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[2015] VSC 454
General information, not legal advice.
Supreme Court of Victoria
2015-08-31
ELLIOTT J
Original judgment source is linked above.
INTERLOCUTORY INJUNCTION - Existing freezing order - Injunction over life insurance proceeds - Application for variation to prevent access to life insurance proceeds - Reasonableness of living expenses and legal costs - Access to alleged trust monies where no significant other assets - Balance of convenience and discretion.
1 This is yet another interlocutory dispute in this proceeding. There have been at least 20 interlocutory orders since this proceeding commenced in mid 2013. The relevant background to the proceeding is set out in a previous judgment ("the Earlier Judgment"), and it is unnecessary to repeat those matters here.
2 Principally, there are 2 matters before me to determine.
3 The first concerns the remaining proceeds of a life insurance policy in the sum of $1,543,276.74 ("the Life Insurance Proceeds"). Those proceeds are held by the second defendant, Elizabeth van der Slot ("Elizabeth"). On 10 July 2014, Elizabeth received $1,736,437.50 from a life insurance company as a result of the death of her husband, Jason van der Slot ("Jason"). Jason was previously the first defendant in the proceeding. The Life Insurance Proceeds are presently the subject of pre-existing court orders.[2] The plaintiffs say the Life Insurance Proceeds are impressed with a trust in favour of the plaintiffs and should not be further dissipated at all. Elizabeth seeks access.
4 The second concerns the amount of money Elizabeth is entitled to. Elizabeth seeks orders to allow past and future legal fees, together with her ongoing living expenses fixed at $2,500 per week, to be paid out of the Life Insurance Proceeds. The plaintiffs seek to have the existing amount of $2,500 reduced to the weekly sum of $1,709.71, and also to prevent any of those moneys being withdrawn from the Life Insurance Proceeds.
5 Relevantly, the orders made on 10 July 2015 were as follows:
(1) The current balance of the life insurance proceeds paid to [Elizabeth] by TAL Life Limited ("the Life Insurance Proceeds").
(2) The current balance of the Commonwealth Superannuation disclosed in paragraph 9(h) of the affidavit of Jason Van Der Slot sworn 29 July 2013.
(3) Whether any, and if so what, assets were purchased with the Life Insurance Proceeds between 20 March 2015 and 19 June 2015.
(4) Whether the government payments referred to in [Elizabeth's] solicitors' letter of 29 June 2015 are being paid into frozen bank accounts and, if so, which accounts and the date from which this occurred.
3. Until further order, the balance of the Life Insurance Proceeds:
(1) Be paid into a separate trust account to be opened by [Elizabeth's] solicitors for that purpose and maintained by them.
(2) Be preserved in their entirety.
6 One of the orders referred to in order 1 above, made by Garde J on 14 October 2014 (which was made by consent), permitted Elizabeth to pay up to $2,500 per week "on account of her and her children's combined ordinary living expenses, including the payment of rent". That position has remained.
7 The context in which the order of 14 October 2014 was made is relevant. At around the time of that consent order, Elizabeth, with the knowledge of the plaintiffs, entered into a lease for a family residence with a fixed rental, which is ongoing, at $1,083.25 per week.
8 When the orders were made on 10 July 2015, it was unclear whether the superannuation funds referred to in those orders had been fully exhausted. It is now common ground that they have been. Accordingly, if Elizabeth is to have sufficient funds for weekly living expenses and also to properly defend this proceeding from funds in her name, then it will be necessary for her to access the Life Insurance Proceeds. Elizabeth has stated she intends to do so, unless access is prevented by the court.
9 The plaintiffs correctly pointed out the differences between the considerations that apply to a freezing order, under what traditionally are referred to as the Mareva principles,[3] and those that apply to injunctive relief where a plaintiff seeks to establish and trace a proprietary interest in a fund.[4] Given the former usually includes an exception[5] for ordinary living expenses of a natural defendant and legal fees in defending the proceeding, I will consider Elizabeth's position in that regard before turning to the issue concerning from where the permitted drawings may be taken.
