Malloy and Stopford Malloy & Ors
[2020] FamCAFC 270
•6 November 2020
FAMILY COURT OF AUSTRALIA
| MALLOY & STOPFORD MALLOY AND ORS | [2020] FamCAFC 270 |
| FAMILY LAW – APPEAL – LEAVE TO APPEAL – PROPERTY – Interim property orders – Appeal against orders for the payment of receivers by the husband – Appeal against litigation funding orders – No error identified – Where insufficient doubt attends the orders sought to be challenged – Where no substantial injustice would result if leave is not granted – Application for leave to appeal dismissed. FAMILY LAW – CROSS-APPEAL – LEAVE TO CROSS-APPEAL – PRACTICE AND PROCEDURE – Cross-appeal against orders for the production of unredacted financial accounts – Adequate reasons – Where the primary judge’s findings were open on the evidence – Where insufficient doubt attends the orders sought to be challenged – Where no substantial injustice would result if leave is not granted – Cross-applicant’s application for leave to appeal dismissed. |
| Family Law Act 1975 (Cth) s 94AA Family Law Rules 2004 (Cth) r 13.07A |
| Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170; [1981] HCA 39 Bahonko v Sterjov (2008) 166 FCR 415; [2008] FCAFC 30 Barnes v Addy (1874) LR 9 Ch App 244 Bennett and Bennett (1991) FLC 92-191; [1990] FamCA 148 Cameron v Cole (1944) 68 CLR 571; [1944] HCA 5 Harman v Secretary of State for the Home Department [1983] 1 AC 280; [1982] 1 All ER 532 Hatton v Attorney General (Cth) (2000) FLC 93-038; [2000] FamCA 892 Hearne v Street (2008) 235 CLR 125; [2008] HCA 36 Medlow & Medlow (2016) FLC 93-692; [2016] FamCAFC 34 Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110 The Commissioner for Railways (New South Wales) v Cavanough (1935) 53 CLR 220; [1935] HCA 45 Wilde v Australian Trade Equipment Co Pty Ltd (1981) 145 CLR 590; [1981] HCA 13 |
| APPLICANT/ SECOND CROSS- RESPONDENT: | Mr Malloy |
| FIRST RESPONDENT/ FIRST CROSS-RESPONDENT: | Ms Stopford Malloy |
| SECOND RESPONDENT/ FIRST CROSS-APPLICANT: | Mr Q Malloy |
| THIRD RESPONDENT/ SECOND CROSS-APPLICANT: | The Malloy Group |
| INTERVENERS: | Mr R and Mr S, Receivers |
| FILE NUMBER: | ADC | 2595 | of | 2015 |
| APPEAL NUMBER: | SOA | 4 | of | 2020 |
| DATE DELIVERED: | 6 November 2020 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | In Chambers |
| JUDGMENT OF: | Strickland, Aldridge & Kent JJ |
| HEARING DATE: | Heard by way of written submissions |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 13 December 2019 |
| LOWER COURT MNC: | [2019] FamCA 986 |
REPRESENTATION
| THE APPLICANT/SECOND CROSS- RESPONDENT: | Self-represented litigant |
| COUNSEL FOR THE FIRST RESPONDENT/ FIRST CROSS-RESPONDENT: | Mr Wells QC with Mr McGinn |
| SOLICITOR FOR THE FIRST RESPONDENT/ FIRST CROSS- RESPONDENT: | Piper Alderman |
| COUNSEL FOR THE SECOND AND THIRD RESPONDENTS/ FIRST AND SECOND CROSS-APPLICANTS: | Mr Harris QC with Mr Besanko |
| SOLICITOR FOR THE SECOND AND THIRD RESPONDENTS/ FIRST AND SECOND CROSS-APPLICANTS: | Barnes Brinsley Shaw Lawyers |
| SOLICITOR FOR THE INTERVENERS: | Crawford Legal |
Orders
The Application in an Appeal filed by the wife on 31 July 2020 be dismissed.
The application for leave to appeal the orders made by a judge of the Family Court of Australia on 13 December 2019 which was filed on 8 January 2020 be dismissed.
The application for leave to cross-appeal the orders made by a judge of the Family Court of Australia on 13 December 2019 which was filed on 10 January 2020 be dismissed.
