Chen and Chen and Ors
[2017] FamCA 115
•2 March 2017
FAMILY COURT OF AUSTRALIA
| CHEN & CHEN AND ORS | [2017] FamCA 115 |
| FAMILY LAW – COSTS |
| Family Law Act 1975 (Cth) | |
| Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 198; [2001] HCA 63 | |
| APPLICANT/WIFE: | Ms Chen |
| 1ST RESPONDENT/HUSBAND: | Mr Chen |
| 2ND RESPONDENT: 3RD RESPONDENT 4TH RESPONDENT 5TH RESPONDENT 6TH RESPONDENT 7TH RESPONDENT 8TH RESPONDENT 9TH RESPONDENT 10TH RESPONDENT | Ms Quen C Pty Ltd (ACN …) Quen Pty Ltd (ACN …) E Pty Ltd (ACN …) Company F (ACN …) G Pty Ltd (ACN …) Mr A Chen Mr B Chen Mr C Chen | ||||
| FILE NUMBER: | MLC | 5805 | of | 2016 | |
| DATE DELIVERED: | 2 March 2017 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | By way of written Submissions |
SUBMISSIONS RECEIVED FROM
| SOLICITOR FOR THE APPLICANT: | Taussig Cherrie Fildes |
| SOLICITOR FOR THE RESPONDENT/HUSBAND: | Clancy & Triado |
| SOLICITOR FOR THE 2ND RESPONDENT: | Kenna Teasdale Lawyers |
Orders
That the husband and the wife be jointly and severally liable for the costs of the third party/ second respondent of this interlocutory proceeding in such sum as may be agreed and failing agreement, as assessed.
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 Chen & Chen and Ors 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 5805 of 2016
| Ms Chen |
Applicant
And
| MR CHEN |
Respondent
And
Ms Quen
Second Respondent
And
C PTY LTD (ACN …)
Third Respondent
And
QUEN PTY LTD (ACN …)
Fourth Respondent
And
E PTY LTD (ACN …)
Fifth Respondent
And
COMPANY F (ACN …)
Sixth Respondent
And
G PTY LTD (ACN …)
Seventh Respondent
And
Mr A Chen
Eighth Respondent
And
Mr B Chen
Ninth Respondent
And
Mr C Chen
Tenth Respondent
REASONS FOR JUDGMENT
On 8 September 2016, I discharged an injunction restraining Ms Quen (the third party) from exercising what I found on the evidence, to be her lawful right to conduct a business as her own. That injunction had been made by the court on 27 July 2016.
As a consequence of my orders, the third party now seeks costs against Ms Chen (the wife) and Mr Chen (the husband) jointly and severally.
I have had considerable assistance from submissions filed by all parties. At their request, the timetable for the filing of those submissions was extended by a chambers order made in December 2016.
For the reasons that follow, there should be an order for costs made in favour of the third party.
The background of the dispute is complicated. However, it is unnecessary for me to reiterate it because the reasons of 8 September 2016 set out my understanding of what had occurred. It is important to observe that the substantive litigation is ongoing and is to be heard by another judge. My task is directed only to the issue of the application for costs arising from my findings.
It is the general rule, as prescribed in s 117(1) of the Family Law Act 1975 (Cth) (“the Act”), that each party should bear their own costs. However, the Court is empowered by s 117(2) of the Act to make an order for costs if it is of the opinion that there are “circumstances that justify it in doing so”. If the Court finds a justifying circumstance, it still has to have regard to the factors in s 117(2A) in considering what order, if any, should be made (see I and I (No 2) (1995) FLC 92-625).
It must also be remembered that costs are not awarded by way of punishment of the unsuccessful party but rather are compensatory in the sense that they are awarded to ameliorate the expense of the successful party as a result of having been required to participate in the legal proceedings.
Although there is reference in one of the submissions to the quantum of the costs sought, I have no such information. In my view, any costs order here should be on the basis that if there is no agreement, the costs should be assessed.
It is also important to observe that the submissions also indicate:
(a)That if there is a basis for a costs order, that issue should be reserved to the ultimate substantive hearing; and
(b)That if there is a basis to make an order for costs now, the payment should be left to that final hearing.
The first question is whether there is any justification for an order for costs having regard to the clear provision in s 117 of the Act.
The substantive dispute is about whether assets said to have been transferred to the third party by formal documents should be disgorged in favour of the husband and/or the wife. The commencement of that proceeding gave rise to the wife’s application (supported by the husband) for injunctive relief to preclude the third party from dealing with the property then under her control.
On 27 July 2016, the wife’s application came before Macmillan J in the judicial duty list. All parties were represented by counsel. The court record shows that all parties asked the court to make orders with their consent such as to so restrain the third party.
It is apparent from the submissions of all parties that there is disagreement about the consensual nature of those orders. To the extent that it is relevant at all, bearing in mind the basis upon which this court can make any order for costs, their respective positions were as follows:
(a)The third party said at [4] of her costs submission that she opposed the injunctive relief from the outset;
(b)The wife said at [5] of hers, that the third party did not oppose the interim injunctive relief…Indeed, Senior and Junior Counsel appearing…did not press any opposition in respect of the interim orders sought by her;
(c)The husband remained silent on the subject but indicated at [9] that he maintained he should have the benefit of the injunctions…(and) has filed a further application…which is yet to be heard.
