Burns & Burns (No 2)
[2023] FedCFamC2F 161
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Burns & Burns (No 2) [2023] FedCFamC2F 161
File number(s): MLC 5056 of 2021 Judgment of: JUDGE O'SHANNESSY Date of judgment: 2 February 2023 Catchwords: FAMILY LAW – cost consequent upon vacation of final hearing – conduct of a party contributing to that hearing being unable to proceed – late renunciation of agreed value of a business – order for costs made. Legislation: Family Law Act 1975 (Cth) s 117 Cases cited: Burns & Burns [2023] FedCFamC2F 140 Division: Division 2 Family Law Number of paragraphs: 38 Date of hearing: 2 February 2023 Place: Melbourne Counsel for the Applicant: Mr J. Mellas Solicitor for the Applicant: Marshalls + Dent + Wilmoth Counsel for the Respondent: Mr S. Lethlean Solicitor for the Respondent: RF Legal ORDERS
MLC 5056 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MR BURNS
Applicant
AND: MS BURNS
Respondent
order made by:
JUDGE O'SHANNESSY
DATE OF ORDER:
2 FEBRUARY 2023
THE COURT ORDERS THAT:
1.The real property situate at and known as L Street, Suburb M, Victoria, described in Certificate of Title Volume … Folio … (“the L Street, Suburb M property”) be forthwith placed on the market for auction on or before Saturday 6 May 2023 (“the sale”) save in the event of advice from the sales agent to hold the auction on another date.
AND THE COURT ORDERS BY CONSENT THAT:
2.The Husband and Wife attend upon the appointment and retention of a sales agent through the following process:
(a)The Wife provides the Husband of a list of three agents (“the list”);
(i)Real Estate N, Suburb O (Mr P);
(ii)Real Estate Q, Suburb M (Mr R);
(iii)Mr S, Suburb M (Mr T); and
the Husband select one and notify the Wife’s solicitors in writing within seven (7) days of these Orders.
(b)Should the Husband fail to select a sales agent within seven (7) days of these Orders, the Wife select an agent from that list and advise the Husband of that selection.
3.The Husband and Wife attend upon the appointment of a conveyancer, with the appointment failing agreement to be as follows:
(a)the Wife provide the Husband of a list of three conveyancers within seven (7) days of these Orders; and
(b)the Husband select a conveyancer within seven (7) days after the list of three (3) conveyancers has been provided; and
should the Husband fail to select a conveyancer, the Wife select a conveyancer from that list and advise the Husband of that selection.
4.The terms and conditions of the sale of the L Street, Suburb M property will be as agreed between the parties and failing agreement will be determined by the sales agent.
5.After both parties consult the sales agent the reserve price be as agreed; and
(a)failing agreement as to the reserve price in writing 28 days prior to the auction, it be determined by an expert valuer at the parties’ equal expense; and
(b)in the event of a dispute as to who the valuer should be, the sales agent be requested to advise which valuer should be retained.
6.The Husband and Wife are to co-operate in every way with the sales agent in relation to the marketing of the L Street, Suburb M property for sale including:
(a)Undertaking necessary repairs and improvements to the L Street, Suburb M property upon the recommendation of the sales agent; and:
(i)The repairs and improvements be agreed between the Husband and wife in writing and in consultation with the sales agent;
(ii)The Husband and wife are to equally share the costs of agreed repairs and improvements;
(b)Making the keys readily available;
(c)Allowing inspection of the L Street, Suburb M property at all times reasonably requested by the agent;
(d)Ensuring the property is clean, net and in good order at the time of inspection by any prospective buyer; and
(e)The cost of repairs be paid from the funds currently held in trust by Lander & Rogers.
7.Upon agreement being reached for sale of the L Street, Suburb M property, the Husband and Wife execute the contract of sale and all other documents necessary to complete the sale of the property including all transfer documentation without delay upon its submission to them by the conveyancer.
8.Upon the completion of the sale, the proceeds of sale be applied as follows:
(a)First to pay all costs, commissions and expenses of sale;
(b)Secondly, to discharge the mortgage and any other encumbrance affecting the L Street, Suburb M property; and
(c)Thirdly, the balance to be held in the trust account of Marshalls Dent & Wilmoth until written agreement or further Order.
