Lovell and Lovell (No 2)

[2009] FamCA 983

FAMILY COURT OF AUSTRALIA

LOVELL & LOVELL (NO. 2) [2009] FamCA 983

FAMILY LAW – STAY – interlocutory proceedings seeking stay of property proceedings and discharge of order

Family Law Act (Cth) 1975

APPLICANT: Mr Lovell

RESPONDENT: Ms Lovell

FILE NUMBER: SYC 1876 of 2008

DATE DELIVERED: 3 September 2009

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Judicial Registrar Loughnan

HEARING DATE: 3 September 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr B. Levet

HUSBAND IN PERSON:

COUNSEL FOR THE RESPONDENT: Mr G. Richardson SC

SOLICITOR FOR THE RESPONDENT: Barkus Doolan Kelly

Orders

1. Leave granted to inspect documents produced on a Notice to Produce by the Husband.

2. That the Application in a Case of the Husband filed 8 July 2009 is dismissed.

3. That the Husband pay the costs of the wife of and incidental to these proceedings those costs to be as agreed or assessed by a taxing officer.

4. The Court certified that it was reasonable to brief Senior Counsel to appear for the wife in these proceedings.

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 1876 of 2008

MR LOVELL

Applicant

And

MS LOVELL

Respondent

REASONS FOR JUDGMENT

1. These are interlocutory proceedings brought by the husband seeking a stay of property proceedings between the parties and the discharge of an order made, I think, on 17 June 2009 that he be restrained from leaving the Commonwealth and some orders to facilitate that.  The wife seeks that that application be dismissed.  These are in the context of proceedings where property settlement commenced in April of 2008. 

2. The parties are both 64 years of age, both having been born in Russia.  They have been married and divorced three times.  Their first wedding was in June 1970 in Russia and their most recent was in December 1998. They were most recently divorced on 30 July 2009.  They have two adult children:  R, twenty eight and N, twenty four.

3. Their final separation was in December 2006.  They were both officers of a company, L Pty Ltd. There have been a number of interlocutory events in these proceedings including two interim hearings and most recently, the matter was before my colleague and was not reached. It was put over to today’s date to deal with the husband’s application.

4. The husband has been charged with some offences.  He has been told that there will be trial of approximately six weeks in about March of 2010. There are two charges under the now repealed section 29C of the Commonwealth Crimes Act, each providing for a maximum of two years’ gaol and two charges under section 136.1(1) of the Criminal Code of 1995, each providing for a maximum of 12 months’ gaol.  

5. The charges are said to relate to grants made to L Pty Ltd over four years starting in 1999, in the total sum of $565,875.  At relevant times, the husband was a director and the wife was secretary of that company.  The husband has been provided with a draft summary of facts relied on by the prosecutor and, as a general proposition, the contention is that a scheme that is intended to assist somebody carrying on a certain type of business in Australia including the export of products, where relevant expenses are incurred, grants can be made under the scheme. Here the company represented to be an exporter of household items to Russia. 

6. Claims were made in the amount that I have indicated was paid and the Crown asserts that documents that evidence the things that fall into the categories of permissible expenses including: the costs of maintaining an overseas representative, the costs of marketing visits, and the reasonable costs of the principals, or an overseas representative, participating in a trade fair or being involved in promotion of the product, were created long after the time the expenses were said to have been incurred. 

7. It will be asserted that the expenses were not incurred. The relevant time is a four-year period from 1999.

8. It is not argued before me that there is no power in the court to stay proceedings.  There are specific references to staying proceedings in the Family Law Act but that is largely related to particular things.  There is an inherent power in courts to stay their own processes. I have been taken to a decision of Wootten J of the Equity Division of the New South Wales Supreme Court in McMahon & Gould which has been cited by a number of other courts with approval. As Mr Levet says on behalf of the husband, it is not said that there is a closed definition of the relevant matters that one would take into account. In later cases there is reference to a concern in relation to the attitude his Honour took in respect of the right to silence. His Honour was dealing with a case which he said was an application to stay civil proceedings in the interests of justice, a particular example being where there are criminal proceedings pending against a party involved in the same proceedings.

