BERRELL & TILY

[2020] FamCA 1050

FAMILY COURT OF AUSTRALIA

BERRELL & TILY [2020] FamCA 1050

FAMILY LAW – LITIGATION FUNDING – Where the matter must proceed to a threshold hearing to determine the existence of a de facto relationship – Where the Applicant has already received $50,000 in litigation funding – Whether the Applicant is entitled to further litigation funding – Orders made for further litigation funding – Where the Respondent seeks an order restraining the Applicant from dealing with any asset – Application for injunctions dismissed.

Family Law Act 1975 (Cth) ss 79, 90SM, 117(2)

Norton & Locke (2013) FLC 93-567
Salvage and Fosse (2020) FLC 93-966

APPLICANT: Mr Berrell

RESPONDENT: Mr Tily

FILE NUMBER: SYC 3428 of 2018

DATE DELIVERED: 9 December 2020

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Stevenson J

HEARING DATE: 14 October 2020

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Mr Hall

SOLICITORS FOR THE APPLICANT: Hall Partners

COUNSEL FOR THE RESPONDENT: Dr Barnett

SOLICITORS FOR THE RESPONDENT: Pearson Emerson Family Lawyers

Orders

1. Each of the parties forthwith do all things and execute all documents necessary to cause payment for the benefit of the Applicant Mr Berrell of a sum of $25,000 from the controlled monies account presently maintained by D Solicitors to the trust account of Hall Partners Solicitors.

2. The solicitors for the Applicant, Messrs Hall Partners, are at liberty to draw upon such funds only for the purpose of payment of legal costs, expenses and disbursements incurred by the Applicant in these proceedings.

3. Otherwise, the Response to an Application in a Case filed by Mr Berrell of 16 July 2020 is dismissed.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Berrell & Tily has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 3428 of 2018

Mr Berrell

Applicant

And

Mr Tily

Respondent

REASONS FOR JUDGMENT

The proceedings

1. Mr Berrell and Mr Tily are parties to proceedings pursuant to section 90SM of the Family Law Act (Cth) (“the Act”). A threshold issue is the existence or otherwise of a de facto relationship between the parties, which is listed for trial for three days commencing on 25 January 2021. The applicant, Mr Berrell, alleges that a de facto relationship existed between the parties during the period 2007 to 2014. The first respondent, Mr Tily, alleges that the parties' relationship was one of friendship and a joint commercial enterprise or partnership. Mr Tily denies completely that the parties engaged in a sexual relationship. Mr Tily denies that the parties ever lived in a de facto relationship for the purposes of the Family Law Act 1975.

2. By a Response to an Application in a Case filed on 16 July 2020, the applicant sought the following orders:

   1.That Mr Tily's "Application" filed 25 June 2020, (together with this "Response"), be referred to Judge Stevenson on a date prior to 28 September 2020;

   2.That for the purposes of the hearing of the Application and Response that Mr Tily disclose to the Court all amounts paid by him since November 2017, for legal costs and disbursements incurred in these proceedings, and concerning the Supreme Court proceedings numbered 2014/…, transferred into this Court, in November 2017;

   3.That monies held in the controlled monies account presently maintained by D Solicitors be released to the Trust Account of Hall Partners Solicitors;

   4.That the solicitors Hall Partners be permitted to draw on those funds in respect of Mr Berrell's legal costs and expenses;

   5.That Mr Berrell be granted leave to rely upon the Amended Application in a Case, served by him in these proceedings on 2 June 2020 together with such other affidavits as are appropriate;

   6.Leave to rely on such other supplementary further affidavits as are produced to the Court for the purposes of the hearing of this Application and the hearing on 29 September 2020;

   7.An order restraining Mr Tily from dealing with any of his assets or from dealing with any asset in which he has an interest directly or indirectly, otherwise than in the usual course of business and in any event not without leave of the Court for any transaction or series of transactions as in aggregate exceeds the sum of $10,000, without the written consent of the Mr Berrell;

   8.An order granting Mr Berrell permission to caveat the titles to the following properties:

   (a)F Street, Suburb G in the State of New South Wales;

   (b)K Street, Suburb J in the State of New South Wales;

   (c)Any other properties in which Mr Tily has an interest coming to the notice of Mr Berrell (sic);

   9.Liberty to apply

   10.Such other orders as the Court thinks fit.