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 Malloy & Stopford Malloy and Ors 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 ADELAIDE |
Appeal Number: SOA 4 of 2020
File Number: ADC 2595 of 2015
| Mr Malloy |
Applicant/ Second Cross-Respondent
And
| Ms Stopford Malloy |
First Respondent/ First Cross-Respondent
And
| Mr Q Malloy |
Second Respondent/ First Cross-Applicant
And
| The Malloy Group |
Third Respondent/ Second Cross-Applicant
And
| Mr R and Mr S, Receivers |
Interveners
REASONS FOR JUDGMENT
Introduction
Ms Stopford Malloy (“the wife”) and Mr Malloy (“the husband”) have been involved in property settlement litigation since July 2015. In the course of those proceedings, a judge of the Family Court of Australia made a suite of interlocutory orders to the following effect on 13 December 2019:
·the husband was to pay the remuneration ($34,640.93) and the legal costs and expenses ($15,737.14) of receivers who had been appointed by the Court pursuant to orders made by another judge on 5 September 2016. A further order was made charging the husband’s property with that obligation (Orders 1–6);
·the husband was not to permit his lawyers to draw on funds provided to them for the purpose of conducting the proceedings on his behalf, until the same amount had been paid to the wife’s lawyers (Orders 16–22); and
·the trustees of the Malloy Trust and the AP Trust were to provide an unredacted version of their financial accounts, which have previously been provided only in redacted form (Orders 7–9).
Although in his Notice of Appeal filed on 8 January 2020, the husband indicated that he proposes to appeal against all of the orders made by the primary judge on 13 December 2019, it is clear from his proposed grounds of appeal and written submissions that he only seeks leave to appeal against the first and second groups of orders identified above. Mr Q Malloy, the husband’s father and the second respondent to the husband’s appeal, and The Malloy Group, which is a group of 48 companies and the third respondent to the husband’s appeal (“the cross-applicants”), similarly indicate that they propose to cross-appeal against all of the orders made by the primary judge but it is clear that leave is sought to cross-appeal only against the third set of orders identified above.
It is agreed that the relevant question is whether, in all the circumstances, the decision is attended by sufficient doubt as to warrant it being reconsidered by the Full Court and whether a substantial injustice would result if leave were refused, supposing the decision to be wrong (Medlow & Medlow (2016) FLC 93-692 at [57]).
These applications are being heard on the issue of leave to appeal and
cross-appeal only, and by way of written submissions, pursuant to orders made by Strickland J on 26 March 2020.
The applications are opposed by the wife.
Application to file a supplementary appeal book
By an Application in an Appeal filed on 31 July 2020, the wife sought leave to file a supplementary appeal book containing her Amended Initiating Application filed on 10 April 2019 and Points of Claim filed on 14 July 2020.
Directions were made on 14 August 2020 for the wife’s application to proceed by way of written submissions, which have now been received.
The wife’s application is opposed by the husband. The cross-applicants oppose the Court receiving the Points of Claim (which was not before the primary judge) but do not oppose the receipt of the Amended Initiating Application (which was before the primary judge).
If leave was to be granted as sought by the wife, then the parties would have to be given the opportunity to place further submissions before the Court addressing the issues raised by them, which would further delay these already protracted interlocutory proceedings. That is not in the interests of justice, and in any event, we do not consider that those documents are so relevant to the applications for leave that they need to be put before this Court.
The wife’s Application in an Appeal will be dismissed.
Leave to appeal
The orders for the payment of the receivers
In order to understand this aspect of the husband’s application for leave to appeal, it is necessary to set out the relevant procedural history.
On 19 October 2015 (as amended on 22 April 2016), Dawe J ordered the husband to pay spousal maintenance to the wife in the sum of $2,000 per week, plus $650 towards her rental costs and any bond payment.
The spousal maintenance was not paid by the husband and on 13 May 2016, the wife brought an enforcement application for payment of the arrears which were then $20,547.
The wife’s enforcement application was heard by Bryant CJ. On 5 September 2016, her Honour made a set of orders appointing Mr R and Mr S of T Accountants (“the receivers”) as joint and several receivers of the following property of the husband (Orders 1–12 made on 5 September 2016):
·jewellery;
·household contents; and
·properties at Suburb E and Suburb B in South Australia.
Importantly for present purposes, the following order was made as to the receivers’ remuneration:
(5)That the Receivers’ remuneration be paid from the financial resources of the husband and such remuneration be calculated in accordance with the standard rates effective from time to time as set out in Annexure “W-7” to the wife’s affidavit sworn 7 June 2016.
A further order permitted the receivers to sell items collected by them and to deduct the sums owed to them prior to payment of the sums owed to the wife (Order 8 made on 5 September 2016).
The husband appealed against these orders and on 7 December 2016, a stay was granted pending the determination of the appeal.
On 5 October 2017, all of the orders concerning the receivers (Orders 1–12 made on 5 September 2016), were set aside by the Full Court and the wife’s application for the appointment of the receivers was dismissed.