9.Pending the completion of the sale of the L Street, Suburb M property:
(a)The Husband withdraw the caveat he lodged on the L Street, Suburb M property;
(b)The Husband has the sole right to occupy the L Street, Suburb M property until 30 days prior to the settlement of the property;
(c)During his occupation of the L Street, Suburb M property, the Husband shall pay all instalments pursuant to the mortgage and all rates and taxes and like apportionable outgoings of the real property as they fall due;
(d)The parties hold their respective interests in the L Street, Suburb M property upon trust pursuant to these Orders;
(e)Neither party encumber the L Street, Suburb M property without the consent in writing of the other party;
(f)The Husband shall maintain the L Street, Suburb M property including the interior, exterior and garden in good repair, make no modifications to the property without the Wife’s consent;
(g)The Husband shall facilitate the Wife inspecting the property prior to it being placed on the market for sale, during the marketing campaign and prior to the completion of the sale and the Wife be accorded privacy;
(h)On or before 30 days of the completion of the sale or settlement of the L Street, Suburb M property, the Husband provide vacant possession, remove all items not included in the sale and ensure that the property is left in a clean and tidy condition; and
(i)Liberty be reserved to either party to apply with respect to the terms and conditions of and execution of the sale.
To resolve the objection to subpoena
10.The Respondent Wife shall forthwith do all acts and things to cause Mr U to produce documents for the V Master Fund for the financial years ending 1994 to 2018.
AND THE COURT ORDERS THAT:
11.The Husband pay the Wife’s fees thrown away fixed in the sum of $8,788 to be paid within seven (7) days from the funds currently held in trust by Landers & Rogers and to be adjusted against the Husband’s entitlement in final property orders.
12.Pursuant to section 149 of the Federal Circuit and Family Court of Australia Act 2021 (Cth), this proceeding is transferred to the Federal Circuit and Family Court of Australia (Division 1).
AND THE COURT NOTES THAT:
A.Orders 1 to 10 are by consent save that the date of auction and the date of vacating the premises was determined by the Judge.
B.Counsel for the Respondent Wife also acting on behalf of Mr U in his Notice of Objection to Subpoena confirms that telephone calls have been made to Mr U’s accountant who shall make inquiries with the Australian Taxation Office (ATO) during proceedings on 2 February 2023 to request financial information.
C.Mr U, who was present in Court, has indicated his willingness to do all acts and such acts and things necessary and sign all documents to obtain and produce the documents referred to in paragraph 10 of these Orders and to make any necessary requests to the ATO that may be required to obtain documents.
D.The matter has been transferred to Division 1 for the following reasons:
(a)If the matter proceeds to final hearing it is likely it would take more than 4 days of hearing time.
E.The parties will be contacted directly by the National Assessment Team confirming the transfer of proceedings and the next listing date.
F.If in any proceedings there are allegations of family violence and the provisions of section 102NA of the Family Law Act 1975 apply (see attached Family Violence Information Sheet), any unrepresented party will not be permitted to personally cross-examine the other party/parties.
G.Affected unrepresented parties may apply to the court and then to the Commonwealth Family Violence and Cross-Examination of Parties Scheme (“the Scheme”) for representation but any such application must be made at least 12 weeks prior to the final hearing.
H.Further information about the legislation and the Scheme can be found at Part 4 of the attached Family Violence Information Sheet.
I.If s102NA applies and a party becomes unrepresented after trial directions have been made, that party is required to promptly advise the Court.
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 a pseudonym Burns & Burns has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
JUDGE O’SHANNESSY
These are the settled reasons of a judgment delivered ex tempore. These reasons were delivered orally. These settled reasons have been corrected from the transcript to correct grammatical errors, to add citations and to attempt to make the orally delivered reasons easier to read. The substance is unchanged.
This is the second judgment in this matter. These reasons should be read together with the reasons of Tuesday 31 January (Burns & Burns [2023] FedCFamC2F 140). I refer to those reasons and to the multiple impediments of the matter proceeding.
On Tuesday 31 January 2023, the matter came on for what ultimately turned out be an interim defended hearing or adjournment application. Some three hours were spent debating whether the trial listed for today could proceed. The trial had been fixed for hearing in November of 2021 but had adjourned several times and was listed for final hearing today, Thursday 2 February 2023. The unrealistic short estimate of the timeframe of the case is not the entire fault of either of the parties and rests with both of them and their previous lawyers.
On Tuesday, I vacated the trial listed for today and I indicated that I intended, because of the length of the matter, that it would be transferred to Division 1 of this Court upon its return. The parties counsel have not spoken against that. I do propose to and will order that the matter be transferred to Division 1, being a Court that can accommodate longer hearings.
Today, I have dealt with a return of a subpoena matter where there was a subpoena very recently issued. There has been agreement reached as to the nature of documents that will be produced. It is agreed that Mr U, the Wife’s stepfather, will and is permitted to redact from any documents that he produces, whether produced directly to the Court or to the Husband's lawyers or to the Wife in these proceedings. Those documents will, in the first instance, have redacted the dates of birth of Mr U and Ms W (the Wife’s mother), their tax file numbers and the personal financial figures and information of Mr U and Ms W.
