KOZAK (Deceased) and KOZAK

[2019] FCWA 243

JURISDICTION : FAMILY COURT OF WESTERN AUSTRALIA

ACT: FAMILY LAW ACT 1975

LOCATION: PERTH

CITATION: KOZAK (Deceased) and KOZAK [2019] FCWA 243

CORAM: TYSON J

HEARD: 8 AUGUST 2019

DELIVERED : 19 NOVEMBER 2019

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 - PROPERTY – Death of a party - Application to reopen after final reasons delivered and prior to pronouncement of orders – Where the Applicant died shortly after reasons were delivered – Where the parties consent to reopen but dispute the scope of leave to reopen – Limited leave to reopen granted – Case turns on its own facts

FAMILY LAW - PRACTICE AND PROCEDURE – Orders made limiting scope of reopening and matters to be addressed at resumed trial

Legislation:

Family Law Act 1975 (Cth)

Category: Not Reportable

Representation:

Counsel:

Applicant	:	Mr Dowding SC
Respondent	:	Mr Hedges SC

Solicitors:

Applicant	:	Frichot & Frichot
Respondent	:	Warner Legal

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

ASIC v Rich (2006) 235 ALR 587

Gaspaldi & Gaspaldi [2008] FamCAFC 134

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

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[Ms Kozak] [(“the wife”)] and [Mr Kozak] [(“the husband”)] were unable to agree on orders by way of alteration of property interests, following the breakdown of their marriage. The trial took place on 12 – 13 July 2018. On 30 July 2019, I delivered reasons, but did not pronounce final orders. I invited the parties to confer and prepare a minute to give effect to the reasons.

2Before orders were made, the wife died. The wife’s sister, [Ms Morrison] has since been appointed as the wife’s Legal Personal Representative (“[the Legal Personal Representative]”). Orders have been made by consent to re-open the trial and adduce further evidence. There is no agreement about the scope of the further evidence to be adduced and ancillary orders, which is the matter now to be determined.

BACKGROUND FACTS

3At the time of trial, the husband was 60 years of age and was working on a full-time basis. The wife was 58 years of age and was in receipt of palliative care, having been diagnosed with [a terminal illness].

4I found the parties’ net property and superannuation entitlements was worth $836,225 plus the husband’s interest in [Property A], which was to be quantified upon sale. I concluded the parties’ contributions should be assessed at 52.5% in favour of the husband and 47.5% in favour of the wife and s 75(2) factors warranted a 7.5% adjustment in favour of the wife. I determined the just and equitable outcome was to divide the parties’ net property and superannuation interests as to 55% to the wife and 45% to the husband.

5After publication of my reasons, I invited the parties to confer as to the terms of a Minute. I considered that was appropriate where the husband needed to advise whether he wished to retain [Property B] or it was to be sold, for the settlement of Property A to take place to enable the husband’s entitlements to be quantified and for procedural fairness to be provided to the trustee of the husband’s fund.

6[In mid-2018] the wife died. On 11 December 2018 the Legal Personal Representative deposed that upon reviewing the wife’s documents after her death, she learnt that on 23 April 2018 the wife had received $255,599.66 from [Super Fund B] on the grounds of permanent incapacity and the wife owed $52,000 to her former employer, which was secured against Property B.[1] The Legal Personal Representative advised the wife had not filed income tax returns for the four years prior to her death. The Legal Personal Representative was unsure what, if any, tax may be owing.

[1] See the Legal Personal Representative’s affidavit filed 11 December 2018.

7The Legal Personal Representative reported she had recently been diagnosed with [a serious medical condition], she would commencing treatment in Australia but she wanted to return to home to [Country A], as soon as possible.

8The husband first discovered the wife’s receipt of the Super Fund B payment when the Legal Personal Representative provided disclosure on 5 December 2018. The husband observed the wife had not disclosed any further debt owing to her former employer. He claimed to be unaware of the encumbrance secured on Property B, which I do not accept, because in my reasons I observed that the wife’s interest in Property B was subject to a seizure and sale order registered on 27 October 2017.[2]

[2] At paragraph 144.

