Full Court- interim property settlement
The Full Court of the Family Court in Strahan and Strahan has restated the approach to be taken for interim property settlement.
The wife successfully appealed against orders by Strickland J that awarded her $1 million by way of interim property settlement. She obtained $5 million from the Full Court. These were to be used for legal costs! The court comprised Justices Boland, Thackray and O’Ryan.
The words that ring out from the judgment (aside from the huge amount of costs) were these by Thackray J:
It is important to keep in mind that the wife is proposing to spend funds that
the husband acknowledges are hers. In my view, that is her prerogative – and a
matter between her and her legal advisors.
Boland and O’Ryan JJ held:
Subsequent to the conclusion of the hearing we referred the decision in Wenz v
Archer to the parties and provided them with an opportunity to make further
submissions. We subsequently received written submissions from each of the Wife
and the Husband.
On behalf of the Wife it was submitted, and we agree, that
the reasons of RiethmulIer FM provide substantial support for the submissions
put on behalf of the Wife for the following reasons:
The Federal Magistrate
concluded from a consideration of the authorities that the occasion for the
exercise of the discretion identified in Harris did not turn on “a test
requiring ‘compelling circumstances’ per se, rather than simply identifying
considerations that would be relevant to the exercise of the discretion” and the
Full Court in Harris “contemplated the exercise of the power ‘where it is
necessary’ … if injustice is to be avoided”.
The Federal Magistrate
concluded that the test for an interim order under s
79 of the Act “must be whether, in all the circumstances, it is
The Federal Magistrate held that the exercise of the power to
make an order under s
79 of the Act on an interim basis requires an analysis of s
79 factors, including a consideration of whether the effect of the interim
order might be unduly to limit the final order which might be made (i.e., the
adjustment or claw-back issue identified in Zschokke).
Magistrate recognised a relevant factor in the exercise of the discretion in
that: “It cannot be the case that a party who has an irresistible claim to a
substantial share of the property of the parties should be held out of that
property while the matter is litigated”.
The Federal Magistrate recognised
that “generally it was better there be once and for all s.79
order, which apparently was the point of departure for the exercise of the
discretion (ie, factors must exist which render it appropriate that the prima
facie or usual position be departed from)”.
It was submitted on behalf of the
Wife that if the Wife were to demur from the reasoning of the Federal
Magistrate, it would simply be that the Federal Magistrate did not sufficiently
and clearly distinguish between the procedural or adjectival issue being the
question of whether the Court should exercise its discretion to entertain or
embark on hearing and determining an interim property settlement application and
the substantive question of the nature of the order to be made once it has been
decided it is appropriate or just to hear and determine an interim application.
We have already said that we agree with the two stage approach.
to the first stage, in our view, when considering whether to exercise the power
79 and s
80(1)(h) of the Act to make an interim property order the “overarching
consideration” is the interests of justice. It is not necessary to establish
compelling circumstances. All that is required is that in the circumstances it
is appropriate to exercise the power. In exercising the wide and unfettered
discretion conferred by the power to make such an order, regard should be had to
the fact that the usual order pursuant to s
79 is a once and for all order made after a final hearing.
In Harris at
79,930 the Full Court gave some examples of circumstances where it may be
appropriate to exercise the power being “where both parties agree to the
disposal of some assets pending the trial” and “[u]rgent situations” to avoid
injustice. Another example is where, as in this case, one party requires funds
to assist in defraying the costs of litigation without which funds an injustice
may be caused.
Then turning to the substantive step we adopt what the Full
Court said in Harris at 79,930 in relation to the second and third matters which
we will now discuss.
In relation to the second matter, as the jurisdiction
79 of the Act is being exercised the provisions of that section must be
considered and applied but with limitations given that it is not the final
hearing. There is also no requirement of compelling circumstances in relation to
the substantive step.
