KOZAK (Deceased) and KOZAK

[2020] FCWA 233

JURISDICTION : FAMILY COURT OF WESTERN AUSTRALIA

ACT: FAMILY LAW ACT 1975

LOCATION: PERTH

CITATION: KOZAK (Deceased) and KOZAK [2020] FCWA 233

CORAM: TYSON J

HEARD: 7 DECEMBER 2020

DELIVERED : Ex tempore

FILE NO/S: PTW 5350 of 2016

BETWEEN: MS MORRISON (as the Legal Personal Representative of) MS KOZAK (Deceased)

Applicant

AND

MR KOZAK

Respondent

Catchwords:

FAMILY LAW – Application to re-open – Where the husband seeks to re-open final property proceedings to adduce further evidence after Reasons have been published, but prior to pronouncement of Orders – Where the evidence the husband wishes to rely upon in support of his application was not diligently provided – Where the Legal Personal Representative is prejudiced by the application for leave to re-open – Application dismissed – Case turns on its own facts

Legislation:

Family Law Act 1975 (Cth)

Representation:

Counsel:

Applicant	:	Mr Dowding SC
Respondent	:	Mr Hedges SC

Solicitors:

Applicant	:	Frichot and Frichot
Respondent	:	Warner Legal

Case(s) referred to in decision(s):

Chong v Ha (No 2) [2018] FCCA 320

Gaspaldi & Gaspaldi [2008] FamCAFC 134

Holland & Holland (2017) FLC 93-798

Smith v New South Wales Bar Association (1992) 176 CLR 256

Suell v Suell (2009) 40 Fam LR 690

Wentworth v Woollahra Municipal Council (No 2) (1982) 149 CLR 672

TYSON J:

WORDS IN SQUARE BRACKETS REPLACE WORDS USED IN THE ORIGINAL JUDGMENT – PARTIES’ NAMES AND IDENTIFYING DETAILS HAVE BEEN CHANGED

IT IS NOTED that publication of this judgment by this Court under the pseudonym Kozak & Kozak has been approved by the Family Court of Western Australia pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

1 The Respondent husband [Mr Kozak] seeks leave to re-open and adduce further evidence. That application is opposed by the Legal Personal Representative of the late wife, [Ms Kozak].

2 The husband and wife separated in October 2015, after a 19-year relationship. They were unable to agree on how to divide their property, which proceeded to trial on 12 and 13 July 2018. Judgment was reserved and Reasons were published on 30 July 2018. At that time, I invited the parties to confer as to the form of the proposed orders, to give effect to the Reasons.

3 On 5 August 2018 the wife died. Since then, her sister has been appointed as the Applicant’s Legal Personal Representative. By consent, leave was granted to adduce further evidence. There was a dispute about the scope of the further evidence, which I determined and Reasons were published on 3 December 2019.

4 The trial resumed and further hearing was conducted on 28 April 2020. Regrettably, there were further delays as a consequence of procedural fairness not being afforded to the trustee of the husband’s superannuation fund, subsequent to which each party then filed and served a minute setting out the final orders they sought.

5 On 21 September 2020 Reasons were delivered. On that date, the husband foreshadowed an application for leave to re-open. I then did not pronounce final orders, to enable the husband to file and serve his application and to afford the Legal Personal Representative an opportunity to respond.

6 I incorporate my Reasons delivered on 30 July 2018 (“2018 Reasons”), 19 November 2019 (“2019 Reasons”)[1] and 21 September 2020 (“2020 Reasons”)[2].

WHAT IS THE APPLICATION AND EVIDENCE RELIED UPON?

[1] Kozak (by her Legal Personal Representative) Ms Morrison and Kozak [2019] FCWA 243.

[2] Kozak (by her Legal Personal Representative) Ms Morrison and Kozak [2020] FCWA 161.

7 Before the Court for determination is now the application a case filed by the husband on 13 October 2020. He seeks “leave … to re-open the case” and “any other orders that the Honourable Court thinks fit in the circumstances”. The husband relies upon his affidavit and the affidavit of [Mr E] both filed 2 October 2020.

8 The husband, through his Senior Counsel today, has clarified the evidence that is sought to be relied upon. Firstly, the evidence is that contained in the affidavit of the husband and Mr E which he now relies. Secondly, the husband says there is further evidence, not currently before the Court, which he seeks to adduce, which will quantify his ultimate entitlements for [Property A]. The husband, through his Senior Counsel, has confirmed he cannot say when that evidence will be available. However, he has proposed that the husband be afforded a short opportunity, of some two to three weeks, in which to adduce that evidence. He concedes there is no certainty that the evidence will be available in that time period.

