Hepner & Scheid
[2024] FedCFamC1F 118
•5 March 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Hepner & Scheid [2024] FedCFamC1F 118
File number: SYC 5892 of 2022 Judgment of: CAMPTON J Date of judgment: 5 March 2024 Catchwords: FAMILY LAW – COSTS – Where the husband filed an Application in a Proceeding seeking for the wife, in her capacity as director of the corporate trustee of the superannuation fund, to do everything necessary to permit the husband to withdraw $150,000 from his own member entitlement for litigation funding and living expenses – Where the wife agreed to releasing the funds but only on condition that the withdrawal would be characterised as an “interim distribution” to the husband for the purposes of the final hearing – Where the wife consented to the husband’s relief during the interim hearing – Where the husband sought fixed costs – Where the wife sought fixed costs – Where the wife’s conditions for the husband to access his own property as she had historically accessed from her superannuation entitlement post-separation, was wholly misconceived – Where the wife’s conduct had caused the husband to incur wholly unnecessary costs – Wife ordered to pay the husband’s costs in the fixed sum of $20,748. Legislation: Family Law Act 1975 (Cth) ss 79, 80, 114, and 117 Cases cited: Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 22 Division: Division 1 First Instance Number of paragraphs: 23 Date of hearing: 5 March 2024 Place: Sydney Counsel for the Applicant: Mr Cox SC Solicitor for the Applicant: Frazi Lawyers Counsel for the Respondent: Ms Gardiner Solicitor for the Respondent: Santone Lawyers ORDERS
SYC 5892 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR SCHEID
Applicant
AND: MS HEPNER
Respondent
ORDER MADE BY:
CAMPTON J
DATE OF ORDER:
5 MARCH 2024
THE COURT ORDERS THAT:
1.The wife pay the husband’s costs of and incidental to his Application in a Proceeding filed 26 February 2024 and of the wife’s Response to an Application in a Proceeding filed 4 March 2024 fixed in the sum of $20,748 within 21 days of the date of this order.
2.The wife’s application for costs of the said Application in a Proceeding and Response thereto be dismissed.
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 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Hepner & Scheid has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CAMPTON J:
These reasons determine the applications for costs made by each of Mr Scheid (“the husband”) and Ms Hepner (“the wife”), of and incidental to the husband’s Application in a Proceeding filed 26 February 2024 and the Response to an Application in a Proceeding of the wife filed 4 March 2024.
The subject matter of the interlocutory dispute was determined by way of a consent order made during the hearing on 5 March 2024 in terms of paragraph two of the husband’s Application in a Proceeding, being:
2.That forthwith the Wife in her capacity as Director of the [B Pty Ltd ATF Scheid Superannuation Fund] do all acts and things necessary and sign all documents necessary to enable the Husband to access the sum of $150,000 from the [Scheid Superannuation Fund] as the Husband may direct in writing.
For the reasons that follow, the wife is ordered to pay the husband’s costs fixed in the sum of $20,748. The wife’s application for costs is dismissed.
BACKGROUND
The wife was born in 1953 in Australia and is currently 70 years old. The husband was born in 1959 in the United Kingdom and is currently 64 years old. The parties commenced cohabitation in or about early 1997 and were married in mid-2007. They separated on 23 October 2020 and were divorced in 2022. There are no children of the marriage. They have both retired.
The wife has three children from a previous relationship, all of whom are now adults. The wife’s granddaughter, D, was born 2006 and is currently 17 years old. From the time D was 12 months old, she has lived with the husband and the wife. On or about 13 November 2009 orders were made for the wife to have sole parental responsibility for D and for D to live with her.
The proceedings were commenced by the wife by way of an Initiating Application filed 23 August 2022 seeking orders pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”) for the adjustment of property. The husband filed a Response to and Initiating Application on 23 September 2022 seeking different orders as to the adjustment of property. On 26 April 2023 directions were made listing the proceeding for trial before Curran J over four days commencing on 9 April 2024. The husband contends that the property of the parties is valued in the range of $20 million. The property of the parties includes the jointly held real property at Suburb C valued in the range of not less than $5 million and Suburb E valued in the range of not less than $3 million, and real property held by the wife in Country F. The single experts’ valuations of real property are in the process of being updated.
