Banner & Cody (No 2)
[2023] FedCFamC1F 345
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Banner & Cody (No 2) [2023] FedCFamC1F 345
File number(s): PAC 1601 of 2020 Judgment of: JARRETT J Date of judgment: 3 May 2023 Catchwords: FAMILY LAW – PROPERTY – Property adjustment application as between applicant and first respondent – Undefended hearing with submissions – Where the applicant owed a significant debt to the Australian Taxation Office – Orders made for applicant’s share of the property pool
FAMILY LAW – EQUITY – Liens – Where the applicant’s former solicitor applied to join the proceedings – Where an equitable lien was asserted over fruits of the litigation – Where there will be no fund for the lien to attach – Joinder refused
Legislation: Family Law Act 1975 (Cth) ss 75(2), 75(2)(ha), 79, 79(4)(d), 79(4)(e), 79(4)(f), 79(4)(g) and 80 Cases cited: Commissioner of Taxation & Worsnop [2009] FamCAFC 4;
Firth v Centrelink & Anor [2002] NSWSC 564
Division: Division 1 First Instance Number of paragraphs: 34 Date of last submission/s: 6 April 2023 Date of hearing: 20 March 2023 Place: Brisbane Solicitors for the Applicant: Litigant in person Counsel for the Respondent: Mr Macarounas Solicitors for the Respondent: Matthews Folbigg Pty Ltd Counsel for the Intervener: Ms Kovacs Solicitor for the Intervener: HWL Ebsworth Solicitors ORDERS
PAC 1601 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR BANNER
Applicant
AND: MS CODY
First Respondent
COMMISSIONER OF TAXATION
Intervener
order made by:
JARRETT J
DATE OF ORDER:
3 May 2023
BY CONSENT AS BETWEEN THE FIRST RESPONDENT AND THE INTERVENER
THE COURT ORDERS THAT:
1.The applicant and the respondent shall forthwith, and no later than seventy-two (72) hours from the date of these orders, do all acts and things and sign all documents and authorities to cause the amount of $140,039.85 to be transferred from the trust account of K Solicitors to the trust account of the solicitor for the respondent (Matthews Folbigg Pty Ltd).
2.The respondent shall, forthwith upon receipt of the $140,039.85 into her solicitor’s trust pursuant to Order 1, and no later than seventy-two (72) hours from the time of such receipt, do all acts and things to pay land tax in the amount of $140,039.85, as referred to in the Land Tax Assessment Notice in her name (correspondence ID …), to NSW Government (Revenue), Biller code: … Ref: …31.
3.The applicant is restrained from dealing with funds in his former solicitor’s trust account (K Solicitors) except as otherwise provided herein.
4.The respondent is restrained from dealing with funds in her solicitor’s trust account received from the proceeds of sale of the property known as J Street, Suburb C in the State of New South Wales, being the whole of the land comprised in Certificate of Title Folio Identifier … (Suburb C property), or pursuant to Order 1, except as otherwise provided for herein.
5.On the later date of fourteen (14) days from the date of these orders and the date of the wife’s compliance with Order 2, the applicant and respondent shall forthwith do all acts and things and sign all documents and authorities to cause the balance of funds remaining in the trust account of K Solicitors trust account, estimated to be in the amount of $41,379.93, to be paid to the Commissioner of Taxation (Intervener) in partial payment of the applicant’s tax-related liabilities.
6.The parties shall be permitted to provide a copy of these orders to K Solicitors and any solicitor employed by K Solicitors, and such orders shall be sufficient authority to permit the payment referred to in Order 1 to occur.
7.Forthwith upon on the completion of the sale of Suburb C property, the proceeds of sale of the Suburb C property, including any deposit received from the purchaser, are to be paid by the respondent in the following manner:
(a)to the Intervener, the lesser of:
(i)45% in partial payment of the applicant’s tax-related liabilities (in the amount of approximately $597,850.74); or
(ii)the sum of the applicant’s outstanding tax-related liabilities.
