Jepson & Jepson (No 2)
[2022] FedCFamC1F 913
Federal Circuit and Family Court of Australia
(DIVISION 1)
Jepson & Jepson (No 2) [2022] FedCFamC1F 913
File number(s): SYC 2100 of 2016 Judgment of: MCCLELLAND DCJ Date of judgment: 22 November 2022 Catchwords: FAMILY LAW – PROPERTY – Where applicant husband seeks an urgent partial property distribution to fund legal representation in criminal and family law proceedings – Where estimated total legal costs are grossly disproportionate to the amount of matrimonial property in dispute – Applicant has failed to establish financial unevenness of playing field – Application dismissed – Matter administratively set down for final hearing. Legislation: Family Law Act 1975 (Cth) ss 79, 80
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 67, 68.
Federal Circuit and Family Court of Australia, Central Practice Direction: Family Law Case Management paragraph 3.9(b)
Cases cited: Iphostrou & Iphostrou and Ors [2011] FamCA 20
Jepson & Jepson and Ors [2017] FamCA 1013
Jepson & Jepson [2022] FedCFamC1F 45
Medlow & Medlow (2016) FLC 93-692; [2016] FamCAFC 34
Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 52
Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466, [2011] FamCAFC 126
Division: Division 1 First Instance Number of paragraphs: 34 Date of hearing: 7 November 2022 Place: Sydney Counsel for the Applicant: Mr Todd Solicitor for the Applicant: Powe & White Family Lawyers The First Respondent: Litigant in person Counsel for the Second Respondents: Mr Walker Solicitor for the Second Respondents: Gillis Delaney Lawyers The Third Respondent: Submitting Notice filed 2 November 2022 The Fourth Respondent: Did not participate ORDERS
SYC 2100 of 2016 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR JEPSON
Applicant
AND: MS JEPSON
First Respondent
MR OAKLEY & MR HAIGHT
Second Respondents
MS B JEPSON (and another named in the Schedule)
Third Respondent
order made by:
MCCLELLAND DCJ
DATE OF ORDER:
22 November 2022
THE COURT ORDERS THAT:
1.The applicant’s Application in a Proceeding filed 24 October 2022 is dismissed.
2.The matter be listed for final hearing by inclusion in the Sydney Registry Rolling List to commence at 9.30 am, 6 March 2023 with an estimated hearing time of three (3) days.
3.The matter be listed for a Trial Management Hearing before Deputy Chief Justice McClelland at 4.00 pm, 16 December 2022.
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 Jepson & Jepson has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
MCCLELLAND DCJ:
INTRODUCTION
This matter concerns an Application in a Proceeding filed by Mr Jepson, (“the husband”) on 24 October 2022, seeking an order for partial property distribution of the parties’ property in order to assist him to meet legal costs associated with protracted family law proceedings that have been ongoing since 2016, as well as criminal proceedings that currently remain on foot. I have dismissed the application in circumstances where the legal costs incurred by both parties are grossly disproportionate to the issues that remain in dispute and I am not satisfied that the parties have, to date, made a genuine attempt to resolve the matter without incurring yet further legal expenses.
Background
The background of this matter has been extensively canvassed in decisions of, firstly, Loughnan J in his decision dated 14 November 2017,[1] and my earlier decision dated 8 February 2022.[2] In those circumstances, I provide the following brief outline of background insofar as it is relevant to the issues I am required to determine in these proceedings.
[1] Jepson & Jepson and Ors [2017] FamCA 1013.
[2] Jepson & Jepson [2022] FedCFamC1F 45.
The husband and wife, Ms Jepson (“the wife”), were married in 1998 and separated in November 2015. They have two children who are now adults.
In April 2016, the wife commenced proceedings in the Supreme Court of New South Wales seeking interlocutory orders for the restoration of possession of the family home and a holiday house, both of which were, at the time, registered in her name, together with ancillary relief.
The outcome of that litigation was that the parties agreed to orders that would have trustees appointed to affect the sale of both properties.
Those properties, located in the suburbs of Suburb R and Suburb P in New South Wales, were eventually sold and the proceeds of sale for the Suburb P property, being the sum of $2,139,812, is being held in a solicitor’s trust account pending completion of this litigation.[3]
[3] Affidavit of Mr Jepson filed 24 October 2022, paragraph 54.
The trustees are both the second respondents in these proceedings. They contend that, as result of difficulties they experienced in dealing with the parties, they incurred substantial fees which total, as at this date, a sum of $1,298,071 outstanding as at 27 October 2021.[4] Both the husband and the wife contend those fees are excessive and, whilst acknowledging a responsibility to pay the receivers, they dispute the quantum. To resolve that issue, the parties have agreed to appoint a referee to advise on the reasonableness of the fees rendered by the receivers. Regrettably, the person so appointed as referee has yet to provide his opinion to the parties or the Court. Understandably, the receivers wish to remain parties to these proceedings until the issue in respect to their outstanding fees is resolved.
