D Pty Ltd And Ors and Sadler And Ors (Costs)
[2016] FamCAFC 273
•23 December 2016
FAMILY COURT OF AUSTRALIA
| D PTY LTD AND ORS & SADLER AND ORS (COSTS) | [2016] FamCAFC 273 |
| FAMILY LAW – APPEAL – COSTS – Where the appellant companies seek their costs of the appeal – Financial circumstances of the parties – Conduct of the parties to the proceedings – Whether the first respondent wife was wholly unsuccessful – Where the appellants rely on offers of settlement made to the wife – Where one purported offer of settlement cannot properly be regarded as such – Application for costs dismissed – Where it would not be appropriate to issue certificates under the Federal Proceedings (Costs) Act 1981 (Cth) to either party. |
| Family Law Act 1975 (Cth) ss 79, 117 Federal Proceedings (Costs) Act 1981 (Cth) |
D Pty Ltd and Ors & Sadler and Ors [2016] FamCAFC 187
Masters v Cameron (1954) 91 CLR 353
Parke & The Estate of the Late A Parke [2016] FamCAFC 248
Sadler & Sadler and Ors [2016] FamCA 604
Strahan & Strahan (Appeal Costs) [2009] FamCAFC 225
Tomaniego & Tomaniego (Costs) [2011] FamCAFC 30
| 1ST APPELLANT: | D Pty Ltd as Trustee of the D Unit Trust |
| 2ND APPELLANT: | C Pty Ltd |
| 3RDAPPELLANT: | E Pty Ltd as Trustee of the E Unit Trust |
| 4TH APPELLANT: | F Pty Ltd |
| 5TH APPELLANT: | G Pty Ltd as Trustee for G Investments Unit Trust |
| 1ST RESPONDENT: | Ms Sadler |
| 2ND RESPONDENT: | Mr Sadler |
| 3RD RESPONDENT: | B Pty Ltd |
| 4TH RESPONDENT: | Mr Miller |
| 5TH RESPONDENT: | Mr AA as Trustee of the Bankrupt Estate of Mr Sadler |
| 6TH RESPONDENTS: | Mr Fuller and Mr Martini as Receivers & Managers Appointed |
| FILE NUMBER: | NCC | 1976 | of | 2012 |
| APPEAL NUMBER: | EA | 124 | of | 2016 |
| DATE DELIVERED: | 23 December 2016 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Ryan, Aldridge & Hannam JJ |
| HEARING DATE: | By way of written submissions: appellants’ submissions filed 12 October 2016; first respondent’s submissions filed 8 November 2016 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 21 July 2016 |
| LOWER COURT MNC: | [2016] FamCA 604 |
REPRESENTATION
| COUNSEL FOR THE APPELLANTS: | Mr M. Pesman SC |
| SOLICITOR FOR THE APPELLANTS: | Beazley Boorman Lawyers |
| COUNSEL FOR THE 1ST RESPONDENT: | Mr J. Siggins |
| SOLICITOR FOR THE 1ST RESPONDENT: | XX Lawyers |
| COUNSEL FOR THE 2ND RESPONDENT: | Ms M. Kennedy |
| SOLICITOR FOR THE 2ND RESPONDENT: | Arnold Lawyers |
| COUNSEL FOR THE 3RD RESPONDENT: | Mr J. Siggins |
| SOLICITOR FOR THE 3RD RESPONDENT: | XX Lawyers |
| COUNSEL FOR THE 4TH RESPONDENT: | Mr B. Bradley |
| SOLICITOR FOR THE 4TH RESPONDENT: | Shotters Lawyers |
| SOLICITOR FOR THE 5TH RESPONDENT: | Hicksons Lawyers |
| COUNSEL FOR THE 6TH RESPONDENTS: | Mr S. Golledge |
| SOLICITOR FOR THE 6TH RESPONDENTS: | Matthews Folbigg Pty Ltd |
Orders
The appellants’ application that the first respondent wife pay their costs of the appeal be dismissed.
