Conrad and Conrad & Anor
[2018] FamCA 383
•31 May 2018
FAMILY COURT OF AUSTRALIA
| CONRAD & CONRAD AND ANOR | [2018] FamCA 383 |
| FAMILY LAW – EVIDENCE – Expert Evidence – Where it had already been decided that further joint instructions were to be provided to the single expert accountant rather than allowing the tender into evidence of an adversarial accounting expert - Where the Court has now settled a letter of joint instruction to be provided to the single expert accountant. FAMILY LAW – COSTS – Where the wife sought that the husband and the husband’s sister should pay for the additional single expert report – Where the husband and the husband’s sister submitted that the wife should be responsible for meeting the additional costs as the wife was the only party who considered it necessary to get this further report – Where the wife should pay the costs of the single expert providing the response to these further joint instructions in the first instance but that this issue shall be a matter for determination after trial. FAMILY LAW – COSTS – Where the decision to order that the wife pay the husband’s and the husband’s sister’s costs of and incidental to the her Application in a Case was reserved – Where a costs schedule was provided to the Court – Where the wife was wholly unsuccessful in her application – Where the wife is ordered to pay the husband’s and the husband’s sister’s costs on a party and party basis at the conclusion of these proceedings. |
| Family Law Act 1975 (Cth) Family Law Rules 2004 (Cth) |
| Broxham & Broxham (No. 2) [2012] FamCA 1085 |
| APPLICANT: | Ms Conrad |
| RESPONDENT: | Mr Conrad |
| SECOND RESPONDENT: | Ms Stocks |
| INTERVENER: | Lynn & Rowland Lawyers |
| FILE NUMBER: | BRC | 5264 | of | 2013 |
| DATE DELIVERED: | 31 May 2018 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Forrest J |
| HEARING DATE: | 21 May 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Matthews QC with Mr Bunning |
| SOLICITOR FOR THE APPLICANT: | Simonidis Steele |
| COUNSEL FOR THE RESPONDENT: | Mr Hackett |
| COUNSEL FOR THE SECOND RESPONDENT: | Mr Hackett |
| SOLICITOR FOR THE SECOND RESPONDENT: | Holloway Jenkins |
Orders
That the joint instructions as contained in the settled letter attached hereto and marked “A” be sent by the parties to the single accounting expert, Mr J of K Valuers.
That Mr J’s costs of providing the opinion sought in these settled joint instructions be paid in the first instance by the Applicant Wife with the determination of the ultimate responsibility for those costs to be reserved to the Trial Judge.
That the Applicant Wife pay the First Respondent Husband’s costs and the Second Respondent’s costs of and incidental to the unsuccessful application to have Mr L’s adversarial report adduced into evidence in the proceedings and also thrown away by the adjournment of the trial, such costs to be on a party and party basis as agreed or to be assessed according to the Scale of Costs set out in the Family Law Rules 2004, with such costs not to be paid by the Applicant Wife before the conclusion of these proceedings.
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 Conrad & Conrad and Anor (No. 2) 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).
“A”
31 May 2018
Mr J
K Valuers
Via Email:
Dear Mr J
RE: BRC5264/2013 – CONRAD & CONRAD & STOCKS
This letter is written on behalf of all of the parties in relation to family law proceedings currently in the Family Court of Australia.
We act for Ms Conrad, the Wife.
The First Respondent, the Husband, Mr Conrad, is self-represented.
The Second Respondent, the Husband’s sister, Ms Stocks, is represented by Holloway Jenkins Lawyers.
You are now requested to consider the construction and balance of the loan accounts of the First Respondent and the Second Respondent with the Conrad Family Trust (“the Trust”).
Background
The Respondents have each sworn 3 Affidavits that address the arrangement upon which the loan accounts were recorded in the Trust. The following extracts of those Affidavits are enclosed and comprise:
Paragraphs 16 to 18 and 26 of the First Respondent’s Affidavit filed 12 September 2014;
Paragraphs 5 to 11 of the First Respondent’s Affidavit filed 17 December 2014;
Paragraphs 200 to 205 of the First Respondent’s Affidavit filed 24 April 2018;
Paragraphs 11 to 18 and 24 of the Second Respondent’s Affidavit filed 12 September 2014;
Paragraphs 5 to 9 of the Second Respondent’s Affidavit filed 17 December 2014; and
Paragraphs 67 to 70 of the Second Respondent’s Affidavit filed 24 April 2018.
Based on the above, the First Respondent’s loan account with the Trust was debited (“charged”) annually by an amount variously described as “interest” or an “adjustment”, calculated at the rate of 7.5% on the opening balance of the Second Respondent’s loan account. A corresponding amount was credited to the Second Respondent’s loan account (“received”).
