Banner & Cody
[2023] FedCFamC1F 225
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Banner & Cody [2023] FedCFamC1F 225
File number(s): PAC 1601 of 2020 Judgment of: RIETHMULLER J Date of judgment: 31 March 2023 Catchwords: FAMILY LAW – PROPERTY – Stay application pending proposed appeal by husband against conviction – Adjournment application of husband – Litigation funding application of husband – Spouse maintenance application of husband whilst husband incarcerated – Application by wife to proceed to trial on an undefended basis – No matters of principle Legislation: Evidence Act 1995 s 75
Family Law Act 1975 (Cth) ss 79, 80, 117
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 6.01, 6.06, 10.27
Federal Circuit and Family Court of Australia, Central Practice Direction – Family Law Case Management, 1 September 2021 cll 3.11, 3.12
Cases cited: Cassaniti v Commissioner of Taxation (2010) 79 ATR 340; [2010] FCA 641
Commissioner of Taxation v Cassaniti (2018) 266 FCR 385; [2018] FCAFC 212
Kowaliw and Kowaliw (1981) FLC 91-091; [1981] FamCA 70
McMahon v Gould (1982) 7 ACLR 202
Perdikaris v Deputy Commissioner of Taxation (2008) 172 FCR 412; [2008] FCAFC 186
Division: Division 1 First Instance Number of paragraphs: 79 Date of hearing: 23 March 2023 Place: Parramatta Solicitor for the Applicant: K Solicitors Counsel for the Respondent: Mr Macarounas Solicitor for the Respondent: Matthews Folbigg Counsel for the Intervenor: Mr Kasep Solicitor for the Intervenor: HWL Ebsworth Solicitors ORDERS
PAC 1601 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR BANNER
Applicant
AND: MS CODY
Respondent
COMMISSIONER OF TAXATION
Intervenor
order made by:
RIETHMULLER J
DATE OF ORDER:
31 MARCH 2023
THE COURT ORDERS THAT:
1.The applicant husband’s Application in a Case filed 3 March 2023 be dismissed.
2.That the respondent wife and the Intervenor have leave to proceed to the final hearing listed on 13 April 2023 at 10.00am on an undefended basis as against the husband.
3.Not less than 72 hours prior to the undefended hearing, the wife and the Intervenor be permitted to file any material on which they seek to rely, in support of proposed consent terms that are agreed between the wife and the Intervenor, NOTING that such agreement was reached between the wife and the Intervenor on 21 March 2023.
4.Costs of this application be reserved to the trial judge.
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).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish 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 Banner & Cody has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
RIETHMULLER J:
INTRODUCTION
The applicant husband filed an Initiating Application on 3 April 2020 seeking final property settlement orders pursuant to s 79 of the Family Law Act 1975 (Cth) as follows:
(a)The removal of caveats lodged by two former solicitors of the parties (which issues have now been settled and the caveats removed);
(b)The sale of two properties of which the respondent wife was the registered proprietor (one at Suburb C and the other Suburb B) and the distribution of the net proceeds of sale equally between him and the wife; and
(c)That he and the wife retain to the exclusion of the other all others, property or superannuation in their respective possession.
On 3 March 2023, the husband filed an Application in a Proceeding seeking, among other things, that the proceedings be stayed (the orders sought by the husband are set out below at [34]). These reasons relate to the husband’s Application in a Proceeding.
BACKGROUND
The husband was born in Australia in 1986, and is currently 36 years of age. The wife was born in 1985 in the United Kingdom, and is currently 37 years of age. The husband is an Australian Citizen, and the wife has permanent Australian residency. They first began living together in 2011 and were married in 2013. There are three children of the parties’ relationship (three girls, born in 2015, 2017, and 2018).
The husband and wife separated in 2019, and a divorce order was made in 2021.
By the time the proceedings were commenced by the husband in April 2023, the wife and the three children were residing in the United Kingdom. The wife moved to the UK with the children in mid-2019. Proceedings with respect to children’s issues were determined in the Family Division of the High Court of Justice of England and Wales, where Poole J found that the children were then habitually resident in the UK, and made orders for contact between the husband and the children if the husband travelled to the UK to spend time with them. In early 2022, consent orders were made in that Court for the children to have FaceTime/video contact with the husband.
The property settlement case initially put by the husband
In support of his Initiating Application filed 3 April 2020, the husband filed a 23-paragraph affidavit, the body of which covers approximately four pages. In that affidavit, filed 3 April 2020, the husband set out the details of himself and the wife, the length of their relationship (being a little less than 8 years from cohabitation in 2011 to separation in early 2019), and that they have three children (now 7, 6, and 4 years of age).
At paragraph 9 of his affidavit filed 3 April 2020, the husband sets out that he and the wife purchased their first home in Suburb B NSW in 2015 for just over $1.5 million, funded in large part by a mortgage of $1.212 million (“the Suburb B property”). He says that the balance was met from savings. In 2016, the parties purchased a second property at Suburb C NSW for just over $1 million (“the Suburb C property”), which the husband says was funded entirely from savings.