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 D Pty Ltd and Ors &Sadler and Ors 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).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EA 124 of 2016
File Number: NCC 1976 of 2012
| D Pty Ltd as Trustee of D Unit Trust 1st Appellant and C Pty Ltd 2nd Appellant and E Pty Ltd as Trustee of E Unit Trust 3rd Appellant and F Pty Ltd 4th Appellant and G Pty Ltd as Trustee for G Investments Unit Trust |
5th Appellant
and
| Ms Sadler and Mr Sadler and B Pty Ltd and Mr Miller and Mr AA as Trustee of the Bankrupt Estate of Mr Sadler |
5th Respondent
and
Mr Fuller and Mr Martini as Receivers & Managers Appointed
6th Respondents
REASONS FOR JUDGMENT
Introduction
On 21 July 2016 a judge of the Family Court made orders which appointed receivers to the property and income of the Sadler Family Trust, H Property Trust and the I Superannuation Fund. The orders were made on the application of Ms Sadler (“the wife”) in property proceedings under s 79 of the Family Law Act 1975 (Cth) (“the Act”) between her and Mr Sadler (“the husband”).
On appeal, on 21 September 2016 the orders were set aside and the application for the appointment of receivers was dismissed (D Pty Ltd and Ors & Sadler and Ors [2016] FamCAFC 187 (“the Full Court reasons”)). The successful appellants now seek an order that the wife pay their costs “of the proceedings both at first instance and on Appeal”.
The primary judge did not make any order for costs at the time the receivers were appointed. The issue of the costs at first instance is therefore a matter for her Honour and not for us (Tomaniego & Tomaniego (Costs) [2011] FamCAFC 30 at [43]-[44]; Strahan & Strahan (Appeal Costs) [2009] FamCAFC 225 at [40]-[41]).
The appeal was allowed because we considered that the primary judge had misapprehended the role and significance of the appointment of the receivers and the nature of the risk that the appointment posed to third parties (that is, the appellants and those who stand behind them).
The appellants seek an order that the wife pay their costs because:
·The appointment was made in breach of contractual promises made by the wife;
·The appointment of the receivers was unnecessary because the purpose of the appointment was to have the receivers trigger redemption provisions in various trust deeds which the wife herself could have done;
·The appointment of receivers put the assets of the appellants at risk;
·The appellants made an offer at the hearing of the appeal which the wife should have accepted; and
·The appellants are strangers to the marriage.
The effect of the second and third points is, simply, that the appeal was successful – the point being that before us it was accepted there had to be an untangling of the interests of the husband and the wife from those of the appellants (Full Court reasons at [40]).
In addition, the appellants relied upon the wife having received an interim property settlement of $1 000 000 and on a written “offer” made on 20 July 2016.
The wife proposed that there be no order as to the costs of the appeal and pointed, in particular, to her financial position and to the conduct of the appellants in both the hearing and the appeal.
Each party to proceedings under the Act is to bear his or her own costs unless the court is of the opinion that there are circumstances that justify a different order (s 117(1) and (2) of the Act). In considering whether any other order should be made, the court is required to have regard to the matters set out in s 117(2A).
The first matter to be considered is the parties’ financial positions (s 117(2A)(a)). Whilst it is correct to say that the wife has received an interim property settlement of $1 000 000, she has used that money to purchase a house and to support herself and the two children of the marriage. She is not working and has the care of the children. The husband, an undischarged bankrupt, is employed but does not pay regular child support.
The wife is struggling to pay her regular expenses and has significant debts owed to both her accountants and her lawyers.
The property proceedings were commenced in 2012 and have not yet been resolved. They have been complicated by the husband presenting his own petition in bankruptcy on 18 February 2015.
As is apparent from the reasons given by us on 21 September 2016, the husband has been extensively involved in many developments of commercial properties undertaken by a web of companies and trusts. In her reasons for the appointment of the receivers (Sadler & Sadler and Ors [2016] FamCA 604), her Honour was critical of both the husband and the third party entities with which he was involved (including the appellants) for not facilitating the valuation of the husband’s interests, failing to give prompt and adequate disclosure and a general lack of cooperation in addressing the legitimate claims of the wife.
In short, there is force in the proposition that the wife’s poor financial position is due to the property proceedings not yet being finalised. We accept it would be difficult for her to meet an order for costs and provide the children with an appropriate standard of living.
The appellants, on the other hand, own significant assets of considerable value, but have significant liabilities which require servicing. The financial position of each of them, however, is very much stronger than the wife’s.
The court is to take into account the conduct of the proceedings before it (s 117(2A)(c)). It is also entitled to take into account the conduct of the proceedings before the primary judge (s 117(2A)(g)) (see Parke & The Estate of the Late A Parke [2016] FamCAFC 248 at [37] and [39]).
