Dewell and Harris & Anor
[2019] FamCA 10
•18 January 2019
FAMILY COURT OF AUSTRALIA
| DEWELL & HARRIS AND ANOR | [2019] FamCA 10 |
| FAMILY LAW – SLIP RULE APPLICATION – Where substantial time has passed since judgment – Where the error was apparent on the reasons given – Where it was clearly the intention of the Court that certain assets not be included in the property division – Order for the balance sheet to be adjusted and amount payable to the parties adjusted accordingly. FAMILY LAW – COSTS – Where the wife seeks an order for costs against the husband – Where the husband had both failed to make full and frank disclosure and actively lied to the Court during the proceedings – Where the actions of the husband caused the wife to incur additional costs – Where an order for costs is necessary to compensate the wife for the costs incurred to remedy, in evidentiary terms, the husband’s failure to disclose – Where the facts in the proceedings do not justify indemnity costs – Order for costs to be paid by the husband of $100 000 – Where the wife seeks an order for reimbursement of the costs of the single experts in the proceedings – Where nothing in the conduct of the husband detracted from the need to have single experts – Application dismissed – Where the respondent’s father seeks costs from the wife calculated on an indemnity basis –Where husband and father acted together in dealings of the husband to conceal evidence – Where the father submits the wife was unsuccessful in her applications pertaining to the father – Where a costs order in favour of the father is inappropriate – Application dismissed. | |
| Family Law Act 1975 (Cth) s 117 | |
| Colgate-Palmolive v Cussons Pty Ltd (1993) 46 FCR 225 |
| APPLICANT: | Ms Dewell |
| RESPONDENT: | Mr Harris |
| 2ND RESPONDENT | Mr A Harris |
| FILE NUMBER: | SYC | 5809 | of | 2011 |
| DATE DELIVERED: | 18 January 2019 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Rees J |
HEARING DATE: | 8 January 2019 |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | Karras Partners Lawyers |
| COUNSEL FOR THE RESPONDENT: | Ms Williams |
| SOLICITOR FOR THE RESPONDENT: | Horton Rhodes Lawyers |
| COUNSEL FOR THE 2ND RESPONDENT: | Mr Rosic |
SOLICITOR FOR THE 2ND RESPONDENT: | Milevski Family Lawyers |
Orders
IT IS ORDERED
That within two months of the date of these orders, the husband pay to the wife the sum of $100,000 on account of her costs of the proceedings.
That the applications set out in Paragraphs 1, 2, 4, 5 and 6 of the wife’s Application in a Case filed 28 November 2018 be dismissed.
That the Application for Costs filed by the second respondent 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 Dewell & Harris 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).
| FAMILY COURT OF AUSTRALIA AT |
FILE NUMBER: SYC5809 of 2011
| Ms Dewell |
Applicant
And
| Mr Harris |
Respondent
And
| Mr A Harris |
2nd Respondent
REASONS FOR JUDGMENT
On 4 November 2016, I delivered reasons for judgment (“the reasons”) and made orders in property proceedings between Ms Dewell (“the wife”) and Mr Harris (“the husband”). The husband’s father (“the father”) was a party to the proceedings.
A significant dispute in the trial related to the ownership of a unit trust referred to in the reasons for judgment as the EUT. Ultimately it was found that the father was the legal owner of the EUT but that its assets were a financial resource of the husband.
The subsequent appeal and cross-appeal were dismissed by the Full Court of the Family Court of Australia.
The matter now comes before me to determine a slip rule application and competing applications for costs.
THE SLIP RULE APPLICATION
There are two bases for this application. Firstly the husband asserts that an asset, being a loan by the husband to Mr CC in the sum of $126,250 was wrongly included in the final balance sheet. Secondly, the husband asserts that, in calculating the value of assets retained by the wife, two art works valued at a total of $5,800 should have been included and were not.
I note that the application is brought some two years after judgment, after the parties were given the opportunity to verify the calculations upon which the orders were based before the orders were made, and after an unsuccessful appeal. However, the slip rule exists to ensure that orders made by the Court reflect the intentions disclosed in the reasons. Regardless of the effluxion of time, where error is apparent, it must be corrected.
Dealing firstly with the loan, at paragraph 246 of the judgment I stated:
The husband in cross-examination said that this was not a debt to him but a debt to [HH] Pty Limited. Why he had included it in his Financial Statements as his asset was never explained. There is no evidence that the money is owed. The item will be removed from the balance sheet.
It is not controversial that the item appeared in the balance sheet.
