Colbert & Colbert
[2022] FedCFamC2F 1090
Federal Circuit and Family Court of Australia
(DIVISION 2)
Colbert & Colbert [2022] FedCFamC2F 1090
File number(s): BRC 3266 of 2020 Judgment of: JUDGE MIDDLETON Date of judgment: 18 August 2022 Catchwords: FAMILY LAW – Property – relationship of 18 years – where wife has failed to engage in proceedings –undefended hearing. Legislation: Family Law Act 1975 (Cth), ss.75(2), 79(2), 79(10)(a), 117(1), 117(2), 117(2A),
Federal Circuit and Family Court of Australia (Family Law) Rules 2021, rr.10.26(2), 10.27(2), 10.6, 12.06
Cases cited: Colgate-Palmolive Company and Colgate-Palmolive Pty Limited v Cussons Pty Limited; Cussons Pty Limited v Colgate-Palmolive Company and Colgate-Palmolive Pty Ltd [1993] FCA 536
Weir & Weir (1993) FLC 92-338
Division: Division 2 Family Law Number of paragraphs: 56 Date of hearing: 12 July 2022 Place: Brisbane Counsel for the Applicant: Hackett Solicitor for the Applicant: Evans Brandon Family Lawyers Solicitor for the Respondents: No appearance ORDERS
BRC 3266 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MR COLBERT
Applicant
AND: MS COLBERT
Respondent
COLBERT PTY LTD
Second Respondent
order made by:
JUDGE MIDDLETON
DATE OF ORDER:
18 AUGUST 2022
THE COURT ORDERS:
1.That the sum of $2,298,085.81 held in the trust account of Messrs Evans Brandon Family Lawyers be disbursed as follows:-
(a)For the benefit of the Applicant Husband, via his solicitors' trust account, the sum of $1,498,085.81, free of any and all claims of the Wife; and
(b)For the benefit of the Second Respondent, the sum of $800,000.
2.That the Wife retain, free from any and all claims by the Husband, the following items:
(a)Her interest in any company or as a beneficiary in any trust;
(b)The contents of her bank accounts;
(c)The personal property and household contents in her possession as at the date on which these Orders are made including any motor vessel she has acquired;
(d)Any motor vessel in her possession; and
(e)Any superannuation or employment entitlements in her name.
3.That the Husband retain, free from any and all claims by the Wife, the following items:
(a)The contents of his bank accounts;
(b)The following chattels in his possession:-
(i)Motor Vehicle 1;
(ii)The trailer;
(iii)Motor Vehicle 2;
(c)Any vehicle in his possession subject to any encumbrance thereon;
(d)All other personal property and household contents in his possession as at the date;
(e)His employment entitlements; and
(f)His Super Fund 1 entitlements.
4.The Wife shall indemnify the Husband against or to or for or in respect of any claim, entitlement, suit, demand or other chose in action (whether existing or arising in the future in law or equity) which any of the companies or trusts including but not limited to Colbert Pty Ltd, B Pty Ltd, C Pty Ltd, the Colbert Family Trust and/or the Colbert Business Trust have to, for, or against the Husband now or in the future for any reason.
5.That the Wife shall bear responsibility for and indemnify the Husband for and in respect of:
(a)Any and all taxation debts in her name or in the name of any entity associated with her, howsoever and whenever arising;
(b)Any claims by any liquidator of any company associated with her, including Colbert Pty Ltd;
(c)All credit card, store or other card liabilities held in her name; and
(d)All other liabilities incurred by her or in her name, howsoever arising.
6.That the Husband shall bear responsibility for and indemnify the Wife for and in respect of:
(a)All credit card, store or other card liabilities held in his name; and
(b)All other liabilities incurred by him or in his name, excepting the claim by the liquidator of the company Colbert Pty Ltd which shall be a liability of the Wife.
7.The Wife shall pay the Husband's costs of and incidental to the proceedings, on the indemnity basis, fixed in the sum of $100,000.
8.That the Applicant Husband and the Husband's solicitors be released from any undertaking given to the Court concerning injunctive relief and released from their obligations as trustees of the monies referred to in paragraph 1 upon compliance with paragraph 1 hereof.
9.That pursuant to section 78 of the Family Law Act 1975, declarations that:
(a)the Second Respondent is entitled to $800,000.00 from the proceeds of sale from the properties located at E Street, D Town in the State of Queensland and F Street, G Town in the State of New South Wales and which are held in Evans Brandon Family Lawyers' Trust Account (Proceeds of Sale); and
(b)the Respondent Wife has no equitable interest in the Proceeds of Sale as against the Second Respondent.