9On 24 January 2019 consent orders were made to reopen the case and for each party to file and serve an affidavit, setting out any further evidence upon which they sought to rely.

10These Reasons should be read in conjunction with the reasons delivered on 30 July 2018. I do not propose to repeat those matters, which are well known to the parties.

WHAT ARE THE APPLICATIONS BEFORE THE COURT?

11The husband seeks orders in terms of his Application in a Case filed 18 July 2019. In summary, he seeks leave to issue subpoena; for the parties to prepare a joint list of questions for the accountant who prepared the wife’s income tax returns, with the costs to be met by the Legal Personal Representative in the first instance; for leave to adduce further evidence as to his health and unemployment; for the parties to have leave to issue subpoena for individuals to attend the trial and give oral evidence, including liberty to cross-examine the Legal Personal Representative, the accountant who prepared the wife’s income tax returns and her former employer.

12The Legal Personal Representative seeks that the husband’s application be dismissed, in her Response filed 31 July 2019. She also seeks that the husband irrevocably authorise and direct that his share of the net proceeds of sale of Property A be paid into his solicitors’ trust account and they be restrained from distributing funds without the prior written consent of the Legal Personal Representative or an order.

WHAT IS THE EVIDENCE THAT IS RELIED UPON?

13The Legal Personal Representative relies upon [her] affidavits filed 14 November 2018, 11 December 2018, 28 February 2019, 18 March 2019, 10 May 2019 and 2 August 2019. The husband relies upon his affidavits filed 22 November 2018, 22 January 2019, 20 February 2019 and 18 July 2019.

14Each party filed written submissions, which were supplemented by the oral submissions.[3] I have read and carefully considered all of the evidence.

WHAT IS THE LAW?

[3] The husband’s submissions filed 24 April 2019 and the Legal Personal Representative’s submissions filed 13 May 2019.

15The determination of whether leave should be granted to reopen is a matter of discretion. The fundamental principle to be applied in determining whether to grant such an application is whether the interests of justice are better served by allowing the application, or rejecting it.[4] 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.[5]

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

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

16The exercise of discretion is informed by the following matters:[6]

[6] ASIC v Rich (2006) 235 ALR 587 at [18].

•The nature of the proceedings.

•The importance of the issue on which the further evidence is sought to be adduced.

•The prejudice to the other party.

•Whether calling the further evidence sought, ought to have been reasonably foreseen.

•The degree of relevance and probative value of the further evidence.

•The public interest in the timely conclusion of litigation; and

•The explanation offered for not having called the evidence.

The wife’s death

17The parties sensibly consented to leave to reopen following the wife’s death. The timing of her death was unexpected. The wife left a will dated 6 May 2016, of which the Legal Personal Representative is the sole beneficiary.[7] The Legal Personal Representative has been granted administration for the wife’s estate on 22 October 2018.[8]

[7] Paragraphs 4 – 6 of the Legal Personal Representative’s affidavit filed 14 November 2018.

[8] Paragraphs 4 – 6 of the Legal Personal Representative’s affidavit filed 14 November 2018.

18In my Reasons, I considered at some length the wife’s health, her diagnosis and life expectancy at paragraphs 104 to 115. I found the wife was unable to work as a result of her health,[9] and concluded the wife’s reasonable needs to support herself required recognition and supported an adjustment in the wife’s favour.

[9] At paragraph 118 and 135 of the reasons.

19The issue is sufficiently important to make a difference to the outcome of the substantive proceedings. While the granting of leave may prejudice the husband in terms of further delay in the proceedings, the husband has consented to the leave.

Super Fund B Payment

20The wife received $255,599.66 from Super Fund B on 23 April 2018. She did not disclose receipt of those funds to the Court or the husband. The Legal Personal Representative was not aware of these funds until after her sister’s death.

21The husband seeks the sum be added back into the joint property of the parties and be available for division. He says the funds should also be taken into account in an assessment of the parties’ respective contributions. The Legal Personal Representative appropriately concedes the payment is relevant and accordingly, that leave should be granted.

