Malcher & Malcher (Security for Costs)
[2017] FamCAFC 202
•29 September 2017
FAMILY COURT OF AUSTRALIA
| MALCHER & MALCHER (SECURITY FOR COSTS) | [2017] FamCAFC 202 |
| FAMILY LAW – APPLICATION IN AN APPEAL – Security for costs – Where the appellant husband ordinarily resides outside of Australia – Where the appellant husband has few assets in Australia – Where the appellant husband is in a poor financial position and it is likely that an order for security for costs would stifle the appeal – Where the appeal is arguable – Where there was delay in the bringing of the application for security for costs – Where the appellant husband is unlikely to comply with an order for costs if the appeal is unsuccessful – Where, on balance, the matters raised weigh against the making of an order for security for costs – Application dismissed. FAMILY LAW – APPLICATION IN AN APPEAL – Extension of time – Where the appellant husband seeks an extension of time to file transcript and a Summary of Argument – Where the application is not opposed by the wife or the ICL – Extensions of time granted. |
| Family Law Act 1975 (Cth) ss 97(3), 106A, 117 Family Law Rules 2004 (Cth) r 19.05(2) |
| Atkins & Hunt(Security for Costs) (2015) FLC 93-646 Halsbury & Halsbury [2008] FamCAFC 170 Luadaka v Luadaka (1998) FLC 92-830 Palma & Caleffi and Anor (Security for Costs) [2011] FamCAFC 174 Proctor & Proctor [2017] FamCAFC 110 |
| APPLICANT: | Ms Malcher |
| RESPONDENT: | Mr Malcher |
| INDEPENDENT CHILDREN’S LAWYER: | Legal Aid NSW |
| FILE NUMBER: | SYC | 3808 | of | 2012 |
| APPEAL NUMBER: | EA | 8 | of | 2017 |
| DATE DELIVERED: | 29 September 2017 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Aldridge, Kent & Cleary JJ |
| HEARING DATE: | 22 September 2017 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 9 December 2016 |
| LOWER COURT MNC: | [2016] FamCA 1063 |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | Barkus Doolan |
| THE RESPONDENT: | In person by telephone |
| SOLICITOR FOR THE INDEPENDENT CHILDREN’S LAWYER: | Legal Aid NSW |
Orders
The Application in an Appeal filed on 27 June 2017 is dismissed.
The time in which the appellant husband is to file and serve the electronic transcript is extended up to and including 10 November 2017.
The time in which the appellant husband is to file and serve his Summary of Argument and List of Authorities is extended up to and including 15 December 2017.
The time in which the respondent wife is to file and serve her Summary of Argument and List of Authorities is extended up to and including 2 March 2018.
The time in which the Independent Children’s Lawyer is to file and serve a Summary of Argument and List of Authorities is extended up to and including 2 March 2018.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Malcher & Malcher (Security for Costs) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EA 8 of 2017
File Number: SYC 3808 of 2012
| Ms Malcher |
Applicant
And
| Mr Malcher |
Respondent
REASONS FOR JUDGMENT
Introduction
By an Application in an Appeal filed on 27 June 2017 Ms Malcher (“the wife”) seeks an order that within 28 days the appellant, Mr Malcher (“the husband”), pay to the wife’s solicitors the sum of $50,000 to be held as security for any costs that may be awarded to her if the appeal filed by the husband is unsuccessful. The wife seeks a further order that in the event the husband fails to make the payment his appeal is stayed permanently.
On the morning of the hearing of this application the husband served a Response and an affidavit affirmed by him. The husband sought leave to rely on those documents. The wife did not oppose his application for leave to rely on the documents and an order was made granting the husband leave. In addition to seeking to have the wife’s application dismissed, the Response sought orders for an extension of time for the husband to file and serve the transcript and his Summary of Argument and for the filing of Summaries in response.
The wife did not oppose the extension of time but proposed that the extension be for a considerably shorter time than that sought in the Response.
