BILLENCORP PTY LTD & BILLINGSLY
[2016] FamCA 1163
•11 November 2016
FAMILY COURT OF AUSTRALIA
| BILLENCORP PTY LTD & BILLINGSLY | [2016] FamCA 1163 |
| FAMILY LAW – COSTS – Application for costs by a third party against the wife arising out of the wife’s application for enforcement of final property orders – where the third party submits that the wife’s application was misconceived – where the wife filed her application following the husband’s failure to make full and frank disclosure with respect to his financial circumstances and the financial circumstances of entities controlled by him or in which he had an interest – where the wife discontinued the orders sought by her against the third party upon being apprised of the husband’s present financial circumstances and the nature of the transactions between the husband and the third party – where the third party did not address s 117(2A) other than in a general sense – wife’s financial circumstances considered – no justification to depart from the usual rule as to costs – third party’s application for costs dismissed |
| Family Law Act 1975 (Cth) Family Law Rules 2004 (Cth) |
| Somerton & Wells (Deceased) and Anor [2015] FamCAFC 12 |
| APPLICANT: | Billencorp Pty Ltd |
| RESPONDENT: | Ms Billingsly |
| FILE NUMBER: | MLC | 745 | of | 2014 |
| DATE DELIVERED: | 11 November 2016 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Macmillan J |
| HEARING DATE: | 3 October 2016 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Kirton QC |
| SOLICITOR FOR THE APPLICANT: | Arnold Bloch Leibler |
| COUNSEL FOR THE RESPONDENT: | Mr Puckey |
| SOLICITOR FOR THE RESPONDENT: | Barry Nilsson Lawyers |
Orders
IT IS ORDERED THAT
Paragraph 1 of Billencorp Pty Ltd’s Application in a Case filed 2 August 2016 be dismissed.
On or before 4.00 pm on 25 November 2016 the parties file and serve any written submissions in support of any application for costs arising out of or incidental to Billencorp Pty Ltd’s Application in a Case filed 2 August 2016.
On or before 4.00 pm on 9 December 2016 the parties file and serve any reply to any written submissions in support of any application for costs arising out of or incidental to Billencorp Pty Ltd’s Application in a Case filed 2 August 2016.
The question of the costs of Billencorp Pty Ltd’s Application in a Case filed 2 August 2016 be determined based upon the parties’ written submissions subject to leave being sought to make oral submissions on or before 9 December 2016.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Billencorp Pty Ltd & Billingsly has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 745 of 2014
| Billencorp Pty Ltd |
Applicant
And
| Ms Billingsly |
Respondent
REASONS FOR JUDGMENT
The application listed before me in the Judicial Duty List on 5 October 2016 was the Application in a Case filed by Billencorp Pty Ltd on 2 August 2016 in which it sought the following orders:
1.The respondent wife Ms Billingsly pay Billencorp Pty Ltd’s costs of and incidental to her initiating application dated 24 May 2016, such costs to be assessed in default of agreement; and
2.The respondent wife Ms Billingsly pay Billencorp Pty Ltd’s costs of this application for costs, on an indemnity basis, such costs to be assessed in default of agreement.
Background
On 4 February 2014, the husband Mr Billingsly, who is not a party to this application, and the wife consented to the Court making final orders for property settlement. Those orders provided inter alia as follows:
1.That on or before the expiration of seven (7) days of these Orders the husband:
a.Pay to the wife the sum of $431, 350 (“the First Payment”); and
...
2.That contemporaneously with the husband making the First Payment the wife do all act and things and sign all such documents as are necessary to;
a.Resign as a director and secretary of [Billencorp] Pty Ltd ACN … (“Billencorp”);
b.Transfer all of her shares in [Billencorp] to the husband at his expense;
…
d.Relinquish her interest in the Billingsly Family Trust.
3.That the husband pay to the wife the further sum of $209,072 (“the deferred payment”) payable in 16 equal quarterly instalments of $13,067 with the first payment to be made 3 months after the First Payment is made pursuant to order 1(a) and then quarterly thereafter.
