Kendling & Kendling [2008]

FAMILY LAW – APPEAL - APPLICATION FOR LEAVE TO APPEAL – Allowed.

FAMILY COURT OF AUSTRALIA

REPRESENTATION

ORDERS

(1) That the application for leave to appeal be allowed.
(2) That the appeal be allowed to the extent necessary to add the following order to the orders made on 25 January 2008:

1. That Orders 9, 11, and 12 of the Orders made on 27 September 2007 shall be modified only to the limited extent that the Husband may borrow and [B] Limited may lend to the Husband funds for the exclusive purpose of satisfying the orders made by the Honourable Justice O’Ryan on 25 January 2008.

(3) That the appeal be otherwise dismissed.
(4) That the applications of both parties to adduce further evidence be dismissed.
(5) That the husband pay the wife’s costs of and incidental to the application for leave to appeal and appeal (with such costs to be assessed in default of agreement).

IT IS NOTED that publication of this judgment under the pseudonym Kendling & Kendling is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Appeal Number: EA 19 of 2008
File Number: SYF 2903 of 2003

Appellant

And

Respondent

REASONS FOR JUDGMENT

1. This is an application by Mr Kendling (the husband) for leave to appeal and if leave is granted, an appeal against orders made by O’Ryan J on 25 January 2008 which required the husband to pay into the trust account of the solicitors for Ms Kendling (the wife) the sum of $1,000,000 to be used by the wife on account of costs incurred by her in proceedings between herself and the husband, with the ultimate characterisation of such sum to be reserved to the trial Judge at the final hearing of the proceedings.
2. Some eight months earlier on 25 May 2007 his Honour had made similar orders requiring the husband to pay $1,100,000 into the wife’s solicitors’ trust account on account of the wife’s costs.
3. By way of any further background, it need only be said that there have been property settlement proceedings pending in this Court between the husband and the wife since March 2006. There are nine other respondents in the proceedings, none of whom apparently have any interest in the present application for leave to appeal/ appeal.
4. There have also been parenting proceedings between the husband and the wife in relation to their two children. Those proceedings were determined by Cronin J by orders made on 21 December 2007 although those orders are now subject to an appeal by the husband.
5. In his reasons for judgment in relation to the orders of 25 January 2008 (paragraph 5), O’Ryan J recorded that he had said in an earlier judgment that the wife “contends that she is unable to determine the asset pool although the value is probably in excess of $100 million”, and that he had also said that the husband “contends that there are property interests of a value in excess of $40 million”.

THE EARLIER ORDERS OF 25 MAY 2007 FOR THE HUSBAND TO PAY THE WIFE $1,100,000 AND A SUMMARY OF THE REASONS FOR THOSE ORDERS

1. As already mentioned, on 25 May 2007 O’Ryan J had made orders whereby the husband was to pay into the trust account of the wife’s solicitors the sum of $1,100,000 to be used on account of her costs, with the characterisation of those costs to be determined by the trial Judge in the final hearing of the proceedings (being the property settlement proceedings). The terms of the orders of 25 May 2007 were as follows:

1. The Husband pay into the trust account of the Wife’s Solicitors, Messrs Michael Conley Solicitors, of Level 5, 14 Martin Place Sydney, the sum of $1,100,000 such sum to be paid as follows:

1.1 by 4.00 pm on 20 June 2007 the amount of $550,000.

1.2 by 4.00 pm on 28 July 2007 the amount of $550,000.

2. The determination as to whether the sum referred to in Order 1 hereof be treated as part of the Wife’s entitlement to property settlement, the provision of maintenance for the Wife, or in payment by the Husband of the costs of and incidental to these proceedings, be reserved to the trial judge at the final hearing of these proceedings.

3. Any monies received by or on behalf of the Wife pursuant to Order 1 hereof be utilised on account of the Wife’s costs in prosecuting her claims in these proceedings, including costs (outstanding and future) in relation to solicitors, counsel, accountants, valuers, and other legal costs and disbursements including process servers fees and conduct money.