9 The Legal Personal Representative relies on her response and the affidavit of [Mr F] both filed 30 November 2020.

10 Senior Counsel for each party had the opportunity to make submissions today. I also have had the benefit of written submissions filed on behalf of the Legal Personal Representative. I have carefully considered the evidence and reflected on the submissions made today.

WHAT ARE THE BACKGROUND FACTS?

11 Briefly by way of background, the parties separated in 2015 after a relationship and marriage of some 19 years duration.

12 The proceedings were expedited to trial, as a consequence of the wife being diagnosed with a terminal illness. At the time of the trial in 2018, I found the parties combined property and superannuation entitlements to be worth $836,226, excluding the husband’s interest in Property A, to which I will refer shortly in more detail.

13 I concluded it was just and equitable to make an order altering the parties’ interest in their property.

14 Following the death of the wife and the substitution of her Legal Personal Representative, the parties agreed and orders were made by consent to adduce further evidence. In essence, following the 2018 trial it emerged that neither the husband nor the wife had complied with their duty to provide full and frank disclosure in a timely manner. Significantly, the Legal Personal Representative discovered after the wife’s death, that the wife had received a total and permanent disability payment of approximately $255,000 prior to trial, which she had not banked, nor disclosed to the husband or the Court. The husband had failed to disclose in a timely manner the updated balance of funds held on trust, following the sale of property of the parties, together with the payment he had received from the late wife’s superannuation entitlements.

15 Leave was granted to the Legal Personal Representative to adduce evidence of the wife’s death, the wife’s receipt of the total and permanent disability payment (“TPD” payment) and the associated tax consequences of the payment. Leave was granted to the husband to adduce evidence of his income since 2018, including his redundancy and receipt of government benefits, together with his efforts to obtain employment.

16 At the resumed trial in 2020, there was then a dispute between the parties as to the available property available for division, the approach the Court was to adopt, and the outcome that was just and equitable.

17 The Legal Personal Representative proposed the husband retain his interest in Property A, which she proposed be disregarded for the purposes of identifying the available assets. The husband proposed Property A be included in the available property of the parties, and the net proceeds of sale be divided in the same percentages as determined by the Court to be just and equitable.

18 I concluded it was appropriate to adopt a three pools approach: pool one included the parties’ joint property, liabilities and superannuation entitlements; pool two comprised of the husband’s interest in Property A; and pool three comprised of the wife’s TPD payment.

19 I found the parties’ contributions to pool one were equal, the husband’s contributions to pool two were 100% and the wife’s contributions to pool three were 100%. I concluded it was still just and equitable to make an order altering the interests of the parties in property, notwithstanding the death of the wife. I determined the husband was entitled to an adjustment pursuant to s 75(2) of the Family Law Act 1975 (Cth), which I quantified by way of a lump sum of $60,000.

20 To give effect to the orders I found to be just and equitable, I proposed the husband retain his interest in Property A, his home at [Property B], debt-free, together with his car, guns, savings, shares and contents. I made an order to split the husband’s superannuation entitlements, which resulted in the husband retaining his entitlements worth $120,548. The proposed orders provided for the husband to retain property and superannuation entitlements to the value of $485,842, excluding the value of his interest in Property A. While the proposed orders provided for the Legal Personal Representative to retain property and superannuation to the value of $365,843, plus the TPD payment of $241,823, providing a total of $607,666.

Property A

21 It is appropriate at this point to turn to the husband’s interest in Property A.

22 In summary, the husband’s mother owned Property A. She passed away prior to separation and left a life interest to a third party. The husband was excluded from his mother’s will. He successfully challenged the will in another jurisdiction. In July 2013 orders were made by consent, providing the husband was entitled to 50% of his mother’s estate, after payment of the executor’s fees and legal costs. The only asset of the estate was Property A.

23 At the time of the 2018 trial, it was agreed Property A was to be sold by way of auction. Property A had previously been valued at $225,000. The husband owed around $72,000 in legal fees associated with his challenge to his mother’s estate, which costs were to be paid upon the sale of Property A, together with the usual costs of sale, in addition to the legal costs of the executor and [a support service], who were also a beneficiary of the estate.

24 At the time of the 2018 trial, I was unable to make any findings as to the likely sale price, costs of sale and the amount which the husband would likely receive from Property A. At that time, I observed those amounts were likely to be “quantified in the near future”.[3]

[3] Refer to paragraph 50 of the 2018 Reasons.