9. His Honour referred to previous authorities and said that he did not think the principle came from any of those authorities but as a matter of obvious law. His Honour said that he approached the decision in relation to staying proceedings in the interests of justice – on the basis of a number of guidelines.  Firstly, prima facie, a plaintiff is entitled to have his action tried in the ordinary course of procedure and business of the court.

10. Secondly, it is a grave matter to interfere with that entitlement with a stay of proceedings and, therefore, there needs to be justification on proper grounds.  The burden is on the respondent, the husband here, in a civil action to show that it is just and convenient that the plaintiff’s ordinary rights should be interfered with.  Neither the accused nor the Crown are entitled, as of right, to have a civil proceedings stayed because of pending or possible criminal proceedings.  The court’s task is one of balancing justice between the parties, taking account of all relevant factors.  Each case must be judged on its own merits.  It would be wrong and undesirable to attempt to define, in the abstract, what are the relevant factors.

11. One factor to take into account, where there are pending or possible criminal proceedings, is what is sometimes referred to as the accused’s right to silence and the reasons why that right under the law, as it stands, is a right of a defendant in criminal proceedings. His Honour goes on: 

    However, the so-called right to silence does not extend to give such a defendant, as a matter of right, the same protection in contemporaneous civil proceedings.  A plaintiff in civil proceedings is not debarred from pursuing action in accordance with the normal rules merely because, to do so, would or might result in the defendant, if he wished to defend the action having to disclose, in resisting an application for summary judgment in the pleading of his defence or by way of discovery or otherwise, what his defence is likely to be in the criminal proceedings.

    The court should consider whether there is a real and not merely notional danger of injustice in the criminal proceedings.  In that regard, factors which might be relevant would include the possibility of publicity that might reach and influence jurors in the civil proceedings, proximity of the criminal hearing, possible miscarriage of justice by disclosure of a defence enabling the fabrication of evidence by prosecution witnesses or interfering with defence witnesses, the burden of the defendant of preparing for both sets of proceedings concurrently, whether the defendant has already disclosed his defence of the allegations, the conduct of the defendant including his own prior invocation of civil process when it suited him.

    The effect on the plaintiff must also be considered and weighed against the effect on the defendant.

12. In this connection, his Honour suggested that it may be relevant to consider the nature of the defendant’s obligations to the plaintiff.  In the appropriate case, the proceeding may be allowed to proceed to a certain stage, for example, setting down for trial and then stayed.

13. Then his Honour goes on to discuss what he calls a realm of controversy in relation to the right of silence and, in some later cases, there have been some references to that.  I have been referred to a number of cases and I do not think, with respect, they contain any precedent or principle or authority.  They are examples of what was done in a particular instance highlighting, helpfully, some issues here and there but not creating any law beyond that which was identified in the earlier case.

14. The husband’s case is that he should not be required to litigate the civil matter for the time being because of a number of things.  He has provided some estimates of costs possible in the criminal proceedings and they depend on whether he has senior counsel or junior counsel, involving hundreds of thousands of dollars. 

15. He refers to the impost on his time and energy, given that the criminal matter is likely to be listed next March. He says that he has other commitments of his time.  He has practised a profession throughout much of his time in Australia.  His practice is winding down.  He puts 16 hours a week into that practice now.  He says something like 30 hours a week is devoted the criminal proceedings and, importantly, he says that it will be harmful to his case or could be harmful to his case if he is obliged to disclose matters in this court that could be discoverable and later adduced against him or might facilitate a chain of inquiries that might improve the prosecution case, or if he is required to reveal to the wife certain material which could adversely impact on her effectiveness as a corroborative witness in the criminal matter.