Thus, on the husband’s case, the purchase of these properties was funded, at least, by around $1.3 million in savings, together with stamp duty being met from savings. At paragraph 11 of his affidavit filed 3 April 2020, he says that he had a significant salary in the time leading up to the purchase of the properties, working for D Pty Ltd. The husband does not allege that either he or the wife had any significant assets prior to the commencement of the relationship. The husband also sets out that during the marriage he was a director and shareholder of various companies which are no longer trading, but at the time of his affidavit, in April 2020, he was employed by a business through a proprietary limited company that he was subsequently operating as sole director and shareholder.
In the April 2020 affidavit, the husband set out that whilst they were together the wife was worked for a period in the beauty industry and also work for a period in customer service. The husband says that both parties contributed to home duties and child rearing. They had various holidays together. He acknowledges that for one period of approximately two months, the wife supported him financially as he was out of work (prior to commencing at D Pty Ltd).
In the husband’s 3 April 2020 affidavit, he identifies what he describes as “the ATO Dispute” as follows:
The ATO Dispute:
17. Whilst employed by [D Pty Ltd] it regularly made PAYG payments on account of my income tax. I lodged my tax returns (as did [Ms Cody] concerning [D Pty Ltd]) and we each received ATO assessments in that respect during the financial years 2015 and 2016 which were satisfied. However, the ATO has since issued amended assessments to both [Ms Cody] and myself which we are contesting in our application to the Federal Court of Australia […] and where the Deputy Commissioner of Taxation is the respondent (“the ATO proceedings”).
18. The ATO proceedings have been listed for hearing in April 2020 in the Federal Court of Australia in Sydney.
19. Prior to the ATO proceedings, the ATO issued garnishee proceedings against [E Company] concerning income being earned by [Ms Cody] from [Suburb C] property. We were in the process of selling [Suburb C] to fund our legal costs, when the garnishee proceedings were served concerning our amended tax assessments. We therefore concluded that if [Suburb C] was sold, the ATO would seek to garnishee the sale proceeds and therefore withdrew the property from sale. There can be no doubt that the ATO intends to target our matrimonial property, including [Suburb C], if it is successful in the ATO Proceedings.
The husband did not set out any details of the amended assessments (not even the amounts involved), nor a summary of the grounds upon which the amended taxation assessments are being challenged, despite proceeding having been instituted in the Federal Court of Australia.
Thus, on the husband’s initial affidavit filed 3 April 2020, it appeared to be a relatively straightforward case as between him and the wife, once the issues concerning the two caveators (solicitors seeking legal fees) and the Commissioner of Taxation were resolved. The husband was served with a Court Attendance Notice on or about 16 April 2020 with respect to the criminal charges. An earlier outline filed by the husband’s solicitor set out that the criminal charge concerned an “alleged involvement in a tax fraud involving the ATO”: see the husband’s written submissions filed 25 February 2022, paragraph 17.
The history of the litigation
The wife did not appear at the first court date on 25 May 2020. The Registrar recorded in the notations that she was advised by the husband’s solicitors that the wife had been served in the UK, however there was no affidavit of service. Unsurprisingly, the matter was then adjourned.
An affidavit of service was filed on 1 July 2020, attesting to service upon the wife on 29 May 2020, some four days after the first court event. The fact that the wife was served after the first court event explains why she did not appear at that event. It also seems that the court event on 25 May 2020 was a waste of costs due to the failure of the husband’s solicitors to effect service on the wife in the eight weeks between filing the husband’s Initiating Application and the first return date.
On 24 July 2020, the wife appeared without a solicitor (at an electronic hearing), however neither she nor the caveators had filed any Response to orders sought by the husband. Directions were then made for the wife and the caveators to file Responses and the matter adjourned. It appears that this event was wasted due to the failure of the wife to file her Response.
At the next hearing on 9 September 2020 (Case Assessment Conference), no agreements were reached and no procedural orders made.
On 29 October 2020, when the matter was again before a registrar, the parties advised that they were negotiating interim orders for the sale of the real properties. The matter was again adjourned.
On 27 November 2020, the Registrar was advised that no progress had been made and that the parties were of the view that they needed to await the outcome of the Federal Court proceedings with respect to the taxation assessment which the Registrar was advised were to be determined on or after April 2021. The matter was adjourned to 29 April 2021, a date unlikely to be after any determination of the Federal Court proceedings apparently listed in April 2021.
On 29 April 2021, the parties again appeared before the Registrar, this time advising that the Federal Court proceedings had been adjourned to July 2022 and that the husband’s criminal trial was listed for early 2022. The application was again adjourned, this time to a date to be fixed in July 2022.
On 15 July 2021, the matter was relisted at the request of the husband and wife who had agreed to the sale of the Suburb B property, however the caveators had not agreed to the orders and the husband was ordered to notify the Commissioner of Taxation. The matter was adjourned without orders being made for the sale of the Suburb B property.