…
It was further ordered by consent on that date that if the husband were to default in the payment of any of the instalments pursuant to paragraph 3 of the orders and remain in default for a period of 30 days that he “immediately do all such acts and things and sign all such documents as are necessary to sell the interest in B Pty Ltd (“BPL”) held by Billencorp” and that the proceeds of sale be applied to pay the costs associated with the sale of those shares, to pay the balance owing to the wife together with interest and thereafter the balance to be paid to the husband.
There is no dispute that the husband made the first payment to the wife as ordered as a consequence of which the wife resigned as a director of Billencorp, transferred her shares in Billencorp to the husband and relinquished her interest in the Billingsly Family Trust as the orders required her to do.
The wife deposes in her Affidavit filed 27 September 2016 and no issue is taken with that evidence, that “[b]etween August 2015 and May 2016, [the husband] complained that he was unable to comply with his financial obligations arising from the Final Order and the Binding Child Support Agreement dated 17 January 2014”, that between December 2015 and May 2016 she sought financial disclosure from the husband and she says informed him in general terms that she was prepared to amicably discuss their financial arrangements if he could provide her with evidence of his asserted financial difficulties and that on 4 May 2016 he failed to make the quarterly payment pursuant to the orders. The wife’s case is that the husband owes approximately $100,000 pursuant to paragraph 3 of the final orders. Ms C, who is now married to the husband and who is the sole director of Billencorp, similarly on behalf of Billencorp does not take issue with the wife’s evidence in relation to there being monies outstanding or as to the amount that is outstanding.
The wife in her Affidavit 27 September 2016 filed in support of her response to Billencorp’s Application in a Case deposes as follows:
·that despite her requests the husband did not provide her with any evidence to support his asserted financial difficulties and that on 3 May 2016 she filed an Application in a Case seeking orders requiring the husband to file a Financial Statement;
·that on 7 May 2016 it came to her attention she said from correspondence her solicitors received from the husband’s solicitors and the husband’s Financial Statement that “[Mr Billingsly] had disposed of the shareholding he owned in [BPL] via [Billencorp] for the sum of $467,091”;
·that on 24 May 2016 she filed an Initiating Application seeking orders for enforcement of the final orders in circumstances where she said the husband’s disclosure with respect to the disposal of the BPL shares was inadequate; and
·that on 28 May 2016 the wife caused a copy of her Initiating Application and her Affidavit in support to be served upon Ms C she says because she had discovered that Ms C was now a director of Billencorp and an equal shareholder.
The wife in that Initiating Application sought inter alia injunctive relief pursuant to s 90AF of the Family Law Act 1975 (Cth) (“the Act”) against Billencorp in its own right or in its capacity as the trustee of D Trust in the following terms:
(a)Doing any such act or thing, or signing any such document, to transfer, dispose or otherwise divest Billencorp of, or its entitlement to, the one D Class share and/or 525 ordinary shares held in BPL.
(b)Directing any other person or entity to do any act or thing, or sign any document, to transfer, dispose or otherwise divest Billencorp of, or its entitlement to, any proceeds or consideration arising from a sale of the one D Class share and/or 525 ordinary shares held in BPL.
(c)Doing any such act or thing, or signing any such document, to transfer, dispose or otherwise divest Billencorp of, or its entitlement to, any unpaid dividends or entitlements owing to it by BPL.
(d)Directing any other person or entity to do any act or thing, or sign any document, to transfer, dispose or otherwise divest Billencorp of, or its entitlement to, any unpaid dividends or entitlements owing to it by BPL.