Whilst the orders made on 5 September 2016 were in force, the receivers undertook work. It was not challenged before the primary judge that their proper remuneration and their costs and expenses for that work were in the sum of $50,378 (at [17]). By an Application in a Case filed on 16 November 2017, the receivers sought payment of that sum and that they have a charge over the husband’s property in relation to it. The receivers’ application came before the primary judge and Orders 1–6 as described above were made.
The husband submits that his Honour erred in ordering him to pay the receivers’ remuneration and their costs and expenses because:
·the Full Court had finally disposed of the entitlement of the receivers to their costs when it set aside the orders made on 5 September 2016;
·the husband had no financial capacity to meet the costs order; and
·the wife had sought the appointment of the receivers and thus she should pay their remuneration and their costs and expenses.
The first point misconceives the nature of the Full Court’s orders. Whilst the Full Court set aside the existing orders for the receivers’ remuneration and their costs and expenses, the effect was simply then that there was no order providing for their payment. It was not an order to the effect that the receivers not be paid.
The order for their appointment remained valid until it was set aside (Cameron v Cole (1944) 68 CLR 571 at 590). The acts undertaken by them whilst their appointment subsisted were validly undertaken (The Commissioner for Railways (New South Wales) v Cavanough (1935) 53 CLR 220 at 225 and 227 and Wilde v Australian Trade Equipment Co Pty Ltd (1981) 145 CLR 590 at 603).
Thus, the receivers were entitled to bring an application for their remuneration and their costs and expenses. Indeed, it would be surprising if they were not to be paid as they were not parties to the litigation and had been appointed by the Court.
It is true that the receivers did not appear at the appeal hearing in 2017. Had they done so, a form of order as to their costs may have been made at that time but, in our opinion, that did not preclude them from bringing their application.
As to the balance of the husband’s submissions dealing with this issue, the husband simply says that he did not seek the appointment of the receivers, that they should never have been appointed, and that he has no means of paying them. The submissions do not come to grips with the findings made by his Honour as discussed above or those, which we shall discuss in more detail shortly, that the husband had access to or the benefit of significant funds which enabled him “to lead an extravagant lifestyle” (at [154]). Therefore, as the husband has not identified any particular error, it cannot be suggested that the primary judge’s decision is attended by sufficient doubt so as to warrant an appeal.
In any event, as the primary judge noted, the husband’s obligation to pay the receivers’ remuneration and their costs and expenses is one that can be taken into account at the time of the final property settlement hearing, so it is difficult to see what injustice would ultimately flow to the husband if leave to appeal was refused.
We are not persuaded that there is sufficient doubt about the orders to warrant reconsideration by the Full Court or that any substantial injustice would flow if leave to appeal was refused.
The litigation funding orders
The effect of the primary judge’s orders (Orders 16–22) was that to the extent that the husband engaged lawyers to act on his behalf in the proceedings and those lawyers engaged other professionals such as accountants or experts, he was to pay to the lawyers for the wife the same amount for her costs of the proceedings as he paid his lawyers. The husband’s lawyers were prevented from drawing on any funds given to them by the husband until the requisite payment had been made to the wife’s lawyers.
The husband submits that the primary judge erred in making these orders because:
·a similar order had been made by Bryant CJ on 5 September 2016, which was later set aside by the Full Court;
·the primary judge failed to sufficiently consider the husband’s financial position;
·the husband has no means to pay; and
·the orders deprive him of the right to seek legal representation.
Bryant CJ did not make any orders as to the funding of the wife’s legal costs (as opposed to those of the receivers) and the first point is misconceived.
The primary judge did consider the financial position of the husband saying:
154.It is not in contention that the husband continues to lead an extravagant lifestyle of luxury housing and expensive, exotic cars. On the other hand, the wife is in receipt of social security and the $650.00 weekly payment made by the husband, and only has the benefit of legal representation because her solicitors are prepared to act for her, seemingly on a no-win no-fee basis. Her counsel have similarly agreed to act for her, but have not necessarily agreed to continue to do so at any trial.