10 In an affidavit sworn 26 June 2015, Elizabeth deposes that she has household and personal effects with a current insured value of $100,000 (having had a replacement value in July 2013 of $200,000), together with jewellery with an estimated value of $100,000. In addition, she owns a car she purchased this year for the sum of $23,500. Save for the Life Insurance Proceeds, she has no other assets.
11 As a result of Jason's death, Elizabeth is a single mother with 2 children who are still of school age. Her weekly expenses are said to be $2,753.98. The major items comprising that figure are rent of $1,083.25, food of $500 and $250 described as "miscellaneous children's expenses, including school fees,[6] extra-curricular activities, books, stationery, sports fees and sundry expenses".
12 Elizabeth's present weekly income is $686.46, consisting mainly of social security benefits.
13 As already noted, the residential rental is fixed, and was previously the subject of agreement. The plaintiffs accept this amount is reasonable. It forms part of the $1,709.71 for which they contend.
14 During submissions, senior counsel for the plaintiffs suggested that $500 per week for food was excessive. When I enquired as to how I was to reach such a conclusion in the absence of any evidence to challenge Elizabeth's affidavit,[7] the court was invited to use "common sense". I indicated that if, by that submission, I was being invited to rely on my own experience in attending at the supermarket and shops to purchase food, I could not form the view that $500 was unreasonable.
15 No alternate figure was proffered by the plaintiffs. There was no attempt to identify what the components of any alternate figure would be. In the absence of anything other than assertions from the bar table that the amount of $500 was unreasonable, I propose to accept the figure. I do so in circumstances where the total amount sought of $2,500 was consented to by the plaintiffs on an ongoing basis from October 2014 until recently.
16 Ultimately, there was no substantive submission by the plaintiffs suggesting the amount of $250 for the miscellaneous expenses was unreasonable. Given the nature of the items referred to, the amount seems to be entirely reasonable.
17 As to the other amounts claimed, the only items that are questionable in the total sum of $2,753.98 are: $150 for "gifts and entertainment"; and $50 for "Citylink".[8] However, this still keeps the total weekly expenses above $2,500 per week, which is the amount sought to be maintained by Elizabeth. On the evidence before the court, I can see no good reason why it should be altered.
18 In the circumstances, that amount will remain unaltered.
19 The next issue to deal with is legal fees. As at 1 July 2015, Elizabeth had already incurred legal expenses of $178,291.23. Of this amount, the court has previously approved payment of $145,000.
20 As to past fees, the amount of $178,291.23 is understandable in circumstances where the matter has been repeatedly before the court over the past 2 or so years. In addition, there have been 11 iterations of the statement of claim served. The most recent version of the statement of claim was filed on 13 July 2015. It consists of 91 pages, and contains a large amount of detailed information. Accordingly, there will be significant costs beyond the amounts already incurred to 1 July 2015 that will need to be met for Elizabeth to conduct her defence of this proceeding properly.
21 As to the legal expenses, an amount being $373,247 is sought.[9] This amount has been the subject of affidavit evidence from an experienced litigation lawyer. The assumptions and calculations made have not been the subject of any contradictory evidence. Further, the solicitor on the record has sworn that if funds are not made available shortly, his firm will cease to act in the near future. A similar position was stated by Elizabeth's counsel from the bar table concerning counsel's ongoing availability.
22 The plaintiffs oppose any allowance for legal fees if access to the Life Insurance Proceeds is involved. However, the plaintiffs submit that, if the court is to allow legal expenses to be accommodated, it should not include the costs of senior counsel. If senior counsel is not included, a sum of $140,800 (which forms part of the amount of $373,247) will not need to be expended.