4. The Wife shall account at the final hearing for monies so received and disbursed.

1. Because of the emphasis placed by counsel for the husband before us on the orders of 25 May 2007, and also because in his reasons for judgment of 25 January 2008 his Honour said under the heading “Relevant Principles”, that he referred to what he had said in his judgment of 25 May 2007 (as well as to the decision of Nygh J in the Marriage of Poletti (unreported, 2 March 1990) and to the decision of the Full Court in that case (1991-2) 15 Fam LR 794), it is necessary that we refer briefly to his Honour’s approach in his judgment of 25 May 2007.
2. It appears from the opening three paragraphs of that earlier judgment, that his Honour then had before him for determination an application by the wife for orders in not dissimilar terms to those which he ultimately made on 25 May 2007, except that the wife sought a sum of $1,185,000.
3. After setting out at great length (paragraphs 6 to 258) the history of the proceedings between the parties up to that time, his Honour said (at paragraph 259) under the headings “Relevant Principle” and “Introduction”, that he was “going to deal with this application pursuant to s 117 of the Family Law Act 1975 (Cth)” and that that section “as a source of power is conceded by the husband”.
4. His Honour then summarised the provisions of s 117, being essentially, that in proceedings under the Act each party shall pay his or her own costs, but that a court may make a costs order, if there are circumstances which justify it in so doing having regard to the matters set out in s 117(2A).
5. His Honour can then be seen as considering (in paragraphs 266 to 293) the matters contained in s 117(2A) as well as matters identified as relevant in Poletti (supra), Luadaka & Luadaka [1998] FamCA 1520; (1998) FLC 92-830, and Zschokke & Zschokke [1996] FamCA 79; (1996) FLC 92-693, and he concluded (at paragraph 294) that the wife had “established justifying circumstances and that an order should be made”. His Honour then concluded his reasons with the following two paragraphs:
   1. In the circumstances of this case it would be unjust and oppressive if an order was not made. In my view, from the Wife’s perspective it would stifle her ability to conduct the litigation. The Wife has anticipated costs including what she has already paid of $1,230,000. If I exclude the amount of $78,389.49, which the Wife contends she owes in relation to the Supreme Court proceedings, the balance is $1,151,610.51. It may be that of the amounts paid some of what was paid related to the proceedings in the Supreme Court. What I do know is that the Husband and [B] Pty Ltd have anticipated total costs of the proceedings in this Court in excess of $1,200,000. Consistent with the submissions as to a “dollar for dollar” order, I can also infer that the Wife will have the equivalent, if not greater costs. In all the circumstances an order that I consider just is that the Husband pay $1,100,000.
   2. I will give the Husband the opportunity to organise his affairs such that the funds can be paid and thus will order that the amount be paid in two instalments. I am satisfied that the amount I am persuaded to order to the Wife is reversible given the property settlement the Husband proposes the Wife will receive.
6. Although his Honour determined the wife’s application pursuant to s 117 of the Act, he left the ultimate characterisation of the amount to be paid to the Judge who would finally determine the property settlement proceedings. This approach would seem to have been open to his Honour on the basis of what was said by the Full Court in Zschokke & Zschokke [1996] FamCA 79; (1996) FLC 92-693 at 83, 215-6; (1996) FamLR 275 at 389-90.
7. We understand that there was no appeal against his Honour’s orders of 25 May 2007 and that the husband paid the money required to be paid under those orders.

THE FURTHER APPLICATION BY THE WIFE FOR FURTHER FUNDS

1. On 30 November 2007 the wife filed a further application seeking a further order that the husband (and/or B Limited) pay into the trust account of her solicitors the sum of $1,485,650.
2. In her affidavit in support of this further application for further funds, the wife claimed that the application had been made necessary by developments in the proceedings which had not been foreseen when the orders of 25 May 2007 were made, and that she had expended almost all the funds which she had received under those orders. Those unforeseen developments included that the estimated length of the hearing of the property settlement proceedings had been extended from 10 to 30 days; there had been 11 days of interlocutory applications; and the parenting proceedings had run for 9 days rather than the estimated 4 days.
3. This further application by the wife was heard by O’Ryan J on 14 December 2007.

THE ORDERS AND REASONS FOR JUDGMENT OF 25 JANUARY 2008

1. On 25 January 2008 his Honour delivered reasons for judgment and made the orders which are the subject of the application for leave to appeal/ appeal now before us, and which are in the following terms:
   1. By 4.00 pm on 29 February 2008 the Husband pay into the trust account of the Wife’s Solicitors, Messrs Michael Conley Solicitors, of Level 5, 14 Martin Place Sydney, the sum of $1,000,000.
   2. The determination as to whether the sum referred to in Order 1 hereof be treated as part of the Wife’s entitlement to property settlement, the provision of maintenance for the Wife, or in payment by the Husband of the costs of and incidental to these proceedings, be reserved to the trial judge at the final hearing of these proceedings.
   3. Any monies received by or on behalf of the Wife pursuant to Order 1 hereof be utilised on account of the Wife’s costs in prosecuting her claims in these proceedings, including costs (outstanding and future) in relation to solicitors, counsel, accountants, valuers, and other legal costs and disbursements including process servers fees and conduct money.
   4. The Wife is to account at the final hearing for monies so received and disbursed
2. In his reasons for judgment of 25 January 2008, his Honour referred at the outset to his earlier orders of 25 May 2007 and then to the reasons given by the wife for her further application filed 30 November 2007 in her affidavit in support of that application. Again in great detail, he then set out (in paragraphs 16 to 103) events which occurred following the making of his orders of 25 May 2007 and up until 19 December 2007.
3. In relation to the principles to be applied his Honour, as we have previously indicated, said:
   1. I simply refer to what I said in my judgment of 25 May 2007. However for present purposes I refer particularly to the decision of Nygh J in the Marriage of Poletti (unreported, 2 March 1990) and on appeal ... 15 Fam LR 794.
4. In the twenty-three paragraphs which then followed, his Honour expressed his conclusions in relation to the wife’s further application. In view of the range of matters put to us on behalf of the appellant husband, we consider that there is value in setting out those paragraphs, notwithstanding their overall length:
   1. This is an extraordinary piece of litigation and is very troublesome. As I indicated in discussion it is my understanding that as yet not one affidavit has been filed for the hearing of the applications for final orders notwithstanding the proceedings have been before the Court since late 2005.

