Kellner and Kellner and Ors

[2014] FCCA 974

FEDERAL CIRCUIT COURT OF AUSTRALIA

KELLNER & KELLNER & ORS [2014] FCCA 974

Catchwords:
FAMILY LAW – Interim application  – sale of property - manner and timing of sale – distribution of sale proceeds – application for costs – after threshold hearing regarding whether or not a de facto relationship existed – whether or not costs order should be made on an indemnity basis – whether or not the Federal Circuit Court costs scale should be departed from.

Legislation:

Family Law Act 1975, s.117

Federal Circuit Court Rules2001, Sch 1, Pt 21

Prantage and Prantage [2013] FamCAFC 105
In theMarriage of Kohan (1992) 16 Fam LR 245
Bennett & Bennett (2001) FLC 93-088
Marsden & Winch [2013] FamCAFC 177
Central Authority v Wageman [2012] FamCAFC 176
AON Risk Management Services Ltd v Australian National University (2009) 239 CLR 175

Applicant: MS KELLNER

First Respondent: MR G KELLNER

Second Respondent: MR A KELLNER

Third Respondent: MS KINGSLEY

Fourth Respondent: [K] PTY LTD

Fifth Respondent: [E] PTY LTD

File Number: DNC 439 of 2012

Judgment of: Judge Harland

Hearing dates:

14 March 2014, 2 April 2014, 22 April 2014

and 28 April 2014

Date of Last Submission: 28 April 2014

Delivered at: Darwin

Delivered on: 14 May 2014

REPRESENTATION

Counsel for the Applicant: Ms Farmer

Solicitors for the Applicant: Withnalls Lawyers

Counsel for the Respondents: Mr Black

Solicitors for the Respondents: Cecil Black Family Lawyers

ORDERS

1. That within 7 days of the date of these orders that the parties do all acts and things necessary to cause a permit to occupy to issue for the property at Property B.

2. That within 72 hours of the date of these orders the first respondent provide to the applicant’s solicitors, all keys, access equipment and remote controls for all doors for the property at Property B.

3. That upon compliance with Order 1 the applicant shall have sole occupation of the property at Property B to the exclusion of the respondents.

4. That within 10 days of the date of these orders, the parties do all acts and things and sign all documents necessary to list the following properties on the market for sale:

   (a)Property L in the Northern Territory of Australia, Lot (omitted);

   (b)Property D in the Northern Territory of Australia, Lot (omitted);

   (c)Property E in the Northern Territory of Australia Lot (omitted);

   (d)Property G in the Northern Territory of Australia Lot (omitted).

5. That the for the purposes of order 4:

   (a)the first respondent will appoint a real estate agent to sell the properties listed at 4(a) and (c) within 7 days of the date of these orders;

   (b)the applicant will appoint a real estate agent to sell the properties listed at 4(b) and (d) within 7 days of the date of these orders

6. That the parties shall accept any offer for sale made by an independent purchaser of or in excess the following purchase prices for the following properties:

   (a)Property L in the sum of six hundred and seventy thousand dollars ($670,000);

   (b)Property D in the sum of six hundred and fifty thousand dollars ($650,000);

   (c)Property E in the sum of seven hundred and twenty thousand dollars ($720,000);

   (d)Property G in the sum of six hundred and eighty thousand dollars ($680,000).

7. That Withnalls Lawyers be instructed to act as the solicitors on behalf of the parties to effect the conveyance for the sales and the Vendors of the respective properties as set out on order 6 (a) – (d).

8. That upon the finalisation of the sale of each of the properties referred to above, the proceeds of sale shall be distributed as follows:

   (a)Firstly, to pay the selling costs including commission marketing expenses and conveyancing in  respect of each sale;

   (b)Secondly, to discharge any warrants registered against the titles of the particular property sold;

   (c)Thirdly, to pay to (omitted) Bank, such money as is required to release the title to the particular property sold;

   (d)Fourthly, to pay the debts referred to in the subsequent paragraphs.

9. That the purposes of giving effect to paragraph (8)d) of this order, the order of priority for payment shall be:

   (a)Firstly, the payment of the amount of the judgment in the Local Court of Darwin the proceedings numbered (omitted) wherein the plaintiff is (omitted) and the Applicant and First Respondent are the defendants, in the event that judgment is not satisfied by the discharge of a warrant referred to earlier herein;

   (b)Secondly, the payment of insurance premiums in respect of insurance for the properties of each of the parties where the jointly or solely, and the property of the Applicant and the First Respondents and the Second Respondent and the property of the Applicant and the First Respondent and the Third Respondent;

   (c)Thirdly, the payment of all monies due to the Australian Tax Office (ATO) for the personal tax liabilities of each of the Applicant and the First Respondent for the financial year ended 30 June 2011 and earlier (if any);

   (d)Fourthly, the payment of all monies due to the ATO for the joint liabilities of the Applicant and the First Respondent for the financial year ended 2012.

