Burt & Merrill (No 3) [2025] FedCFamC1F 598 (25 July 2025)

1. Leave be granted to the first respondent to make an application for litigation funding against the third respondent dated 18 June 2025
2. By 14 August 2025 the second and third respondents each file an affidavit detailing:

(a) what steps are required to be taken by each of them or the applicant and first respondent to finalise the administration of the bankrupt estate of the first respondent and the liquidation of C Pty Ltd (In Liq) (ACN [...]) ("the steps");

(b) the timeframe required to fulfill the steps prior to 1 December 2025;

(c) the anticipated costs of the steps; and

(d) the second respondent is to advise whether it will admit the proof of costs filed by II Lawyers or what other approach or action it intends to take in relation to that claimed debt.

1. The matter be listed for mention by web conference on 10 September 2025 at 9:30am.
2. Costs be reserved.
3. The Application in a Proceeding filed 18 June 2025 be otherwise dismissed.

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

Note: This copy of the Court's Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Burt & Merrill has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).

1. By an Application in a Proceeding filed on 18 June 2025 by the first respondent de facto wife, Ms Merrill ("the wife"), she seeks orders:

(a) for leave to bring an application for litigation funding against the third respondent, Mr PQ In His Capacity As Liquidator Of C Pty Ltd (In Liq.) (Acn [...]) ("the liquidator");

(b) that within seven days, the liquidator pay to the wife's solicitor's trust account the sum of $132,000;

(c) that the following subpoenas be issued (copied exactly as per the application):

(i) subpoena/s to II Lawyers for production and inspection of source documents of the court file MLC9912 of 2013 in anticipation of the taxation of Ms Merrills's costs and disbursements sought, and information in relation to the creation and execution of the Deed;

(ii) subpoena/s to Mr Coupe (trustee) and ST Partners for production and inspection of documents and examination of same related to the sale by ST Pty Ltd of the ring (part of the pool of assets currently before the Court to be adjudicated upon the hearing determination of the s 90SM hearing);

(iii) subpoena/s to Mr Coupe (trustee) and ST Pty Ltd for production and inspection to produce any and all correspondence, documents and the like in relation to the selection, nomination and appointment of the Trustee in Bankruptcy;

(iv) subpoena/s to Mr Coupe (trustee) and ST Pty Ltd for production and inspection taxation of costs to be reviewed by taxation experts engaged by the wife's solicitors; and

(d) that the matter be referred for judicial mediation.

1. The wife relied on an affidavit filed by her on 18 June 2025 and a Financial Statement filed 18 July 2025. She also relied upon affidavits filed by her solicitor, Mr Giramondo, on 20 June 2025 and 18 July 2025.
2. Paragraphs [6]-[7] of the affidavit of Mr Giramondo filed 20 June 2025 deposes that the wife requires litigation funding in order to obtain funds to retain lawyers to do the following:

(a) preparing for trial on 1 December 2025;

(b) ready the matter for the wife to be in a position to file proposed consent orders between herself and the applicant de facto husband, Mr Burt ("the husband"), finalising the division of property between them;

(c) make a future application for taxation of her previous solicitors', II Lawyers, costs;

(d) make future applications to remove the trustee in bankruptcy; and

(e) arrange some form of mediation.

1. By paragraphs [4]-[14] of an affidavit filed by the wife on 18 June 2025, she deposes to wishing to receive litigation funding for largely the same purposes. She notes that on 10 January 2025 orders were made by McGuire J providing her three and a half months in which to undertake the taxation of legal costs charged to her by II Lawyers. She explains that she has not undertaken that taxation of costs because she did not obtain legal representation until 26 March 2025 and that she was out of time to have the legal costs taxed by the Costs Court of the Supreme Court of Victoria or to have the costs taxed under the Legal Profession Uniform Law.
2. She further states that fees owed to II Lawyers have been submitted to the trustee in bankruptcy as a proof of debt and the trustees refused to undertake a taxation of the costs claimed.