10.That all other Applications are dismissed.
the court notes that:
A.These Orders have been amended pursuant to rule 10.13 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
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 the pseudonym Colbert & Colbert has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE MIDDLETON:
BACKGROUND
This is a property proceeding brought by the husband Mr Colbert (the applicant) against the wife Ms Colbert (the first respondent) and joined by the second respondent, Colbert Pty Ltd (in Liquidation) (the second respondent).
The applicant and first respondent commenced living together in 2001, married in 2004 and separated on 4 December 2019, a relevant relationship of 18 years.
The proceedings were commenced on 23 March 2020. Orders were made on 19 May 2020 for the wife to file her response and provide disclosure, the wife did not comply with the order for disclosure and filed her response approximately two months later on 3 July 2020 wherein she sought orders that the property interests of the parties be adjusted such that she receive 65% of the known net asset pool.
On 14 July 2020 I made an order for H Accountants to be appointed to provide a report in relation to the viability of the second respondent. On 4 December 2020 after a contested interim hearing I made orders for the wife to have sole use and occupation of the parties D Town property and for the husband to have sole use and occupation of the parties G Town property.
The parties were thereafter to comply with the reasonable requests of H Accountants, however, on 12 May 2021 the wife was self-acting and it was apparent that she was frustrating the preparation of a report from H Accountants and otherwise not complying with previous court orders.
On 7 September 2021 the wife did not appear and the second respondent was joined. The husband was appointed trustee for sale over both the D Town property and the G Town property.
On 13 December 2021 the applicant brought an application for substituted service in circumstances where the wife was no longer corresponding with him or his solicitors, her whereabouts were unknown and she was not complying with court orders or appearing in court. An order for substituted service to be effected on the wife was made.
On 14 March 2022 the wife once again failed to appear in court. On that occasion I made an order for the matter to proceed by way of undefended hearing in the event the wife did not appear in the next occasion and in those circumstances I once again made an order that the wife be served in accordance with the previous order for substituted service so that she would be accorded procedural fairness.
On 12 July 2022 the matter came before me and once again the wife failed to appear. The applicant and second respondent made submissions that the matter proceed on an undefended basis and I heard their submissions in relation to that aspect and the entirety of the proceedings and reserved my judgement.
At the time of hearing the undefended hearing the applicant’s solicitors held in trust the sum of $2,298,085.81, comprising the balance of the net proceeds of sale of the previous referred to matrimonial properties. Both the applicant and second respondent sought orders for the disbursement of those monies held in trust and the applicant thereafter seeks orders that the wife retain all items of property in which she has an interest or in which she possesses to the exclusion of the husband and that he similarly retain all items of property in which he has an interest or that are in his possession to the exclusion of the wife. The precise minute of orders sought by the applicant is found at exhibit 1 and the written submissions of the second respondent which contain the order it seeks is found at exhibit 2.
Accordingly the issues for determination are:
(a)should the matter proceed by way of undefended hearing; and if so
(b)Whether the orders sought by consent by the applicant and second respondent are just and equitable.
MATERIAL
The applicant sets out the material upon which he relies in his written submissions filed with the court on 12 July 2022. The second respondent sets out the material upon which it relies in its written submissions tended to the court on 12 July 2020 (Exhibit 2).
THE LAW
As this matter involves an application to finalise the proceedings on an undefended basis Part 10.6 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (the Rules) applies.
As this matter involves an application for property orders Part VIII of the Family Law Act 1975 (Cth) (the Act) applies. Pursuant to section 79(2) I must not make an order unless I am satisfied that it is just and equitable to make an order. Once I have made that determination then I must consider the matters set out in s.79(4) and s.75 (2) of the Act.
DETERMINATION
Rule 10.26(2) provides that a respondent is in default if the respondent fails to:
(a)Give an address for service before the time for the respondent to give an address has expired; or
(b)file a response before the time for the respondent to file a response has expired; or
(c)comply with an order of the court in the proceeding; or
(d)file and serve a document required under these rules; or
(e)produce a document as required by division 6.2.2; or
(f)do any act required to be done by these rules; or
(g)defend the proceeding with due diligence; or
(h)prosecute with due diligence any application the respondent has made in the proceeding.