(b)the balance to the respondent.
8.Prior to any distribution pursuant to order 7, the respondent shall:
(a)cause an amount equivalent to the estimated tax payable as a result of the sale of the Suburb C property to be transferred to the trust account of the respondent’s solicitor;
(b)cause the respondent’s solicitor to retain any amount for tax payable pursuant to 8(a) above in its trust account pending assessment and payment of the tax;
(c)instruct the respondent’s solicitor to apply the funds held on account of tax pursuant to 8(b) above in payment of such tax when assessed; and
(d)in the event the sum retained pursuant to 8(b) above exceeds the amount payable for tax any excess remaining in the trust account shall be distributed:
(i)to the Intervener, the lesser of:
A.45% in partial payment of the applicant’s tax-related liabilities; or
B.the sum of the applicant’s outstanding tax-related liabilities.
(ii)the balance to the respondent.
9.The balance of any refund of land tax received by the respondent in respect of land tax paid in relation to the Suburb C property over a reasonable amount of legal costs incurred by the respondent in obtaining such refund shall be distributed at the respondent’s direction:
(a)to the Intervener, the lesser of:
(i)45% in partial payment of the applicant’s tax-related liabilities; or
(ii)the sum of the applicant’s outstanding tax-related liabilities.
(b)the balance to the respondent.
10.The respondent shall forthwith do all acts and things to seek a refund of the land tax paid by her pursuant to these orders, and, if such refund is received, cause those funds to be paid into the trust account of Matthews Folbigg Pty Ltd, and the respondent shall not otherwise deal with those funds expect for in accordance with the preceding order.
11.Within fourteen (14) days of receiving payment in accordance with order 7, the respondent pay to the Intervener the lesser of:
(a)the sum of $99,574.89 in partial payment of the applicant’s tax-related liabilities, or
(b)the sum of the applicant’s outstanding tax-related liabilities.
12.Subject to these orders, the applicant shall retain to the exclusion of the respondent all items of personalty in his possession including but not limited to motor vehicles, cash in bank accounts, superannuation, furniture and personal belongings.
13.Subject to these orders, the respondent shall retain to the exclusion of the applicant all items of personalty in her possession including but not limited to motor vehicles, cash in bank accounts, superannuation, furniture and personal belongings.
14.Except as otherwise provided for in these orders, the applicant hereby indemnifies the respondent from and in respect of all actions, claim, suits and demands as may be made against the applicant in relation to all liabilities in the name of the applicant.
15.Except as otherwise provided for in these orders, the respondent hereby indemnifies the applicant from and in respect of all actions, claim, suits and demands as may be made against the respondent in relation to all liabilities in the name of the respondent.
16.As between the respondent and the Intervener, each party pay its own costs of the proceeding.
17.The parties do all acts and things and sign all documents necessary to give effect to these Orders.
18.The parties forthwith do all acts and things and sign all such documents as may be necessary to give effect to these Orders.
19.The Judicial Registrar of the Federal Circuit and Family Court of Australia (Division 1) be appointed pursuant to section 106A of the Family Law Act 1975 (Cth) to execute any document and/or instrument necessary to give effect to the foregoing orders in the event of either party failing, refusing or neglecting to execute such document within 7 days of being requested to do so by the other party or by that other party’s legal representative and the cost of procuring due execution of the document/s and/or instrument/s shall be borne on a solicitor/own client basis by the party in default and the party not in default shall be at liberty without further order of the Court to deduct from any moneys payable to the party in default pursuant to these orders such costs as have been incurred by the party not in default pursuant to this order.
20.The Judicial Registrar or other officer is authorised to execute any such necessary document and/or instrument pursuant to the above order upon being satisfied by affidavit that refusal, neglect or default as the case may be has occurred.
THE COURT FURTHER ORDERS THAT:
21.The Application in a Proceeding for joinder filed by the applicant’s former solicitor on 13 April, 2023 be dismissed.
