Grefeld and Grefeld and Anor

[2011] FamCA 478

FAMILY COURT OF AUSTRALIA

GREFELD & GREFELD AND ANOR [2011] FamCA 478

FAMILY LAW – Costs – Where property settlement between the husband and wife has been resolved – Accrued jurisdiction – Where the wife has been found to hold property on trust for the second respondent – Where the second respondent seeks the applicant wife and respondent husband pay her costs on an indemnity basis – Where the husband’s conduct contributed to the second respondent’s costs – Where the wife was a silent player in her husband’s misuse of the second respondent’s monies – Where the wife is not in as strong a financial position as the Second Respondent – Where the second respondent was wholly successful in respect of her claim – Husband to pay the costs of the second respondent on an indemnity basis – Wife to pay the costs of the second respondent on a party and party basis – Costs to include updated valuations and document translation.

APPLICANT: Ms Grefeld

FIRST RESPONDENT: Mr Grefeld

SECOND RESPONDENT: Ms J Grefeld

FILE NUMBER: BRF 2504 Of 2005

DATE DELIVERED: 22 June 2011
Published from Chambers

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Barry J

HEARING DATE: 25 August 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Sheehy, Solicitor appearing for the Applicant Wife

SOLICITORS FOR THE APPLICANT: Peter J Sheehy Solicitors

COUNSEL FOR THE FIRST RESPONDENT: There was no appearance by the First Respondent Husband

COUNSEL FOR THE SECOND

RESPONDENT:

Mr McGregor of Counsel appearing for the Second Respondent

SOLICITORS FOR THE SECOND

RESPONDENT:

Jones McCarthy Lawyers

Orders

1. The Applicant and the First Respondent jointly and severally be liable for the costs of the Second Respondent but only to the extent as detailed in these Orders.

2. The First Respondent pay the costs of the Second Respondent on an indemnity basis to include the sums of:

   a.$513.33 for the one third share of an updated joint valuation; and

   b.$1,000 in relation to the translation of Country A documents.

3. The Applicant pay the costs of the Second Respondent on a party and party basis to include the sums of:

   a.$513.33 for the one third share of an updated joint valuation; and

   b.$1,000 in relation to the translation of Country A documents.

IT IS NOTED that publication of this judgment under the pseudonym Grefeld and Grefeld is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRF2504/2005

Ms Grefeld

Applicant

And

Mr Grefeld

First Respondent

And

Ms J Grefeld
Second Respondent

REASONS FOR JUDGMENT

1. On the 22 June 2010 for reasons given at the time I made a declaration that the Wife, Ms Grefeld, held the property situated at E Road, Suburb B on trust for the Second Respondent (Ms J).  There were consequential orders for the Wife to transfer the property to the Second Respondent in accordance with the findings made in the reasons which had been delivered.

2. The issue of costs as between Ms J on the one hand and the wife and the Respondent Husband remains outstanding. 

3. On the 6 July 2010 written submissions were received on behalf of Ms J.  The orders sought are in the following terms:

   That the Applicant Wife and the Respondent Husband pay the Second Respondent’s costs of and incidental to these proceedings on an indemnity basis in the sum of $132,765.82 plus:

   a.$513.33 being the Second Respondent’s one third share of the updated joint valuations carried out by [G Valuers] on 27 May 2010 and;

   b.$1,000 being the Second Respondent’s costs in relation to the translation of [Country A] documents together with the costs of and incidental to this application.

4. At the hearing of this matter on 1 June 2010 the Court was informed the proceedings for property settlement as between the Husband and Wife were resolved.  The only proceedings remaining were in the nature of a civil dispute between Ms Grefeld and Ms J.

5. Ms Grefeld’s response to the submissions are annexed to an affidavit of her solicitor, Peter John Sheehy, filed on 20 July 2010.

6. There does not appear to be any argument other than the determination of costs falls to be considered pursuant to the terms of s 117 of the Act as the issues were determined pursuant to the Court’s accrued jurisdiction.

7. In the course of property settlement proceedings Ms Grefeld elected to join Ms J as a party to the proceedings.  The major issue in dispute was the entitlement as between the Wife and the sister-in-law to the E Road property.

