Barker and McKenzie and Ors

[2014] FamCA 264

FAMILY COURT OF AUSTRALIA

BARKER & MCKENZIE & ORS [2014] FamCA 264

FAMILY LAW – discovery and disclosure – application for costs – outstanding applications are adjourned

Family Law Act 1975 (Cth)

APPLICANT: Mr Barker

RESPONDENT: Ms McKenzie

INTERVENORS: Ms B, Ms C, Mr D, Ms E and Mr F

FILE NUMBER: MLC 9886 of 2010

DATE DELIVERED: 23 April 2014

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 12, 13 March 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Schetzer

SOLICITOR FOR THE APPLICANT: Schetzer Constantinou

COUNSEL FOR THE RESPONDENT: Mr Testart

SOLICITOR FOR THE RESPONDENT: Kennedy Partners

COUNSEL FOR THE INTERVENOR: Mr Bradshaw for Mr F and Mr Wraith for the proposed intervenor Ms G

SOLICITOR FOR THE INTERVENOR: Tolhurst Druce & Emmerson

Orders

1. If discovery and disclosure has not been completed, each party by 4 pm on 7 May 2014 provide to the other party a list of all documents required for inspection and within 7 days thereafter, subject to any objection on the grounds of privilege, such documents be made available for and be inspected by the other party(ies).

2. That the order requiring the intervener(s) to file a financial statement is discharged.

3. That the wife’s application for costs is dismissed.

4. That all outstanding applications are adjourned to 10.00am on 5 June 2014 for final hearing.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Barker & McKenzie and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 9886  of 2010

Mr Barker 

Applicant

And

Ms McKenzie

Respondent

REASONS FOR JUDGMENT

1. These two discrete issues arise out of a complicated property dispute involving a variety of parties. In the running of argument, compromises were reached in the matters save for two. They were:

   (a)Should an order for costs be made in favour of the wife to “tide” her over as a result of the substantive case being adjourned on the first of its listed days?

   (b)Should a previous order by the Court for a third party to file a financial statement be revisited because of a change in the nature of the application by the third party?

2. The parties to this marriage were Mr Barker (the husband) and Ms McKenzie (the wife). There are two children of their relationship.

3. In 2013, the husband died. That event gave rise to his Executors being substituted for the deceased. A number of interlocutory events followed.

4. Subsequently, the husband’s son and daughter from his first marriage were joined to the proceedings as interveners. Their claims for relief included:

   (a)An application for maintenance under the Victorian Administration and Probate Act otherwise known as a “Part IV application”;

   (b)A claim for money due under a loan; and

   (c)The enforcement of a claim arising out of the conclusion of the husband’s first marriage to his first wife pursuant to an order that has apparently remained dormant for over 20 years.

5. Shortly prior to the allocated trial date, another claimant sought to intervene. This was the sister of the husband. It seems that the husband was the executor and trustee of his mother’s estate and in some capacity, which remains to be canvassed in further detail, he provided support of a financial nature for his now wheelchair-bound sister. Two issues seem to have arisen there:

   (a)Was the estate of the husband’s mother distributed? What happened to the funds from that estate?

   (b)The sister now seeks leave to bring an application under Part IV of the Administration & Probate Act 1958 (Vic).

6. Counsel for the estate made a limited admission for the purposes of the relief sought by the sister of the husband. The executors do not admit maladministration. They admit that property of the mother’s estate was sold by the husband during his lifetime and that the proceeds were used for living and lifestyle expenses but otherwise, there is no evidence that they can provide as to how the proceeds were applied. That concession was confined to the proceedings in this Court and it was made clear by counsel for the estate that if proceedings were begun under the Part IV process in the Supreme Court, the concession would be withdrawn.

7. In the midst of all of this, there is a house of which the husband was the registered proprietor and in which the husband’s sister has a life interest.  The remaindermen are the two infant children of the deceased and the wife. It is now common ground that the wife does not seek that the house form part of the property of the husband for division ; indeed, she is prepared to seek a court-endorsed compromise so that the two children relinquish their interests.

8. Until the commencement of what would have been the trial, there were two bank accounts set up as trust accounts with a total of about $360,000 in them. It was said that the deceased was the trustee of the trusts for each of the two infant children.  By agreement, those funds are to be paid to the wife to assist her to fulfil her maintenance and welfare obligations towards the children.

9. There are other complicating facts still to be resolved. For example, the husband and wife had a self-managed superannuation fund. Its member’ balances remain a mystery. Its balance sheet of assets does not necessarily reflect the value of the known assets. The bank account statement produced under subpoena shows significant withdrawals. The husband had reached the relevant retirement age and perhaps had begun withdrawing from the fund for his future. In the midst of all of this, the accountant for the fund who is also one of the executors of the husband is said to say that the trustee of the superannuation fund is a corporate trustee. That is inconsistent with the trust deed and the correspondence from the Australian Taxation Office. There are no current explanations for the inconsistency.

