Matheson and Matheson and Anor

[2011] FamCA 461

FAMILY COURT OF AUSTRALIA

MATHESON & MATHESON AND ANOR [2011] FamCA 461

FAMILY LAW – Property Settlement – Where previous consent orders have been set aside under the wife’s section 39A application – Where only partial property settlement orders in existence – Where the husband was an discharged bankrupt – Where the husband has  been largely non-compliant with court orders – Where the property pool has been diminished due to the husband’s behaviour – Where the wife has had the care of two out of three children of the marriage since separation – Where the wife alone has borne the cost of supporting the children – Property division of 90:10 in favour of the wife. FAMILY LAW – Costs – Application by the wife’s former solicitors seeking a declaration pursuant to s 78 they held a lien over the moneys held in their trust account – Where no costs assessment completed – Where money held in solicitors’ trust account is the remainder of the parties’ property pool – Solicitors’ entitlement to the moneys held in their trust account is not a matter for the court’s determination at this point in proceedings – Order for payment out of Husband’s 10 per cent entitlement - Application in a case dismissed.

APPLICANT:

Ms Matheson

RESPONDENT: Mr Matheson

INTERVENOR: B Legal

FILE NUMBER: BRF 1279 of 2005

DATE DELIVERED: 17 June 2011

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Barry J

HEARING DATE: 14 June 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT: The Applicant Wife appearing in person

COUNSEL FOR THE RESPONDENT: There being no appearance by the Respondent Husband

SOLICITORS FOR THE INTERVENOR: Mr Steel, Solicitor of B Legal appearing for the Intervenor

Orders

Property Settlement

1. By way of final orders for property settlement the Wife is entitled to 90 per cent of the remaining funds held in B Legal’s trust account and the Husband is to receive 10 per cent of same.

2. By way of property settlement B Legal are to make payment to the Husband of the sum of $1,388.38 or such greater or lesser amount which represents 10 per cent of the current balance in the trust account.

Application in a Case filed by B Legal Dated 19 May 2011

1. The Application in a Case filed by B Legal dated 19 May 2011 is dismissed.

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

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRF1279/2005

Ms Matheson

Applicant

And

Mr Matheson

Respondent

And

B Legal
Intervenor

REASONS FOR JUDGMENT

1. I am asked to determine an application by Ms Matheson for final property settlement property orders together with an application by B Legal her former solicitors, for a declaration under s 78 that Mr C is entitled to maintain a lien over the moneys held in the firm’s Trust Account.

Brief History

1. The Husband filed an application for property settlement on the 11 May 2005.  Consent orders were made on the 12 May 2005. 

2. On the 16 March 2006 the Wife filed an application seeking an order under

   
   

   s 79A to set aside the consent orders.

3. Paragraph 60(g) of the affidavit of the Wife filed on the 16 March 2006 in support of her application detailed extensive company searches which had been carried out on her behalf by her solicitors around this time.  The s 79A application was not opposed and the original orders of the 12 May 2005 were set aside.  On the 29 September 2006 I set aside a transaction purporting to transfer the ownership of a motor vessel MV H by transferring control of a company from the Husband to Ms D the Husband’s then partner.

4. On the 12 April 2007 after a two day hearing after it was ascertained the Husband was still an undischarged bankrupt, the parties entered into partial property settlement orders.  On the 23 July 2008 I dismissed an application by Mr E, the Husband’s brother, to intervene in the proceedings.  In the orders of the 23 July 2008 I ordered by paragraph (7):

   7.All outstanding applications be dismissed and the proceedings removed from the active pending cases list.

5. On the 30 July 2009 I made orders under the slip rule to correct the impression that the outstanding property settlement application had somehow been dismissed.  There has been no appeal from the orders of the 30 July 2009.

Final Property Settlement Still Remains to be Determined

1. There has been no further appearance by any of the other parties to the original proceedings heard in April 2007.  I am satisfied proper notice has been given to the other Respondents.

2. On the date of the adjourned hearing to finalise property settlement issues namely the 14 June 2011 there was no appearance by the Husband, Mr Matheson.  I am satisfied by material on the file that Mr Matheson has been made fully aware that the matter had been set down for final determination on that date. 

3. He has not filed any material to be relied on at the adjourned hearing.

4. At paragraph 125 of her affidavit filed on 15 March 2006 the Wife deposes:

   125.The Husband and I worked together to acquire the assets we had at separation.  It was a 19 year relationship with equal financial contributions.  I was only 17 years of age and my husband 22 years at the time of cohabitation.  Neither the Husband nor I had substantial assets or incomes.

5. At paragraphs 13 and 14 of the same affidavit under the heading “[Boat]” the Wife deposes:

   13.This boat was purchased by the Husband and I in or about mid-2003 when we were residing in [F Town].  It is a vessel used for commercial purposes, usually under contracts to [G Pty Ltd] operating from [F Town].  The boat was to transport passengers between the [G Pty Ltd] ships and the mainland.  Until the date of separation the boat was called “[H]” and registered in the company name of [H Pty Ltd].