22I am readily satisfied it is in the interests of justice to permit a limited reopening of the case to take into account the Super Fund B payment. The amount will be relevant in terms of the property of the parties’ and the assessment of contributions. While the evidence could, and indeed should have been disclosed by the wife, it would be prejudicial to the husband not to take it into account. The evidence is relevant and of probative value. It will likely have a material impact on the result.

Debt owing by the wife to her former employer

23The Legal Personal Representative deposes the wife continued to owe $52,000 to her former employer, [Business A] at the time of her death. Based upon her enquiries, since August 2017 the wife owed $135,765.93 (“debt 1”) plus interest and costs secured by way of a seizure and sale order against Property B and Property C. Debt 1 was paid in full on 30 November 2017 upon settlement of the sale of Property C.

24The wife also owed $69,752.73 (“debt 2”) to her former employer, which was not paid upon the sale of Property C. On 20 July 2018 the wife and her former employer agreed to settle debt 2 by payment of $52,000, inclusive of costs. Debt 2 has since been paid and the seizure and sale order has been discharged.

25The Legal Personal Representative seeks leave to reopen to adduce evidence about debt 2, which the husband opposes. The wife failed to disclose the debt. She specifically asserted there were no further monies owing to her former employer. Contrary to that claim, the wife was clearly aware of the existence of debt 2, given the negotiations which resulted in a concluded agreement on 20 July 2018, after trial and prior to delivery of reasons.

26I have already referred to my observations about the seizure and sale order as to the wife’s interest on Property B. In my Reasons I noted the lack of submissions about the order and what amount, if any, remained outstanding. These were matters within the wife’s knowledge and remit to disclose. I concluded in the circumstances it was appropriate for the wife to satisfy the order and have the encumbrance removed. Her Legal Personal Representative has done so.

27I am mindful of the High Court’s observations in Smith v New South Wales Bar Association (1992) 176 CLR 256 where they stated:

If an application is made to re-open on the basis that new or additional evidence is available, it will be relevant, at that stage, to enquire why the evidence was not called at the hearing. If there was a deliberate decision not to call it, ordinarily that will tell decisively against the application.

28In my view, this matter falls into such a category. In the exercise of my discretion, I am not satisfied that leave should be granted to reopen and adduce evidence about debt 2. I have reached that conclusion in circumstances where this evidence was available to the wife prior to trial, where no adequate explanation has been provided for her failure to adduce the evidence and where the late introduction of the proposed evidence would prejudice the husband.

29The Legal Personal Representative’s submission that debt 2 existed at the time of trial, does not support the exercise of discretion in their favour. While the evidence may be relevant to the property of the parties, the quantum is modest in light of the circumstances. The importance of this evidence needs to also be viewed in the context of the trial having been concluded. In the exercise of my discretion, I consider the interests of justice are best served by rejecting the application to adduce evidence on this matter.

The wife’s Income Tax Returns, her debt to the Legal Personal Representative and sale of shares

30I propose to consider these matters collectively, as there is an element of overlap.

The wife’s Income Tax Returns

31The Legal Personal Representative instructed accountants to prepare and file of the wife’s income tax returns. The wife’s taxable income, based upon the lodged returns, are as follows:[10]

[10] Ignoring the cents.

Financial Year	the wife’s taxable income	Tax owing (unpaid)
2015	$109,762	($3,917)
2016	$86,401	($868)
2017	$83,525	($644)
2018	$257,741 less $186,291 being the taxed element of Super Fund B payment = $71,450	$2,541

32The husband argues this evidence demonstrates the wife had greater access to funds than disclosed at trial. He points to the fact the Court found at the time of trial the wife had limited income, she was reliant on her disability pension and her weekly reasonable expenses of $1,120 exceeded her income. The Court concluded it was reasonable for the wife to have borrowed money to supplement her living expenses.

33The husband says in light of the wife’s income, her expenditure of $100,000 from her superannuation and $2,100 from the parties’ joint line of credit were not reasonable. Had the Court had the benefit of evidence as to her actual income, it may have adopted a different approach in terms of the treatment of those monies. He says the evidence from the wife’s income tax returns demonstrates her income was sufficient to meet her reasonable expenses and there was no need for her to borrow money from her sister or former employer.

