Melville & Dent (No.2)

FAMILY COURT OF AUSTRALIA

MELVILLE & DENT (NO. 2)

[2009] FamCA 81

FAMILY LAW – PRACTICE AND PROCEDURE – ADJOURNMENT – Adjournment with costs – Indemnity costs – Determination of costs thrown away as a result of the adjournment – Order for the sale of a real property on the basis of husband being unlikely to be able to make mortgage payments at a time of impecuniosity – Payments to be made as a condition of an adjournment

Family Law Act 1975 (Cth)

Black and Kellner (1992) FLC 92-287
Brown & Brown (2004) FamCA 1067
Colgate-Palmolive Company and Anor v. Cussons Pty. Limited (1993) 46 FCR 225
LGM and CAM (Contempt) [2008] FamCAFC 1
Penfold v Penfold (1980) FLC 90-800
Tate v Tate (2000) FLC 93-047
Weir and Weir (1993) FLC 92-338
Yunghanns (2000) FLC 93-029

APPLICANT:

Ms Melville

RESPONDENT:

Mr Dent

FILE NUMBER:

MLF

3157

2006

DATE DELIVERED:

12 February 2008

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

THE HONOURABLE JUSTICE CRONIN

HEARING DATE:

2 & 3 February 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT:

MR STRUM

SOLICITOR FOR THE APPLICANT:	MARSHALLS & DENT
COUNSEL FOR THE RESPONDENT:	MR HOULT

SOLICITOR FOR THE RESPONDENT:

FORTE FAMILY LAWYERS

Orders

That by 4.00pm on 10 March 2009, the husband pay the wife’s costs thrown away fixed in the sum of $31,025.
That by 4.00pm on 10 April 2009, the husband pay the arrears of mortgage payments to National Australia Bank (Asia) Ltd up to the payments due immediately before that date and provide evidence to the wife that that has been done.
That the husband forthwith do all things necessary and sign any necessary document to consent to the sale of the real property at H in the United States of America.
That in default of agreement between the parties as to the terms and conditions of the sale, these proceedings be relisted before me on short notice by application supported by affidavit setting out what orders are sought.
That there be general liberty to apply.
That if the husband:
(a)fails to make proper disclosure of all documents in his power, possession or control; or
(b)fails to comply with the provisions of any of paragraph (1), (2) or (3) hereof,
the wife have liberty to seek to have the case relisted prior to 6 May 2009 and to have it proceed on an undefended basis on such terms as may then be determined.
I certify for the attendance of counsel.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLF 3157 of 2006

MS MELVILLE

Applicant

And

MR DENT

Respondent

REASONS FOR JUDGMENT

The final hearing of this matter was adjourned on its second day for reasons which I gave ex tempore. Unashamedly, the husband was given a significant indulgence.
The wife sought that any adjournment be conditional or at least closely allied to, orders that the husband:
(a)pay the wife’s costs on an indemnity basis;
(b)pay arrears of child support;
(c)pay the mortgage arrears on the family home as well as payments on that mortgage until trial;
(d)sell a property in the United States of America.
It was also put as part of the wife’s submission that orders should be made:
(e)that the husband make proper disclosure; and
(f)there be default provisions for failure to comply with any of these orders to such an extent that the wife have a right to proceed with her case on an undefended basis.
These issues all have to be seen in the context of a number of hearings in which the wife expressed frustration about not being able to obtain information about a business in Hong Kong most particularly so that it could be properly valued for the purposes of the property proceedings. A fair and simple statement would be that the wife gave up on trying to get access to the information clearly under the control of the husband and as a consequence, had determined to run her case on the basis of the principles set out in Weir and Weir (1993) FLC 92-338 and Black and Kellner (1992) FLC 92-287. The husband in turn, pleaded for one last chance.
In granting the adjournment, I indicated it would come at a price but I was not referring to all of the oral applications then made by the wife. I propose to deal with each of those applications in turn.
Importantly, it should be noted that these applications were not in writing. They could not be. The application for the adjournment was made after the trial had already begun. I consider myself seised of the matter and part-heard. Nothing turns on the fact that the applications were made orally.
It is important to also observe that the earliest I can accommodate the parties to resume the trial is in May 2009. Just what dispute will then have to be litigated is now difficult to discern having regard to the inadequacy of the husband’s discovery and in turn, the presentation of his evidence concerning financial matters.
The background of the adjournment must also be a matter to be considered in respect of those oral applications but I do not propose to restate the unusual reasons why I granted the adjournment over very strong opposition from the wife. My ex tempore reasons can be read for that context.