22.Within fourteen (14) days the respondent and the Intervener file and serve any written submissions or aide memoire on the question of costs of the Application in a Proceeding for joinder.
23.Within fourteen (14) days thereafter the applicant and the applicant for joinder file and serve any written submissions on the question of costs of the Application in a Proceeding for joinder.
24.Subject to any indication by correspondence to the Chambers of Justice Jarrett by any party, the question of costs will be dealt with on the papers.
IT IS NOTED BY CONSENT AS BETWEEN THE RESPONDENT AND THE INTERVENER
A.On 20 November, 2018, the applicant filed in the Federal Court of Australia an Originating Application for Judicial Review seeking declaratory relief that he is entitled to $850,195.00 PAYG withholding credit for the financial year ended 30 June 2016 (Judicial Review Proceeding).
B.In the event the Judicial Review Proceeding is successful (including any appeal), or the Intervener decides that the applicant is entitled to a PAYG withholding credit for the financial year ended 30 June 2016, any overpaid amount received by the Intervener in partial payment or full payment of the applicant’s tax-related liabilities will be applied against any other tax- related liability the applicant may have or refunded to him in the event the applicant has no other tax-related liability.
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
JARRETT J:
Before me are two applications. The first is an application for final orders filed by Mr Banner on 3 April, 2020 for property adjustment orders. That application proceeded to an undefended hearing before me on 20 April, 2023. The second is an application in a proceeding filed by Mr L, Mr Banner's former solicitor on 13 April, 2023 seeking to be joined to the proceedings so as to enforce an asserted equitable lien over the applicant's property for legal work that he has done. I propose to deal firstly with the application in the proceeding and then with the substantive application.
The joinder application is opposed by the first respondent, Ms Cody, and the intervener in the proceedings, the Commissioner of Taxation. The application in a proceeding filed by Mr L seeks an order that he be joined as a third respondent to the proceedings. It seeks an order that he is "entitled to a special lien (“fruits of the action lien”) for priority payment of legal costs of the Husband incurred in the proceedings in the sum of $110,070.22” and he seeks an order that the unpaid costs be ordered to be “paid in priority out of the property division ordered in favour of the Husband”.
There is no dispute that the applicant for joinder was the applicant's solicitor in these proceedings for some time. He was given leave to withdraw as the applicant's solicitor on 13 April, 2023 when his application was filed and it was first mentioned before me. He has been the solicitor in the proceedings for the applicant since the principal proceedings were commenced.
Ordinarily a solicitor is entitled to charge for their services. There is a regulatory regime that applies to the engagement of and payment of legal practitioners. Tendered at the hearing before me and what became exhibit 1 on this application was a document described as a costs agreement. The costs agreement was said to be the agreement between the applicant for joinder and Mr Banner. The copy that was tendered is not signed either by the solicitor or the client, but I will assume for the purposes of these reasons that the agreement was executed to the extent that it was required to be executed and that otherwise it binds Mr Banner.
Of relevance is clause E14. It is important so I will set it out in full. It says this:
Without affecting any lien to which the firm is otherwise entitled at law over funds, papers and other property of the client in the firm's possession, (a) the firm shall be entitled to retain by way of lien any funds, property or papers of the client which are from time to time in its possession or under its control until all costs, disbursements, interest and other moneys due to the firm have been paid, (b) the firm's lien will continue notwithstanding that the firm ceasing to act for the client in accordance with clauses E7 and E8. The client acknowledges that the firm is a small suburban practice with limited resources and that the acceptance of instructions is conditional upon the firm having the prior right to payment of all unpaid costs and disburse as a first charge on any settlement, verdict, moneys or costs orders called at law a fruits of the action lien and the client hereby irrevocably authorise and direct and if required to do so by separate instrument will execute further documentation so confirming the payment of any agreed settlement sum, verdict moneys or costs orders to the firm's trust account. The client acknowledges that he has been particularly invited to obtain independent legal advice in this respect before executing this agreement."
