Hooper & Hooper [2015] FCCA 1967 (23 July 2015)

Last Updated: 5 August 2015

FEDERAL CIRCUIT COURT OF AUSTRALIA

HOOPER & HOOPER

[2015] FCCA 1967

Catchwords: FAMILY LAW – Property – application by the husband for an order which will allow him to borrow $140,000.00 secured against real properties so that he can pay the wife the balance of a post-separation judgment debt and to provide him with funds to pay past and anticipated future legal costs.

Legislation: Family Law Act 1975, ss.79, 80, 117

Zschokke & Zschokke [1996] FamCA 79; (1996) FLC 92-693 Strahan & Strahan (2011) FLC 93-466 Harris & Harris [1993] FamCA 49; (1993) FLC 92-378

Applicant:

MR HOOPER

Respondent:

MS HOOPER

File Number:

NCC 3022 of 2011

Judgment of:

Judge Terry

Hearing date:

9 July 2015

Date of Last Submission:

9 July 2015

Delivered at:

Newcastle

Delivered on:

23 July 2015

REPRESENTATION

The Applicant:

In Person

Counsel for the Respondent:

Mr Rugendyke

Solicitors for the Respondent:

Flintoff Lawyers

ORDERS

(1) The husband’s application filed on 18 March 2015 for Orders 2, 4, 5 & 6 is dismissed.

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

FEDERAL CIRCUIT COURT OF AUSTRALIA AT NEWCASTLE

NCC 3022 of 2011

MR HOOPER

Applicant

And

MS HOOPER

Respondent

REASONS FOR JUDGMENT

Introduction

1. Mr Hooper and Ms Hooper are involved in bitterly contested parenting and property proceedings.
2. On 18 September 2013 an interim order was made restraining the husband from selling, encumbering or dealing with his interest in two real properties without the written consent of the wife. He has applied to have this order varied so that he can use the properties as security for a loan of $140,000.00.
3. He intends to use $26,000.00 to pay the balance of a civil judgment debt which he owes to the wife and remainder to pay his past and anticipated future legal costs in the family law proceedings.
4. The wife opposes the application. She strongly objects to the husband being allowed to borrow against the properties to pay the judgment debt which he is currently paying by instalment from his income and she objects to him being allowed to borrow against the properties for any reason when it is her case that she should receive everything of value in the non-superannuation asset pool.

Background

5. The husband and wife had a 3 ½ year relationship which ended on 30 April 2010.^[1]Their separation was acrimonious and they remain intensely hostile to each other five years later.
6. The parties have one child, X, born on (omitted) 2008.
7. The husband filed an application for parenting orders in February 2012 and in June 2012 amended his application to also seek property orders. In due course the wife filed a response seeking different parenting and property orders.
8. Final parenting orders were made by consent on 14 June 2013. This did not stop the parties bickering about parenting arrangements and on 16 July 2014 the husband filed an application seeking fresh parenting orders.
9. The wife opposes that application and it is yet to be resolved.
10. The property matter is also still unresolved. It has taken a long time to get to the point of being ready for a hearing because of the need to await the outcome of the wife’s defamation action against the husband in the District Court of NSW, a long running dispute about the valuation of (business omitted) and latterly (business omitted) and disputes about disclosure.
11. The defamation action has been finalised and on 2 July 2015 an updated valuation of (business omitted) and (business omitted) became available. Mediation has been tried and has failed and to the best of my knowledge the property matter is as ready as it will ever be to be listed for trial.
12. The parties are in a dispute about the size of the property pool. The dispute will only be resolved at trial but the non-superannuation assets at present seem to me to be worth somewhere between net $463,000.00 to $550,000.00 if certain debts in connection with companies are taken into account and $755,000.00 if they are not.
13. The husband alleges that a real property and a motor vehicle which are registered in the wife’s mother’s name should be treated as assets of the wife and included in the pool. This may be an issue at trial but the wife disputes that she has any interest in these assets and for the purposes of this interim application I must disregard them.
14. The real properties in Property P and Property B which the husband wishes to borrow against have a net equity of $156,830.00 and $560,000.00 respectively so they are a very significant part of the asset pool.
15. The Hooper Superannuation Fund has assets about $220,000.00 net.
16. The husband’s current position about final property orders is contained in an amended application filed on 18 March 2015. He proposes that the wife receive 100% of his interest in the Hooper Superannuation Fund and that each party otherwise retain the assets in their possession or under their control. This would leave him with the Property P and Property B properties as they are in his name.
17. The latest document filed by the wife seeking final property orders is a further amended response filed on 10 December 2012 in which she proposes a 70/30 division of the assets and superannuation. However during the hearing of the current interim application the wife’s counsel said that it was the wife’s case that the husband should be held responsible for the diminution in value of (business omitted) from $1.5m to zero and that the wife would be arguing at trial that as a result she should receive all the remaining assets.