8. As between Mr Grefeld and Ms Grefeld it was agreed Ms Grefeld would retain the matrimonial property in Australia (as determined by the Court) and for his part Mr Grefeld would retain whatever assets there were in Country A.

9. For brief reasons given at the conclusion of these proceedings I did not make formal orders for property settlement in those terms.  My reasoning was that I could not be at all satisfied as to the financial position of Mr Grefeld in Country A and accordingly was not prepared to make final orders for property settlement as I could not make a finding that any such orders would be just and equitable.

Written Submissions by the Second Respondent Plaintiff

1. Ms J was initially joined as a party to these proceedings in November 2006 upon application by Ms Grefeld.  There was a property at D Street which was in Ms J’s name which had previously been in Mr Grefeld’s name but had been transferred to his sister shortly after separation from Ms Grefeld.  Ms Grefeld withdrew any claim to the D Street property at the outset of the hearing before me in June 2010.

2. In the meantime, Ms J had ascertained that the E Road property had been acquired with moneys from an account in her name which had been used by Mr Grefeld, her brother, pursuant to a power of attorney document she had executed many years earlier.

3. At page 4 of the written submissions on the costs issue Counsel for Ms J submitted:

   It ought to have been clear to the Husband and Wife from as early as
   25 February 2008 that the Second Respondent’s funds were used to purchase the property at [E Road] and that there was no basis disclosed by either the Applicant or the First Respondent to defeat her claim that the property was held on trust for her.

4. On page 5 of the submissions it is argued that both the Husband and the Wife have the capacity to pay Ms J’s costs of the proceedings on an indemnity basis.

5. As the reasons for judgment of the 22 June 2010 reveal, I am very sceptical as to the reliability of the evidence the Husband has placed before the Court as to his financial position. 

6. I propose to proceed on the basis Mr Grefeld could not meet an order for indemnity costs but any order for costs in favour of Ms J against her brother would be relatively meaningless in that the expense of endeavouring to enforce the orders against assets in Country A would be a prohibitively expensive exercise.

7. The evidence would indicate that although Ms Grefeld’s income is modest, she does have title to a block of land, which for the purposes of the proceedings, was unencumbered and had a value of $825,000.  If the circumstances were otherwise appropriate I am satisfied the Wife has the capacity to meet costs either on a party and party or an indemnity basis.

8. I accept the force of the submission made at page 5 of Counsel’s submissions that Mr Grefeld’s conduct contributed to Ms J’s considerable legal costs in this matter.

9. At page 6 of the submissions it is submitted:

   The Wife’s conduct also contributed to the Second Respondent’s considerable legal costs in this matter.

10. I accept the accuracy of the submissions made at pages 6 and 7 of the written submissions in support of this claim including the submission that Ms Grefeld’s conduct contributed to Ms J’s costs.

11. At page 10 of the submissions under the subheading “[E Road]” Counsel argues:

    The Wife ought to have known as early as October 2005 prior to the Second Respondent’s involvement in the matter, that there was evidence that the Second Respondent was a beneficial owner of the E Road property.

12. At page 11 paragraph 1(d) Counsel submits:

    On the 25 February 2008 the Wife’s solicitors were provided with the last of the documents sourced by the Second Respondent in support of her claims (refer affidavits of [Ms F] filed by leave on
    5 July 2007 and 9 December 2008).  These documents closed the chain of irrefutable evidence in respect of the use of the Second Respondent’s funds for the purchase of the [E Road] property.

13. At page 12 paragraph 3(e) of the written submissions Counsel submits:

    On the morning of the first day of the trial (1 June 2010) the Wife’s Counsel gave notice of a change of defence.  In the new defence, the Wife abandoned her rejection of the Second Respondent’s claim to have paid for [E Road].  This is to say that from the time of the Second Respondent’s final disclosure of evidence on 25 February 2008 until 1 June 2010 (a period including the filing of the Second Respondent’s evidence-in-chief on 2 June 2009 and her affidavit in reply of 8 July 2009) the Wife made no gesture to acknowledge the force of the Second Respondent’s evidence, yet on the first day of the trial her change of defence was, in effect, an admission that the weight of evidence in favour of the Second Respondent’s claim was irrefutable.  This concession ought to have been made immediately (or within a reasonable time) after the Second Respondent’s final disclosure of evidence on 25 February 2008.  The very latest that the concession ought to have been made was at the time of the Second Respondent’s provision of translations of all those documents that were disclosed by February 2008, namely immediately (or within a reasonable time) after the Second Respondent’s affidavit of evidence-in-chief was filed on the 2 June 2009.

