Cummins & Magro
[2021] FamCA 90
•25 February 2021
FAMILY COURT OF AUSTRALIA
Cummins & Magro [2021] FamCA 90
File number(s): SYC 2160 of 2018 Judgment of: ALTOBELLI J Date of judgment: 25 February 2021 Catchwords: FAMILY LAW – PROPERTY – Interim property orders – Interim costs – Injunctions – Appointment of a single joint expert – Where wife appears to be unemployed – Where husband and Second Respondent jointly operate business – Where wife unable to pay legal fees – Where husband’s financial circumstances more flexible than that of the wife – Orders made for husband to pay to the wife $40,000 for the purposes of settling her legal fees. Legislation: Family Law Act 1975 (Cth) ss 79, 80, 117, 117(2A);
Family Law Rules 2004 (Cth) Part 15.5, r 15.46.
Cases cited: Vail & Vail [2020] FamCA 1070. Number of paragraphs: 32 Date of last submission/s: 22 February 2021 Date of hearing: 22 February 2021 Place: Sydney via web conference Counsel for the Applicant: Mr Simpson Counsel for the First Respondent: Mr Johnston Solicitor for the First Respondent: Goldrick Farrell Mullan Solicitors Advocate for the Second Applicant: Mr Frakes Solicitor for the Second Respondent: Watts McCray ORDERS
SYC 2160 of 2018 BETWEEN: MS MAGRO
Applicant
AND: MR CUMMINS
First RespondentMS DUKE
Second Respondent
ORDER MADE BY:
ALTOBELLI J
DATE OF ORDER:
25 FEBRUARY 2021
THE COURT ORDERS THAT:
1.Within 14 days, the wife is to comply with Part 15.5 of the Family Law Rules 2004 (Cth), including r 15.46, in relation to the appointment of a single joint expert to value the real estate and business interests of the husband and the wife.
2.Leave be granted to the parties to file a minute of order in Chambers within 28 days of the date of these orders in relation to the appointment of single joint experts, but on the basis that the husband bears the cost in the first instance with the issue of cost ultimately to be determined by the trial judge.
3.Within 21 days of the date of these orders, the husband is to pay to the wife the sum of $40,000 into a bank account nominated by the wife for the purpose of settling her legal costs incurred to date.
4.All outstanding interim applications presently before the Court be dismissed.
IT IS NOTED THAT
A.Ms Duke will cooperate with any reasonable requests for the provision of information to the experts for the purposes of the preparation of the reports.
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 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Cummins & Magro has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
(Revised from the transcript)ALTOBELLI J:
This matter came before me on Monday of this week as a duty matter. These oral reasons for judgment explain the orders that the Court has made. The wife, who appears to be the Applicant in the substantive property proceedings sought urgent interim orders in terms of the interim orders proposed in her Further Amended Application filed 19 May 2020. By way of summary, she sought to join Ms Duke as the Second Respondent to the proceedings. Ms Duke is, it would appear, in substance, the husband's business partner.
The wife sought orders in relation to the appointment of a single joint expert to value the various corporate and trust interests that she alleges constitutes part of the property pool, as well as some real estate, at the expense of the husband and the Second Respondent. The wife also sought an order by way of partial property settlement against the husband and the Second Respondent to the extent of $40,000 on account of legal costs. Finally, the wife sought injunctions against both the husband and the Second Respondent to restrain them from any act to dispose of or encumber the property and business assets.
The wife's Application was supported by her Affidavit filed 23 July 2020. If the wife relied on a Financial Statement that she had sworn during these proceedings, that was not made known to the Court by her counsel, even after the absence of such was noted by counsel for the husband. Nonetheless, her Affidavit did contain some evidence about her current finances.
In the husband's Response dated 2 September 2020 he sought orders that the wife's Application be dismissed and that the wife pay his costs on an indemnity basis or as otherwise determined, agreed or as assessed. The husband's Response was supported by his Affidavit filed 2 September 2020 and a Financial Statement filed 17 February 2021. The husband did not oppose, however, any orders in relation to joining Ms Duke as the Second Respondent.
