Whooten and Frost (deceased)

[2018] FamCA 79

FAMILY COURT OF AUSTRALIA

WHOOTEN & FROST (DECEASED) [2018] FamCA 79

FAMILY LAW – PROPERTY – partial property settlement – where the husband has died – where the wife’s claim is unparticularised – where s 79(8) creates an additional barrier – where there is appeal against the issue of jurisdiction and power – where evidence does not support the making of orders.

Administration and Probate Act 1958 (Vic).

Family Law Act 1975 (Cth)

Stanford & Stanford (2012) 247 CLR 108
Strahan & Strahan [2009] FamCAFC 166
Whooten & Frost (Deceased) [2017] FamCA 975

APPLICANT: Ms Whooten

RESPONDENT: Mr Swallow and Mr Banford as Joint Legal Personal Representatives of the Estate of the Deceased Husband Mr Frost

FILE NUMBER: MLC 11742 of 2016

DATE DELIVERED: 21 February 2018

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 13 December 2017; 13 February 2018

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Matta

SOLICITOR FOR THE APPLICANT: Nevett Ford

COUNSEL FOR THE RESPONDENT: Mr Bartfeld QC with Ms Renwick

SOLICITOR FOR THE RESPONDENT: KCL Law

Orders

1. That the wife’s application for a property settlement under s 79 of the Family Law Act 1975 (Cth) filed on … 2016 is stayed pending the determination of the appeal against orders made on 29 November 2017.

2. That the application in a case filed by the wife on 30 August 2017 and the application in a case filed by the respondents on 14 December 2017 are otherwise dismissed.

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  Whooten & Frost (Deceased) 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 MELBOURNE

FILE NUMBER: MLC 11742  of 2016

Ms Whooten

Applicant

And

Mr Swallow And Mr Banford as Joint Legal Personal Representatives of the Estate of the Deceased Husband Mr Frost

Respondent

REASONS FOR JUDGMENT

1. These reasons concern two issues of an interlocutory nature.  They are:

   (a)whether there should be a stay of proceedings (as distinct from a stay of orders); and

   (b)whether, accepting the jurisdiction was found to exist by virtue of a hearing, the court should exercise the power to make an order for interim property settlement or litigation funding.

2. The proceedings are between Ms Whooten (“the wife) and two men in their capacities as the executors of the Estate of the Late Mr Frost (“the Executors”).

3. The wife and Mr Frost were married to each other and separated.  Mr Frost died in a tragic accident.  The circumstances of the immediate post-death litigation can be found in the judgment of the court (see Whooten & Frost (Deceased) [2017] FamCA 975).

4. In the initiating application referred to in the previous reasons for judgment, the wife did not seek interim orders.  She filed an application in a case on 18 July 2017 in which she sought inter alia periodic spousal maintenance but of course as the then respondent was deceased, that cause of action could not be brought.  She then also sought an application for payment of:

   The sum of $180,000 within seven days after the date of this order to fund the applicant’s anticipated legal fees.

5. On 30 August 2017, the wife filed an amended application in a case deleting the reference to the periodic spousal maintenance but then seeking:

   That within seven days the Respondent pay to the Applicant’s solicitor’s trust account the sum of $279,250.50 and such sum be used by the Applicant towards the payment of her legal and other costs incidental to this Application and to fund her everyday living expenses.

   That such payment will be brought into account by the Court as partial property settlement upon the final resolution of these proceedings.

6. The executors of the will of Mr Frost obtained a grant of probate in the Supreme Court of Victoria in May 2017 and were therefore substituted for him.

7. On 14 December 2017, the executors sought an order that the initiating application of the wife be stayed pending the hearing and determination of the appeal against the orders which give rise to the argument about jurisdiction.

8. Thus, the present two applications arise out of those documents. 

9. The wife’s position in relation to the application for the stay of the proceedings was that she would not oppose it on condition that she obtained the orders for litigation funding that she sought. For the reasons that follow, as I do not propose to grant her application, it is important to deal with the estate’s application first. Rule 1.10 of the Family Law Rules 2004 provides that unless a legislative position states otherwise, the court may make an order in relation to any matter under the rules and in doing so, may impose terms and conditions. Rule 11.01 of the rules gives the court general power to stay a case or part of a case. No guidance is given in the rules about how such an order should be imposed but the main purpose of the rules (Rule 1.04) is to ensure that each case is resolved in a just and timely manner at a cost to the parties, and the court, that is reasonable in the circumstances of the case.