So on the basis of that agreement, I am comfortably be satisfied that there is a contractual entitlement to some form of charge over the types of property that are set out in that clause. The clause is qualified in the sense that it is said to be without prejudice [my words] to any other lien to which the firm is otherwise entitled.
It has long been recognised that a particular lien arises in favour of a solicitor who has performed legal work which has resulted in the generation of a fund for a particular client. All parties in this case referred me to Firth v Centrelink & Anor [2002] NSWSC 564 where Campbell J summarised the relevant position.
35.The authorities establish the following propositions concerning this right of the solicitor:
(a)The solicitor’s right exists over money recovered through obtaining judgment in litigation, and also over money recovered through the settlement of litigation: Carew Counsel Pty Ltd v French [2002] VSCA 1 at [33]; Roam Australia Pty Ltd v Telstra Corporation Ltd [1997] FCA 980, Lehane J, 22 September 1997, unreported at 4.
(b)The solicitor’s right exists over both the amount of a judgment in favour of the client, and the amount of an order for costs in favour of the client: In The Estate of Fuld (No 4) [1968] P 727 at 736; Twigg v Keady (1996) 135 FLR 257 at 266 – 267 per Finn J; In Re Blake; Clutterbuck v Bradford [1945] Ch 61 (a case concerning a statutory charging order rather than a lien arising in equity’s exclusive jurisdiction, but dependent on the same principle as the equitable right – see paragraph 44 below).
(c)It exists over money which is in the possession of the solicitor, and also over money which is in court ( In Re Meter Cabs [1911] 2 Ch 557 at 562) and money which is owed to the client but not paid into court ( In The Estate of Fuld (No 4) [1968] P 727; Re de Groot [2001] 2 Qd R 359 at 375)
(d)The solicitor need not be still acting for the client at the time that the money was recovered: In The Estate of Fuld (No 4) [1968] P 727; Kelso v McCulloch (Supreme Court of NSW, Young J, 24 October 1994 unreported); Twigg v Keady (1996) 135 FLR 257 at 289 per Kay J; Roam Australia Pty Ltd v Telstra Corporation Ltd [1997] FCA 980, Lehane J, 22 September 1997, unreported at 4
(e)For the right to arise it must be shown that there is a sufficient causal link between solicitor’s exertions and the recovery of the fund of money: Roam Australia Pty Ltd v Telstra Corporation Ltd [1997] FCA 980, Lehane J, 22 September 1997, unreported at 4 - 5; Carew Counsel Pty Ltd v French [2002] VSCA 1 at [33].
(f)The quantum of money for which the solicitor has the equitable right is the amount which is properly owing to the solicitor by the client, whether that amount be ascertained by taxation of a bill of costs, or assessment, or pursuant to a costs agreement: Roam Australia Pty Ltd v Telstra Corporation Ltd [1997] FCA 980 (Lehane J, 22 September 1997, unreported at 4). In relation to those situations where taxation is necessary to ascertain the quantum owing to the solicitor, the solicitor’s right exists in the fund prior to the occurrence of the taxation ( Johns v Cassel (1993) 6 BPR 13,134 at 3,136 per Hodgson J; Twigg v Keady (1996) 135 FLR 257 at 289 per Kay J; In The Estate of Fuld (No 4) [1968] P 727 at 740; Roam Australia Pty ltd v Telstra Corporation Ltd [1997] FCA 980 (Lehane J, 22 September 1997, unreported at 6).