[4] Affidavit of Mr Oakley & Mr Haight filed 1 November 2022, paragraph 21.
An additional complicating factor has been the fact that the husband is the subject of criminal charges. The husband describes the charges as approximately 98 alleged offences “relating to company banking transactions that occurred in 2013.”[5] While the circumstances are not entirely clear, the wife contends that the husband has also been charged with offences relating to a substantial and valuable collection, which the husband contends is worth an estimated value of $1.5 million.
[5] Affidavit of Mr Jepson filed 24 October 2022, paragraph 43.
These proceedings were initially provisionally listed for final hearing on 15 August 2022. That hearing was adjourned for reasons which included delay in obtaining a report from the referee appointed to assist the parties to resolve the question of fees payable to the receivers and also as a result of unresolved questions concerning the criminal charges pending against the husband, including determining whether the collection remained as an asset of the parties or would ultimately be confiscated as being proceeds of crime.
Prior to the matter being listed for callover with a view to the allocation of a hearing date, the husband filed his Application in a Proceeding dated 24 October 2022 in which he sought a number of orders including, most relevantly, an order for partial property distribution in the sum of $2,260,000 pursuant to ss 79 and 80 of the Family Law Act 1975 (Cth). As noted, those funds were sought to fund his legal representation in both criminal and family law proceedings.
In his Outline of Case Document (Interim Hearing) filed on 4 November 2022, the husband proposed a variation of the orders set out in his Application in a Proceeding, with that proposed minute being as follows:
1.Leave is granted to [MR JEPSON] (the “Applicant”) to the Application in a Proceeding to have this matter listed on short notice to enable the application to be heard and determined urgently.
2.By way of partial property settlement, the Applicant shall receive $2,260,000.00 (the “partial property settlement sum”).
3.In the alternative to Order 2, the Court Order such an amount to be paid to the applicant as the Court considers appropriate by way of interim property order being an amount between $375,000 and $2,260,000.
4.In the alternative to Order 2 and/or Order 3, the husband shall receive the amount of $375,000 by way of interim property order in favour of the applicant.
5.In order to give effect to the aforesaid orders, [MR O’HEARN] and [MR HAIGHT] (the “Second Respondents”) are directed to transfer to the trust account of Powe & White Family Lawyers, as the legal representatives on behalf of the Applicant, the partial property settlement sum.
6.These Orders require the Second Respondents to immediately transfer to [O School] the amount required to discharge the debt owing to [O School] for school fees and charges that are presently outstanding on behalf of the Applicant and/or [MS JEPSON] (the “First Respondent”).
7.Costs.
(As per the original)
At the hearing of this matter the husband pressed, at the present time, only Order 4 of his amended minute of order, being an order for partial property distribution in the sum of $375,000. It became apparent, during the course of the proceedings, that the husband pressed that order only as a result of discussions between the husband and the legal representatives for the second respondents, who indicated that they would oppose an order for partial property distribution that resulted in insufficient funds remaining in the controlled monies account such that they would lose their entitlement to priority if funds in excess of that which they claim to be payable to them is released to the parties.
Relevant legal principles
I set out the relevant principles that apply in considering whether to make an order for partial property distribution in my previous judgment in this matter published on 8 February 2022:[6]
[6] Jepson & Jepson [2022] FedCFamC1F 45
34. Sections 79 and 80(1)(h) of the Act confer power on the Court to make orders for a partial distribution of property prior to the final hearing. By way of summary, the relevant legal principles that I apply in this matter are as follows;
•Section 79 confers a discreet power to make orders for property settlement and the Court may exercise that power through “a succession of orders until the power ... is exhausted” or until a final order dealing with all the known property of the parties is made: Gabel & Yardley (2008) FLC 93-386 as cited in Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466 (“Strahan”) at 85,640.
•Section 80 is not, in itself, a source of jurisdiction for such an order to be made. Rather, the section is an “enabling provision” that provides various ways in which the general power in s 79 may be exercised in individual cases: Davidson & Davidson (No. 2) (1994) FLC 92-469 and Yunghanns & Yunghanns (1999) FLC 92-836. This includes, by s 80(1)(h), the making of “a permanent order, an order pending the disposal of proceedings or an order for a fixed term or for a life or during joint lives or until further order”.
35.There are three stages to the hearing of an application for interim property adjustment orders:
•The first two stages were described in Strahan at 85,645–85,646, with the first being a “procedural step” which requires an analysis of whether the circumstances of the case triggers the Court’s power to invoke s 80(1)(h) to make an order for partial property adjustment. At this stage, the “overarching consideration” is the interests of justice.