10. That Property A be listed for lease at $850 per week with (omitted) Real Estate the appointed managing agents and all net rental proceeds be paid to (omitted) Bank Business Account (omitted).

    (a)(omitted) Real Estate in the sum of $2,814 for valuation services for the rental valuations for Property Y and Property D;

    (b)(omitted) in the sum of $770 for valuation services for the rental valuations for Property Y and Property D;

    (c)(omitted) for insurance related to Property A and Property B and Property G in the sum of $15,346.50;

    (d)Australian Taxation Office for all fines and interest owed by (omitted) Pty Ltd;

    (e)$50,000 by way of partial property paid to Withnalls Lawyers for and on behalf of the Applicant Ms Kellner and $100,000 by way of partial property paid to Cecil Black Family Lawyers for and on behalf of the First Respondent Mr G Kellner; and

    (f)Balance to Withnalls Lawyers Trust Account.

11. That within 7 days the parties shall approach the President of the Institute of Chartered Accountants Australia to nominate a chartered accountant (practising in Darwin if possible) not previously engaged by any of the parties.

12. That the first respondent pay the Applicant’s costs in accordance with schedule 1 of the Federal Circuit Court Rules2001 from the date of filing until 17 December 2013.

13. That the application in a case filed on 11 April 2014 by the second respondent be dismissed.

14. That the second respondent pay the Applicant’s costs with respect to the application in a case filed on 11 April 2014 of $1,661 within 30 days of the date of these Orders.

15. That these proceedings be transferred to the Family Court of Australia NOTING that the parties estimate that the final hearing will take at least 5 days.

NOTATION:

It is noted that the parties have already listed the property at Property D for sale.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT DARWIN

DNC 439 of 2012

MS KELLNER

Applicant

And

MR G KELLNER

First Respondent

MR A KELLNER

Second Respondent

MS KINGSLEY

Third Respondent

[K] PTY LTD
Fourth Respondent

[E] PTY LTD
Fifth Respondent

REASONS FOR JUDGMENT

1. This case has a long history. On 17 December 2013 I made a declaration which included that the parties were in a de facto relationship. The applicant filed an application in a case on 7 March 2014 (amended on 14 March 2014).

2. The issues I am asked to determine today are:

   a)Whether or not the applicant should be given sole occupation of Property B. Whether or not this property should be sold;

   b)Whether or not the parties should engage a new agent to sell the property at Property D;

   c)Whether or not the applicant or the first respondent should nominate three agents to sell the other properties with the other party to choose one of those three;

   d)Whether or not the properties at Property G and Property E should be sold at the same time or with the Property G property to be sold first;

   e)How the proceeds of sale should be distributed;

   f)Whether or not the first respondent should pay the applicant’s costs of the jurisdiction issue and whether or not those costs should be paid on an indemnity basis or on some other basis.

Property B

1. The applicant seeks to retain this property as part of her final property settlement. The respondents do not want to keep this property and want it sold. It is apparent from the balance sheet the parties handed up that the applicant may well be able to retain that property as part of her settlement.  In those circumstances it would not be just and equitable to force the sale of that property before a final hearing as this would deprive the applicant of the opportunity of keeping the property she wants. This is particularly so when there are other properties which no party wish to keep which can be sold to reduce the parties’ debts.

2. When the parties separated, the Property B property was being built. The first and second respondent completed the property after separation to the exclusion of the applicant. The applicant was to be the builder. The parties have mortgages secured across their properties.

3. The applicant seeks exclusive occupation of this home. She proposes that the property she is currently living in be rented out.

Property A

1. The applicant currently lives at Property A. She has obtained a rental appraisal for the property of between $850 and $900 a week. The applicant says the rent can be applied to the loans to reduce the financial pressure on the parties.

2. The first respondent says that the Property B property could be rented instead. He provides no evidence as to what it could rent for. Given the level of acrimony between the parties it is appropriate that agents be appointed to manage the rental.

3. The applicant’s proposals with respect to the Property B property and the Property A property are sensible. As the first respondent is not seeking to keep either property it should make no difference to him as to which property is rented out and which property is occupied by the applicant.  I will address the second respondent’s position separately.

Property D property

1. On the last occasion this matter was in court the parties entered into orders with respect to the Property D property. At that time the parties thought that property was subject to a Defence Housing Australia (DHA) lease. The parties have since discovered that this is not the case.