The Independent Children’s Lawyer (“the ICL”), who is also a party to the appeal, did not wish to be heard on the application for security for costs. He adopted the same position as the wife in relation to the application for an extension of time.
The parties were involved in parenting and property proceedings before Le Poer Trench J. The hearing spanned 33 days between 20 July 2015 and 28 October 2016. Extensive reasons comprising some 2,228 paragraphs over 437 pages were given on 9 December 2016.
The husband filed a Notice of Appeal on 6 January 2017. A procedural hearing was conducted by a Registrar on 22 March 2017 and the husband was directed to file and serve the appeal books and an electronic copy of the transcript by 28 July 2017. The appeal books have been prepared but have not yet been filed. The transcript has not been filed.
On 19 June 2017 the husband wrote to the Appeal Registry seeking an extension of 60 days (to 29 September 2017) to file the appeal books and that the subsequent orders for the filing and serving of Summaries of Argument and Lists of Authorities also be extended by 60 days. That request was granted on 4 July 2017.
Background
The parties commenced their cohabitation in mid-2000 and separated on a final basis in or about February or March 2011. They have three children who were born in 2002, 2003 and 2006.
Throughout the proceedings before the primary judge the wife was represented by a solicitor and counsel. The husband acted for himself.
The parenting orders made by the primary judge provided for the wife to have sole parental responsibility for the children who were to live with her. Orders were made for the children to spend substantial time with the husband both during the school term and during school holidays, although the orders in relation to each child were slightly different.
In relation to the parties’ property his Honour ordered the wife to pay the husband the sum of $350,622 on or before 1 April 2017, although the wife was to deduct from that sum a number of specified debts owed to her by the husband as set out in the orders. Upon the wife making the payment the husband was to transfer to the wife all his interest in a property at Suburb N, in which the parties had previously lived.
The primary judge also made an order that there be a departure from the Child Support Assessment dated 16 June 2015 in respect of the period 1 June 2015 to 30 June 2018. The Child Support Registrar was to assess the child support payable on the basis that the husband had a taxable income in each of those years of the order of $200,000.
The husband has appealed against each of the 83 orders made by the primary judge, including an order dismissing the husband’s claim for spousal maintenance.
Security for costs
It is well established that the Court has the power to make an order for security for costs. That power is found in s 117 of the Family Law Act 1975 (Cth) (“the Act”). The Full Court in Atkins & Hunt(Security for Costs) (2015) FLC 93-646 (“Atkins”) at [12] regarded it as well settled that in addition to the matters referred to in s 117(2A) the following matters should also be considered under s 117(2A)(g):
·The prospects of the success of the appeal;
·Whether the claim for security for costs was made bona fide;
·Whether or not an order for security for costs would stifle the litigation;
·Whether or not the litigation may involve a matter of public importance;
·Whether or not there had been a delay in bringing the application for security; and
·Whether or not there would be difficulty in enforcing an order for costs.
See also Palma & Caleffi and Anor (Security for Costs) [2011] FamCAFC 174; Luadaka v Luadaka (1998) FLC 92-830.
As the Court in Atkins pointed out at [22], these factors largely mirror the considerations referred to in r 19.05(2) of the Family Law Rules 2004 (Cth) (“the Rules”). We would add to that, in these circumstances, that it is also a relevant consideration whether or not the husband ordinarily resides outside Australia (r 19.05(2)(h)) and whether or not there are unpaid costs orders (r 19.05(2)(g)).
The wife bases her application upon two propositions. The first is that the husband ordinarily resides out of Australia and the second is that he has limited assets within Australia which could, in any event, easily be dissipated or removed from Australia. Thus she submits if the appeal was unsuccessful and she received the benefit of a costs order it would be impossible to enforce.