25 By the time of the 2020 trial, Property A had still not sold, nearly two years after the trial had commenced. I observed, in the 2020 Reasons, that the husband had not led any evidence to explain the delay, when Property A was likely to be sold and therefore when his entitlements would crystallise.

26 On that basis, the Legal Personal Representative urged the Court to disregard the husband’s entitlements to Property A and exclude any assessment of his contributions to his inheritance.

27 I was not prepared to do so, on the basis that the authorities established that it was wrong, as a matter of principle, to exclude any existing legal or equitable interests in property from consideration in applications for property settlement. [4] In doing so I observed as follows:

There was no admissible evidence to support a precise finding as to what [the husband]’s interest may be. It would be ideal if the Court were in a position to make findings as to the value of [the husband]’s interest in [Property A]. Regrettably, despite the passage of nearly two years since the trial commenced, I am unable to do so.[5]

[4] In Holland & Holland (2017) FLC 93-798.

[5] Refer to paragraph 38 of the 2020 Reasons.

28 I found the wife did not contribute to the husband’s inheritance, and assessed the husband’s contributions to Property A at 100%.[6]

[6] Refer to paragraphs 67 to 69 of the 2020 Reasons.

29 I declined to grant orders as proposed by the husband for the Legal Personal Representative to share in the proceeds of Property A,[7] given the delay in the sale, the duration of the proceedings and the duty of the Court to end financial relations between parties, as far as practicable pursuant to s 81 of the Act.

WHAT IS THE HUSBAND’S CASE?

[7] Refer to paragraph 103 of the 2020 Reasons.

30 The husband deposes on 10 September 2020, he was advised that Property A had sold for $209,000, settlement was scheduled for later that month and he did not anticipate receiving any proceeds of sale.

31 On 18 September 2020, the husband’s solicitor in the family law proceedings contacted the husband’s solicitor acting in the estate proceedings, requesting documentation. [The solicitor in the family law proceedings] then received the settlement statement for Property A dated 8 September 2020.

32 The settlement statement confirmed $65,000 was to be paid to the husband’s solicitor [in the estate proceedings] and after payment of the usual costs of sale, the net proceeds of sale were to be held on trust by the solicitors acting on behalf of the estate.

33 On 29 September 2020, the husband received the final settlement statement dated 21 September 2020, which was not materially different to the previous draft statement.

34 The husband deposes as at October 2017, he owed costs relating to the estate $72,008, of which $65,000 has been paid. He has otherwise attached to his affidavit a number of documents which he says were provided to his solicitor on 18 September 2020 relating to the estate. Notably, they include correspondence from the husband’s estate solicitors dated 24 February 2016, 1 November 2017, the orders of the [other jurisdiction] dated 3 July 2013, together with more recent communication between parties to the estate dated September 2020, concerning the dispute as to the costs and disbursements incurred by the estate.

35 The husband also relies on an affidavit of Mr E, the solicitor who acts on behalf of the estate. Mr E confirms only asset of the estate was Property A, which has sold. After payment of $65,000 for the husband’s solicitor’s costs and $10,000 to a support service, a balance of $118,799 is being held on trust.

36 On 23 September 2020, Mr E requested a firm of solicitors prepare a bill of his costs, arising from administration of the estate. Upon receipt of the bill, Mr E anticipates there will be discussions between the estate, the solicitors acting for the husband and the support service, in an effort to resolve matters and the ultimate payments to be made.

37 Mr E deposes he is unsure “exactly what the disbursements and my legal costs will amount to and I am unlikely to know the exact amount for a number of weeks until I receive the prepared Bill”.

38 Mr E hopes the quantum of costs can be agreed, failing which, it is reasonable to assume there may well be further proceedings and/or litigation between those parties.

WHAT IS THE LAW?

39 The husband accepts the summary of the law as set out in the submissions filed on behalf of the Legal Personal Representative.

40 The granting of leave to re-open is an exercise of discretion. That discretion is guided by the interests of justice.[8] The essential question is, whether the Court more able to do justice in the facts and circumstances of the particular case if the application is granted. The object is to make the order most likely to promote the interests of justice, paying proper regard to any prejudice to the other party.[9]

[8] Smith v New South Wales Bar Association (1992) 176 CLR 256.

[9] Gaspaldi & Gaspaldi [2008] FamCAFC 134.

41 Relevant to that determination are a number of matters, including the likely prejudice to the other party, the reasons why the evidence was not led in the first place, the public interest in a timely conclusion of litigation, and the nature of the proceedings.