2. This will take a few weeks for the parties to formalise. Mr G Kellner wants to take the opportunity to appoint a new agent to sell the property.  He complains that the current agent has not done much to market the property. This is not supported by the evidence. The current agency agreement is due to expire in a couple of weeks. Due to the issue concerning the DHA, the property will not sell in that time period. Ms Kellner wishes to extend the current agency agreement. This is a sensible approach. These parties cannot agree on anything. Appointing a new agent would lead to further delays in circumstances where the parties owe significant funds to the bank.

3. The parties were served with breach of facility offer notices with respect to loans secured cross collaterally against three of their properties.

Property G and Property E

1. The applicant seeks that the properties at Property G and Property E be sold at the same time. The respondent seeks that the properties be sold one after the other.

2. The respondent rejects the applicant’s contention that he has been difficult and obstructive with respect to selling the properties. He says he merely wants to ensure that the properties are sold for the best price.

3. Neither the applicant nor the first respondent is currently working. The parties rely on rental income to pay for their living expenses. They are not keeping up with loan repayments. Properties need to be sold.

4. In circumstances where the parties agree the properties should be sold the court can see no advantage in selling the properties one at a time rather than together.

How the proceeds of sale should be distributed

1. The applicant and respondent are in partial agreement about the distribution of sale proceeds. The respondent seeks payment of some monies which are likely to be the subject of dispute at the final hearing. These include the items listed at paragraph 11(e) to (h) of the first respondent’s amended response.

2. I will make orders providing for payments of debts which are not controversial and will provide for the release of some funds to the applicant and first respondent by way of partial property settlement.  The remainder will be placed in Withalls Lawyers trust account. Any further application with respect to those funds can be made to the Family Court.

Orders

1. The lawyers had indicated that they were agreed that Withnalls lawyers would act on the conveyancing. It is apparent from the lack of an agreed minute that this is no longer agreed. In my view it will be more economical for the parties for Withnalls to act on the conveyancing for the parties as they already have the information about the properties. The respondents have not proposed an alternative and it is clear that the parties will not be able to agree on any alternatives which will result in further delay unless an order is made now.

2. Given the debts the parties have incurred the sale of the real estate needs to occur without further delay. It is for this reason that I have included tight time frames in the orders and given the parties inability to agree on anything I have given the applicant and first respondent the right to nominate agents for certain properties.

Transfer of these proceedings

1. The parties agree that this matter should be transferred to the Family Court of Australia, Darwin. The preliminary issue took up court hearing time of three and a half days.

2. The parties agree that the final hearing is likely to take at least five days. The parties have a clearer idea of the property pool now than they did previously and they handed up a handwritten balance sheet. There are still some unknowns and the parties need to make further financial disclosure. The third respondent was recently joined to the proceedings by consent. The fourth and fifth respondents are companies.

3. Any further interlocutory issues, including the application in a case filed after the hearing of this application in a case will be listed before the Family Court.

Application in a case filed on 11 April 2014 by second respondent

1. On the 2 April 2014 the legal representatives advised the court that some issues were agreed and that they would prepare a minute of consent orders with respect to those issues. The court reserved its decision. Despite enquiries being made by Chambers staff no minute was forthcoming and the court issued a Chambers order that any minute of consent ought to be filed by 4.00 pm Friday, 11 April 2014.

2. When Mr Black announced his appearance on 14 March 2014 and 2 April 2014 he said he appeared for the first, second and third respondents. The second respondent filed an application in a case seeking orders with respect to Property B on 11 April 2014. The occupation and possible rental of Property B was the subject of the submissions during the interim hearing. The second respondent filed a response to the applicant’s application in a case on 2 April 2014.  He was legally represented and was present in court on 2 April 2014 wherein he sought a dismissal of the applicant’s application for exclusive occupation of the Property B property.  He could have sought other orders with respect to the Property B property in that response together with an affidavit and financial statement. He chose not to and instead filed an application in a case together with supporting documents. At the interim hearing on 2 April 2014 the first and second respondent asked for the Property B property to be sold.

3. The first respondent also filed a further affidavit on 11 April 2014.  The purpose of which is unclear.  The second respondent states in his affidavit filed on 11 April 2014 that although his and his father’s position at the interim hearing on 2 April 2014 was that the Property B property should be sold, he has since changed his mind.  He now wants control over the property and wants to rent it out pending the final hearing.

4. The second respondent could have raised this argument at the interim hearing.  During the course of the interim hearing the second respondent heard me say that I would not order the sale of a property on an interim basis when a party was seeking to retain the property on a final basis which is the applicant’s position with respect to this property.

