Close & Close (No 2)

[2014] FamCA 283

FAMILY COURT OF AUSTRALIA

CLOSE & CLOSE (NO 2) [2014] FamCA 283

FAMILY LAW – COSTS – Interim – Where the wife sought costs against the husband because of the husband’s failure to properly, and in timely manner provide documents and disclosure – Where the obligation to disclose is not a partial one – Where information should not have to be prised from the party holding the assets by the party seeking the information – Relevant legal principles applied – Where the conduct of the husband favours an orders for costs to the wife – Whether the wife’s application for costs should be determined at the conclusion of the final hearing – Where the court determined that it is appropriate to deal with the wife’s application now – Where there court determined the husband had failed to disclose assets or liabilities in a timely way – Where it is appropriate that there be an order for costs in favour of the wife.

Family Law Act 1975 (Cth) s 117, 117(2A)

APPLICANT: Ms Close

RESPONDENT: Mr Close

FILE NUMBER: SYC 485 of 2010

DATE DELIVERED: 2 May 2014

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Aldridge J

HEARING DATE: 26 February 2014 and by way of written submissions

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Broun Abrahams Burreket

SOLICITOR FOR THE RESPONDENT: Djekovic, Hearne & Walker

Orders

1. That the husband will pay the wife’s costs of and incidental to her requests for disclosure from him in compliance with orders for disclosure since 1 April 2011 together with her attempts to obtain from him the documents requested by any single expert in these proceedings.

2. That the husband pay the wife’s costs of and incidental to the Application in a Case filed in court on 10 December 2013, as agreed, taxed or assessed.  Such costs are payable forthwith upon such agreement, taxation or assessment and such taxation or assessment may proceed forthwith.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Close & Close has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 485 of 2010

Ms Close

Applicant

And

Mr Close

Respondent

REASONS FOR JUDGMENT

Introduction

1. In this matter an Application in a Case by Ms Close (‘the wife’) was filed in court on 10 December 2013.  The respondent is Mr Close (‘the husband’).

2. This application deals with costs in property proceedings that are yet to be heard.  The present position in the proceedings is that the real estate and extensive business operations of the parties, particularly the husband, are being valued.

3. The wife says that because of the husband’s failure to properly and in a timely manner provide documents and disclosure she has been put to the expense of enforcing proper disclosure from the husband.  She now seeks an order for her costs of those efforts.

4. The wife relies on an Application in a Case dated 6 December 2013 which was filed in court on 10 December 2013.  In that document she sought the following  order:

   That within 7 days the husband provide to the legal representative for the wife Moore Stephens Pty Limited, the single expert forensic accountants appointed in these proceedings answers to all questions and copies of all documents sought to date.

   In default, the wife sought orders that the matter proceed as an undefended case against the husband, that the experts be at liberty to draw such adverse inferences as they thought appropriate from the failure of the husband to provide the answers to the questions asked or to provide the documents sought.

5. The wife also sought an order that the husband pay the costs of and incidental to the application and of and incidental to her requests for disclosure and provision of documents to the single expert that had been made by her since 30 April 2010.

6. On 30 April 2010 the wife’s solicitors wrote to the husband’s solicitors proposing, by way of disclosure, that the parties disclose documents in the categories that were set out in the letter.  On 20 July 2010 the wife disclosed documents that she asserted came within those categories. 

7. On 17 August 2010 the wife’s solicitors wrote to the husband’s solicitors stating:

   We note we still have not received full financial disclosure from your client.  Would you please forward that information as a matter of urgency.

   8.On 26 August 2010 the wife’s solicitors again wrote to the husband’s solicitors seeking full and frank disclosure of the husband’s financial circumstances. Noting that no financial information of any description had been provided by the husband they said:

   With this complete dearth of material our client has no alternative but to commence proceedings for property and seek interim orders that your client provide financial disclosure.