23 This is a complex case involving millions of dollars. The statement of claim contains allegations concerning 133 transactions over an extended period of time. It also makes very serious allegations, including fraud. The expert evidence to be relied upon by the plaintiffs is voluminous and complex. It is clearly a matter that warrants senior counsel being briefed. The plaintiffs themselves have retained senior counsel. This is not a situation where a "Rolls Royce" approach[10] would be unjustifiably sanctioned.
24 In the circumstances, it is not only in the interests of Elizabeth, but also the court and the due administration of justice, that Elizabeth is properly represented. In my view, the allowance for legal costs should also include senior counsel. However, I am conscious of avoiding unnecessary costs before the matter is ready to be set down for trial. Accordingly, while I will make a ruling in favour of Elizabeth in relation to senior counsel, I will not permit costs to be incurred until the interlocutory steps have been completed to the extent that the proceeding is ready to be set down for trial. If necessary, the timing of this may be the subject of submissions at the upcoming directions hearing on 11 September 2015.
25 Finally on the question of costs, the plaintiffs submitted that any approval by the court of the payment of Elizabeth's costs should not include costs that have already been incurred but have not been the subject of court approval for payment. As I understood the submission, it was put that because these costs had been incurred without approval, Elizabeth's lawyers have taken a risk they should not have taken and there is no good reason now for them to be approved. In my view, there is little merit to this submission. There is no suggestion the costs have been incurred excessively or improperly. There is no restriction on costs being duly incurred because of the orders presently in place. The only restriction is upon payment. Now that the costs have been properly incurred, I can see no good reason why they ought not be paid, subject only to the issue concerning from where the funds for payment ought to be derived.
26 In the Earlier Judgment, the following was stated:[11]
Given the premiums for the life insurance policy were paid out of an account into which converted funds were paid, in the absence of any evidence from Elizabeth, the plaintiffs are entitled to contend that the moneys used to pay the premiums were the subject of a trust in favour of the plaintiffs notwithstanding the fact that there were mixed funds in the account.
27 This interlocutory finding reflects the evidence presently before the court that suggests the funds alleged to be misappropriated by Jason (referred to in the passage quoted above as the "converted funds") were paid into a particular account. It was from that account that premiums were paid for the life insurance policy. As noted in the introductory remarks above,[12] the plaintiffs' case is that the Life Insurance Proceeds are impressed with a trust in favour of the plaintiffs. It is on this basis the plaintiffs submit these proceeds ought not to be dissipated before the hearing and determination of the proceeding, or at least until Elizabeth has fully exhausted the realisation of all other assets in her own name.
28 The plaintiffs referred to a number of authorities which stand for the general proposition that defendants ought not be able to access a fund to pay ordinary living expenses or legal costs if that fund is the subject of a prima facie beneficial entitlement by a plaintiff.[13]
29 I do not propose to go through these authorities in any detail. Although different considerations apply when access is sought by a defendant to such a fund,[14] the court still has a discretion, governed by principles of equity, when determining the nature and extent of any interlocutory relief. In an application such as this, in the exercise of the discretion on the balance of convenience, hardship to the defendant is a relevant consideration.[15]
30 Since the death of Jason, Elizabeth has been required to sell the family home. She had also received considerable financial assistance from her father. Notwithstanding this, her remaining assets, relatively speaking, are minimal. Further, those assets are the subject of the current freezing orders.
31 I can see very little utility in requiring Elizabeth to sell her remaining household assets and personal effects when, if they were all sold as the plaintiffs submitted they ought to be,[16] the proceeds would still not be sufficient to meet her ongoing living expenses and her legal costs. In contrast to a number of cases referred to by the plaintiffs, this is not a case where a defendant has "significant" assets available to it which could be realised if the pursued fund were protected by an order of the court.
32 With respect to Elizabeth's jewellery, it is protected by the freezing order currently in place. If it were sold and Elizabeth succeeded at trial, it is arguable damages may not be an adequate remedy.
