Case Note – Lovett & Xavier and Anor [2014] FamCA 49

Lovett & Xavier and Anor [2014] FamCA 49

Facts:

The wife commenced an application in a case seeking the sum of $100,000 for, inter alia, her ongoing legal fees.

The relationship was about 16 year’s duration with the parties having been married in 1998, separating briefly in 2009; with final separation occurring in 2012.

The parties had an 11 year old daughter with whom they shared time equally between households.

In the substantive proceedings the wife joined the husband’s brother (who was also the husband’s business partner) as the second respondent alleging the husband had engaged in transactions designed to divest the matrimonial pool of property in 2009, in the context of the first separation. The wife applied for final orders to reverse the dispositions pursuant to section 106B Family Law Act 1975 (“FLA”).

At the interim hearing it was not controversial that the property available for distribution was at least $1,180,081.37 on the husband’s case; and the husband made a concession in affidavit material that the wife would receive an overall adjustment in a range between 50% and 55%.

Issues:

The wife’s application was that the $100,000 be paid either by way of an interim costs order pursuant to section 117 FLA; or as an interim property settlement pursuant to section 79 FLA and section 80(1) (h) FLA.

The wife’s counsel also referred to spousal maintenance as being a potential source of power but this was not pursued.[i]

In any event, the wife’s position was regardless of the source of power, having regard to Zschokke (1996) FLC 92-693 and Strahan (Interim Property Orders) 2011 FLC 93-466 the relevant considerations in ordering a payment with respect to legal costs were the same. That is:

1. The respondent being in a relative position of strength;
2. Respondent’s capacity to meet their own costs; and
3. Applicant’s inability to meet their own costs.

A further submission was made with respect to complexity of the litigation being a factor, but not a precondition, for making an order under any of the possible heads of power (Zschokke).

The husband did not take issue with the legal principles raised by the wife but argued that any payment ordered ought to be characterised as a part property settlement under section 79 and section 80(1)(h) FLA. The husband also referred to Gabel v Yardley (2008) FLC 93-386 as authority for the proposition that any interim property order must be capable of reversal without report to section 79A FLA or appeal.

Held:

With respect to the power being exercised pursuant to section 117 FLA the court made a number of points at 49 to 55:

• The general (and primary) proposition in section 117 FLA is that each party bears their own costs;
• However, section 117(2A) FLA allows the court to make an order for costs (including an interim order) if the circumstances justify to do so, as the court considers just;
• Section 117(2A) mandates the factors which the court must consider which justify an order with the weight attached to each factor wholly discretionary;
• If the litigation funding is ordered pursuant to section 117 then some form of assessment of the amount required should be made.

In relation to the last point the court referred to Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578 where it was said funds for litigation expenses ought to be applied for that purpose only, and the court might require records to be maintained to permit review.

Justice Thornton determined that having regard to the submissions by both parties, it was appropriate and in the interests of justice to exercise the power under section 79 FLA.

At 77 Her Honour said:

“I accept the submissions on behalf of the husband in respect of the issues he raised surrounding s 117 of the Act. This is largely because one of the issues in the substantive proceedings will be whether the husband has divested himself of property in favour of his brother and if so, whether any transactions should be reversed under s 106B of the Act by way of a final order. It will not be possible until the conclusion of the substantive hearing to make any findings about the conduct of the parties which might have implications as to costs under s 117. I cannot identify matters in isolation or cumulatively which would justify an order for costs against the husband. It would be inappropriate for this reason to characterise any payment to the wife at this stage of the proceedings as a payment for costs under s 117.“

With respect to interim property order pursuant to section 79 the court referred to the 2 steps from Strahan, that is, the procedural or “adjectival” step; and then the substantive step.

The first step requires the court to identify the circumstances that make it appropriate to consider using the power. Here it was satisfied because of the complexity of the litigation, the wife’s expectation that she would receive at least $100,000 at the final hearing was conceded, the funds being sought for costs were not at an unreasonable level, and the purpose for which the wife required the funds was well set out.

The court considered the substantive step taking into account post Stanford and Bevan considerations.

In finding that the proposed interim settlement was just and equitable within the meaning of section 79(2) the court had regard to the relatively long marriage, it was common ground the pool was at least $1,180,081.37 on the husband’s case, the husband conceded the wife will ultimately be entitled to 50% to 55% of the net pool, and the court was satisfied the interim property settlement of $100,000 sought by the wife was capable of being adjusted and taken into account at the final alternation of property interests without resort to section 79A.