106. On behalf of the Husband a number of submissions were made and they can be summarised as follows. First, it was contemplated by me on 25 May 2007 that there would be further proceedings and my order was a “once and for all” order. Second, the amounts claimed by the Wife are excessive. Third, the Husband cannot pay the amount sought. Fourth, the Wife has her own resources.

107. As to the first matter, at the time of making the orders on 25 May 2007 I did not have in mind that anything like what has transpired since then would happen. For example, it was not foreshadowed that [B] Ltd would lend the net proceeds of sale of [the B Facility] to [T] Pty Ltd. Further, it was not foreshadowed that the accounts of [B] Ltd and [T] Pty Ltd may have to be redone.

108. As to the second matter in my judgment of 25 May 2007 I set out my understanding of the quantum of costs and disbursements incurred by each of the Husband and the Wife including anticipated future costs. I was of the view that the costs of the Husband would probably be well in excess of $1 million. I found that the estimated combined costs of the Husband and [B] Ltd were in excess of $1.2 million. I did not include any estimate of costs for [T] Pty Ltd. As to the Wife I was satisfied that she had anticipated total costs of the proceedings including disbursements already paid of in excess of $1.2 million.

109. I am satisfied, for reasons which include what has happened since 25 May 2007, that the costs of all parties will now be significantly greater than what I had previously anticipated. For example I said that in an affidavit of 19 April 2007 the Husband contended that his solicitors estimated that he would require an amount of $320,000 to pay his legal costs to the conclusion of the parenting and property proceedings. There was put in evidence documents that reveal that the following payments may have been made by the Husband:

$

• 16 July 2007 Barkus Edwards Doolan 150,878
• 16 July 2007 Barkus Edwards Doolan 100,000
• 13 September 2007 Barkus Edwards Doolan 125,757

As well there was a schedule of fees for a total of $233,180 due to Ms Dorrough, and counsel instructed by her, for work done between 10 September 2007 and 10 December 2007.

110. In my opinion, the amount sought by the Wife is significant but not controversial when consideration is given, amongst other things, to the costs of the Husband and [B] Ltd and [T] Pty Ltd and what has happened in these proceedings.

111. As to the third and fourth matters, in my judgment of 25 May 2007 I dealt with the disclosed financial circumstances of each of the Husband and the Wife.

112. As to the Wife I was satisfied that she did not have sufficient resources to enable her to pay the then anticipated costs. The Wife has now expended most of the $1.1 million she received pursuant to the order of 25 May 2007.

113. The Wife attached to her affidavit a copy of a letter dated 27 November 2007 she received from her solicitors, which it is contended provides a summary of the legal fees and disbursements paid by the Wife to date, and the legal fees and disbursements estimated to conclude the preparation of the property case and to conduct a trial for six weeks. It is contended as follows:

• estimate of fees of costs application of $76 740;
• estimate of fees of application by [T] Pty Ltd to vary orders of 17 October 2007 of $50,000;
• estimate of fees of senior counsel for the final hearing excluding any interlocutory applications of $369,600;
• estimate of fees of junior counsel excluding any interlocutory applications of $207,900;
• estimate of solicitors fees for final hearing including preparatory work, real property valuations, and expert accountant report of $1,270,000.

The total estimate of future legal fees excluding any interlocutory applications is $1,396,740.

114. The Wife also seeks an amount of $88,910 to reimburse Mr [P] for monies which she borrowed from him to pay her legal fees and disbursements.

115. The Wife contends that she does not have the financial means or resources to pay the estimated ongoing legal fees and that if she is unable to pay those fees then she will not have the benefit of legal representation.

116. The Wife has made an application to [SF Company] to borrow a further sum of $967,500 and she is presently awaiting approval of that application. However she stated that the interest on the loan would not be sustainable and accordingly she is applying for the loan purely as an interim step pending the determination of the current costs application. To offset the interest charged by [SF Company] the Wife intends to deposit the sum of $577,500 being the total of the monies required by senior and junior counsel for the six week final hearing and preparation time until such time as she is required to draw on the funds.

117. The Wife gave evidence that the financial accounts for [W] Pty Ltd for the financial year ended 30 June 2007 have been completed and that she has a loan account with this company of $1,478,906. However the Company does not have sufficient cash flow to repay the debt.

118. I am satisfied that the Wife’s financial circumstances are largely as they were before. The Wife has attempted to sell the [PP] land. I understand that the litigation between [W] Pty Ltd and [T] Pty Ltd is unresolved.

119. In conclusion, I accept that the Wife does not have sufficient resources to enable her to pay the anticipated costs outlined above.