8. On 7 September 2010, by way of disclosure the husband provided a folder of documents.

9. On 24 January 2011 the wife made a request for disclosure by the husband of his beneficial interest in a number of corporations, financial documents relating to those corporations and the management thereof, income tax returns, superannuation statements, credit card statements and documents in relation to the husband’s salary.

10. On 1 April 2011 Registrar Sanderson made several orders directing the husband to provide further documents and information by way of disclosure.  There was also a direction that the wife provide further material by way of disclosure.

11. On 18 April 2011 the wife’s solicitors wrote to the husband’s solicitors seeking the documents and information ordered to be provided by 5 April 2011.  The wife was in a position to provide her documents. 

12. In a letter incorrectly dated 21 January 2011 the husband’s solicitors wrote saying:

    We refer to you facsimile of 18 April 2011 and previous correspondence.

    We enclose lever-arch binder containing financial and other material requested in the course of the proceedings.

    We are still awaiting instructions in relation to some of the matters raised in earlier correspondence and anticipate being able to complete the exchange of communication as directed shortly after the Easter break.

    We apologise for any inconvenience occasioned to your office as a consequence of our delay in providing the enclosed documents.

13. On 16 May 2011 the wife’s solicitors wrote to the husband saying:

    Unless there has been full compliance with all outstanding directions by your client by 20 May 2011 we will be seeking:

    9.1to maintain the listing before the Docket Judge on 30 May 2011;

    9.2an order for costs for the prior mention and the mention on 20 May 2011.

14. On 20 May 2011 Registrar Sanderson directed the husband to make full disclosure as required pursuant to earlier directions and the Rules forthwith.

15. On 16 June 2011 the husband’s solicitors wrote to the wife’s solicitors setting out in detail their position in relation to disclosure. 

16. On 5 July 2011 the wife’s solicitors replied pointing out a number of documents that they thought were missing from that disclosure. 

17. On 10 August 2011 the wife’s solicitors wrote seeking disclosure in relation to a number of documents in relation to the husband’s late mother’s estate and his property at Y Town known as ‘X Street’.  A response was made to those requests on 30 August 2011.

18. On 28 November 2011 the wife’s solicitors sought disclosure of 2011 accounts, whether in draft or final form and asked a number of specific questions by way of further disclosure.

19. On 19 April 2012 the wife’s solicitors sought answers to outstanding correspondence including questions asked on 5 July 2011 and 28 November 2011. 

20. On 3 May 2012 the husband’s solicitors replied saying:

    We attach a substantive response to your letter 28 November 2011.  In relation to item 3, we are obtaining updated instructions and will respond to that as soon as we can.

    In relation to the provision of further accounting material, we confirm that both our client’s bookkeeper and external accountant are presently on vacation.  His accountant will return on Monday and his bookkeeper on Tuesday.  We expect that any outstanding material could be able to be supplied without difficulty as soon as they return.

21. On 7 May 2012 Justice Ryan by consent, ordered that by 4.00 pm on 9 May 2012 the husband provide to the solicitors for the wife:

    1.1Answers to and documents requested by way of letter dated 28 November 2011 from Broun Abrahams Burreket to Djekovic Hearne & Walker Solicitors, a copy of which is annexed and marked with the letter “A”.

    1.2All the documents relating to the terms upon which any company in which the husband has an interest operates and/or occupies the [Hotel I] at [Suburb B] and any other hotel premises, including but not limited to lease, management agreement or any other agreement.

    1.3Management accounts for any company in which the husband has an interest for the period 1 July 2011 to 31 March 2012.

22. On 10 May 2011 the husband provided a bundle of material in relation to a number of companies. 

23. On 17 May 2012 Justice Ryan ordered the husband to provide within 28 days all outstanding documents pursuant to the orders made on 7 May 2012 plus a number of other specified documents and explanation of certain transactions. 