1. By way of background, the initial hearing of the husband and wife's property matters pursuant to s 90SN of the Family Law Act 1975 (Cth) ("FLA") was conducted over eight days between 3 April 2017 until 16 October 2017. Judgment was delivered on 10 August 2018. Justice Berman was the presiding judge.
2. In July 2019, C Pty Ltd was placed into liquidation on the application of the Victorian Commissioner of State Revenue over a debt of about $23,000. Mr PQ was appointed as liquidator of C Pty Ltd.
3. On [...] December 2019, the wife became bankrupt on a creditor's petition and Mr Coupe was appointed as trustee in bankruptcy on that day.
4. In February 2023, the wife was discharged from bankruptcy.
5. Upon discharge from bankruptcy, property vested in the bankruptcy trustee does not revert to the bankrupt. The administration of the bankrupt estate continues despite discharge until the administration of the estate has concluded: see s 127 of the Bankruptcy Act 1966 (Cth) ("BA").
6. The liquidator opposes the application for litigation funding where an amount is sought out of the funds subject to the liquidation. The liquidator raises that leave is required for the wife to commence an application by reason of the operation of s 471B of the Corporations Act 2001 (Cth) ("CA") which provides:

While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with:

1. a proceeding in a court against the company or in relation to property of the company; or

b enforcement process in relation to such property;

except with the leave of the Court and in accordance with such terms (if any) as the Court imposes.

1. Court is defined under s 58AA of the CA and means any of the courts referred to in that section including the Federal Circuit and Family Court of Australia (Division 1).
2. The liquidator opposes the grant of leave on the basis that:

(a) the liquidator has as at 15 July 2025, funds in the sum of $69,022 and has insufficient funds to meet a payment of $132,000;

(b) the liquidator requires a balance of funds in the sum of at least $50,000 to meet the ongoing costs of the administration of the liquidation given that he is responsible for managing a number of commercial properties owned by the company in liquidation; and

(c) the funding is required for matters that have not been the subject of current applications before the Court and which are not relevant to the resolution of the property issues between the parties. As the liquidator notes (and as is apparent from the terms of the application):

19. ...

(a) the first tranche of funding applied for is the funding required for the purpose of bringing the litigation funding application ($23,100);

(b) the second tranche of funding applied for is the funding required for the purpose of bringing an application to remove/dismiss the trustee of the applicant's bankrupt estate - [Mr Coupe]. ($38,500). The request for funding includes "Engage taxation expert" ($8,800) and "Prepare for mediation" (counsel and expert fees) $6,600); and

(c) the third and fourth tranches of funding applied for are in respect of the funding required for the purpose of preparing for the final hearing commencing on 1 December 2025 ($38,500) and appearing at that hearing ($39,600) (being a total of $78,100).

1. The liquidator notes that the proceedings comprise of two applications, the first being the substantive application for orders as between the husband and wife pursuant to s 90SN of the FLA and the second being the proceeding transferred from the Supreme Court of Victoria to this Court in October 2022 (being a proceeding where the liquidator seeks orders in relation to the ongoing conduct of the winding up as a result of filing an originating process in the Supreme Court of Victoria in early 2021).
2. The substantive proceedings have been resolved in principle between the parties and that is reflected in a minute of consent orders that were proposed as between the husband and wife and annexed to an affidavit filed by the husband on 9 July 2024 and which are referred to as annexure PQ-3 to the affidavit of Mr PQ dated 15 July 2025. It is noted that to give effect to the agreed terms, the pool of assets must be determined or agreed and therefore the question of the quantum of the surplus in both the bankruptcy and the liquidation is relevant to the resolution of the proceeding as between the husband and wife.
3. As to the transferred proceedings, the liquidator refers to an open letter written by the husband's solicitors on behalf of the husband dated 22 September 2021 which sets out his views as to the disposition of the liquidation proceedings which indicates that there was very little in dispute in relation to the conduct of the liquidator as at the date of that letter.