120. As to the financial circumstances of the Husband in my judgment of 25 May 2007 I set out what the Husband contended in a number of affidavits and financial statements. As well, given the evidence of the concluded sale of [B Facility] I endeavoured to calculate what the Husband contends to be the net value of the assets and arrived at an amount of $44,287,062. I calculated that if I took into account the approach suggested by Mr [V] then the net value was $72,985,756. As seen above, [Penelope Kendling] suggested that some of the matters raised by Mr [V] have to be dealt with. However notwithstanding the sale of [B Facility] the Husband contends that he does not have the capacity to meet the amount sought by the Wife.

121. I made very clear before, and of course remain of the view, that I cannot make any concluded findings as to the extent and value of the financial circumstances of the parties. The effect of the orders of 19 December 2007 is to give the Husband some further time to file his evidence in chief including valuation evidence.

122. The Husband still maintains that he does not have the capacity to meet the payment sought by the Wife. I assume that the reason why he currently maintains this position is because of the loan by [B] Ltd to [T] Pty Ltd of the majority of the proceeds of sale of [the B Facility]. I dealt with this in my judgment of 17 October 2007. In any event I previously calculated that according to the Husband there are property interests of a net value in excess of $40 million.

123. Notwithstanding the above, the Husband still seeks by way of property settlement the order as set out in the amended reply filed on 18 May 2007. In summary, the Husband proposes that the Wife receive an entitlement equal to 20 per cent of the net assets. This means that the Husband proposes, on the evidence currently available, that the Wife receive an entitlement of a value of $8,857,412 (20 per cent of $44,287,062) or $14,597,151 (20 per cent of $72,985,756).

124. If the Wife received $8,857,412 then according to the Husband her entitlement would be satisfied as follows:

$

• “[RI]” at [MX] 4,500,000.00
• Shares, [W] Pty Ltd nk
• Loan account, [W] Pty Ltd 1,599,094.00
• Household contents 50,000.00
• Debt owed for child support 10,000.00
• Debt owed to Husband 500,000.00
• Costs paid 1,100,000.00
• Payment by Husband 1,098,318.00

Total 8,857,412.00

125. Now obviously there remain issues in relation to the above. It may ultimately be found that the net assets are greater than $44,387,062. Depending on the outcome of the Supreme Court litigation it may be that the shares in [W] Pty Ltd have a value. It may be that the loan to [W] Pty Ltd is not recoverable and/or that the Wife does not owe $510,000 to the Husband. Further, there will be applications that one or more parties pay the costs of one or more of the other parties of the proceedings; for example there is yet to be determined the application for costs filed on behalf of the Wife on 31 October 2007.

126. What is clear is that the Husband will have to pay an amount of money to the Wife and other amounts so as to enable the Wife to receive what the Husband contends is the Wife’s entitlement. The other amounts are various debts which total in excess of $7 million. The Husband has not filed any further amended reply notwithstanding the advance of the proceeds of sale of [B Facility] to [T] Pty Ltd and thus I infer that the Husband has the resources to enable him to readily achieve what he asks this Court to order him to do.

127. In the circumstances of this case it would be unjust and oppressive if an order was not made. In my view, from the Wife’s perspective it would stifle her ability to conduct the litigation. I propose to make an order that the Husband pay to the Wife an amount of $1 million. It may be that further applications for costs are made. This amount is consistent with the amount that the Wife said she has recently sought to borrow.

128. I am satisfied that the amount I am persuaded to order the Husband pay to the Wife is reversible given the property settlement the Husband proposes the Wife will receive.

THE DECISION IN POLETTI

1. Given O’Ryan J’s reliance on what was said by Nygh J at first instance in Poletti (supra) regarding applications of the type in question, and given also the extent of the reliance placed on Poletti in the husband’s grounds of appeal and the submissions in support of them, it will be useful at this point to set out the relevant passages from Nygh J’s decision as they appear in the judgment of the Full Court in Poletti (supra):

It might be worthwhile before I deal with the relevant facts, such as they are, to state the basis upon which I intend to proceed. In this case I will proceed along the lines indicated by the Full Court not so very long ago in In the Marriage of DJ and LL Wilson (1989) 13 Fam LR 205; [1989] FLC 92-033. As the Full Court and on this particular point it was unanimous - pointed out in that case, although the application is commonly referred to as an application for interim costs, and no doubt it is convenient for everyone to refer to it as such, the issue on such an application is not the question of whether one party should be responsible for the costs of the other, nor is it a question of determining in advance whether any expenditure was reasonably or properly incurred. It is rather, as it certainly was in In the Marriage of Wilson, a situation where one party to the marriage controls almost exclusively what might be described as the patrimony of the parties and has control of the bulk of the assets and funds of the parties, where an order may be made to ensure that the other party, who does not have the fortune of controlling those funds, at lease [sic] has an equal or near equal opportunity to present his or her case.