16. There is no significance attached to the husband’s arguments.  The husband does not say that, in relation to costs, for example, that complying with the obligations that are likely to fall to him between now and March next year, under the Family Law Act, will involve a cost that he cannot meet from some source. He does not identify what the cost would be. There is no indication of how a stay would provide extra funds for his criminal proceedings.

17. He has the same problem with his argument about the time and energy diverted by these proceedings unless they are stayed. We are at a stage in the litigation that used to be referred to the resolution phase, where the parties are required to provide information to each other and focus on settling the case.  They have obligations of disclosure, in a general sense, that are established by the legislation and they have specific obligations in relation to certain events such as an upcoming conciliation conference.  There are processes of discovery and inspection and so on that can occur either informally or under court order.

18. The husband does not say there is some significant aspect that is likely to arise in the context of the proceedings, in this period of time, that is going to make a substantial or significant impost on him.  The wife has said, in another context, but relevant here, that she will not press for discovery in relation to a category of documents that could be relevant to the criminal proceedings. The husband does not point to anything that would prejudice him.

19. As to the issues of what would be harmful to his case, the primary decisions that I have been referred to, which is a 1982 decision of Wootten J and a subsequent decision of the High Court from 1995 predate the Evidence Act.  The Evidence Act, amongst other things, says at section 128:

    This section applies if a witness objects to giving particular evidence, or evidence on a particular matter, on the ground that the evidence may tend to prove that the witness:

    (a)has committed an offence against or arising under Australian law or a law of a foreign country;  or

    (b)is liable to a civil penalty.

    It goes on:

    The court must determine whether or not there are reasonable grounds for the objection and, if the court determines there are reasonable grounds, the court is to inform the witness of some things, and that is:  that the witness need not give the evidence unless required to do so under a particular provision and the court will give a certificate if the evidence is given willingly or under a compulsion;  and that evidence being given in proceedings in an Australian court, and the prohibition is on any evidence of any information, document or thing obtained as a direct or indirect consequence of the person giving the evidence.  So that evidence cannot be used against the person who has the certificate.

20. That protection does not apply to perjury proceedings but that is not the issue here.  The provision under which the court can require a witness to give evidence notwithstanding that there is an objection is subsection (4):

    The court may require the witness to give the evidence if the court is satisfied that:

    (a)the evidence does not tend to prove that the witness has committed an offence against or arising under, or is liable to a civil penalty under, a law of a foreign country;  and

    (b)the interests of justice require that the witness give the evidence.

21. There is protection. In the first instance, he can object to giving evidence.  There is a safeguard if he was to be compelled to give the evidence. If the evidence is given, neither that evidence nor anything that comes from it, direct or indirect, can be used in evidence against him.

22. We are at an interlocutory stage in the family law litigation.  The wife has indicated a certain attitude in her case to the granting of a certificate under section 128.  It is not a matter for her but she has indicated a certain approach which would mean there is no impediment to it from that side of things. More importantly, there is no event at which it is foreseeable the prejudice that the husband is concerned about could arise.

23. As to the issue of revealing material to the wife, there is nothing said about that.  It is asserted, and I accept, that she would be in a category of person, probably a category just comprising herself, in a position to corroborate aspects of the husband’s case in relation to the conduct of the business of this company. There is just that bare fact. It is asserted by the husband’s solicitor that there would be an adverse impact on his criminal proceedings by certain material. The disclosure called for by the wife excludes documents relating to the period relevant to the criminal matter. It is hard to see how disclosure of other documents could have any impact.

24. In those circumstances, there seems to be no significant prejudice to the husband, nothing to warrant so serious a step as to interfere with the progress of this case.

25. As has been said in the wife’s case, there are substantial delays in this Court.  The legislation requires that parties take certain steps in the litigation as a matter of logic and as a matter of practice.  One event flows from another and delays are measured, one event to another. It is not possible to see how the parties can be protected from a delay of six months or nine months if they do not crack on with the proceedings during that time.  The wife has a case to make and she is impecunious.  She has been laid off her employment which was with the husband. Her sacking was said to be justified by an event that did not occur.  That was the closing of the husband’s practice. I understand that the wife was the manager of the practice. Thus on the face of it, the wife’s own circumstances are disadvantageous.

