McDermott & McDermott
[2016] FamCA 613
•29 July 2016
FAMILY COURT OF AUSTRALIA
| MCDERMOTT & MCDERMOTT AND ORS | [2016] FamCA 613 |
| FAMILY LAW – PRACTICE AND PROCEDURE – Application for Leave to Reopen – property proceedings – discussion as to applicable principles – where judgment reserved – where evidence subject of application previously struck out on objection – where evidence if in admissible form is as to a significant issue and relevant – where such evidence likely to affect outcome of proceedings – where leave granted. |
| Evidence Act 1995 (Cth) s 50 | |
| Australian Securities and Investments Commission v Rich [2006] NSWSC 826; 235 ALR 587 | |
| APPLICANT: | Mr McDermott |
| 1st RESPONDENT: | Ms McDermott |
| 2nd RESPONDENT: | B Pty Ltd |
| RECEIVER: | Mr M |
| FILE NUMBER: | SYC | 70 | of | 2014 |
| DATE DELIVERED: | 29 July 2016 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Foster J |
| HEARING DATE: | 14 June 2016 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Picker |
| SOLICITOR FOR THE APPLICANT: | Hancock Alldis & Roskov |
| COUNSEL FOR THE 1ST RESPONDENT: | Ms Gillies |
| SOLICITOR FOR THE 1ST RESPONDENT: | Campbell Paton & Taylor |
| SOLICITOR FOR THE RECEIVER: | Colin Biggers & Paisley |
Orders
That the husband be granted leave to reopen his case.
That the husband file and serve a supplementary affidavit of his evidence in chief as to the factual issues the subject of this leave application within 21 days from this date.
That the husband within 21 days from this date provide to the wife’s solicitors originals of documents sought to be relied on by him as to any transaction asserted together with a photocopy of such documents and 14 days thereafter the wife’s solicitors return to the husband such original documents.
That the husband within 21 days from this date provide to the wife’s solicitors a summary schedule of the evidence as to the receipt and disposition of funds by him the subject of the leave application identifying where at all possible the source of any funds received by him and the disposition of such funds by reference to objective documents contained his supplementary affidavit.
That the wife’s costs of and incidental to any additional hearing be reserved.
That the wife’s application for costs is reserved.
That the wife file and serve written submissions as to costs within 14 days from this date and the husband file and serve any written submissions in reply with judgment as to costs thereafter reserved to chambers.
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 McDermott & McDermott 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).
| FAMILY COURT OF AUSTRALIA AT PARRAMATTA |
FILE NUMBER: SYC 70 of 2014
| Mr McDermott |
Applicant
And
| Ms McDermott and B Pty Ltd |
Respondents
And
| Mr M |
Receiver
REASONS FOR JUDGMENT
The protracted course of this matter concluded with the close of evidence and final submissions on day six of the hearing, with judgment on that day reserved to a date to be fixed.
In the intervening period the applicant husband filed an application on 14 April 2016 for leave to reopen his case.
The application for such leave was before the Court on 14 June 2016. On that date the following orders and notations were made:
1. The Application by the Husband to reopen be adjourned for hearing to Wednesday 20 July 2016 at 2:15pm.
2. The Husband file and serve written submission in support of the application by no later than Tuesday 5 July 2016.
3. The Respondent Wife file and serve any written submissions in response by no later than Tuesday 19 July 2016.
IT IS NOTED THAT:
A. Consequent upon filing of written submissions if the parties do not seek to be heard orally in respect of the application they are at liberty to inform the Associate in Chambers and then judgment will be reserved to Chambers.
B. The Receiver and Liquidator neither opposes or supports the Husband’s application and does not want to be heard in respect of that application.
It was subsequently agreed that judgment would be reserved without either party seeking to make oral submissions.
The applicant husband relied on:
a)His application for leave filed 14 April 2016;
b)His affidavit in support filed 14 April 2016; and
c)His written submissions dated 5 July 2016 and 19 July 2016.
The wife relied on:
a)Her response filed 30 May 2016 seeking a dismissal of the husband’s application and costs on an indemnity basis;
b)Her affidavit filed 30 May 2016; and
c)Her written submissions dated 11 July 2016 and 20 July 2016.
Leave to Reopen: applicable principles
It is well settled that reopening of a case prior to delivery of judgment is an exception to, rather than the usual course of, a trial.
