FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Chen & Chen (No 2) [2024] FedCFamC1F 665
File number MLC 5805 of 2016 Judgment of WILSON J Date of judgment 4 October 2024 Catchwords FAMILY LAW – MAJOR COMPLEX FINANCIAL PROCEEDINGS LIST – application by first respondent for indemnity costs against second respondent – second respondent failed to adequately discharge her duties concerning disclosure – application for indemnity costs granted. Legislation Corporations Act 2001 ss 95A, 436A, part 5.3A
Family Law Act 1975 ss 79(2), 117(1),117(2), 117(2A), 117(2A)(c), 117(2A)(g)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021
Cases cited Bacall & Zagar [2020] FamCA 350
Barker v Barker (2007) 36 Fam LR 650
Black v Kellner (1992) 15 Fam LR 343
Chen v Chen (No 3) (2020) 63 Fam LR 448
Chang v Su (2002) 29 Fam LR 406
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Fitzgerald v Fish (2005) 33 Fam LR 123
Flight v Robinson (1844) 50 ER 9
Guild v Stasiuk (No 2) [2020] FamCA 564
In the Marriage of Briese (1985) 10 Fam LR 642
In Marriage of Giunti (1986) 11 Fam LR 160In the Marriage of Hogan (1986) 10 Fam LR 681
In the Marriage of Kohan (1992) 16 Fam LR 245
In the Marriage of Marinko (1983) 8 Fam LR 849
In the Marriage of Mezzacappa (1987) 11 Fam LR 957
In the Marriage of Morrison (1994) 18 Fam LR 519
In the Marriage of Stein (1986) 11 Fam LR 353In the Marriage of Suiker (1993) 17 Fam LR 236
In the Marriage of Weir (1992) 16 Fam LR 154
Kannisv Kannis (2002) 30 Fam LR 83Medlon v Medlon (No 6) [2015] FamCAFC 157
Monte & Monte [1986] FamCA 1
Moy v Pao [2022] FedCFamC1A 17
Oriolo v Oriolo (1985) 10 Fam LR 665
Waterman & Waterman [2017] FamCAFC 23Willans & Enmore (No 2) [2021] FedCFamC1F 130
Division Division 1 First Instance Number of paragraphs 61 Date of last submission 16 September 2024 Date of hearing 16 September 2024 Place Melbourne Counsel for the applicant Did not participate Counsel for the first respondent Mr D. Farrands KC Counsel for the second respondent Did not participate Counsel for the third respondent Did not participate Solicitors for the fourth, fifth and sixth respondents – the liquidators Mr N. Ayliffe Counsel for the seventh respondent Did not participate Counsel for the eighth respondent Did not participate Solicitors for the receivers KHQ Lawyers Counsel for the ninth and tenth respondents Did not participate ORDERS
MLC 5805 of 2016 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN MS CHEN
Applicant
AND MR CHEN
First Respondent
MS QUEN
Second Respondent
ORDER MADE BY
WILSON J
DATE OF ORDER
4 OCTOBER 2024
THE COURT ORDERS THAT –
1.Pursuant to s 117(2) of the Family Law Act, the first respondent’s costs are to be assessed on an indemnity basis by a registrar…
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- Chen & Chen (No 2) [2024] FedCFamC1F 665
- Case
- [2024] FedCFamC1F 665
- Decision Date
CaseChat Overview and Summary
The primary legal issue was whether Mr Chen's conduct warranted an indemnity costs order under section 117(2) of the Family Law Act. This required the court to assess whether Mr Chen's actions were egregious enough to justify such a significant financial penalty. Additionally, the court considered the argument that Mr Chen's appointment of administrators to certain companies was improper, an abuse of statutory power, and unlawful. However, the court noted that no factual findings had been made regarding the appropriateness of these appointments, and thus, it could not proceed on the assumption that they were an abuse of power.
The court found that Mr Chen's conduct was indeed egregious. It was noted that Mr Chen had knowingly disregarded his legal obligations, withheld crucial documents, and misrepresented his understanding of the proceedings. This conduct was seen as deliberately obstructive and resulted in significant costs for Ms Chen. The court emphasised that such behaviour was not only unreasonable but also harmed the integrity of the family law process. Consequently, the court granted the application for indemnity costs, ordering that Mr Chen pay the costs incurred by Ms Chen from 20 September 2020 to 20 May 2022, as well as the costs of the application itself. The court did not make any findings regarding the legitimacy of the appointments of administrators, but it did highlight the importance of adhering to legal obligations in family law proceedings.