The wife’s unchallenged evidence is that the husband left Australia for Europe on 10 November 2015 and that other than for a period of about six weeks between March and May 2016 (when he returned to Australia for his father’s funeral) and 7 July 2017 until 1 August 2017 (during which period the parties’ son played in an interstate sports competition) the husband has remained living overseas. On his arrival in Australia in July 2017 the husband indicated on his Incoming Passenger Card that he was not intending to live in Australia for the next 12 months. On the same form he described his occupation as a financial services professional.
We were informed that the husband was personally present at the hearing before the primary judge on the 31 dates that it was before the Court in 2015 (between 20 July 2015 and 12 October 2015) but not personally present on the last two days (22 September 2016 and 28 October 2016). That attendance is consistent with the wife’s evidence. The husband attended the hearing of this application by telephone. In his application for leave to attend by telephone he informed the Court that he “is currently not in Australia”.
Would an order for security stifle the appeal?
The primary judge found the assets of the parties to have a value of $3,701,410, of which the major asset is the property at Suburb N which was valued at $3,550,000. After taking into account a number of liabilities the primary judge found the parties’ net property to be $1,074,560. In addition the parties had some $370,451 in superannuation.
The primary judge concluded that the non-superannuation property should be divided between the parties so that the wife received 70 per cent and the husband 30 per cent. Their superannuation was to be divided so that the wife received 80 per cent of the combined superannuation entitlements and the husband 20 per cent. This led the primary judge to make the order in relation to the property to which reference has earlier been made.
The wife’s evidence was that these orders have now been implemented and that on 27 March 2017 she paid into the husband’s bank account the sum of $273,470.30, which was the balance payable after deduction, pursuant to the final orders, of child support arrears, security for child support, the husband’s share of the setting down and hearing fees, costs payable pursuant to earlier orders of the Court and the husband’s share of the costs due to the ICL and the single expert.
Between 30 March 2017 and 3 April 2017, very shortly after the deposit into the husband’s account was made, the funds in the account were disbursed to HH Pty Limited (“HH”), LL Asset Management Pty Limited and Ms G. According to an ASIC search undertaken on 15 September 2017 the husband is the sole director of HH and he and his late father are the shareholders. The husband is the sole director of LL Asset Management and HH is its sole shareholder. Ms G is the husband’s partner.
The wife asserts that taking into account the payment of $273,470.30, the husband has had the benefit of total net assets of some $345,572. Those assets include a motor vehicle valued at $41,200 and jewellery and timepieces valued at $65,000.
The husband’s evidence is the payment to Ms G was the repayment of a debt owed to Ms G and her parents.
His affidavit further explains that he used the $273,470.30 to retire debt (including the debt to Ms G and some credit card providers), travel to Australia in July 2017, purchase a motor vehicle, pay veterinary bills and for living expenses. He said that $41,345.79 remains in the account of HH and $25,000 has been placed in an investment account and earmarked for the cost of obtaining the transcript.
This explanation leaves the fate of $41,852.37 unexplained. Some explanation may perhaps be found in a bank statement annexed to the husband’s affidavit, which shows that on 28 July 2017 $15,648.90 was paid to MJ Services and a further $15,840.32 was paid to an unknown recipient. The husband’s evidence did not refer to either payment. We shall proceed on the basis that those two sums are, at least, still available to the husband. He also has 3000 Euros in an account in European Country FF.
His evidence is that he is currently unemployed.
His affidavit demonstrates that he has been sued by Bank XY for $32,871.94 (he informed us in submissions that a default judgment has now been obtained against him) and that he owes Bank YZ $56,648.66. He hopes to be able to satisfy these debts by persuading the creditors to agree to accept a lesser payment.
Leaving aside debts to friends and family members he owes a total of $89,520.60 to Bank XY and Bank YZ. The estimated cost of obtaining 27 days of transcript is $31,050 (six days of transcript relevant to the parenting aspect of the proceedings has already been provided to the parties by the Court).