Debt to The Legal Personal Representative

34The husband says the debt owing by the wife to the Legal Personal Representative should be ignored, in light of the wife’s available income now apparent. The Legal Personal Representative opposes that course of action, noting the finding that the debt was outstanding at the time of trial, with the benefit of the wife and the Legal Personal Representative being cross-examined. In my view, this is not strictly an application to reopen, as opposed to each party foreshadowing their proposed submissions at the further hearing.

The wife’s shares

35In February 2019 the Legal Personal Representative disclosed documents regarding the wife’s sale and ownership of shares for the first time. The husband complains inadequate disclosure has been provided and from the limited documents now available, the wife incurred capital losses of $134,930 from the sale of shares between 2015 and 2018. He submits this evidence is material to the Court’s assessment of contributions, in addition to the funds available to the wife to support herself.

36The Legal Personal Representative says the wife disclosed the source documents as to her income and while the returns had not been prepared, the underlying documents were available. Specifically, the wife disclosed her PAYG payment summaries for the 2015 to 2017 financial years, her Centrelink PAYG payment summary for 2018 and documentation regarding the sale and purchase of shares, together with bank statements. The Legal Personal Representative points out the husband elected not to cross-examine the wife about her share trading, nor did he seek an adjournment on the basis he complained that the wife’s disclosure was inadequate.

37The Legal Personal Representative says the wife’s disclosed payment summaries recorded her net income was $161,113 inclusive for the financial years 2015 to 2017. The tax returns for the same period record the wife’s income was $166,507. The 2018 return reflects the Super Fund B payment. It is not in dispute that while the payment was received in that financial year, the cheque was not banked.

Discussions

38I accept the evidence of the wife’s income tax returns and the tax consequences of the lodgement of the returns were not available at the time of trial. There was no explanation provided as to why the returns had not been attended to prior to trial. I do not consider the evidence in relation to the wife’s income, as reflected in those returns, together with the tax liabilities, is likely to affect the result and in the exercise of my discretion, decline to grant leave.

39The evidence which the husband seeks to adduce reveals a modest change in the wife’s income, such that it is unlikely, if admitted, to affect the result. The same is true of the tax owing for the 2015 to 2017 years. The evidence of the wife’s share-trading since separation is of limited relevance and probative value. I have already observed the source documents were available to the husband. He was aware the wife was buying and selling shares. He did not pursue these matters at trial. The fact the husband elected not to cross-examine the wife on these topics, when he had the opportunity to do so, is also a material consideration, together with the prejudice to the legal representative given cross-examination is no longer possible of the wife.

40I am not persuaded the interests of justice support the proceedings be reopened to adduce evidence as to the wife’s filed income tax returns for 2015 to 2017 inclusive and the tax liabilities. I am not satisfied that the delay in the conclusion of the proceedings and the prejudice to the Legal Personal Representative support the granting of leave.

41In circumstances where it is agreed leave should be granted to adduce evidence in relation to the Super Fund B payment, it would be artificial to ignore any associated tax consequences of the payment. I am satisfied the interests of justice require that leave should be granted to adduce evidence as to the Super Fund B payment and the associated tax consequences in the 2018 tax return. It is appropriate that evidence is before the Court, as it may impact on the outcome. It is relevant and of probative value.

The husband’s employment and health

42The husband seeks leave to reopen and adduce evidence about changes in his circumstances. At the time of trial, the husband was employed and on 31 August 2018 he was made redundant. Since that time, the husband has remained unemployed.[11]

[11] Paragraphs 10 – 12 of the husband’s affidavit filed 22 November 2018; and paragraphs 3 – 4 and 10 of the husband’s affidavit filed 20 February 2019.

43The husband receives Centrelink benefits of $521.94 per fortnight, which he is reliant on to support himself, together with his savings. His income is now less than his weekly needs. He has unsuccessfully sought to obtain employment and continues to do so, as a condition of receipt of government benefits.[12]

[12] Paragraphs 6 – 9 of the husband’s affidavit filed 20 February 2019.