3. A Case Outline filed on behalf of the first respondent indicated that he sought the following orders:

   1.The Response to Application in a Case filed by the applicant on 16 July 2020 be dismissed.

   2.The applicant meet the First Respondent's costs of and incidental to the Response to Application in a Case filed on 16 July 2020.

Background

1. The first respondent commenced these proceedings on 18 December 2014, by way of a Summons filed in the Equity Division of the Supreme Court of New South Wales.  The first respondent sought relief against the applicant and his parents Ms B Berrell and Ms C Berrell.  On 13 April 2015 the first respondent filed a Statement of Claim in the Supreme Court.

2. On 27 March 2015 the first respondent made an application for orders that a sum of $375,000 be paid into the Supreme Court.  These funds consisted of part of the proceeds of sale of a real property owned by the applicant and his former wife.  Such an order was made by consent on 2 April 2015.  Counsel for the first respondent stated in a Case Outline document that the sum of $526,661 is currently held in a controlled monies account as a result of the Order of the Supreme Court made on 2 April 2015.  These funds are held in a controlled monies account operated by D Solicitors, the previous solicitors for the applicant.

3. On 28 April 2017 the applicant sought an order in the Supreme Court for release of a sum of $100,000 from these funds to meet his legal fees.  On 27 October 2017 Slattery J made Orders which permitted the applicant to receive a sum of $50,000 for that purpose.

4. On 29 November 2017 Slattery J ordered that the proceedings be transferred to the Family Court of Australia.  The preliminary issue of the existence of a de facto relationship was listed for trial to commence on 1 June 2020 but that hearing could not proceed on the allocated dates.  Fresh trial dates in 2020 were vacated on the application of the first respondent, on the basis that his partner was due to give birth to their child at that time.

Consideration

Litigation funding

1. I reject the submission on behalf of the applicant that he seeks access to "his own money" rather than litigation funding.  Beneficial ownership of these monies was at issue in the Supreme Court proceedings, which remain on foot pending the outcome of the hearing of the threshold issue in this court.  The application for access to those funds is worded expressly in terms of payment of legal costs.

2. Counsel for the first respondent effectively conceded that the Court has jurisdiction to make an order for access to the funds, as sought by the applicant, pursuant to section 117(2) or its inherent power. The submission on behalf of the first respondent was that it would be inappropriate that there be such an order in the circumstances of these proceedings.

3. As the Full Court observed in Norton & Locke (2013) FLC 93-567 (“Norton & Locke”):

   22.There is no doubt that the Family Court has the "... authority and duty to decide whether a controversy brought before it lies within the limits of its jurisdiction ..."  (per Gibbs CJ in Ex Parte Green 193, citing Reg. v Federal Court of Australia; Ex parte WA National Football League (1979) 143 CLR 190). ..."

1. In Salvage and Fosse (2020) FLC 93-966, the Full Court considered an application for litigation funding in the context of proceedings to set aside a Binding Financial Agreement. Ryan and Aldridge JJ observed as follows:

   8.This is not a case where there are assets available for division, and section 79 or its equivalent section 90SM of the Act which might ultimately apply here, have no operation because of the Cohabitation Agreement. Rather, the application is to set that agreement aside. Nonetheless, it is accepted by the appellant, as it must be, that section 117 of the Act empowers the court to make such orders as to costs and is of sufficient width to empower the making of the order sought by the respondent in the proceedings.

2. Ryan and Aldridge JJ observed further:

   14.The critical question therefore is whether the applicant has "any real prospects of obtaining justice unless the order is made" (Parker v Parker (1992) 16 Fam LR 458 at 461), or in terms of section 117(2) of the Act whether in all of the circumstances the costs order is just. That question raises, at least, consideration of the strength of the applicant's case and the effect of the order upon the respondent.