In Urban Transport Authority of NSW v Nweiser (1982) 28 NSWLR 471 at 478, Clarke JA (with whom Mahoney and Meagher JJA agreed) pointed to the relevance, in an application to reopen, of the question whether the interests of justice are better served by allowing or rejecting the application. His Honour observed that:
The principle which would guide the Court in determining whether to grant an application for leave to reopen is whether the interests of justice are better served by allowing or rejecting the application as the case may be. No doubt it is relevant to take account of a number of matters such as likely prejudice to the party resisting the application and the reasons why the evidence is not led in the first place.
In Australian Securities and Investments Commission v Rich [2006] NSWSC 826; 235 ALR 587 at [18], Austin J pointed to matters relevant to an application to reopen including:
a)The nature of the proceeding;
b)Whether the occasion for calling the further evidence ought reasonably to have been foreseen;
c)Considerations of fairness in respect of the defendant's notice of the case they have to meet;
d)The importance of the issues as to which the further evidence is sought to be adduced to the issues in the case;
e)The degree of relevance and probative value of the further evidence;
f)The prejudice to the defendant in terms of delay and the completion of the proceedings and consequential costs;
g)The public interest in the timely conclusion of the litigation; and
h)The explanation offered by the applicant for not having called the evidence-in-chief.
In this Court in Mallard & Mallard [2011] FamCA 876, Fowler J distilled the applicable principles thus at [91] –[92]:
The fundamental principle to be applied in determining whether to grant an application to reopen a hearing after judgment has been reserved is whether the interests of justice are better served by allowing the application or rejecting it: Urban Transport Authority of New South Wales v Nweiser (1992) 28 NSWLR 471 per Clarke JA at 476 with whom Mahoney JA and Meagher JA agreed; Gelly and Gelly (No 1) (1992) FLC 92-290 per Treyvaud J at 79, 146-148; Smith v New South Wales Bar Association (No 2) [1992] HCA 36; (1992) 176 CLR 256 per Brennan Dawson, Toohey and Gaudron JJ at 266-7 and Gaspaldi and Gaspaldi [2008] Fam CAFC 134 (unreported, Family Court of Australia, Bryant CJ, Thackray and Le Poer Trench JJ, 2 October 2007); Stephens & Stephens & Anor (Enforcement) [2009] FamCAFC 240.
The court has discretion to reopen a hearing and allow fresh evidence where:
- the fresh evidence was not easily available at the time of the trial and could not be discovered despite the exercise of due diligence and
- the fresh evidence is so material that the interests of justice require it and
- if believed, the fresh evidence would most probably affect the result of the trial and
- there would be no prejudice to the other party by reason of its introduction at a late point in time.
In similar circumstances to the present application in Summitt & Summit & Ors(Re-Opening) [2009] FamCA 365, Murphy J in considering the relevant principles said at [14] – [19] :
In a case involving an application for settlement of property, it can broadly be said that common law principles govern applications to re-open in this Court. (see e.g. Gelley & Gelley (1992) FLC 92-290 and the cases there discussed).
Those principles make it clear that the granting of leave to re-open is discretionary. That discretion is guided by the interests of justice. The essential question is, is the court more able to do justice in the facts and circumstances of the particular case if the application is granted. (see eg Smith v NSW Bar Association [1992] HCA 36; (1992) 176 CLR 256; Urban Transport Authority v NSEISER (1992) 28 NSWLR 471 at 478 and EB v CT (No. 2) [2008] QSC 306)
In cases where reasons for judgment have not been delivered, the High Court has held that the primary consideration should be embarrassment or prejudice to the other side. (see Smith above, at 266-267)
A recent decision of the Supreme Court of Queensland, EB v CT (No. 2) [2008] QSC 306 was referred to by both counsel for the husband and wife. That case involved an application for property settlement under (then applicable) State law with respect to a de facto relationship. In that case, Applegarth J summarised, by reference to earlier authorities, the (common law) principles applicable to a re-opening:
[2] The guiding principle in deciding whether to grant leave to re-open is whether or not the interests of justice are better served by allowing or rejecting the application. Reference is made in Finbrough Investments Pty Ltd v Airlie Beach Pty Ltd and in the cases referred to in it to the need for finality and litigation.
[3] In Smith v New South Wales Bar Association the High Court stated that different considerations may apply depending on whether the case is simply one in which the hearing is complete, or one in which reasons for judgment had been delivered. As to the former situation, the Court said it was difficult to see why the primary consideration should not be that of embarrassment or prejudice to the other side.