Substantive issue exists as to whether the interests of the wife as a primary beneficiary of a discretionary trust, known as the G Trust, established by the wife’s now deceased mother in 2005, is property of the wife for the purposes of s 79 of the Act. It is the husband’s case that the wife is the appointor of the G Trust and the sole shareholder of the corporate trustee. The wife is the “governing director”, having contended additional powers to the exclusion of other directors. The wife is also the primary beneficiary and default capital and default income beneficiary. As I understand it, it is the husband’s case that the G Trust is, both in law and in practice, under the control of the wife and that the wife can obtain or effect the obtaining of all the property of the G Trust should she elect or be ordered to do so.
The parties are the sole members of the Scheid Superannuation Fund, established during the marriage. They are each the shareholders and directors of the corporate superannuation trustee, B Pty Ltd. At 30 June 2023, the value of the husband’s benefit in the Scheid Superannuation Fund was in the range of $1,783,157, and the wife’s benefit in the range of $2,057,982. The husband in his affidavit said that from about November 2021 to October 2023, the wife withdrew $385,000 from her pension in the Scheid Superannuation Fund. He said that these funds have been applied to purchase a property at Suburb H QLD in mid-2022 and at least $15,455 to meet her legal costs associated with these proceedings. During the hearing the wife confirmed that some monies drawn from her member entitlement in the fund had been applied to pay her legal costs in these proceedings.
The assets of the Scheid Superannuation Fund include a commercial property in Sydney, gems, a portfolio of securities, and $645,000 cash at bank.
In or about October 2023 the husband became eligible to draw on his member interest in the fund. He adduced evidence of an email from the funds accountants for a requirement for he and the wife to execute resolutions and other documents for he to access that entitlement.
Each party contends that it is just and equitable to adjust their property (Stanfordv Stanford (2012) 247 CLR 108). The wife seeks an adjustment as to 70 per cent of the property of the parties in her favour and 30 per cent to husband. She seeks that the husband transfer to her his interests in the Suburb C and Suburb E real properties. The husband seeks an adjustment of 35 per cent of the property of the parties in his favour, with the remaining 65 per cent being adjusted to the wife.
In November 2023, the husband requested that the wife agree to his request to draw on his pension from the Scheid Superannuation Fund to meet his legal costs of these proceedings, and his living expenses. A short time later, the wife responded to that request, agreeing “in principle” to the husband withdrawing an appropriate amount. Her agreement was conditional on the husband particularising the amount he sought to withdraw, and that the funds withdrawn should be “classified as an addback”. Shortly thereafter, the husband responded to the wife identifying the proposed use of funds from the Scheid Superannuation Fund for the purpose of legal fees and that the withdrawals may not be characterised by the trial judge as an addback as they would have each withdrawn some of their entitlements. He proposed that the characterisation of the withdrawals be determined at final hearing by the trial judge. In December 2023 the wife responded to the husband dictating that she would only provide her consent if the withdrawals were classified as an interim property distribution to the husband. In February 2024, the husband responded, stipulating that he sought to withdraw $150,000 from the Scheid Superannuation Fund in tranches over a period of two months to meet his legal costs, including fees for updated valuations, his living and medical expenses, and his mother’s rent and utilities. The fund had more than sufficient cash reserves to pay this sum to the husband. There was no evidence that the making of such payment would prejudice the fund. The husband again requested that the characterisation of these withdrawals be determined at final hearing by the trial judge.
In February 2024, the wife wrote the husband seeking to clarify whether the husband had sought advice as to whether the $150,000 sought was within the annual limit that the parties are able to withdraw from the fund. She said that if that was the case, then she agreed to the withdrawal, but only if the withdrawals were characterised as an interim distribution to the husband.