It is Ms C’s evidence that in her capacity as now the sole director of Billencorp, she engaged Arnold Bloch Leibler (“ABL”) who on her instructions wrote to the wife. That letter dated 2 June 2016 is annexed to her Affidavit filed on 2 August 2016 in support of Billencorp’s Application in a Case. That letter advised as follows:
·that on 10 February 2014 the husband had borrowed $431,350 on commercial terms from Ms C which he had paid to the wife, the same day, in order to comply with the final orders;
·the cheque paid to the wife was drawn on the account of E Pty Ltd, an entity within the F Group controlled by Ms C;
·the loan to the husband was conditional upon Ms C having the right to acquire the shares in BPL held by Billencorp as trustee of the Billingsly Family Trust in the event he defaulted on the loan;
·on 28 August 2014, as a result of his default, the husband transferred six shares in Billencorp to Ms C and Billencorp in its capacity as trustee of the D Trust acquired 300 ordinary and 1 D class share in BPL for the amount of $467,091, the value of those shares having been calculated on an arm’s length basis.
·Ms C was appointed as a director of Billencorp on 25 November 2014;
·Billencorp in its capacity as trustee of the D Trust purchased further shares in BPL in July 2014 and August 2015 both at the instigation of and funded by Ms C (or entities associated with her);
·the husband was at all times and remains a director of Billencorp but has no beneficial interest in the D Trust;
·on 29 April 2016 Ms C, as appointor of the D Trust, removed Billencorp as trustee and appointed D Pty Ltd (a company in which she is the sole director and shareholder) as trustee in its stead.
The letter went on to point out that in circumstances where Billencorp was merely a former trustee and did not own any shares in BPL, those shares having vested in D Pty Ltd on 29 April 2016, the wife’s application with respect to Billencorp was misconceived.
It is the wife’s evidence that she was unaware of the transactions referred to in the letter she received from ABL until the receipt of that letter. Although Ms C asserted that the wife was aware that the husband had disposed of the shares she did not take issue with the wife’s evidence as to when she became aware of the various transactions.
It is the wife’s evidence that upon receipt of the letter from ABL she sought the consent of both the husband, who was acting on his own behalf and Billencorp so that she could consider her position. This is consistent with Ms C’s evidence at paragraph 11 of her Affidavit filed 2 August 2016 that on 3 June 2016, the day after her solicitors had written to the wife’s solicitors, they received a letter from the wife’s solicitors advising that they had been instructed to adjourn the hearing of the wife’s application “to afford an opportunity for discussion about the resolution of this matter”.
The matter could not be administratively adjourned and on 7 June 2016 both the wife’s solicitor and Mr G on behalf of Billencorp appeared and the matter was adjourned to 6 July 2016. The husband did not appear at the hearing on 7 June 2016. At that hearing the wife and Mr G agreed that they would meet on 24 June 2016 in an attempt to resolve the wife’s application.
Although that meeting took place there was no resolution and on 28 June 2016 the wife caused a letter to be forwarded to Arnold Bloch Leibler indicating that the wife would “not seek any orders against your client at the hearing on 6 July 2016”, reserving her rights to do so in the future upon 7 days written notice. That letter is annexure TLB-3 to the wife’s Affidavit filed 27 September 2016.
The wife ultimately elected not to proceed with her Initiating Application. Ms C deposes that on 5 July 2016 ABL received a letter from the wife’s solicitor advising that the Court had refused to grant an administrative adjournment of the matter and that her solicitors would appear at the hearing and notify the Court that the wife was discontinuing her application. ABL replied to that letter on behalf of Billencorp the same day noting that “[Billencorp] wishes to be heard on the question of costs, which it has incurred in responding to your client’s application” and requesting that the wife’s solicitors “provide proposed consent orders that will enable my client’s application for costs to be heard, in default of agreement.”
Mr G appeared on behalf of Billencorp at the hearing on 6 July 2016 and the wife was given leave to withdraw her Initiating Application.