10. Albeit the wife’s application was formally filed in late 2016, there is little prospect that it could be determined in the immediate future because of the variety of interlocutory proceedings that have taken place over the past twelve months.  No doubt, the application for a probate has delayed that and there is now pending an appeal against my orders which goes to the very heart of the power of the court to make the orders sought by the wife.  In those circumstances, there is no prejudice to the wife in staying the continuation of her application for property settlement until at least the appeal is determined.  Equally, there is no point in the court ordering a conciliation conference or indeed discovery processes when no orders of that nature have been sought.  If those orders were pursued, apart from the potential loss of costs, I would be inclined to make them.  In the circumstances, I intend to confine the stay only to the final hearing of the property proceedings being listed until the determination of the appeal.

11. I turn then to the wife’s application for money.

12. Mr Matta of counsel on behalf of the wife provided a document setting out proposed interim orders which slightly varied the money order which she earlier sought.  His proposal was in two parts.  First, he sought an order that the executors pay from the estate $280,000 “with such sum to be categorised as an interim property settlement”.

13. Albeit the application was based on an interim property settlement, Mr Matta orally addressed the question of litigation funding also being potentially the exercise of the powers of the court in s 117 of the Act.  Mr Bartfeld QC on behalf of the estate did not take exception to the application being put in the alternative.

14. The second tranche of the proposed orders was directed to the estate paying to the wife’s solicitors the same amount as may be incurred by them in relation to the estate.

15. Of the $280,000 lump sum sought by the wife, the costs aspect would be offset enabling the wife to have money to do as she pleased.

16. In default of payment of the $280,000, the wife sought a sale of the property at B Street, C Town which the estate seems to have declared in its inventory to the Supreme Court of Victoria as not having yet been sold.

17. With the appeal pending against the power of the court to make the orders at all, the wife offered an injunction be made against her preventing her from reducing the equity in the property that she owns at D Street. Suburb E to less than $300,000.  In submissions, that application was varied to the wife agreeing to charge her property in favour of the estate such as to give rise to the estate protecting itself, if necessary, with some form of caveat.

18. The estate argued that no order should be made and pointed to the need for the court to be able to claw back any sums made in the long run.  That is particularly pertinent in situations where the money is being proposed to be spent on legal fees and living expenses rather than being put into an asset, the proprietary interest in which can later be altered.  That argument was addressed by counsel for the wife as being unnecessary because of the offer of the injunction and charge over her property.  The wife’s position is therefore that the court should not worry too much about the exercise of the power because the money could always be recovered.  In my view that argument has no merit because the court is obliged in either of the circumstances proposed by the wife, to consider whether it ought to exercise the power in the first place rather than be dismissive of the estate’s concerns by saying that money can be recovered later.

19. The estate also submitted that the wife has assets over which she has control.  The wife however pointed to the fact that the very nature of her application arises because she does not have the means to support herself and therefore no capacity to service any loan if she endeavoured to borrow against her own property.  I accept that is the case but when I turn to the evidence in a moment, I remain unsure whether the solicitors would be prepared to take some charge over the wife’s property of the nature being offered to the estate, or what other commercial arrangements could be made through the solicitors, such that if the wife’s defence of the appeal is unsuccessful, her own solicitors could protect their own interests.

20. A fundamental problem arises from the uncertainty about just what is the wife’s claim even if the estate is unsuccessful on its appeal.  To date, the wife has not filed anything specific by way of relief in circumstances where her counsel points to the evidence which he submitted justified the exercise of the power under s 79 of the Act.

21. It is also important here also to understand that to protect herself, the wife has sought relief in the Supreme Court of Victoria against the estate under Part IV of the Administration and Probate Act 1958 (Vic). No application for equitable relief is made against the estate from which I have inferred that the wife acknowledges that her late husband was the legal owner of the property and that she did not have an interest under some equitable claim as distinct from under the Family Law Act based upon contribution and her future economic circumstances. No challenge appears to have been made to the inventory of the estate indicating that those assets cannot be distributed because they did not belong to the husband.

22. The problem is further compounded by reference to s 79(8) of the Act which requires a court to contemplate whether it would have made an order in the first place and that same provision must apply to an interim property settlement as much as to a final order. 

23. The wife relied on three affidavits.  In her affidavit filed 27 June 2017, the wife acknowledged that she did not have “an intimate knowledge” of the husband’s financial interests, assets and resources but she then made estimates of the “property pool”.  In addition, and relevant to the issue of contribution, the wife said that she was unaware of the husband’s assets and/or liabilities at the commencement of the relationship.  It is difficult therefore to see how absent some clear claim for an equitable interest, the wife can confidently say that she has an entitlement simply based on contribution.