44The Legal Personal Representative argues this evidence should be excluded and any changes in his circumstances since trial are irrelevant. I disagree. I must consider whether granting leave is most likely to promote the interests of justice. An assessment of s 75(2) matters relating to the husband’s employment and income earning capacity were considered in my reasons. I observed the husband’s weekly expenses were less than his income.

45The husband’s redundancy and his subsequent efforts to obtain employment are relevant and probative. These events could not have been reasonably foreseen. They are of sufficient importance to make a difference to the outcome of the substantive proceedings.

46I acknowledge the Legal Personal Representative’s complaint that to grant this leave, could be prejudicial if they are deprived of the opportunity to cross-examine the husband. I consider the Legal Personal Representative should be entitled to cross-examine the husband about these matters, if they wish to do so. That is procedurally fair and I consider that to be appropriate, in the circumstances.[13]

[13] See paragraph 117, in the post separation period the husband gave scant evidence about his efforts to gain employment and my view that he had not made either serious or genuine attempts to return to work.

47I conclude it is in the interests of justice to permit a limited reopening of the case to enable evidence to be adduced by the husband about his redundancy, his efforts to obtain employment, his receipt of government benefits and for that evidence to be tested by way of cross-examination.

48The husband seeks to reopen and lead evidence about his health and its impact upon his capacity to work. The husband says on 4 April 2018 he was certified as unfit for work for three months.[14] That is not relevant or material to his application to reopen, when that was evidence available at the time of trial and in circumstances where that period has now lapsed.

[14] See the husband’s submissions filed 24 April 2019, page 20.

49The husband has provided two letters from Dr [D] dated 23 May 2019 which state that the husband is “unable to work in his trade” and “he cannot do his job as [an engineer] any more due to [his] injury”.[15] He has foreshadowed calling expert medical evidence.

[15] See the husband’s affidavit filed 18 July 2019, annexure B.

50The correspondence is not admissible evidence. There is no admissible evidence before the Court from any medical practitioner detailing their qualifications and expertise, the appointments with the husband, his diagnosis, prognosis, treatment and the like. There are simply blanket statements, not in an admissible form, expressing an opinion that the husband is unable to work in a certain capacity. It is unclear when the doctor formed that view, what that view is based upon, whether any assessment was conducted as to the husband’s capacity to perform other work given his qualifications nor any predicted prognosis.

51In my Reasons, I observed that:

(a)The husband [was injured] in 2014 and took 18 months off work, He received an insurance payment;[16]

(b)He underwent [major] surgery and was certified as unfit for work for nine months, during which period he performed some work;[17]

(c)The husband resumed working in 2016;[18]

(d)While the husband sought to argue that his health impacted upon his capacity to work, he led no evidence from either a treating medical practitioner or specialist.[19]

[16] Paragraph 76 and 101 of my reasons.

[17] Paragraph 76 of my reasons.

[18] Paragraph 78 and 93 of my reasons.

[19] Paragraph 115 of my reasons.

52Consistent with the High Court’s authority to which I have referred,[20] in circumstances where the husband had the opportunity to lead this evidence at trial, where he failed to do so and where he has not proffered any satisfactory explanation for his failure to do so, I am not satisfied that he should be granted leave to adduce evidence as to his health. It would appear the health issues which the husband complains of have been long-standing and pre-existing at the time of trial.

[20] Smith v New South Wales Bar Association (supra).

53The occasion for calling evidence in that regard could have been reasonably foreseen by the husband. He made a deliberate decision not to call the evidence earlier. While he says he is not working, he is not in receipt of a disability pension. I decline to exercise my discretion to grant the husband leave to adduce evidence as to his health.

The husband’s interest in the estate of the late Ms K

54The husband has a 50% interest in Property A arising from his late mother [Ms K’s] estate.[21] At the time of trial, Property A was due to be sold and from the proceeds of sale, the costs of sale, the executor’s legal costs, [a support service’s] costs and the husband’s legal costs relating to the challenge of his mother’s estate were to be met. I found the husband’s share of the net proceeds of sale should be taken into account upon settlement.

[21] Paragraphs 47 – 48 of my Reasons.