The Wife seeks an order for costs thrown away. Exhibit W1 of 2 February 2023 is her tax invoice to date. The purpose of that invoice is to show that, without counsels' fees, there has been $20,460 (including GST) worth of work in preparation for this hearing. The Wife seeks some part of that sum plus counsels' fees (or some part thereof) for the two hearings necessary to run this matter to ground. The Wife concedes that some part of the preparation for this hearing is not lost and will be reused one way or another in the ultimate final hearing.
The Husband resists any order for costs and seeks that both parties' costs be reserved to final hearing. Where costs are reserved to a final hearing, that simply shifts that part of the load of dispute to the next judge, rather than it being dealt with by me. There are times when that is appropriate, including when the costs issue turns on some matter that can only be dealt with at trial. In resisting the costs order, the Husband points to the fact that it is now (today) agreed that there are relevant documents that at least exist that Mr U can access concerning the self-managed superannuation fund. The Husband first articulated his belief in such documents on 24 June 2022 and articulated them again on 17 January 2023. Hence, he says that demonstrates the Wife’s lack of response to his calls for source documentation.
A response was received from the Wife’s solicitors on 23 December 2023, which was annexed to the Husband’s affidavit of 1 February 2023. The relevant part of that response reads:
My client’s father, [Mr U], is prepared to provide an affidavit regarding his company’s contributions to his daughter’s superannuation during the period from 1993 to 2017. He has provided a copy of his records from [X Pty Ltd] regarding these transactions, which we attach for your reference.
It is common ground that the records referred to in that letter are a spreadsheet kept by Mr U. Ultimately, Mr U does swear an affidavit, which is filed and which annexes a spreadsheet.
In what I take to be an effort to cooperate with the court's processes, Mr U, represented by the Wife’s counsel, Mr Lethlean, this day has agreed to have his accountants chase up the Australian Taxation Office to obtain documents that he does not currently have in his possession. Arguably, they may be in his power. Further to that, it transpires that he has some handwritten records prior to the operation of the Excel spreadsheet document. Further to that, he may have some cheque butts which would corroborate the entries in either the handwritten records or the Excel spreadsheet documents.
When produced, I expect (without making a determination) that such documents and information would be relevant and maybe even determinative of the dispute. But I do not determine that matter.
The request for the documents was marked by demands upon the Wife to produce documents that she does not have. The demand for documents in a letter does not mean that the documents exist in the hands of the person from whom they are demanded. The demands for the documents upon the Wife treat the Wife and her stepfather and his entity as if they are the same person. However, there is substance to the point that, for some time, the Husband has agitated the issue of source documents relating to the superannuation issue.
The Husband now has an Excel spreadsheet, which is a record of Mr U, which may or may not ultimately be regarded as a source document. For my purposes today, I regard it as a source document, as it is Mr U's own record of the funds contributed to that superannuation fund. Sometimes people think a source document means something independent of the party. It is not. A source document would cover any document or record relevant to the inquiry, including those in Mr U’s hand and including his own records. Whether they are accurate or not, or reliable or not, or truthful or not, is a separate issue.
Counsel for the Husband, Mr Mellas, made a point that the adjournment was necessary because there exist further documents relating to the superannuation fund. Mr Lethlean’s rebuttal to that is that the superannuation documents issue was only one of the issues relating to why the matter is not able to proceed.
There are multiple issues about why the matter is unable to proceed. Mr Lethlean presses that, in substance, all of the issues about why the matter is unable to proceed lie at the hands of the Husband. I am not satisfied that they all do, but the issue of the late recanting of the value of the business was one of the primary matters that meant the matter could not proceed. The issue of whether further documents had not been produced would not, of itself, necessarily precipitate an adjournment. There is the doctrine that a relevant document or evidence not produced may mean that an adverse inference can be drawn against the party or witness not producing them. Parties should not expect an adjournment of a final hearing set down for more than a year because they can identify a document, not produced, that may assist their dispute. The recanting of the agreed valuation on the business was a very significant aspect.
On Tuesday 31 January 2023, I was addressed on the basis that the draft tax return alerted the Husband to the issue of $138,000 of director's loans, being a recording of money that been lent by the company to him. I was told that the draft tax statement was only available to the Husband on or about 23 January 2023. I was told he was only made aware of such “loans” for the first time last week. However, his own trial affidavit had recorded a paragraph, of which I was not aware on Tuesday, that included:
69.I have serious concerns about some of the financial decisions that were made, in particular… directors loans in excess of $130,000 to me that I am unsure how they have arisen and transfers of money made by [Ms Burns] from the [E Pty Ltd] account to [Mr U] and [Ms W] made without my knowledge or consent.
Hence that was not an issue that arose on 31 January 2023. I accept counsel's statement to me that some imprecision in what was stated to me on that day as to the date, except it is common ground that the draft tax returns was only available on 23 January 2023. It now appears that, in fact, the Husband has been agitated about the director's loans for some time. I am not ruling whether his concern is correct or not. I am not able to investigate that on this interim hearing. But that issue should have been agitated long ago, not in the weeks before trial.