155.The following points tell in favour of a litigation funding order in the wife’s favour:
•So long as the husband remains legally represented, there will not be a completely level playing field, in that the wife is dependent upon solicitors acting without any guarantee of reward, whereas the husband’s solicitors are guaranteed of payment;
•Despite the husband being without income, he plainly has his lavish lifestyle funded by his father’s largesse, albeit structured by way of drawings, with a corresponding entry in his loan accounts with various entities associated with his father;
•The husband’s loan accounts disclose they have been utilised to pay the husband’s father’s legal fees as well. Whilst that may have been at the instigation of those who undertake book keeping for the relevant entities, it nonetheless shows the flexibility of the husband’s arrangements;
•In light of the above, it is self-evident that the husband’s financial position is vastly superior to the wife’s, and can be legitimately be regarded, as counsel for the wife suggests, as unlimited;
•Even though the husband claims that his father will not provide funding for legal costs if a litigation funding order as sought by the wife is made, there is no reason to think, especially now that the husband’s father and the [Malloy] Group are parties, that the husband’s interests will really, in any practical way, be prejudiced if that occurs;
•The wife’s case for substantive relief is arguable, and deserving of being heard;
•The ferocity of the resistance to the wife’s case inevitably means her costs will be significant going forward. Already both parties have accrued fees exceeding $1million; and
•A dollar-for-dollar order, if the husband remains represented, will ensure something like parity in legal resources.
Thus, the husband’s submissions as to his capacity to meet the wife’s legal costs were expressly considered. The husband’s submissions do not identify why this consideration was insufficient or why it was wrong. It is not the task of an appeal Court to rummage through the appeal book and the transcript to try to obtain the answers to these questions (Bahonko v Sterjov (2008) 166 FCR 415 at [3]).
Finally, the primary judge’s orders do not prevent the husband from obtaining legal representation but instead impose a financial obligation on him in the event that he does so.
We are unable to see that the husband has identified any doubt as to the correctness of his Honour’s decision or that any substantial injustice would result if leave to appeal was refused.
The husband’s application for leave to appeal will therefore be dismissed.
Leave to cross-appeal
The subpoena issue
By a Notice of Cross-Appeal filed on 10 January 2020, the cross-applicants seek leave to appeal against the orders requiring the Malloy Trust and the AP Trust to produce an unredacted version of their financial accounts which had previously been provided in a redacted form (Orders 7–9).
The Malloy Group is apparently controlled by Mr Q Malloy. The primary judge explained the relevance of the group to the proceedings in the following terms:
3.At the heart of the wife’s case, are unpaid present entitlements (“UPEs”) said to be due and payable to the husband as a beneficiary under a number of trusts, of which some of the [Malloy] Group companies are trustees. She says that, to the extent that those trustees no longer have funds to satisfy the payment of those UPEs, their dealing with those funds is a traceable breach of trust, and to that end, seeks to identify the entities which presently hold them, so that they may be recovered, presumably now that the [Malloy] Group have been joined as parties, in these proceedings themselves.
…
7.The husband had been previously in a de facto relationship. It appears as though in the ensuing property proceedings, the husband claimed to have little in the way of assets, and hence unable to pay amounts due to his previous partner under a Binding Financial Agreement. In large part, that was because in 2012, a number of companies which he controlled, are said to have fallen into financial difficulty associated with the global financial crisis, in consequence of which, pursuant to securities which members of the [Malloy] Group held over those corporations, they left the husband’s control, and such remaining assets as they had were, it seems, largely used to satisfy their liabilities to the [Malloy] Group. The wife now says that those events were contrived so as to defeat the claim of the husband’s de facto wife.
The cross-applicants propose three grounds of appeal in their Notice of
Cross-Appeal, however they effectively raise two challenges to the relevant orders (cross-applicants’ Summary of Argument filed on 6 July 2020, paragraphs 17–19). First, his Honour’s reasons are said to be inadequate. Secondly, they contend that “the evidence was not capable of supporting the finding (at [62]–[67] of the [r]easons) that the [h]usband might have choses in action against an entity … which, according to the Financial Statements, owe unpaid present entitlements to the [h]usband” (cross-applicants’ Summary of Argument filed on 6 July 2020, paragraph 19).
His Honour said:
63.However, as counsel for the wife correctly identified, the wife’s case is far broader than simply seeking to identify monies paid to, or owing to, the husband or companies he controls, or previously controlled. Rather, a major focus of her case is in relation to tracing the husband’s UPEs.
64.Her argument commences with the terms of the deeds of the trusts in which the husband is shown as having UPEs. For instance, in relation to the [AD] Trust, clause 3.6 of the trust deed provides that:
Any amount set aside under 3.2 shall not form part of a trust fund but is held by the trustee as a separate trust fund upon trust for the person entitled for the benefit of it.