   15.It would not be just, for example, for the respondent to have to pay the legal expenses of the applicant, where the case to be taken was weak, fanciful or misguided or where the effect on the respondent of such an order would work an injustice.  We do not consider it helpful, however, for there to be a need to identify the applicant's case as strong, persuasive or such like to justify an order.  That invites a descent into semantics and an artificial characterisation of the strength of the proposed proceedings.  The consideration should be whether the case to be raised by the applicant is sufficient, in all of the circumstances, as to its nature and prospects, to justify an interim order for costs ...

3. The applicant relied in part upon his impecuniosity in support of his application for release of funds to meet his legal costs.  He deposed that his income consists solely of compensation payments of $864 per week and that his assets consist only of personal effects and jewellery.

4. The first respondent deposed that he has expended $722,356 on legal costs in the proceedings in the Supreme Court and the Family Court of Australia.  He indicated that his anticipated legal costs in respect of the hearing of the threshold issue amount to some $103,400.

5. The applicant asserted a de facto relationship of approximately seven years' duration.  The applicant contended that the parties occupied the same house for a period but maintained separate bedrooms in order to conceal their relationship from the first respondent's family.

6. The applicant contended that the first respondent paid $25,000 each for permanent residency applications in Country L himself for each party.  He deposed that they had a joint intention to live together as a couple in Country L and that they did so for a period unspecified in the evidence in this application.

7. There are numerous factual disputes which are apposite to the issue of the existence or otherwise of a de facto relationship.  It is likely that the credit of the parties and their witnesses will be a significant element in the resolution of these issues.

8. It seems to me that the applicant has an arguable case that a de facto relationship existed between the parties.  I am of the view that his case cannot properly be categorised as "weak, fanciful or misguided", in the words of the majority in Norton & Locke.  I do not take the view that an order for litigation funding would work an injustice to the first respondent.  He claims to be entitled to the whole of the funds held in the controlled monies account but that proposition rests on his complete success in the proceedings in this court and/or the Supreme Court.  In my view, it cannot be concluded that the applicant is unlikely to receive an order for alteration of property interests.

9. There is an obvious imbalance in the financial circumstances of the parties, which places the first respondent at a significant advantage over the applicant.  He is impecunious and, by contrast, the first respondent has paid legal fees in a sum in excess of $700,000.  It seems to me that there is little prospect that the litigation will take place "on a level playing field" unless the applicant has access to funds to meet his legal costs.

10. It does not follow, however, that the applicant should receive the whole of the amount which he seeks as litigation funding.  He presented no evidence as to his anticipated legal costs, nor did he identify what aspects of the proceedings are to be funded by the sum of $50,000.  In particular, there was no evidence of the amount which he requires to fund his litigation to be stage of the threshold hearing.

11. The applicant gave no account of his use of the sum of $50,000 which he received pursuant to the orders of the Supreme Court.  I am prepared to assume that all of those funds have been applied to legal costs, as the hearing of the threshold issue has been fixed for trial on two occasions.  It seems to me to be a reasonable assumption that all necessary preparatory work had been carried out prior to the first fixture in June 2020.

12. In the absence of any evidence to justify expenditure of a further sum of $50,000, I am not prepared to make an order which would see the applicant receive that sum from the controlled monies account.  Doing the best I can in these circumstances, I will order that the applicant receive a sum of $25,000.  In my view, that sum should be adequate to allow him to participate in the threshold hearing on a level playing field with the first respondent.

Injunctive relief

1. As was properly acknowledged by counsel for the first respondent:

   27.As was found in the matter of Norton & Locke ... the Court has limited jurisdiction to grant an injunction pending determination of jurisdictional facts, where the injunction is necessary to "protect its function" as a court.

   It was contended on behalf of the first respondent, however, that the applicant failed to establish that there are compelling circumstances such as to warrant the granting of the injunction.

