Berrell & Tily

Case [2021] FedCFamC1F 329

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Berrell & Tily [2021] FedCFamC1F 329

File number(s): SYC 3428 of 2018
Judgment of: CHRISTIE J
Date of judgment: 21 December 2021
Catchwords:

FAMILY LAW – INTERIM PROPERTY PROCEEDINGS – De facto threshold test – Family Law Act 1975 (Cth) s 90RD – Resolution of threshold issue remains outstanding – INJUNCTIONS – Mareva – Whether funds held should be released – COSTS – Bases for interim release of under Family Law Act 1975 (Cth) ss 90SM and 117.

Legislation: Family Law Act 1975 (Cth) ss 90RD, 90SM, 117, 117(1) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 5.07 and 5.08
Cases cited: Fitzgerald (As Child Representative for A (Legal Aid Commissioner of Tasmania) v Fish and Anor (2005) 33 Fam LR 123, Norton & Locke [2013] FamCAFC 202, Salvage & Fosse [2020] FamCAFC 144.
Division: Division 1 First Instance
Number of paragraphs: 41
Date of hearing: 10 December 2021
Place: Sydney
Solicitor for the Applicant: Hall Partners
Counsel for the Respondent: Mr Kearney SC
Solicitor for the Respondent: Lander & Rogers

ORDERS

SYC 3428 of 2018

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN:

MR BERRELL

Applicant
AND:

MR TILY

Respondent

ORDER MADE BY:

CHRISTIE J

DATE OF ORDER:

21 DECEMBER 2021

THE COURT ORDERS THAT:

1.The application in a case filed by the applicant on 12 July 2021 is dismissed.

2.The application pursuant to s 90RD of the Family Law Act 1975 (Cth) be listed for final determination for five days commencing 5 September 2022.

3.The applicant pay the respondent’s costs and incidental to the application filed 12 July 2021 as agreed or in the absence of agreement as taxed.

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 pseudonyms Berrell & Tily is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

REASONS FOR JUDGMENT

CHRISTIE J:

  1. These are interlocutory proceedings between Mr Berrell (the applicant) and Mr Tily (the respondent). There are no other parties to the interlocutory proceedings named on the application. There was no application or response filed by any third party and no evidence from any third party.

  2. This case has had a protracted history commencing in the Supreme Court of New South Wales on application by Summons filed on behalf of…

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Berrell & Tily [2021] FedCFamC1F 329
Case
[2021] FedCFamC1F 329
Decision Date

CaseChat Overview and Summary

In the case of Berrell & Tily, the primary issue before the Federal Circuit and Family Court of Australia was the interim release of funds held by solicitors in a controlled account. The funds in question were part of the assets of a company, M Pty Ltd, in which the applicants, Mr Berrell and Mr Tily, held equal shares. The applicants had entered into a business partnership in 2009 for a property development in regional New South Wales. The dispute centred on the beneficial entitlement to the funds held by the solicitors, the nature of the relationship between the applicants, and whether there should be a property adjustment if they were in a relationship.

The legal issues involved determining the appropriate jurisdictional basis for an interim order to release the funds. The possible grounds included an adjustment of property under section 90SM of the Family Law Act 1975 (Cth) or a costs order under section 117(1) of the Act. In making such an order, the court would consider the financial positions of the parties, whether the applicant had an arguable case for substantive relief, the evidence regarding the applicant's likely costs of litigation, and the position of the applicant's legal representatives in continuing to act if funds were not forthcoming.

The court declined to grant leave for Mr Berrell to rely on more than one affidavit, adhering to the Federal Circuit and Family Court of Australia (Family Law) Rules 2021, rule 5.08. The court allowed Mr Berrell to rely on a costs notice despite non-compliance with the Rules, as long as it supported the costs sought. The court also noted that the timing of notice of the intention to rely on additional material was improper under rule 5.07 of the Rules. Ultimately, the court found that it could not safely conclude at an interim stage that the funds were Mr Berrell's or that he would become entitled to them in due course. The submissions made on behalf of Mr Berrell were unsupported by evidence, and the court was not satisfied that the funds belonged to Mr Berrell. Consequently, the court rejected the application for the interim release of funds.

The final orders were that Mr Berrell's application for the interim release of funds was dismissed, and no order was made as to costs.