Orders
Orders of the court
MLC 5805 of 2016
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN
MS CHEN
Applicant
AND
MR CHEN
First Respondent
MS QUEN
Second Respondent
ORDER MADE BY
WILSON J
DATE OF ORDER
4 OCTOBER 2024
THE COURT ORDERS THAT –
1. Pursuant to s 117(2) of the Family Law Act, the first respondent’s costs are to be assessed on an indemnity basis by a registrar of this court in respect of the period 20 September 2020 to 20 May 2022 and when assessed paid by the second respondent.
2. The first respondent’s costs of and incidental to this application for indemnity costs are to be assessed by a registrar of the court and when assessed, paid by the second respondent.
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).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Full text does not contain this section.
Ratio Decidendi
Legal Principle Established
Mr Farrands KC advanced a pointed submission. It was as follows –“The second respondent’s conduct is of the worst possible kind; ignoring the advice of her legal team, wantonly withholding key documents, seeking to present as an ignorant or confused victim of the family court system, and all the while well knowing that the first respondent was incurring substantial and unnecessary costs, the second respondent hoping this might put the first respondent off pursing his rights.”FOURTH BASIS FOR AN INDEMNITY COSTS ORDER – NO GROUNDS FOR PLACING COMPANIES IN ADMINISTRATION As a further stand-alone basis for applying for indemnity costs against the second respondent, the first respondent contended that the second respondent’s evidence in relation to the fourth, fifth and sixth respondents was hopeless and should be rejected with the consequence that it should be held that –(a)the second respondent acted improperly in seeking the appointment of administrators to the fourth, fifth and sixth respondents;(b)the appointment of the administrators was an abuse of statutory powers; and(c)the appointment of the administrators was bad in law. Before going further, it must not be overlooked that no findings have yet been made about the propriety or otherwise of the appointment of administrators to the fourth, fifth and sixth respondents. Equally, no finding has yet been made about the legitimacy of the second respondent’s purpose in seeking the appointment of administrators to the fourth, fifth and sixth respondents. Accordingly, the first respondent’s contention that the appointment of the administrators “was clearly done for an improper purpose and/or was an abuse of statutory power” has not been debated nor any findings made on the issue. Despite there being no factual findings made in relation to the second respondent’s acts of procuring the appointment of administrators to the fourth, fifth and six respondents, the first respondent’s submissions were laced with assumption – namely, that an improper purpose had been engaged in, that an abuse of statutory power was manifest and that the second respondent had herself breached s 436A of the Corporations Act. There being no findings of fact concerning the appropriateness or otherwise of the second respondent appointing administrators to three companies, it is not correct for me to proceed on the basis urged by the first respondent, namely, that the appointment of the administrators was an abuse of statutory power, that it was done for an improper purpose and that the appointments were bad in law. In assessing the conduct of the second respondent by appointing administrators to the fourth, fifth and sixth respondents in the context of an application by the first respondent for an indemnity costs order, at least one issue will be whether the second respondent’s conduct of so appointing the administrators was reasonable in all the circumstances. On behalf of the first respondent, Mr Farrands argued in written submissions that a director abuses his or her statutory power under s 436A of the Corporations Act if he or she appoints administrators for an improper purpose. It was argued that the appointment of the administrators was done for an improper purpose because –(a)the appointments were not done for a purpose identified in Part 5.3A of the Corporations Act;(b)a proper purpose was maximising the chances of the company continuing or if not possible, to result in a better return to creditors and members than would result from an immediate winding up;(c)on the facts of this case (according to the first respondent) the appointment of administrators was directed to protecting the second respondent’s interests in a property at Suburb AC and in another property at Suburb AF for the benefit of the second respondent’s two children given that the loans from National Australia Bank to companies owned or controlled by the second respondent were cross-collateralised to her personal assets;(d)the appointments of administrators was made on the recommendation of the accountant for the second respondent in order for that accountant to have input and influence over the conduct of the companies in question; and(e)an administrator rather than a provisional liquidator was appointed suggesting that the administrator was more compliant than might a provisional liquidator have been.