v and v
[2006] FCWA 100
•27 SEPTEMBER 2006
JURISDICTION:
FAMILY COURT OF WESTERN AUSTRALIA
| ACT: | FAMILY LAW ACT 1975 |
| LOCATION: | PERTH |
| CITATION: | V and V [2006] FCWA 100 |
| CORAM: | PENNY J |
| HEARD: | 21 AUGUST 2006 |
| DELIVERED: | 27 SEPTEMBER 2006 |
| FILE NO/S: | PT 1097 of 2001 |
| BETWEEN: | V |
| Applicant/Wife |
AND
V
Respondent/Husband
V
Intervener
(Page 2)
Catchwords:
Spousal maintenance - wife's capacity to work - wife's expenses allegations of non-disclosure by husband - husband to pay wife a sum for future, not past, legal costs
excessive - application refused
Legislation:
Family Law Act 1975 - s 72(1), s 75(2)
Category: Not Reportable
Representation:
Counsel:
Applicant:
Respondent:
Intervener:
Solicitors:
Applicant:
Respondent:
Intervener:
Case(s) referred to in judgment(s):
Chester v Chester (1995) FLC 92-612
Zschokke and Zschokke (1996) FLC 92-693, at 83,217-83,218
(Page 3)
1 On 15 June 2006, Mr Monaghan M handed down Reasons for Decision which included the following orders:
1. Within 21 days the husband and wife do file and serve upon the other a sworn Affidavit of Documents, in a form as close as is reasonably practicable to the form previously referred to as Form 25 under the Previous Family Law Rules, and together with the normal description and detail of each document or class of documents, detail be provided as to how and when each document or class of documents has been previously been disclosed to the other party. 2. Concurrently with the said Affidavit of Documents, the husband and wife each file and serve an Undertaking as to Disclosure. 3. The wife’s application for interim property settlement, interim costs and interim spousal maintenance be dismissed. 4. The wife’s application for payment of repairs in relation to the [south-west] property be adjourned to the trial Judge. 5. Save and except for the Form 2 application of the wife filed 23 March 2006 and the Form 2A response of the husband filed 19 April 2006 all other interim applications before the Court be and are hereby dismissed. 6. The Form 2 application of the wife filed 23 March 2006 and the Form 2A response of the husband filed 19 April 2006 be requested to be listed before the Managing Judge, the Chief Judge, with the Associate to the Chief Judge to advise the parties in writing of the date and time of which the matter is to be brought before the Chief Judge, failing which the Chief Judge give further procedural orders in relation to this matter at the Review hearing listed for 23 June 2006 at 9.30 am. 7. The case be transferred to the Family Court of Western Australia for further hearing. 8. The costs of each party in relation to the matters covered in this judgment be reserved either to the trial Judge, or if the trial Judge is unable or unwilling to deal with the said costs applications, to be relisted after trial before Monaghan M upon giving reasonable written notice. 2 The issue for determination is the wife’s Form 20 Notice of Appeal filed on 21 June 2006 whereby she sought to appeal some of those orders. She seeks orders in relation to disclosure, spousal
(Page 4)
maintenance, interim costs and other payments. In her Minute of Orders handed up on 21 August 2006, the wife now seeks the following orders:
“1.
The husband pay or cause to be paid to the wife the sum of $200,000 within 21 days, such sum to be characterised by the Trial Judge.
2.
The husband pay or cause to be paid to the wife interim spousal maintenance in the sum of $5,500 per month together with all outgoings on the property at [south-west] including:
2.1 Wester [sic] Power, Alinta Gas; 2.2 Water Rates; 2.3 Council Rates; 2.4 Insurance on contents and building. 3. The husband pay or cause to be paid to the ANZ Bank the outstanding sum due and owing on the wife’s credit card … such sum to be characterised by the Trial Judge.
4. The wife have liberty to relist her application for interim security for costs within fourteen days notice to the husbands solicitors.
5. The applications other wise be adjourned to the day of 2006.”
History and background
3 The husband was born [date] 1951 and is aged 55 years. The wife was born [date] 1957 and is aged 48 years. The parties met in about 1985 and lived together at various times thereafter. They married in January 1998 and separated in January 2001. There are no children of the marriage. The wife filed an application in 2001 and the parties then reconciled. In 2004, the parties finally separated and the wife instituted proceedings against the husband. They divorced in February 2006.