Such an order certainly will be made on account of costs but what ultimately will be the fate of the moneys paid, whether it is to be treated as an advance on the ultimate property order, or whether it is to be treated as an advance on any ultimate costs order or a mixture of the two, is a matter which must be left to the trial Judge. It is therefore not on an occasion like this for me to determine whether or not there is justification pursuant to section 117(2). Section 117(2) is not really applicable. This is an interlocutory order made pursuant to section 80 of the Family Law Act.

Having regard to the magnitude of the properties and the companies involved, as it appears from the husband's affidavits, I have no reason to doubt the general reasonableness of those estimates. It is then a question, if any order is to be made, to what extent she requires an immediate infusion of funds. It is my view that her solicitor estimates he may require prior to the hearing. No doubt, if funds are made available to pay for the work already done, he can exercise patience until the hearing. A figure of approximately $120,000 would be appropriate.

The next question is whether the wife has funds available herself from which she could meet the whole or part of that without having to call on the husband to provide it out of what I have described as joint patrimony.

Reference has been made to two sources of possible funds...

The second source that was referred to was the surrender of her life policy which I was advised had a value of some $55,000 which again would go some way towards meeting her expenditure. Certainly those options are available but I have to weigh them against the other options. The other option is that the husband has a considerable amount of assets under his control, assets in which the wife also has an interest and in respect of which clearly at some future date an adjustment of property has to be made. ...

...

... The resources upon which the husband can call through the companies in which the wife has an interest are considerably more extensive and more flexible than any on which the wife can call.

For those reasons, therefore, I have come to the conclusion that I should make an order that the husband provide within one month of the date hereof the sum of $120,000 on account of the costs of the wife together with the rider, as I have indicated earlier, that the allocation of those sums towards either the ultimate receipt by the wife of her property settlement or her costs is to be determined later by the trial judge.

1. It will thus be seen that Nygh J considered that in applications of the type in question, the issue is not so much an issue of costs in the sense of whether one party should be responsible for the costs of the other, or whether any expenditure was reasonably or properly incurred, but rather whether, where one party has control of the bulk of the assets of the parties, an order should be made to ensure that the other party has at least a near equal opportunity to present his or her case.
2. While in his judgment of 25 May 2007 O’Ryan J can be seen as having adopted a more strictly costs-based approach (in the sense of an application of s 117 of the Act), in his judgment of 25 January 2008, his Honour adopted what might be described as the more broad-brush approach suggested by Nygh J in Poletti (supra) and approved by the Full Court in that case and inferentially in Zschokke (supra). There can be no doubt, in our view, that that approach was open to his Honour, and while the position of counsel for the husband before us was at times somewhat ambivalent, we understood that ultimately he did not challenge the correctness of the decision in Poletti (supra). Rather the challenge was to O’Ryan J’s application of that decision.

THE PRESENT APPLICATION FOR LEAVE TO APPEAL AND THE NEED TO MODIFY EARLIER INJUNCTIONS

1. In her application filed 30 November 2008 seeking (in paragraph 1) the additional funds of $1,485,650, the wife had recognised (in paragraph 3) that some modification of earlier orders would be needed when she sought the following order:
   1. That Orders 9, 11, and 12 of the Orders made on 27 September 2007 shall be modified only to the limited extent that the Husband may borrow and [B] Limited may lend to the Husband funds for the exclusive purpose of satisfying this Order.
2. In his reasons for judgment of 25 January 2008, his Honour referred to the wife’s position in this regard saying:
   1. On 30 November 2007 the application which I am presently dealing with was filed. The Wife accepts that Orders 9, 11 and 12 made on 27 September 2007 may have to be modified to enable the Husband to borrow funds from [B] Ltd to satisfy any order I may make.
3. However, his Honour’s orders of 25 January 2008 did not include any provision to make any necessary modification to the orders of 27 September 2007. Nor does his Honour appear to have explained in his reasons why he did not provide for any such modification.
4. This was an omission relied on before us on behalf of the husband to establish a substantial injustice to the husband both for purposes of the grant of leave to appeal and for purposes of certain of the grounds of appeal (notably Ground 1).
5. Counsel for the wife was prepared to concede such an omission and was also prepared to have us make an order as sought in paragraph 3 of the wife’s application filed 30 November 2007 (but not in the more wide general terms sought in the appellant’s hand written minute of orders submitted at the hearing before us).
6. Subject to our concluding that there is otherwise no substance in the husband’s complaints regarding the making of the order for the provision by the husband to the wife of additional funding, we would be prepared to make the order in terms of paragraph 3 of the wife’s application filed 30 November 2007. To do so, would necessitate allowing the appeal at least to the limited extent necessary to make that order, and hence a grant of leave to appeal would be necessary.
7. In these circumstances, we see little value in considering further the issue of leave to appeal. Rather it will be more convenient to move straight to consider the grounds of appeal. We note in this context that certainly in their written submissions, this was the approach of both counsel.

