Karllsson and Karllsson and Anor

[2015] FamCA 51

FAMILY COURT OF AUSTRALIA

KARLLSSON & KARLLSSON AND ANOR [2015] FamCA 51

FAMILY LAW – PRACTICE AND PROCEDURE – Stay – order made for the valuation of, and the husband’s interest in, the intervener's trust – where husband seeks a stay of order pending appeal – husband’s mother sought to intervene in proceedings and set aside orders for valuation – prejudice to wife – appeal rendered nugatory – stay granted

Family Law Act 1975 (Cth) ss 79(10), 92
Family Law Rules 2004 (Cth) rr 6.06, 6.05, 22.11

Aldridge & Keaton (Stay Appeal) [2009] FamCAFC 106
Barro & Barro (1983) FLC 91-300
Friscioni & Friscioni [2009] FamCAFC 43
Shaw & Shaw (1989) FLC 92-030
Trahn & Long (No 2) [2008] FamCAFC 194

APPLICANT: Mr Karllsson

RESPONDENT: Ms Karllsson

INTERVENER: Ms Karllsson Snr

FILE NUMBER: ADC 43 of 2013

DATE DELIVERED: 6 February 2015

PLACE DELIVERED: Adelaide

PLACE HEARD: Adelaide

JUDGMENT OF: Dawe J

HEARING DATE: 28 October 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Strum

SOLICITOR FOR THE APPLICANT: Mills Oakley Lawyers

COUNSEL FOR THE RESPONDENT: Mr Bartfeld QC

SOLICITOR FOR THE RESPONDENT: Norman Waterhouse Lawyers

COUNSEL FOR THE INTERVENER: Mr Dickson QC with Mr Matta

SOLICITOR FOR THE INTERVENER: Thomson Geer

Orders

1. Paragraph (1) (b) of the Order dated 25 July 2014 is amended to read:

   “The husband’s interests in the [P] Trust and [N] Investments Pty Ltd”.

2. The Orders made on 25 July 2014 are stayed pending the determination and delivery of reasons for judgment by the Full Court of the Family Court of Australia in respect of the husband’s application for leave to appeal and appeal.

3. The husband’s Application in a Case filed 26 August 2014 is dismissed.

4. The Notice of Intervention filed by Ms Karllsson Snr on 12 September 2014 is dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Karllsson & Karllsson and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT ADELAIDE

FILE NUMBER: ADC 43 of 2013

Mr Karllsson

Applicant

And

Ms Karllsson

Respondent

And

Ms Karllsson Snr
Intervener

REASONS FOR JUDGMENT

Introduction

1. The proceedings commenced in early 2013 when Ms Karllsson (“the wife”) filed an Initiating Application seeking final orders in respect of both parenting and property matters.  Responding documents were filed shortly thereafter by Mr Karllsson (“the husband”). 

2. The husband is involved in the management of the Karllsson Group.  The Karllsson Group is a collection of entities accumulated and created by the husband’s family.  One of these entities is the P Trust (“the Trust”).  This judgment concerns an application for a stay of orders which required the valuation of the Trust and the husband’s interest therein. 

3. The husband’s mother, Ms Karllsson Snr (“the intervener”) sought to intervene in proceedings and set aside the order.  The intervener is the Appointor of the Trust. 

Procedural History

1. I do not set out in full the history of the matter but what follows is that which is pertinent to the Application in a Case currently before the Court.

2. The husband filed a Further Amended Application in a Case on 18 June 2014 and the wife filed an Amended Response to an Application in a Case on 4 July 2014.  The interim orders sought in the husband’s application were directed primarily to alterations of the existing parenting arrangements.  In her response the wife sought parenting orders, spousal maintenance and other ancillary orders including the valuation of particular entities collectively known as the Karllsson Group. 

3. Specifically, she sought orders that the husband provide, within 21 days, the following documents:

   2.4A copy of the Trust Deed and any amending Deed(s) for the [P] Trust (and it is noted the husband has obtained the consent of his mother to provide these documents);

   2.5The detailed movements in the loan accounts (copies of general ledger reports and journal entries) of the husband, his mother and the husband’s father’s estate in all entities in the [Karllsson] Group (the husband notes that he believes these have all been provided at least in part for the period 1 July 2009 to 2012), for the period 1 July 2010 to 30 June 2013.