55Both parties complain that as at February 2019, Property A was vacant and was not being actively marketed for sale. Neither party seemed to be seeking leave to reopen as such, but rather were updating the Court about the delay. The parties have leave to update the Court with the actual sale price, which stands.

56While the Legal Personal Representative also sought orders requiring the husband to irrevocably authorise the executor to cause payment of his entitlements into his solicitor’s trust account, this matter was not pursued at any length at the hearing. In the circumstances, I propose to adjourn generally that application and give the Legal Personal Representative liberty to relist on short notice.

CONCLUSIONS

57For the above reasons, I conclude that it is in the interests of justice to permit a limited reopening of the case to enable evidence to be adduced as to:

(a)The wife’s death, her receipt of the Super Fund B payment and the tax consequences of the payment.

(b)The husband’s redundancy and his subsequent efforts to obtain employment.

58I have declined permission to reopen the case to enable evidence to be adduced as the husband’s health and about the wife’s debt 2, to her former employer. In light of these reasons, I consider it appropriate that the Legal Personal Representative should be able to cross-examine the husband in relation to his redundancy, his income and efforts to obtain employment.

59Given my findings, I do not consider the interests of justice support the orders sought by the husband in terms of questions being posed to the accountant who prepared the wife’s income tax returns, for the accountant and the wife’s former employer to attend the resumed trial and be cross-examined. I decline to grant the husband leave to issue subpoena.

60I am not persuaded that the limited leave to reopen requires the husband to have permission to cross-examine the Legal Personal Representative. I cannot see how that would assist. The Legal Personal Representative has deposed of the matters that have come to her attention since her sister’s passing, the steps she has taken and the disclosure provided. It was unclear to me what areas of cross-examination of the Legal Personal Representative were potentially relevant and probative, given the limited areas in which I have now granted leave to reopen.

61The Legal Personal Representative has been diagnosed with [a serious medical condition] and she has returned to Country A. To require the Legal Personal Representative to return to Australia, for the purpose of being cross-examined, would impose a cost, in terms of time and money, in addition to potentially impacting upon her health and treatment.

62I propose to hear from the husband as to whether he maintains an application to cross-examine the Legal Personal Representative in light of these Reasons, and to hear from the Legal Personal Representative before making any further orders. If I am persuaded that cross-examination should occur, I will hear whether that can be accommodated by video-link.

63The general principle is that the interests of justice are served by the timely resolution of legal disputes. Regrettably, this matter has taken far longer to conclude than it should, or either party had hoped. Further delays in the conclusion of these proceedings is not in either party’s interests. I propose to hear from the parties as to any further appropriate programming orders to resume the trial, including the opportunity for each party to make submissions in relation to the effect of the limited matters for which leave has been given to reopen and the effect of that evidence on a just and equitable determination of the substantive proceedings.

64For that reason, I propose to distribute these reasons from chambers, to allow the parties to reflect on my reasons, to confer about any proposed further orders and any further listing.

ORDERS

65Subject to hearing from the parties, I propose to pronounce orders as follows:

1.The Legal Personal Representative have leave to reopen her case, for the limited purpose of adducing evidence in relation to the death of the Applicant, the Applicant’s receipt of the [Super Fund B] payment and any tax consequences of the payment including monies owing to the Australian Taxation Office.

2.The Respondent have leave to reopen his case, for the limited purpose of adducing evidence in relation to his income since the date of judgment including receipt of government benefits, his redundancy, and his efforts to obtain employment.

3.The Legal Personal Representative have leave to cross-examine the Respondent, if she chooses.

4.The substantive proceedings be listed for the resumed hearing, at a date and time to be advised, subject to hearing from the parties as to the estimated hearing time and each party and their counsel’s availability.

5.Paragraph 2 of the Form 2A of the Legal Personal Representative filed 2 August 2019 2019 be adjourned generally, with liberty to relist upon providing reasonable notice.

6.In the event that such a relisting is sought, the Respondent is required to file and serve a Minute and affidavit within 14 days of a request to relist the application.

7.The balance of the outstanding interim applications be and are hereby dismissed.

8.Both parties’ costs be reserved.

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

CD

Secretary

19 NOVEMBER 2019