The wife deposes at paragraph 14(o) of her Affidavit filed 27 September 2016 that prior to the commencement of the hearing her solicitor, having regard to the fact that Billencorp had advised in writing of its intention to seek an order for costs, invited Billencorp to make that application. Ms C in her Affidavit filed 3 October 2016 in reply to the wife’s Affidavit confirms that ABL had indicated that Billencorp would seek its costs but does not take issue with the fact that they were invited to make any application for costs by the wife’s solicitors at the hearing on 6 July 2016 and did not do so. Prior to granting the wife leave to withdraw her application the parties and in particular Mr G, who appeared on behalf of Billencorp, were asked whether there was anything arising from that order to which Mr G responded as follows:
Mr G: No issue with that, your Honour. We will look forward to receiving the notice of discontinuance with respect to that application in due course.
When asked if there was anything further the solicitor appearing on behalf of the wife replied that there was not and Mr G did not suggest otherwise.
There was some dispute between the parties as to whether in those circumstances the wife was required to file a Notice of Discontinuance and Ms C deposes at paragraph 22 of her Affidavit filed 2 August 2016 that on 12 July 2016 ABL requested in writing that the wife provide them with a copy of her Notice of Discontinuance without delay to which the wife’s solicitors replied that there was no need for the wife to file that notice.
ABL then wrote to the wife’s solicitors explaining why they said the wife should be required to file a Notice of Discontinuance. Whether or not the wife should or should not have filed a filed a Notice of Discontinuance is in my view not material to the matters I must determine with respect to this application.
Legal Principles
The general rule in proceedings in this Court is that each party should bear their own costs of the proceedings. However s 117(2) of the Act provides that:
If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
Having formed the opinion that that there are circumstances that would justify it making an order for costs the court may do so having had regard to the matters in having regard to the matters pursuant in s 117(2A) of the Act. Those matters are as follows:
(a) the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g)such other matters as the court considers relevant.
The relevant matters in s 117(2A) of the Act “must all be taken into account and all balanced in order to determine whether the overall circumstances justify the making of an order for costs” (I & I (No 2) (1995) FLC 92-625).
Rule 19.18(1) of the Family Law Rules 2004 (Cth) (“the Rules”) provides that the Court may make an order for costs:
(a) of a specific amount;
(b)as assessed on a particular basis (eg lawyer and client, party/party or indemnity);
(c)to be calculated in accordance with the method stated in the order; or
(d)for part of the case, or part of an amount, assessed in accordance with Schedule 3.
Discussion
Counsel for Billencorp submitted that as r 20.59(2) of the Rules provides that “[i]f an order is made against a person who is not a party to a case, the order may be enforced against the person who is not a party”, an order might have been made against her client even if Billencorp had not participated in the proceedings. Although r 20.59(2) of the Rules is not the basis of the Court’s power, it is correct that the Court does have power in certain circumstances to make orders affecting a person or entity not a party to the proceedings.
Although the wife’s application did not name Billencorp as a party to the proceedings the Rules also require a person, or in this case a company, whose rights may be directly affected by an issue in the case, and whose participation is necessary for the court to determine all issues in dispute in the case to be included as a party to the proceedings. It is reasonable to assume that it was on that basis that the wife’s application was personally served upon Ms C in her capacity as a director of Billencorp and arguably if the wife had not withdrawn her application Billencorp would have been formally joined as a party to the proceedings. In any event no issue was taken, correctly so in my view, as to the Court’s power to make an order for costs in the company’s favour in this case.
Counsel for Billencorp, whilst seeking an order for costs, did not directly address the question of the circumstances she said would justify the Court departing from the general rule that parties to proceedings in this Court should bear their own costs or refer to the matters in s 117(2A) other than in a general sense.
The general thrust of counsel for Billencorp’s submissions was that the wife’s application itself was misconceived, the suggestion being that on that basis costs should follow the event. That is not the rule in this Court and for the Court to adopt that approach would ignore the general rule that each party bear their own costs of the proceedings absent circumstances justifying otherwise and consideration of the relevant matters in s 117(2A) of the Act.