4 The C Trust was settled in 1990: the husband is the guardian and appointor of the trust. The trustee of the trust is C Pty Ltd. The directors of C Pty Ltd now are the husband and his son from an earlier relationship, PWV. In 2001, the Trust owned the franchise business BSW and a 90% share in BPN. At this time the husband said that, in the 1999 financial year, the total gross income
(Page 5)
deriving from the [franchise] business was $802,918. The other
assets of the C Trust, in 2001, included:
• the former matrimonial home, which is mortgaged, in [the suburbs]; • a property [in the south-west]; • a commercial property in [the suburbs]; • a 50% share in a rental house in [the eastern states]; • a …boat; • shares in 14 to 16 …racing syndicates; and • a share in a syndicate which owns a Greyhound pup. 5 The net assets as at 30 June 1998, 1999 and 2004 were nominal, its profits having been distributed and then loaned back to the trustee by the beneficiaries.
6 The entirety of the BPN business was, in or after 2001, transferred to the PNB Unit Trust. Its trustee is V Holdings Pty Ltd. The directors of V Holdings Pty Ltd are the husband and his business partner, Mr NK. In 2004, 90% of the PNB Unit Trust’s operating profit of $561,642 was distributed to the C Trust and the remaining 10% was distributed to the S Trust, which is associated with the husband’s business partner. V Holdings Pty Ltd also loans funds to the C Trust: in 2004, this loan was $416,612.
7 The financial statements for 2004 financial year for the C Trust are annexed to the husband’s affidavit filed on 5 October 2004. V Pty Ltd is a beneficiary of the C Trust. As at 30 June 2004, its main asset is a loan to the C Trust. Its net assets as at 30 June 2004 are $851,066, comprising the balance of an unsecured loan of $938,680 to the C Trust.
8 An experienced forensic accountant, Harvey Pickup, was appointed to value the [franchise] businesses. Although the valuations are now disputed by both parties, the goodwill for the BPN business was valued at $1,090,000 and the BSW business valued at $15,000. In his Form 13 financial statement filed on 16 August 2005, the husband states that his assets total $37,500. In relation to the C Trust, he states:
“The value of the C Trust is mainly comprised of the value of real estate and the [franchise] business. The real estate has been valued as follows:
(Page 6)
Units X and Y, [suburban commercial units] $425,000 [South - west home] $1,150,000 [former matrimonial home] $500,000 [investment property] $500,000 There are mortgages of $321,500 on the [south-west home]
and $346,500 on [the investment property]
The [franchise] businesses have been valued by Harvey
Pickup at:
BPN $1,090,000 BSW $15,000 I do not agree with the valuation of BPN for reasons i [sic] will refer to in my trial affidavit, and I propose seeeking [sic] a further input from Harvey Pickup.”
9 The husband now says that the [franchise] business is suffering as a result of:
(a) a general downturn since 30 June 2005 due to a buoyant cash economy and the countercyclical nature of the [franchise] business; and (b) as of 31 March 2006, the old franchise agreement has changed and the rate at which franchisees are paid has reduced.
10 Annexed to the husband’s affidavit filed on 14 August 2006 are financial statements for July 2005 to June 2006. The operating profit for the PNB Unit Trust for the six months to 31 December 2005 was $214,603, of which $193,143 was distributed to the C Trust; the C Trust’s profit was $183,341. The accounts for 2006 tend to indicate the profit of the business has decreased. For the period of January 2006 to 31 March 2006, the profit of the PNB Unit Trust was $57,003; of which $51,303 was distributed to the C Trust. The C Trust, after expenses including donations of $10,000, made an operating profit of $21,227. For the period of April 2006 to June 2006, the PNB Unit Trust, after expenses including donations of $10,000, made a net profit of $44,991.
11 The wife has exclusive occupation of the [south-west home]. By consent orders made on 14 October 2004:
“1.
Until further order the wife have exclusive occupation of the property at [south-west] and the use of the contents therein provided the wife shall maintain the
(Page 7) same in good order and not dispose of any chattel
therein.2.
The husband cause the C Trust to have all mortgage payments and statutory outgoings with respect to property distributed in paragraph 1 hereof.”