14. As I understood it the amended defence put forward by Ms Grefeld’s Counsel was that the power of attorney document gave Mr Grefeld power to borrow funds from the donor and he had done just that.  The question of repayment was said to be largely irrelevant although Mr Grefeld was asserting that he had more than repaid Ms J.  Counsel for the Wife asserted that the mere fact that money has been lent to acquire property does not give the lender any proprietorial interest in the property.

15. I accept the accuracy of the submission made in paragraph 3(e) as quoted as to the change of tack by Ms Grefeld’s legal representatives at the commencement of the trial.  As is evident from the reasons for judgment delivered on the 22 June 2010, I was not accepting that it was a genuine loan by Mr Grefeld, but even if it was, the law requires him under the duties cast upon trustees in a fiduciary relationship to have disclosed the existence of the loan to his sister and this he failed to do.

16. At paragraph 4(d) at page 13 of the submissions Counsel submits:

    In her Affidavit of 15th June 2009 (paragraph 54) the Wife deposed:

    “He ([Mr Grefeld]) also only informed me around December 2007, over three years after the divorce application, that he had used his sister’s money to purchase my home in [E Road].”  This statement is inaccurate in three respects:

    i.firstly, the Wife repeats the omission made at paragraph 30 of her affidavit (referred to above) ie that the Husband had informed her and communicated documentation to her on 3 and 13 October 2005 where he informed her of his use of the Second Respondent’s moneys;

    ii.secondly, the divorce application was made in July 2003, over four years prior to the period to which the Wife refers (“December 2007”);

    iii.thirdly, the Wife erroneously fails to acknowledge the legal correspondence of 27 September 2006 where the Husband informed her that he had used the Second Respondent’s moneys to purchase [E Road], which she included as Annexure B of her affidavit of 2 July 2007.”

17. At page 14 Counsel notes under the terms of s 117(2A)(e) that:

    Section 117 (2A)(e)

    The Second Respondent was wholly successful in respect of her claim in these proceedings.

    Section 117 (2A)(f)

    No relevant offers of settlement made in writing.  Offers were made but none acknowledged the Second Respondent’s interest in the [E Road] property.   The Second Respondent was forced to proceed through to the trial in order to have her interest recognised.

    Other relevant matters

    The Second Respondent is a third party.  She was brought into the proceedings by her joinder by the Applicant.  She was in the same position as a litigant of the civil courts where ordinarily costs follow the event.  She should have a costs order made in her favour. 

    The conduct of both the Applicant and the First Respondent set out above justify the making of an order on an indemnity basis.”

    I accept the force and accuracy of submissions in these terms.

Applicant Wife’s Response to Submissions of the Second Respondent

1. At page 4 of Ms J’s submissions the point was made:

   It ought to have been clear to the Husband and the Wife from as early as 25 February 2008 that the Second Respondent’s funds were used to purchase the property at [E Road] and that there was no basis disclosed by either the Applicant or the First Respondent to defeat her claim that the property was held on trust for her.

2. On behalf of Ms Grefeld in response, it was submitted:

   It was not clear to the Applicant Wife as early as 28 February 2008 that the Second Respondent’s funds were used to purchase the property at [E Road].  The Wife’s case rested completely in the hands of the Husband for production of documents from [Country A] to be able to make disclosure.  In the absence of complete disclosure, the Wife’s position in not accepting the assertions by the Respondent Husband as to the provision of the funds and the source of the funds was not an unreasonable one.

3. What this submission overlooks is the fact that there had been affidavits filed by Ms J’s solicitor of the 5 July 2007 and the 9 December 2008.  These affidavits annexed bank documents which prima facie indicated that the transfer of the funds for the purchase of the E Road property came from an account in Ms J Grefeld’s name.

4. At paragraph 2 of the submissions made on behalf of the Wife it is noted:

   The Second Respondent and the Husband failed to adequately provide proper disclosure of documents throughout the case.  Indicative of this was the position of the Second Respondent over a six month period on at least two directions hearings before his Honour, the Second Respondent indicated that she intended to travel to [Country A] to inspect a “warehouse full of documents”.