Detailed below, for your assistance, is a breakdown summary of the First Respondent’s loan account with the Trust as sourced from the Trust’s detailed general ledger:-
30-Jun
Opening Balance
$Interest
/adjustment
$Profit
Distribution
$Other
Transactions
$Closing
Balance
$2004 (262,690) 2005 (262,690) (146,484) (12,198) 51,499 (369,874) 2006 (369,874) (162,212) 54,245 175,975 (301,866) 2007 (301,866) (174,774) 913,024 338,542 774,926 2008 774,926 (224,691) 27,317 174,815 752,367 2009 752,367 (272,636) 43,140 (92,290) 430,582 2010 430,582 (297,859) 27,711 (98,388) 62,045 2011 62,045 (327,159) 115,351 (21,429) (171,193) 2012 (171,193) (358,376) 49,668 (101,182) (581,082) 2013 (581,082) (386,361) 56,021 (210,594) (1,122,015) 2014 (1,122,015) (302,319) 63,534 (198,385) (1,559,186) 2015 (1,559,186) (332,104) 48,000 (147,409) (1,990,699) 2016 (1,990,699) (358,663) 48,000 (61,829) (2,363,192) 2017 (2,363,192) (373,967) 0 6,837 (2,730,321) (3,717,605) 1,433,812 (183,839)
Detailed below is a breakdown summary of the Second Respondent’s loan account with the Trust as sourced from the Trust’s detailed general ledger:-
30-Jun
Opening Balance
$Interest
/adjustment
$Profit
Distribution
$Other
Transactions
$Closing
Balance
$2004 1,953,124 2005 1,953,124 146,484 3,222 60,000 2,162,831 2006 2,162,831 162,212 5,271 - 2,330,314 2007 2,330,314 174,774 872,416 (381,620) 2,995,883 2008 2,995,883 224,691 47,643 366,925 3,635,143 2009 3,635,143 272,636 63,681 (0) 3,971,459 2010 3,971,459 297,859 60,278 32,527 4,362,123 2011 4,362,123 327,159 109,058 (20,000) 4,778,341 2012 4,778,341 358,376 55,943 (41,184) 5,151,475 2013 5,151,475 386,361 65,377 (1,572,296) 4,030,916 2014 4,030,916 302,319 63,534 31,281 4,428,050 2015 4,428,050 332,104 20,548 1,469 4,782,171 2016 4,782,171 358,663 46,151 (200,756) 4,986,229 2017 4,986,229 373,967 14,840 21,947 5,396,983 3,717,605 1,427,962 (1,701,707)
The earliest accounting records reviewed for the Conrad Family Trust (the Trust) are for the 2005 financial year (management accounts). As you will see below, you are being provided with copies of the management accounts and general ledgers.
You will also see that at 30 June 2005, the primary assets of the trust were:-
$
Cash 657,564
Property 1,384,625
Loan – First Respondent 369,874
2,412,063
And at 30 June 2005, the primary liabilities were:-
$
Loan – Second Respondent 2,162,831
Loan – N Pty Ltd 238,822
2,401,653
Accounting records for the years earlier than 30 June 2005 are not available.
Questions to be Addressed
Do you agree with the breakdown summaries of the Trust loan accounts for the First Respondent and the Second Respondent as detailed in the background section above? If not, can you set out how you disagree?
Is the loan account for the First Respondent as recorded in the financial records of the Trust calculated pursuant to the arrangement referred to in the Respondents’ affidavits and, if not, why not?
Is the loan account for the Second Respondent as recorded in the financial records of the Trust calculated pursuant to the arrangement referred to in the Respondents’ affidavits and, if not, why not?
Based on the Trust’s financial records, has the Trust been charged interest by the Second Respondent in any of the years under review and if so, how has it been calculated?
If the Trust had been charged interest by the Second Respondent in any of the years under review, calculated at 7.5% on the opening balance of the Second Respondent’s loan account, rather than an adjustment being made against the First Respondent’s loan account, would this have changed the recorded loan accounts of the First Respondent and the Second Respondent and, if so, how?
What would the balance of the First Respondent’s and the Second Respondent’s Trust loan accounts be if the Trust had been charged interest annually by the Second Respondent calculated at the rate of 7.5% on the opening balances of the Second Respondent’s loan account rather than the First Respondent’s loan account being debited by that same rate of adjustment?
Does the Trust loan account for the First Respondent reflect an annual adjustment of 7.5% on 100% or 50% of the opening balance of the Second Respondent’s loan account for the respective years?
If the annual adjustment to the Second Respondent’s loan account was actually interest, should she have declared it as assessable income?
