedings: this represents about 12.8 per cent of the $2,913,002.64 which the Estate asserts to be the approximate net value of the property of the parties and about 21.3 per cent of the amount contended for by the Applicants’ as being that which justice and equity demands the Estate receive.[16]

   [16]         That is: of the 60 per cent of $2,913,002.64.

3. It is trite to observe that, whatever orders are ultimately determined to be just and equitable, these funds will never really be recovered.

4. For the reasons set out above, I make Orders in terms of those set out at the commencement of these Reasons.

I certify that the preceding sixty-seven (67) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Hogan delivered on 28 July 2017.

Associate:

Date:              28 July 2017