On 21 July 2021, at the eighth court event, the parties agreed with respect to the sale of the Suburb B property by the husband, and the payment of sufficient sums (payment of $60,000 to the caveators, then the second and third respondents) in order to obtain the discharge of the caveats. Notably, the consent order provided for considerable sums to be paid to meet the parties’ expenses in carrying out the order (including conveyancing costs). Orders were also made for the parties to have access to funds for the purpose of meeting legal expenses. The orders made provision for $110,000 to be released to the wife’s solicitors. Order 2(n) of the orders made 21 July 2021 included the following, by way of release of funds to solicitors for the husband:
…
vii. In payment of $60,000 to [K Solicitors’] trust account impressed with a charge against the sale proceeds in this amount in favour of the Husband’s solicitor [K Solicitors], for the Husband’s anticipated Family law legal costs and to secure the ongoing performance of those works in accordance with their retainer.
…
ix. In payment of $20,000 to [K Solicitors’] trust account impressed with a charge against the sale proceeds in this amount in favour of the Husband’s solicitor ([K Solicitors]), for the Husband’s anticipated specialist’s legal costs and to secure the ongoing performance of those works in accordance with their retainer.
…
xi. In payment of $30,000 to [K Solicitors’] trust account impressed with a charge against the sale proceeds in this amount in favour of the Husband ‘s solicitor ([K Solicitors]), for the Husband’s Federal Taxation legal costs which were required to preserve matrimonial assets.
xii. In payment of $100,000 to [F Solicitors’] trust account, impressed with a charge against the sale proceeds in this amount in favour of the Husband’s solicitor ([Mr G]), for the Husband’s criminal law lawyers anticipated legal costs and to secure the ongoing performance of those works in accordance with their retainer.
(Orders made 21 July 2021, Order 2(n))
In late 2021, the husband was indicted in the Supreme Court of New South Wales.
On 11 February 2022, the matter was again before the Court, as a result of an application by the Commissioner of Taxation to inspect the Court file. On this occasion, a request by the husband for an adjournment was refused and husband was ordered to file and serve his responding material within 14 days. Thereafter, on 25 February 2022, an order was made by the Registrar in chambers (without hearing the parties) that the proceedings be “referred to the Judicial Services team for allocation of the proceedings to a Justice of Division 1”.
On 26 May 2022, the matter was first listed before this Court, however it was not able to proceed as the Commissioner of Taxation then sought to be joined to the proceedings, and thus had to amend his application and serve the other parties. Directions were made to ensure the steps required for procedural fairness were undertaken and Commissioner of Taxation’s the interlocutory application listed for hearing before me in November 2022.
By July 2022, the wife’s solicitors wrote to the husband for the third time concerning claims that he was letting Suburb C property through E Company, and seeking an account of the profits. The wife’s solicitors also advised that the wife intended to sell the chattels in the Suburb C property. This appears to have elicited two responses, the first from the husband’s solicitors stating “please refrain yourselves from taking any action in relation to the [Suburb C] property”, and the second response, by email from the husband to the wife’s solicitors alleging “You’re a douchebag”, “Weak ass bitch”, and suggesting the recipient “go fuck yourself”: see the wife’s affidavit filed 28 November 2022, paragraph 36 (noting there are two paragraphs numbered 36). The locks were changed, then forced by an unknown person, leading to the wife requesting assistance of the police.
On 15 November 2022, I heard the Commissioner of Taxation’s Application in a Proceeding filed 30 June 2022 and ordered that the Commissioner of Taxation be granted leave to intervene in the proceedings. The Commissioner, in substance, seeks orders that monies be paid to the Commissioner of Taxation in partial payment of the husband’s taxation liabilities. The Commissioner, however, does not plead a claim in debt, and eschewed such a claim in argument.
On the same day that the Commissioner was joined, the wife filed an Application in a Proceeding seeking that the Suburb C property be sold (orders excluding the husband from the property and for the wife to sell the property). Directions were made for the filing of any further material and the wife’s Application in a Proceeding listed for hearing on 7 December 2022.
On 7 December 2022, orders were made for the sale of the Suburb C property by the wife and directions for the preparation of the matter for trial to be held on 13 April 2023 and orders for the parties to attend a conciliation conference with a registrar on 23 February 2023. At that time, it was expected that the husband’s criminal trial would have been completed before the conciliation conference date.
On 23 February 2023, the husband made an oral application to vacate the conciliation conference (which was listed to proceed by way of audio visual link) on the grounds that he was awaiting the verdict of the jury in his criminal trial. The oral application for adjournment was only forewarned by an email to the registrar’s chambers 4.15 pm the day before. Not surprisingly, the registrar was forced to vacate the conciliation conference and reserved the parties’ costs. The registrar, clearly mindful of the trial date and the importance, at least to the wife, of ensuring the matter proceeded to trial, adjourned the matter to a chambers hearing on 24 February 2023 and invited submissions as to any variations that were sought as to the trial directions.
On 24 February 2023, the registrar ordered the husband to pay the costs of the wife and the Commissioner of Taxation for the adjourned conciliation conference, fixed at $4,000 each. The registrar amended the trial directions to allow the husband further time to file material. The registrar also ordered that, in the event that the husband failed to comply with the orders for filing trial material, the other parties be at liberty to seek orders that the matter proceed on an undefended basis.
On 3 March 2023, the husband filed an Application in a Proceeding seeking a stay of the family law proceedings on the basis that the verdict in his criminal trial had not been delivered. However, before the matter came before the Court, the jury had convicted him. The husband neither gave evidence, nor called evidence in his criminal trial. The husband awaits sentencing, in custody, and the present hearing had to be with him appearing by audio link from the correctional facility. During the lunch adjournment, arrangements were made to ensure that the husband’s solicitor could use the audio link (in private) to obtain further instructions from the husband.