5. Throughout much of the litigation it was abundantly clear that Ms J was in Country A endeavouring to get access to the source documents.  Ms Grefeld held her title by virtue of the fact that the moneys were transferred directly from Ms J’s account to the solicitors’ trust account.  All of this was done under the instructions of Mr Grefeld.  I do not accept that the Wife is able to rely on Ms J’s failure to produce documents when clearly the documents were under the control of Mr Grefeld and he had been responsible for arranging for the transfer of funds for the acquisition of the property.

6. At paragraph 3 of the Wife’s response it is submitted:

   3.As conceded by the Second Respondent (page 4.2) the documents asserted by her to support her claim, were finally annexed to her affidavit of evidence-in-chief of 2 June 2009.

7. I accept that the documents were annexed to the affidavit of evidence-in-chief of Ms J on the 2 July 2009 but it ignores the fact that the relevant documentation had previously been annexed to the affidavit of Ms J’s solicitor in the affidavits referred above namely the ones filed by leave on the

   
   

   5 July 2007 and 9 December 2008.

8. At paragraph 4 of the Wife’s response the point is made that the trial had to be adjourned on the 19 June 2009 for reasons determined at the time.

9. It is then asserted that Ms J declined or refused to attend mediation.

10. I am not at all convinced that this is a relevant factor in the determination that has to be made on the issue of costs in this matter.

11. At paragraph 5 of the Wife’s response document submissions are made that Ms Grefeld’s financial position is poor.  She has a substantial capital gains tax against the Suburb C land which was purchased 15 years ago for $220,000.  It is further submitted:

    If the [Suburb C] land needs to be sold, costs of sale less capital gains tax will leave the Wife in a position of having insufficient funds to be able to re-house herself and a number of the adult children who still live with her, and pay her debts.

12. It is noted:

    The Wife has funded her action from borrowed money from her mother.  Her costs incurred and/or spent now exceed $151,000.

13. I have no reason to doubt the accuracy of the information that is provided by the Wife’s legal representative, but if the Wife elects to incur costs in contesting the uncontestable, it is a matter for which she must ultimately bear responsibility.

14. Ms Grefeld’s financial position is set out in paragraphs 90 to 96 of her affidavit filed on the 3 June 2009.  Her taxable income disclosed for the financial years ending 2003 to 2008 could only be described as modest indeed.  She does tutoring work at Griffith University for which it appears she receives a very modest weekly amount.  Her statement of financial circumstances also filed on the 3 June 2009, reveals that whilst her income from tutoring was only $133 a week she was having payments made of household expenses in the sum of $1,880 a week.  This was provided by way of a capital sum her father had invested for which Ms Grefeld and her family received the investment income.  Ms Grefeld’s evidence at paragraph 111 of her affidavit is that she owes her parents $617,000.  She confirms this in the statement of financial circumstances.  There is no evidence she is being pressed for repayment.  Her father is now deceased and the investment proceeds from the capital sum apparently are being received by her mother.

15. At paragraphs 16 and 17 of the Wife’s response submissions it is noted:

    16.The Second Respondent is a third party to the proceedings, but the proceedings are under the Family Law Act.  They are not cross vested proceedings.  Whilst she may be in the same position as the litigant in the civil courts where ordinary [sic] costs follow the event, the remedy sought by the Second Respondent were [sic] in equity.

    17.As the Second Respond [sic] seeks equitable remedies from a court, she should come with clean hands.  Whilst it was conceded by all parties that no one will ever be able to determine with any degree of satisfaction on the evidence before the court who owed who [sic] what in the [Grefeld] family.  It is a case on the evidence given by the Second Respondent that clearly she is an advantageous financial position compared to both the Applicant Wife [sic].

16. The fact that Ms J may be in an advantageous financial position compared to Ms Grefeld does not have anything to do with the issue of clean hands.  She has unfortunately been duped by her brother who has completely misused his position as trustee of her moneys.