I am not in a position to finally determine whether the consent was willingly given or begrudgingly offered as a holding order on the basis of the court’s inability to hear the case that day. In my view, it makes no difference as no transcript of the proceedings was provided. However, I infer that the order had a limited life and must be seen as a holding order because it was drawn by the parties as continuing only until the return date of 7 September 2016 rather than “until further order”. In addition, that order presumably did not come from the parties themselves because the court would have been responsible for providing the date to which the parties then referred.
It would seem an appropriate inference that the limited life combined with the special fixture indicates that the consent was a pragmatic one in circumstances of the court’s inability to deal with such a contested issue there and then. For the reasons that follow, I consider the consent or otherwise does not matter because the original injunction, whether consented to or not, was only to last until the return date.
When the injunction was made, the provisions of s 114 of the Act would have been applied (either by the court or the parties) and that focuses on what is proper. Whilst there is not only no definition of what is proper and also no guidance given under the Act, as to how to interpret the section, this court would normally rhetorically ask, as would courts of other jurisdictions, whether the applicant had shown that there was an identifiable substantive issue to be tried justifying the entitlement to the immediate relief which, if not granted, would likely prejudice the applicant in the pursuit of the orders sought and, if so, then determine whether the balance of convenience favours the granting of the proposed injunction. (see Gleeson CJ and Crennan J in Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57; [2006] HCA 46 at [19]). Obviously, that assessment is heavily reliant upon the untested evidence presented to the court and it would usually favour a liberal approach in accepting what is asserted. In this case, it is pertinent to observe that the husband’s written submission contained the following:
[10]The husband acknowledges that he was unsuccessful on 7 September 2016, and largely because his material was inadequate.
The husband’s submission went on to say that the “rule” under the Act was not that costs followed the event but rather that the court “has a much broader discretion”. With that statement I agree but it must be to the evidence that the court looks to see whether any of the “tests” are satisfied to grant an interim injunction in circumstances where powerful authorities such as O’Neill (supra) and Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 198; [2001] HCA 63 provide guidance as to how to assess what is proper. As my reasons then observed, the evidence was inadequate.
In determining the application, it is helpful to know that a series of documents had been executed by the husband and the third party giving rise to some form of settlement between them and under which, assets that might have been property in which the wife had an interest (presumably equitable), were transferred to the third party and, it would seem, she asserted that consideration was provided. The evidence suggested and there seemed little doubt, the wife knew nothing about the transfers notwithstanding her adult children had some knowledge but did not want to burden her with the problem of their father’s involvement with the third party.
My reasons for making the orders were set out in Chen & Chen and Anor [2016] FamCA 758 and I do not need to repeat them here. However, I made the following observations:
[64]Thus, I conclude that the assets about which the husband and the wife seek protection may be the subject of claims but I am not able to say at this stage that there is any prospect of those potential claims being successful. To make injunctive orders of the type made on 27 July would not be a limited exercise of power. Quite the contrary, they were and would be, extensive and invasive in circumstances where all of the documentary evidence supports a conclusion that the third party is the owner of the property of the business.
[65]When I consider the balance of convenience, it is hard to know what the prejudice is to the husband and wife when they have chosen to limit the evidence upon which the Court can make a proper assessment of what did happen. The husband’s approach of telling the Court what he says is the comprehensive story in the future, is very unsatisfactory. The wife’s approach of not having any explanation for her children’s role not only in respect of the agreements but also the allegations of the third party that they were demanding money, is equally perplexing.
There is therefore substance to the submission that the “material was inadequate” from the husband. In respect of the wife, the submission was strongly put that she did not have and could not have had the relevant material. That said, the involvement of her adult children even after the husband’s liaison with the third party came to light was only peripherally addressed. Nothing was said by the wife as to what her children told her about what their father (who was not separated from their mother) was doing of a commercial nature with the third party and them. On a prima facie level, all of the evidence pointed to the third party being the legal owner of this business. True it was that the substantive proceedings by the husband were to set the various transactions aside, but his silence on the third party’s assertions did not assist.
The law in relation to the power of the court to make an order for costs was not in dispute. I turn then to the submissions.
The third party submitted:
·The third party put the husband and wife on notice of her intention to discharge the “holding orders”;
·There was a finding that husband had not adduced any evidence of the basis upon which he sought the relief in relation to the ultimate issue to be tried
·There was a finding that the wife’s evidence was also deficient;
·There was a finding that there was no evidence of a real risk of asset dissipation;
·The husband and wife were wholly unsuccessful;
·There was nothing in the financial circumstances of the parties to preclude a costs order being made.
The husband submitted:
·Each party should bear their own costs or the costs should be reserved to trial;
·An order for costs would create hardship based on the husband’s financial circumstances;
·The third party’s financial circumstances were superior and on that basis alone, her application should be refused.
