Worsnop and Worsnop

[2007] FamCA 244

FAMILY COURT OF AUSTRALIA

WORSNOP & WORSNOP [2007] FamCA 244

FAMILY LAW - COSTS – Interim costs – When a further should be made – Relevant matters

Family Law Act 1975 (Cth)

Poletti and Poletti (1991-1992) 15 FamLR 794;
Schokke and Schokke (1996) FLC 92-693;
Penfold and Penfold (1980) FLC 800 at 75,053-4

APPLICANT: Mrs Worsnop

RESPONDENT: Mr Worsnop

FILE NUMBER: SYF 2193 of 2006

DATE DELIVERED: 21 March 2007

PLACE DELIVERED: Sydney

JUDGMENT OF: The Hon. Justice Rose

HEARING DATE: 9 March 2007

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms M Bridger

SOLICITOR FOR THE APPLICANT: JFS Moy, Solicitor

COUNSEL FOR THE RESPONDENT: Mr G Gould

SOLICITOR FOR THE RESPONDENT: LAC Lawyers

SOLICITOR FOR THE INTERVENOR: Australian Government Solicitor on behalf of the Commissioner for Taxation

Orders

1. That the husband and wife give all necessary instructions, authorities and directions to cause their respective solicitors to pay to the wife or her solicitor the sum of $81,006.75 from the joint controlled monies account in the names of the solicitors for the husband and wife being account number …, BSB … with the ANZ Bank, V on or before 28 March 2007.

FAMILY COURT OF AUSTRALIA AT SYDNEY

File number:  SYF2193 of 2006

MRS WORSNOP

Applicant

And

MR WORSNOP

Respondent

REASONS FOR JUDGMENT

Introduction

1. In these proceedings, the wife sought an order for interim costs pursuant to her Response filed in Court on 30 January 2007.  The order sought by her was in the sum of $250,000.00 to be paid to her solicitor from monies held in the joint controlled monies account number …, BSB … with the ANZ Bank at V held in the name of the solicitors for the husband and wife (“the joint controlled monies account”).

2. During the course of her opening, counsel for the wife informed me that the agreed balance in the joint controlled monies account inclusive of interest is $229,261.76 as at 2 March 2007.

3. Counsel for the wife informed me that her client sought the whole of the current balance in the joint controlled monies account by way of an order for interim costs.

4. The husband and the intervenor by their legal representatives sought an order that the application of the wife be dismissed.

5. Submissions made by the legal representatives for the parties were consistent with the application being based upon the discretionary power to make an order for interim costs pursuant to section 117(2) of the Act.  No submissions were made in relation to the alternative powers of the court such as pursuant to section 80(1)(h) discussed in the Full Court judgments in Poletti and Poletti[1] and Schokke and Schokke[2]  The latter was otherwise referred to by counsel for the husband in relation to the merits of the wife’s application.

   [1] Poletti and Poletti (1991-1992) 15 FamLR 794

   [2] Schokke and Schokke (1996) FLC 92-693

6. Consequently, I will proceed to determine this matter on the basis of the exercise of the discretionary power contained in section 117(2).

7. The trial in the substantive proceedings between the parties has been fixed to commence at 10.00am on 7 May 2007 for four days.

Previous relevant orders

1. On 29 September 2006, orders were made by me, inter alia, requiring the husband and wife to remit the whole of funds held in an account by their respective solicitors in the United Kingdom to a joint controlled monies account in the names of their Australian solicitors and that the funds be applied to meet certain liabilities as well as the payment to the wife of $97,000.00 for her interim costs.  A copy of the orders made is annexure “B” to the affidavit of the wife’s solicitor, JFS Moy sworn 29 January 2007.

2. On 5 December 2006, upon hearing submissions by counsel for the parties, I made orders for costs in relation to the applications determined by me on 29 September 2006.

3. On 30 January 2007, I made various orders by way of case management.  The application of the wife seeking a further order for interim costs, the subject of this Judgment, was stood over for determination by the Judge who was to conduct the Judicial Settlement Conference fixed to take place on 16 February 2007 or as he may otherwise order.  Further orders were made regarding general interest charges on outstanding tax payable by the husband as well as payment of outstanding amounts pursuant to the mortgage granted over the former matrimonial home, to be satisfied from the funds held in the joint controlled monies account.

4. On 2 February 2007 further directions and notations were made in respect of both pre-trial management and interlocutory issues.

5. On 16 February 2007 the Judicial Settlement Conference was conducted.  However, the parties did not reach agreement.

6. On 9 March 2007, further directions were made by consent so far as pre-trial case management was concerned.  The hearing in relation to the wife’s current application for interim costs took place.