(g)The solicitor’s equitable right exists before the court is asked to intervene to protect it; it “arises immediately upon the recovery of monies through the exertions of the solicitor”: Carew Counsel Pty Ltd v French [2002] VSCA 1 at [33]; if the lien is over the proceeds of an order for costs, it comes into existence at the time of making of that order for cost: Phillipa Power & Associates v Primrose Couper Cronin Rudkin [1997] 2 Qd R 266; Kison v Papasian (1994) 61 SASR 567. If the lien is over the proceeds of a settlement, it arises when the settlement agreement is entered into: Re de Groot [2001] 2 Qd R 359 at 368. (These statements concern when the lien comes into existence as an item of present property – they are not concerned with the ability of the solicitor to deal with the rights under the lien as future property before the fund is in existence.)
(h)The right of the solicitor is one which the solicitor can enforce against the client, entitling the solicitor to an injunction to prevent the payment of the fund to the client without notice to the solicitor until such time as the quantum of the solicitor’s entitlement to be paid from the fund is ascertained: In The Estate of Fuld (No 4) [1968] P 727. If the quantum of the solicitor’s entitlement has been ascertained, the solicitor is entitled to an order that the amount of his entitlement be paid to him from the fund, notwithstanding opposition from the client: Leamey v Heath [2001] NSWSC 1095 (Campbell J, 22 November 2001, unreported).
(i)The right can also be enforced against people other than the client, in certain circumstances. When the money recovered takes the form of a debt owed to the client, which has been assigned, the right of the solicitor will prevail over the rights of an assignee of the debt, save where the assignee is a bona fide purchaser for value without notice: Re de Groot [2001] 2 Qd R 359. (If the assignee is a bona fide purchaser for value without notice, it may be that priorities between the solicitor’s right and the right of the assignee are to be determined in accordance with the rule in Dearle v Hall , (see Meagher, Gummow & Lehane, Equity Doctrines and Remedies , 3rd edition, at [819] ff) or it may be that the court considers who, of the solicitor and the assignee, has the superior equity - Re de Groot [2001] 2 Qd R 359 at 368 – 376 – but it is not necessary for me to consider that matter further.)
(j)If the client is a company which goes into liquidation, the solicitor is entitled, in relation to costs arising from work done before the start of the liquidation, to claim the full amount of the costs from the fund, and is not required to prove in the liquidation: In Re Born; Curnock v Born [1900] 2 Ch 433; In Re Meter Cabs [1911] 2 Ch 557. This has the same practical effect as enforcing the right against the other creditors of the company. The solicitor’s lien attaches to property recovered through his exertions, even if the actual recovery occurs after the client goes into liquidation: North West Construction Co Pty Ltd (In Liquidation) v Marian [1965] WAR 205 at 211.
(k)Likewise if the client is a natural person who becomes bankrupt, the solicitor is not required to prove in the bankruptcy for the amount of costs incurred, but can recover the costs from the debt which is the result of his efforts: Guy v Churchill (1887) 35 Ch D 489; Worrell v Power & Power (1993) 46 FCR 214. The trustee in bankruptcy takes that debt subject to the equitable right of the solicitor to be paid his costs, and if the amount of the solicitor’s costs exceeds the value of the debt, the debt does not vest in the trustee in bankruptcy at all; if the client is discharged from bankruptcy he can sue to enforce the debt as it never was property divisible among the creditors, and any amount that the client then receives is also subject to the solicitor’s lien: Kison v Papasian (1994) 61 SASR 567
(l)If the client is the liquidator of a company in liquidation, the solicitor’s lien over property recovered through his exertions is to be satisfied before the statutory order of priorities for distribution of the property of the corporation comes into effect: Jeffcott Holdings Ltd (in liq) v Paior (1995) 18 ACSR 213
(m)If the money recovered is held in the solicitor’s trust account, and the solicitor is served with a garnishee notice, issued to enforce a debt which the client owes to another person, the garnishee notice is not effective to attach the money in the trust account, to the extent that the solicitor has a lien over it: Phillipa Power & Associates v Primrose Couper Cronin Rudkin [1997] 2 Qd R 266. Likewise if the money recovered is held by a third party, and a garnishee notice is served on that third party, the solicitor’s lien prevails over the garnishee notice: Dallow v Garold ; Ex parte Adams (1884) 14 QB D 543.