The husband went on to submit that to treat this dispute as essentially commercial in nature and hence to deal with the costs application in a way that a commercial court might, would limit the operation of s 117. I have no intention of dealing with the application other than in accordance with s 117.
The wife submitted:
·There was no reason to depart from the principle in s 117(1);
·In the alternative, in the absence of sufficient evidence upon which appropriateness to make an order could be assessed, the issue of costs should be reserved;
·The third party did not oppose the injunctive order;
·The third party’s evidence could have, but did not, assuage the concerns of the wife about the dissipation of assets;
·The husband could have assuaged the concerns of the wife because he had knowledge of the various transactions;
·The lack of discovery was a problem for the wife (noting that it was before McClelland J in December but it was not suggested before me that lack of discovery was a justification for continuing the injunction).
In respect of the 5th dot point above, there can be little doubt that the husband could have informed the wife of the details about which he had unique knowledge. Indeed, he was still said to be living with the wife and, whilst having had a relationship with the third party and had two children with her, kept all this secret from the wife. But so too, the wife’s children did not tell her much that was presumably within their particular knowledge. The husband and the wife contributed to the situation.
I find in the circumstances, this was a most unusual set of facts and the evidence was inadequate to support the orders sought by the husband and the wife. But more importantly, in between the time that the injunction was first granted (by “consent” of all parties) and the hearing five weeks later, any inadequacies were not remedied. I am consequently satisfied there is a justification to depart from s 117(1) of the Act. The question remains as to whether an order should be made having regard to the requirements of s 117(2).
The financial circumstances of each party are difficult to assess because the evidence cannot be tested. Impecuniosity is not a bar to making an order for costs if the other conditions of s 117(2A) or any of them are met (see D and D (Costs) (No 2) [2010] FamCAFC 64; (2010) FLC 93-435). Accordingly, I reject the submission that the “superior” financial circumstances of the third party “alone” justify a refusal of an order. Her circumstances are but one factor. In a case where lawyers were involved for both the husband and the wife and the third party had placed them on notice of her intention to seek to have the injunction discharged, simply to point to a superior financial position ignores the fact that evidentiary attention to detail was either missed or deliberately withheld for tactical purposes. Even so, there were commercial operations involved in this case including at least an assertion that the husband was paid money. I do not find that the financial circumstances issue assists but do find there is no evidence of impecuniosity even if an order might cause hardship immediately.
A submission by both the husband and the wife concerned delaying enforcement until the conclusion of the proceedings. In the case of the wife, it was submitted that the approach of the Federal Court of Australia and the Supreme Court of Victoria was to do so to avoid “multiple taxations and avoiding unfairness”. Nothing I have seen here would give rise to such an issue. The same provisions of s 117 of the Act will apply to any other hearing in this court between these parties. As such, interlocutory hearings are within the parties’ own hands.
On the issue of the stay, in my view, absent agreement, the court ought not to make such an order without some evidence. Nothing here indicated that some arrangement could not be reached or had been attempted between the parties. Nothing was indicated by the third party that enforcement would follow or that some accommodation could not be reached.
A difficulty with making an order that costs be reserved to trial is that if the trial judge is not the person who heard the interlocutory application, it can be difficult (but certainly not impossible) to make a finding that there were, or were not, justifying circumstances as required by s 117(2). In a case such as this, it is better for me to determine that issue. The only logical reason for doing otherwise is (as was submitted) that more evidence or a different story may emerge at trial that places all parties in an entirely different position to that which has currently emerged. In my view, that argument has little merit in a case where the evidence was inadequate. What possible explanation could there be for an incomprehensive picture being portrayed at the interlocutory level? If there is a tactical advantage in “keeping the powder dry”, why are the court’s resources being used up in those circumstances which in turn, delay other cases from being heard at a final level? On the basis of the submissions, I find there is no justifiable reason for delaying the costs determination.
Thus, I propose to asses this application on the material before me.
I am satisfied that there may be financial difficulties for the husband and the wife in relation to an order for costs but that I could not say that the material suggests that undue hardship either now or in the future would be caused by an order. The absence of material by the third party is of little significance.
I am satisfied that no legal aid issue arises here.
I find that the conduct of the litigation has been as I have described it. In circumstances where parties are represented by lawyers and notice of a dispute is given before the hearing, it is puzzling that consideration is not given to the rectification of evidentiary concerns. In the case of the husband, his approach was to say that “all would be revealed”. That made no sense in the circumstances.
There are no other factors than those that I have mentioned in the course of these reasons that justify an order.
In my view, both husband and wife contributed to the case proceeding and I am not able to distinguish between them as to who should be responsible for the third party’s costs. To the extent that there is some distinction, they can sort that out between themselves at their trial as I understand that the husband has indicated he is intending to file a s 79 application against the wife.
An order should therefore be made that in default of agreement as to costs, they be assessed and the husband and wife be jointly and severally liable.
I certify that the preceding Thirty Eight (38) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 2 March 2017.
Associate:
Date: 2 March 2017
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