   14.At the date of this affidavit a company search shows the current director and secretary of [H Pty Ltd] is the Husband.  He is also the sole share holder.

6. From my knowledge and history of this matter, the assets the parties acquired were largely as a result of the Husband requesting his brother Mr E to mortgage his home.  There is evidence that at the request of the parties he (the brother) transferred his home to the Wife.

7. Mr E Matheson has never been repaid the moneys borrowed by the Husband. 

8. It is largely these moneys which allowed the parties to acquire the valuable boat.

Marital History

1. The parties cohabitated in 1989, married in 1995 and separated in March 2005.  Three children were born of the relationship in 1991, 1993 and 1996.

2. Pursuant to earlier Court orders the children resided with the Wife.  I note the second child turns 18 later this year.  In about November 2005 the eldest child commenced living with the Husband (refer paragraph 6 of the Wife’s affidavit filed March 2006).

3. The Husband was born in 1967 and the Wife in 1971.

4. I do not intend to trace the lengthy and complex history of financial transactions.  In part these are set out in previous judgments which I have delivered in this matter.  Suffice to say at all material times the Husband was an undischarged bankrupt.  He had been declared bankrupt years earlier on a creditor’s petition.  As he had not bothered to file a statement of his assets and liabilities, under the Bankruptcy Act a bankrupt’s period in bankruptcy does not commence until such a document is filed.

5. Had the Wife’s solicitors conducted such an elementary search at the commencement of the litigation, it would have saved a great deal in legal costs and Court time and it is likely the value of the property pool would not have diminished to the extent it in fact did.

6. I have perused the Wife’s financial statement filed on 3 June 2011.  She is in receipt of Centrelink benefits by way of a Newstart Allowance.  She has no assets.  She has another person in her household who is in receipt of $214 who pays $100 towards lodging and food.  Her liabilities amount to $1,000 with a total value of her property a meagre $346.

7. In her affidavit filed on the 6 June 2011 she makes the following points under the heading “Non-Compliance”:

   Due to the non-compliance by [Mr Matheson] of not supplying financial information as requested by the Court he has by default in my opinion negated any right to claim funds from the settlement of this event.  Furthermore it is my belief that through the following collection of reasons [Mr Matheson] has demonstrated clearly (see annexure 3 document 2 in whole) that any and all claim he may believe he has to the remaining balance of funds should be refused and I appeal to this Court to do so.

8. I accept the Wife’s submissions in the following respects:

   ·The Husband has largely been non-compliant with Court orders

   and directions throughout the course of the litigation.

   ·She has supported two of the children over the past seven years.

   ·The Husband has not assisted in the support of these children by

   way of payments of child support or other assistance.

·Because of the Husband’s conduct she has lost her credit rating and

is unable to obtain loans or credit cards.

·The Husband benefited from the sale of thousands of dollars in

value of small plant/equipment and other disposable items of

company property that was never itemised on an official plant

register.

·The Husband removed and on sold two life rafts from the

vessel H.  There is evidence the proceeds of this sale were

received into his bank account.

1. I accept in large measure the validity of the complaints that the Wife makes against her Husband. 

2. The fact remains that the major source of the assets that the parties acquired during the course of their relationship stems from the unpaid loan from the Husband’s brother.  There is no evidence that the Wife has any liability for this loan.  It would be the Husband who has the legal and moral responsibility to repay this debt – although there are very grave doubts that he ever would do so.  I note the Wife’s concession (quoted at paragraph 10 above) that as at 2006 she was of the view the contributions were equal.

3. On account of s 79 factors I would propose to award the Wife 70 per cent of the token amount of moneys left.  The reduction in the Husband’s entitlement on account of s 79 factors arises largely as a result of his behaviour during the course of the litigation as detailed in paragraph 22 above.  The reality is the Wife is unlikely to receive any part whatsoever on account of the moneys in trust.

4. On account of s 75(2) factors as the Wife has had the past support of the children since the period of separation, and is likely to continue to have the support of the youngest child, a further award of 20 per cent to the Wife is appropriate.

5. The order of the Court by way of property settlement will be that the Wife is to receive 90 per cent of the remaining funds held in B Legal’s Trust Account and the Husband is to be entitled to 10 per cent of same.

6. The affidavit of Mr C (paragraph 15) indicates that the amount held in trust is $13,883.89.  The Husband will be entitled to the sum of $1,388.38 or such other amount as equates the 10 per cent of the Trust Account balance.

Application by Solicitors – B Legal

1. By an application in a case filed 19 May 2011 the solicitors seek orders in the following terms:

   1.That [Mr C] in his capacity as trustee for the [B Legal] Lawyer’s Trust Account be joined to the proceedings.

   2.That the Court declare pursuant to s 78 of the Family Law Act that [Mr C] as trustee for the [BLTA]:

   a.is entitled to maintain a lien over the moneys held in the [BLTA] on behalf of the applicant wife and;

   b.        has an equitable interest in those moneys and;

   c.        may deal with those moneys in a manner deemed fit.