There were essentially two limbs to Billencorp’s case that the wife’s application was misconceived. The first being as submitted by counsel for Billencorp that the Court’s power pursuant to s 90AF to grant an injunction was not enlivened because there were no property proceedings on foot. Counsel for the wife on the other hand submitted that the Court does have the power to make orders pursuant to s 90AF by way of enforcement. This submission is supported by the decision of the Full Court of this Court in Somerton & Wells (Deceased) and Anor [2015] FamCAFC 12 in which the Full Court held that the trial judge had not erred in ordering the sale of a property pursuant to s 90AF of the Act by way of enforcement of orders for property settlement.
Although Billencorp was not a party to the property proceedings and it would appear is now wholly owned and controlled by Ms C, it is also the case, as counsel for the wife submitted, that Ms C is not an unrelated third party having formed a relationship with the husband prior to the orders being made and then later marrying the husband. Although it was hinted at that the actions of the husband and Ms C may have been intended to defeat the wife’s claim I am not in a position and do not make any findings with respect to those matters.
The second limb of Battercorp’s case was that the wife’s application was misconceived because by the time she filed that application Billencorp in its capacity as trustee of the Billingsly Family Trust no longer owned any shares in BPL and that although Billencorp had previously owned shares in BPL in its capacity as trustee of the D Trust, that was no longer the case, D Trust Pty Ltd having replaced Billencorp as trustee on 29 April 2016 and those shares having by virtue of the Trustee Act 1958 (Vic) vested in D Pty Ltd.
Counsel for Billencorp submitted, correctly in my view, in support of her case that in circumstances where Billencorp was not a party to the earlier proceedings, not the subject of the final orders and that neither the husband nor Billencorp had been restrained by those final orders from dealing with the shares held by Billencorp in its capacity as trustee of the Billingsly Family Trust, there was nothing to stop the husband disposing of those shares as it now appears he has done. Nor, as counsel for Billencorp submitted, was the husband required by those orders to notify the wife of either his intention to dispose of the shares or of the fact that he had done so. Whether that was by choice or omission, in my view the orders speak for themselves and the result is the same.
It was submitted by counsel for Billencorp that in those circumstances the wife’s Initiating Application was a retrospective attempt to provide security for the enforcement of the final orders. I do not accept that submission. The wife’s application was an application for enforcement of orders which included a mechanism for the enforcement of those orders which she pursued based upon the information available to her at the time.
Whether or not there was any obligation upon either the husband or Billencorp to advise the wife of the disposal of the BPL shares, the wife’s evidence that she had been unaware until early May 2016 that the husband had disposed of those shares and that as at 24 May 2016, when she filed her Initiating Application, the husband had still not provided her with adequate disclosure as to the disposal of those shares is essentially unchallenged.
It is also the case that although Ms C deposes to Billencorp, as trustee of the D Trust, having acquired the BPL shares and the husband having transferred six shares in Billencorp to her on 28 August 2014 and her appointment as a director of Billencorp on 25 November 2014, there would appear to be no dispute that the details of these transactions were not known to the wife until she received ABL’s letter on 2 June 2016 after she had filed and served her Initiating Application. Although there may not have been any obligation upon the husband to advise the wife that he had disposed of the shares it doesn’t change the fact that when she filed her Initiating Application she had only limited information available to her.
In circumstances where Ms C does not take issue with the wife’s evidence that it was not until 12 August 2016 that Billencorp lodged documents with ASIC to give effect to the husband’s resignation as a director and 24 August 2016 when it lodged documents to give effect to the transfer of the husband’s shares in Billencorp to Ms C, I am satisfied, as submitted by counsel for the wife, that even if she had done an ASIC search at the time of filing her Initiating Application, she would have had no way of knowing that the husband was no longer a director of Billencorp or had disposed of his shares in Billencorp.
Similarly although as submitted by counsel for Billencorp, Ms C, as Appointor of the D Trust, had already removed Billencorp as trustee of that trust and the shares it had previously held in its capacity as trustee of the trust had vested in D Pty Ltd, that was not information available to the wife or of which she could have had any independent knowledge. In my view the question for the purposes of this application is not whether the change of trustee caused any prejudice to the wife’s position, having occurred prior to her filing her Initiating Application, but what knowledge the wife had at the time she filed that Application.