The balance sheet should be adjusted by removing that item and the amount payable to the wife adjusted accordingly.
In relation to the art works, again it is not contended on behalf of the wife that the value of the works should not have been included or that she did not retain them.
The value of the assets retained by the wife should be amended to reflect her retention of those items and the balance payable to the wife adjusted accordingly.
COSTS
There are three separate applications before the Court.
The wife seeks an order that the husband pay her costs of the proceedings on an indemnity basis in the sum of $571,157. In the alternate, she seeks an order that the husband pay her costs of the proceedings on a party and party basis in the sum of $300,118. She concedes that the Court might order that costs be as assessed or agreed.
Further, the wife seeks an order that the husband be solely responsible for the payment of the costs of the single experts.
The wife then seeks an order that the husband indemnify her in relation to any costs order made against her on the application of the father and a further order that the father pay a specified portion of her costs in relation to his involvement in the proceedings.
The husband opposed the wife’s applications but did not seek any order that his costs be paid.
The father seeks an order that the wife pay his costs of the proceedings on an indemnity basis or, in the alternate, on a party and party basis.
All of the applications are governed by the provisions of s117(2A) of the Family Law Act 1975 (Cth) in the following terms:
In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(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.
I propose to consider the applications in order.
The wife’s application that the husband pay her costs of the proceedings.
There is a discrepancy between the financial circumstances of the wife and those of the husband by virtue of the orders for property settlement. The extent of that financial discrepancy is not known.
In the reasons at paragraph 230 I found:
The court could have no confidence that the full extent of the husband’s assets and liabilities have been exposed.
Of the known asset pool, the wife received assets with a net value in excess of five million dollars being 52.5 per cent of the assets of the marriage. The husband retained net assets equivalent to 47.5 per cent of the pool but he also has the use of the net assets of the EUT valued at trial at some $5.1 million. Thus the known assets and resources of the husband considerably exceed those of the wife.
None of the parties is in receipt of legal aid.
The wife places great reliance on the conduct of the husband and his father in the course of the proceedings.
The wife asserts that the husband engaged in “calculated, belligerent and obstructive conduct” designed to defeat the ability of the Court to make an order which was just and equitable. Reference was made in the submissions on behalf of the wife to the findings at paragraphs 203 to 230 of the reasons under the heading “The Husband’s Non-Disclosure”. The findings that the husband had deliberately destroyed documents, failed to disclose relevant matters and lied under oath were not challenged. Indeed, that conduct was conceded by Counsel for the husband in submissions in the substantive proceedings.
On behalf of the wife it was submitted that, because of the husband’s non-disclosure and his deliberate lies, the wife was put to expense in undertaking the forensic exercise of attempting to ascertain the nature and extent of the assets and liabilities. I accept that submission.
Further the wife asserted that the husband “manufactured” liabilities in order to reduce the amount available for distribution. Those liabilities included both monies said to be owed by him to the father and money said to be owed by the EUT to the father. As was clear from the reasons, it was the husband who had controlled the accounts of the EUT and directed the accountants who prepared them.
During the course of the hearing, the husband asserted that he owed the father $1 million; that he owed significant amounts to his mother’s estate; that he owed the father a significant amount in relation to money from a Leveraged Equity account. In relation to the alleged debt to his mother’s estate, it was no more than a device to reduce the available assets. The assertion in relation to the leveraged equity debt to his father was withdrawn in submissions. The debt of $1 million was found to be statute barred. In relation to such matters I accept the submission on behalf of the wife that the husband manufactured those alleged liabilities for the purpose of reducing the asset pool.
The significance of that conduct is that the wife was required to rebut the evidence.
In relation to the debt alleged by the husband to be owed by the EUT to the father, the relevant findings are set out at paragraphs 62 to 69 of the reasons. At 66 and following I found:
The largest liability of the EUT is the loan account of the second respondent, shown in the 2015 balance sheet as $3,196,262. How that figure was calculated is a mystery. In the financial year ended 30 June 2014, the loan account was recorded as having increased from $3,065,269 in 2013 to $4,499,412 in 2014. There is no explanation for the increase. In cross-examination the second respondent could not explain it. He was clear that he had not advanced $1,434,143 to the EUT. I do not accept that this figure accurately represents the loan account owed.
In the financial year ended 30 June 2015, the loan account had decreased to $3,196,262. There was no suggestion that the second respondent had received $1,303,150 or any money at all. I do not accept that the Financial Statements of EUT accurately reflect the amount of the loan account.
