Jepson & Jepson (No 7)
[2024] FedCFamC1F 363
•29 May 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Jepson & Jepson (No 7) [2024] FedCFamC1F 363
File number(s): SYC 2100 of 2016 Judgment of: ALTOBELLI J Date of judgment: 29 May 2024 Catchwords: FAMILY LAW – PROPERTY – Where the husband and the second respondent seek an interim property distribution to pay legal fees and prepare for final hearing – Where the final hearing is in July 2024 – Where the wife has access to a majority of the matrimonial asset pool – Where the wife asserts the husband will not be entitled to any property adjustment at final hearing and that he has wasted their assets – Order for the husband and the second respondent to each receive $140,000 from monies held in trust – Where it is in the interests of justice to do so. Legislation: Family Law Act 1975 (Cth) s 79 Cases cited: Jepson & Jepson (No 5) [2024] FedCFamC1F 51
Jepson & Jepson (No 6) [2024] FedCFamC1F 290
Division: Division 1 First Instance Number of paragraphs: 29 Date of hearing: 20 May 2024 Place: Sydney Solicitor for the Applicant: Powe & White Family Lawyers Counsel for the First Respondent: Mr Watkins (direct brief) The Second Respondent: Litigant in person ORDERS
SYC 2100 of 2016 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR JEPSON
Applicant
AND: MS JEPSON
First Respondent
MS B JEPSON
Second Respondent
ORDER MADE BY:
ALTOBELLI J
DATE OF ORDER:
29 MAY 2024
THE COURT ORDERS THAT:
1.Within seven days of the date of these orders, the Applicant Husband and the Second Respondent each receive the sum of $140,000, being from the monies held on trust by JJ Lawyers, by way of partial property settlement.
2.The money referred to in Order 1 is to be applied only towards the preparation and conduct of the final hearing of this matter, including counsel’s fees.
3.Any costs incidental to the Applicant Husband’s Application in a Proceeding filed 10 May 2024 are reserved to the final hearing.
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).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of 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 subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALTOBELLI J:
INTRODUCTION
These reasons for judgment explain the orders the Court has made for an interim distribution of property by way of, and for the limited purpose of, meeting the costs of the final hearing of this matter for the applicant husband (“the husband”) and the second respondent paternal grandmother (“the second respondent”).
BACKGROUND
This is the third judgment delivered in this matter this year. Matters of background are adequately set out in the judgment of McClelland DCJ on 9 February 2024 (Jepson & Jepson (No 5) [2024] FedCFamC1F 51 at [5]–[14]) (“Jepson & Jepson (No 5)”)) and that of Campton J on 2 May 2024 (Jepson & Jepson(No 6) [2024] FedCFamC1F 290 at [3]–[21]).
ISSUES
By way of an Application in a Proceeding filed 10 May 2024, the husband seeks, in effect, an order for interim distribution of property in the sum of $350,000. By way of a Response to an Application in a Proceeding filed 16 May 2024, the first respondent wife (“the wife”) asks the Court to dismiss the husband’s application. By way of a Response to an Application in a Proceeding filed 16 May 2024, the second respondent supports the husband’s application, and seeks an order in her favour in the sum of $350,000. The second respondent also sought an order that the wife be restricted to only utilise $350,000 for costs in the present proceedings, from funds she received by way of inheritance from her late parents. I declined to deal with this order, on the basis that the second respondent could have raised this issue in the proceedings before Campton J referred to above but did not. Each of the specific orders sought by the parties are reproduced in the first schedule to these reasons.
THE EVIDENCE BEFORE THE COURT
In support of his case, the husband relies on the following material:
(a)Application in a Proceeding filed 10 May 2024;
(b)His affidavit filed 10 May 2024;
(c)His affidavit filed 6 October 2023 (paragraphs 29 to 105 only);
(d)Outline of Case Document filed 16 May 2024;
(e)Y Company Deed of Settlement;
(f)Financial Statement filed 21 May 2024; and
(g)Costs Notice filed 21 May 2024.