On 26 February 2024, the husband filed an Application in a Proceeding seeking that the wife in her capacity as Director of the B Pty Ltd ATF Scheid Superannuation Fund, do all acts and things necessary to enable him to access $150,000 from the Scheid Superannuation Fund. The relief was cast in language as an exercise of power source by s 114 of the Act. He also sought for the wife to pay his costs of and incidental to these proceedings. The wife filed a Response to an Application in a Proceeding on 4 March 2024 seeking:
1.That to the extent the sum of $150,000 is not classified as an income stream under the Husband’s pension entitlements of the [Scheid Superannuation Fund], that forthwith the Husband and the Wife in their capacities as Directors of [B Pty Ltd ATF the Scheid Superannuation Fund] do all acts and things necessary to pay the sum of $150,000 to the Husband as he may otherwise direct in writing by way of interim property settlement pursuant to s79 and s80 of the Family Law Act 1975 (Cth).
4.That the husband shall pay the wife’s costs of and incidental to these proceedings.
(As per the original)
THE COMPETING RELIEF AS TO COSTS SOUGHT
After the consent order was made during the hearing determining the interlocutory contest as recorded earlier in these reasons:
(a)The husband sought that the wife pay his costs fixed in the sum of $20,748; and
(b)The wife sought that the husband pay her costs in the fixed sum of $23,125.
It was agreed that the fixed quantum of costs as sought by each party was fair and reasonable.
THE LAW
The relevant principles as to costs are well settled. While the starting position established by s 117(1) of the Act is that each party pays their own costs, s 117(2) allows the Court to make such orders as to costs as it considers just if there are circumstances which justify it doing so. In considering what order for costs, if any, should be made, the Court is required to have regard to the matters set out in s 117(2A) of the Act and give weight as it considers appropriate to any relevant factor. It is well settled that no single factor in s 117(2A) has priority, nor must more than one factor be satisfied. Rather, any one factor may be sufficient.
The party seeking costs bears the onus to establish circumstances which justify departing from the position that each party pay their own costs, for the making of a costs order in their favour. If it is established there are circumstances justifying a costs order, the next consideration is on what basis should costs be paid. That second consideration is not in contest in this matter. The Full Court has made clear that it is unnecessary to spell out detailed reasons for decisions in costs matters. I shall refer to such s 117(2A) matters as are relevant and engaged here.
CONSIDERATION
Each party has the benefit of significant property yet to be adjusted. Their respective financial circumstances do not materially impact on the circumstances justifying the making of costs orders as sought by the other.
The husband identified the wife’s conduct in obstructing him accessing his own property, producing the necessity of the filing of his Application in a Proceeding. He identifies, and I accept, that on no less than four occasions he sought the wife’s consent for him to access that property to pay his legal fees in not dissimilar terms to the wife had accessing her own superannuation property post separation, to apply as she elected. I accept the husband’s submission that:
(a)The wife created “false roadblocks” for the purposes of advancing her personal position in the s 79 litigation that may have conflicted with her fiduciary duty as an officeholder of the corporate trustee of the superannuation fund to progress the interests of the members of the fund; and
(b)The husband’s access to his own member entitlement did not prejudice the wife’s substantive relief sought. It reflected that relief.
The wife’s conduct in requiring, as a condition of the husband accessing his own property, for it to be “classified as an addback” or categorised as an interim or partial property distribution, was misconceived. The wife could not identify during the hearing how an exercise of power pursuant to s 79 and 80(1)(h) could operate to adjust the husband’s own property in his favour. Cast against this circumstance, she consented to the primary order sought by the husband. Her conditions as to the facilitation for the husband to receive some of his superannuation entitlements, maintained until the running of the interim hearing, was doomed to fail.
The husband’s costs incurred in bringing the application were wholly unnecessary. The wife knew, or ought to have known, that the position she adopted on the disputed issue may be attributed to having an ulterior motive, or that it was grounded from a wilful disregard of advice. The prolongation of this interlocutory dispute was occasioned by the wife’s ill-founded conditions.
I find that the husband has established circumstances which justify departure from the position that each party pay their own costs, and as to the making of a costs order in his favour. I find that the wife has not established a circumstance to justify an order for costs in her favour. It is just for the wife to pay the husband’s costs in the fixed sum as sought.
I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Campton. Associate:
Dated: 5 March 2024
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