At the hearing it appeared that there was tacit acceptance by all parties that the wife should receive around 55 per cent of the property of the husband and wife. It was also clear that the Commissioner of Taxation is owed around $850,000 in primary tax (together with substantial interest and penalties), as a result of taxation assessments issued by the Commissioner.
Whilst it was accepted by all parties that the husband’s application to challenge the taxation assessments remains pending in the Federal Court of Australia, no party was able to identify what further steps, if any, were required to prepare for that hearing, nor how long it was likely to take, nor when it may be heard. Whilst the husband did not provide a copy of his application to the Federal Court with respect to the tax issues (an Originating Application for Judicial Review filed 10 October 2018), a copy was provided by the Commissioner of Taxation in an affidavit filed 21 March 2023. The husband’s application is drafted seeking judicial review of a decision of the Commissioner of Taxation that rejects his claim to a credit as a result of PAYG withholding tax alleged to have been deducted by his employer. This does not appear to be a question for judicial review of a taxation assessment, but rather an issue when determining the amount outstanding to the Commissioner when the Commissioner seeks to enforce the tax debt. That is, the PAYG issues do not affect the tax assessment, but simply go to whether the husband should receive a credit for tax withheld by his employer: see generally Perdikaris v Deputy Commissioner of Taxation (2008) 172 FCR 412; Cassaniti v Commissioner of Taxation (2010) 79 ATR 340; and Commissioner of Taxation v Cassaniti (2018) 266 FCR 385. That issue can be dealt with in an application for a declaration, or as a defence to any tax proceedings by the Commissioner to enforce the debt. Whilst the Federal Court application is framed as a judicial review application, it relies upon a factual claim that the employer withheld tax, and ultimately seeks a declaration that:
1. The [husband] is entitled to a credit, pursuant to s 18-15 of Sch 1 to the Taxation Administration Act 1953 (Cth) in the sum of $751,667 for the Income year ending 30 June 2016.
Whilst the Federal Court application has the appearance of a complex administrative law and tax case, it appears now that in reality it may only be a factual dispute as to whether PAYG withholding tax was deducted from the husband’s pay.
The husband has not responded to the orders sought by the Commissioner of Taxation, nor put on evidence that the PAYG tax was withheld from his salary, in order to oppose the orders that the Commissioner seeks in this Court. However, the husband stated that he intends to appeal the criminal conviction.
PENDING INTERLOCUTORY APPLICATION
The matters to be determined at this interlocutory hearing of the husband’s Application in a Proceeding filed 3 March 2023 are:
1. That these proceedings be stayed pending the Applicant Husband receives his criminal law trial verdict in the Supreme Court of New South Wales and otherwise pending further order.
2. That the orders dated 07 December 2022 by His Honour, Justice Riethmuller be varied as follows:
(a) The the (sic) fixed trial dates (with an estimated hearing time of 2 days) of 13 April 2023 be vacated.
(b) The costs application filed 29 November 2022 by the ATO be adjourned for hearing together with the Final Hearing.
(c) That all orders and case management directions including without limitation, the filing and service of affidavit evidence, joint chronology, financial, expert evidence and Court Book be vacated.
3. That the Case Management orders and directions made 24 February 2023 by [the Judicial Registrar] be vacated.
4. That the sum of $100,000.00 be released from [K Solicitors’] Trust Account to [K Solicitors] for the Husband’s accrued legal costs and disbursements (including Consultant Solicitor’s consulting fee) forthwith.
5. That within 7 days, the sum of $20,000.00 be released from [K Solicitors’] Trust Account to Husband to be paid to the Husband, by way of interim spousal maintenance.
6. That the sum of $50,000.00 be released from [K Solicitors’] Trust Account to [K Solicitors] for the Husband’s solicitor anticipated future legal costs in these proceedings.
7. That within 14 days, the Respondent Wife provide financial disclosure and all settlement documents agreed between the Wife and the Deputy Commissioner of Taxation and/ or the Australian Taxation Office in relation to her tax debt liability including settlement deeds and agreements negotiated by [H Solicitors], in the Federal Court Tax Proceeding […].
8. Costs.
The wife sought orders that the matter proceed on an undefended basis, with leave to the wife and the Commissioner of Taxation to file any material that supports their likely consent orders. The Commissioner also argued for the dismissal of the husband’s Application in a Proceeding filed 3 March 2023 and supported the wife’s application for the matter to proceed undefended.
In substance, the issues arising out of the husband’s Application in a Proceeding are:
(a)Whether the trial should be stayed, and if not whether it should be adjourned;
(b)Whether there should be an order for funds to be released to the husband to pay outstanding legal fees and fund the family law litigation;
(c)Whether the wife should pay the husband lump sum spousal maintenance; and
(d)Whether the wife should make disclosure of her settlement arrangements with the Commissioner with respect to the Commissioner’s claim against her for tax.