No loan account ledgers have ever been produced, although they have been called for. The loan account balances have been recorded by the accountants in the Financial Statements simply on the basis of instructions, firstly from the second respondent and then from the husband. They have no probative value.
In any event, as has been explained, the second respondent, in his Will and by his Statutory Declaration made on 16 March 2016, has forgiven those debts. There is no evidence from the second respondent that he intends to call up the loan, whatever its accurate balance might be.
Again, the significance of the conduct is that the wife was required to disprove the husband’s allegations.
On behalf of the wife it was asserted that the husband concealed evidence relating to the true position of the father’s testamentary dispositions. The findings in relation to that issue appear at paragraphs 109 to 123 of the reasons. The husband orchestrated a scheme designed to conceal from the wife and from the Court the true nature of the father’s testamentary dispositions. At paragraph 215 of the reasons I stated:
The husband did not disclose, in his trial affidavit, his knowledge of the provisions of the second respondent’s Will and the fact that he would receive the second respondent’s interest in F Pty Ltd and the EUT on the death of the second respondent. Similarly, he did not disclose his dealings with the various lawyers in relation to the iterations of the second respondent’s testamentary dealings and their combined efforts to ensure that they were kept from the wife and from the Court. Those matters emerged in cross-examination by virtue of the material produced in answer to subpoenas issued by the wife.
Again, the significance of the conduct is that the wife was required to disprove the husband’s allegations.
I have not set out all of the instances of the husband’s conduct which are complained of but those that have been recounted illustrate that the husband not only failed to make full and frank disclosure but actively lied and obfuscated and thus the costs incurred by the wife were increased as she and those advising her sought to bring to light a true picture of the asset position.
On behalf of the husband it is submitted that the wife too was guilty of conduct capable of criticism. That may be so but any conduct on the part of the wife is insignificant when compared to the misconduct of the husband. There were only negligible assets in the wife’s control. She had very little information about the significant financial transactions. The husband’s dealings with the assets of the EUT and those other dealings conducted by him of which the wife had no knowledge were the significant dealings and it was those dealings that occupied most of the trial.
The wife relied upon the husband’s admitted failure to comply with obligations of disclosure. On 14 October 2013 the Court noted:
It is agreed that the husband will provide on the first of each month an updated list of disclosure documents which would include certificates [of] the shares, accounts issued, any evidence of property dealings, cattle dealings, updated bank statements and any other relevant document. Those documents are to be available for inspection upon request and after inspection the inspecting party is at liberty to ask questions about those documents.
The husband, in cross-examination, conceded that he had never complied with that obligation.
Some further instances of the husband’s failure to give proper disclosure are set out at paragraphs 216 to 230 of the reasons.
On behalf of the husband, it was submitted that the wife was wholly unsuccessful in the relief that she sought against the father and that she did not succeed in her application for a distribution of 65 per cent of the asset pool.
I accept that submission. However, the wife did achieve a distribution of 52.5 percent of the asset pool and established that the assets of the EUT were a financial resource of the husband so it cannot be argued that she was wholly unsuccessful. It is also to be remembered that the husband swore on oath that he was, in fact, the owner of the units in the EUT, contrary to his position at trial.
The only offer of settlement to which I was referred was an offer made by the husband on 29 June 2012. The husband offered to settle the matter on the basis that the wife received the Suburb C property and specific chattels. There was no offer of a cash adjustment and no superannuation split.
The wife achieved the Suburb C property, superannuation of $1.1 million and more than $2 million in cash. The offer has no relevance in this determination.
Taking all of those matters into account, I am of the view that the conduct of the husband requires that he make a contribution to the costs consequently incurred by the wife.
I do not accept the submission made on behalf of the husband that to make such an order is to double count the husband’s conduct of the litigation. The adjustive order made in favour of the wife in the substantive proceedings was made primarily because of the availability to the husband of a substantial financial resource. An order for costs is made to compensate the wife for costs incurred because of the work that needed to be done to remedy, in evidentiary terms, the husband’s failure to disclose and his deliberate obfuscations and untruthfulness.
I am conscious of the fact that the wife received $300,000 by way of partial property settlement which was used by her for payment of costs. I do not accept the submission made on behalf of the husband that this amount should in some way be deducted from her entitlement to costs. The money was joint money, paid to her as part of her entitlement to property settlement. In so far as she was entitled to 52.5 per cent of the assets, it could be argued that of the sum of $300,000, she contributed $157,500 of her own money.