4. The application came before the Court on 15 July 2014.  While the balance of the matters were resolved by consent, or adjourned to a further date, I heard brief argument on the orders sought by the wife in relation to the Trust.  I reserved judgment at the conclusion of the hearing.

5. Judgment was delivered on 25 July 2014 and the following orders made:

   The parties jointly instruct Mr [M] to include assessment and values of the following in his valuation:

   a)The [P] Trust and [N] Pty Ltd;  and

   b)The husband’s interests in the [P] and [N] Pty Ltd

6. The orders are now amended to ensure the full correct name of the Trust and N entity is reflected in the orders, namely, “[P] Trust and [N] Investments Pty Ltd”.

7. An Application in a Case was filed on behalf of the husband on 26 August 2014 seeking a stay of the orders made 25 July 2014, in so far as they required the valuation of the Trust and the husband’s interests therein.  A Notice of Appeal, and an application for leave to appeal, was filed contemporaneously. 

8. On 12 September the husband’s mother, Ms Karllson Snr, filed a Notice of Intervention and supporting affidavit, seeking to set aside the orders made on 25 July 2014 so far as they related to the P Trust.  While I have some concerns in relation to the method used by the husband’s mother, for present purposes Ms Karllsson Snr is referred to as “the intervener”.

9. The application for a stay, and the intervener’s application, was heard on 28 October 2014.  The husband was represented by Mr Strum of Counsel, the wife was represented by Mr Bartfeld, QC and the intervener by Mr Dickson, QC with Mr Matta as Junior Counsel.  I received written outlines from all parties.

10. At the conclusion of the hearing on 28 October 2014 judgment was reserved and the valuation of the Trust, and the husband’s interest therein, stayed pending this judgment.

Submissions

The Husband

1. Counsel for the husband submitted the balance of convenience clearly favours the husband.  He maintained that if the application for a stay is refused the appeal will be rendered nugatory.  Similarly he maintained that if the Trust is valued, and the husband’s appeal is ultimately successful, the valuation will have been otiose and the costs of the valuation thrown away.

2. Mr Strum referred to annexure “LK12” of the wife’s affidavit filed 20 October 2014.  The annexure is an exchange of emails between the wife’s solicitors and Mr M, the joint expert appointed to undertake the valuations, which reveal Mr M is able to undertake a partial valuation of the entities which could be updated to include the Trust should the Full Court decide in the wife’s favour.  Accordingly, counsel for the husband submits that there is little, if any, prejudice to the wife in granting the husband’s application for a stay. 

3. While counsel for the husband did not take me to the grounds of appeal in great detail it was submitted that there is an arguable case to be prosecuted by the husband in the hearing of his appeal.

4. Mr Strum relied upon an invitation to participate in mediation made by the wife’s solicitors to suggest that, in any event, the wife views the valuations as unnecessary.  Similarly, he also claimed that because of the wife’s willingness to participate in negotiations without a valuation of the Trust the wife’s bona fides in opposing the stay should be called into question.

5. It was submitted that the Court should dismiss the wife’s concerns in relation to disclosure of relevant information in respect of the cross distributions between the subject Trust and trusts controlled by the husband, because any distributions will be reflected in the husband’s trust’s accounts.

The Wife

1. It was submitted by Mr Bartfeld, QC that there could be no prejudice to the intervener if the orders of 25 July 2014 were carried out but the wife on the other hand would otherwise suffer significant prejudice.

2. It was argued that the wife will be unable to fully consider her options, primarily that the Trust be joined under Part VIIIAA, if a stay is granted.  It was asserted that the only basis upon which the wife can, responsibly, proceed with an application of that nature is if there is sufficient information available.

3. It was asserted that the husband is attempting to stifle the wife’s trial preparations.  It was argued that the wife needed to progress to the next stage of disclosure and that this information should have been readily available given the husband’s intimate involvement in the Trust and wider Karllsson Group.  Mr Bartfeld, QC submitted that to grant a stay would cause an unreasonable delay which should not be visited upon the wife merely because the intervener seeks to preserve her privacy. 