24. In the same affidavit, the wife said that she believed that the husband had unilaterally disposed of property after the husband’s death and made reference to a clearing sale that had taken place on the farm.  Absent some legitimate right to stop that clearing sale, I am not sure of the relevance of the point.  Presumably, the obligations of the executors required them to protect the assets of the deceased.

25. The wife again focussed on contribution and said that she and the husband did not have joint bank accounts and that prior to his death, the husband had the benefit of a consistent and substantial income from investments and income derived from his late father’s estate.  Vague as those statements were, they seemed to acknowledge that the husband’s contribution was quite significant albeit she was not sure of the extent.

26. Insofar as her role might be described, the wife said she assisted on the farm and conducted landscaping works.  As the husband often travelled, she tended the farm and the gardens but against that presumably, she had the benefit of the support of the husband and their living circumstances.  The limited evidence also made reference to the demolition of a house which she “organised”.  Absent some closer scrutiny of these statements and more importantly, some consideration as to their admissibility, it is difficult to know what weight in any assessment would be given to them.  That is particularly relevant when one considers not just the s 79(2) matter but also as I have earlier mentioned, the reference to s 79(8) of the Act.

27. The wife filed a second affidavit on 22 August 2017 in which she set out all of the correspondence that had taken place between her solicitors and those acting for the husband prior to his death in which various demands were made for the production of documents.  At no stage could it be said that there was a claim for relief of any particular type or extent or even possibly, one that the recipient of the letter could see as a property claim.  The correspondence therefore was not much help.  There were suggestions of attending mediation but that would seem pointless without some indication of the ambit of the dispute or the parameters of the claim.  In any event, an attempt at mediation was apparently unsuccessful.  Much of the correspondence otherwise is devoted to spousal maintenance but of course that claim abated on death.

28. Quite significantly, including in the hearing on the submissions, reference was made to the fact that the estate declared to the Supreme Court of Victoria as part of the inventory that the husband had $1.084 million in superannuation.  That money was paid by the trustees of the superannuation fund into the estate rather than to any nominated beneficiary.  That must mean that the husband had excluded the wife as a beneficiary.  In the same way, apparently, the deceased’s will made no reference to the wife either.  Those matters all go to questions of the nature of the relief sought by the wife and whether or not it is ultimately just and equitable to make any order at all. 

29. Thus, the evidence of the wife does not assist me.  It does not address how she is currently living and why the disposal of her own assets might not ameliorate her present position.

30. The wife also relied on the affidavit of her solicitor Mr F.  He said that his firm had agreed to continue to act on behalf of the wife waiving the normal requirement to hold money in trust pending a “partial property distribution” from the estate.  No mention was made of what would happen if that did not occur.  He went on to say that fees for counsel had to be provided regardless of the firm’s policy about their own costs but in this case, it would seem that all of the legal fees including counsel’s fees have been carried until now.

31. Mr F set out in some detail all of the work that he anticipated having to be undertaken but all of that is now on hold as a result of the orders that I earlier foreshadowed not to mention the appeal.  No doubt the appeal will be an expensive exercise as well. 

32. As discussed at the hearing during submissions, the evidence of Mr F shows that the wife is being charged fees far in excess of the scale of costs in the Family Law Rules but that is a matter entirely for her. In a property settlement, the wife can spend the money as she wishes but to the extent that the court is asked to make an order based on a s 117 power, the court ought be careful to ensure that as those costs may not be necessarily recovered, the court scrutinizes what is being proposed to be spent.

33. Mr F also made reference to counsel’s fees much of which was around preparation for the final hearing and the attendance at a mediation but neither of those is currently relevant having regard to the impending appeal and the order for the stay of the proceedings.

34. Mr F then said that the solicitor having conduct and control of the matter (by which I understood he was referring to someone other than himself) was “instructed” that the deceased had greater access to funds than the wife and the wife had relied upon him for her funds.  An unusual assertion was made that the husband used the “disparity in finances as a controlling mechanism against the applicant wife” but I fail to see how that is relevant in circumstances where one would have expected to see at least some plea for relief having regard to the absence of any equitable claim in the Supreme Court.  In addition, such statements are unhelpful leaving aside the question of their admissibility.

35. Mr F went on to say that he considered that the wife had a “strong prima facie case” and was “entitled to a percentage of the property pool” which would be in excess of the partial property settlement funds that she was seeking.  I do not know how that statement is made in circumstances where no indication was given of the type and extent of the relief that the wife was seeking.