42 Prejudice has been described as a broad concept, not limited to cost or expense. The significant stress imposed on litigants, particularly where the prior litigation history has been lengthy (as is unquestionably the case here) has been widely recognised as an element of prejudice.[10]

DISCUSSIONS AND CONCLUSIONS

[10] Suell v Suell (2009) 40 Fam LR 690, at [11].

43 A number of observations need to be made about the husband’s application.

44 On 10 September 2020, the husband was advised Property A had sold for $209,000, and settlement was scheduled. At that time, it was foreshadowed the husband was unlikely to receive any net proceeds of sale, after payment of expenses including the estate’s legal costs.

45 On 18 September 2020, the husband’s solicitors obtained a settlement statement for Property A, dated 8 September 2020. The settlement statement provided for payment of $65,000 to the husband to meet his costs associated with challenge to his late mother’s estate, and after payment of $10,000 to the support service, and the usual costs of sale, net proceeds of sale of approximately $118,000.

46 That evidence was within the custody, possession and control of the husband prior to publication of the 2020 Reasons. I am told today, and it does not appear to be in dispute, that evidence was only disclosed to the Legal Personal Representative on or around 17 September 2020.

47 On 16 September 2020, my associate advised both parties by telephone that judgment would be delivered from Chambers and the proceedings were listed on 21 September 2020. On 18 September 2020 the Reasons were provided by email to both parties. The husband did not provide to either the Court, or to the Legal Personal Representative, any notice prior to 21 September 2020 of his proposed application for leave to adduce further evidence.

48 In circumstances where a relevant enquiry is to ask why the evidence was not called earlier, the husband’s failure to adduce the evidence, to disclose the evidence and to raise these matters when he could have done so at an earlier time, are material.

49 The husband’s interest in Property A has been an issue in the substantive proceedings. The Court has been unable to quantify what his interest is worth, as a consequence of the lack of evidence adduced by the husband.

50 When leave was granted to adduce evidence after the 2018 trial, there was no application by the husband to adduce updated evidence about the progress of the sale of Property A.

51 The matters now raised by the husband and upon which he seeks to rely were within his ability to call. There is no suggestion it was the responsibility or obligation of the Legal Personal Representative to do so.

52 The evidence does not support a finding that the husband has exercised reasonable diligence to obtain the evidence, in circumstances where he has provided no explanation as to what enquiries or efforts were made by him about the sale of Property A, prior to September 2020. The husband is silent as to why the evidence now obtained was not disclosed earlier. There is no explanation about why he did not make an application to adduce evidence when at least by 9 September 2020, the evidence was available to him.

53 However, even accepting that the sale of Property A has occurred relatively recently and shortly prior to publication of the 2020 Reasons, there is also no evidence from the husband about what efforts, if any, he made prior to that time, to be appraised as to the progress of the sale, the likely sale price, the quantum of costs he owed, or the quantum of costs of the estate. All of those matters were plainly material to the question of his entitlements in Property A.

54 In noting the failure of the husband to do so, I observe he has been legally represented, both in relation to this challenge to the estate of his late mother, and in the substantive proceedings. In the substantive proceedings, his interest in Property A was squarely an issue.

55 I also observe, as pointed out by the Legal Personal Representative , while the husband says he was unaware of the costs charged by the estate, and the suggestion there is a dispute about whether those costs were capped, the husband knew the executor of the estate was a solicitor. That solicitor, Mr E, had managed the estate for many years. It ought to have been readily apparent to the husband, and those advising him, that legal fees were being charged by the estate, which were to be paid. Those costs would therefore have a direct bearing on the husband’s entitlements in Property A.

56 It was within the remit of the husband to make those inquiries, as I observed in the 2018 Reasons.[11]

[11] Refer to paragraph 49.

57 The Legal Personal Representative submits if the husband became aware he would receive more than he had anticipated, or hoped, from the sale of Property A, the present application would not have been made. That is not an inference which I am prepared to draw.

58 In the circumstances, I am not satisfied the evidence sought now to be led would have a material impact on the outcome, given I have made no findings as to what the husband’s interest in Property A is worth. I have been unable to do so, because of the manner in which he conducted his case and given the available evidence.

59 It is conceded, appropriately in my view, by the husband’s Senior Counsel that there is presently no evidence to enable the Court to make such findings. Further, there is no certainty about when the husband will be able to adduce that evidence, given the outstanding issues concerning the quantum of costs to be charged by the estate. There remains over $118,000 held on trust by the estate, subject to the competing claims to be resolved.