As to the third matter identified at 79,930 by the
Full Court in Harris, in discussion before us it was described as the
“adjustment issue” or “claw-back issue”. It was submitted by senior counsel for
the Wife that it is relevant to consider whether an order would give the
applicant “more than they would be indubitably entitled to on a final hearing”
or alternatively “would it give them so much that it could not be adjusted on a
final hearing?” As we have observed the Full Court in Zschokke at 83,220-221
stressed the importance of consideration of the “adjustment issue” if the power
80(1)(h) of the Act is being exercised. We accept the submission and observe
that this matter is relevant because the discretion conferred by the power in s
79 is to make such order as the Court considers appropriate provided it is
just and equitable to make the order in circumstances where the power will not
be exhausted by the interim order. As Bryant CJ and Coleman J observed in Gabel
v Yardley at  and  the interim order must be capable of variation or
reversal without resort to s
79A of the Act or appeal. As Finn J said at  the interim order must be
“capable of alteration at any time prior to, or as part of, the final exercise
of the s
Once a court proceeds to exercise the power in s
79 of the Act, being in the substantive phase, a court is required to
undertake consideration of the matters in s
79(4) including by reference to s
79(4)(e) the matters in s
75(2) so far as they are relevant. However consideration of such matters may
be brief and if it is established that “it seems likely to the Court that …
the applicant … will be likely receive by way of property settlement a sum
sufficient to cover the advance, that would seem to be sufficient to enable the
order sought to be made”: Zschokke; Polletti and Polletti per Nygh J and Wenz v
Archer. As senior counsel for the Wife submitted, “provided scope can be found
within the assets of the parties for an order of the size sought … then that
should be the end of the matter”. In other words, in such circumstances the
applicant would only be receiving what he or she was entitled to receive when
the power was exhausted.
The legislation does not prescribe what the Full
Court in Zschokke at 83,218 described as “preconditions” and nor would we seek
to exhaustively prescribe matters that may be relevant to take into account in
the exercise of the discretion under s
80(1)(h) of the Act. As to the three “criteria” identified by the Full Court
in Zschokke, we accept that an inability on the part of an applicant for an
interim property order to defray the costs of litigation to meet his or her
litigation costs would be a relevant matter to take into account at the
procedural or first stage. Senior counsel for the Wife submitted that it may be
relevant at the substantive or second phase in reviewing the “necessarily
limited and impressionistic budget for costs” to ensure that the application is
bona fide. We are of the view that it may be that any issue about the bona fides
of an application is relevant at the procedural phase in the context of
considering if in the interests of justice it is appropriate to make an order
before the final hearing.
We also emphasise that in order to establish an
appropriate case for an interim property settlement order more is required than
the mere fact that upon a final hearing the applicant would receive the property
being sought (or an amount in excess of the funds being sought) from the other
As to the other matters being a position of relative financial
strength on the part of the respondent to an application and the capacity of the
respondent to meet his or her own litigation costs, there is no doubt that the
financial circumstances of both parties are relevant at the substantive stage
and may also be relevant at the procedural stage. Senior counsel for the Wife
submitted that all of the matters discussed by the Full Court in Zschokke are
self-evident and we accept that this is so in relation to at least two of the
matters being the need for funds and the financial circumstances of both
As to the various matters discussed by Brereton J in Paris King
Investments which we have discussed above, we do not propose to deal with all of
what his Honour said, however we make the following observations about some of
the matters. Obviously the applicant should have “at least an arguable case for
substantive relief which deserves to be heard”. Further, in determining at the
procedural stage whether to exercise the jurisdiction there may need to be
evidence of the applicant’s “likely costs of the litigation” given that the need
for funds to defray litigation costs and expenses is the circumstance propounded
as to why it is appropriate that an order be made. We also accept that “it is
not an essential precondition” that the applicant’s legal representatives will
not continue to act unless the costs are paid or secured on an ongoing basis.
In a separate judgment, but agreeing with the result, Thackray J held:
The Full Court in Zschokke also mentioned (at 83,217) three matters that
would be relevant in considering an application for an interim property
settlement order that was intended to fund legal costs. These were the matters
that Strickland J referred to in his reasons, namely:
a position of
relative financial strength on the part of the respondent;
capacity to meet his own litigation costs; and
an inability on the part of
the applicant to pay her costs.
None of these three matters can be referenced directly to the statutory
provisions. However, the legislation itself provides no guidance to the Court in
determining when it is appropriate to exercise the power to make an interim
property settlement order. It was to be expected that over time jurisprudence
would develop to assist judicial officers when called upon to exercise their
discretion. These attempts to ensure some predictability in the exercise of
discretionary powers come in the form of statements of principles or guidelines.
However, as the High Court has made clear, these are not binding principles of
law. Mason and Deane JJ said in Norbis v Norbis  HCA
FLC 91-712 at 75,166, “the nature of the issues which arise under sec.
79 is such that there is either little or no scope for giving guidance in
the form of binding rules of law”.
The Full Court recognised as much in Harris when it said (at 79,928)
80 is intended to be a wide, enabling provision and there is no
justification for imposing limitations upon its normal or ordinary meaning and
operation when applied to s.
79”. The Full Court’s reference in Harris to the need to establish
“compelling circumstances” must therefore be read in light of that undoubtedly
accurate statement of the law. It should also be observed that the Full Court in
Harris used other, less rigorous, formulations in describing when an interim
order might be made. For example, the Court referred to interim orders being
made in “appropriate circumstances” (at 79,928) and in “a proper case” (at
79,929). Similarly, Nygh J in Burridge and Burridge (1980)
FLC 90-902 at 75,679 referred to an order being made under s 80(2)(h)
if the “justice of the case so requires”.