The costs application

The wife sought indemnity costs totally $75,417 to be paid to her within 14 days.
Counsel for the husband initially said he was not challenging the figure but rather its payment. He said the husband would pay $20,000 within 30 days, $30,000 in 90 days and the balance after the hearing from his share of the property settlement. That statement or concession was made by the husband’s counsel on the first day of the hearing being Monday 2 February 2009. Overnight, the position of the husband changed. On the morning of 3 February 2009, the husband’s counsel said his instructor had not seen the wife’s cost agreement but in any event, the husband had resiled from his earlier concession. The husband’s position was that he would pay $20,000 within 28 days and the question of both liability and quantum should be determined at the end of the trial. To make an order in the terms sought by the wife would, he said, amount to a refusal of the adjournment because it would be oppressive if linked as a condition of the adjournment to the payment of the costs.
The haste with which the adjournment application was dealt with and the costs application as well, justifies me not holding the husband to the concession by his counsel. However, that simply means that I should determine the matter according to law.
Section 117 of the Family Law Act 1975 (“the Act”) is the relevant statutory provision. It provides that each party shall bear his or her own costs. However, pursuant to sub-s (2), the Court may make such order as to costs as it considers just if it is of the opinion that there are circumstances to justify doing so.
In considering what order (if any) should be made, the Court is required (inter alia) to have regard to the matters referred to in s 117(2A). They are:
(a)the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(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 answer 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.
In Penfold v Penfold (1980) FLC 90-800 High Court of Australia said that the general rule expressed by s 117(1) was not paramount to s 117(2). That is, when a court finds circumstances justifying an order for costs, the principle that each party should bear their own costs should give way.
Thus, s 117(2) requires a finding of justifying circumstances as an essential preliminary to the making of an order.
The circumstances of this case justify a departure from the principle in s 117 of the Act. If nothing else, the husband knew he had to be prepared and as late as days before the hearing, was producing documents associated with the company’s accounts. In particular, in 2008 in an interlocutory hearing, the husband said that there were no management accounts. Now, he concedes they do exist. The importance of these accounts lies in the fact that on the husband’s case, the only asset in the company in Hong Kong is a loan account owed by him of over HK$12 million. That is over A$2 million. It does not take much imagination to understand the wife’s concern about two particular things. First, where did the loan account money go? Secondly, if the liability is genuine, it must presumably be paid from non-company resources of the parties.
Before looking at s 117(2A), this is a case where the quantum of costs is in issue. The wife seeks her solicitor’s preparation from 6 January 2009 to 31 January 2009 totalling $49,725, $2500 for her accountant, $2600 for her solicitor attending to instruct counsel per day, counsel’s brief fee, conference and preparation of $12,525, and $3,000 for her counsel’s fee thrown away as a result of rejecting a brief. That excludes goods and services tax but comes to approximately $75,400.
The basis of the calculations is that this amount of money has been expended by the wife through her lawyer’s preparation and that that work will have to be done again. She said that the lawyers would have every justification in a case as complicated as this in charging for their work. Mr Hoult for the husband did not agree entirely but knowing the complexity of the matter and the voluminous material involved, I have to agree with the wife’s position.
This is a case where the husband concedes that there is a justification for an order for costs. That does not obviate the necessity for me to consider the matters set out in s 117(2A) of the Act.
In respect of the financial circumstances of the parties, although both have property, the wife has no income of substance. The husband, is on any view, drawing income from the company in Hong Kong. On one view, his expenditure would appear unrestrained. On the husband’s own evidence, he supports his new partner and a child in the Philippines and has had significant travel and accommodation costs. His statement of financial circumstances shows his salary and the various expenses of some substance paid by the company in Hong Kong. Mr Strum of counsel for the wife described the husband’s lifestyle as profligate. In this case, I am satisfied that the financial circumstances are such that on a costs application I am able to say that the parties are financially comfortable.
Neither party appears eligible for any benefits from any legal aid authority.
The conduct of the parties to the proceedings has been sufficiently canvassed in my reasons and those relating to the adjournment to indicate that the husband at best has been less than diligent in getting his house in order.
The failure of the husband to comply with various orders necessitated not so much the proceedings being issued as is contemplated by the Act but certainly it has brought about the adjournment.
The question of success of either party is not relevant to my determination. What is relevant is that the husband sought a significant indulgence when as early as August 2008, the wife was seeking to proceed with her case on an undefended basis. In August, he was given an opportunity to participate notwithstanding his lack of responsiveness to orders.