Orders

Orders of the court

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Background

Background to the litigation

Mr Berrell sought to rely on more than one affidavit. I declined to grant leave. Each party is entitled to rely on one affidavit only without leave: Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) r 5.08. Leave should be granted if Mr Berrell is able to demonstrate a legitimate reason for departure from the Rules such as a relevant change of circumstances but none was advanced. I allowed Mr Berrell to rely on a costs notice (even though he had not complied with the Rules for its filing) and so to the extent that Mr Berrell argued the additional material he sought to rely on supported the costs sought, there was no prejudice to him. In addition, giving notice of the intention to rely on material within the two days prior to the listing falls foul of the requirement that a party’s evidence be filed and served with sufficient time to allow the other party to understand the case they are meeting: r 5.07 of the Rules.FACTUAL BACKGROUND In 2009, Mr Berrell and Mr Tily entered into a business partnership in respect of a property development in regional NSW. The development site was purchased through the company M Pty Ltd. Each of the parties have an equal shareholding in the company. M Pty Ltd assets include:(a)$325,000 (and accrued interest) held by D Solicitors; and(b)$175,000 held by Q Solicitors (solicitors previously retained by Mr and Mrs Berrell senior). The issues in dispute are:(a)Who is beneficially entitled to the funds of M Pty Ltd?; and(b)Were Mr Tily and Mr Berrell in a relationship?; and(c)If Mr Tily and Mr Berrell were in a relationship, should there be an adjustment of property? It is in the above factual context that the issue of interim release of funds comes to be determined.PRELIMINARY DISTRIBUTION OF FUNDS: THE LAW The primary application of Mr Berrell is that the sum of $199,050 be released to him. In order to determine whether or not such an order can be made, it is necessary to first understand the jurisdictional basis for the relief. The jurisdictional bases include: an adjustment of property pursuant to s 90SM of the Act. In the majority of cases caution will be exercised in making any order pursuant to the terms of s 90SM of the Act in circumstances where the determination of the issue under s 90RD remains outstanding: Norton & Locke [2013] FamCAFC 202 at [78]. Alternatively, a party may in appropriate circumstances move the court to make an order pursuant to s 117(1) of the Act. In order to make a costs order it is necessary to identify those “justifying circumstances’ which would persuade the court to depart from the usual rule. In Salvage & Fosse [2020] FamCAFC 144 at [64], his Honour Justice Watts set out the matters to which the court would have regard to when making a cost order:a)The financial positions of each of the parties; andb)whether the Applicant had “at least an arguable case for substantive relief which deserves to be heard”; andc)the evidence adduced as to the Applicant’s “likely costs of litigation”; andd)the position of the Applicant’s legal representatives in continuing to act if funds were not forthcoming.CONSIDERATION AND DETERMINATION

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

In Salvage & Fosse [2020] FamCAFC 144 at [64], his Honour Justice Watts set out the matters to which the court would have regard to when making a cost order:a)The financial positions of each of the parties; andb)whether the Applicant had “at least an arguable case for substantive relief which deserves to be heard”; andc)the evidence adduced as to the Applicant’s “likely costs of litigation”; andd)the position of the Applicant’s legal representatives in continuing to act if funds were not forthcoming.CONSIDERATION AND DETERMINATION The applicant sought access to monies which had been the subjected of an injunction in the Supreme Court proceedings and were preserved in a solicitors controlled monies account. The beneficial ownership of those funds is squarely in issue in the proceedings (whether those proceedings are the claim commenced in the Supreme Court relating to M Pty Ltd or the proceedings commenced by Cross-claim for property adjustment). It cannot be safely concluded at an interim stage that those monies are the “applicant’s funds” or indeed funds to which Mr Berrell will become entitled to in due course. Somewhat curiously, at the hearing Mr Hall (solicitor advocate for Mr Berrell), purported to represent Mr Berrell and his parents (“the Berrell parties”), in circumstances where no person other than the applicant and respondent had filed any application, response, notice of address for service or affidavit. When the matter came before the court for interim hearing, Mr Hall indicated that, contrary to Mr Tily’s characterisation of the relief sought by his client, it was not the position of Mr Berrell that the orders being sought were litigation funding orders but rather, as he developed in oral submissions, that they were monies belonging to Mr and Mrs Berrell senior. Mr Hall represented: “these monies were the monies of Mr and Mrs [Berrell] who were both elderly, they were the proceeds of the sale of their house…”and later sought to correct the position after having taken instructions and said:“The money [Mr Kearney] seems to be talking about as being in the trust account is the proceeds of sale of Mr [Berrell’s] property as I understand it. It’s contrary to what I understood was the case before and it was contrary to the case I ran but where I receive the information I must pass it on [to her Honour].” The difficulty with much of the position taken by Mr Berrell was that it was unsupported by any evidence. Significantly, not only was it unsupported by evidence, it was necessary for Mr Hall to withdraw the submission that the funds represented those of Mr and Mrs Berrell senior. This was further confused by the submissions made on behalf of the Berrell parties that in order to release the funds restrained all that was required was to demonstrate that the entirety of Mr Berrell’s funds were frozen and he has no other source from which to meet his legal fees and/or application of the funds to legal fees does not amount to dissipation for the purpose of defeating a claim. I reject the submissions in circumstances where it is not plain on the evidence on whose behalf that submission was made given Mr Hall’s position that he acted for all of the Berrell parties and secondly on the basis that while I accept fully that Mareva relief is not intended to operate as de facto security, on the evidence in this case I could not be satisfied that the funds, currently the subject of restraint are funds which belong to Mr Berrell. This is one of the issues to be determined in the case. Finally, I am concerned that if further funds are released there is no certainty that such funds may be recovered by Mr Tily if he is ultimately successful in the proceedings (commercial or family law).