Accordingly, I accept the submissions of senior counsel for the wife
80 confers a “free standing and unfettered discretion to entertain an
application for an interim property settlement”;
it is “contrary to proper
judicial practice to confine the jurisdiction … by artificial formulae”; and
the only limits on the application of s
80 “are the usual limits on the exercise of a judicial discretion”.
It is pertinent to note that the High Court has considered an attempt
to confine the exercise of a judicial discretion by a similar test to that
applied by the trial Judge in the present matter. In AMS v AIF
(1999) 199 CLR 160 the High Court found it was impermissible to
impose upon a parent the obligation to demonstrate “compelling reasons” to
justify a proposed relocation of a child when such an obligation is “not
warranted… by the statutory instructions” (at  per Kirby J; see also at
 per Gleeson CJ, McHugh & Gummow JJ).
Accordingly, I respectfully adopt the view expressed by
Riethmuller FM in Wenz v Archer (2008)
40 FamLR 212 at  where, after reviewing relevant authorities, his Honour
Whilst the phrase “compelling circumstances” is often referred to, it
appears to me that this is simply descriptive of the need for there to be
matters that weigh sufficiently against the benefits of having only one exercise
of a s
79 power, rather than generating a new test of “compelling circumstances”
which is not referred to in s
Riethmuller FM was alluding in this passage to the view expressed by
the Full Court in Harris that “as a generality, the interests of the parties and
the Court are better served by there being one final hearing of s.
79 proceedings”. In this regard it is important to note that s
80(1) is couched in the permissive. Hence, although the Court must give
consideration to the matters set out in s 79(4)
when hearing an application for an interim payment, it has no obligation to make
an interim order. The Court “may” do so if it considers that it should in the
exercise of its discretion.
In every defended case one of the parties will claim they are entitled
to a payment or transfer of property from the other party. In many cases the
other party will acknowledge they are likely to be ordered to transfer property
or make a payment. That, however, could not of itself be sufficient to make it
appropriate for the Court to make an interim order. Circumstances may change
radically during the course of proceedings, as has been seen with recent severe
fluctuations in the market. The personal circumstances of the parties may change
dramatically. Furthermore, although a party may anticipate ultimately being
ordered to transfer property or make a payment, they may legitimately expect to
obtain an order for costs against the other party which will be satisfied from
funds or property that would otherwise have been transferred.
These sorts of
considerations provide a strong basis upon which the Court should maintain its
traditional stance that there should ordinarily be only one hearing of disputes
concerning alteration of property issues. I accept the submission of senior
counsel for the wife that something out of the usual course would need to be
established before the Court could be expected to devote its resources to
resolution of disputes about interim alteration of property interests. However,
once the Court has determined that it is appropriate to embark upon the hearing
of an interim dispute, it has no alternative other than to exercise (or decline
to exercise) the power to make an interim order by application of the relevant
provisions of the legislation.
In my view, the two step approach advocated
by senior counsel for the Wife aptly encapsulates the way the Court should
approach an application for interim property settlement. The Court must first
identify circumstances that make it appropriate to give consideration to
exercising its power to make an interim order. It is at this stage that the
Court has regard to the policy consideration that it is generally in the
interest of the parties and the Court for there to be only one exercise of the s
79 power. However, once the Court has determined that the interests of
justice require it to exercise the power, the conditions on which the power is
to be exercised are governed only by the obligation to make an order that is
“appropriate” and to ensure that the proposed order is “just and equitable” by
reference to the matters set out in s 79(4).
I accept the submission of senior counsel for the Wife that in applications
designed to secure funds for legal costs it is appropriate for the Court to give
consideration to whether the claim for costs is “genuine” – i.e. that a party is
not bringing an interim application on a pretext. However, once the Court is
satisfied the claim is genuine, it should not “take a narrow view of the costs
budget”. I also agree that “it is dangerous for the Court to put itself in the
solicitor’s chair [especially in a case where] there are 182 boxes of materials
to go through”.
Finally, I accept the submission of senior counsel for the Wife that it
is not appropriate to seek to control the extraordinary level of costs incurred
in this litigation by denying only one of the parties access to funds. In this
regard it is important to keep in mind that the wife is proposing to spend funds
that the husband acknowledges are hers. In my view, that is her prerogative –
and a matter between her and her legal advisors.
Thank you to Brisbane barrister Malcolm Pieterse for bringing this case to my attention.