60 The estate’s costs will now be subject to a bill. It is foreshadowed that upon receipt of that bill, there will be negotiations between the husband, the support service and the estate in an effort to resolve matters, failing which, it may be that further litigation ensues. I am unable to make any findings about how long those matters may take, noting they involve third parties, who are strangers to the current proceedings.

61 It is therefore not possible to determine, whether the further evidence which the husband now seeks to adduce, is so material that the interests of justice require its admission or, if accepted it would most probably affect the results of the case.

62 I do not accept the husband has exercised reasonable diligence in making efforts to lead this evidence, noting he has been legally represented and given his expenditure on legal costs. Further, the evidence sought to be led by the husband could have been disclosed earlier than 21 September 2020.

63 Accepting the discretion whether to admit further evidence needs to be exercised with much care, I consider it relevant to take into account the very lengthy history to this litigation. The proceedings have been on foot since 2016. The proceedings were expedited to trial in 2018 as a consequence of the wife’s limited life expectancy. Judgment was delivered promptly following a two-day trial. Subsequent to the wife’s death, leave to re-open was granted.

64 I accept the submissions of the husband that the significant delays arose as a consequence of the wife’s failure to disclose. The second one-day trial was held on 2020, and further judgment delivered. In this matter there has been an inordinate delay in finalisation of the litigation.

65 I accept part of the delay has been beyond the control of the parties, caused by the Court’s limited availability. Part of the delay has arisen due to the failure of the wife to disclose receipt of the TPD payment. Part of the delay has been at the hands of the husband, firstly in relation to the current application, but further as a consequence of the husband’s failure to provide procedural fairness to the trustees of his fund, despite the orders made on 30 July 2018 that he do so, within 21 days. The husband had still not complied with that order at the time of the 2020 trial, which was then not attended to until a number of months after the trial, leading to a delay in receipt by each party of the final minute of orders sought and therefore delivery of the Reasons.

66 I am satisfied there is prejudice to the Legal Personal Representative in any delay in the conclusion of these proceedings. She is the sole beneficiary of the late wife’s estate. She has been diagnosed with [a serious medical condition], is in poor health and resides in [Country A]. She is continuing to incur costs in these proceedings. She does not, at this time, have access to funds which the Legal Personal Representative is entitled to pursuant to the proposed orders.

67 The prejudice to the Legal Personal Representative includes the stress of the proceedings, the ongoing legal costs, and also the delay in her access to funds. The husband’s Senior Counsel proposed a partial remedy to the prejudice, through the release of some funds to the Legal Personal Representative . That does not address all of the prejudice, which I am satisfied the Legal Personal Representative would suffer, if the husband was granted leave.

68 I also observe that if the husband were granted leave, there is a potential further prejudice, with the inconsistency of the value of his interest in Property A, when the value of the balance of the property was now some time ago. Should leave be granted there are questions as to whether there may be further applications, to adduce updating evidence about the value of the balance of the property. Should that transpire, there would be additional costs and delay.

69 After careful consideration, I am not satisfied the husband has discharged the ‘heavy burden’ of establishing the interests of justice warrants leave been granted to re-open. In reaching that conclusion, I have taken into account the public interest in achieving finality of litigation and the well-established principle that to grant leave to re-open where judgment has been delivered should be ‘extremely rare’[12] and in ‘exceptional circumstances’ only.[13]

[12] Wentworth v Woollahra Municipal Council (No 2) (1982) 149 CLR 672.

[13] Chong v Ha (No 2) [2018] FCCA 320, at [43] (Kemp J).

70 I accept the Legal Personal Representative would be prejudiced if the application to adduce further evidence was granted, which would result in the case dragging on. That would inevitably cause the tortuous history of this litigation to be extended.

71 The husband has not demonstrated either due diligence or care in adducing the additional evidence upon which he seeks to rely. Even at this late state, the husband has not adduced evidence to enable the Court to make any findings about what his ultimate entitlements will be in Property A. Further, the husband cannot say when that evidence will be available.

72 While the husband’s Senior Counsel suggested the husband could not argue if the Court were only prepared to allow him a few weeks in which to adduce that evidence, I cannot be satisfied that would necessarily result in the further evidence being available. That too would result in further delay and ongoing prejudice to the Legal Personal Representative.

73 For these reasons, I intend to dismiss the husband’s application.

ORDERS

1.The application in a case filed by Respondent on 2 October 2020 and the response filed by the [Legal Personal Representative], on 30 November 2020 be and are hereby dismissed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Family Court of Western Australia.

CD

Secretary

24 DECEMBER 2020