The application of the wife for a further order for interim costs

1. There was no issue taken in the proceedings in relation to the applicable legal principles.  Whilst the general rule is that each party should bear his or own legal costs pursuant to section 117(1) in proceedings under the Act, that legislative provision is subject to section 117(2) whenever there is a finding “in a particular case that there are circumstances justifying the making of an order for costs”.[3]

   [3] Penfold and Penfold (1980) FLC 800 at 75,053-4

2. Once such a finding is made, then I am required to make findings in respect of the relevant matters that arise pursuant to section 117(2A).

3. Consequently, the matter proceeded before me on the basis of whether there was a justifying circumstance as described in Penfold and in the event the answer was in the affirmative, whether the weight to be given to relevant matters pursuant to section 117(2A) should result in an order and the quantum of such order.

4. The matter proceeded before me in accordance with the conventional practice and procedure, namely that judgment was to be given on the Papers after hearing submissions on behalf of each of the parties.

5. I find that justifying circumstances have been established on behalf of the wife for the purpose of potentially a further order for interim costs being made in her favour for the following reasons.

6. The wife is not engaged in any remunerative employment.  The wife attends to home duties and the care and upbringing of the four children of the marriage whose ages at the time of giving judgment on 29 September 2006 were 12, 10 (twins) and 9 months respectively.  The wife’s income comprises interim spousal maintenance and the family allowance.  The wife does not have at present an income earning capacity.

7. The wife and the husband live as a separated couple under the same roof being the former matrimonial home of which the wife is the sole registered proprietor.  Their four children live with them.

8. There was an implicit acceptance in the submissions made by counsel for the parties that the issues for determination in the substantive proceedings are complex both in terms of questions of law and the findings of fact that may be required.  Each of the parties, including the intervenor, will carry out an active role in the trial.

9. Other than the former matrimonial home currently occupied for the benefit of the husband and wife and their four children, the wife’s financial resources are essentially reflected in her interest in the joint controlled monies account and items of personalty being the jointly owned household contents, jewellery and personal effects.  It was not submitted that items of personalty should be sold by her.

10. For those reasons I have concluded that the threshold question must be answered in favour of the wife as it would be extremely difficult for her as an unrepresented litigant to properly conduct her case having regard to the issues for determination, unless she is able to access funds to secure legal representation.[4]  In reaching that conclusion I have not lost sight of the submission made by counsel for the husband that the wife having received the benefit of a previous order for interim costs, namely the order made on 29 September 2006, a further order should not be made in the wife’s favour.  That will be a matter to take into account when considering relevant matters pursuant to section 117(2A).

    [4] Poletti, ibid at 799

Relevant matters pursuant to section 117(2A)

1. I make the following findings in relation to matters that are relevant to these proceedings pursuant to section 117(2A).

2. The wife’s financial circumstances are set forth in her Financial Statement sworn 25 January 2007.  I have earlier summarised the wife’s income, earning capacity and property.  So far as the former matrimonial home is concerned, I understand it is now unencumbered as a result of discharge of the mortgage following earlier orders that had been made.  In that regard, I was also assisted by the aide-memoire provided by counsel for the husband as part of his submissions.

3. The husband’s financial circumstances are set forth in his Financial Statement sworn 8 September 2006 which by consent were brought up to date by his counsel in statements from the Bar Table.  The husband’s income is estimated at $3,000.00 per week gross.  The husband’s expenses have been reduced, but were still in excess of his income.

4. Bank funds have reduced substantially to $9,000.00.  The funds in the joint controlled monies account are now in the amount to which earlier reference has been made.

5. The husband’s golf club membership was sold for $52,000.00 and utilised to pay tax and for business purposes.

6. The cruiser has been sold and the net proceeds of sale deposited into the joint controlled monies account.

7. The most significant of the husband’s liabilities are estimated personal tax of $9,818,749.00 and general interest charges totalling $11,700,000.00.

8. C Pty Limited, the entity by which the husband conducts business, is indebted for tax in the sum of $421,000.00.

9. Consequently, even allowing for the real estate owned by the husband being N having an estimated value of $250,000.00, it is clear that the husband’s liabilities are overwhelming on the basis that further notices of assessment of tax payable are in accord with the estimate earlier referred to.  That estimate has been based on a prudential audit.

10. Legal aid has not been provided.

11. With regard to the conduct of the parties to proceedings in relation to interlocutory issues, those matters have been the subject of previous orders made by me.  Counsel for the wife informed me that inspection of documents belatedly discovered by the husband in accordance with those orders is able to proceed, however, such inspection is likely to take “some days” and the wife would be assisted by being able to retain an investigative accountant.

12. On 29 September 2006 orders were made, inter alia, which provided for payment of the wife’s interim costs of $97,000.00 from the funds in the joint controlled monies account.

13. The affidavit of the wife’s solicitor sworn 29 January 2007 states that such funds have now been fully utilised in payment of the wife’s costs and disbursements which included her costs billed to November 2006 in the amount of $71,659.00 as well as counsel’s fees.  The wife’s solicitor’s further evidence is that $4,619.25 is payable in respect of outstanding legal fees incurred by the wife in the United Kingdom which were related to matrimonial disputes between the husband and wife, as well as estimate of fees that will be payable to counsel given that fee notes have not been received for part of those fees as well as the solicitor’s unbilled costs of about $3,200.00.