•The second stage is the “substantive step”, where the provisions of s 79 must be considered and applied, but with limitations, given that it is not the final hearing.
•The third stage, although not necessarily to be considered in this order, is to assess whether the applicant for relief has discharged the persuasive burden referred to in Medlow & Medlow (2016) FLC 93-692 (“Medlow”) at [86], where the Full Court said:
The onus was clearly upon [the applicant for relief] to establish that there were sufficient assets available for the interim distribution and that the effect of any interim order was capable of being reversed as part of the final hearing or at least would not defeat [the respondent]’s property claim. The onus was not on the [respondent] to adduce such evidence.
36.The overriding consideration at all stages of the process is that the Court is satisfied that it is “just and equitable” to make the order in the circumstances before the Court: Stanford & Stanford (2012) 247 CLR 108 at [35] (“Stanford”).
37.In applying these considerations, the exercise of the Court’s jurisdiction should be conducted with an appreciation that “as a generality, the interests of the parties and the Court are better served by there being one final hearing of s 79 proceedings”: Strahan at 85,656, citing Harris & Harris (1993) FLC 92-378. In that context, as noted by Thackray J in Strahan at 85,656:
…it is important to note that s 80(1) [or s 90SS(1)] is couched in the permissive. Hence, although the Court must give consideration to the matters set out in s 79(4) [or s90SM] when hearing an application for an interim payment, it has no obligation to make an interim order. The Court “may” do so if it considers that it should in the exercise of its discretion.
(Emphasis in original)
Additionally, I would add that consideration as to whether there should be an order for the adjustment of the parties’ legal and equitable interests in matrimonial property should not be commenced with the assumption “that one or other party has the right to have the property of the parties divided between them”: see Stanford v Stanford (2012) 247 CLR 108 (“Stanford”) at [40] and also Medlow & Medlow (2016) FLC 93-692 (“Medlow”) at [72]. This applies to an application for a partial distribution of property in interim proceedings as much as it does to an application for the adjustment of property at the final hearing of the matter.
Further, relevant to the contentions of the husband in this case, an applicant for orders for partial property distribution is required to show more “than the mere fact that upon a final hearing the applicant would receive the property being sought (or an amount in excess of the funds being sought) from the other party.”[7]
[7] Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466 at [139] (“Strahan”).
Consideration
For the purpose of this application, the parties agreed that the Court, at final hearing, would likely find that the total assets of the parties was $4,767,812, from which would be deducted liabilities of $2,245,083, leaving a balance of net assets available for distribution between the parties of $2,522,729. The parties acknowledge, however, that from that amount, they are jointly responsible for meeting the fees of the referee in the sum of $55,000. This reduces the net pool, as agreed to by the parties for the purpose of these proceedings, to the amount of $2,467,729. On that basis, the amount of $375,000 as sought by the husband by way of partial property distribution would represent approximately 15.2 per cent of what the parties have agreed for the purpose of these proceedings to be the anticipated net property pool at final hearing.
I accept, on the basis of those figures, as agreed for the purpose of these proceedings, it could reasonably be anticipated that the husband would receive, by way of final orders for property adjustment, an amount in excess of the sum he is seeking in these interim proceedings. On that basis, the test adumbrated by the Full Court in Medlow is satisfied.
In terms of the second test adumbrated in Strahan, I have had regard to the affidavits of the parties in which they have set out, by way of summary, relevant s 79(4) considerations that would likely be taken into consideration by the Court in determining that it is just and equitable to make an adjustment of the parties’ property pursuant to s 79(2).
In terms of the first test adumbrated in Strahan, I also accept that an order for partial property distribution may be appropriate and in the interests of justice in order to assist a party to meet legal expenses which they are likely to incur in the proceedings. This is particularly the case where there is a disparity in the financial resources of the parties with the consequent comparative ability to fund their case. In that respect, the authorities are quite clear that, wherever possible, the Court should endeavour to even out the playing field between litigants where one party has predominant control of and access to the matrimonial property pool: Iphostrou & Iphostrou and Ors [2011] FamCA 20 at [60] and Strahan at [79]–[80].
In that respect, the husband contends that there is an unevenness in the playing field in this matter, in circumstances where he is currently unemployed and the wife remains in employment. That contention, however, needs to be seen in context. The wife contends that the husband has been unemployed since 2014 only as a result of an unwillingness on his part to exploit his substantial earning capacity. This is in circumstances where the husband acknowledges that, as a result of applying his business skills, he built up a substantial business raising a gross turnover of between $70–$90 million per annum. The wife’s contention regarding the husband’s potential earning capacity is clearly a matter that will require determination at final hearing.