By way of a Response to an Application in a Case dated 19 January 2021 the Second Respondent also sought leave that she be joined as a Second Respondent, but, in addition, that her husband Mr C be appointed as her case guardian. She sought a number of orders in relation to single expert reports and the failure to properly prosecute the proceedings, but she opposed the application for partial property settlement and injunctions insofar as they related to her, and sought that the wife proffer an undertaking as to damages in the event that injunctions were granted against her. The Second Respondent also sought an order that the wife vacate the premises that she occupied at Suburb D as well as pay her costs. The Second Respondent's evidence consisted of an Affidavit of Mr C sworn 19 February 2021.
Mr Simpson of counsel appeared for the wife. It is possible that he was acting on a direct brief pro bono basis, not that that would obviate in any way his duty to the Court. Mr Johnston of counsel appeared for the husband. Mr Frakes, solicitor, appeared for the Second Respondent.
All parties consented to orders 1 and 2 in the Second Respondent's Response. Thus, Ms Duke was joined formally as Second Respondent and Mr C was appointed as her case guardian.
The Court had available to it a number of further documents. The draft financial statements and tax returns for the husband and the various business entities that comprised the group through which the business was conducted became Exhibit C1. Mr Frakes provided an overview of the corporate structure of the companies and trust that formed the avenue by which the businesses were conducted. This document became Exhibit 2R1.
The Applicant provided a bundle of correspondence relating to requests for disclosure which became Exhibit C2. The First Respondent also provided a bundle of correspondence relating to disclosure and this became Exhibit R1. During submissions, reference was made to the Applicant's draft balance sheet dated 30 March 2020 which, apparently, was used either for the purposes of a conciliation conference or a mediation. That document becomes Exhibit C3.
These are interim proceedings only. The evidence is incomplete and untested. Nonetheless, the totality of the material before the Court enables certain impressions to be formed.
The husband together with Ms Duke operate a repair business. The husband appears to be the technical expert, and Ms Duke appears to have the financial acumen for the business. According to the husband at paragraph 7 of his Affidavit he states, and I quote: “I employ between 30 and 45 staff and subcontractors”. It is notable that the husband should use the first-person pronoun in this sentence, reflecting his attitude about his role in the ownership and control of the business. The impression created from the rather complex, corporate and trust structures relating to the business is that it is substantial and it uses service, discretionary and unit trusts. Real estate appears to be owned through the trusts. Based on the draft financial statements that became Exhibit C1, the turnover of the business is measured in millions of dollars each year, but the underlying profit is very difficult to ascertain because of the complexity of the corporate and trust structures used, as well as lack of clarity about loan accounts.
The wife complains about the husband's non-disclosure, but the correspondence tendered in evidence suggests that the situation in reality is that the husband has been, or seems to have been, quite meticulous in providing disclosure, but those documents are no longer available to the wife through no fault of her own. There was some suggestion that the wife's previous solicitors retain a lien over the documents in relation to unpaid fees. In these circumstances, it is inappropriate and, indeed, misleading to suggest to the Court that the husband has not properly disclosed relevant financial documents. The Court is not prepared to require him to provide the documents once again, because the volume of the same creates the impression that there would not be insignificant cost to him in so doing. The wife has remedies available to her so that she can obtain the documents that are currently supposedly held on lien.
Mr Frakes for the Second Respondent submitted that his client's health was parlous and that the matter needed to be expedited. If his client can produce the appropriate evidence and make the necessary application, the final hearing of this matter may be expedited, but this merely accentuates the need to have evidence about valuation, a matter to which the Court will refer shortly.
There are some issues that can be dealt with succinctly. There is no basis found at law or in any evidence of the Applicant or in any submission made by her counsel that would require the Second Respondent to bear the cost of any single joint valuation of the husband's interest in the businesses conducted by him. Moreover, precisely the same conclusion applies to her application that the Second Respondent should somehow be liable for any partial property settlement in the wife's favour. Lastly, precisely the same conclusion applies to the wife's application for an injunction restraining the Second Respondent from disposing of or encumbering the property and business assets.