THE GROUNDS OF APPEAL

1. In an amended notice of appeal filed 7 March 2008, the husband sought (if leave to appeal was granted) to rely on 20 grounds of appeal. At the hearing before us two of those grounds (Grounds 5 and 19) were abandoned, but with an application being made to add an additional ground relating to a litigation funding advance which the wife had received subsequent to the hearing before O’Ryan J on 14 December 2007.
2. We will return in due course to the application to rely on additional ground of appeal and to the applications from both parties to adduce further evidence.
3. As to the eighteen grounds of appeal which were pressed, a number were repetitive in substance of others, and the scope of certain others not easy to apprehend. In these circumstances, we will now endeavour to consider the grounds by reference to the broad categories of complaints made on behalf of the husband as we understood them to be in light of the submissions of his counsel.

THE MAKING OF A SECOND ORDER OF THE TYPE ALREADY MADE ON 25 MAY 2007

1. In addition to the complaint contained in Ground 1 in relation to the husband’s inability to raise the further funds ordered to be paid because of the existing injunctions (which, we have said, we are prepared to modify), that ground also contained the complaint that a second order of the type made on 25 May 2007 should not have been made, apparently because the order of 25 May 2007 must have been intended to cover all future costs incurred by the wife. This second complaint was also the subject of Grounds 2 and 6.
2. It must be said at the outset of the discussion of this second complaint, that nothing in the relevant authorities suggests that only one order of the type in question can be made. Further, there is nothing in our reading of his judgment of 25 May 2007, to suggest that his Honour contemplated that there could only be one such order made in relation to these particular proceedings.
3. But in any event, it will be recalled that his Honour stated in paragraph 107 of his judgment of 25 January 2008 after having set out (in paragraphs 16 to 103) in great detail the events which had occurred since 25 May 2007, that he “did not have in mind that anything like what has transpired since then would happen”.
4. It would seem that Ground 6 seeks to challenge this statement in paragraph 107 by his Honour on the basis that his detailed analysis of events in the first judgment should be regarded as intended to cover all future eventualities.
5. However, it was not established that his Honour had misunderstood any of the events which he recorded in his second judgment as having occurred since the first judgment, nor that any of those subsequent events were in fact covered in the first judgment. We are thus not persuaded that his Honour’s statement that at the time of the first judgment he did not have in mind “anything like” what subsequently transpired, was not open to him.

THE ALLEGED FAILURE TO FOLLOW THE PRINCIPLES IN POLETTI

1. As we have already indicated, it was the husband’s case before us that his Honour, having said that he would apply the principles suggested by Nygh J in his judgment in Poletti (supra), then failed to do so. The essential principle which can be extracted from that judgment is that orders of the type now under challenge may be made in:

a situation where one party to the marriage controls almost exclusively what might be described as the patrimony of the parties and has control of the bulk of the assets and funds of the parties, ... to ensure that the other party, who does not have the fortune of controlling those funds, at lease [sic] has an equal or near equal opportunity to present his or her case.

1. Ground 9 is apparently directed to this principle with its assertion that his Honour erred in failing to find that the wife “had failed to discharge her onus in respect of the relevant principles applicable to an application for interim costs as referred to in [Poletti]”, with it being asserted in the written submissions in support of this ground, that his Honour did not satisfy himself as to the husband’s control of the bulk of the parties’ assets and as to the wife’s inability to present her case because of lack of resources.
2. Such assertions are, in our view, without foundation when regard is had to the concluding paragraphs of his Honour’s judgment of 25 January 2008, set out above, in particular paragraph 119 in relation to the wife’s position where his Honour said that he accepted that “the Wife does not have sufficient resources to enable her to pay the anticipated costs”, and paragraph 122 where in relation to the husband’s position, his Honour concluded that on the husband’s own case there were property interests with a net value in excess of $40 million.

THE EXPENDITURE BY THE WIFE OF THE FUNDS PROVIDED UNDER THE ORDERS OF 25 MAY 2007

1. By Ground 3 it is asserted that his Honour erred in making the orders of 25 January 2008 for further funding in circumstances where the wife had failed to adduce evidence of precisely how the funds previously provided had been expended. Ground 12 is in similar terms, but also asserts that his Honour’s reasoning was inadequate in relation to the wife’s expenditure of the previous funds.
2. As was submitted by counsel for the wife in his written outline (paragraph 49), the assertion in Ground 3 is wrong because reference to the wife’s affidavit filed 30 November 2007 in support of her application for further funds, reveals that she did set out (in paragraph 6) how she had spent the funds previously ordered to be paid.
3. His Honour can be seen as expressly accepting this evidence in paragraph 9 of his judgment of 25 January 2008 (although there would appear to be a typing error with respect to the amount repaid to Mr P, but no issue was raised about that apparent error before us). There can thus be no complaint regarding his Honour’s reasons in relation to this matter. We do not see that his Honour needed in those circumstances to say more than that he accepted the wife’s evidence in this regard.