12 The husband’s son has intervened in the proceedings. In his Form 1 Application filed on 1 April 2005 the husband’s son seeks a declaration that C Pty Ltd, as trustee of the C Trust, holds 50% of its assets, liabilities and financial resources in trust for him. He was granted leave to intervene on 29 August 2005.
Interim spousal maintenance
13 The wife outlines her history of employment in her first affidavit filed on 2 February 2001 and in her affidavit for trial filed on 10 June 2005. She says she:
(a) started her own … business in 1982 …; (b) worked as …. from 1984/1985 to 1989; (c) worked as a partner in a [business] from 1991 to February 1993; (d) worked full-time for a … business from 1993 to 1997; and (e) was not allowed to work outside the home from 1997.
14 She said:
“65. I would anticipate returning to work at some stage, once I am able to find suitable employment. The majority of my experience is [in her profession]. In my last position I earned approximately $500.00 gross per week. I would estimate that this would be my maximum earning capacity. I do not know how long it will take me to find a job suitable to my experience and qualifications, given that I have not had any practical work experience for three years. 66. As an alternative to obtaining paid employment I would prefer to set up my own business again from which I could derive an income…”
15 In the wife’s affidavit for trial filed on 10 June 2005, she said: “121. I was working full time and my wages were used for my
personal expenses and housekeeping. [The husband]
paid the utilities from the Trust. I was earning a
(Page 8)reasonably high income and was able to save and by the time we were married I had savings of approximately $40,000.”
16 In her affidavit filed on 26 August 2004, the wife states she is unable to work [in her profession]. She states that she goes to the gym for about 2 hours each day. She describes her health problems as including:
(a) back spasms, which initially developed in about 1995; (b) bowel spasms; (c) heel spurs; (d) tennis elbow; and (e) anxiety and depression, for which she was prescribed medication in August 2004.
17 The wife was referred to WorkFocus Australia for an employability assessment. She completed the vocational assessment on 8 October 2004. The second part, a Physical Work Performance Evaluation was scheduled for 11 October 2004; however, this did not proceed. She had been assessed by a GP on 8 and 11 October 2004 and was found to have “very high blood pressure and she was extremely stressed”. He considered she was unfit for employment or a physical assessment at that time.
18 The husband, in his affidavit filed on 5 October 2004, states that the wife applied for and obtained a job [in her profession] in 2003 but refused the job as the pay rate was $16 per hour.
19 In her affidavit filed on 11 October 2004, the wife responded: “… [A]s to the job I applied for 12 months ago I say I applied to [a firm]. I said I had not worked for a long time and had not confidence. They said they would take me on as an… assistant. I was to be paid $14 per hour I would be working on Friday night and or any night and on the weekend. [The husband] said that he did not want me to work at night or at the weekend. I declined the job.”
20 She did not say that she declined the job because of any medical reason.
21 A gastroenterologist, Dr Linden Easton, in a medical report dated 1 December 1998, and annexed to [the solicitor’s] affidavit filed on 11 October 2004, in addition to addressing the wife’s history of rectal pain, wrote:
| (Page 9) |
“Thank you for asking me to see this delightful 41 year old lady with a history of rectal pain. [The wife] has told me that she has had recurrent bouts of severe rectal pain for approximately 7 years. The attacks can occur once or twice a month and usually last for several hours.…
As you know [the wife] is married, she was previously [employed in her profession] but is now building a house in the [south-west] and her husband is very busy with his own business. There is no relevant family history apart from her father who died from a cerebral tumour. Normally she exercises very intensively by jogging and performing pump aerobics. She has a high protein, low fat diet and is otherwise extremely well.
On examination she looked very fit and well.”
22 Dr David Watson filed an affidavit on 18 August 2005, in
which he said:
“To sum up, these imaging studies have confirmed that [the wife] has significant problems in her feet and her lumbar spine. Furthermore, they indicate the problems are chronic, have been present for quite a number of years and are consistent with the history that she gave. From a practical point of view there is little that can be offered to alleviate her symptoms other than to try and avoid prolonged standing, prolonged sitting and activities that involve rapid or hard physical activity on concrete floors.