I turn to section 117 of the Family Law Act 1975 (Cth) (‘the Act’), which reads:
117 Costs
(1)Subject to subsection (2), subsections 45A(6) and 70NFB(1) and sections 117AA and 117AC, each party to proceedings under this Act shall bear his or her own costs.
(2)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), (5) and (6) 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.
(2A)In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(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.
[Notations omitted]
The starting point at section 117(1) is that each party to proceedings shall bear his or her own costs. That position is subject to subsection 117(2A), where in considering what order should be made, the Court shall have regard to a number of factors.
The following headings relate to the section 2A factors.
Financial circumstances of each of the parties
The Husband is not working at this time and has some limited funds available to him in bank accounts. Ultimately he will be able to have the benefit of a significant share, whether it's half or some other share, of an asset pool of what appears to be somewhere between $1,500,000 and $2,500,000. That total sum depends upon the degree of mortgage debt and the value of the factory premises, and what the former matrimonial home sells for. Hence, the parties are not impecunious and sooner or later will have significant capital sums available to them.
Legal aid
Neither Party is in receipt of legal aid.
Conduct of the parties to the proceedings
In this matter, costs have been thrown away by both parties in preparing for a trial that was unable to proceed.
I am and remain concerned about the Husband's attitude to getting the matter on for trial. The withdrawal of the agreed value of the business valuation was late in the proceedings and had the inevitable position that there was going to be an asset of which there was no value. That conduct of the proceedings is very significant.
The further conduct of the proceedings is contrary to the rules of the Court. The Husband elected to obtain/retain an expert witness to contest a value of the factory premises that he seeks to retain mere weeks before the trial. That process by the rules of the Court is meant to be undertaken by a single expert witness. I have no evidence that, following the valuation that is now disputed, that questions were raised of that valuer, which is the normal process to question the value. Even assuming that it is appropriate there be an adversarial witness as to the value of the factory, and I am not ruling on that, that is a significant matter as to the conduct of the proceedings. There is no evidence that the existing single expert witness was asked to revise his or her valuation in the period since it was undertaken in the event of there being significant movements in the market.
Failure to comply with previous orders
It has not been pointed out to me whether the adjournment of the proceedings or the vacation of the trial was necessitated by the failure of a party to the proceedings to comply with previous orders made.
Whether any party has been wholly unsuccessful
In this case, that is sort of a nil-all draw. No one has been wholly unsuccessful.
Settlement offer
Whether any party has made an offer in writing to the proceedings is not relevant.
Other relevant matters
The relevant matter is that the rules of the Court and the Act that conducts the proceedings of this Court command that parties, judges and lawyers proceed in an efficient and timely manner. This matter was fixed for final hearing in November 2021. The parties separated in or about September 2020. I am satisfied that the Husband's conduct of the proceedings in regard to the adversarial witness, Mr J, and the withdrawal of the valuation of the business process is entirely contrary to those underlying general principles of the efficient and timely conduct of the proceedings.
I take into account that both parties' lawyers had underestimated the time necessary for the hearing and that cannot all be set at the foot of the Husband.
In all of those circumstances, I am satisfied that the Husband's conduct of the proceedings is significant and has been the main contributor to the vacation of the trial.
I have a discretion as to how costs are awarded and costs are not to be awarded to punish a party. They are solely compensatory.
Having looked at the scale of costs in family law matters and compared it with the bill, items of costs that I have regard to is item 8 of schedule 1 of the relevant rules that has preparation for trial of a two-day matter of $6,227. I regard only half of that as lost.
The costs that the Wife's solicitors seek in regard to that were effectively something considerably more than the scale cost but not any exorbitant amount. It has been necessary for the Wife's solicitor to attend for roughly three hours on Tuesday and then six hours today at a scale rate of $260 per hour, which I take from item 15(b) of the scale of costs. That is about $780 for Tuesday and $1,560 for today.
Counsel's fees for those two days would be item 13, and being one and a half times the daily hearing fee, would be $3,335. Part of the appearance fee today of Mr Lethlean has been necessary to deal with the subpoena objection and it is not appropriate at this point in time to lay that expense at the feet of the Husband.
However, I am satisfied that it is appropriate to make a costs order arising from the conduct of the proceedings that necessitated or contributed to the vacation of the trial. That should be paid by the Husband and from the funds held in trust to be taken into account on the final hearing are as follows:
·Half of item 8 $ 3,113
·Solicitors’ attendance on Tuesday $ 780
·Solicitors’ attendance today $ 1,560
·One counsel's fee on scale $ 3,335
That total is $8,788. I take into account that that is but a small proportion of the Wife's actual fees that have been thrown away.
Thank you.
I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Ex Tempore Reasons for Judgment of Judge O'Shannessy. Associate:
Dated: 17 February 2023
0