With great respect to the wife, her applications against the Second Respondent were cavalier and ill-conceived. If she had any cogent evidence to grant her applications, she certainly did not draw the same to the attention of the Court. However, the Court does not accept the submission of Mr Frakes on behalf of the Second Respondent that, in effect, and, in substance, any order against the husband is an order against her. With respect, that is inconsistent with the husband's own evidence about his shareholdings in various companies, and also inconsistent with the corporate structure diagram provided by Mr Frakes. Ms Duke may well be the sole director and/or secretary of the various companies, but the husband and Ms Duke appear to be the shareholders who, ultimately, have the capacity to control the finances of the business.
The wife is not, in any event, prepared to offer an undertaking as to damages in this case. That in itself is an alternate reason for not granting any relief in favour of the wife as regards an injunction against the Second Respondent. The absence of an undertaking as to damages is also part of the reason why the Court declines to grant to the wife the injunction she sought against her husband. In Vail & Vail [2020] FamCA 1070, at paragraphs [14] to [25], I recently discussed undertakings as to damages in family law proceedings. My view remains the same in this case. There is no reason why, on the facts of this case, the wife should not offer an undertaking as to damages and, indeed, some of her cavalier conduct as regards the Second Respondent simply strengthens my impression as to the need for same. The fact that the wife may well be impecunious is not, of itself, a bar to seeking her undertaking as to damages.
In any event, the injunction that she seeks is unworkable. In theory, the mere drawing of a cheque or debiting of an account to pay, for example, employees or trade creditors could have the potential to encumber the property and business assets. Her own draft balance sheet acknowledges the existence of bank loans secured against real estates. The financial statements refer to borrowing costs and bank overdraft. On its face, the making of the order provided by the wife would potentially cripple the business. There was no provision in the orders exempting, for example, transactions in the ordinary course of business. Curiously, even when counsel for the husband noted this omission, counsel for the wife did not seek to amend his client's Application.
Turning to the remaining issues, the first issue is that of a single joint expert. Putting aside for the moment the drafting of orders 2 to 5 in the wife's Application, in substance she sought orders that would lead to an agreed accountant and real estate valuer valuing the husband's interests in the various businesses and properties identified in the order. The wife's case was that this was essential to progressing the matter towards either a negotiated settlement or a hearing.
Perhaps curiously, the Second Respondent accepted the need for this expert evidence to be obtained, though clearly on the basis that it was not at the Second Respondent's expense. Indeed, in order 3.2, the Second Respondent invited the Court to note that she would cooperate with any reasonable request for the provision of information to the experts for the purposes of preparation of the requisite reports.
All that the husband could submit was that obtaining these reports would be premature. The Court does not agree. Obtaining a proper valuation of the husband's various business interests and real estate interest is central to an early determination of this case, either through settlement or a Court decision. The wife proposes that the costs be borne by the husband. The husband contends that he does not have the financial capacity to meet this cost. The Court does not agree. Exhibit C1 creates the impression that the husband's financial circumstances are not just vastly superior to that of the wife, but significantly more flexible.
His access to a loan account suggests access to cash when needed. The loan account itself may well have a bearing on the balance sheet, but that is only after valuations are obtained. Putting aside the capital gains tax issues referred to in Exhibit C1, the documents within Exhibit C1 create the impression that the husband's income is as reflected in his draft 2020 individual taxation return, is about $95,000 which is broadly consistent with his Financial Statement. But in that same Financial Statement, he discloses as income $1,374, describing it is a director's loan.
The calculation of this amount is not explained, but in Part O of the Financial Statement, he states that he receives distributions and dividends through his interest in the company running the businesses and trusts sufficient to meet his liabilities as required annually to repay his director's loan. The meaning of this is by no means clear. In any event, it certainly enhances the Court's impression about the flexibility and the fluidity of the husband's financial affairs. Basically, he draws enough from the company to cover his liabilities. The cost of the expert's report will be such a liability. The ultimate allocation of this cost is a matter for the trial judge at a final hearing.