4. On behalf of the wife it was submitted it is unlikely that the husband will be granted leave to appeal on two grounds.  First, the order is one of practice and procedure as opposed to affecting substantive rights.  Secondly, the order does not affect the rights of the intervener. 

5. Mr Bartfeld, QC also referred to the affidavit of the wife filed 20 October 2014, specifically the substantial number of financial documents annexed where the husband’s intermingling of the affairs with the Trust was, it was submitted, readily apparent, showing that the husband as a director is actively participating in the decision making process of the Trust. 

The Intervener

1. The intervener seeks not a stay but to have the orders, so far as they relate to the P Trust, set aside.  The intervener submits that the Court has an inherent power to set aside an order upon the application of a party who has had no notice of the proceeding. 

2. Counsel for the intervener, Mr Dickson, QC, submitted that the wife’s position must be that either the Trust is property or a financial resource. The evidence currently before the Court does not establish that the Trust could be considered property for the purposes of the Act. The intervener could exercise her powers of appointment and remove the husband from any role within the Trust either as a trustee or a beneficiary. Counsel submitted that absent the right of control the only right the husband has is to be considered. It was submitted that it must therefore be a financial resource.

3. The intervener relied on the Full Court decision of Shaw & Shaw (1989) FLC 92-030 as authority for the proposition that it is not necessary to value a financial resource.

4. Mr Dickson, QC also relied upon the wife’s offer to participate in mediation in the absence of a valuation of the Trust as an indication that the wife “can’t in reality be regarding it as property”.

5. In response to the wife’s submissions, in relation to an application under Part VIIIAA, the intervener argued that it was not a genuine “third option” as it does not assist the wife in determining whether the Trust is property for the purposes of the Act but rather provides a method by which the wife would be able to access the property once such a determination had been made.

Notice of Intervention

1. On 12 September 2014 the husband’s mother, Ms Karllsson Snr, filed a Notice of Intervention by Person Entitled to Intervene purportedly pursuant to rule 6.06 of the Family Law Rules 2004 (Cth) (“the Rules”).

2. Rule 6.06 permits the Attorney-General, or “any other person who is entitled under the Act to do so” to intervene in proceedings without the court’s permission. 

3. It is unclear upon which section the intervener sought to rely. Section 79(10)(b) of the Family Law Act 1975 (Cth) (“the Act”) provides that a person “whose interests would be affected” by the making of an order under s 79 is entitled to become a party to the proceedings.

4. Ordinarily leave would be required pursuant to s 92 of the Act. That section provides any person may apply to intervene in proceedings, other than divorce or nullity of marriage proceedings, and the Court may make an order entitling that person to intervene upon such conditions as the court considers appropriate.

5. The Full Court considered a party’s right to intervene in proceedings in Barro & Barro (1983) FLC 91-300. While a Court has a discretion to permit a person to be heard without applying for leave under s 92 that discretion should be “exercised pragmatically in the circumstances of the individual case so as to give adequate protection to the third party consistently with the rights of the parties to the proceeding”.  At 78,057 Fogarty and Treyvaud JJ went on to note:

   …It is a matter of identifying the interests of the third party in the particular case and making orders which do justice in those circumstances.  Where, for example, a third party who is a stranger to the proceedings desires to be heard upon production of documents which may be ordered under reg.  92 it may be appropriate to permit that person to be heard without any necessity of seeking any form of intervention.  In other cases where the order is of a more significant nature or it is suggested that there is a more proximate relationship between the third party and one of the parties to the proceedings the Court would need to consider whether it was sufficient to grant leave to intervene in the particular issue subject to any condition as to costs or whether there were such special circumstances as to require the third party to intervene wholly in the proceedings or not be heard at all.

6. The orders made on 25 July 2014 do not affect the interests of the third party.  The orders do not provide for the P Trust, or the assets thereof, to be in any way encumbered or distributed.  Nor is the husband’s mother restrained from dealing with the P Trust.  It is difficult to see how the valuation of the entity will affect the interests of the intervener save and except as to privacy.

7. The affidavit of the intervener filed on 12 September 2014 sought the orders set out in Annexure “A” namely:

   1.That Order 1(a) of the Orders made by her Honour, Justice Dawe on 25 July 2014, be set aside in part by deleting reference to “The [P] Trust”.