In support of her case, the wife relies on the following material:
(a)Response to an Application in a Proceeding filed 16 May 2024;
(b)Amended Response to Initiating Application filed 11 December 2023;
(c)Her affidavit filed 9 October 2023, paragraphs 68, 126, 137 and 328;
(d)Exhibit to her affidavit filed 9 October 2023, page 509 (paragraph 75 of the KK Company report “[Y Company] Forensic Investigation”);
(e)Her tender bundle dated 10 October 2023, page 447, paragraph 32;
(f)The husband’s affidavit filed 24 October 2022, paragraphs 19 and 126;
(g)The husband’s affidavit filed 6 October 2023, paragraph 226;
(h)Affidavit of Mr DD filed 16 November 2021, pages 26–30, 34 and 75;
(i)Affidavit of Ms B Jepson filed 22 October 2023, paragraphs 41 and 46;
(j)The husband’s Costs Notice filed 25 October 2023;
(k)The husband’s Costs Notice filed 7 November 2022;
(l)Financial Statement filed 23 May 2024; and
(m)Costs Notice filed 21 May 2024.
In support of her case, the second respondent relies on the following material:
(a)Response to an Application in a Proceeding filed 17 May 2024;
(b)Her affidavit filed 17 May 2024;
(c)Her affidavit filed 22 October 2023;
(d)Financial Statement filed 21 May 2024; and
(e)Costs Notice filed 9 November 2023.
THE APPLICABLE LAW
The applicable law is set out at [35] of the judgment of McClelland DCJ (Jepson & Jepson(No 5)). I respectfully adopt the same.
WHY REVISIT THE ISSUE OF INTERIM PROPERTY DISTRIBUTION?
Counsel for the wife quite correctly raised the issue of the appropriateness of this Court yet again considering the husband’s application for interim distribution of property in order to meet his legal costs. Indeed, counsel suggested that the application was an abuse of process.
When McClelland DCJ dismissed the husband’s application for an interim property distribution on 9 February 2024, it was in fact the second application for similar orders that had been dismissed. A common theme of both of the relevant judgments was to “…even up the parties (sic) comparative resources that were available to them to conduct the litigation” (Jepson & Jepson (No 5) at [14]). On 2 May 2024, however, Campton J discharged orders that had until then prevented the wife from accessing funds that she had received by way of inheritance for the purpose of meeting her legal costs. The Court accepts the submission made on behalf of the husband that, in effect, the order in question created uneven access by the husband and the wife to their resources. In short, this Court is satisfied that circumstances had sufficiently changed so as to warrant a reconsideration of the issue before the Court.
Of course, the second respondent’s application for partial property distribution in order to meet her costs also constitutes a different set of circumstances which warrants revisiting the issue.
For the same reason, the Court is also satisfied that, as a matter of formality, leave should be granted to the husband to bring the present application, noting that after setting out interim orders in an Initiating Application or Response, leave of the Court must be sought if a party wishes to file more than one additional Application in a Proceeding (Federal Circuit and Family Court of Australia, Central Practice Direction: Family Law Case Management, paragraph 6.18). The Court dispenses with the need for the husband to have sought leave as part of his Application in a Proceeding filed 10 May 2024.
THE COMPETING PROPOSALS FOR ORDERS UNDER S 79 OF THE ACT
The final orders proposed by the husband are contained in his Outline of Case Document filed 20 October 2023 commencing from page 23. He seeks an order that the wife pay him the sum of $1,280,000 failing which the wife’s property at EE Street, City Q (“the City Q property”) be sold. He seeks an order that both the wife and he be declared equally liable to pay the second respondent such amount as ordered by the Court in repayment of any loans due to her. He otherwise proposes that each party retain what they have.
The final orders sought by the wife are contained in her Amended Response filed 11 December 2023. She seeks an order that the monies currently held on trust for the parties be paid to her, and that they each otherwise retain what they already have.
The final orders sought by the second respondent are contained in her Amended Response to Initiating Application filed 18 December 2023. In the first instance, she seeks repayment of the loan in the sum of $417,624.20 to the third respondent (K Pty Ltd) in priority to any property division between the husband and the wife. There are various default provisions in the event of non-payment. The Court notes that the third respondent was removed from the proceedings by consent at an interim hearing on 20 December 2023. The second respondent, however, is still pressing her claim for recoveries of monies advanced to the husband and the wife in the sum of $417,624.20. In addition, the second respondent seeks orders for the delivery of specific items of valuable personal property including an instrument, two vehicles and a valuable collection, or payment in lieu of their return. She proposes that if the parties fail to, or cannot comply, the City Q property should be sold to enable payment.