THE CLAIM THAT THE WIFE’S COSTS WERE EXCESSIVE

1. Both Grounds 4 and 8 assert error on the part of his Honour in failing to determine that the costs claimed by the wife were “manifestly” or “grossly” excessive, with Ground 10 then asserting that his Honour should have required the wife to produce “an itemised bill of costs”, and Ground 13 asserting that his Honour should have required the wife’s costs to be at scale or alternatively (according to the supporting written submissions), required a taxation before ordering that further funds be advanced to the wife.
2. To the extent that it might be said that his Honour was required (having regard to the observations of Nygh J in Poletti (supra)) to satisfy himself as to the reasonableness of the wife’s costs, he can, as counsel for the respondent wife pointed out, be seen to have done so in paragraph 110 of his judgment of 25 January 2008, which for convenience we here repeat:

110. In my opinion, the amount sought by the Wife is significant but not controversial when consideration is given, amongst other things, to the costs of the Husband and [B] Ltd and [T] Pty Ltd and what has happened in these proceedings.

1. His Honour had, of course, previously carried out a detailed analysis of what had happened in the proceedings.
2. As to the suggestion that his Honour should have required itemised bills of costs, or required the wife’s costs to be at scale, or required a taxation (or assessment under the Family Law Rules 2004), such suggestions would seem to be at odds with what was said by Nygh J in Poletti (supra). The amount of the wife’s costs is at this stage a matter for the wife bearing in mind that the advances which she receives from the husband may in time be held to form part of her property settlement entitlement, or if they are ultimately to form part of a costs order payable by the husband, could well in that context be subject to a taxation or assessment.

USE OF FUNDS TO REPAY LOANS TO OTHER PERSONS

1. By Ground 16 it is asserted that it was contrary to authority, being the decision of Moss J in Chester & Chester (1995) FLC 92-612; (1995) 19 Fam LR 281 to order that part of the “interim costs order” was to enable the wife to repay borrowings made for the purpose of paying her costs.
2. Chester (supra) was said to be authority for the proposition that the purpose of an order of the type here under consideration is to provide the applicant with the means to continue with the litigation, not to reimburse moneys already expended on costs.
3. We do not consider that the Full Court authorities of Wilson (1989) FLC 92-033; (1989) 13 Fam LR 205, Poletti (supra) or Zschokke (supra) can be read as imposing such a restriction on the scope or purpose of such orders. Moss J’s observations in Chester (supra) would seem to be based on the observations of Brennan J in refusing special leave to appeal in Breen & Breen (1990) 65 ALJR 195.
4. The orders made in Breen (supra) and Brennan J’s reasons in relation to the special leave application were described in the following way by the Full Court in Zschokke (supra):

In Breen, Cook J, in addition to making an order that the husband pay to the wife by way of interim lump sum maintenance the sum of $30,000, as well as periodic maintenance of $650 per week, had also ordered that the husband pay to the wife ''by way of preliminary and interim costs a sum of $45,000''. However, the last-mentioned sum was ordered to be held by the solicitors for both parties as trustees for them and there were other orders strictly regulating the use of the sum. His Honour had affidavit evidence from the wife that she had ''practically nothing'' and affidavit evidence from the husband that he had assets worth over $22 million. The parties had cohabited for about 20 years.

The Full Court (Strauss, Baker and Butler JJ) dismissed the husband's appeal against the orders made by Cook J. The judgment of the Full Court was delivered by Strauss J who expressly rejected the submissions made on behalf of the appellant husband to the effect that costs cannot be ordered towards costs yet to be incurred and that a court cannot order a litigant to provide an adversary with ''a fighting fund'' for purposes of proceedings between them.

In refusing the husband's application for special leave to appeal in relation to the costs order, Brennan J (as he then was) said as follows:

"The order made in this case may be unusual but it cannot be said to be beyond the jurisdiction of the Family Court under either s 117(2) or under s 74 of the Family Law Act 1975 (Cth).

It is unnecessary to determine whether the power to make the order falls under s 117(2) rather than under s 74 (as the decision in Wilson v Wilson [1989] FLC ¶92-033 suggests). Nor is it necessary to determine whether the order in the present case is to be characterised as an order as to costs or an order as to security for costs.

The order seeks to ensure that, in the circumstances of the present case, the wife should be able to prosecute the pending matrimonial proceedings and should have the funds required to do so. Such an order made for such a purpose, though it falls within one or other of the powers conferred on the Family Court, should be so framed as to protect the parties from any risk of injustice arising from the manner in which the funds are expended. However, in the circumstances of this case, it is not appropriate to grant special leave to appeal to consider the form of the order."

1. It will be seen that there is nothing in Breen (supra) to suggest that orders of the type in question cannot be made to cover costs already paid. The only criterion suggested by Brennan J was that such orders should be framed “to protect the parties from any risk of injustice arising from the manner in which the funds are expended”.
2. We are satisfied that O’Ryan J’s orders of 25 January 2008 met this criterion.