The husband relied upon an affidavit filed by his solicitor on 3 March 2023 where the solicitor sets out that he has been acting in these proceedings since April 2020, and acting in the taxation proceedings since March 2020. The affidavit identified that an application made to transfer the taxation proceedings in the Federal Court of Australia to this Court was refused by Perram J. Importantly, Perram J notes that the Commissioner of Taxation had no proprietary interest in the Suburb C property and goes on to say:
[Quote omitted in compliance with s 121 of the Family Law Act 1975 (Cth)].
Since the judgment of Perram J, the Commissioner of Taxation has intervened in these family law proceedings, but does not seek to have the tax and family law proceedings heard in the one court. The solicitor for the husband sets out that the tax case was listed for mention on 17 March 2023, however no further information was provided as to the progress of the tax case.
In the husband’s solicitor’s affidavit filed 3 March 2023, he says the following:
11. It would be unfair and a denial of natural justice for the Husband to proceed to trial by fixing dates for a Final Hearing in these proceedings as presently lacks capacity to provide his “informed consent”.
12. It is my assumption that His Honour, Justice Riethmuller may have anticipated that the Husband would obtain his criminal law verdict on or before Christmas 2022, or no later than 31 January 2023 when orders are made on 07 December 2022, ordering the Conciliation Conference to be held 23 February 2023. Regrettably this is not the case, and this has left the recent Conciliation Conference otiose and futile.
13. I was formerly unable to make an application for the client to vary His Honour’s orders dated 07 December 2022 as the time to vary such orders had lapsed, and my firm have received no funds from the Husband since the sale of [the Suburb B property] in [late] 2021, and is desperate need of funds to continue in representing the Husband in these proceedings.
14. The outcome of the Husband’s criminal law verdict may lead to a very different conclusion in these proceedings. If the Husband is convicted in his criminal law trial, he may forfeit the [Federal Court] Proceedings and the alleged outstanding PAYG claim may be categorized as a “debt”.
15. In contrast, if the Husband is found to be “not guilty” in his criminal law verdict, the alleged debt is not crystallized. This leaves no basis for the [Deputy Commissioner of Taxation] to hold funds “on credit” pending an outcome of the Husband’s criminal trial or the [Federal Court] proceedings.
However, by the time of this interlocutory hearing the husband had been convicted in the criminal proceedings.
The solicitor then set out the evidence relied upon with respect to costs as follows:
18. I verily believe that the Husband is in urgent need of funds to maintain proper legal representation in these proceedings.
19. My best estimate of the Husband’s legal costs are as follows:
(a) Current unbilled - work in progress= E$100,000.00
Work undertaken by [K Solicitors] (including Consultant’s fees) = E$100,000.00 since the commencement of the within Family Court Proceedings.
(b) Anticipated funds required to prepare Husband for his Federal Court Tax Proceedings
= E$50,000.00
(i) Counsel = E$30,000.00
Perusing brief, advising, and necessary work including reviewing and settling affidavit evidence and correspondence with client and solicitor.
(ii) Solicitor ([K Solicitors]) = E$20,000.00
Brief to Counsel and necessary preparation for in readiness for trial and attendance.
(c) Anticipated funds required to prepare Husband for and including attendance of (Family Law) Final Hearing = E$50,000.00
(iii) Counsel= E$20,000
Based on a fixed 2 days hearing plus hearing preparation work;
(iv) Solicitor ([K Solicitors]) = E$20,000
Based on a fixed 2 days hearing plus hearing preparation work;
(v) Solicitor ([K Solicitors]) = E$10,000
Preparation work including conferences with client & counsel, telephone and email correspondence including necessary affidavit evidence.
19. It would be very difficult for my firm to continue to provide legal representation for the Applicant Husband if costs are disallowed.
(Emphasis in original)
Paragraph 18 of the solicitor’s affidavit filed 3 March 2023 (as set out above) was the subject of objection. The statement in that paragraph is merely a statement of the solicitor’s opinion, not in a form that is evidence. Indeed, it would be necessary for the husband to give evidence that he requires funds for representation and that he has no other funds that he can access. At the very least, the solicitor could have even recounted such evidence of the husband (relying upon the exception to the hearsay rule for the purpose of interlocutory applications in s 75 of the Evidence Act 1995 (NSW)). Paragraph 18 of the affidavit is not admissible evidence and it will be stuck out.
No itemised list is provided of any fees incurred to date, nor explanation of the estimated future costs of the proceedings in either the family law or tax matter.
Application to stay or adjourn the proceedings
At the conclusion of the hearing of the husband’s Application in a Proceeding filed 3 March 2023, I refused the application for a stay or to adjourn the trial and stated that I would provide reasons in due course, so as to ensure that the parties were aware of the outcome at the earliest opportunity given the proximity of the trial dates.