1. The applicant wife did not initially refer to any head of power upon which the application for litigation funding was sought. The wife's counsel, when addressing the Court in reply, raised s 114UB of the FLA as a source of power to make the orders. Notwithstanding that the written submissions filed by the liquidator prior to the hearing referred to the relevant legislation and the decision in this proceeding of McGuire J in Burt & Merrill [2023] FedCFamC1F 1144, there was no detailed reference to the relevant principles to be applied in considering the application.
2. The matters that must be considered as to whether to make a litigation funding order pursuant to s 114UB(3) of the FLA were not directly addressed. Section 114UB of the FLA (which is an analogue of s 117(2A) of the repealed act) provides:

(1) Subject to subsection (2) of this section, subsection 102QAB(6) and sections 114UD and 114UE, each party to proceedings under this Act is to bear the party's own costs.

(2) If, in proceedings under this Act, the court is of the opinion that there are circumstances that justify it in doing so, the court may, subject to subsection (3) of this section, sections 114UC and 114UD and the applicable Rules of Court, make any order for costs and security for costs that the court considers just, whether by way of interlocutory order or otherwise.

(3) In considering what costs order (if any) should be made, the court must have regard to the following:

(a) the financial circumstances of each party to the proceedings;

(b) whether any party to the proceedings is receiving assistance by way of legal aid in respect of the proceedings and, if so, the terms of the grant of the assistance to that party;

(c) the conduct of the parties to the proceedings in relation to the proceedings including, without limiting paragraphs (a) and (b), the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters, and in relation to their duty of disclosure under subsection 71B(1), 90RI(1) or 90YJA(1);

(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;

(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings;

(f) whether a party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer;

(g) such other matters as the court considers relevant.

(4) A party to the proceedings may make an application for costs:

(a) at any stage during the proceedings; or

(b) within 28 days after the final order in the proceedings is made.

(5) The court may order that a party is entitled to costs:

(a) of a specific amount; or

(b) as assessed on a particular basis (for example, party and party, solicitor and client or indemnity); or

(c) to be calculated in accordance with the method stated in the order; or

(d) for part of the proceedings, or part of an amount assessed in accordance with the applicable Rules of Court.

(6) If the court makes a costs order but does not specify the method for the calculation of the costs, the costs are to be assessed on a party and party basis.

(7) Subject to subsection (3), the court may make a costs order in favour of, or against, a party to the proceedings regardless of the degree to which the party has been successful in the proceedings.

1. Justice McGuire referred at [12] of Burt & Merrill [2023] FedCFamC1F 1144 to the proper approach in determining an application for litigation funding using the costs provisions of the Act where his Honour stated:
   1. Sufficient authority assists me in isolating the matters to be addressed in determining an application for litigation funding, including but not limited to the following:

(1) the ability of the applicant to meet his own litigation costs;

(2) the ability of the applicant to source alternative finance for litigation;

(3) the ability of the relevant respondent or respondents to contribute to the applicant's litigation costs;

(4) the complexity of the proceedings;

(5) the stage that the proceedings have reached when the application is brought, including:

(a) the proximity to trial;

(b) the timeliness or delay in bringing the application;

(c) whether the making of an order would bring delay upon the trial with consequent prejudice to any other parties; and

(d) any prejudice to the respondents, generally, who, of course, must also be accorded procedural fairness and justice in any balancing of such matters where prejudice is claimed by the applicant;

(6) the prima facie merits of the substantive case; and

(7) the nature and extent of the property pool and whether any such order can be attended to without bringing prejudice to a respondent in the sense that the substantive orders might eventually cover any advances made by way of litigation funding.