I have indicated to her that it is my view that she should not aspire to going back to [work in her profession]. To do so would be to put her in the position of developing further problem and having little opportunity for symptomatic relief.”
| 23 | In her affidavit filed on 28 November 2005, the wife says: “14. I cannot work and I refer to the affidavit of Dr David |
Watson filed herein. I do not intend to return to work but I would anticipate that I would purchase a business when I receive a suitable amount of property settlement.”
| 24 | In her affidavit filed on 9 May 2005, the wife states: “Partial Spousal Maintenance/Property Settlement | |
|
(Page 10)
27. I still entertain at the [south-west] property. My personal expenses are still the same and I still eat out at restaurants. 28. My current weekly spending on my personal expenses together with expenses to [the south-west property] are $1,500 which includes the expense referred to in my statement of financial circumstances.”
25 A year later, in her ‘Application for waiver of fees on the basis of hardship’ filed on 21 June 2006, the wife states:
“I have applied for unemployment benefits but as at the date of swearing this Affidavit I have not received any unemployment benefits. I have received a reference from Centrelink…”
26 Counsel for the wife mistakenly conceded there was no evidence the wife had been granted a disability pension. In her affidavit filed on 26 July 2006, she had said:
“6. I have not worked since prior to 1997 [in my profession] but because of my disabilities I have been unable to work in this capacity. I can no longer stand or sit for any length of time I have received no financial support from the husband since I separated from the husband save for the funds referred to in paragraph 8 hereof.
7. Since I have not been able to have my Application for further funds heard in a timely manner, in July 2006 I applied for and was granted a disability pension. I receive $202 per week.”
| 27 | Section 72 of the Family Law Act 1975 provides: “72 Right of spouse to maintenance (1) A party to a marriage is liable to maintain the other party, |
to the extent that the first-mentioned party is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately whether:
(a)
by reason of having the care and control of a child of the marriage who has not attained the age of 18 years;
(b)
by reason of age or physical or mental incapacity for appropriate gainful employment; or
(c) for any other adequate reason;
(Page 11)
having regard to any relevant matter referred to in subsection
75(2).”
28 In order to succeed in her spousal maintenance claim, the wife must satisfy the Court that:
(a) she is unable to support herself adequately for one of the reasons set out in s 72(1); and (b) the husband is reasonably able to maintain her to some extent.
29 The learned Magistrate identified, correctly in my view, that of crucial importance in the final disposition of these proceedings is the wife’s capacity to maintain herself. Notwithstanding the affidavits of medical practitioners and the fact that the wife currently receives a disability pension, when I have regard to the fact that:
(a)
in 2001 the wife anticipated returning to employment or establishing a business;
(b)
the wife turned down employment in 2003 for reasons other than her health;
(c)
her pre-existing health problems have not prevented her from obtaining employment or operating a business prior to 1997;
(d) she has qualifications [in a profession]; (e)
it has remained her intention to establish or purchase a business after receipt of a property settlement;
(f)
the lack of any evidence whatsoever in relation to any attempts the wife has made to obtain gainful employment, whether in [in her profession] or in any other capacity or business;
(g)
the wife’s failure to provide any evidence she had completed an employability assessment with WorkFocus Australia; and
(h)
the wife’s failure to answer a set of specific questions requesting to know what efforts the wife has made to find employment.
(Page 12) 30 I concur with the learned Magistrate and consider that, on an interim basis, the wife has not established to my satisfaction she does not have any capacity to assist in supporting herself by reason of any physical or mental incapacity for gainful employment. I consider she has a capacity for employment which she is not exercising. I estimate this earning capacity to be, if the wife was employed for 25-30 hours per week at $14-$16 per hour, about $400 per week. In circumstances where her accommodation needs are being met and the C Trust is meeting mortgage payments, insurance premiums and statutory outgoings in relation to the [south-west] property, I am not prepared to make an order for spousal maintenance in the terms proposed by the wife.
31 The wife sets out her expenses in her affidavit filed on 26 July 2006. Having considered the amount of $1,400 sought, I agree with the submission of counsel for the husband that the general living expenses stipulated are excessive. In this case, the wife does not have control or care of a child of the marriage, has few commitments, has no responsibility to support any other person and her accommodation needs are being met. The wife’s claim for property settlement is such that it is not certain the wife will retain a home such as the [south-west] property free of encumbrance. In these circumstances, I consider her general living expenses to be excessive. In her affidavit filed on 26 August 2004, the wife says she spent cash of $250 per week, had credit cards and made purchases through [the business] of $1,000 per week. In his affidavit filed on 5 October 2004, the husband confirms he paid her $250 for housekeeping for the both of them, says the credit card was for emergencies, and lists the wife’s [business] expenditure for the last six months. Prior to 1997, the wife says she had been able to earn a reasonably high income and accumulate savings. When I have regard to the wife’s earning capacity and the fact that her accommodation needs are met, I consider the wife is able to support herself adequately through gainful employment.