For the years ended 30 June 2005 to date, have either the Respondent or Second Respondent made any financial contributions to the Trust that are not reflected in their loan accounts?
If so, how have the contributions been treated for accounting purposes?
Are the annual profit distributions detailed in the financial statements and income tax returns of the Trust consistent with the entries in the First Respondent’s and Second Respondent’s loan accounts?
Who has paid income tax in each of the years on the distributions from the Trust?
In relation to the Husband’s Trust loan account:
a.Was his loan account debited on 28.04.11 for $235,000?
b.If so, what was this for?
c.Was his loan account credited on 30.06.11 for $200,000?
d.If so, what was this for?
e.Was his loan account debited on 01.07.12 for $200,000?
f.If so, what was this for?
g.What is the net effect of any of the above transactions on the Respondents’ Trust loan account?
Have generally accepted accounting principles been applied to the calculation of the First Respondent’s loan account and, if not, why not? If not, then what is the effect, if any, of applying generally accepted accounting principles to that calculation?
Have generally accepted accounting principles been applied to the calculation of the Second Respondent’s loan account and, if not, why not? If not, then what is the effect, if any, of applying generally accepted accounting principles to that calculation?
Information included in Brief
Included in your additional brief of information are the following:
Print out of MYOB management accounts for the years ended 30 June 2005 to 2015;
Print out of MYOB general ledgers for the years ended 30 June 2005 to 2015;
Print out of MYOB general ledger in relation to Mr Conrad’s loan account for the period of 01 July 2014 to 30 September 2017;
Print out of MYOB general ledger in relation to Ms Stocks’ loan account for the period of 30 June 2015 to 30 September 2017;
Financial Statements for the Conrad Family Trust for the year ended 30 June 2009;
Income Tax Returns for Mr Conrad for the years ended 30 June 2010 to 2017; and
Income Tax Return for Ms O Conrad for the year ended 30 June 2014;
We refer to the attachments to your report dated 26 April 2018 which include:
Income Tax Returns for the Conrad Family Trust for the years ended 30 June 2010 to 2017; and
Financial Statements for the Conrad Family Trust for the years ended 30 June 2010 to 2017.
If, after considering these instructions you would like to confer with the legal representatives of the parties or the external Accountant for the Trust, would you please email all parties to that effect?
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 5264 of 2013
| Ms Conrad |
Applicant
And
| Mr Conrad |
First Respondent
And
| Ms Stocks |
Second Respondent
And
| Lynn & Rowland Solicitors |
Intervener
REASONS FOR JUDGMENT
On Thursday, 24 May 2018, I heard submissions from Queen’s Counsel for the wife and counsel for the First Respondent husband and the Second Respondent (the husband’s sister) in respect of some further joint instructions to the single expert accountant in this matter (“the Expert”) that I had previously determined should be provided to the Expert, rather than allowing the tender into evidence of a report from an adversarial accounting expert retained by the wife.
The wife’s legal representatives provided me with a draft of the instructions they proposed be sent as joint instructions to the Expert. The Respondents’ legal representatives also provided me with a draft of the joint instructions they proposed be sent to the Expert. There was some agreement about parts of the draft. There was disagreement with respect to other parts, particularly as to the number and content of the questions to be addressed by the Expert.
I heard submissions from counsel and reserved my determination on the settling of those joint instructions. I have now settled the letter of joint instructions after having reflected on the submissions I heard and have, effectively, included in these joint instructions as now settled, most of the instructions sought to be given by the Applicant wife and also most of the instructions sought to be given by the Respondents. The questions, as settled, seek answers to questions that I consider will assist the Court in the determination of this difficult dispute.
The settled joint instructions are attached and marked “A”.
Costs of this additional single expert report
The wife submitted that the costs of the report should be paid in the first instance by the Respondents, as they have access to funds to do that and she does not. It was further submitted that the costs could ultimately be borne equally, by way of adjustment after the conclusion of the property adjustment proceedings.
The Respondents submitted that the wife should pay for the report as it was the wife and the wife alone who considered it was really necessary to get this further report, the Respondents being satisfied with the report already provided by the Expert and simply adopting the position that if there was to be any further accounting evidence then it should be provided by the Expert rather than an adversarial expert engaged by the wife.
That is the position the Court adopted. Notwithstanding the submissions of the wife’s legal representatives and the prima facie impecuniosity of the wife, previous orders consented to by the wife provided for the wife to pay for the Expert’s updated report that has already been adduced. Clearly, the wife has sourced the funds to pay for that from somewhere, even if it has been borrowed from family members and/or friends.
I am satisfied, in the circumstances, that the wife should again pay the costs of the Expert providing the response to these further joint instructions in the first instance, but will again order that ultimate determination as to where the burden of those costs finally falls shall be a matter for determination after trial.