24. In infer from that order that the husband had not complied with the order made on 7 May 2012. 

25. On 26 June 2012 further information and documents were provided by the husband. 

26. On 26 June 2012 the husband’s solicitors wrote saying they had been advised by their client’s accountants that they believed it would be highly unlikely that they would be able to comply with Order 16 of the orders made on 17 May 2012, which required financial accounts from the current year to be completed by 1 August 2012.  They understood that the accounts would be available by the end of August. 

27. On 23 October 2012 the wife’s solicitors wrote saying the financial accounts for the year ended June 2012 had not yet been provided.

28. On 30 October 2012 those documents were provided.  The letter included the following:

    Apart from the above and the enclosed binder, we are preparing further material in relation to transactions which occurred during the last tax year.  You should expect to receive these within the next couple of days.

29. By 20 November 2012 that material had not been provided and the wife’s solicitors wrote asking when it would be provided.  On 29 November 2012 that information was provided by the husband.

30. On 18 January 2013 the wife sought copies of the management agreements in relation to five hotels. 

31. On 21 January 2013, having referred to certain information provided in the letter of 29 November 2012, the wife’s lawyers asked a number of questions in relation to the Z Hotel. 

32. On the same day a letter was written asking for information in relation to a property at AA Street, Town E and the business relationship between husband and some named individual. 

33. A follow up letter was sent on 1 February 2013. 

34. On 28 March 2013 the court ordered the husband to provide further disclosure and documents and answers to the letters dated 18 January and 21 January 2013 from the wife’s solicitors.

35. On 18 April 2013 some material was provided by the husband.  The letter enclosing the material said:

    We are presently attending to obtaining the balance of the outstanding material and expect to be able to serve this shortly.

36. On 23 July 2013 the single expert, in his engagement letter, set out a significant amount of material and documents his wished to have in order to carry out the business valuations.

37. Certain information was provided by the husband on 8 October 2013.

38. On 17 October 2013 the husband’s solicitors wrote saying:

    I have been in touch with our client’s accountants and have been informed that final accounts for the 2013 tax are expected to be completed within four weeks.

    It is anticipated that the balance of the information requested by Mr Pickup can be provided in the same timeframe.

39. On 5 November 2013 the wife’s solicitors wrote to the husband saying:

    We note you have failed to provide any documents as requested in the letter from Moore Stephens dated 23 July 2013 or provided any answers to the requests for information enclosed in that letter. 

    We put you on notice that in the event the information is not provided within 7 days we will seek to relist the matter as a matter of urgency and seek costs against your client in respect of the same.

40. On 11 November 2013 the husband’s solicitors replied saying:

    As advised in our letter of 17 October 2013 our client expects the balance of the accounts will be completed within about four weeks. 

    We have sought an update from our client’s accountant who has informed us that he will have completed all required work by the end of this month.  We will then be in a position to provide all of the outstanding material required to complete the valuation.

    We note that your letter 24 October last advised your client’s profit and loss statement for the [S Investment Trust] and the balance sheet for the year ended 30 June 2013 were in draft form and the depreciation schedule had not yet been completed.

    Would you please advise when it will be anticipated these documents will be in final form.

41. The above chronology clearly establishes that there has been considerable delay by the husband in providing disclosure.  Time and time again further documents and further information has had to be sought by the wife. 

42. The obligation to disclose is not a partial one.  It is an absolute requirement to disclose all relevant information and documents.  Information should not have to be prised from the party holding the assets by the party seeking the information. 

43. It is true that the husband does not have complete control as to when his accountants and bookkeepers prepare the accounts.  He does have some measure of control, however.  In any event, the up to date accounts only form a small part of the information that had to be obtained from the husband by persistent request.  The fact that there were a number of orders made by the court requiring the husband to comply with his obligations for disclosure is most telling.

Relevant legal principles

1. Any application for costs is governed by s 117 Family Law Act 1975 (Cth) (‘the Act’). The general rule is that each party bear their own costs but nonetheless the court has a broad discretion as to who should pay costs. In exercising that discretion the court is to have regard to the matters requires consideration of the matters raised in s 117(2A) of the Act.