Importantly, what falls from a summary of those principles is that if the lien exists, it exists independently of any order of the Court being made regarding the lien. It comes into existence when a settlement agreement is entered into and it does not matter where the funds are held, whether they are held by another solicitor or somewhere else. The right to the lien exists prior to the proper establishment of the quantum of the costs claimed by the solicitor. All those things may be taken as given.
It is necessary now to consider for a moment the principal application. It is an application for property adjustment brought by Mr Banner. The Commissioner of Taxation has joined the proceeding. In short compass, the parties have between them property which approaches $1.9 or $2 million depending upon whether some sum that was paid to the parties in the course of the proceedings is included or not. The husband has an income tax liability which, according to one version of the evidence, stands at about $1.1 million.
There is a dispute about the existence of that liability. The husband disputes it and has taken proceedings in the Federal Court to advance his dispute. Riethmuller J in his reasons given recently on the stay application, amongst other things, prosecuted by the applicant refers to the issue in relation to the tax debt as being a factual one, namely, whether the primary tax that the Commissioner has raised against the applicant being unpaid withholding tax was, in fact, paid by a company with which the husband was associated. It is a question of fact for determination in the relevant place at the relevant time, but the issue does not seem to be particularly complex. In any event, there is that liability which, as between at least the first respondent and the Commissioner of Taxation, there is no dispute.
The wife has a land tax liability and when all of those things are taken into account, and leaving aside the tax debt, the estimated net assets are in the order of $1.6 million. The first respondent and the Commissioner of Taxation have reached an agreement about the disposition of the principal proceedings. I have been presented with some orders with which each of them agrees whereby certain funds that are held in a trust account by the applicant for joinder are paid to the first respondent for the purposes of her meeting a land tax obligation. The balance is then to be paid to the Commissioner of Taxation in part satisfaction of the applicant's debt.
Another property, referred to in the material as the Suburb C property, is to be sold and after the payment of various expenses the net proceeds of sale are to be divided between the applicant and the Commissioner. The proportion, roughly speaking, is 55 per cent/45 per cent. I say "roughly" because there are adjustments to be made.
The applicant for joinder has not identified the fund in respect of which he says his lien attaches. There are the funds in his trust account which presumably he says might be charged by either the contractual lien or the fruits of the litigation lien, but those funds in his trust account were placed there by an order of the Court. The order was made in July, 2021 and it makes it clear that those funds are held by him as trustee for the applicant and the first respondent pending further order of the Court.
The funds were liberated from the sale of a property which, as I understand the material, was registered solely in the first respondent's name. So there is a real question about whether those funds are indeed the applicant's or the first respondent's or, having regard to the order made for their disposition to the solicitor's trust account, whether the purpose of the trust for which they are held is to abide any further order of the Court. On any view, it seems to me, they are not funds in respect of which a lien could attach because they are not Mr Banner’s funds.
The only other fund that might arise is a notional fund which is generated upon the sale of the Suburb C property and a distribution of the net proceeds of sale. The orders that I am asked to make are such that any entitlement that the husband might otherwise have received under them is to be paid directly to the Commissioner of Taxation. There is no doubt that the Court has power to do that. Section 80 of the Family Law Act 1975 (Cth) supplies that power if the power was otherwise in doubt. So to the extent that it is argued that there would be a fund from which the solicitor's costs might be paid and in respect of which the lien might attach, it is plain, in my view, that there will be no such fund. No such fund will come into existence because upon the sale of the Suburb C property and the distribution of the proceeds in accordance with the proposed orders there will be nothing received by the husband.
The contractual lien set out in the solicitor's costs agreement refers to the charge attaching to settlement sums, verdict money or costs orders. This is not a case where there will be a settlement sum, verdict monies or costs orders in favour of the applicant.