32 The wife also sought payment of her ANZ credit card. As at 2 February 2001, this debt was $2,000. The credit card account was $3,900 in debit on 9 May 2005. The limit was $8,000. It was $4,500 in debit on 28 November 2005. In her affidavit filed on 26 July 2006, the wife says the credit card limit was extended from
(Page 13)
$8,000 to $12,000. There is no evidence as to the extent of debt owed on the card or what debts were paid for on the card. In her affidavit filed on 16 August 2006, the wife says she found an American Express Card and, in a week or two, utilised the card, which she was told had a limit of $4,500. There are now no available funds remaining on the card.
Interim costs
33 The wife signed a costs agreement with [her lawyers] in January 2001. She signed an updated costs agreement in May 2005. She sought $30,000 by way of security for costs in her Form 3 Application filed on 2 February 2001. She sought $50,000 by way of security for costs in her Form 2 Application filed on 26 August 2004. After receipt of $35,000 by way of consent orders, the wife applied for $50,000 for interim costs in her Form 2 Application filed on 23 December 2004. She then filed an Amended Form 2 Application on 13 January 2005 by which she sought $200,000 by way of security for costs. On 20 May 2005, the husband was ordered to pay to the wife $54,500, to be characterised by the trial Judge. She filed an ‘Amended Amended’ Form 2 Application on 28 November 2005 seeking $200,000 by way of security for costs in relation to accounting and legal costs to the trial.
34 A Commonwealth Bank home loan summary statement for the period ending 30 June 2005, annexed to the wife’s affidavit filed 26 July 2006, shows a capacity to redraw $150,272.
35 On 7 December 2005, by consent, orders were made that the husband pay or cause to be paid $50,000 to the wife, $50,000 to the husband and $50,000 to the husband’s son “for costs, such sum to be characterised by the Trial Judge”. The husband says he drew funds from the mortgage on the … property in [the south-west]. He says this takes the facility to its original and maximum limit. It appears the husband and his son were hesitant in withdrawing the remaining $100,000, there being no time expressed in the consent orders as to when the $50,000 to each party was to be paid. The wife, in her Form 2 Application filed on 1 February 2006, sought to have the $50,000 payable to each of them pursuant to the consent orders be paid to her.
36 To date, the wife has therefore received over $139,000
including:
(a)
$35,000, to be characterised by the trial Judge, by consent orders dated 14 October 2004 requiring the
(Page 14)
husband to cause the C Trust to pay the sum to the
wife;(b) $54,500 by orders dated 20 May 2005; (c) $300 from the husband’s son by orders dated 16 May 2005; and (d) $50,000 by consent orders dated 7 December 2005.
37 The wife’s mother has been repaid a loan of $150,000 pursuant to consent orders dated 14 October 2004.
38 In Zschokke and Zschokke (1996) FLC 92-693, at 83,217- 83,218, the Full Court identified that the following three matters would be relevant to an application for interim costs, namely:
(a) a position of relative financial strength on the part of the respondent; (b) a capacity on the part of the respondent to meet his own litigation needs; and (c) an inability on the part of the applicant to meet her costs.
39 Although not pre-conditions to an order, the following two factors would add considerable weight to the case for an order of the type in question, namely:
(a) complexity in the financial affairs of the respondent; and (b) a need for an expert investigation into those affairs.
40 Counsel for the wife submitted at the hearing that the asset pool of this case was in the vicinity of $5 million. The husband in his affidavit filed on 14 August 2006 says that the gross asset pool is in the region of $4,000,000. Counsel for the wife submitted that the wife was entitled to at least 50% of the assets of the parties and will be entitled to over $2.5 million, subject to disclosure.