The first respondent has failed to provide an address for service, file a response in time, comply with orders of the court and defend the proceedings with due diligence. In short, since shortly after May 2021 the first respondent has failed to comply with any order of the court, has failed to appear in court, has failed to respond to any communication and has effectively abandoned her defence of these proceedings.
Rule 10.27(2) provides that if a respondent is in default the court may:
(a)order that a step in the proceeding be taken within the time limited in the order; or
(b)give judgment or make any other order against the respondent; or
(c)make an order referred to in paragraph (B) to take effect if the respondent does not take a step ordered by the court proceeding in the time limited in the order.
These proceedings have been on foot since 23 March 2020 and justice can only be done if they are brought to an end in a timely fashion and in circumstances where the applicant is not put to ongoing excessive fees as a result of the first respondent’s failure to engage in the proceedings.
I am certainly satisfied on the evidence that the wife has been accorded procedural fairness and that all reasonable attempts to effect service upon her have been made. The affidavit in support of the application for substituted service for example contains evidence that the wife was active on Facebook in 2022 and that previously Facebook messenger had been used as a means to communicate.
I am satisfied that it is appropriate in the circumstances, having found the first respondent is in default, that I strike out her application and affidavits and that I proceed to hear the matter on an undefended basis.
In those circumstances, in real terms, there is no dispute before the court as the applicant and second respondent consent to me making the orders sought by the applicant. However, in making that order I must of course be satisfied that it is just and equitable to adjust the property interests of the applicant and first respondent and that ultimately the orders sought by the applicant and second respondent are just and equitable in all of the circumstances.
Prior to separation the parties lived together and both worked in the business operated by the second respondent. Upon separation the applicant relocated to the G Town property and the wife terminated the applicant’s employment with the second respondent and gave him a reduced income stream to live off. The applicant was required, therefore, to take up employment as a transport worker.
The evidence establishes that the first respondent wife sold the husband’s pre-relationship commercial premises a few months prior to separation. Prior to the proceedings being commenced in this court there were proceedings on foot in the Magistrates Court where the wife sought an ouster order against the applicant claiming that domestic violence was being perpetrated in the form of financial abuse. These proceedings regularised matters and appropriate orders were made for the valuation of matrimonial assets and the preparation of a report as to the viability of the second respondent.
The evidence establishes that the first respondent wife failed to cooperate with H Accountants, the appointed expert and failed to comply with orders of the court. Furthermore on 12 May 2021, the last time the wife appeared in this court, I specifically told the wife that she must comply with the orders and provide to Mr J, an employee of H Accountants engaged to perform the work ordered to be undertaken the necessary documents that had been requested. The wife did not comply with that order and, thereafter, failed to attend court.
The evidence establishes that the wife simply decamped leaving staff and creditors a note suggesting that the applicant and his lawyers were responsible for the demise of the business. The wife left the D Town property and has never returned. The wife’s actions in those circumstances caused the business established by the husband and conducted thereafter jointly by the parties, to be abandoned and the commercial property in which it was housed sold with the proceeds of that sale being retained by the first respondent wife.
The evidence further establishes that the wife accessed her self-managed superannuation fund, consisting of more than $400,000, removed those funds with the status of those funds currently unknown. This was done once again without any communication to the applicant husband.
The applicant husband has conducted various investigations through subpoena which have established that the first respondent wife has made significant deposits and withdrawals at K Venue in the L Region with neither the purpose, source nor the net result of those dealings being known to either the applicant or the court.
The evidence establishes that the wife has removed significant personal chattels which cannot be found and has withdrawn funds from the business without accounting for them. It is submitted on behalf of the applicant that the conduct of the wife in these proceedings could only be described as contemptuous of disclosure obligations and orders requiring cooperative case progression to the mutual benefit of both litigants, intended to cause a lack of transparency to enable the wife to conduct secret transactions which benefit her alone and intended to present the court and the husband with a fait accompli involving a state were nothing is available for the husband. I am persuaded by those submissions and agree that it is open on the evidence to find that the wife has had the use of and access to significant assets and cash without accounting for any of it (Weir & Weir (1993) FLC 92-338).
It is in my view important to recognise that the loss to the pool of assets includes the loss of a business which was previously able to fund a reasonable standard of living and which gave rise to the matrimonial pool which was available before the wife unilaterally dealt with it. I agree with the submissions of the applicant that the wife’s conduct as a litigant in these proceedings is some of the worst seen in this court and should be assessed as having been undertaken with malicious intent.