14. The wife’s solicitor provided an estimate of costs to the conclusion of the pre-trial conference which included outstanding costs as being “over $100,000.00” and in addition costs from that court event to judgment.  The total of all costs estimated, including counsel’s fees, is $277,420.00.

15. Realistically, the only property of the husband and wife readily accessible as the source of a possible further order for interim costs is the joint controlled monies account.

Conclusion

1. I have determined that there will be an order for interim costs in favour of the wife for the following reasons.

2. There is no doubt that the substantive proceedings fixed to commence on 7 May 2007 for 4 days involve complex issues of law and of fact, especially in view of the relief sought by the intervenor.

3. I take into account the complexity in the financial affairs of the husband which has given rise to the estimated extraordinarily high tax liability, the need for appropriate detailed preparation, the large amount of costs expended by the husband in relation to tax issues and to a lesser extent these proceedings, as well as the inability of the wife to readily meet her ongoing litigation costs from her own income property or financial resources.[5]

   [5] Schokke and Schokke (1996) FLC 92-693 at 83,208-9

4. Assessing the quantum for the purpose of making an order that I consider just, as required by section 117(1), is difficult.

5. The wife has already received the benefit of previous order for interim costs in the sum of $97,000.00 which has been fully expended.  Counsel for the wife had made it clear on at least one previous court appearance that further interim costs may well be sought.  Whilst the evidence does not disclose any detailed analysis of the legal costs so expended, other than by reference to solicitor’s costs and counsel’s fees and the evidence does not include a copy of the costs agreement between the wife and her legal representatives, I have assumed the costs so paid were in accordance with that agreement.

6. $4,619.25 is the amount of the outstanding legal costs payable by the wife to her UK lawyers.  I infer that it is a reasonable amount in the absence of contrary evidence.

7. $2,887.50 similarly is payable for outstanding counsel’s fees.  Senior counsel has not yet sent his fee note.  Without that document I am not prepared to give the solicitor’s estimate any weight.  I am not in a position to consider whether it was reasonable to brief senior counsel.  That should not be taken as a criticism of senior counsel or the instructing solicitor.

8. With regard to the balance of the costs sought, there has not been any evidence from which I can distinguish between party/party costs and solicitor/client costs.  That distinction is important given that I am assessing quantum on a party/party basis there having been an absence of any application or submission to the contrary.  Accordingly, doing the best I can in those circumstances and having regard to the impending trial, I have proceeded on an arbitrary basis.

9. In accordance with the orders made by me on 30 January 2007, case management proceeded without a pre-trial conference.  Consequently, I have ignored the reference to a pre-trial conference in the affidavit of the wife’s solicitor, although taking into account her cost estimates.

10. Adopting that approach, I have allowed the following for the purpose of assessing quantum on the basis of necessary preparation and representation at the trial by solicitor and counsel.  I have not made any allowance for senior counsel.  Whilst it may be reasonable to brief senior counsel having regard to the issues, the funds available are limited to those in the joint controlled monies account, the husband and wife at this stage being each equally entitled.

11. It is solely a matter for the wife after obtaining legal advice as to whether she briefs particular counsel, whether senior and/or junior counsel.

12. Similarly, I accept the submission made by counsel for the husband that the evidence does not suggest that the wife has sought litigation funding, let alone whether she would be successful in obtaining it even if the terms and conditions were acceptable to her.

13. I have also taken into account that the prudential audit is complete.  The relevant report is available for perusal by the wife and her legal representatives.

14. The legal representative for the intervenor has informed me that the Commissioner has completed his investigation of the husband’s financial affairs and it will not be contended at the trial that the husband has hidden his financial resources.  To that extent, the wife and her legal advisors have been potentially saved a considerable amount of time and money.

15. As previously referred to, due to the absence of evidence that distinguishes costs on a party/party basis from solicitor/client costs and the lack of evidence of the wife’s cost and fee agreements with her solicitor and counsel, I have concluded that the quantum of the interim costs order will be $81,006.75 calculated as follows:

    (a)       Solicitor/client costs up to the commencement of the trial - $50,000.00.

    (b)Attendances at court and conferences with counsel (5 days) - $10,000.00.

    (c)Junior counsel (approximately one-third of estimate of senior and junior counsel’s fees) - $13,500.00.

    (d)       Outstanding UK legal costs - $4,619.25.

    (e)       Outstanding counsel’s fees - $2,887.50

    (f)       Total = $81,006.75

I certify that the preceding fifty three (53) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rose

Associate: 

Dated:  21 March 2007

IT IS NOTED that this judgment for all publication and reporting purposes be referred to as WORSNOP & WORSNOP