26. I refuse to grant the stay.  There may be individual incidents and something might come up that warrants consideration of the issues behind the husband’s application but I cannot see anything today.

27. Perhaps the more important issue is the removal of the injunction in relation to the husband leaving the country.  On 17 June 2009, I ordered that:

    Pending the hearing of this application, the husband deliver to the registry manager of the Family Court of Australia, Sydney Registry, all passports of the husband including Australian, Russian passports and that the husband be restrained by injunction from leaving the Commonwealth of Australia and making an application for the issue of a fresh passport.

    And the husband seeks relief from that order and the return of his passport.  And the argument he makes is, he should be permitted to leave.  He and his lawyers say that there are witnesses in Russia in the prosecution case.  Relevant events are said to have occurred in Russia.  The husband speaks Russian and the most efficient way of preparing the defence case would be to allow him to leave the Commonwealth.

28. It is submitted and, it is no doubt true, that the granting of an injunction in the first place, to restrain his travel was a very onerous step.  The onus remains on the wife to justify the order.  The order itself contemplated the husband being able to come back to court if he had a reason to travel.  Even if the relief was sought for so mundane a thing as a holiday, it is submitted that the injunction should not stand and it is submitted that it certainly cannot stand if it would interfere with his preparation of the criminal case. It is submitted that his right to silence extends to him not being required to say or do anything more than that he needs to go. It is also asserted that he has not breached any court orders in these proceedings.

29. In terms of the husband being held hostage within the jurisdiction to safeguard the subject matter of the property proceedings, it is asserted in the husband’s case that all of the identified funds are within the jurisdiction here. It is submitted that on the wife’s case, there is something in excess of $9 million in assets and $7 million in debts. Thus, the argument runs, it is not necessary to keep him here and, in any event, injunctions were granted on 17 June 2009 and on an earlier date, fully protect the wife in relation to the repatriation of funds overseas. It is noted in his case, that he was not similarly restrained in the criminal proceedings. The thrust of that submission, although nothing else was said about it, was that if he is trusted in the criminal proceedings to return and so on, there is no reason to distrust him in the civil matter.

30. The submission on behalf of the wife is, that there is nothing more than a bald assertion that it is necessary for the husband to leave the country. That is true.  The husband does not say, “I have attempted to deal with this in an efficient and effective way from Australia and it is not practicable”.  Neither he nor his solicitor identify any special circumstances that would prevent inquiries being undertaken in that way.  Observations were made, I think, during the course of submissions by me and by Mr Richardson on behalf of the wife that you could imagine that there might be some dangers for the husband’s case if he wanders around proposing various things and making inquiries about various things to potential witnesses but that is a matter for him. I accept that the husband speaks Russian and that his solicitor may not but that does not explain where the efficiencies or the effectiveness of him travelling to Russia, come from. 

31. In relation to him not being required to say anything more than “I need to go” that cannot be right.  It is clear, from the decision of Wootten J, that there is no automatic translation of the right to silence across from criminal to civil proceedings. Beyond the fact that the onus remains with the wife this is still a court that needs to act on the basis of evidence. 

32. It is not the wife’s case that there are sufficient assets within the jurisdiction to meet her claim.  There is a document which is a draft balance sheet which has obviously been a document of – that has been a developing document – attached to her affidavit of April. It does identify $9.6 million in assets and $7.1 million in debts but, as is the fashion in modern family law, many of the included assets do not exist.  We have $433,000 being the proceeds of sale of something, $75,000 being a deposit retained by the husband, the proceeds of sale of another property at $163,000, and a deposit from the sale of another property $133,000, a deposit from a second sale of a property at B of $110,000, a payment from the parties’ son to the husband of $220,000. Those funds are sought by way of add backs, they may not exist.