2. In Norton & Locke the Full Court said:

   49.Taken together, the authorities point to the Family Court having power – within its jurisdiction to determine if it has jurisdiction – to control its own processes and to protect its function as a court by granting interlocutory injunctions so as to "preserve the status quo" pending the resolution of the issue of jurisdiction.

   50.However, the ambit of relief "preserving the status quo" is limited by the narrow ambit of the power itself and by the narrow jurisdiction within which the power is being exercised.  As a result, the cautionary notes sounded by the authorities in respect of Mareva orders have a direct bearing upon the nature and ambit of interlocutory injunctions of the type under discussion.  In particular:

   a.the preservation of an existing state of affairs (the "status quo") is not sufficient, of itself, to grant the relief – an injunction is not granted "as of right" when an assertion of jurisdiction and an entitlement to de facto financial relief is sought;

   b.the injunction "... must be necessary to prevent the abuse of the process of the court" (per Wilson and Dawson JJ in Jackson at 617-8) or to "protecting its function as a court" (per Menzies J in Ex parte Bevan;  Gibbs CJ in Ex parte Green);

   c.the relief must be required by reference to an emergent state of affairs which demonstrate a clear danger to the applicant obtaining relief reasonably sought.  That is where "...the circumstances point compellingly to a need to preserve the status quo as an interim measure pending a hearing to determine whether interlocutory relief should be granted" (per Wilson and Dawson JJ in Ex parte Green);

   d.the relief should be granted only "...while the question whether [the court] had jurisdiction remained in doubt" (Ex parte Green);

   e.the questions of fact and law upon which jurisdiction depended would have to be determined as a matter of the "utmost urgency" and "...once it appeared that jurisdiction was lacking, the injunction would have to be dissolved, however inconvenient that course might appear"  (Ex parte Green);

   f.the remedy is not to be used so as to "create security for the [applicant] or to require a [respondent] to provide security as a condition of being allowed to defend the action ..." (per Deane J in Jackson v Sterling Industries Pty Ltd);

   g.pending a decision as to jurisdiction, regard must be given to the fact that the injunction "...imposes a severe restriction upon a [respondent's] right to dealt (sic) with his or her assets" (per Dixon J in Glover v Walters);

   h.proper regard must be had to the fact that jurisdiction has not been decided and the fact that, consequently, a possible outcome is that no remedy sought by the applicant may be granted.  Equally, proper regard must be had to the nature, extent and value of the relief claimed by the applicant in the event that jurisdiction is established;

   i.the remedy, if granted should go no further than that which is required to preserve property in respect of which a danger is established pending determination of the jurisdictional question.

3. Accordingly, I accept that the Court has jurisdiction to make injunctive orders of a narrow compass in the present circumstances.  It may well be that the terms of the injunctive orders sought by the applicant extend beyond the parameters described by the Full Court in Norton & Locke.  In my view, however, there are two clear reasons for refusal of the application for injunctive relief.

4. Firstly, I accept the submission on behalf of the first respondent to the effect that the applicant failed to adduce evidence which would justify the granting of the injunction sought by the applicant.  He simply identified assets in which he asserted that the first respondent holds a legal or beneficial interest.  He adduced no evidence of any intention, threat or conduct on the part of the first respondent to dispose of or otherwise deal with any of this property.

5. Secondly, in my view, a significant matter which militates strongly against the granting of the injunction is the impecuniosity of the applicant.  He proffered no undertaking as to damages, nor gave any explanation as to how he might do so in his present financial circumstances.  This matter is significant because the injunctive orders sought would be highly likely to impact adversely on the commercial activities of the first respondent.  I decline to make the injunctive orders sought by the applicant.

Leave to rely upon further affidavit material

1. In my view, there is no reason for this issue to be determined prior to the commencement of the trial and I will not do so.  I would note that the Court has been informed on two prior occasions that the applicant was ready to proceed with the hearing of the threshold issue.

I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Stevenson delivered on 9 December 2020.

Associate: 

Date:  9 December 2020