   2.That the Applicant Wife in these proceedings pay the Intervener’s costs of and incidental to this Application.

   3.Such further order as this Honourable Court deems appropriate.

8. A valuation of the Trust and the husband’s possible interest in that Trust are matters relevant to the property settlement proceedings.

9. The intervener alleges that she was not given notice of the orders sought.  It must be conceded that she was not given an opportunity to be heard.  However, her interests are not affected by the order for valuation.

Stay of Order pending Appeal by husband

1. Pursuant to the Rules the filing of a Notice of Appeal does not stay the operation of an order:

RULE 22.11

Stay

(1) The filing of a Notice of Appeal does not stay the operation or enforcement of the order appealed from, unless otherwise provided by a legislative provision.   

(2)If an appeal has been started, or a party has applied for leave to appeal against an order, any party may apply for an order staying the operation or enforcement of all, or part, of the order to which the appeal or application relates.   

(3) An application for a stay must be filed in the Registry in which the order under appeal was made and be heard by the Judge, Federal Magistrate or Magistrate who made the order under appeal.   

1. The making of an order for a stay “is wholly discretionary and the circumstances that would justify an order for a stay depend on the circumstances of each case” (Friscioni & Friscioni [2009] FamCAFC 43 at [54]).

2. Notwithstanding some brief remarks by counsel in respect of “special circumstances” the principles applicable to the granting of a stay are well settled.   In Aldridge & Keaton (Stay Appeal) [2009] FamCAFC 106 the Full Court listed the factors relevant to the exercise of discretion:

   ·the onus to establish a proper basis for the stay is on the applicant for the stay.  However it is not necessary for the applicant to demonstrate any “special” or “exceptional” circumstances;

   ·a person who has obtained a judgment is entitled to the benefit of that judgment;

   ·a person who has obtained a judgment is entitled to presume the judgment is correct;

   ·the mere filing of an appeal is insufficient to grant a stay;

   ·the bona fides of the applicant;

   ·a stay may be granted on terms that are fair to all parties - this may involve a court weighing the balance of convenience and the competing rights of the parties;

   ·a weighing of the risk that an appeal may be rendered nugatory if a stay is not granted – this will be a substantial factor in determining whether it will be appropriate to grant a stay;

   ·some preliminary assessment of the strength of the proposed appeal – whether the appellant has an arguable case;

   ·the desirability of limiting the frequency of any change in a child’s living arrangements;

   ·the period of time in which the appeal can be heard and whether existing satisfactory arrangements may support the granting of the stay for a short period of time; and

   ·the best interests of the child the subject of the proceedings are a significant consideration.

3. A consideration of the merits of an appeal has been described by the Full Court in Trahn & Long (No 2) [2008] FamCAFC 194 as “some preliminary assessment of the strength of the proposed appeal”.  It is not a re-hearing of the merits of the applicant’s proposed orders but rather an exercise to establish whether the applicant has an arguable case on appeal.   

Consideration

1. I received the letter containing the invitation to mediation (Exhibit 1).  I am not satisfied that one party’s preparedness to undertake sensible negotiations could impact upon the Court’s determination of an application for a stay of orders.  The wife’s attempt to resolve the dispute out of court should not be interpreted as a concession that the valuation was not required if the matter proceeds to trial. 

2. Notwithstanding proceedings commenced only a short time ago the parties have already engaged in numerous costly interlocutory hearings in relation to both parenting and property matters.  It would be entirely inappropriate to penalise a party for seeking to resolve the matter and avoid further costly litigation.

3. The husband brought his application for a stay swiftly.

4. While acknowledging that only a preliminary assessment of the merits of the appeal is warranted, the appeal relates to a procedural matter which does not affect the substantive rights of the parties. 

5. The grant of the stay will delay the wife’s preparation of the matter for trial.

6. However, the significant factor is that the appeal will be rendered nugatory if the stay is not granted.

7. It is therefore, on balance, necessary to grant the stay pending the determination of the appeal.

I certify that the preceding forty-eight (48) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Dawe delivered on 6 February 2015.

Associate: 

Date:  6 February 2015