36. In Strahan & Strahan [2009] FamCAFC 166, the Full Court set out the applicable principles to be applied in an application for an interim property settlement. As can be seen, the wife’s application is for a partial distribution of property but in the alternative, litigation funding relying upon the s 117 costs power. The approaches are entirely different. In the former, the wife seeks what is in effect, her own property, to do as she might wish. In the latter, in a jurisdiction where costs are not the norm, the court has to find that there is a justifying circumstance established to depart from the statutory principle. It is necessary here to deal with both of those matters because of the way she presented her case.

37. It is trite to say here that the pathway is complicated. Two reasons are immediately apparent. First, it will now be evident that it is concerning that no specific alteration of property relief is sought. I understand the argument that if one does not know what the property is, it is very difficult to know what one’s entitlement is. However, this case is unusual. The Estate has argued, and continues to argue, there is no capacity of the court to exercise the power of property interest alteration because no formal relief was sought prior to the husband’s death. Despite that gauntlet being laid down, months have gone by, and I am concerned that that step remains unresolved from the wife’s perspective. The wife is undoubtedly permitted to plead that she needs to establish the “pool” first but there are two problems with that approach. First, the Estate says it has concerns about clawing back money which is unashamedly going to be expended on legal fees and living expenses. The concern of the Estate is not ameliorated by the suggestion of a charging of the wife’s interest in her own property because it is necessary to first establish an entitlement to an order.

38. A second issue is also perplexing here. A reasonable view of the evidence as I have set it out would note that there is no specific indication of the nature of the claim of the wife beyond the entitlement to spousal maintenance which has abated with the husband’s death. In Stanford & Stanford (2012) 247 CLR 108 (at paragraph 39) the High Court of Australia made clear that it should not be assumed that the parties’ interests in the property “are or should be different from those that then exist.” That is, and relevantly here, just because a marriage has ended, there cannot be an assumption which leads to an automatic adjustment of the property interests between the parties.

1. The Court must adhere to the “fundamental propositions” when exercising its power under s 79 including “the need to preserve and protect the institution of marriage identified in s 43(1)(a) as a principle to be applied by courts”. (Stanford [41]). The parties did not regulate their future financial circumstances by a binding financial agreement, that is, did not “expressly… put in writing” how they wanted their property interests arranged but, on the basis of the wife’s evidence, there is no suggestion of any implicit understanding or agreement with the husband such as to give rise to an assumption by her that the farm, its plant and equipment and, relevantly here, the superannuation, was something in which she had an interest.

2. As the High Court observed, the principles in s 43(1)(a) serve to “accommodate[s] that fact” [41]. That is, if those assumptions “stated or unstated” were sufficient during the marriage, the Court recognises the importance of those assumptions and acting in accordance with the principle to protect the institution of marriage must have a “principled reason for interfering” with the property interests of the parties [41].

3. The Court cannot reach a conclusion about making an order that is just and equitable “only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2)”; to do so would “conflate the statutory requirements and ignore the principles laid down by the Act” (Stanford).

4. In assessing the entitlement to the exercise of the power to make an interim property order, I turn to Strahan, where Boland and O’Ryan JJ articulated the test as (at [132]):

   In relation to the first stage, in our view, when considering whether to exercise the power under ss 79 and 80(1)(h) of the Act to make an interim property order the “overarching consideration” is the interests of justice. It is not necessary to establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power. In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.

5. Their Honours said that an order under s 79 is usually a “once and for all order”.  That concept can be seen at [113]:

   There is only one exercise of the power under s 79 of the Act. However, this power may “be exercised by a succession of orders until the power … is exhausted” and the power is exhausted “when there remains no property … with respect to which orders by way of alteration of interests in property could be or have been made”: Gabel per Bryant CJ and Coleman J at [57] . As Finn J in Gabel at [125] said: “it is only the final order, which deals on a final basis with all known property of the parties, which completes the one single exercise of the s 79 power”. Further, an earlier order whether made under s 79(6) or s 80(1)(h) is capable of alteration at any time prior to, or as part of the final exercise of the s 79 power: Gabel per Bryant CJ and Coleman J at [69]–[73] and Finn J at [126] .(citations omitted)

6. In respect of assessing the evidence such as to justify the exercise of the s 79 power, fundamentally, I must consider whether it is appropriate to do so guided by the wide discretion but remembering that the usual order pursuant to s 79 is a once and for all order made after a final hearing. This latter point is sometimes seen as addressing the clawing back issue but I consider it more than that. In circumstances where the court is asked to find it is appropriate to exercise the power, the court must have some idea of the basis of the claim and the potential quantum of the relief sought.