41 The husband conceded the wife was entitled to at least 25% of the asset pool. Counsel for the wife interpreted this to mean that on the husband’s case the wife was entitled to over a million dollars, but the $4,000,000 figure proffered by the husband was expressed as a gross figure, not a sum net of liabilities. In his affidavit filed on 2 December 2005, the husband says “the net asset pool is something in the vicinity of $3,000,000.” The husband’s son claims a 50% interest in the assets of the trust. The learned Magistrate identified that one quarter of the remaining 50% of
(Page 15)
$3,000,000 would be approximately $375,000. Whatever the extent of the wife’s claim, it is apparent that the husband is in a position of relative financial strength, he is capable of meeting his own litigation needs and the wife is unable to meet her costs.
42 Given the limited amount of assets held in the husband’s name, the wife’s claim may have to be met from assets of the C Trust, PNB Unit Trust or V Pty Ltd. However, I accept that presently the withdrawal of funds for interim costs from the PNB Unit Trust is not appropriate because, firstly, funds are required for the BPN business to operate and, secondly, because the husband’s business partner owns 10% of the BPN franchise and a unilateral withdrawal of funds would affect his interests.
43 The parties have discussed in their affidavits the prospect of using mortgages on the C Trust real estate to withdraw funds. The affidavit of Mr M filed on 26 July 2006 refers to loan accounts as at 30 June 2005 in paragraph 18. It makes no mention of the withdrawal of $50,000 pursuant to the consent orders and the fact that the husband and his son may withdraw $50,000 each under the mortgage to pay legal fees.
44 In his affidavit filed on 14 August 2006, the husband says:
“40. In respect to paragraph 17, I am making extra payments on the mortgages, as due to my age I have to make inroads into capital. It was only because of the fact that I had to make such inroads that money was available to draw on to pay legal fees.”
45 I accept that the underlying cash flow distributed to the C Trust might be sufficient to meet interest repayments on some of the funds sought by the wife for the payment of interim costs, if the amount was borrowed using the real estate as security.
46 Counsel for the wife drew attention to loans made by the C Trust to Mr L and Mr W. As at 30 June 2004, the C Trust showed a loan of $112,950 to Mr L. This loan of $112,950 is also referred to in the Single Expert’s report dated 2 June 2005. Annexed to an affidavit filed on 30 November 2005 of an accountant briefed by the wife’s solicitors, Garry James Anderson, is a document titled ‘C - Balance Sheet’ for 2005 ostensibly prepared from MYOB financial records showing no loan to Mr L in 2004. In 2005, there is a loan of $8,908 to Mr L and a loan of $54,650 to Mr W. In his financial statement filed on 16 August 2005, the husband says:
| (Page 16) |
“The [franchise] financials also show an unsecured loan. This loan is overdue for payment. The loan was made to Mr L. It appears unlikely now that the loan will be repaid.”
47 The husband’s affidavit filed on 14 August 2006 shows on the C Trust Balance Sheet as at 31 December 2005, there is a loan of $234,521 to Mr L and $228,299 to Mr W. In the husband’s affidavit filed on 14 August 2006, he says:
“43. In respect to the loans to L and W, referred to at Paragraph 19, the C Trust was committed to this project a long time prior to separation. Originally I supported the project because one of the participants was going to start making bricks and was prepared to take [business trade] in exchange for bricks. . The brick possibility has now collapsed. At present I am in the process of trying to recover the loans. The loans are clearly documented in the books of account.”
48 Plainly, there is a discrepancy in the evidence as to the quantum of the loans in 2004 and I accept that the evidence in relation to these loans in both 2004 and 2005 is currently unclear. I accept that there may be some need for expert investigation into these loans and this is a factor which adds considerable weight to the wife’s claim for interim costs.
49 Counsel for the wife submitted at the hearing that the amount sought by the wife, being the $200,000, has now largely been spent and the balance of funds available will be utilised by the wife’s accountant to try and determine what constitutes the asset pool and the value of the [franchise] businesses. In her ‘Application for waiver of fees on the basis of hardship’ filed on 21 June 2006, the wife estimated her outstanding legal and accounting fees at $165,000. On 26 July 2006, she estimated her outstanding legal and accounting fees to be $181,520.