   3.That the Court make such order for costs in favour of [Mr C] as it deems appropriate.

2. In an affidavit filed on the 19 May 2011 accompanying the application in a case at paragraph 15 Mr C notes:

   15.[BL] intends to render an account for $13,883.89 to the wife on the basis of its unbilled work in process [sic] and disbursements after judgment in this application.

3. The fees rendered to date have been marked as “draft”.

4. In the course of submissions by the legal representatives for the Applicant solicitors it was accepted:

   ·B Legal did not seek to be heard in relation to the

   determination of property settlement issues as between the parties.

   ·B Legal did not seek any orders be made in terms of their

   application in a case so long as there is no specific order made by the Court ordering the solicitors to pay the Wife any of the moneys held in trust.

   ·Before B Legal could lay claim to any amount in their trust

   account found to be the Wife’s entitlement to property settlement,

   the firm would need to obtain a costs assessment for the Wife to

   pay the costs said to be due and owing.  Thereafter the irrevocable

   authority signed by the Wife on 5 April 2007 would be sufficient to allow the transfer of the funds from the trust account to their general account in part payment of their fees.

   ·The issue of the determination of an entitlement to the moneys held

   in the solicitor’s trust account as between the solicitors and former client is not a matter which the Court is required to determine at this point in time.

5. Annexure 7 of Mr C’s affidavit was not annexed to the original affidavit and accordingly a further affidavit of the 1 June 2011 was filed.  The document which was omitted is entitled “Draft Tax Invoice re: [Mr Matheson] Matrimonial”.  It is addressed to Ms Matheson and is dated the 19 May 2011.

6. The summary being page 6 of 45 and page 7 of 45 reveals:

   ITSA Bankruptcy no match returned       $24.00

   ITSA Bankruptcy no match returned       $24.00

   ITSA Bankruptcy no match returned       $24.00

   ITSA Bankruptcy browse list                   $24.00

7. No detail is provided as to the dates of these searches.  There are no details for legal expenses incurred for any of the ITSA items on page 6 other than an entry on page 41 of 45 pages being an entry for the 11 April 2007 showing a 12 minute call to ITSA re: Husband undischarged bankrupt.  There is no other attendance on ITSA making enquiries which revealed bankruptcy “no match returned”.  This discrepancy was not explained but it may well be all four searches were carried out on the 11 April 2007.

8. The total costs B Legal claim are set out in paragraph 13 of

   
   

   Mr C’s first affidavit being $100,013 and $11,020 by way of disbursement.

9. Section 78 of the Act is in the following terms:

   78       Declaration of interests in property:

   (1)      declaration of existing title of rights in proceedings between the parties to a marriage with respect to existing title or rights in respect of property the Court may declare the title or rights, if any, that a party has in respect of the property.

   (2)      consequential orders where a Court makes a declaration under subsection (1) it may make consequential orders to give effect to the declaration including orders as to sale or partition and interim or permanent orders as to possession.”

10. In the circumstances of this case it is not appropriate for a declaration of interests pursuant to s 78 to be made. Regardless of that observation, I am not at all confident that the section could be interpreted in the manner contended. It has to be a declaration of an existing title or right. It may be that in the fullness of time a Registrar relying on Schedule 6.6 of the Family Court Rules could find that the firm was not entitled to claim its costs as against the Wife. It is a matter for the Wife whether she wishes to file a notice of objection to any bill of costs rendered in the future.

Conclusion

1. I have dealt with this matter as best I can by finalising the property settlement issues which remained unresolved as the orders of the 12 April 2007 were only partial property settlement orders.  I am not prepared to make a declaration that the Applicant’s solicitors have an equitable interest in the moneys in their Trust Account until they can obtain an assessment through the normal costs process.  I am satisfied that to date that has not been done.  As I have indicated the Wife may elect to resolve the matter one way or the other either by walking away because she is emotionally exhausted or by taking the matter further and litigating whether the solicitors are entitled to charge for the work done when they failed to carry out such a basic search as a bankruptcy search in circumstances where they knew or should have known that such a search could be relevant.

2. I appreciate it is distressing to the Wife that the Husband should receive any funds at all, whilst the likelihood is she will receive nothing.  This stems from the fact that in large measure the Husband did not engage legal representation and at all times acted on his own behalf.  It would be a fair summary to say that at all times he was “a law unto himself”.  The Wife elected to engage lawyers. As noted above the issue as to the entitlement of the remaining funds as between the Wife and her solicitors is not a matter a Court can adjudicate upon until the memorandum of fees and disbursements in final form has been issued.

3. Accordingly, I am of the view that the orders sought in the application in a case are not orders that the Court can make at this point in time.  There were no other orders sought by the solicitor appearing for the intervenors.  In the circumstances the orders sought in the application in a case are dismissed.

I certify that the preceding forty-one (41) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Barry delivered on 17 June 2011.

Associate: 

Date:  17 June 2011