1. See also: Salvage & Fosse [2020] FamCAFC 144; (2020) FLC 93-966 and Artinos & Artinos [2022] FedCFamC1F 221 (per Strum J at [115]-[129]) which deals with applications relying on s 79 and 80(1)(h) of the FLA.
2. Turning to those considerations:

(a) I accept based on the wife's Financial Statement that she has insufficient funds to presently pay legal fees;

(b) the wife has not made submissions or put on evidence in relation to her ability to source alternative finance for litigation;

(c) on the evidence before the Court, the liquidator does not have the funds available to pay the amount sought by the wife. I accept the liquidator's evidence that funds must be available to meet the ongoing expenses of the administration of the liquidation;

(d) these proceedings are relatively complex but to a significant extent the complexity has been brought on by the conduct of the husband and wife in relation to the approach they have taken to the conduct of proceedings in particular on part of the wife failing to progress the issue of II Lawyers's costs when orders were made for that purpose; and

(e) whilst the application has been brought at an appropriate time, the making of the order for the reasons sought are likely to delay the trial and prejudice other parties. The mooted applications against the trustee in bankruptcy and liquidator, and the taxation of costs of II Lawyers, are not sufficiently formulated and are likely to cause prejudice and delay. II Lawyers are not a party to these proceedings and their rights would be directly affected by the process which the applicant wishes to undertake in relation to the taxation of their costs.

1. The wife seeks to challenge the remuneration of the liquidator, but she is not a party to the proceeding where the liquidator's fees are being incurred and there is no application for litigation funding made in that proceeding. The proceedings have not been consolidated. For these reasons the application for litigation funding is dismissed.
2. The matter is now listed for final hearing on 1 and 2 December 2025, however, it is not apparent what relief is sought and what orders can be made if the administration of the bankruptcy and liquidation are not concluded.
3. The wife seeks to challenge the level of fees charged by her former solicitors and asked the Court to make orders that affect that firm, however, that firm is not a party to these proceedings. Complaints are also made about the level of fees claimed by the trustee and liquidator; however, it is not clear what level of fees they intend to charge.
4. In order to bring some clarity to these matters, I require the trustee and liquidator within 20 days to each file affidavits with the court as to:

(a) what steps need to be taken by each of them or the husband and wife to finalise the administration of the bankrupt estate of the wife and the liquidation of C Pty Ltd;

(b) the timeframe in which those steps are to be taken prior to 1 December 2025; and

(c) the anticipated cost of each of those steps.

1. Additionally, the trustee in bankruptcy must advise the Court in writing of its decision as to whether it will accept the debt claimed by II Lawyers and, if so, what steps, if any, it intends to take in relation to that debt or the treatment of that debt.
2. I make these orders pursuant to the powers provided under ss 90-15 of the Insolvency Practice Schedule (Bankruptcy) and Insolvency Practice Schedule (Corporations). Those sections provides that the Court may make such orders as it thinks fit in relation to the administration of a regulated debtor's estate and the external administration of a company.
3. Sections 90-5 and 90-10 of the Insolvency Practice Schedule (Bankruptcy) provide that the Court may enquire into the administration of a regulated debtor's estate. Such enquiry may be initiated by the Court on its own initiative during proceedings, or by a person with a financial interest in the administration of the regulated debtor's estate, the committee of inspection or the Inspector-General. There are analogous provisions under the Insolvency Practice Schedule (Corporations).
4. Once this information is received the parties, the Court will be in a better position to either resolve all matters between the parties or alternatively be in a position to properly prepare for the resolution of the matter whether by the parties themselves or by orders of the Court as a result of the hearing listed on 1 December 2025.
5. I will not make orders for the subpoenas referred to in the application to be issued because:

(a) there is no application before the Court to the taxation of II Lawyers's costs and it is not yet clear how the trustee will treat the debt;

(b) the trustee by his counsel advised the Court that he would respond to a request for the production of documents relating to the ring;

(c) the question of the appointment of the trustee is not yet the subject of any application; and

(d) there is no application for the taxation of costs.

1. It is premature for the matter to be referred to a judicial mediation prior to the receipt of the information as ordered by the Court.

I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of the Honourable Justice McNab.