50 The principles applicable to orders for interim costs, in conjunction with the s 117(2A) factors, were discussed in Chester v Chester (1995) FLC 92-612, where Moss J said at p 82,107:
“These principles include recognition that the object is to provide the Applicant with means to continue the conduct of litigation, not to reimburse the Applicant for moneys already expended on or towards her costs… Accordingly there seems no reason why such principles should not continue to be applicable to the determination of applications under the Family Law Act for interim or preliminary costs or for the
(Page 17)
provision of security in respect of such costs and, where it is proper to make such an order, applicable to the framing of the order so as to protect the parties from any injustice by reason of the manner in which the funds are expended.”
51 I accept that the wife is entitled to be properly represented up to and including the conduct of the trial. What I do not accept is that an interim costs order should be awarded to enable the wife to pay legal costs that have already been incurred in circumstances such as the present case where no clear source of funds is available and payment would probably involve, to some extent, refinancing mortgages, further encumbrances to real property or a withdrawal of funds from a business the husband says is suffering a downturn. I am not sure that immediate payment of accrued legal debts will assist the wife to conduct her case in the future.
52 Counsel for the husband also submitted the legal costs sought by the wife were inexplicably high. He submits funds provided by way of open-ended orders had not been entirely used by the wife for legal or accounting fees, but used to supplement living expenses. He raised a concern that funds provided in future by way of interim costs may be utilised as “a lump sum spousal maintenance-type claim through the back door”. The wife’s affidavit filed on 26 July 2006 shows that a portion of each of the three payments made to the wife was used by her for general living expenses.
53 I indicated at the hearing that, subject to any orders for costs, any amount ordered by way of costs may be added back to the asset pool. In Zschokke and Zschokke (1996) FLC 92-693, Baker, Finn and Hannon JJ said at p 83,216:
“But it seems to us that where the Court makes as order of the type in question pursuant to the provisions of s 117(2), that provided such an order was either one by way of security or an interlocutory (i.e. interim) order, it must be open to the Court to make an order or direction, as Bulley J did in Hogan, to the effect that the sums paid pursuant to the order could be taken into account, or at least had regard to, in the determination of the property proceedings between the parties. Indeed such an order would seem desirable in most cases in the interests of according justice to each party.”
54 I consider the appropriate course in this case is for the husband to pay or cause to be paid to the wife the funds necessary at this time so as to enable the wife to bring her case to trial. The
(Page 18)
trial Judge may then take these funds into account, or have regard
to them, in the determination of the matter.55 The solicitor for the wife estimates the costs in bringing the matter to trial in her affidavit filed on 26 July 2006. The total amount that might be incurred by the wife is over $430,000. Might I say that to expend $430,000 on a claim that may be worth, if the wife’s entitlement were, say, $750,000 is extraordinary. In her affidavit filed on 9 May 2005, …, the solicitor for the wife, states that the wife had paid $23,513 and owed $17,330. She estimated her future fees to be $60,000, counsel’s fees at about $59,000 and accountants’ fees at $24,500. The accounts forwarded to the wife on 30 November 2005 had totalled $116,631.09, with an estimated $80,000 in solicitor’s fees to bring the matter to trial. By 26 July 2006, the accounts totalled $236,285.97
56 The costs that may be incurred in future include: counsel’s fees estimated at $42,350; accountant’s fees estimated at $20,000; and the solicitor’s fees to be incurring in preparing the matter for trial are estimated at a further $80,000. The trial affidavits of the parties have already been filed. I assess the appropriate amount of interim costs, including payments for reasonable accounting fees in the future and fees for counsel, at $80,000.
Proposed orders
1. Within 21 days, the husband pay or cause the trustee of the C Trust to pay to the wife the sum of $80,000 by way of interim costs, such sum to be:
(a) held by the solicitor for the wife; and (b) expended only on: accounting fees; or solicitor’s fees; or fees for counsel; or a combination of these fees; but only if accrued on or after the date of these orders; with such sum to be taken into account, or at least had regard to, in the determination of the property settlement proceedings between the parties.
2. The husband and the trustee of the C Trust be at liberty to give effect to order 1 by way of a mortgage or further encumbrance to any real property held by C Pty Ltd of no more than an additional $80,000, notwithstanding any existing Court order or injunction.
3. The Form 20 Notice of Appeal filed by the wife on 21 June 2006 is otherwise dismissed.
(Page 19)
I certify that the preceding [56] paragraphs are a true copy of the reasons
for
judgment delivered by this Honourable Court
Associate
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