THE PROPERTY SETTLEMENT AWARD TO BE RECEIVED BY THE WIFE ON THE HUSBAND’S CASE

1. In paragraph 255 of his judgment of 25 May 2007 his Honour set out the orders which the husband sought in a further amended reply filed on 18 May 2007. His Honour then stated in paragraph 256 of that judgment, that the husband proposed that the wife would receive a property settlement of a value of $8,857,412.40. His Honour repeated that statement in paragraph 123 of his judgment of 25 January 2008, and in paragraph 124 of that second judgment he explained how on the husband’s own case the wife’s entitlement would be satisfied. (We have earlier set out paragraphs 123 and 124 of the judgment of 25 January 2008.)
2. Grounds 17, 18 and 20 of the husband’s grounds of appeal challenge his Honour’s reliance on the amount that the wife would receive by way of property settlement as a matter which would support the orders for the further advance to the wife. We see no merit in such a challenge. Indeed to the contrary, in order to avoid any risk of injustice to the husband, his Honour needed to be satisfied that the wife’s likely eventual award would exceed the funds to be advanced to her by the husband; in other words, the orders had to be “reversible”.

THE WIFE’S CAPACITY TO BORROW TO FUND THE LITIGATION AND THE HUSBAND’S APPLICATION TO ADDUCE FURTHER EVIDENCE

1. In paragraph 116 of his judgment of 25 January 2008 his Honour recorded that the wife was awaiting approval of an application to borrow commercially a sum of $967,500 as an interim measure (because the interest rate would not be sustainable) pending the outcome of the application which was before his Honour for determination. We here repeat paragraph 116 (emphasis added):

116. The Wife has made an application to [SF Company] to borrow a further sum of $967,500 and she is presently awaiting approval of that application. However she stated that the interest on the loan would not be sustainable and accordingly she is applying for the loan purely as an interim step pending the determination of the current costs application. To offset the interest charged by [the lending company] the Wife intends to deposit the sum of $577,500 being the total of the monies required by senior and junior counsel for the six week final hearing and preparation time until such time as she is required to draw on the funds.

1. By Ground 7 the husband asserts that his Honour erred in failing to determine that the wife had the means available to her to borrow to fund her own litigation. In support of this ground the husband sought to adduce further evidence to establish that the wife had subsequent to the hearing on 14 December 2007 been granted a loan of $590,000 from a lending company. The husband also sought to amend his grounds of appeal to add an additional ground based on this subsequent advance to the wife and also to seek an order from this Court to the effect that if he was otherwise unsuccessful before us, we would at least order that the amount which he had to pay to the wife pursuant to O’Ryan J’s orders of 25 January 2008 be reduced to the sum of $439,500 (to take account the amount received by the wife less administration costs of the loan).
2. We are not persuaded that we should admit the further evidence sought to be adduced by the husband, or permit him to amend his notice of appeal to add the additional ground or to seek an order for a reduced amount.
3. We are of this view because it is clear from paragraph 116 of his Honour’s judgment that he was well aware of the wife’s application to borrow from a lending company, but that he recognised that because the interest rate would not be sustainable, this would be only an interim step pending determination of the application before him. In other words, the evidence that the wife was able to borrow only part of the sum for which she had applied, would not in any way render his Honour’s decision erroneous. Put simply, it could not be said that his Honour was wrong to conclude that the wife should look to the husband rather than to a commercial lending institution for the funds necessary to pursue her case, in circumstances where on the husband’s case she will ultimately receive a sum in advance of $8 million out of an estate of at least some $40 million which is presently controlled by the husband.

CONCLUSION IN RELATION TO THE HUSBAND’S APPEAL AND THE WIFE’S APPLICATION TO ADDUCE FURTHER EVIDENCE

1. Save only for the issue of the need to modify the existing injunctions to permit the husband to raise the funds required to be paid to the wife, we conclude for the reasons given that there is no substance in the husband’s appeal.
2. In these circumstances it is unnecessary that we consider the wife’s further evidence regarding certain matters which it was submitted on her behalf would “buttress” his Honour’s decision (CDJ v VAJ [1998] HCA 67; (1998) 197 CLR 172; (1998) FLC 92-828).

FURTHER APPLICATION FILED BY THE HUSBAND ON 20 MAY 2008

1. It has been drawn to our attention by the Appeal Registrar that on 20 May 2008 the husband filed a further application seeking that this court stay the orders of 25 January 2008 pending out determination of the appeal.
2. It is unclear to us why an application for a stay would be made to us rather than to the Judge who made the order. But be that as it may, we see no reason for the application to be pursued given that our decision is now available. No doubt if the husband considers that he has good reason to pursue this further application, his legal representatives will approach the Appeal Registrar for a further listing of this matter before us (if necessary by way of written submissions).

COSTS OF APPLICATION FOR LEAVE TO APPEAL/ APPEAL

1. In light of the submissions made at the conclusion of the hearing before us, we consider that the husband should pay the wife’s costs of the application for leave to appeal/ appeal having regard to her overall success.

I certify that the preceding sixty-five (65) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court

Associate:

Date: 29 May 2008