The Court rejects the submission made by the husband that the wife should pay the cost of the expert reports because she owns a property in Country F which, on her draft balance sheet, was valued at $141,888. As her counsel quite properly submitted, little is known about the marketability of the property. This Court's impression is that it will be far quicker to tap into the flexibility and fluidity of the husband's financial affairs in order to fund the reports.
As foreshadowed, the form of the order proposed by the wife is problematic, but these are matters of form, not substance. The Court will direct the wife to comply with part 15.5 of the Family Law Rules and, in particular, rule 15.46. The parties will have leave to file a minute in chambers within 28 days in relation to the appointment of single joint experts, but on the basis that the husband bears the cost in the first instance with the issue of cost, ultimately, to be determined by the trial judge.
The Court is not prepared to grant the relief sought by the Second Respondent in relation to the expert evidence and, in particular, the consequences that the failure by either the husband or the wife to fund the expert evidence. Moreover, the Court also declines to make the order proposed about the husband or the wife's failure to properly prosecute the proceedings. Whilst the personal circumstances of the Second Respondent render quite understandable her proactive approach to the conduct by the other parties of this litigation, she has perhaps minimised the complexity as between the husband and the wife in circumstances where there is a seeming imbalance of power and where the wife appears to have represented herself at various times. If there is a failure to prosecute the proceedings on the part of any party, an application should be made to the Court.
The final issue for the course of determination is whether the Court should make the partial property settlement order proposed by the wife in the sum of $40,000. The order makes it clear that the purpose of the payment is for her to settle her legal costs incurred to date. Indeed, the evidence is that she owes her former lawyers, G Solicitors, almost $36,000. The issue of the lien has already been noted. The husband in his Financial Statement does not disclose any liability for legal fees. The Court is, therefore, entitled to assume that he pays his legal fees as they are incurred.
What are the relevant principles to be applied? Well, firstly, it's necessary to identify the source of power relied upon to make such an order. There was no specific submission about this. There appear to be two alternatives. It could be an interim costs order under s 117 of the Family Law Act 1975 (Cth) (‘the Act’), or an interim property order under ss 79 and 80. Given that the order was framed as an order in respect of costs, it is possible that s 117 is the appropriate source of power.
Although each party generally bears their own costs in this jurisdiction, the Court has a broad description to make such order as to costs as the Court considers just, where there are circumstances that justify it in doing so. An applicant for costs bears no additional or special onus other than the establishment of justifying circumstances. In the exercise of its discretion to order costs, regard must be had to the factors set out in s 117(2A) of the Act insofar as they are relevant.
Those factors are as follows:
(a) the financial circumstances of each of the parties to the proceedings;
(b) whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c) the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f) whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g) such other matters as the court considers relevant.
In this case, there are two relevant subsections – subsections (a) and (g). There is a vast disparity between the financial circumstances of the parties. The wife deposes to being currently unemployed, whereas at husband's financial circumstances have already been adverted to. Based on the draft balance sheet her assets are relatively small compared to his. The husband is paying his legal costs. She is not. Without further litigation funding, the wife may find it harder to engage lawyers and counsel. The issue of documents retained on lien has already been adverted to. There are, clearly, potential complex issues of valuation that require legal assistance.
Given the flexibility and fluidity of the husband's financial circumstances, the Court is satisfied that he has capacity to meet this order. This Court is of the view that there are circumstances that justify making the order, including, significantly, the fact that the matter is more likely to come to a conclusion if the wife has access to the documents kept by her previous lawyers, as well as the possibility of engaging further lawyers, a matter that might be possible if she does not have an existing substantial debt for legal fees.
Even if s 117 is not the proper basis for making the order proposed, I am satisfied that the alternate basis under ss 79 and 80 by way of interim property distribution would achieve exactly the same result.
I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Altobelli. Associate:
Dated: 25 February 2021
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