At best, assuming the husband’s evidence to be complete and accurate (and there is no means of determining otherwise on this application), he has available to him $97,835.01 (the amount in the HH account, investment account and the two withdrawals on 28 July 2017). Thus, any order for security for costs will impair his ability to pay for the transcript or settle with his creditors. If he does not settle with his creditors the husband says that bankruptcy is inevitable. Either way the husband submits that any requirement to provide security for costs would stifle the appeal.
It is true, as the wife submits, that these debts have been owing for some time and that he may be able to settle with his creditors for a very reduced sum (as he has done with other credit card providers) but there remains a very real risk that an order for security for costs would stifle the appeal.
The financial circumstances of the parties
In the previous section we have already discussed, in some detail, the financial circumstances of the husband.
The wife did not accept that he was unemployed or in as poor a financial state as he suggested, but she did accept that there is no clear evidence of significant income earned or assets held by him.
The wife conceded that she is in a far superior financial position to the husband. She has the benefit of a high income and owns the former family home which was valued at $3,550,000 in November 2016. That, however, does not paint the full picture. She has a very substantial mortgage of $3,000,000 and has considerable debts, including taxation liabilities and a debt to her lawyers in relation to the hearing, which she is paying by instalments. Her evidence is that her outgoings exceed her income.
Since 10 November 2015 the wife has met all the expenses of the parties’ three children including the payment of private school fees for each of them without any assistance from the husband. The husband has been assessed to pay child support of $881 each month from 1 October 2017. The burden of supporting the children is made more difficult by the legal fees that have been incurred and will be incurred as a result of this appeal.
We note that whilst it is ultimately a matter for the bench that will hear the appeal it is quite unlikely that the husband will be granted leave to appear in that appeal by telephone and that he would therefore need to return to Australia to conduct the appeal or to have a lawyer appear on his behalf. Either course will involve the husband incurring further expense.
The reality is that any appeal is likely to be a significant financial strain for both parties.
The prospects of success of the appeal
Given the length of his Honour’s reasons and given that the Court has not yet received the written submissions of the husband in support of his appeal, it is difficult to ascertain what the merits of the appeal might be. Some indication can be gleaned from the grounds of appeal themselves, which are as follows:
1.That the judge was in error in that:
1.1The judge fell into error in the parenting matter by allowing the single expert ([Dr A]) to continue to give evidence when it had been proven that his testimony was tainted by his contact with the treating psychologist ([Dr U]) before the hearing. [Dr A’s] recommendations had completely changed between the period of his written reports and the time of the hearing following his contact with [Dr U]. This was in direct defiance to the direction of the judge and was aided by the ICL in that he/they had been involved directly in contravening the judge’s directions.
1.2The judge fell into error by not considering that the single expert ([Dr A]) had changed his opinions on numerous occasions during his testimony.
1.3The judge fell into error in not considering all of the evidence put before him in the financial matter.
1.4His judgement does not consider a vast majority of evidence that was put before him.
1.5The judge fell into error in making findings that are not based on any evidence.
1.6The judge fell into error by exercising his discretion in making findings that are not based on any or all of the evidence that was before him. His decisions and certain conclusions are clearly wrong.
1.7The judge fell into error in making findings that are in direct contradiction to the evidence put before him.
1.8The judge also fell into error by being [sic] exhibiting a strong bias against the appellant as evidenced in the transcript. The judge treated the appellant with a great level of ambivalence and ignored certain requests and motions without giving them due consideration.
1.9The judge fell into error in not allowing the cross examination of certain witnesses.
1.10The judge fell into error in not allowing the appellant to call certain witnesses.
As can be seen the grounds are very general and most do not identify a particular error. Nonetheless we are prepared to proceed on the assumption that the husband’s grounds of appeal are reasonably arguable. The wife accepted that, save for two grounds, the appeal was not so devoid of merit as to be a factor that supported her application.
It must be observed that in the absence of any evidence of an intention to return to Australia in the near future, the appeal against the orders that the children spend time with the father would appear to be pointless.
Has the claim for security for costs been made bona fide?
There is no suggestion that the wife’s application for security is made anything other than bona fide.