It follows that the wife’s behaviour has significantly affected my ability to properly assess the asset pool and in those circumstances I am somewhat hamstrung in assessing the justice and equity of the orders being sought. However, I am persuaded that I should draw inferences unfavourable to the first respondent wife as a result of her conduct and failure to diligently defend these proceedings.
At [164] through to the end of [166] of the applicant’s trial affidavit the applicant sets out the assets removed from the asset pool by the wife and the value of those assets. His evidence is that a conservative estimate of the assets removed from the matrimonial pool together with assets currently retained by the first respondent wife total approximately $1.1 million. Furthermore, the evidence from the liquidator supports a finding that the wife took in addition to her wages, cash and benefits from the company totalling $571,560 after separation. The evidence also establishes that from the sale of the commercial premises previously referred to, the first respondent wife retained approximately $700,000 that she has used and/or retained unilaterally.
In terms of contributions it is the husband’s evidence that he brought into the relationship the commercial business which formed the foundation for the acquisition of assets and the lifestyle upon which the parties became accustomed. That commercial entity is now lost as a direct result of the wife’s actions.
The applicant husband asserts that but for the wife’s conduct the likely contribution assessment would have been very close to equality, however, there would be an adjustment in that assessment based on the husband’s initial contribution of the business giving the significance of it in relation to the lifestyle acquisition of assets throughout the relationship.
The applicant in his written submissions has provided the court with a simplified asset pool summary of outcomes taking into account the add backs asserted by the applicant. I adopt the asset pool summary of outcomes and am satisfied that the matters referred to therein appropriately deal with the current situation and reflect the evidence to support making findings consistent with that summary.
Of course the summary of itself raises several questions as posed in the applicant’s written outline. The answer to those questions can never be satisfied because of the wife’s actions, however, I am satisfied that she has availed herself of in excess of $1 million worth of assets and she is satisfied with what she has achieved, the proof of which is in her lack of engagement in these proceedings since shortly after May 2021.
The evidence establishes that the wife is now living in what can only be described as luxurious circumstances and that she is able to support herself. The evidence also establishes that she made transactions totalling $250,000 at K Venue. Of course I have no way of knowing whether the wager of $250,000 resulted in an increase in assets or the loss of that sum. The wife’s actions permit me to make an inference, in my view that the wife is financially secure otherwise she would be before me seeking a share of what is left of the matrimonial assets.
The applicant husband is now caring for the parties’ youngest child Y, who is 15 years of age and is also supporting the parties’ oldest child, X who is 16 years of age and who resides with the paternal grandmother. He receives no child support or financial assistance from the wife whatsoever.
It is submitted on behalf of the applicant that the wife’s actions have caused an increase in creditor claims and in those circumstances he acknowledges that he must share the remaining assets with the second respondent as a creditor despite not having a role in accumulating the debts. I accept the submission and find that the wife’s actions has placed the husband in a far more difficult financial position he may otherwise might have been if this matter was conducted in an orderly fashion.
The applicant had been seeking a child support departure order but acknowledges in the circumstances that any order made would not be complied with and indeed circumstances regarding the wife would find it very difficult for me to form a fund against which a departure order could be made. In those circumstances the applicant husband has quite properly abandoned his child support departure application but in the circumstances seeks an increased uplift or adjustment pursuant to section 75(2), which in my view is appropriate.
Adopting the table as previously referred to in doing the best I can in relation to assessing the other unknown assets of the wife I am satisfied that the orders that the husband seeks for himself, which amount to approximately 67.2% of the assets are in all the circumstances just and equitable.
In relation to the second respondent’s entitlement to the orders sought, effectively the second respondent seeks to attach itself to the assets that the wife might receive pursuant to the summary pool previously referred to in these orders. That is, the second respondent seeks to receive the $800,000 that the wife would otherwise receive pursuant to that summary.
The second respondent has existing Supreme Court proceedings by which it seeks to recover funds from the first respondent wife. However, as creditors, section 79(10)(a) of the Act provides for the second respondent to become a party to the proceedings and to seek a property adjustment if it appears that the creditor would not be able to recover the debt if a particular order were made. Quite clearly in circumstances where the first respondent wife has decamped and her present whereabouts are unknown I am satisfied that it is appropriate that I make an order that the second respondent receive $800,000 from the monies held in Evans Brandon Family Lawyers.