An order for costs is a discretionary matter but it must not be oppressive such as to thwart the intention of the Court in granting the adjournment.
As at 13 January 2009, the husband had $18,595 in the Standard Chartered Bank account. He is currently having his company pay $4400 per week but that includes child support, mortgages on the Australian and US properties. To fund all of that, the company must be earning significant sums of money. Up until 30 December 2007, a time during which the husband was endeavouring to deal with significant litigation in Hong Kong including a criminal prosecution, the company had a gross profit in excess of HK$4 million per annum or about A$800,000. From that, all of these expenses had to be paid. On my best calculation, excluding the unusual expenses of legal costs, commissions, travel and entertainment as well as directors’ remuneration, the company was still making a profit in the 2007 year which ultimately belonged to the husband.
In his affidavit filed for the trial, the husband said that the company has had to downsize as a result of the litigation in Hong Kong and currently employs six staff and has a turnover this year of around US$1.5 million. He said from 2003 to date, the company has not made any net profits but has suffered significant losses in each year. That statement is inconsistent with the evidence of his own accountant.
The husband also said in his affidavit for the trial that the immediate impact of his imprisonment in Hong Kong was not too bad as the 2008 shipping and customer ordering had already taken place. He said that in normal economic circumstances, the impact would be felt more in 2009. He pointed to the fact that the company had had a vast downturn in sales in 2007 due at least in part to economic circumstances in the United States. He pointed to the fact that there were no new products to show and cash flow was very tight. He said he did not expect that cash flow would recover quickly and was uncertain how long it would take to recover.
The husband also said that he owed the company a significant sum of money. As at 31 December 2007, that sum was fixed at A$2,201,631. He said this was the company’s main asset. He went on to say that in the current state of affairs, the company had debts of US$90,000 to vendors and it expected US$150,000 to come in in January and February 2009 but from that, US$50,000 during those months was for operational expenses. He said that after that, the cash flow would “probably be nil”. After that in April, he thought the cash flow might increase.
If the husband pays what he owes to the vendors, he still has some profit in his hands depending upon operational costs. I have been unable to find any evidence from the husband about how the loan account is serviced other than by reference to the interest and bank charge items in the proffered profit and loss statement and a summary of past company activities provided in the accountant’s affidavit. In the twelve months ending 31 December 2007, the husband was able to reduce his loan account by A$800,000 in a year where there was profit before tax of only A$33,000. The husband seems to have the capacity to use the loan facility without much restraint even though it is not at all clear what secures or supports it.
In my view, the husband has the capacity to borrow from the company notwithstanding his apparent doom and gloom. In addition, he has indicated a desire to keep the property in the United States of America and for the company to pay the mortgage. The husband says that should continue until further hearing. That is an odd luxury in a time of need for fiscal restraint.
Turning then to what is the appropriate order. The wife seeks indemnity costs.
Chapter 19 of the Family Law Rules 2004 makes clear that costs to be paid by parties to their lawyers should be within the range set out by the schedules unless the parties knowingly contract out of the rules. Here, I have been advised there is a Costs Agreement between solicitor and client and the wife has contracted out of the Rules. The fees suggested by counsel for the wife even without examining the costs agreement must be seen to be within the range of possibilities. It must also be remembered that the husband’s own counsel was at first not shocked by the suggestion of the fees incurred.
An indemnity costs order is an exception in this Court rather than the rule. This Court has often adopted the principles set out in Colgate-Palmolive Company and Anor v Cussons Pty Limited (1993) 46 FCR 225. In that case, Sheppard J made a pertinent observation about the court-endorsed costs structure of litigation in the Federal Court of Australia which, to a very large degree, is the same philosophy in this Court. Sheppard J said:
For present purposes it is enough to say that the position is as it is because members of the profession, both solicitors and counsel, and also professional witnesses, have refused to accept as a proper or sufficient guide to their costs and fees the provisions of scales of costs and charges provided for in schedules … Taxing officers have been obliged to tax bills on the basis of the Rules and the Schedule. The fact that the scales themselves provide ranges of fees or charges for various items depending on degrees of difficulty, levels of responsibility and time involved, has not overcome the practical problem which exists.
Sheppard J went on to set out some examples of where indemnity costs should be contemplated. Among the circumstances contemplated, his Honour referred to evidence of particular misconduct that caused loss of time to the Court and to other parties.
His Honour said that:
The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.
It remains to say that the existence of particular facts and

circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.
In Yunghanns (2000) FLC 93-029 the Full Court said that the categories of circumstances that might give rise to an indemnity order were not closed. The Court said at 87,471:
…and it is not a condition precedent to the exercise of the discretion that some collateral purpose or species of fraud be established against the party against whom such an order is sought. All that is required is that the Court asked to exercise the discretion be satisfied that some ‘particular facts and circumstances of the case in question warrant the making of an order for repayment of costs other than on a party/party basis.
In the recent Full Court decision of LGM & CAM (Contempt) [2008] FamCAFC 1, the Court referred to what was said in Kohan and Kohan (1993) FLC 92-340 at 79,611 where their Honours said:
…We are of the opinion that in an appropriate case, the Court has a discretion to order costs on an indemnity basis and that such costs may be ordered, where they have been incurred under a costs agreement which departs from the usual scale of costs. However, it is fundamental to the exercise of that discretion in the Family Court that the Judge should not only understand that such an order is a very great departure form the normal standard, but also that the Judge should know what the terms of the agreement are, to what extent it exceeds the parameters set by the scale and what its likely impact will be on the financial position of each of the parties. This impact is a relevant matter to which the trial Judge should have had regard, when considering the financial circumstances of each of the parties to the proceedings under s117(2A)(a), or perhaps even more as a relevant matter under paragraph (g).