The husband’s arguments

18. The husband first filed an application seeking orders which would allow him to obtain funds by mortgaging the Property B & Property P properties on 26 September 2014 when he was still represented and an amended application was filed by his solicitors on 18 March 2015.
19. On 17 June 2015 the husband’s solicitors filed a Notice of Ceasing to Act and the husband represented himself at the hearing of his interim application on 9 July 2015. He said that he had ceased to instruct his solicitors because he could no longer afford to pay them and that he would re-engage them if he obtained funds to pay outstanding legal fees of $15,653.00 and to pay future legal costs.
20. The husband said that he had paid $199,103.00 professional fees and $29,000.00 for valuations and experts reports to date. He said that he could no longer afford to pay his solicitors because although he earned $2,561.64 net per week and received $330.00 per week net from renting the Property P property (total $2,891.64) he had only $254.37 left each week after necessary expenditure.
21. The husband said that he had been informed by his solicitors that the hearing was likely to take 10 days and would cost about $150,000.00.

The wife’s arguments

22. The wife opposes the application on several grounds.
23. She pointed to the fact that the husband had not given any precise evidence about his likely future legal costs and that there was no evidence that his solicitors would not act for him unless he obtained a lump sum to pay them on account of fees.
24. She submitted that the husband should not be allowed to diminish the non-superannuation pool by $140,000.00 when her argument that she should receive everything of value in that pool was not frivolous and vexatious and when there was simply no way that the money could be recovered if the need for that arose to do justice and equity between the parties.
25. The wife strongly opposed the husband being allowed to diminish the pool by borrowing money to pay the balance of the judgment debt.
26. The wife is in receipt of Centrelink benefits. She did not provide any information about how much she had paid in legal fees to date save that she has used $50,000.00 from a distribution from (business omitted) for this purpose. The wife’s mother is otherwise paying her legal fees. There was no suggestion that the wife’s solicitors were likely to cease to act for her.

The applicable law

27. The first thing a court must do when dealing with an application by a party to obtain litigation funds is to identify the source of power on which the party seeks to rely to justify the making of the order.^[2]
28. The self-represented husband did not address this issue but I am satisfied that his application can only be characterised as an application for an interim property settlement pursuant to s.79 of the Family Law Act (FLA). It cannot be characterised as an application for costs pursuant to s.117 FLA and it cannot be characterised as a spouse maintenance application when the husband earns $200,000.00 per annum and clearly has no entitlement to spouse maintenance.
29. The court has the power to make an interim property settlement order and making such an order in an appropriate case is a recognised way of providing a party with litigation funding.^[3]
30. The husband’s application is somewhat unusual in that he seeks an order which will permit him to borrow. However in my view s.80(1)(k) FLA, which provides that the court may make any other order (whether or not of the same nature as those mentioned in the preceding paragraphs of this section) which it thinks it is necessary to make to do justice between the parties, allows me to make an order permitting the husband to obtain possession of part of the value of the matrimonial pool by borrowing against real property.
31. However in making an order for interim property settlement the Court is exercising the s.79 power and therefore before making the order it must be satisfied that it is just and equitable to do so. This self-evidently requires the court to be satisfied:

That the remaining property will be adequate to meet the legitimate expectations of both parties at a final hearing, or that the order which is contemplated is capable of being reversed or adjusted if it is subsequently considered necessary to do so.^[4]

32. The husband’s application for money to pay the balance of the judgment debt is also an application for an interim property settlement and the same considerations apply to it, namely that the court must be satisfied that it is just and equitable to make the order which in turn requires the court to be satisfied that the order is capable of being reversed or adjusted if it is subsequently necessary to do so.