The authorities in relation to indemnity costs are well known and do not need to be repeated here. I do not consider that the facts in these proceedings justify a finding that there is “some special or unusual feature to justify the Court in departing from the ordinary practice”, to use the words of Sheppard J in Colgate-Palmolive v Cussons Pty Limited (1993) 46 FCR 225.
The wife’s costs at scale are $300,117.52. This litigation, which commenced in November 2011, has already stretched over more than seven years.
A requirement that costs be assessed would no doubt impose further expense on both parties and add even more time to the conclusion of the proceedings.
In the circumstances, I propose to arbitrarily fix the amount of costs to be paid by the husband at $100,000. I am satisfied that at least that sum was spent by the wife in her attempts to bring the relevant evidence before the Court.
The husband should have a reasonable time to pay that amount. He will be ordered to pay within two months.
The costs of the single experts
The husband paid the costs of the single experts on the basis of an order made 17 June 2013 to the effect that he pay the costs in the first instance and that the wife reimburse him for one half of the amount on completion of the proceedings.
That order has been perfected.
At paragraph 11 of her affidavit sworn 19 December 2018, the wife acknowledges that she is liable for $43,054.60 being half of the fees of the single experts.
Nothing in the conduct of the husband of which the wife complained detracted from the need to have single experts appointed to value the assets.
The wife’s applications will be dismissed.
The father’s application for costs against the wife.
The father seeks costs in the sum of $78,603, calculated on an indemnity basis. There is no calculation of the father’s costs at scale but I accept that they would have been considerably less than that sum.
There is no evidence of the financial position of the father. However, the father had allowed the husband exclusively to have access to the considerable assets of the EUT since 1999; he had not called in an alleged loan to the husband of one million dollars made in 2001 and he had not called in his alleged loan to the EUT in excess of three million dollars. It can be inferred that he is a man of means.
The father was not in receipt of legal aid.
The wife, in defence of the father’s application for costs, relies upon his conduct in the proceedings.
The father and the husband acted together in the dealings which are referred to at paragraph 32 of these reasons. In his evidence, the father said that he executed the relevant documents as “an attempt to stop her … [the wife] from getting her claws into my assets. I don’t think it’s been very effective”.
The father joined the husband in resisting the inspection of documents produced on subpoena which ultimately revealed the true nature of his testamentary arrangements.
The father maintained the position that he was owed one million dollars by the son and would call upon the loan if he needed the funds.
In so far as the accounts prepared for the EUT over a period of years were inaccurate and misleading, the father must bear some, although not all, responsibility. He was the sole owner of the units in the trust. Further, in his trial affidavit, he deposed that, in the past and continuing, he gave instructions for the preparation of the accounts of EUT. In cross-examination, it was clear that he did so having no knowledge of significant transactions carried out by the husband using the assets of the EUT and involving the EUT as a party. Considerable time was taken in attempting to establish the true financial position of the EUT with no assistance from the father.
The father maintained in his trial affidavit that he was owed money by the EUT as stated in its accounts. The findings in relation to that matter are set out at paragraphs 62 to 69 of the reasons and referred to above.
On behalf of the father, it was submitted that the wife was unsuccessful in her application for a declaration that the assets of the EUT were the assets of the husband. However, it is to be recalled that the husband, allowed by the father to treat the assets of the EUT as his own, went so far as to swear that he was the owner.
The Full Court of the Family Court of Australia, dealing with the father’s application for costs of the appeal stated:
It is also contended, by reference to s 117(2A)(g), that the wife’s cross-appeal was doomed to fail because the “factual circumstances” in the instant case were different to that applicable in the decided authorities upon which the wife sought to rely. The arguments advanced by the wife were unsuccessful but we do not consider them to have been fanciful or wholly lacking in ostensible merit. We do not consider her appeal was doomed to fail whether by reference to the asserted difference in the “factual circumstances” or otherwise.
The father relies upon an offer made on 7 October 2016 to the effect that, if the wife withdrew her application in relation to the assets of the EUT, he would not seek costs and would allow the husband to rely on his affidavit and make himself available for cross-examination.
The ownership and use of the assets of the EUT was the central and most significant issue in the proceedings.
Although the wife was not able to persuade the Court that the husband was the beneficial owner, it was found that the husband dealt with the assets as if he were the owner.
Having regard to all of those matters, it is not appropriate to make any order for costs in favour of the father.
His application will be dismissed.
I certify that the preceding seventy-one (71) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 18 January 2019.
Associate:
Date: 18 January 2019
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