2. The evidence in relation to the parties financial position appears only from an interim hearing before Justice Ryan in May 2012.  Her Honour felt that it was not possible to make a safe preliminary assessment of the wife’s property entitlement.  Her Honour found that a more accurate assessment of the husband’s income for the years ended in 2010 and 2011 was $765 892 and $502 946 respectively.

3. I do not, however, have any evidence as to the parties’ present financial state.

4. Accordingly, this is not a fact to which I give significant weight.

5. I am not aware that either party is in receipt of legal aid. 

6. The conduct of the parties is crucial.  I have already indicated that the wife has had to prise documents and disclosure from the husband and that there have been repeated court orders for him to do so.  Given the nature of the duty to disclose, which is entirely designed to prevent conduct of this kind, this conduct strongly favours an order for costs in favour of the wife. 

7. It follows that the Application in a Case filed 10 December 2013 and the conduct of the wife has been necessitated by the failure of the husband to promptly comply, or at all with earlier orders of the court. 

8. In answer to this the husband firstly says that the application should not be determined now but should be determined at the conclusion of the hearing when the ‘relevance and impact of the matters that the wife alleges can be seen in the proper context’.  It has never been suggested by the husband that any of the documents or information sought by the wife went beyond a proper request for disclosure.  The obligation is to disclose so that issues as to the assets of a party can be determined as much as possible in advance of the hearing.  Whether that disclosure becomes relevant to the issues at the hearing is entirely a different matter.  The obligation to disclose remains.  It is appropriate to deal with the application now.

9. The husband has not adduced any evidence suggesting his delay in complying with the orders was due to any financial hardship. 

10. It is true that there is no suggestion that the husband has failed to disclose assets or liabilities but clearly he has failed to disclose relevant information and documents within a timely way.  In those circumstances it cannot be said that he has acted reasonably in complying with the orders.  The fact that the wife may have herself been dilatory on one or two occasions of providing documents is no answer to the claim of the wife.

Conclusion

1. The husband’s business affairs are extensive.  Whether they are complex or not will be a matter for the hearing.  Neither excuses the husband from his obligations and indeed makes compliance all the more important.  Taking those matters into account it is appropriate there should be an order for costs in favour of the wife. 

2. Disclosure was first raised in April 2010.  It was not until April 2011 that the first order for disclosure was made by the court.  It is the appropriate date therefore for the costs orders to commence. 

3. The wife seeks an order that those costs be paid on an indemnity basis.  I am not satisfied that there has been such a degree of non-compliance as would justify an order for indemnity costs.  Generally speaking the husband has provided the ‘bulk’ of the documents for information usually, not on time but ultimately.  One could not infer from the events a deliberate attempt not to comply. 

4. It was further submitted:

   Unless the costs are assessed on an indemnity basis the prejudice the husband’s conduct imposes upon the wife is not redressed for that prejudice is of a real financial nature that threatens her ability to participate in these proceedings on a level playing field because of her already poor financial position.

5. There was no evidence to satisfy me that that is in fact the position and that the husband is deliberately using an imbalance of financial position to his advantage.

6. Accordingly, I am not satisfied that costs should be paid on an indemnity basis. 

7. The orders will be that the husband will pay the wife’s costs of and incidental to her requests for disclosure from him in compliance with orders for disclosure since 1 April 2011 together with her attempts to obtain from him the documents requested by any single expert in these proceedings and that he husband pay the wife’s costs of and incidental to the application in a case filed in court on 10 December 2013, as agreed taxed or assessed.  Such costs are to payable forthwith upon such agreement, taxation or assessment and such taxation or assessment may proceed forthwith.

8. Accordingly, I make the orders set out at the commencement of my Reasons for Judgment. 

I certify that the preceding sixty-two (62) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Aldridge delivered on 2 May 2014.

Associate:

Date:  2 May 2014