The fees suggested do not seem to be extraordinarily high. I see no reason in the case for the wife to be significantly out of pocket. Costs are not intended as a punishment but rather to compensate the party who has no choice but to litigate. This is therefore a case where an order for indemnity costs is warranted.
In respect of the solicitor’s preparation which included the trial affidavit, much can either be reused or dealt with in a subsequent costs argument. I do not propose to decide that issue now. Thus, if there is a future costs application, this matter save for the immediate costs thrown away, can be ventilated.
I find those costs thrown away are those of the solicitor’s time at $2600 per day, the accountant’s work which has been useful but will now have to be done again and comprehensively at $2500, and counsel’s fees including preparation at $15,525. Mr Strum asked me for the sum of $3000 for a brief fee lost as a result of the trial being most likely to continue but as it turned out, the case went into the second day and as such, I have ignored that compensatory fee. Accordingly, the total sum involved is $31,025.
I propose to otherwise reserve the issue of any other costs of preparation by the wife’s solicitor until after the trial. On any view, had the matter proceeded as an undefended case, that work would have been utilised. Had an application for costs then been made, it may have been successful but that is a matter now best determined after the trial concludes.
Accordingly, the appropriate order for costs thrown away is $31,025. The next question remains as to when that should be paid. The husband argued that he could pay $20,000 now and the balance at the conclusion of the trial. Having regard to the matters that I have canvassed including taking into account that he needs to pay his accountant $13,000, I see no reason why he cannot pay the whole of the $31,025 within one month. In my view that is not oppressive nor having regard to the way he has used funds of the company, is it prohibitive. I also find that it is most likely that even with the cash flow problems to which I have referred, those sums of money could be found having regard to the size of the loan account and the absence of any indication as to how that loan account is secured or supported.

The arrears of child support

Counsel for the wife sought that as a condition of the adjournment, the husband pay the arrears of child support of approximately $10,000. In the same breath however he said that his client did not necessarily concede that that was the right sum of money.
The husband’s evidence was that he could not “recall” receiving regular child support assessments since separation but that he had been “distracted” for the past few years by the civil and criminal litigation so he was not prepared to say that he had not received them. He thought that the arrears of child support was around $13,000. In reply to that affidavit, the wife said that she found his response distressing. She said he was well aware of the child support arrears and she had provided the Agency with his contact details and address.
In my view, the husband’s view is at odds with his professed desire to have some form of relationship with his daughter. He indicated distress at the breakdown of that relationship. The formal assessment of child support in any family situation is in effect irrelevant. Child support is there as a yardstick for parents to resort to if they cannot reach agreement about the appropriate levels of financial support for their children. What was asserted in this case was that the husband had provided a second hand laptop computer but otherwise had been recalcitrant in respect of making any contributions. In circumstances where the allegation of the wife is that the husband has lived a profligate lifestyle, if that were true, his statement about the Child Support Agency obligations has a very hollow ring to it. He certainly knew where his daughter was and who was caring for her and it must be obvious that with her schooling, expenses of her care were not small.
The unusual feature of this case however is that the husband says he now understands the seriousness and importance of child support assessments in Australia unlike in the United States where he thought it was part of the property settlement. That too has a hollow ring about it. Again, in his affidavit, he referred to the fact that in gaol, he endeavoured to have his lawyers ascertain just what the assessments were and that the wife’s lawyers were not particularly cooperative. That too seems to me to be passing responsibility to someone else.
Importantly, he said that on 8 January 2009, he entered into an agreement with the Agency to pay the arrears at the rate of one payment of A$3000 and A$1000 per month from March on top of the assessment that has already been made.
I do not have enough evidence in this case to justify making an order for a lump sum payment in those circumstances. It is questionable whether I have the jurisdiction to do what the wife wants me to do. In those circumstances, having regard to the arrangement between the husband and the Agency, I decline to include that as part of the adjournment condition.