The Costs of and incidental to the Wife’s unsuccessful application to adduce Adversarial evidence and the Costs thrown away by the Adjournment of the trial
In my judgment dismissing the wife’s application for the report of Mr L to be admitted into evidence delivered last Wednesday, 23 May 2018, I discussed the Respondents’ applications for the wife to pay their costs of and incidental to the unsuccessful application and also those costs thrown away by the adjournment of the trial. I remarked that I would reserve my decision until I received the estimate of those costs from the Respondents on Thursday, 24 May.
At the further mention of the matter on Thursday, counsel for the Respondents obtained leave to file an affidavit of the Second Respondent’s solicitor, Mr Holloway sworn that morning. Mr Holloway set out his estimate of his costs relating to work undertaken by his firm for the Second Respondent referable to the wife’s unsuccessful application to introduce evidence of Mr L to be $16,618. He also attached a schedule of the fees charged by Mr Hackett of counsel referable to the unsuccessful application and costs thrown away by the adjournment totalling $23,760. In addition, he said that his instructions were that Mr Hodges of counsel, who had previously been engaged to appear for the Second Respondent throughout last year and earlier this year had rendered fee notes totalling $70,840 of which his client estimates $38,500 is attributable to work necessitated to resist the wife pressing the admission of Mr L’s evidence. The Court was told that all of those costs were actual costs, including the solicitor’s costs pursuant to a costs agreement, and that they were not calculated pursuant to scale or on a party and party basis.
Counsel for the Respondents submitted those costs should be paid by the wife, but conceded that such an order should not require the costs be paid until the conclusion of the proceedings.
Queen’s Counsel for the wife submitted, as I observed in my previous reasons, that costs should be reserved until after the trial. He went on to submit that if the Court was not minded to reserve the question of costs that they should be ordered to be paid as agreed or to be assessed and that, even then, the wife should not be required to pay them before the conclusion of the proceedings.
Although s 117(1) provides that each party should bear their own costs in proceedings under the Family Law Act 1975 (Cth) in this Court, s 117(2) confers discretion on the Court to make costs orders it considers just, if of the opinion that there are circumstances that justify it in doing so. Matters the Court must consider are enumerated within s 117(2A).
The wife pressed her application for the admission into evidence of Mr L’s report in the face of the husband’s position, advanced early in the proceedings, that issues she wanted Mr L (or any other adversarial appointed expert) to address were more properly addressed by the already appointed Expert. The wife was wholly unsuccessful in her application, one that I am satisfied should not have ever been brought before the options available to the wife under the provisions of the expert evidence part of the Family Law Rules 2004 were utilised and exhausted.
The wife’s financial position is, prima facie, poor. Nevertheless, that is not good enough reason on its own, in my judgment, not to make a costs order against her. As was referred to by counsel for the Respondents, in Broxham & Broxham (No. 2) [2012] FamCA 1085 Murphy J said:
…litigants in this Court are not free from litigating at peril of an order for costs given the discretion which is enlivened by reference to section 117(2A) and the factors enumerated within that section. Were it otherwise parties would be able to litigate with impunity and indeed, with immunity. In my view that is not consistent with the discretion inherent in section 117 of the interests of justice.
I am not satisfied that reserving the question of the Respondents’ costs is an appropriate exercise of the discretion in this instance. Whether the wife is ultimately successful in the proceedings or not is a matter to be determined at trial. Whether the factual issues raised by her in respect of this accounting issue have a bearing on the ultimate outcome is also a matter to be determined at trial. That there might ultimately be something in it, does not, in my judgment, somehow overcome the importance of the total lack of success on her Application in a Case. The orders I make in respect of re-engaging the Expert on the issues the wife raises are orders that should have been pursued long ago. I determined, effectively, that the position adopted by the Respondents on that was justified. I am satisfied that an order that the wife pay their costs of and incidental to that unsuccessful application is justified.
I am also satisfied that the trial was adjourned principally because of the unsuccessful nature of that application and the consequent outcome and that the Respondents should also have their costs thrown away by the adjournment paid by the wife.
However, I am not persuaded that an order for her to pay all of the costs referred to in the affidavit of the Second Respondent’s solicitor is a just order. I will order that the wife pay the Respondents’ costs on a party and party basis in accordance with the scale of costs set out in the Family Law Rules 2004 as agreed or to be assessed and that the wife only pay those costs at the conclusion of these proceedings.
I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 31 May 2018.
Associate:
Date: 31 May 2018
Key Legal Topics
Areas of Law
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Family Law
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Evidence
Legal Concepts
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Expert Evidence
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Costs
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Appeal
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