Has there been a delay in bringing the application?
As the Court pointed out in Atkins at [42], whilst the Rules do not provide a time limit for the bringing of an application for security for costs, “it is desirable for an application for security for costs to be filed as soon as practicable after the appeal has been instituted”. Such an application should be heard before the appellant has spent significant funds on preparation for the appeal.
The wife’s application was brought almost six months after the Notice of Appeal was filed and three months after the first procedural hearing before a Registrar. The consequence is that the husband has already prepared the appeal books.
The wife submits that she filed this application only after the husband failed to lodge the appeal books in accordance with the original directions of the Registrar. The husband wrote to the Registry on 19 June 2017 seeking an extension of time, which was granted on 4 July 2017. He was obliged by those orders to prepare the appeal books and has done so.
The wife does not give any explanation as to why this application was not filed earlier than it was and this consideration favours refusal of the application.
Does the appeal involve a matter of public importance?
The appeal does not involve a matter of public importance.
Would there be a difficulty in enforcing an order for costs?
This issue has already been largely canvassed earlier in these reasons for judgment.
The wife also relies upon the failure of the husband to pay the costs that were ordered to be paid by him on 3 December 2012, 4 November 2013 and 3 June 2015 in the total sum of $6,419.38. The husband did not pay child support and the arrears at 27 June 2017 were $17,062.87. The primary judge accepted that the husband would not voluntarily pay these debts and the property orders provided for them to be deducted from the sum payable to him under the orders prior to payment.
The husband failed to comply with the property orders in that he failed to sign the necessary documents, which required the wife to make an application on 22 February 2017 seeking orders pursuant to s 106A of the Act that the Registrar sign the documents on the husband’s behalf. Those orders were made on 14 March 2017.
These matters indicate that the husband will not voluntarily comply with any costs order that might be made in the appeal.
Other relevant considerations
There are some further matters which we consider should also be taken into account.
The first arises from three extraordinary features of this litigation which underlie the current application.
First, as we have already recorded, the trial of these parenting and property proceedings took place over no less than 33 days over the period spanning July 2015 to October 2016. It may be observed, by way of example, that in some Magellan cases involving numerous and serious contested allegations of child abuse and in some financial cases of unusual complexity, the statistical average trial time of four and a half days for trials heard in the trial division is exceeded, and occasionally by a significant margin. However, we observe that we have been unable to identify anything about the factual and legal issues involved in this case to explain why anything like 33 days of trial was necessary to hear and determine those issues. Relevant to the wife’s present application, it is not evident that the manner in which the wife elected to conduct her case at trial explains this length of trial. The wife’s evidence includes that the estimate of costs the wife received from her lawyers, who are experienced in this jurisdiction, was predicated upon a nine day trial. Section 97(3) of the Act obliges the Court to endeavour to ensure that proceedings not be protracted.
Second, the sheer length of the trial largely explains why, exclusive of any legal fees in respect of the appeal, the wife has, dismayingly, incurred in excess of $1,000,000 in legal fees. To put that into perspective, the primary judge found the net assets of the parties, inclusive of superannuation interests of about $370,000, to be worth a combined total of $1,445,011. Thus, before costs of the appeal are accounted for, the wife’s legal fees equate to the total of the parties’ non-superannuation assets combined as found by the primary judge.
The wife’s affidavit filed on 18 September 2017 details, aside from legal expenses, the serious impacts that a trial of this duration has had had upon her both professionally and personally.
Third, as we have already said, the reasons for judgment delivered by the primary judge comprise no less than 2,228 paragraphs occupying 437 pages. Leaving aside that the narrative content and sheer length of these reasons go well beyond the legitimate function of reasons for judgment, as recently discussed by this Court in Proctor & Proctor [2017] FamCAFC 110 at [67], the financial and other burdens upon the parties to an appeal from orders explained by grossly excessive reasons increase exponentially because of that excess. Whether the reasons are infected by appealable error will be a matter for the appeal itself.