The National Australia Bank mortgage arrears

The wife’s position was that the National Australia Bank had currently been placated notwithstanding there were several thousand dollars of arrears of mortgage payments on the basis that the trial was proceeding this week and the issue would be resolved in some way. That dilemma has not gone away with the adjournment. Mr Hoult on behalf of the husband said that there was no evidence the bank was intending to foreclose and whilst that is correct, there is an indication that the bank is concerned about the mounting arrears in circumstances where the wife’s financial position is moderate. The parties are aware that the adjournment period is for three months and no doubt the bank will be told that. I have no understanding of whether the bank would be prepared to wait that period of time but I would have imagined that having been told that the trial would be dealt with this week, they might have some concerns about the mounting debt.
What is odd about this case however is that the husband showed in his financial statement that the Hong Kong company on his behalf was paying the payments. How that is the case having regard to the current arrears is not clear. However it seems to me that as an oral application has been made for the payments to be made, it is a matter that needs to be determined on the evidence. The husband indicates that the current payments are being made through the company. He shows in his affidavit of evidence in chief a desire to keep the American property as a holiday home. He refers to the fact that the company is paying the mortgage payments in respect of that property as well. In the circumstances, the husband clearly indicates that he does not have a difficulty making the periodic payments. I then turn back to the comments that I made earlier about the cost issue and his capacity to make the various payments drawn down through the loan account in lump sums. In my view, he can draw down the arrears of mortgage but on the basis that the National Australia Bank was prepared to wait for the Court to determine this issue rather than take action itself under its security, I propose to make an order that the husband pay the arrears of the mortgage to the National Australia Bank within two months of these orders. I note that in Annexure JAM2 to the wife’s trial affidavit, she annexes an email from the bank officer to she and the husband indicating that November and December payments have not been made. On the information there contained, the arrears would appear to be something in the vicinity of A$7000. In the circumstances, I see no reason why the husband cannot catch up with those payments in two months from now. As with the costs issue, I do not see that as an oppressive order having regard to the evidence presented to me by the husband.

The sale of The American property

The American property is a holiday house at H in America which is the subject of litigation in the United States of America. That court process appears to be similar to an application for partition proceedings in Australia.
The property was purchased in 2001 for US$540,000 (A$820,000) with a mortgage in the joint names of the parties from Chase Home Finance. The parties seem to agree that the mortgage is currently sitting at A$470,000.
The property was renovated at substantial cost. The funds for the renovation came from the Hong Kong business or more importantly, from the loan account funds to which I have referred.
In about the middle of 2007, the wife proposed that the property be sold because of her concern that the mortgage commitment could not be met.
In the middle of 2008, the wife obtained an estate agent appraisal saying that the American property was worth more than US$2.5million but by October, presumably with the global financial crisis, it had plummeted to US$1.9million.
The wife said that through the internet, she found that the husband had rented the property out but had not accounted to her for rental funds. Any payments in respect of the current $470,000 mortgage had to come from the husband’s business or more importantly the loan account.
The wife’s evidence was that the husband refused to sell the property at a time when the price was much higher than it is now. She said:
It was clear that we could not afford the rental payments with the bank charging penalties for each and every default on the mortgage secured by the property.
In February 2007, mortgagee Chase Bank Finance told the wife that they were foreclosing with the mortgage sum four or five months in arrears.
In March 2007, the mortgagee was provided with an address in New York which the wife had not given them. In April 2007, Chase Bank Finance confirmed that they had received funds from the husband and had reinstated the loan. This was at a time according to the wife when the husband was providing “very limited funds” to support she and the child of the marriage.
Notwithstanding the payments in early 2007, in late 2007, Chase Bank Finance again threatened foreclosure on the American property because the mortgage payments had not been made.
The husband did not respond to the wife’s proposal to sell the property as a consequence of which she made the application for the sale in the United States court. It would appear that the property has been in the throes of foreclosure on at least three occasions since separation and hence, the wife decided that the sale was the most appropriate course of action.
The proceedings in the Supreme Court of New York were begun in January 2008. The husband appears to have been difficult to serve with documents. That caused delay.
On 16 January 2009, the United States court adjourned the proceedings again apparently on the basis of the impending proceedings in this Court.
The husband has filed a defence to the New York proceedings but it is not readily apparent on what basis he claims that a sale should not occur. In April 2008, at a time at which the husband was struggling with all of his problems in Hong Kong, his American lawyers filed this defence which seems to say that he had expended large sums of money on the property as a result of which a lien on the wife’s interest had arisen. He said that the wife had deliberately and maliciously acted to deprive him of his entitlement to “mitigate expenses” and a right to subject the premises to being rented. Having regard to the evidence that I have read, that argument is hard to follow.
In his affidavit, the husband said the American property was continuing to fall in value but that finding buyers was a problem with so many properties on the market.
In respect of the Chase Bank Finance mortgage, the husband said he had to wait for funds coming into the Hong Kong company to enable him to pay the arrears on the American property mortgage. He then pointed the finger at the wife and said she did not make any attempt to borrow money or otherwise help in relation to the mortgages of either the E (a suburb of Melbourne) or American properties.
The husband said that it is not necessary to sell the American property. He said he had worked hard over the last 15 years to purchase and maintain the real properties whilst the wife “sat back with no job” and only criticised him when he failed to make the payments of the bills on time. Importantly, he said he would “like to retain” the American property. He said he would rent it out to help with the mortgage payments.
He said at times his mother helped him make payments by delivering the cheques to the bank to avoid late fees.
Of the United States proceedings and his defence, he said very little.
Whilst I understand the husband’s desire to keep the American property, it is obvious that the mortgage payments have been and continue to be a problem. As I said there have been three foreclosure actions. The husband said that the money came from his loan account or from this mother but having regard to the problems he has with funds generally as I have outlined earlier, it is difficult to see anything other than a repeat of the problems over the last two years and that puts both the interest of the wife and the husband at risk.
That being the case, the property should be sold if possible to stem the financial bleeding. If the husband desires to keep it, I see no reason why he cannot endeavour to purchase it by providing the necessary funds which in turn could be used to rationalise debt in Australia and alleviate some of the financial stress on the parties. That sort of order is not an exercise of the s 79 power but rather an asset protection order. In this case, unless some urgent action is taken, the property value could deteriorate further. Delay prejudices the wife if her argument is right about the husband having undisclosed resources. Similarly, it prejudices the husband because on his case, a huge company loan has to be supported ultimately by the parties non-business assets.
As asset-protection in this case is important, I think it appropriate for this Court to order the husband to proceed to do all things necessary to conclude the United States proceedings and sell the American property.