Determining whether to grant a stay requires consideration of a broad range of factors, as set out by Wooten J in McMahon v Gould (1982) 7 ACLR 202 as follows:
(a) Prime facie a plaintiff is entitled to have his action tried in the ordinary course of the procedure and business of the court;
(b) It is a grave matter to interfere with this entitlement by a stay of proceedings, which requires justification on proper grounds;
(c) The burden is on the defendant in a civil action to show that it is just and convenient that the plaintiff’s ordinary rights should be interfered with;
(d) Neither an accused nor the Crown are entitled as of right to have a civil proceeding stayed because of a pending or possible criminal proceeding;
(e) The court’s task is one of ‘the balancing of justice between the parties’, taking account of all relevant factors;
(f) Each case must be judged on its own merits, and it would be wrong and undesirable to attempt to define in the abstract what are the relevant factors;
(g) One factor to take into account where there are pending or possible criminal proceedings is what is sometimes referred to as the accused’s ‘right of silence’, and the reasons why that right, under the law as it stands, is a right of a defendant in a criminal proceeding. I return to this subject below;
(h) However, the so-called ‘right of silence’ does not extend to give such a defendant as a matter of right the same protection in contemporaneous civil proceedings. The plaintiff in a civil action is not debarred from pursing action in accordance with the normal rules merely because to do so would, or might, result in the defendant, if he wished to defend the action, having to disclose, in resisting an application for summary judgment, in the pleading of his defence, or by way of discovery or otherwise, what his defence is likely to be in the criminal proceeding;
(i) The court should consider whether there is a real and not merely notional danger of injustice in the criminal proceedings;
(j) In this regard factors which may be relevant include:
(i) the possibility of publicity that might reach and influence jurors in the civil proceedings;
(ii) the proximity of the criminal hearing;
(iii) the possibility of miscarriage of justice eg by disclosure of a defence enabling the fabrication of evidence by prosecution witnesses, or interference with defence witnesses;
(iv) the burden on the defendant of preparing for both sets of proceedings concurrently;
(v) whether the defendant has already disclosed his defence to the allegations;
(vi) the conduct of the defendant, including his own prior invocation of civil process when it suited him;
(k) The effect on the plaintiff must also be considered and weighed against the effect on the defendant. In this connection I suggest below that it may be relevant to consider the nature of the defendant’s obligation to the plaintiff;
(l) In an appropriate case the proceedings may be allowed to proceed to a certain stage, eg, setting down for trial, and then stayed.
(Citations omitted)
The current proceedings have been pending for nearly three years, and have occupied over a dozen interlocutory events. The issues, at least on the wife’s case, are relatively simple: the parties have separated and she seeks to retain a reasonable share of the assets that appear to have been accumulated whilst they were together, in circumstances where she has the care of the parties’ three young children and is unlikely to receive child support now that the husband has been convicted and is incarcerated awaiting sentencing.
As noted above, there appears to be little real dispute between the wife and either the husband or the Commissioner of Taxation. The significant dispute is between the husband and the Commissioner of Taxation.
The wife is entitled to expect that the litigation should come to an end expeditiously. She waited nearly three years and now has a trial date. The wife has expended considerable costs in the proceedings due to the difficulties caused by the husband’s criminal conduct and lack of effective participation in these proceedings. It was not suggested in argument before me on this application that the wife was a party to the criminal conduct that led to the charges. She is ready to proceed, despite concerns as to the husband’s disclosure, as she wants to be free of this litigation. One cannot overlook the emotional pressure of any ongoing family law litigation on litigants, yet alone in circumstances where the other party has been charged with a serious criminal office that has been the subject of numerous media reports.
The husband’s solicitor largely argued the case for a stay on the basis that it should automatically flow until such time as any appeal from the criminal proceedings verdict is determined. There is no automatic right to a stay of civil proceedings. In the present case, there no longer appears to be a risk of the husband incriminating himself, nor of adverse publicity affecting the proceedings as the jury trial has been completed. There was nothing in the submissions, nor the brief affidavit evidence, to indicate that there was any real risk to the husband if this matter proceeds to trial.
The husband’s case for an adjournment relied upon the uncertainty of the outcome of the tax proceedings in the Federal Court of Australia. However, if the husband is successful in those proceedings it will only have the effect of significantly improving his financial position. The wife is aware of this possibility and does not seek to await the outcome of those proceedings, no doubt prepared to argue that the husband’s tax difficulties flow from his misconduct and that he should bear responsibility for the taxation liabilities: see generally Kowaliw and Kowaliw (1981) FLC 91-091. Given the husband’s conviction in the criminal proceedings, this does not appear to be an issue that would continue to occupy any significant time at trial.
The husband is also concerned as to the level of his preparation for the family law proceedings. However, the husband’s solicitor was not able to articulate what further preparation was required in this case, nor any issues other than the question of whether any property settlement in favour of the husband (pursuant to s 79 of the Family Law Act 1975 (Cth)) should be ordered to be paid to the Commissioner of Taxation (or otherwise be held on trust pending further order) pursuant to s 80 of the Family Law Act. These question do not appear to require any significant material to be filed.
It is apparent from the summary of the litigation (as detailed above), that the husband has filed hardly any documents with this Court, and those documents that have been filed prior to the current applications were in the briefest possible terms. However, no explanation has been given as to why he could not file material in these proceedings (at the very least why some topics may leave him open to self-incrimination). The solicitor representing the husband was unable to articulate how evidence in the family law proceedings could have potentially affected the criminal law proceedings. It appears that any risk to the husband of proceeding to trial in this matter is no more than speculation in the current circumstances, particularly given that no basis for a risk was able to be articulated by his solicitor.