[4] In Reid v Brett the criteria governing the exercise of the discretionary power to re-open a case to admit further evidence where the hearing has concluded but judgment has not been delivered, was said to be as follows:
(a) the further evidence is so material that the interests of justice require its admission;
(b) the further evidence, if accepted, would most probably effect the result of the case;
(c) the further evidence could not by reasonable diligence have been discovered earlier;
(d) no prejudice would ensue to the other party by reason of the late admission of the further evidence.
In addition, his Honour held that:
[5] Reference by the High Court to prejudice to the other party, and the guiding principle of the interests of justice, require account to be taken of the strain that litigation imposes on personal litigant. The prejudice caused by delay in the delivery of an expected judgment at the end of stressful litigation can not
always be measured in terms of money or cured by an order for costs. The interests of justice is served by finality in litigation, particularly where prolonged litigation imposes a strain on personal litigants.
I consider that that is particularly true of litigation in this court generally.
Some Background
The background to the matter was considered in the context of previous proceedings between the husband and wife in Reasons for Judgment delivered on 14 April 2014 (McDermott & McDermott [2014] FamCA 245) and on 5 August 2014 (McDermott & McDermott & Ors [2014] FamCA 615).
On 14 April 2014 orders relevantly were made as follows:
(1) That within seven days from the date of these orders the Husband shall provide to the Wife’s solicitors the following information and do the following things in relation to any work from 1 July 2013 to date that the Husband has undertaken on his own behalf, on behalf of [B] Pty Ltd the company) or on behalf of any other entity that is of a similar nature or type of work to the work undertaken by the company in the normal course of its business:
(a) A list of particularising all such work undertaken including the name of the person or entity for whom the work was undertaken, the dates between which the work was undertaken, the amount of money paid or to be paid for all such work and particulars of the financial institution and account into which the money was or was intended to be paid;
(b) A list of all amounts of money which remain to be paid and direct the person or entity responsible for payment to make those payments into the company’s account at the National Australia Bank are being account …20 (“the NAB account”);
(c) Pay into the NAB account all the money presently held by him or under his control with respect to the work particularised by him in the list provided pursuant to (a) above less money paid from funds held by him or under his control properly expended in the usual course of business of the company.
(2) That within seven days from this date the Husband and Wife authorise and direct the appropriate officer of the National Australia Bank to permit the Husband and the Wife to operate the NAB account independently of each other for the purposes of the usual course of business of the company and do all things necessary to facilitate each of them having internet banking access to the said account.
(3) That the Husband and Wife shall pending further order facilitate all income received by the company in the usual course of business being paid into the NAB account from which payments in the ordinary course of business or pursuant to these orders shall be made.
(4) That pending further order the Wife shall have the conduct of and manage on a day-to-day basis the farming enterprise conducted at the [D Street, E Town], New South Wales property and the Wife shall be restrained from conducting the said farming enterprise other than in the ordinary course of business and through the company.
(5) That pending further order the Husband shall have the conduct of and manage on a day-to-day basis the [construction] enterprise conducted during the course of the marriage by the company and the Husband shall be restrained from conducting the said [construction] enterprise other than in the ordinary course of business and through the company.
(6) That pending further order the Husband is restrained on his own behalf or on behalf of any other entity save for the company from undertaking any work of the type or nature of the work that has been at any time prior to the date of these orders undertaken or engaged in by the company in the ordinary course of its business.
Thereafter it was readily apparent that the husband had failed to comply with the orders as made but continued to use company and partnership funds and assets as he saw fit and to divert funds to his own or other accounts.
On 9 May 2014 ex parte orders on application by the wife were made restraining the husband and the manager of the ANZ Bank I Town Queensland from transferring monies or making payments from ANZ accounts held in the name of the husband being ANZ account …52 (“the ANZ account”) and in the names of the husband and Mr R being ANZ account …43 to any person or entity other than to the National Australia Bank account held in the name of the Company being account …20.
A copy of the order made on 9 May 2014 was promptly served on the manager ANZ Bank, I Town Queensland. As at 9 May 2014 there was a balance in the ANZ account of $21,029.
Notwithstanding the orders made on 9 May 2014 the husband transferred $286,846.49 from ANZ account …52 in the period from 9 May 2014 to 15 August 2014. None of these transfers were paid to the Company account as ordered. It is the husband’s previous sworn evidence that those funds were those of the Company and the Partnership.
The source of funds deposited to the ANZ account during the period 16 December 2013 to 28 May 2014 (there being no deposits between 9 May 2014 and 28 May 2014) were subsequently identified by the liquidator as belonging to the Company as to 65 per cent and the Partnership as to 35 per cent.