Default

I began by referring to the question of linking the adjournment to conditions. Mr Hoult urged me not to make the conditions oppressive because that would mean excluding the husband from the proceedings. It has been and continues to be, the wife’s desire to have the proceedings continue on an undefended basis because of the husband’s lack of candour as she sees it, in relation to disclosure.
An undefended hearing means literally that the respondent does not participate at all. In Tate v Tate (2000) FLC 93-047, the Full Court said that this court is all too frequently confronted with litigants who fail in their duties of full and frank, as well as prompt, disclosure of their financial affairs. The Full Court said that where that failure resulted in the response or application being struck out, the party who is in default ought have no further right to be heard without specific order of the court. A court in those circumstances can make a variety of orders in the exercise of discretion to limit participation particularly where it is needed to enable a court to ultimately arrive at a just and equitable outcome.
In Brown & Brown (2004) FamCA 1067, O’Ryan J said:
What is very clear from the case law and the provisions of the 2004 Rules is that it is fundamental that the rules of court and/or procedural orders must be obeyed and the court should not be reticent about exercising the powers in Rule 11.02(2) in appropriate cases. In my view, it is not necessary that the circumstances be (exceptional). No litigant, whether legally represented or not, should harbour any doubt that manipulation of the court’s processes, through disregard of and deliberate non-compliance with its orders and directions will attract other than the strongest measures from the court.
In this case, the husband has been granted an indulgence rather than simply being permitted to exercise his rights to access to justice. I made clear in granting the adjournment of the concerns I had in proceeding on an undefended basis. The orders I propose to make are intended to be fulfilled. I have found them to be orders capable of being so fulfilled. If they are not, I see no reason why the approach in Brown ought not apply.
I do not propose to make specific disclosure of documents orders as those have been made before. However, if the husband fails to provide documents that are available to him and needed for the company analysis, he does so at his peril.

I certify that the preceding Seventy Seven (77) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate:

Date: 12 February 2008

[2009] FamCA 81

12 February 2009