The wife and the Commissioner of Taxation have a right to have the matter determined expeditiously. This right, whilst important for efficient administration by the Commissioner, is significant for a spouse in family law proceedings, particularly when waiting to move on with their life after property settlement proceedings are concluded.
When considering the husband’s stay application I have also had regard to the tax proceedings in the Federal Court of Australia. However, for the reasons set out below, these proceedings can only result in a benefit to the husband, if he is successful. Thus, the proceedings are not a basis for a stay of the wife’s case in this Court.
For these reasons, I was not persuaded that the family law proceedings should be stayed.
Whilst the stay is refused, the question of whether to adjourn the proceedings requires separate consideration. It appears that the husband’s adjournment application was based upon the desire to complete the tax case and to have more time to prepare for the family law proceedings.
The solicitor for the husband was not able to articulate precisely what is proposed to be done in preparation for trial by the husband, nor what time would be required to file any further material by the husband. Whilst the submissions from the solicitor were capable of giving the impression that he had done little or nothing in preparation of either the family law property settlement proceedings or the tax proceedings, the enormous legal expenses already incurred by the husband indicate otherwise. Despite the large expenses, and the lengthy period during which the matter has been set for trial, nothing of substance has been filed, nor responses made to the wife’s request for further disclosure. It is not put that the husband had prepared material but refrained from filing it due to concerns of self-incrimination. Indeed, the husband simply failed to even attend at the conciliation conference (emailing the registrar late the afternoon the day prior) causing the other parties to waste considerable costs.
On the material before the Court, the husband has not persuaded me that it is appropriate to adjourn the trial in this Court which has been listed for many months in circumstances where it was always expected that he would have had a verdict in the criminal law proceedings (which he has now received). At worst, the husband could have prepared his family law affidavits and simply sought to delay filing them until after the criminal law proceedings had reached a verdict, but that does not appear to have occurred even though he had many weeks awaiting the verdict.
I am not persuaded that the trial should be adjourned. As the husband’s solicitor put no specific proposal for any variation of trial directions (that would retain the trial date) and was unable to articulate, even in the most general sense, the nature of the preparation yet to be done nor a time line for filing material, I am not persuaded that I should alter the directions that have already been made.
Whether the matter should proceed on an undefended basis
The Court has power to make directions as to how a trial should proceed when a party is in default of obligations under the rules or pursuant to directions in r 10.27 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth). This power is reiterated in cl 3.11 and cl 3.12 of the Federal Circuit and Family Court of Australia, Central Practice Direction - Family Law Case Management, 1 September 2021.
The husband has defaulted in numerous respects during the course of these proceedings. In particular:
(a)Failing to file a Response to the Commissioner of Taxation’s Application in a Proceeding filed 10 December 2021, leading to the husband being ordered by a registrar to file a Response, and instead filing a Response seeking that the registrar recuse himself;
(b)Failing to file a response to the wife’s Application in a Proceeding filed 15 November 2022 seeking to sell the Suburb C property (despite orders to do so);
(c)Despite orders made 7 December 2022, failing to file and serve any Amended Initiating Application by 14 December 2022, when clearly the current application does not adequately deal with the current proceedings;
(d)Despite orders made 7 December 2022, failing to file and serve his evidence for trial by 14 February 2023;
(e)Failing to attend and properly participate in the Conciliation Conference on 23 February 2023;
(f)Failing to file and serve any Amended Initiating Application by 8 March 2023 (the time as extended by the registrar);
(g)Failing to file and serve his evidence by 8 March 2023 (the time as extended by the registrar);
(h)Failing to file and serve his updated financial statement by 8 March 2023 (the time as extended by the registrar); and
(i)The husband has never provided financial disclosure as required under the rules, nor responded to a request for disclosure made 10 February 2023 by the wife.
These failures to properly participate in the proceedings must be seen in the context of the extent of legal fees that the husband has expended in the family law proceedings. The husband’s solicitor’s affidavit filed 3 March 2023 sets out the amount spent by the husband on the family law and tax litigation to date. In the husband’s Costs Notice filed 23 March 2023, it is estimated that only about $60,000 has been paid to date and that the estimated unpaid costs are $110,000. That is, in the proceedings to date the husband’s solicitor says that the husband has spent around $170,000 pursuing his family law application.
The solicitor estimates (without particularly) that a further $50,000 would be required for the husband to further participate in the family law proceedings. No details of how these estimates or figures were calculated is provided in the solicitor’s affidavit. Most significantly, the husband does not appear to dispute the wife’s position, but has not formally consented to orders as sought by the wife.
The reality is that the husband has done nothing to advance these proceedings, since he obtained orders early on enabling him access to funds for the litigation. Indeed, he put the wife to the costs of obtaining orders for the sale of the Suburb C property when it must have been apparent that the Suburb C property would need to be sold. The husband has not made disclosure of his financial circumstances. Even on the current application (Application in a Proceeding filed 3 March 2023), there is no evidence as to his financial position. Whilst one may expect that he is impecunious, given that he is incarcerated, there remains no disclosure from him nor evidence from him as to the issue. This is not a case where the husband never had a capacity to earn income: he was clearly sufficiently astute to earn significant sums at D Pty Ltd, or at least participate in a significant tax fraud. In the circumstances of this case, the failure to make disclosure cannot be seen as relatively minor issue in the way it may be seen in a case where a party has never had assets or a significant income.