THE CONTENDED BALANCE SHEET
In a case where the parties seem singularly unable to agree to anything of substance, their respective contentions about the balance sheet are surprisingly similar. In the wife’s affidavit filed 16 May 2024, and the husband’s case outline filed 16 May 2024, they both contend for a pool of assets of about $4.6 million. There are relatively minor differences about the value of jewellery, handbags, motor vehicles and tools, all of which should be determinable without undue complexity either by valuation, or compromise. It is unnecessary to set out the competing balance sheets, for present purposes. What is clear, however, is that the vast majority of the assets on the balance sheet are in the wife’s name and controlled by her.
Whereas the husband contends for a single pool of assets, the wife contends for two asset pools. Significantly, in the second asset pool, she places the City Q property, and her inheritances from her parents, all together totalling $2,915,997. She contends that the husband has made no contribution to the second asset pool. Whilst a hint was given in submissions that the husband may concede at final hearing that he made no contribution to the wife’s inheritances, he contends that he has contributed to the City Q property, valued at $1,725,000.
In short, it would seem that the wife will contend that all of the assets in her name, irrespective of which pool, should be retained by her, with the husband retaining his $5,000 Motor Vehicle 4, and tools of the same value. She contends for nondisclosure on the part of the husband, and that he has wasted, by his own conduct, an enormous pool of assets through mismanagement and dishonesty, including criminal activity.
In short, the husband contends that because of the very significant financial contribution made by the second respondent, his contribution would at least equal that of the wife, even taking into account her post-separation inheritances and property acquisition. He denies nondisclosure, dishonesty, criminal behaviour and any conduct amounting to waste. The Court inferred that an implied theme of his case would be that the wife, who enjoyed all the advantages of a successful business, should share the disadvantages of an unsuccessful business.
The Court notes that the wife makes very serious allegations against the husband in terms of his behaviour and conduct, but he has not been convicted of the crimes for which he has been charged despite a significant passage of time.
Curiously, the Court notes, neither party’s balance sheet refers to the loan for which the second respondent contends. This is curious indeed in the husband’s case because his Financial Statement of 20 October 2023 expressly refers to a loan from the second respondent of $1 million. In the second respondent’s case, she contends for financial contribution totalling about $6.3 million, much of it to pay the husband’s legal fees, with the rest to support the businesses conducted by the husband and the wife at various times, as well as to pay their home and contents and car insurance, their life insurance and their children’s school fees. The wife’s treatment of the second respondent’s financial contribution to the relationship is minimalistic. Even if her contention of statute barred debts is correct, the financial contribution made by the second respondent presents as being very significant indeed.
Notwithstanding the balance sheets contended by each of the husband and the wife, each also acknowledged that there would be arguments about addbacks in relation to premature distribution or dissipation of matrimonial assets.
DO THE CIRCUMSTANCES WARRANT AN EXERCISE OF THE COURT’S POWER TO MAKE AN ORDER FOR INTERIM PROPERTY DISTRIBUTION?
This Court concludes in the affirmative. The orders made by Campton J on 2 May 2024 granted to the wife access to over $1 million for the purposes of litigating the present claim. The husband presents as being impecunious. The second respondent likewise presents as impecunious. They both owe significant legal costs. The ability of the wife to litigate on the one hand, and that of the husband and the second respondent on the other, is clearly disproportionate. The litigation is complex. Given the litigation history of this matter, the prospects of settlement would be negligible if the parties lack independent, professional, and experienced representation. It is in the interests of justice that orders be made to facilitate all parties’ effective participation in the proceedings.
CONSIDERATION OF S 79 OF THE ACT
The highly litigious and contentious nature of the present long-running, highly expensive matter compels the Court to adopt a conservative approach in the application of s 79 of the Family Law Act 1975 (Cth) in the present context. Appropriate scepticism must be exercised. After coming to this case for the first time, I am far from satisfied that all relevant facts have been placed before the Court. None of the serious allegations made by the wife have been tested in cross-examination. Indeed, the seriousness of the allegations accentuates the need for them to be properly tested at a hearing by cross-examination in a context where all parties are properly represented by skilled counsel. Whereas the husband may well need to provide answers about the circumstances in which the parties’ business empire met its demise, perhaps the wife will need to provide answers about the disposition of assets, as well as the extent of her knowledge about the husband’s business dealings. Both the husband and the wife may well have given inadequate consideration to what appears to be the vast financial contribution provided by the second respondent. There are far more unanswered questions about this case than answered ones.