Between 28 May 2014 and 21 July 2014 the Partnership under the direction of the husband hired assets to various third parties using a combination of Partnership and Company assets. Payments were invoiced to the third parties and those invoices directed payment to the ANZ account.
The source of funds deposited to the ANZ account between 9 May 2014 and 15 August 2014 were subsequently identified by the liquidator as belonging to the Partnership as to 72.5 per cent, the Company as to 27 per cent and Z Pty Ltd as 0.5 per cent.
The source of further deposits totalling $39,815 made to the ANZ account between 9 May 2014 and 15 August 2014 is unknown. Further the husband on 14 August 2014 in breach of the injunctive order withdrew $50,000 from the ANZ account and deposited those funds into a Suncorp Bank account in his name.
On 18 September 2014 the liquidator caused his solicitors to write to the ANZ Bank demanding payment of $383,457.22 to the liquidator within 14 days. By email on 17 December 2014 the ANZ Bank denied liability for the repayment. On 31 March 2015 the liquidator caused his solicitors to inform the ANZ Bank of proposed proceedings in the District Court of NSW to recover funds.
On 4 December 2014 the liquidator caused his solicitors to write to the husband’s solicitors demanding payment of $286,846.49 from the husband.
The husband says that he was not aware of the injunctive order until sometime after 19 May 2014, notwithstanding he was represented by counsel on 12 May 2014. Sometime after 28 May 2014 the husband procured the “reactivation” of the ANZ account asserting that he misunderstood the orders. His assertions in this regard were avoidant and ingenuous at best.
The husband provides his assertions in summary as to the purpose of various withdrawals from the ANZ account. He was not entitled to withdraw the funds. He does not take issue with the liquidator’s assertion as to the source of funds deposited to the ANZ account.
The husband has paid legal fees to date of about $175,000 and owes in unpaid fees about $50,000. The inference is that such fees have been paid from the funds diverted by him.
On 21 July 2014 Mr M of M Advisory was appointed as receiver and manager of the income and property of the parties’ partnership (“the Partnership”).
With the parties’ consent on 13 August 2014 Mr M of M Advisory was appointed as liquidator of the parties’ company B Pty Ltd (“the Company”) following the making of a winding up order as to that company.
Subsequently it became apparent that the husband had set up a “phoenix” company Z Pty Ltd (“Z”) through which he sought to conduct the business conducted by the Company and Partnership.
With the parties’ consent on 18 December 2014 Mr M of M Advisory was appointed as liquidator of the husband’s company Z Pty Ltd (“Z”).
It is the disposition and use of funds of the Company and Partnership that have been one of the focuses of this matter particularly for the liquidator.
It has been necessary for the liquidator to make an application as to property of the various entities that are the subject of liquidation and or receivership. On 18 December 2014 orders were made by consent as to the disposition of sale proceeds of two vehicles including a Japanese car. On 18 February 2015 an order was made facilitating the repossession of that Japanese car and its delivery up to the liquidator.
On 7 May 2015 the liquidator, Mr M, filed an Application in a Case supported by affidavit in relation to an issue arising from his role as a liquidator and receiver in these proceedings.
The Application in a Case relevantly sought the following orders:
a)A declaration that any funds deposited into the Australia and New Zealand Bank Limited account number …52 and BSB number … in the name of the second respondent from 9 May 2014 are properly the property of the Company, the Partnership and Z Pty Ltd on a proportionate split of 72.5 per cent to the partnership and 27 per cent to the Company and 0.5 per cent to Z Pty Ltd. Such property vests in Mr M in his capacity as receiver and manager of the Partnership and liquidator of the Company and [Z].
b)The applicant be entitled to his costs of this application.
The husband sought an order that such funds in the said account vest in the liquidator as at the date of order in the current application. A consequence of such an order would render the liquidator’s application nugatory as in effect there were minimal funds at hand.
The Husband’s Application
The husband asserts that he should be granted leave to reopen his case to seek to explain the use and disposition of the Company and Partnership funds by him.
He asserts that in April 2014 it was his understanding that an investigation as to the funds passing through his ANZ and other accounts was to be undertaken by the liquidator. This notwithstanding that the person who had intimate knowledge of such transactions was the husband. It was crucial to the husband’s case that he adduce admissible evidence at trial. He did not.
At trial the husband sought to adduce evidence of his utilisation of such funds by way of a summary prepared by him and annexed to his trial affidavit. The summary was struck out as it offended s 50 of the Evidence Act 1995 (Cth). Importantly there was no application for an adjournment so as to facilitate evidence in proper form.
The husband now seeks to try to remedy this defect in his trial evidence by adducing some background documents purporting to reveal the application of some of the funds by him.