Although there may not have been any obligation imposed upon the husband by the final orders to advise the wife of the disposal of the shares, in circumstances where the final property orders made provision for the sale of the shares in the event of the husband’s default, in my view the wife was at the very least entitled to proper disclosure upon his default.
In all of the circumstances I do not consider that the wife’s application based upon the knowledge she had when she filed that application was misconceived.
Although counsel for the wife conceded that the wife’s application had been unsuccessful, that is also just one of the matters the Court is required to consider when determining what if any order it should make for costs in circumstances where it is satisfied that there are circumstances which justify a departure from the general rule that each party should bear its own costs. In fact it does not necessarily follow that even if the wife’s application had been misconceived that that would be a circumstance that would justify the Court in making an order for costs against her.
Counsel for Billencorp was critical of the wife for persisting with her application after receipt of the letter from ABL in circumstances where she said her client incurred considerable costs. In my view this ignores the fact that the day after the wife received the letter from ABL she promptly sought to adjourn the proceedings in order to consider her position in light of the contents of that letter, and that following the agreed roundtable conference the wife firstly indicated that she would not be seeking orders against Billencorp without notice in writing and ultimately abandoned her application. This was all in circumstances where Billencorp was not called upon to file any answering material and there was no substantive hearing of the matter. In all of the circumstances I accept counsel for the wife’s submission that the wife acted both appropriately and prudently and that her conduct would not be a matter which would weigh in favour of an order for costs in Billencorp’s favour.
Other than her submission with respect to the wife not having abandoned her application immediately upon receipt of the letter from ABL on 2 June 2016, there was otherwise no submission with respect to the wife’s conduct of the proceedings, or with respect to any offer having been made in writing to settle the proceedings. Although the proceedings as between the husband and the wife were necessitated by the husband’s failure to comply with the final property order and although it was submitted by counsel for the wife that the various transactions were designed to defeat the wife’s claim, as previously referred to I am not in a position to make such a finding and in all of the circumstances I do not consider that these are matters which are relevant for the purposes of the application I must determine.
Counsel for the wife submitted that although not determinative the financial circumstances of the parties is a significant consideration in this case. It is certainly one of the matters the Court must consider in determining what if any order for costs should be made. Although Ms C deposed to having significant commercial interests in Australia and having built up a residential and commercial property development business in Australia there is no evidence before me as to the financial positon of Billencorp in particular as to what if any assets it may have.
The wife for her part deposed that she has a gross income of approximately $135,000 per annum but that she is now meeting the full cost of the children’s private school fees and that for the three months prior to the date she swore her Affidavit had only received $1,190 from the husband for the support of the children which leaves her responsible for most of the children’s day to day living expenses and that she was owed approximately $100,000 by the husband pursuant to the final property orders. This evidence was not the subject of any challenge. Based upon this evidence although the wife’s financial circumstances are not so dire as to preclude the Court from making an order for costs, I am satisfied that an order for costs would be likely to be a significant financial burden for the wife.
Having regard to all of the evidence and the matters in s 117(2A), I am not satisfied that there are circumstances in this case that would justify a departure from the general rule that each party should bear their own costs of the proceedings and propose to dismiss paragraph 1 of Billencorp’s Application in a Case.
The parties also made submissions with respect to paragraph 2 of Billencorp’s application that the wife should pay its costs of that application, however it was agreed that as the outcome of its application that the wife pay Billencorp’s costs of and incidental to the wife’s Initiating Application was likely to be a relevant factor, the parties would be afforded the opportunity to make further written submissions with respect to Billencorp’s Application in a Case. I propose to make orders accordingly.
I certify that the preceding forty-five (45) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Macmillan delivered on 11 November 2016.
Associate:
Date: 11 November 2016
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