7. In the wife’s interim property application, I do not know what she seeks by way of substantive alteration of property interests of the husband and hence the Estate but I also have to contemplate that there must be “principled reason for interfering” with the property interests of the Estate. The offer of security by a charge does not assist the wife because there is an underlying assumption that if the exercise of power is wrong, it can be later rectified but that does not address the first question of whether it is just and equitable to make an order at all.

8. In respect of that first question, the wife has not asserted any equitable interest in the Supreme Court nor set out any evidence that might enable me to draw an inference that such an interest has arisen.  To simply point to her “contributions” raises the risk of conflating s 79(2) and s 79(4). The two year gap subsequent to separation enables some focus on what the wife saw as her entitlement which was predominantly a right of financial support. I could not draw any conclusion from the solicitors’ letters an assertion that by virtue of something that the parties had agreed upon or she had done, she was entitled to presume that the farm was somehow her property. From the non-committal responses of the husband when alive, I could not draw a conclusion that he felt the wife had some interest in his property. Indeed, her evidence as outlined above shows that largely, the parties kept their financial lives separate.

9. The particular problem here is not made any easier by reference to s 79(8) of the Act. Assuming, as I must, that the court has jurisdiction as a result of my earlier determination, s 79(8) provides that where, before settlement proceedings are completed, a party dies, the proceedings may be continued if the court is of opinion:

   That it would have made an order …if the deceased had not died; and

   That it is still appropriate to make an order with respect to property.

10. If the court has difficulty concluding the first question because of the matters set out above, it is much harder to then to answer the second question.

11. Having regard to the evidence presented by the wife as outlined and my observations upon it, I cannot find that it is just and equitable to make an order here and thus, s 79(8) creates an even greater obstacle. The wife’s application for a partial or interim property settlement even with the offer of an injunction or charge must fail.

12. That then leads me to the second issue of whether the power in s 117 enables the court to make a litigation funding order here. First, accepting that I am endeavouring to create “a level playing field”, I have limited evidence about what the anticipated costs will be. I am also limited because the wife makes clear that she wants the money for living expenses as well and accordingly, that cannot be the focus for the purposes of s 117.

13. I do not accept the evidence of the wife’s solicitor justifies a conclusion that the money must be advanced by the Estate. There is no indication why, if the stay of proceedings acts to delay the most significant part of the litigation, there is a need to spend what can only be a significant amount of money. True it is that there is now an impending appeal relating to jurisdiction and the exercise of power, but I have no evidence of how that will be handled by the lawyers and at what costs. Importantly, the evidence of the solicitor was that his firm had agreed to continue to act knowing that the wife did not have money but that they did require counsels’ fees. Nothing was said about the firm’s intention with respect to taking a charge over the assets in which the wife has a sole proprietorship nor whether some arrangement is possible through other sources to cover the commercial problems of the fees of counsel and expert witnesses such as valuers.

14. I am conscious too that in respect of the expenditure of costs, the court has a limited role to play where the litigant executes a contract for legal services where the fees are far beyond what the court’s scale provides. But in circumstances where the solicitor makes reference (at para [13]) to preparation for interim court hearings and mediation where the parameters of the property relief claim have not been addressed, one must question what is anticipated. The wife has the husband’s will and the probate inventory so one could safely assume that she knows what assets there are. To the extent that she maintained that she did not know what the husband had, it was not said that that problem remained with the advent of the inventory. Thus, I am again perplexed about what her claim is which would justify the sorts of fees totalling $179,000 being expended and for that money to be paid immediately. Of that sum, $16,500 was for “third party experts and commercial lawyers” to value and determine the “property pool” but that brings me back to the probate inventory. Of the anticipated $179,000, $33,110 was allocated for a mediation in circumstances where it ought be self-evident with the position adopted by the Estate that there is nothing to talk about at this stage until the appeal issue is determined.

15. I agree that the position is unsatisfactory but that does not enable the court to craft something out of nothing. If it is accepted, as I consider ought be the case, I could only make an order relying on s 117 if there was a justifying circumstance, I could not find that circumstance here. What concerns me is that the wife relies upon the fact that she has no income and therefore could not service a loan. No evidence was produced to indicate that is the case.

16. In my view, there is no basis here to make an order under the power granted by s 117. 

17. The wife’s application therefore fails and is dismissed.

I certify that the preceding fifty-five (55) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 21 February 2018.

Associate: 

Date:  21 February 2018