In the circumstances, the wife’s contention that she should receive almost the entirety of the asset pool is a contention that must be treated very carefully indeed. The suddenly shifting goalposts of her proposed orders cannot be ignored in the present context, even if she was entitled to change her mind. Seemingly within a matter of weeks, the wife went from conceding that the husband should receive $320,000 to asserting that he should receive nothing. The goalposts shifted, but not, it would seem, the underlying basis of her claim. How can that be so?
The position of the second respondent is slightly different. She may, or may not be a creditor, depending on findings of fact. Even if she is not a creditor, her evidence about financial contribution will be significant. She too will both have questions to ask, and to answer in this case.
Both the husband and the second respondent have the right to be legally represented at the hearing. They both seek $350,000. In response to a question from the bench about how she came up with the figure of $350,000, the second respondent said she could not remember, but that she had been helped by the husband when preparing for this matter. The solicitor for the husband conceded that on his own evidence, the amount that he actually needs to run a final hearing from the date of his affidavit (10 May 2024) to the end of a five-day hearing would be about $140,000 GST inclusive. It is accepted that the husband owes his solicitors more than $140,000, and that the difference between this amount and the amount sought was attributable to costs rendered but unpaid. Of course, the solicitor is potentially protected by a fruits-of-the-litigation lien, as well as any other security that may have been taken. In a case which is as fraught with uncertainty as the present one, from the Court’s perspective, there is a significant difference in terms of impact on the balance sheet between $140,000 and $350,000, particularly if that is multiplied by two. If an order for interim property distribution is made, it will be at the lower figure, and it will be strictly conditional on the application of the funds towards preparation and conduct of the final hearing, including counsel. The Court notes that the wife’s estimated costs to prepare and conduct the final hearing are between $77,000 and $147,000 (depending on whether a solicitor is required).
ARE THERE SUFFICIENT ASSETS TO SATISFY THE ORDER WITHOUT PREJUDICING THE WIFE’S CLAIM?
If, as the Court is contemplating, an order for $140,000 is made in favour of the second respondent, given that she is contending for a payment to her significantly greater than this amount, the Court is satisfied that this amount can be “clawed back” in the sense of it being offset against her prospective potential entitlement. The same conclusion applies to the husband. It is difficult to conceive of a situation where his entitlement is less than $140,000. With the necessary scepticism that is applied on the facts of this case, it is hard to see how the proposed orders would defeat any legitimate expectation of the wife at a final hearing.
ORDERS
The Court will order that the husband and the second respondent each receive the sum of $140,000, being from the monies held on trust by JJ Lawyers. This money is to be applied only towards the preparation and conduct of the final hearing, including counsel’s fees.
Any costs incidental to this application are reserved to the final hearing.
I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Altobelli.
Associate:
Dated: 29 May 2024
SCHEDULE ONE
Orders sought by the husband
(1)All time limits be and are hereby abridged necessary to allow this Application in a Proceeding to be brought before and otherwise heard urgently before the Court.
(2)By way of partial property settlement, the Applicant Husband shall receive the sum of $350,000.00, being from the monies held by JJ Lawyers in relation to the sale of L Street, Suburb P in the State of New South Wales.
(3)Necessary to give effect to the aforesaid Order, the solicitor for the Husband shall serve upon JJ Lawyers a copy of these Orders whereupon such Orders are sufficient authority for JJ Lawyers to direct the relevant sum to Powe & White Family Lawyers on behalf of the Applicant Husband.
(4)The Respondent Wife shall pay the costs of the Applicant Husband on an indemnity basis or otherwise she shall pay the costs of the Applicant Husband as determined by the Court.
Orders sought by the wife
(1)That the husband’s Application in a Proceeding filed 10th May 2024 be dismissed.
(2)That the applicant pay the first respondent’s costs.
Orders sought by the second respondent
(1)That Orders be made in accordance with the applicant husband’s application in a proceeding.
(2)That the Orders be made that Ms B Jepson is also given access to $350,000 from the marital assets to fund proceedings.
(3)That Ms Jepson is restricted to only utilising a maximum of $350,000 of the inheritance prior to the final hearing of the judgement.
(4)In the alternative that Ms B Jepson is repayed the amount of $417,624.20 as detailed in the Affidavit 17 May 2023 at paragraph 19.
(5)In the further alternate that each party is allowed access to an amount of funds that the Court see’s fit to allow each party to be legally represented at final hearing. I estimate that a suitable amount would be $150,000 for each party and that Ms Jepson is restricted from disposing of or utilising any more then that from the inheritances until determination of the final hearing.
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