FAMILY LAW CASE WATCH – PAILING & GILBERT [2015] FCCA 2533

 In Case Watch, Family Law

A CAUTIONARY TALE

Property proceedings – parties self represented at final hearing, assessment of contributions including initial contributions, add backs, negative contribution – waste and consideration of legal fees.

Pailing & Gilbert [2015] FCCA 2533

Peter Pavusa accredited family law specialist is a Brisbane Family Lawyer of Merthyr Law, who practices exclusively in Family and Relationship Law.

This was a decision of His Honour Judge Brown.

Facts:

The Husband and Wife commenced a de facto relationship in 1994, married in 2002 and separated on 27 August 2012. They have since divorced.

There are two children, born in 1995 and 1997.  The children live with the Wife.

The Wife has a child from an earlier marriage, born in 1992 who was two years of age when the parties began their relationship.

In paragraph 26, when the matter came before His Honour at the final hearing commented that:

  1. …In all the circumstances, it seemed to me to be largely axiomatic that there were great perils for the parties in proceeding with what seemed to me to be potentially extremely vitriolic property proceedings, given the extent of the property available and the likely costs“.

The net equity of the assets in dispute were in the amount of approximately $600,000.

In paragraph 28, His Honour confirmed when the matter first came before him at an initial hearing that:

  1. [I]t behoves the parties to consider closely how much of their scarce funds they are prepared to commit to litigation. Considerations of prudence dictate that there should be some level of objective proportionality between what each is likely to derive from the proceedings and what each will spend in achieving it. Such considerations are particularly germane in the period prior to the parties embarking upon the formal court inaugurated conciliation process

His Honour then commented at the final hearing

Although it might appear both trite and condescending for me to point it out, the parties are currently confronting a serious mutual problem. It is their problem, not the court’s problem. In such circumstances, it is often useful for the parties concerned and their lawyers to approach the case arising as a problem solving exercise. From my perspective, very often, matrimonial property proceedings are an exercise in financial harm minimisation”. [3]

In paragraph 29, His Honour then went on to comment:

  1. Regrettably, Cassandra-like, I perceive that my admonitions have gone unheeded. The parties were each unrepresented at final hearing. In the husband’s case, he has incurred legal fees of approximately $42,000.00, [4] whilst the wife has incurred legal costs of approximately $74,000.00 [5]“.

His Honour no doubt bearing in mind the parties were self represented and due to the “extremely vitriolic” nature of the proceedings His Honour gave a detailed and considered judgment which raised some interesting points.

In summary they are:

  1. His Honour stated that the position in respect of the process to be applied to the resolution of matrimonial property matters until recently was well settled and required the application of… a preferred approach involving a four step process namely:
  • indentifying and valuing the property of the parties;
  • identification and valuation of contributions to the property (including property no longer owned by the parties); and
  • identification and assessment of various matters in Section 79(4)(d)(2)(g) including matters in as far as they are relevant in Section 79(2).
  1. Considerations of justice and equity. His Honour referred to Hickey & Hickey & Attorney-General (intervener) [2013] FLC 93-143 at 78,386 and Bevan & Bevan [2013] FAM CAFC 116.
  1. His Honour in paragraph 136 discussed the case of Stanford v Stanford.
  1. His Honour then reviewed the case of Bevan and summarised his opinion that (paragraph 140) “From this, I take it the four step process remains a valid approach in the vast majority of cases, providing care is taken not to overlook the requirement that all orders altering property interests in proceedings arising under the Act, the justice and equity”.
  1. His Honour then commented in paragraph 141 that “… it is abundantly clear that the marriage between the parties has common to an end and, as such, there is logical justification for them holding any joint community property together. In particular, they have already agreed to the sale of the matrimonial property, which they jointly owned.”
  1. His Honour then commented in paragraph 142 “In those circumstances, I am satisfied that is appropriate to adopt the four step process in this case and it is in accordance with the notions of justice and equity that the court proceeds to make orders pursuant to Section 79 of the Act, with respect to the parties various proprietary interest.”

 

  1. His Honour also commented in paragraph 143 that, “Although the multi-step envisaged by Hickey remains relevant it is less prescribed as a consequence of what was said by the High Court in Stanford. In this context, I respectively adopted what was said by Murphy J, Watson & Ling [2003] FamCA 57 at 13as a result of those matters, the court’s approach to Section 79/s 90SM may be less compartmentalised then what a strict or unthinking adherence to four or three (steps) might otherwise reveal.  The task is essentially holistic, it is just and equitable in the particular circumstances of the particular relationship or marriage under consideration to make an order, and if so, its terms must similarly meet that criteria.  Of course, holistic though that approach is, it must be referenced to what the Act requires and care must be taken to ensure that the court’s reasons make that clear.

 

  1. His Honour considered the concept of a notional “add back” to the pool of matrimonial assets in particular in relation to legal fees. His Honour noted there are three grounds whereby a notional “add back” could be brought into account, namely:

 

  • matrimonial assets have been utilised to pay the parties legal fees thus diminishing the pool of assets value to be distributed between them and so creating a situation where the normal rule by where each party should bear their own costs is defeated (in the marriage of DJM & JLM [1998] 23 Fam LR 296;

 

  • where there has been a premature distribution of matrimonial assets (in the marriage of Townsend [1994] 18 Fam LR 505;

 

  • where one of the parties have embarked on a course of conduct, either recklessly or with the direct intend to reduce or minimise the effective value of some item of matrimonial property (in the marriage Kowaliw [1981] FLC 91-092 at 76,644.

 

  1. His Honour then in paragraph 152 referred to the case of “NHC & RCH [2004] FLC 93-204 at 79,322-3 and in particular “if the funds used existed at separation, and are such that both parties can be seen as having an interest in them (on account, for example, of contributions), then such funds should be added back as a notional asset of the party who has had the benefit of them.”
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