5. On 2 April 2014 I reserved decision after hearing argument on 14 March and 2 April 2014.  It has been necessary to relist the matter before delivering judgment because of this further application in a case.  I listed it for mention on 22 April 2014 and expressed my concern to Mr Black that this further application is an abuse of process.  It does not raise any new issues that could not have been addressed on 2 April 2014. Mr Black sought that it be listed for argument.  It was listed for that purpose on 28 April 2014. Both parties filed written submissions referring to various authorities. I have considered those submissions and authorities and note that the submissions for the second respondent in particular miss the mark. There is no suggestion that the second respondent is a vexatious litigant. The second respondent’s submissions to treat the issue as if the second respondent is being excluded from the proceedings. This is not the case. The comments made by the Full Court in Bennett & Bennett (2001) FLC 93-088 and in Marsden & Winch [2013] FamCAFC 177 simply do not apply.

6. The issue is that the second respondent had the opportunity to be heard on the issue with respect to the Property B property and did not take up the opportunity. He should not now be permitted to seek to agitate the same issue which he could have agitated on 2 April 2014. This is an important point which has implications not just for this individual case but for the case management responsibilities of the court generally. The second respondent was named as a respondent in the proceedings when the applicant filed her initiating application on 17 October 2012. This court delivered its judgment finding that the applicant and the first respondent were in a de facto relationship on 17 December 2013. Whilst it was reasonable for the second respondent not to incur the cost of filing documents whilst the jurisdictional issue remained a live issue, he had several months prior to the interim hearing and after the delivery of that judgment to file his material. He chose not to do so and provides no explanation as to why he did not file his material earlier. It is only after the interim hearing that he tells the court for the first time that he seeks to retain the Property B property. The interim orders that I am making giving the applicant sole occupation of the Property B property does not render the second respondent’s application for final orders nugatory. The second respondent’s position is not, as stated erroneously in his written submissions, that he is not a disinterested third party.  The issue as to whether or not the Property B property should be transferred to the applicant or the second respondent or be sold is not affected by the interim orders I am making. It is significant that the second respondent only sought to retain this property after being unsuccessful in seeking the property be sold on an interim basis.

1. The written submissions by the second respondent did not squarely address the very simple issue which is that he had the opportunity to agitate his claim at the time of the interim hearing and failed to do so. The rule of this court places obligations on the parties to avoid undue delay and expense and technicality.[1]  It is instructive to remind parties and their legal representatives about the court’s inherent jurisdiction to protect its own processes.  In her written submissions the applicant referred to Central Authority v Wageman [2012] FamCAFC 176 and the quote from Lord Diplock in Hunter v Chief Constable of West Midlands Police being

   “the inherent power which any court of justice must possess to prevent misuse of its procedure in a way we, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people.”

   Both aspects of this statement are relevant here.

   [1] Rule 1.03(4) Federal Circuit Court Rules 2001

2. The High Court decision of AON Risk Management Services Ltd v Australian National University (2009) 239 CLR 175 is an important case here. At [92] the plurality noted that case management administered by courts is an accepted aspect of the civil justice system and is necessary to deal with costs and delay. The application in a case seeks to re-agitate issues which have already been agitated. There is mischief to the court and the administration of justice generally if the second respondent is allowed to re-agitate an issue already determined. It would necessarily mean delay and additional cost not just in their case but for other cases as well as if any litigant who is unhappy about an interim decision could re-agitate it by filing a further application in a case dealing with the same subject matter. The fact that in this instance I had not yet delivered my reasons does not detract from this point. There is no prejudice to the second respondent in having the applicant live in the property she wants to retain on a final basis. The parties’ financial circumstances are intermingled to some extent and the rental income from the Property A property will be applied to the parties’ debt.

3. The second respondent should not have filed the application in a case.  He sought to agitate it even after being on notice about the court’s concerns about it being an abuse of process because the subject matter had already been agitated. As a result there has been further delay in this matter as well as additional court time.  The second respondent should pay the applicant’s costs of responding to this application which involved two court attendances and preparation of written submissions I fix those costs at $1,661 in accordance with item 3 of the Federal Circuit Court Rules 2001 costs scale.

Costs

1. The applicant seeks costs of the jurisdictional argument on an indemnity basis. The jurisdictional issue was heard over the course of three and a half days plus written submissions.