10. There is a business conducted by a company of which the husband seemed to have the major control. It conducts an adult entertainment establishment. That establishment has been on the market for sale. It is said that the sworn valuation does not resemble a current offer by a purchaser.  Questions remain unanswered about where the profits (if any) have gone subsequent to the husband’s death and who is managing the corporate owner.

11. In the course of discussion amongst counsel, the question of jurisdiction arose and although I am somewhat uncertain about whether there is agreement, it seems that no objection will be raised about the Court exercising the accrued or associated jurisdiction to determine all matters in one hearing as part of a common substratum of facts.

12. What brought about the two discrete issues which began these reasons was that in 2013, I set the trial down with an estimated duration of 3 days. That estimate was most likely optimistic at the time but with the current actions all to be heard, the duration is more likely 4 to 6 days.

13. When the case was called to start, affidavit material was still being filed at the last moment and of course, there was the new issue of the husband’s sister’s claim for relief. Over opposition from the wife’s counsel, I said that I was not prepared to deal with this case in bits and pieces and that it needed a definitive start date and uninterrupted time of the Court. A part heard case of this complexity with varying parties is almost impossible to do other than in one hearing. Endeavouring to find days shortly after an adjournment is not easy because of the Court’s listing process not to mention finding dates that suit parties and counsel. The most efficacious way of dealing with the problem was for one hearing. I agreed therefore to deal with the interlocutory issues and ensure that on the next occasion, everything would be ready.

14. In fairness to the parties, two things must be recorded. First, negotiations have been going on and I was informed that, at times, the parties were close to a resolution. Secondly, counsel have been diligent in confining issues to those that had to be litigated. That is significant here because the wife is the ultimate beneficiary of the husband’s residuary estate and as such, apart from her own entitlement under Part VIII of the Family Law Act 1975 (Cth) (“the Act”), there are disputes which eat into her additional entitlement in the estate as well as her own costs being met from her entitlements.

15. Thus, to the extent that I can exhort parties to use some pragmatism here, I do so. The issues are challenging but not difficult. The jurisdiction of the Court may be arguable but it can be exercised. The funds are limited even if they exceed $3million and there are two children who need reasonable accommodation and education. Both husband and wife are said to have decided upon the private school system. What can easily and readily be seen is that the combined costs of all parties is enormous but importantly, the costs and expenses of the estate and the executors is in the hundreds of thousands of dollars.

16. I return then to the interlocutory issues. I have endeavoured to list some of the complexities above because of the nature of the two issues I have to immediately determine. I stress that I do not have the benefit of evidence being tested and I do not propose to draw any inferences at this stage that might otherwise normally apply in such a dispute. It has not been practicable for me to do so having regard to the fact that many of the matters set out above have come from assertions and submissions made by counsel no doubt properly based on instructions and on the material thus far filed in the Court.

17. The wife initially sought an order for costs thrown away as a result of the adjournment. She pointed to inadequate discovery. Whatever the problem has been and, it will be obvious from the facts that I have generally outlined, the case was not in a state where the Court would have had all of the facts at hand. There would have been a reliance on inference and conjecture.

18. Sensibly, the issue of discovery was apparently resolved by agreement and orders are to be made.

19. The dispute about discovery is whether it should be limited or wide-ranging. In respect of the latter, counsel for one of the interveners sought that the Executors file an affidavit of documents from which inspection could occur. I do not consider that appropriate because of the ultimate costs involved and the potential for further argument over such things as privilege and possible delays.  In my view, limited discovery here should take place because of the now reduced number of issues in contention. It is timely to remind the parties of the disclosure obligations under the Family Law Rules.

20. The main purpose of the rules is made clear:

    The main purpose of these Rules is to ensure that each case is resolved in a just and timely manner at a cost to the parties and the court that is reasonable in the circumstances of the case.

21. Rule 1.06 provides that the Court must be active and, relevantly in this case, identify the issues in dispute early, set realistic timetables, monitor and control the progress of the case and ensure that parties and their lawyers comply with the rules and procedural orders.

22. To achieve that purpose, the rules provide that the Court should apply them in such a way that :

    (a)      deals with each case fairly, justly and in a timely manner;

    (b)encourages parties to negotiate a settlement, if appropriate;

    (c)is proportionate to the issues in a case and their complexity, and the likely costs of the case;

    (d)promotes the saving of costs;

    (e)gives an appropriate share of the court's resources to a case, taking into account the needs of other cases; and

    (f)promotes family relationships after resolution of the dispute, where possible.

23. It is important therefore to encourage negotiations to continue here because ultimately, it is the wife who is the beneficiary of whatever residuary estate there is and the children of this marriage are in her long term care. Equally, the Court has to be cautious about the use of its resources and whilst there is little if any, dispute about the accrued jurisdiction, it should not spend inordinate time permitting litigation of peripheral issues that may too affect the wife’s ultimate entitlement at significant cost.