33 I am fully aware that, to the extent the Life Insurance Proceeds are dissipated, they are unlikely to be replenished by Elizabeth in the event the plaintiffs are successful in this proceeding in establishing their proprietary claim. That is self-evidently unsatisfactory.
34 However, although the plaintiffs have established a prima facie case, there is still some work to be done in relation to the tracing of funds. The account from which the premiums were paid contained mixed funds. The extent to which the life insurance premiums may have come from legitimate sources remains uncertain. Even if the plaintiffs succeed, it ultimately may be found that they are only entitled to a proportionate amount of the Life Insurance Proceeds.[17] A further relevant matter is that there has been delay on the part of the plaintiffs in prosecuting this proceeding.[18]
35 I am also minded that Elizabeth is the sole provider for 2 school age children, who can only be considered innocent victims in the very unfortunate circumstances of this case. They have already lost their father. Proper provision should be made for their upkeep until the proceeding is duly heard and determined.
36 In summary, the justice and convenience of this case requires that Elizabeth be able to maintain the family and to have the means of properly defending herself.
37 Accordingly, order 3 of the orders made 10 July 2015 will be varied so that the preservation of the Life Insurance Proceeds will be subject to allowances for Elizabeth's living expenses in the sum of $2,500 per week and for her legal expenses for this proceeding, in the amounts authorised by the court.
[1] Distinctive FX Pty Ltd v Wright [2015] VSC 299.
[3] Mareva Compania Naviera SA v International Bulk Carriers SA [1975] 2 Lloyd's Rep 509. See also Zhen v Mo [2008] VSC 300, [22]-[30] (J Forrest J).
[4] See, for example, Cardile v LED Builders Pty Ltd (1999) 198 CLR 380, 395-401 [30]-[43] (Gaudron, McHugh, Gummow and Callinan JJ); PCW (Underwriting Agencies) Ltd v Dixon [1983] 2 All ER 158, 163G (Lloyd J).
[5] In Australian Receivables Ltd v Tekitu Pty Ltd (2008) NSWSC 433, [28] Brereton J described such allowances as "virtually always appropriate".
[6] There was a suggestion previously by the plaintiffs that school fees had been waived, but this position was not borne out by the evidence.
[7] There was no application to cross-examine Elizabeth and the affidavit was relied upon by Elizabeth without objection.
[8] I was told by Elizabeth's counsel from the bar table that this was an error, and should have referred to Myki costs rather than Citylink. I was informed the Myki costs are incurred in the children travelling to and from school. The outcome of this application does not depend on the accuracy or otherwise of these statements.
[9] This is without prejudice to any further application if necessary.
[10] Cf TDK Tape Distributor (UK) Ltd v Videochoice Ltd [1986] 1 WLR 141, 146B (Skinner J).
[13] These included Australian Receivables Ltd v Tehitu Pty Ltd [2008] NSWSC 433 [27]-[28] (Brereton J); Badman v Drake [2008] NSWSC 968 [8], [11] (Brereton J); His Eminence Metropolitan Petar v The Macedonian Orthodox Community Church [2006] NSWCA 277, [20], [40], [59]-[61], [85]-[86] (Beazley JA, Giles JA, Hodgson JA).
[15] See, for example, Australian Receivables Ltd v Tekitu Pty Ltd [2008] NSWSC 433, [28] (Brereton J). See also ICF Spry, The principles of equitable remedies (7th ed, 2007), 470-475.
[16] The plaintiffs' submission went so far as to contend that Elizabeth ought to be required to sell all household items, even things such as bedding, the kitchen table and the refrigerator, before access to the Life Insurance Proceeds could properly be permitted.
[17] See, for example, Foskett v McKeown [2000] UKHL 29; [2001] 1 AC 102, 131G-132F, 133C, 134D-E, 140H (Lord Millett), see also 110B-F (Lord Browne-Wilkinson), 115F (Lord Hoffman).
[18] As to which, see the Earlier Judgment, [41].
Distinctive FX Pty Ltd
Wright
(1999) 198 CLR 380