As set out above, in the consideration of the husband’s adjournment application, the husband has not explained his failure to prepare, nor provided any proposal for preparation for trial.
Having regard to all of the circumstances of the matter, I am ultimately persuaded that it is appropriate that the hearing proceed on an undefended basis.
Litigation funding orders
As I have concluded that the proceedings should continue on an undefended basis, there is no need for the husband to receive litigation funding for the family law proceedings.
With respect to the tax proceedings, it is not open to make orders under s 117 of the Family Law Act for litigation funding for proceedings in another court. Thus to the extent that the husband’s solicitor argued for orders enabling litigation funding of the husband’s tax case that application must be refused. Whether it is appropriate to make orders giving the husband access to any of the proceeds of the s 79 property settlement or whether the whole of that sum should be paid to the Commissioner of Taxation (relying upon s 80(1)(f) of the Family Law Act) are not issues for this interlocutory application, but more appropriately determined at the final hearing.
Even if the matter was not proceeding on an undefended basis, there are a number of impediments to orders for litigation funding or partial property settlement (the alternative method of placing a person in funds for litigation). The husband has not identified how he has expended the considerable sums he has already received for litigation. The husband has provided no evidence directly addressing his financial circumstances. The future funding amount sought does not appear to be based upon any assessment of the work to be done as the solicitor was unable to articulate what work was required to prepare for a trial.
To the extent that one could consider the application as one for an interim property settlement order, this is not a case where the husband will necessarily receive any funds, if the wife and Commissioner of Taxation are successful. For this reason, it is not appropriate to make interim property settlement orders as such orders have the potential to prejudice the other parties.
The husband’s spousal maintenance claim
The husband also sought a $20,000 lump sum “by way of interim spousal maintenance”: see the husband’s Application in a Proceeding filed 3 March 2023, paragraph 5. The claim appeared unrealistic from the outset given that the husband has a clear earning capacity, if he is not incarcerated or otherwise focused upon his defence to criminal law proceedings.
As the husband had been convicted and incarcerated by the time of this hearing, he abandoned his spousal maintenance claim. Clearly he cannot obtain spousal maintenance when he is incarcerated and being maintained at the expense of his Majesty. However, it is telling that the spousal maintenance claim was only abandoned on the day of this interlocutory hearing and not before so as to minimise the wife’s costs.
The husband’s discovery application
The husband seeks discovery of the documents concerning the wife’s settlement with the Commissioner of Taxation with respect to the Commissioner’s clam against her for income tax. The duty of disclosure is set out in r 6.01 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth). Rule 6.06(3) of the rules provides a detailed list of documents that would ordinarily be relevant to proceedings pursuant to s 79 of the Family Law Act 1975, which should be disclosed.
The wife does not allege that she has a tax liability for the purpose of these proceedings. If she did have a tax liability, it would be a basis for a greater entitlement by her under s 79 of the Family Law Act 1975, rather than a lesser entitlement. Taxation liability of spouses is not joint, but individually assessed upon each spouse’s actual circumstances. As the issues between the wife and the Commissioner of Taxation do not bear upon the extent of the property available for property settlement, nor indicate that the wife has greater assets than she has disclosed, it is difficult to see that the documents are relevant to issues pertaining to s 79 of the Family Law Act 1975. Similarly, the wife does not dispute the Commissioner of Taxation’s claims as to the extent of the husband’s tax debt: it is not a case where the wife says that the husband’s tax debt will be likely to reduce as a result of the proceedings in the Federal Court of Australia. I am not persuaded that the documents have sufficient relevance to the issues in these proceedings to warrant an order for disclosure.
Whilst the documents concerning the wife’s settlement with the Commissioner of Taxation may be useful to the husband in planning his approach to his own tax dispute with the Commissioner, this is not a basis for ordering disclosure.
CONCLUSIONS
For the reasons I have given, I formally dismiss the husband’s application for spousal maintenance against the wife, and the husband’s application for disclosure. I also dismiss the husband’s application for a stay pending any appeal against the husband’s conviction in the criminal law proceedings. Having regard to the circumstances of the case, I am not persuaded to adjourn the trial of the proceedings. Further, given the husband’s failure to properly participate in the proceedings (where he is the applicant), despite incurring enormous legal expenses (and having regard to the matters set out above) it is appropriate that the matter proceed on an undefended basis at the trial.
The wife seeks leave to file further material in the event she reaches a settlement with the Commissioner of Taxation (which she believes is likely), in order to explain and support any consent position she reaches with the Commissioner. As the wife and the Commissioner of Taxation cannot settle the entire proceedings without the consent of the husband, it is appropriate that the wife have leave to file an affidavit to explain the basis of any agreement she reaches with the Commissioner given that the Court is not bound to make orders reflecting an agreement between different parties to the proceedings. In this regard, I make orders in the form sought in the wife’s Response to Application in a Proceeding filed on 21 March 2023.
I therefore make orders accordingly.
I certify that the preceding seventy-nine (79) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Riethmuller. Associate:
Dated: 31 March 2023
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