Discussion

The husband’s application for litigation funding

33. The wife is represented by solicitor and counsel in these proceedings, the property matter is messy and the consequences for the husband if the wife obtains her desired outcome are dire; he will lose both of the real properties in his name and may be left with nothing but significant debt. Therefore if the husband’s claim for money to pay for legal fees was reasonable in amount, and if it was necessary for the husband to obtain a lump sum in order to secure the services of a lawyer, and if the husband could be given a lump sum without potentially impacting on the wife’s entitlement to a property settlement, then I would be inclined to make the order the husband seeks.
34. Unfortunately the husband fails at every hurdle.
35. The first problem is that the husband seeks to diminish a modest pool and it is particularly important therefore to ensure that if he is given something it is no more than is absolutely necessary to pay his legal fees. He sought about $114,000.00 for legal costs in all being $15,000.00 to pay his current legal bill and about $100,000.00 on account of future costs but he provided only the vaguest evidence about why he required $100,000.00.
36. He said that his solicitor had informed him that the hearing might take 10 days and cost $150,000.00 but I cannot see how the property matter can possibly take 10 days to hear; my estimate would be 3.
37. I cannot be certain at this stage about the extent if any to which the parenting matter will need a hearing given that there are final orders in place. If it does and if the matters are heard together this will add to the hearing time but I cannot be satisfied that the husband needs $100,000.00 to fund future legal representation let alone $150,000.00 and there is no evidence which would allow me to proportionally scale this back unless I use a very rough rule of thumb and use an amount of $30,000.00.
38. The second problem is that the husband’s solicitors did not cease to act for him of their own accord, he terminated their instructions. There was no evidence that his solicitors required a lump sum in order to continue to act for him and an examination of the details of his income and expenditure annexed to his affidavit suggests that he could continue to pay his solicitors from income if he chose.
39. The husband is employed by (employer omitted) as a (occupation omitted). On the basis of the payslip he provided for the week ending 7 June 2015 his income is $212,155.88 per annum or $4,079.92 per week gross.
40. The amount he received in the week of 7 June 2015 was higher than this, he received $5,116.52 gross that week. From this was deducted $1,930.00 tax and $475.00 being the garnishee for the defamation costs debt. Added to it was $310.50 being a “meal/incidental’s” allowance which he receives free of tax making his total in hand for that week $3,022.02.
41. However the husband worked out an average weekly net amount of $2,561.64 using the year to date figures on the payslip and for the purposes of this exercise I will be cautious and use this figure.
42. The husband also receives net $330.00 per week from the Property P property giving him an average disposable weekly income of $2,891.64.
43. The husband provided a breakdown of his weekly expenditure which appeared to demonstrate that he was spending $2,637.27 per week leaving a surplus of $254.37. However he included in his expenditure the garnishee amount of $475.00 which had already been deducted to arrive at the net weekly income of $2,561.64, and he included $198.00 per week university fees for his son Y but provided no evidence that these could not be deferred and repaid by Y once he commenced earning income.
44. Leaving aside any other issues which might exist in relation to the husband’s expenditure he thus has $927.37 per week or $48,223.24 per annum surplus income available to him, not $254.37 or $13,227.24 as he suggested.
45. I cannot be satisfied that if the husband has $927.37 per week surplus income that he would not be able to obtain a personal loan if he needed, especially if the amount he sought was something like $30,000.00 to $45,000.00 rather than $100,000.00, and I cannot be satisfied that alternatively he could not reach some other arrangement with a solicitor about paying his legal fees.
46. The final problem, and it would cause the husband’s application to fail even if the other issues did not exist, is that I must be satisfied that any order I make pursuant to s.79(2) FLA is just and equitable.
47. The parties had a short relationship and at first blush the wife’s claim that she should be able to scoop up almost all the remaining non-superannuation assets seems ambitious, but I cannot immediately dismiss as fanciful the wife’s claim that she will be able to demonstrate that the husband has done away with $1.5m of value from the pool since separation. It would be unsafe at this stage for me to make an order which would prevent the wife obtaining the amount she claims if I ultimately determine that she is entitled to it.
48. There is no evidence that the husband would easily and quickly be able to restore $114,000.00 to the pool if necessary and I therefore cannot be satisfied that I will ultimately be able to do justice and equity to the wife in terms of a property settlement if I allow the husband to diminish the pool by $114,000.00 at this stage.

The husband’s application to obtain a lump sum to pay the judgment debt

49. The husband’s application for money to pay out the judgement debt must also be dismissed, again because I simply cannot be satisfied that if I allow the husband to obtain this money the position will be able to easily and quickly be restored if the wife succeeds with her claim for a property settlement.
50. There is also no urgent necessity for the husband to obtain a lump sum to pay this debt. The wife is not pressing for a lump sum and it is being recovered by means of a garnishee of his wages which given his income is not impacting in any way on his ability to live.
51. The husband’s application for litigation funding and money to pay the balance of the judgment debt must therefore be dismissed.

I certify that the preceding fifty-one (51) paragraphs are a true copy of the reasons for judgment of Judge Terry

Associate:

Date: 22 July 2015

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^[1] There is an issue on the wife’s case about whether some sort of personal relationship continued for a period after that but that is neither here nor there for the purposes of this application.
^[2] Zschokke & Zschokke ([1996] FamCA 79; 1996) FLC 92-693.
^[3] Strahan & Strahan (2011) FLC 93-466.
^[4] Harris & Harris [1993] FamCA 49; (1993) FLC 92-378.