A great many number of points were taken by counsel for the Commissioner of Taxation and counsel for the first respondent as to why the application for joinder ought be refused. There were procedural points and points of more substance.
I do not intend to deal with each of those points seriatim, save to say that in respect of the procedural points. To the extent that there is any defect in procedure in the applicant for joinder's application, I would be inclined to waive those defects and make whatever order was necessary under the rules to remedy those irregularities. But the more substantive argument to which I have just referred promoted largely by the Commissioner of Taxation is good. I find that there will be not be any fund or property, however one wishes to describe it, against which the lien will attach.
During the course of submissions I discussed with counsel, both for the respondent and the Commissioner of Taxation, the proposition that when the Court makes an order under section 79 of the Act in a case that involves a creditor such as this, the Court is not making a property adjustment order in favour of the creditor.
As I understood the submissions made, at least for the Commissioner, it was suggested that in making an order the Court was exercising the powers under s 79 to make a property adjustment order whereby the interests of the parties in their property was adjusted to the Commissioner. I do not accept that argument. The statements of the Full Court in Commissioner of Taxation & Worsnop [2009] FamCAFC 4 make it clear, in my view, that, in fact, that is not what occurs in a case such as present when the Court makes an order in favour of a creditor. A creditor remains a creditor and takes on not special status nor accrues any particular rights beyond being a creditor. But even so, in the circumstances that I have already explained in these reasons, the applicant for joinder's application for relief set out in his application in a proceeding must fail. The fund which might otherwise go to Mr Banner will not if I make the orders. At no point will it be held by any party on his behalf.
The application in the case filed on 23 April, 2023 will be dismissed.
I move then to the question of the orders that have been agreed between the first respondent and the intervener. The applicant participated in the undefended hearing before me. After taking submissions from the parties on the point, it was plain that there was to be no cross-examination of the only relevant witness namely the first respondent. The application proceeded before me by way of submissions. Each party, including the applicant, was given the opportunity to make submissions.
It became apparent in the course of submissions that the terms of the orders in a general sense were agreed between all parties. Mr Banner did not cavil with the way in which the property was to be divided in a general sense between Ms Cody on the one hand and him or the Commissioner of Taxation on the other. The real issue that became apparent from his submissions was whether the amounts to which he might otherwise be entitled, were it that Commissioner of Taxation was not involved, be paid to him or should they be paid to the Commissioner as the Commissioner and the first respondent had agreed. I will return to that issue shortly.
The parties made available to me a document entitled “Consent Order Summary of the Intervener and the Respondent”. I will mark that as exhibit 3 in these proceedings. It contains a table of the assets and liabilities of the parties. No party suggested that it was inaccurate and I am content to adopt it as a statement of the assets, liabilities and financial resources that are relevant in these proceedings.
It seems to be common ground that insofar as the taxation debt is concerned, it is, first, a debt owed by the applicant to the intervener, subject of course to his present proceedings in the Federal Court. Secondly, the first respondent was not involved in the generation of that debt in the sense spoken of in the primary judgment in Worsnop or in the Full Court judgment in Worsnop, such that it could properly be said that this is a debt that might be treated separately from the rest of the parties' assets and liabilities as it was in Worsnop. That is to say, it was a debt owed by the husband in respect of which the first respondent was not required to make any contribution. That seems to have been the approach taken here. It is, on the material that I have read, appropriate to take that course.
The parties’ submissions make it clear that the orders proceed on the basis that contributions by each of these parties first, to the financial aspects of their relationship and secondly, to the non-financial aspect of their relationship should at the time of the hearing be seen as equal. Having regard to Ms Cody's affidavit evidence, that is an entirely appropriate course. The contributions described by her in her affidavit would lead, in my view, almost inevitably to the conclusion that contributions ought to be assessed as equal.