65.Her argument then, is that the receivers appointed to the trustee companies could not deal with the monies held under the trust of the UPEs established under clause 3.6, because they were not assets to which the trustee could have recourse by way of indemnity against general trust assets. Subject to the beneficiary having acted in way so as to allow that occur – as to which there is no evidence – that argument seems likely correct. Therefore what the wife seeks to do, is to look at the accounts of the two trusts, so as she can determine where any funds dealt with in breach of trust presently lie, or at least identify the next line of inquiry in tracing them. She says, and it was not controversial, that under the doctrine articulated in Barnes v Addy (1874) LR 9 Ch App 244, where funds are received that are known to be the result of a breach of trust, then they are held under a remedial constructive trust in favour of the original beneficiary. She says therefore, that she is seeking to identify actual beneficially owned assets of the husband, and hence the movement of funds derived from any dealing with monies impressed with the sub-trust is relevant.
66.At the time of the argument in relation to this issue before me, counsel for the subpoenaed companies correctly identified that none of the [Malloy] Group had been joined as parties, and hence asserted that the wife was prepared to wound but not strike. Since then, of course, the wife has joined those parties. However, even absent their joinder, it seems to me as though the wife’s case, insofar as it was seeking to ascertain assets of the husband and their location, did not necessarily require those parties to be joined. That is because, as I explored with counsel for the wife, even absent those companies joinder, the wife could seek to have, as part of her property division, the transfer to her of the choses in action which the husband’s rights to trace would represent, and thereafter, consistent with that assignment, she could commence proceedings in the husband’s name against the entity which presently controls the asset impressed with the constructive trust. That, to my mind, is clearly a legitimate forensic purpose in obtaining the information which the subpoenae seek in an un-redacted form.
67.I am therefore satisfied that the present level of redaction, which is restricted only to the husband or his current or former companies, is a demonstrably inadequate answer to the subpoenae.
It is clear enough why the primary judge came to his Honour’s conclusion and therefore the reasons are adequate (Bennett and Bennett (1991) FLC 92-191 at 78,266-78,267; Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110 at
[57]–[59]).
Here, the issue before the Court was a limited one — whether an unredacted version of financial accounts, which had already been provided in a redacted form, should be provided for inspection by the wife’s lawyers and accountants alone. Contrary to the cross-applicants’ submissions, the above passages contain no implicit findings that the trusts had been holding unpaid present entitlements for the husband or that the husband actually had a claim against the trustees of the trusts who may have dealt with them. If that had been the case, the reasons would, of course, have had to be more extensive.
As to the second issue, the cross-applicants submit that the evidence did not permit the primary judge to find that an unredacted version of the financial accounts had apparent relevance to the proceedings (Hatton v Attorney General (Cth) (2000) FLC 93-038 at 87,606) because there was no evidence to show that:
·the trustees of the two trusts ever held unpaid present entitlements for the husband;
·funds representing unpaid present entitlements had been transferred to another entity;
·the transfer of such funds was recorded in the unredacted version of the accounts; and
·any transferee had the requisite knowledge for the purpose of a claim under the “first limb” in Barnes v Addy (1874) LR 9 Ch App 244.
That may be so but they are matters for a final hearing. The issue before the primary judge was whether the documents sought by the wife had apparent relevance to those issues. Such a finding could be made without resolving them. Indeed, the documents sought by the wife might assist in the resolution of those issues, even if only to identify a proper line of enquiry, thereby giving them the necessary relevance. We consider that was a finding that was open to the primary judge on the evidence.
The subject matter of the cross-appeal is also one of practice and procedure and thus one where leave to appeal is given reluctantly (Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177).
Further, we do not consider that any substantial injustice would flow to the cross-applicants if leave to appeal was refused. The production of an unredacted version of the financial accounts, which have already been provided in a redacted form, does not appear onerous. Under the primary judge’s orders, the inspection of those documents is limited to the wife’s lawyers and any expert accountant engaged by them. There is no significant adverse impact to the cross-applicants.
The concerns postulated by the cross-applicants about preserving confidentiality are met by each of the express terms of the subject orders restricting publication made by the primary judge; the obligations cast by r 13.07A of the Family Law Rules 2004 (Cth); and the implied undertaking as to the use of documents produced under compulsion (Harman v Secretary of State for the Home Department [1983] 1 AC 280; Hearne v Street (2008) 235 CLR 125 at [96]).
It follows that we are not satisfied that sufficient doubt attends the correctness of his Honour’s decision to warrant reconsideration by the Full Court or that any substantial injustice would flow if leave to appeal was refused.
The cross-applicants’ application for leave to appeal will therefore be dismissed.
I certify that the preceding forty-eight (48) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Strickland, Aldridge & Kent JJ) delivered on 6 November 2020.
Associate:
Date: 6 November 2020
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