1. It is clear from the affidavits that the wife is far from sanguine that her document represents a statement of what exists. She says: 

   The balance sheet was prepared on my instructions and on the information disclosed by [the husband] in his financial statement dated 3 July 2008.  I am informed, and verily believe, that the information in the balance sheet has been updated as and when more information becomes available to me and my lawyers.  The information contained in the balance sheet is a summary and may not be entirely accurate.

2. And, as has been pointed out in the wife’s case, that is not the husband’s evidence.  He thinks the assets, in respect of which he has an interest, are balanced by debts.

3. It is true that injunctions have been granted that prevent the husband from repatriating funds.  The controversy on the occasion in June and on a previous occasion resulted from a concern of the wife that the husband was dealing with the parties’ funds without her consent and in a way inimical to her claim. His action in repatriating funds from Australia, without the wife’s agreement and so as to avoid this court having an influence on that decision, validates her concerns.

4. In this instance, his obligation was not to avoid breaching court orders. It is not to make a disclosure to the wife. His obligation was to have her approval to repatriate the funds. They were her funds. That is the point of property proceedings in family law. Every dollar of the pool of assets is joint funds. Once the parties separate, a party who is in control of joint funds is a fiduciary for the other party. The husband needed her agreement.

5. It is no comfort to me that no similar restraint is sought in the criminal proceedings. Appropriately, there is a raft of legislation in respect of the proceeds of crime. I would be surprised if the Commonwealth were not able to attack assets, perhaps even assets in the wife’s name, as a result of that legislation. The Commonwealth may well be sanguine about the husband’s travel, there being sufficient assets within the jurisdiction to meet its claim. However, the wife has no reason to be sanguine about that matter. She is concerned that some of the funds needed to meet her legitimate claim under section 79 are not within the jurisdiction.

6. I appreciate that an injunction to restrain travel from Australia is among the most draconian orders this Court might make but the circumstances that justified the order of 17 June 2009 still apply. There is nothing in the case of the husband today that warrants that restraint being removed. His application is dismissed.

1. Generally, parties bear their own costs.  The court has power to make an order and, in doing so, is required to consider the matter set out in section 117(2).  They include their financial circumstances.  There is no Legal Aid here.  The conduct of the parties in relation to the proceedings, that is attending, filing documents and so on, whether either has been in breach of a court order, whether either has been wholly unsuccessful in the proceedings, any offers of settlement in writing under section 117C or otherwise, and any other matter that is relevant to the question of costs. Here the parties have substantial assets.  I am told the husband has money at bank, and that he is restricted for reasons unrelated to an order I made, in relation to the use of those funds.  That means that some arrangement could be made in respect of those funds.

2. The husband has been wholly unsuccessful.  I appreciate that the husband is entitled to chance his arm in relation to the issue of passport and I have some sympathy with him in relation to this issue. However, he does not say he wants to revisit the merits the original injunction. He says very particularly, “I need relief from the injunction to do a certain thing”. He has not made that case out and he did not even try and make it out. Thus he is not arguing the integrity of the original order, which he could have done any day after 17 June 2009. He could have filed a review. 

3. Thus this was unnecessary litigation. In relation to the stay, I simply do not understand the reason for the application.  I could understand it if the final hearing was booked for tomorrow. I cannot understand it given the point at which these proceedings have reached.

4. For those reasons there should be an order for costs. As has been said on behalf of the wife, a party and party costs award is a limited indemnity.  It represents some part of the costs actually incurred by a party in running a case. I suspect a very disappointing fraction in the context of this case. However, it seems to me that an award on a party and party basis is appropriate given that the husband is entitled to ask again that the wife explain the basis on which he is so seriously restrained.

I certify that the preceding forty two (42) paragraphs are a true copy of the reasons for judgment of Judicial Registrar Loughnan.

Associate: 

Date:  12 October 2009