At trial he did not challenge, seek to put the transactions to the liquidator or seek to obtain concessions by the liquidator in oral evidence as to the application of all or part of the funds by him for proper Company or Partnership purposes, although it appears that such documents (that appear to have been at the I Town property) that may touch upon the issue were readily available to him until July 2015 and then by arrangement with the liquidator.
At relevant times the operation by the husband of the ANZ and other accounts and his disposition of funds was in breach of clear court orders. The husband had a significant period of time in which to address the issue of such funds, the final hearing not commencing until March 2016. He did not.
The husband asserts that in the absence of leave to reopen the Court may be led into error if it concludes that the funds used by the husband were applied in total for his personal benefit. Yet there is no such evidence. Indeed the evidence is silent on the question.
The husband further submits that he was not given the opportunity to present submissions on the issue. Yet such submissions could only be founded on facts before the Court of which there were none.
The Wife’s Response
The wife asserts that the husband seeks not to adduce “further evidence” but evidence to which objection was successfully taken at trial.
In reality, it is contended, the husband seeks to “appeal” the evidentiary ruling at trial where no step was taken at trial to cure the defect.
Indeed it is contended the trial continued “without demur”, it now being too late for the husband to complain except to his legal advisors.
Discussion
These are protracted property proceedings where there have been a number of interlocutory applications primarily brought on by the husband’s failure to comply with orders or conduct.
The trial took six days and has put the wife, who has the primary care of the parties’ two young children, to significant expense.
The evidence sought to be adduced by the husband was the subject of evidentiary objection at trial. The husband was clearly aware of the relevance of the issue.
No application was made in a timely manner for an adjournment to address the issue.
Whilst the evidence may be material depending on admissibility and may have some bearing on the outcome, these issues must also be considered in light of the prejudice to the wife and the circumstance that by March 2016, when the trial commenced, proper evidence (if it exists) would have been available to the husband on the issue on due enquiry. If so, it could have been presented in admissible form.
The relevant documents related to his bank accounts and objective documents relating to his financial dealings. It was for him to adduce evidence in his case in proper form and not assume someone else will address the issue.
The wife will be put to the expense of further days of trial and the preparation therefore. The liquidator will no doubt be required to further cross examination as to effect of transactions that may be asserted by the husband, putting the parties to further expense.
Further trial dates in this Registry that is overwhelmed by a significant case load and inadequate judicial resources may well not be until 2017, thus prejudicing the wife who seeks finality, not the continuation of litigation in which the husband has not engaged in good faith.
Yet the issue on which the leave application turns is indeed crucial to a proper determination of the matter. The sums involved are not trivial but significant.
Save for delay any prejudice to the wife can be addressed by appropriate orders for costs not only of this application but of any additional hearing days.
On balance and overall the interests of justice lead to the conclusion that leave to reopen should be granted.
Otherwise it is indicated that by reason of the matters discussed above the husband should bear the entirety of any further costs incurred by the wife. An order will be made reserving the question of the wife’s costs of any further hearing.
Costs
The husband seeks an indulgence from the Court. Even though successful it is appropriate that consideration be given to the expense to which the wife has been put to meet the application.
The wife seeks an order for her costs on an indemnity basis.
Section 117 of the Family Law Act 1975 (Cth) (“the Act”) provides that each party to the proceedings shall bear his or her own costs.
That principle is, however, subject to the discretion afforded to the trial judge in subparagraph (2), which provides that if the Court is of the opinion that there are circumstances that justify it in doing so, the Court may, subject to further subsections thereof and the applicable Rules of the Court, make such order as to costs as the Court considers just.
Although s 117(2) requires a finding of justifiable circumstances as an essential preliminary to making an order for costs, there is no additional or special onus on an applicant who seeks an order for costs: see Penfold v Penfold (1980) 144 CLR 311.
The matters relevant to determining what order, if any, should be made for costs are set out in subsection (2A) of that section as follows:
a)The financial circumstances of each of the parties to the proceedings;
b)Whether any party has legal aid and the terms of any grant of aid;
c)The conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answers, questions, admissions of facts, production of documents and similar matters;
d)Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the Court;
e)Whether any party to the proceedings has been wholly unsuccessful in the proceedings;
f)Whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
g)Such other matters as the Court considers relevant.
It is appropriate having regard to the granting of leave that the parties be given the opportunity to make submissions as to costs. Orders will be made to that effect.
I certify that the preceding sixty-five (65) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 29 July 2016.
Associate:
Date: 29 July 2016
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