2. The first respondent resists the costs order arguing simply that if the matter had been transferred to the Family Court there would not have been the need for a separate hearing on the jurisdictional issue. This is because he says the Family Court has jurisdiction to deal with orders under a partnership. This omission is entirely misconceived. Whilst the Family Court has accrued and associated jurisdiction (as does this court) this does not mean that the Family Court would exercise jurisdiction in isolation to there being a course of action under the Family Law Act 1975. The applicant was entitled to ask the jurisdictional argument be resolved once the respondent placed it in issue as it may well be that he / she would do better in a family law property settlement where non-economic factors can be taken into account than with respect to a commercial partnership issue. Even if the matter had been transferred to the Family Court before the jurisdictional issue was heard it may well have been that the Family Court would have determined to have a separate hearing on this issue in any event.

3. In order for the Court to make a costs order in favour of the parties there must be justifying circumstances as set out in section 117(2A) of the Family Law Act 1975. I will address each of these matters in turn.

(a) The financial circumstances of each of the parties to the proceedings

1. The financial position of the parties is somewhat unclear as they are yet to proceed to a final hearing. The parties handed up a handwritten balance sheet at the beginning of the interim hearing. It is apparent from that document that the net pool is approximately $2,000,000.

2. Neither party is working currently and is relying on rental income.

3. The applicant and the first respondent are in a similar financial position.

(b) Whether any party to the proceedings is in receipt of assistance by way of legal aid

1. Neither party is in receipt of legal aid.

(c) The conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters.

1. The applicant complains that the first respondent’s conduct lead to delay and increased costs.  By the time of the first court appearance the first respondent had not filed any documents.  This meant the first court appearance was a wasted one.

2. It was not until the interim hearing on 8 November 2012 that the first respondent informed the applicant that he was challenging the existence of a de facto relationship. He should have disclosed this much earlier.

3. The matter was then listed for a 2 day preliminary hearing on 28 and 29 November 2012.  The case was stood down on 28 November 2012 to enable the first respondent to obtain a medical certificate. This was produced in the affidavit and the hearing was adjourned. The court reserved the applicant’s costs.

4. The respondent failed to comply with directions to file a financial statement on more than one occasion. He never sought an extension of time or that the order be discharged. He only filed a financial statement shortly before the preliminary hearing despite having months to do so.

(d) Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court

1. Not applicable.

(e) Whether any party to the proceedings has been wholly unsuccessful in the proceedings

1. The first respondent was wholly unsuccessful at the threshold hearing.

(f) Whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer

1. Not applicable.

(g)  Such other matters as the court considers relevant.

1. Not applicable.

2. It is important to note that in Family Law matters, section 117(1) provides that the usual rule is that each party shall be responsible for his or her own costs.

3. To make a costs order at all is a departure from the ordinary rule. Schedule 1 of the Federal Circuit Court Rules2001 sets out a scale of costs to be applied in family law proceedings and in general Federal Law proceedings. It is an events based costs scale. Part 21 of the Rules deals with costs and disbursements. If the court decides that it is appropriate to order costs then in usual cases the scale of costs should apply. It is designed to avoid parties having to go through the expense and delay of having bills of costs taxed. This case is not out of the ordinary. I can see no reason why if costs are to be ordered why they should not be ordered in accordance with schedule 1 of the Federal Circuit Court Rules2001.

4. I find that it is appropriate to make a costs order in favour of the applicant. The first respondent was wholly unsuccessful and his conduct contributed to delay and increased costs.

5. The applicant has entered into a retainer with her lawyers where she is being charged a higher hourly rate because her lawyers have agreed to accept a deferred payment.

6. The applicant seeks her costs be paid on an indemnity basis. Indemnity costs are only awarded in exceptional circumstances: see Prantage and Prantage [2013] FamCAFC 105. When considering whether or not to make an indemnity costs order it is necessary for the Court to know the terms of any costs agreement which exceed the costs scale. See In theMarriage of Kohan (1992) 16 FAM LR 245 and Prantage. The applicant has provided scant information about this and does not tell the court how much costs she has incurred. The first respondent’s conduct and his complete lack of success at the threshold hearing justifies a costs order but not on an indemnity basis. The applicant seeks her costs be taxed. Some of the legal work which has been done up until the jurisdictional decision will be used for the primary proceedings. I am not satisfied that the circumstances justify departing from the scale, particularly when I am left in the dark as to what her costs are.

7. In all of the circumstances it is appropriate that the first respondent pay the applicant’s costs in accordance with schedule 1 of the Federal Circuit Court Rules2001 from the date of filing until the date the judgment was handed down.

I certify that the preceding fifty-two (52) paragraphs are a true copy of the reasons for judgment of Judge Harland

Associate: 

Date:  14 May 2014