The orders sought by the applicant will see him receive $1.9 million in assets at the conclusion of an 18 year relationship to which two children were born. As I have previously said the wife has abandoned the defence of these proceedings and has clearly decamped with significant assets that might otherwise be available for distribution. This has caused me to infer facts which may otherwise have been proven by disclosure.
I am satisfied that the wife created a situation where she has prematurely distributed assets secretly to herself and that she is satisfied with what she has achieved.
The applicant seeks an order that the wife indemnify him against or to or for or in respect of any claim entitlement suit demand or other chose in action (whether existing or arising the future in law or equity) which any of the companies or trusts including but not limited to Colbert Pty Ltd, B Pty Ltd, C Pty Ltd, the Colbert Family Trust and/or the Colbert Business Trust have to, for, or against the husband now in the future for any reason.
This order is in my view not only supported by the evidence but is entirely appropriate in the circumstances where the first respondent wife, since separation has removed the applicant husband from the business and, thereafter, conducted herself and the business in a very detrimental manner resulting in the business now being in liquidation. In those circumstances she must indemnify the husband against any existing or contingent claim.
The applicant husband also seeks an order that the first respondent wife pay his costs fixed in the sum of $100,000. The affidavit of Mr Dean Evans filed on 11 July 2022 appropriately sets out the costs agreement entered into between the applicant husband and Evans Brandon Family Lawyers and the letter written to the applicant husband pursuant to Rule 12.06 of the rules detailing the applicant’s legal costs.
The general principle in relation to costs is that each party to a proceeding shall bear their own costs. Section 117(1) and section 117(2A) set out the matters which are should have regard to work in considering what order (if any), should be made as to costs under s.117(2).
The applicant’s financial position has been set out in his financial statement filed on 29 April 2022. The financial summary contained therein reveals that his personal expenditure outweighs his personal income by approximately $300 each week, however, as a result of the orders that I have made in relation to the property matters, the husband will receive assets totalling approximately $1.9 million of which $1.4 million is made up of cash. I have made certain findings in relation to the first respondent wife’s financial position based on inferences supported by the evidence provided by the husband. I am satisfied as a result of those inferences made that the wife is in a reasonably strong financial position.
Neither party was in receipt of any assistance by way of legal aid.
The applicant husband has attempted to conduct these proceedings in an orderly, cost efficient and timely fashion. The first respondent wife’s attitude and conduct in relation to these proceedings is disgraceful and as a result of her behaviour the applicant husband has been put to significant additional costs as a result of them to file several applications in a case for compliance of orders and/or other appropriate orders to move the proceedings forward.
There have been many applications made in this court by the applicant husband necessitated by the failure of the first respondent wife to comply with orders. There is no evidence of any offers in writing being made to the other party and indeed in circumstances where the first respondent wife is disengaged from the proceedings and has failed to disclose her whereabouts and or communicate with the husband or his lawyers any offers would not have been accepted in my view.
In relation to indemnity costs, In Colgate-Palmolive Company and Colgate-Palmolive Pty Limited v Cussons Pty Limited; Cussons Pty Limited v Colgate-Palmolive Company and Colgate-Palmolive Pty Ltd [1993] FCA 536, Sheppard J at [24] said:
….In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v. Barnes (39 Ch D at 141) said the Court had a general and discretionary power to award costs as between solicitor and client "as and when the justice of the case might so require." Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v. Preston ((1982) 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule.
In my view the conduct of the first respondent wife puts this case in the category of special or unusual in that it is perhaps some of the worst conduct this court has seen for quite some time.
I am satisfied in all of the circumstances that it I am justified in making a costs order and furthermore that the sum sought in the amount of $100,000 is reasonable having regards to the significant additional costs the applicant was put to in conducting these proceedings in an attempt to not only engage the first respondent wife but also in assisting the court to determine the nature and value of the parties’ legal and equitable interests. In short I am satisfied that a costs order in the sum of $100,000 is appropriate and justified.
Whilst it could not be ascertained with precision as to the entitlement of the applicant husband and second respondent I am, however, satisfied that the orders being sought by those parties are orders that are of a commercial nature and that will resolve these proceedings in a cost efficient and just and equitable way. For these reasons I am satisfied that overall the orders are just and equitable.
I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Middleton. Dated: 18 August 2022
0