24. That said, all of the participants are parties to the proceedings and with that position comes responsibilities to the other parties and the Court. Much of the argument that culminated in agreement about exchange of documents was a complaint about lack of information and documents being provided. It is therefore timely to remind all parties what the rules provide about that. Chapter 13 of the Court’s rules provides for that as set out in the following paragraph.

25. Rule 13.01 provides that the parties’ duty of disclosure applies to each document that:

    (a)       is or has been in the possession, or under the control, of the party disclosing the document; and

    (b)      is relevant to an issue in the case.(my emphasis).

26. All parties here are represented and counsel have diligently distilled the issue.  Each party should therefore be aware of not only what those issues are but also what documents are necessary to establish the relevant proofs required.  In my view therefore, there should only be limited discovery and responsive inspection.

27. As part of the discovery process, the parties argued over whether the third party adult children of the husband should file a financial statement.  An order had previously been made that he do so.  I note that that order was made without opposition from that party at that stage. 

28. Rule 13.05 requires:

    (1)A party starting, or filing a response or reply to, a financial case (other than by an Application for Consent Orders) must file a Financial Statement at the same time.

    (2)If a party is aware that the completion of a Financial Statement will not fully discharge the duty to make full and frank disclosure, the party must also file an affidavit giving further particulars.

    Note: The court may order a party to file an affidavit giving further particulars in relation to the party's financial affairs.

29. The words and concepts in the rules appear clear and were intended by their nature to apply to any person who becomes a party.  But the information in such a financial statement is used for different purposes in different proceedings.  It may be relevant here both as to what happened to the money spent by the husband on his adult children but it could also become relevant on a costs issue.

30. It was submitted that an order had already been made albeit not complied with and the Court was therefore functus officio.  In other words, the Court could not backtrack on the subject.  I reject that.  There is no reason why the Court cannot reconsider its orders that are made under the rules (see rule 1.11).

31. Rule 1.06 requires the Court to apply its rules to promote the main purpose.  The main purpose is set out in rule 1.04.  In promoting that purpose, the Court is mandated to identify issues that require full investigation.  That identification is assisted by rule 1.07 which requires the Court to apply the rules in a way that:

    To achieve the main purpose, the court applies these Rules in a way that:

    (a)deals with each case fairly, justly and in a timely manner;

    (b)encourages parties to negotiate a settlement, if appropriate;

    (c)is proportionate to the issues in a case and their complexity, and the likely costs of the case;

    (d)promotes the saving of costs;

    (e)gives an appropriate share of the court's resources to a case, taking into account the needs of other cases; and

    (f)promotes family relationships after resolution of the dispute, where possible.

32. The nub of this dispute lies in a consideration of rule 13.02.  It provides:

    (1) This Division sets out the duty of disclosure required by parties to a financial case.

    (2) This Division does not apply to a party to a property case who is not a party to the marriage or de facto relationship to which the application relates, except to the extent that the party's financial circumstances are relevant to the issues in dispute.

33. I find on what is currently anticipated, the third party is not a party to the marriage and the only obvious immediate relevance of his financial circumstances relates to the monies that may have been sent by the husband prior to his death.  Those issues should be found more readily in the husband’s own accounts and I am not persuaded that endeavours have been exhausted in that area.  Trawling through a third party’s accounts is not only invasive but unreasonable.  I am not persuaded that there is anything relevant here at this time.  That may obviously change as the evidence unfolds.  The financial statement order is therefore discharged.

34. The other issue that required determination relates to a costs question.  An order was sought that the estate of the husband contribute towards the wife’s costs to assist her to continue this litigation.  As I observed at the time, the estate money is ultimately going to her anyway.  But that is not a basis to make an order.  The heads of power were canvassed and the wife’s position was to seek the order as a costs order.

35. Section 117 of the Act provides that in proceedings under this legislation, each party shall bear their own costs unless there are circumstances that justify a departure from that principle.

36. I am not convinced that there are circumstances here to justify making an order.  It was the wife’s position that she wanted to proceed with the trial.  The estate said it could.  The dilemma was that no party seemed to have a comprehensive understanding of what was being litigated at that time.  There were arguments and complaints about discovery and non-compliance yet the wife wanted to proceed in any event.  There were late joinder issues which were irrelevant to the estate yet the wife wanted costs against the estate.  The estate is obviously the only party which is flush with funds.

37. As the provision begins with the starting point that each party bears their own costs, I can see nothing unusual about what occurred here to warrant a finding that the Court should depart from that principle.  The wife’s application for costs must therefore fail.

38. The parties also provided a minute of what should occur relating to discovery.  In my view, there should be a limitation on documentation being pursued and I propose to order that each party seeking documents provide a list of what they desire to inspect.  Thereafter, subject to privilege issues, the documents should be expeditiously provided for inspection. 

39. The hearing should otherwise proceed as soon as possible within the Court’s resources.

I certify that the preceding Thirty Seven (37) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 23 April 2014.

Associate:

Date:  23 April 2014