Comparatively, the wife contends, that as result of legal fees that she has incurred in these proceedings, she is no longer able to afford legal representation and is sustaining herself and assisting her children only through the income she receives working shift work as a healthcare professional. Again, the parties’ comparative earning capacities will be an issue that will be considered at the final hearing.
In circumstances where these issues remain to be resolved, the husband has failed to satisfy me that there is, in fact, an unevenness in the parties’ financial resources such that it justifies an order being made for partial property distribution to assist him in meeting legal fees which he anticipates incurring in these proceedings. Accordingly, I am not satisfied that it is in the interests of justice for an order for partial property distribution to be made in the circumstances of this case.
I would add that, even if I had been so satisfied, I would have declined to make an order for partial property distribution in circumstances where the legal fees incurred by the parties and which the husband contends are likely to be incurred by him, in this litigation, are grossly disproportionate to the amount in dispute.
In that context, I have noted that the parties have agreed, for the purpose of these proceedings, that the net property available for distribution between them is $2,467,729. The husband contends that a just and equitable adjustment of the matrimonial property pool is one that would result in him receiving 60 per cent of the net property pool. Comparatively, the wife contends that a just and equitable adjustment of the parties’ property would result in her receiving 50 per cent.
In other words, the parties are locked in protracted litigation fighting over who should obtain the disputed 10 per cent of their property pool. Based on their agreement for the purpose of these proceedings, this means that the parties are in dispute in respect to an amount of approximately $246,000.
Astonishingly, the parties have to date incurred combined legal fees in the order of $1.1 million. This is over and above the $1,298,071 claimed by the second respondents. Additionally, the costs notice provided by the husband and marked as Exhibit 1 in these proceedings anticipates that he will incur, by way of future costs over and above those which he has already incurred, the following costs for the remainder of this litigation:
·Solicitors costs – $350,000;
·Junior counsel’s fees – $150,000;
·Senior counsel’s fees – $200,000;
·Total – $700,000
In other words, leaving aside the costs of the other parties to this litigation and the costs of the second respondents and assuming the wife remains self-represented, the parties will end up spending, according to the husband, an estimated total amount of $1.8 million fighting over a dispute concerning the apportionment of $256,000.
This is an absurdity. As I indicated to the parties’ legal representatives during the course of these proceedings, in the strongest terms, the parties and/or their legal advisers may ultimately be held accountable for the gross disproportionality of legal costs being incurred in these proceedings. In that respect, I refer the parties to the overarching purpose as set out in ss 67 and 68 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (the “FCFCOA Act”).
As I have earlier noted, the Court’s power as to whether or not to make an order for partial property distribution is discretionary. For the reasons which I have set out herein, I decline to exercise my discretion to make an order for partial property distribution as sought by the husband.
In that context, I note that the orders sought by the husband as set out in his Outline of Case Document (Interim Hearing) filed on 4 November 2022 are different from those which are set out in his Application in a Proceeding filed 24 October 2022. While the husband sought only an order in terms of Order 4 of his proposed minute of order as set out in his Outline of Case Document (Interim Hearing), he sought orders for the balance of his Application in a Proceeding to be stood over, with liberty to apply for the proceedings to be relisted so that he could agitate in respect to the remaining orders he proposes in that application.
I decline to make that order. This is because the orders sought by the husband in his Application in a Proceeding filed on 24 October 2022 have been superseded by the husband’s minute of order as set out in his Outline of Case Document (Interim Hearing). This would create uncertainty and result in unfairness to the other parties who would be left in a degree of confusion as to precisely what orders are being pressed by the husband.
Additionally, I have had regard to the obligation imposed upon the Court pursuant to s 67 of the FCFCOA Act which requires a Court to have regard to the impact of litigation not only on the parties to the immediate proceedings before the Court but also “the efficient use of the judicial and administrative resources available for the purposes of the Court” including, most relevantly, other litigants whose matters would necessarily be delayed by the Court applying further resources to considering the balance of orders sought by the husband in his Application in a Proceeding.
In circumstances where it is imperative for the litigation that has infected the parties’ lives for the past seven years to come to finality, I have therefore administratively listed the matter for hearing for three days commencing Monday, 6 March 2023. The matter has also been listed for been listed for a Trial Management Hearing at 4.00 pm on 16 December 2022.
At that Trial Management Hearing, the parties will be required to explain whether they have complied with paragraph 3.9(b) of the Central Practice Direction: Family Law Case Management by being prepared to make and consider reasonable offers of settlement, and, in the absence of such compliance, reasons for that failure.
I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Deputy Chief Justice McClelland. Associate:
Dated: 22 November 2022
SCHEDULE OF PARTIES
SYC 2100 of 2016 Respondents
Fourth Respondent:
K PTY LTD
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