The next step in the process is to make an assessment of whether any adjustment to that contribution-based entitlement is necessary having regard to the matters set out in ss 79(4)(d), (e), (f) and (g) of the Act. Section 75(2) is called up and relevantly in this case s 75(2)(ha). This is a case where absent the debt to the Commissioner there would be a relatively significant adjustment in favour of the wife to the contribution-based assessment. That is because she has the care and control of the parties' children. She has an income earning capacity which on its face which is far less than that of the husband and absent the tax debt which must necessarily mean absent any wrongdoing on his part, he would have an earning capacity which far outweighed that of the wife.
So in general terms and absent the tax debt, one might easily conclude that a significant adjustment to the contribution-based entitlement would be made. But the tax debt needs to be taken into account. The parties have approached the case on the basis that the approach adopted by the primary judge in Worsnop really is a good guide to the way in which this case should be approached. That is to say, although the wife is not sharing in the liability directly, nonetheless it needs to be taken into account under s 75(2)(ha) and the way to do that to work justice and equity between the parties and to include the creditor's interest is to reduce any 75(2) adjustment. The parties have done that in this case and reduced it from what would otherwise be a large adjustment to an adjustment of some 5 per cent such that there is a differential of ten percent. In my view, that is an entirely appropriate course and I so find.
The terms of the orders otherwise are relatively unremarkable. They provide for some moneys held in a trust account to be paid to the first respondent so she can discharge some land tax, the balance to be paid to the Commissioner of Taxation. Provision is made for the sale of the Suburb C property. The division of proceeds is provided for in the orders and there is an adjustment to the Commissioner provided for in paragraph 11 that I am satisfied is appropriate. Otherwise, as I say, the orders are unremarkable.
I am inclined to make them subject to a determination about the issue raised by the applicant. The applicant says that the taxation debt is not a debt that he owes. He has taken proceedings in the Federal Court for relief to that effect. Those proceedings were commenced in 2020. It is now 2023. They do not seem to have moved along very smartly, and, as I have already indicated, and as recognised by Riethmuller J, the real issue seems to be one of fact which ought not be particularly hard to resolve.
In any event, the proceedings remain on foot. The husband says that the funds that are to go to the Commissioner under the proposed consent orders should be paid to him because he needs to fund legal representation so that he can prosecute the Federal Court proceedings. I accept that is probably so – that he will need to fund lawyers if he wishes to engage legal representation. That he might wish to engage legal representation is not unreasonable in the circumstances given that, first of all, he is litigating in a superior court of record; secondly, he is presently the subject of incarceration awaiting sentence, having been convicted of some offences. There is no evidence before me about the likely sentence that he will receive, but if I assume for the moment that he will remain incarcerated for some time, then his desire to have legal representation in the Federal Court is understandable. That is not to say, of course, it is necessary because the applicant could prosecute his Federal Court proceedings himself just as he has these proceedings most recently.
The Commissioner, on the other hand, says that the money should be paid to the Commissioner because the Commissioner has a bona fide debt, is entitled to be paid and in the event that it turns out the Federal Court proceedings are successful from the applicant's point of view, any money that he might have paid to the Commissioner or any money that might have been paid to the Commissioner by these orders can be repaid to the applicant or offset against any other tax liabilities that he might have.
Neither party took me to any authorities which might assist to determine the way in which to determine the point. It seems to me that it was simply a plea by the husband for access to some funds for his legal representation in the Federal Court proceedings. In my view, that is not enough. The Court has an obligation to see to the interests of creditors. It is a matter for which the Family Law Act provides in s 75(2)(ha), and the Court has an express power set out in s 80 to make the orders that are contemplated here.
In those circumstances, I am satisfied that it is appropriate to make the orders that have been agreed between the first respondent and the intervener. I am satisfied that as between the applicant and the first respondent those orders are just and equitable for the purposes of section 79(2) and should be made. Accordingly, there will be orders in terms of the minute that has been provided to my Chambers by the first respondent and the intervener.
I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jarrett. Associate:
Dated: 3 May 2023
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