17. The beneficiary of this has been Ms Grefeld I accept the force of the submission made at paragraph 12 that the proof of the source of the funds was not necessarily conclusive evidence of the ownership of the funds.  The fact remains that Ms Grefeld should have been put on alert that there was a real possibility that moneys emanating from an account in Ms J’s name found their way to the solicitor’s trust account and thereafter were used to settle the acquisition of the E Road property.  Because of Mr Grefeld’s conduct, there may have been some doubt on Ms Grefeld’s part, but she was in receipt of documentation at an early stage which should have caused her to consider her position in relation to the claim to both D Street and later E Road.

1. Ms J filed two financial statements on the 1 February 2007 and on the

   
   

   2 February 2009.  In the latter document she discloses an income of $600 a week.  She had a total of Euro 2.1 million invested in a series of bank accounts in Australia and Country A.  Part O of the financial statement provides a detailed breakdown of the money in various accounts.

2. In the course of her oral evidence Ms J acknowledged that Euro 1 million had been transferred from an account in Mr Grefeld’s name to an account in her name. 

3. I accept the accuracy of the submissions made at paragraph 22 that Ms J has the beneficial ownership of D Street.  However, that has nothing to do with this dispute.  The reality is her mother elected to reward Ms J because of the care that she had provided to her mother.  It was the mother’s decision to place the property in Ms J’s name.  The only relevance to these proceedings is that I am required to have regard to the financial circumstances of the parties and it is indicative that Ms J has a valuable asset at her disposal.  I do not see this as a compelling reason why she should not be awarded her costs.

4. As I have noted, any award of costs as against Mr Grefeld is likely to be a pyrrhic victory in that there is unlikely to be any compliance by Mr Grefeld with any such order.  So far as Mr Grefeld is concerned I would have no hesitation in making an award that he pay Ms J’s costs on an indemnity basis.  His irresponsible behaviour has resulted in the situation being as it is.  He was quite recalcitrant in his approach in baldly asserting that Ms J owed him money when he had previously been swearing Court documents to the effect that he owed her money.  He is the one who has failed to produce a proper accounting of the funds used.

5. So far as the orders for the sum of $513.33 for the one third share of an updated joint valuation and $1,000 in relation to the translation costs, I am minded to make an order that Ms J be reimbursed for these outlays.

6. So far as the costs application against Ms Grefeld is concerned, I will not award indemnity costs.  My reasons are as follows:

   ·I accept that her financial position is likely to be precarious in the

   future.  She owes her mother in excess of $150,000 for moneys

   borrowed for legal expenses. 

   ·She will have the party and party costs to be paid to Ms J.

   ·It is likely she will have to sell the vacant block of land. 

   ·She will incur significant capital gains in the event of such a sale. 

   ·The income she has at her disposal is modest.

   ·Such amount as she receives from the sale of the vacant block

   of land would be used to either earn interest to assist in

   supporting herself or used to acquire a modest residence for herself.

   ·She says she owes her mother $617,000 but there is no evidence

   she is under any pressure to repay this amount.

1. A further reason for declining to order indemnity costs as against Ms Grefeld is that she was largely a silent player in Mr Grefeld’s manipulation of the family’s fortunes.  Whilst she was not an active participant in the misuse of Ms J’s moneys, she was entitled for a period of time to be sceptical of Mr Grefeld’s claims as to the source of the moneys used to acquire the E Road property.

2. I am satisfied that she was not entitled to contest the proceedings in the way that she did based on the documentary evidence that was placed before the Court, but her conduct was not such as to find the special circumstances necessary to justify an award of indemnity costs.

Affidavit of Second Respondent’s solicitor, Keiran McCarthy Filed 6 July 2010

1. This affidavit annexes the costs agreement entered into between Ms J’s solicitors and their client.  It also sets out the various tax invoices which have been rendered to their client. 

2. Whilst I have indicated I do not propose to award Ms J indemnity costs I accept that the amounts to be charged pursuant to the costs agreement represent reasonable commercial rates for experienced practitioners in this jurisdiction in the South East Queensland area.  I also accept that prima facie the work carried out on behalf of their client would appear to be uncontentious.  It was as a result of Mr Grefeld’s conduct, a complicated and difficult matter.

3. For the above reasons orders will issue in the terms as set out on page three hereof.

I certify that the preceding fifty-four (54) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Barry delivered on 22 June 2011.

Associate: 

Date:  22 June 2011