In our reasons we were critical of the assistance given to the primary judge by the appellants. We also had the benefit of documents that were not presented to her Honour, including the critical D Unit Trust Deed. The primary judge “was not made aware of the potential scope and magnitude” of the action that could be taken by the appellants’ mortgagee (Full Court reasons at [62]).
Had the appellants given the primary judge the assistance that we received the appeal may not have been necessary.
The success of the appeal is to be taken into account (s 117(2A)(e)). However, the appellants’ grounds of appeal and Summary of Argument ranged widely. None of the grounds was withdrawn. The upshot was that the appeal succeeded on one aspect of one ground yet the wife was obliged to meet them all.
The appellants relied upon what they described as relevant offers to settle the proceedings (s 117(2A)(f)).
On 20 July 2016 the lawyers for the appellants wrote to the wife’s lawyers as follows (errors as per the original):
Your client was present in Curt today when Counsel instructed by this firm tendered the [SJ Ltd] Loan deeds signed by your client on behalf of [B Pty Ltd]
By making application to appoint a receiver and manager to [B Pty Ltd], your client is deliberately breaching her obligations under the loan deeds.
We place your client on notice that if any of the [HH] family assets or companies suffer loss or damage as a consequence of your client’s actions in Court today they will sue her personally for damages and also [B Pty Ltd].
As [SJ Ltd] has a fixed and floating charge over all of the [HH] family assets and Companies, should a receiver be appointed to say [MN] Pty Ltd, the damages claim could be in the tens of millions of dollars.
Make no mistake the damage your clients actions will cause. The [HH] family had a receiver and manager appointed by a bank in September 2011 because a guarantor went into liquidation. It cost them hundreds of thousands of dollars to refinance with [SJ Ltd].
Your client is literally biting the hand that feeds her. She still has an opportunity to withdraw the application before judgement.
This letter does not make an offer of settlement (Masters v Cameron (1954) 91 CLR 353). Indeed, it makes no proposal at all as to how the husband’s and wife’s interests were to be untangled from the appellants’ interests. This is of significance because such an untangling is inevitable given both the matrimonial dispute and the husband’s bankruptcy.
The letter does not attempt to explain why the appointment of receivers to the three trusts (as opposed to MN Pty Ltd, for example) could be as disastrous as threatened in the letter.
The belligerent and bullying tone of the letter rather supports the primary judge’s concern that there was a community of interests between the husband, the appellants and the accountant who continues to act for both.
It seems that by the time the appeal came on for hearing the appellants had reconsidered their approach. D Pty Limited made an open offer which included a proposed undertaking of its directors to act swiftly in dealing with any redemption application and to “appoint a valuer in consultation with the solicitors or accountants for the wife”. Unfortunately this offer was not accepted. It was, however, made too late to have any bearing on costs.
The husband and the various persons who stand behind the appellants were engaged in various property developments using complex company and trust structures. The appellants are involved in these developments or are the vehicle for the developments. They are thus strangers to the marriage but not to the financial affairs of the parties – they are undoubtedly necessary parties.
Finally, we turn to the submission that the wife “breached contractual promises” in seeking the appointment of the receivers. As we recorded in our earlier judgment, the current lending arrangements concerning the appellants were supported by guarantees given by many entities, including B Pty Limited. This company is the trustee of the three trusts to which the receivers were appointed. The guarantee was executed by the wife on behalf of B Pty Ltd in May 2015.
We presume that this is the agreement that the wife is alleged to have breached, as the appellants’ submission referred to this guarantee and to no other contract. The guarantee is between SJ Ltd, Mr HH, MN Pty Limited and B Pty Ltd. The wife is not a party to it. The appellants appear not to be parties to it. The appellants’ submissions did not deign to identify the contractual term said to have been breached by the wife.
It follows that this submission is entirely misconceived and must fail.
The fact that the appellants succeeded on the appeal, albeit on one aspect of one ground, supports a costs order in their favour. The other matters considered above do not. The appellants’ application that the wife pay their costs of the appeal will therefore be dismissed.
We are of the view that it is not appropriate to recommend certificates issue to either party under the Federal Proceedings (Costs) Act 1981 (Cth).
I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Ryan, Aldridge and Hannam JJ) delivered on 23 December 2016.
Associate:
Date: 23 December 2016
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