Thus it is that the appeal record for this appeal occupies some nine volumes, a voluminous trial transcript, and the estimated time for the hearing of the appeal is two days. Consequently, the wife’s costs of responding to this appeal will be significant as is the potential injustice to her, given also her costs thus far, if the outcome of the appeal is that the wife receives a costs order which goes unmet.
The wife has received a Notice as to Costs advising that the costs and disbursements of the appeal are estimated to be $127,011 of which just under $123,000 is yet to be incurred. Having regard to the matters that we have just discussed, that estimate does not appear to be unreasonable. Thus the order proposed by the wife falls well short of providing security for a complete indemnity against her possible costs. Of course, to the extent that no costs order is made or that the amount of any ordered and assessed costs fall below the funds held by way of security those surplus funds will be returned to the husband.
Having regard to these matters, the sum claimed by way of security is reasonable.
Conclusion
It is important to bear in mind that the starting position under s 117(1) is that each party is to bear his or her own costs. We also bear in mind what was said by the Court in Halsbury & Halsbury [2008] FamCAFC 170:
34. Before concluding we take the opportunity to make the following observations regarding applications for security in relation to the costs of an appeal. Such applications appear increasingly to be taking up the time and resources of the litigants and of the Court. The proper place of such applications and the competing rights that lie at the heart of such applications need to be borne in mind by those seeking them.
35. Appeals are a part of our system of law. They operate as part of the proper checks and balances on the actions and decisions of trial judges. Litigants have a right to appeal in circumstances where they, properly and bona fide, allege error on the part of the trial judge (subject of course to the requirements in certain circumstances of leave to appeal being granted). That right to appeal is an important part of our system of law. It should not be fettered except for good reason.
The fact that the husband appears to be residing permanently overseas, probably in European Country FF, and that there is no evidence that there will, in due course, be sufficient assets in his hands within the jurisdiction to meet a costs order, if one is eventually made, support the application. We also take into account the failure of the husband to pay previous costs orders, notwithstanding that they were subsequently paid by being deducted from the sum payable to the husband under the final property orders.
However, the failure to bring this application promptly, the difference between the parties’ financial circumstances and the real risk that an order for security for costs would stifle an appeal that is properly conceded to be arguable persuade us that the application should be refused.
The application will therefore be dismissed.
Application for extensions of time
As neither the wife nor the ICL opposed the husband’s application for an extension of time we will make orders to that effect, but we are not inclined to give the husband the period of 90 days from the date of this judgment to obtain the transcript and a further 30 days for his submissions.
We accept that it will take some weeks for the transcript to be obtained, but, as is clear, because the husband presently holds the funds to pay for it, there should be no undue delay. The period of six weeks that was proposed by the wife will be sufficient.
The husband said that he needed a period of 120 days from the date of this judgment to prepare his Summary of Argument because it will be long and detailed, involving very many cross-references between the transcript and the primary judge’s reasons. We do not accept this should be so. The Summary of Argument is just that – a summary.
We are concerned too that the approach of the husband indicates a misunderstanding of the appeal process. The task of an appeals court is to identify error – it is not to re-hear the whole case and simply to substitute its own view of the facts or the manner in which the discretions as to the nature of the parenting and property orders should be exercised.
As presently advised, we see no basis for the husband’s Summary of Argument to exceed the prescribed 15 pages. In the absence of an order providing for a longer Summary, the Registrar would be entitled not to accept for filing a document that exceeds that length.
We will extend the time for the filing and serving of the electronic transcript up to and including 10 November 2017, the time for the filing and serving of the husband’s Summary of Argument up to and including 15 December 2017 and for the filing and serving of each of the wife’s and the ICL’s Summaries of Argument up to and including 2 March 2018.
I certify that the preceding sixty-nine (69) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Aldridge, Kent & Cleary JJ) delivered on 29 September 2017
Associate:
Date: 29 September 2017
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