Nyles and Nyles

[2008] FamCA 280

FAMILY COURT OF AUSTRALIA

NYLES & NYLES [2008] FamCA 280

FAMILY LAW – COSTS – Security for costs

Family Law Act 1975 (Cth)

APPLICANT: Mr Nyles

RESPONENT: Mrs Nyles

FILE NUMBER: MLF 4247 of 2003

DATE DELIVERED: 7 March 2008

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Carter J

HEARING DATE: 7 March 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr T North SC

SOLICITOR FOR THE APPLICANT: Lander & Rogers

COUNSEL FOR THE RESPONDENT: Dr C L Pannam QC, with
Mr A.I. Strum

SOLICITOR FOR THE RESPONDENT: Taussig Cherrie & Associates

Orders

BY CONSENT IT IS ORDERED:

1. That all extant parenting orders in respect of the children of the marriage X and G both born … June 1994 remain of full force and effect save that in respect of the husband's time with the children:

(a)       in the event the wife is unable to spend her regular mid-week dinner with the children during school terms, she notify the Boarding House at S School and the husband upon her becoming aware of her inability to do so;  and

(b)       in the event of the children or either of them wishing to spend such dinner time with the husband (in lieu of the wife) and the husband is available to spend such time with them, he be at liberty to take the children from the Boarding House for a period commencing at 3.30 p.m. (or such later time as the School may request) provided that the husband supervises and assists the children with their homework and concluding not later than 8.30 pm by which time he return them to the Boarding House;

(c)       if the children or either of them are ill at the Boarding House and the wife is unable to care for them or either of them personally:

(i)        the wife shall notify the husband and the Boarding House of her inability to do so upon her becoming aware of same;

(ii)      the husband have the first option to care for the children or either of them if he is personally able to do so until they or either of them are recuperated and are fit to return to the Boarding House.

1. That the parties obtain a further recommendation in writing from Dr Y, Clinical Psychologist, as to the husband's application for orders permitting the children to spend time with him:

(a)       overnight on Sundays when the children spend weekends with him in accordance with the extant parenting orders until the start of school the following day or such earlier time as S School may request;

(b)       overnight on the weeknights the husband has dinner with the children either pursuant to the extant parenting orders or in accordance with paragraph 1(b) of these orders.

1. That the husband's amended Application in a Case filed 13 November 2007 and the wife's further Response thereto filed 22 November 2007 be adjourned to the Senior Registrar’s Duty List on a date to be fixed after receipt by the parties of Dr Y’s recommendations or upon further application by either party to the Senior Registrar’s Associate.

1. Pursuant to s 65DA(2) and s 62B of the Family Law Act 1975, the particulars of the obligations these orders create and the particulars of the consequences that may follow if a person contravenes these orders and details of who can assist the parties adjust to and comply with an order are set out in the Fact Sheet attached hereto and these particulars are included in these orders.

IT IS ORDERED

1. That until further order the husband be restrained from further encumbering or doing any act or thing to diminish the value of P property.

2. That the husband provide a charge in an amount of $72,000 in favour of the wife in a form sufficient to enable her to lodge a caveat to protect her interests.

3. That the parties and the husband’s solicitors be at liberty to make further submissions as to the priority of the charge to be given to the wife and the priority of a charge given by the husband to his solicitors on 12 October 2007 and that issue be adjourned for further consideration on Tuesday, 6 May 2008.

4. Save as aforesaid the interim application of the wife seeking security for costs be dismissed.

5. That the wife’s costs of the application be reserved.

IT IS CERTIFIED

1. That pursuant to r 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of Counsel and Senior Counsel.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER:  MLF 4247 of 2003

MR NYLES

Applicant

and

MRS NYLES

Respondent

REASONS FOR JUDGMENT

1. Mr and Mrs Nyles, who will be hereafter referred to as the “husband” and “wife” respectively, resolved outstanding financial disputes on 10 March 2006, when Young J made orders by consent in relation to final property orders and the parties signed a Binding Financial Agreement.

2. On 2 July 2004 the husband filed an application to set those orders and the Binding Financial Agreement aside.  He subsequently amended the application twice, and as at today his further Amended Application, which was filed 11 October 2005, is the application upon which he relies.

3. The wife opposes the application and she now seeks security for costs. This can be seen in par 3 of her Response to an Application in a Case filed 10 October 2007. In all, she seeks that the husband provide the sum of $322,000 as and by way of security for the wife’s costs. That sum includes prospective costs, estimated as being between $200,000 and $250,000, and about $72,000 which is in respect of two orders for costs made in 2007, payment of which was stayed until the determination of the substantive application under s 79A of the Family Law Act 1975 (“the Act”).

4. The wife is represented by Dr Pannam one of her Majesty’s Counsel and Mr Strum of counsel.  I have had the benefit of written submissions from both parties.  I have had the benefit of written submissions from both parties.  The husband has been represented by Mr North of Senior Counsel.  Those submissions have been, if I may say, well prepared, cogent and they have been of great assistance.  Both documents, which will remain on the court file, also include lists of documents which are relied upon or to which there was to be reference.  I will list those documents later on.

Legal Principles

1. The power of the Court to make an order for security for costs is found in s 117(2) of the Act which provides:

   “Section 117(2A):  [Matters to be taken into account]

   By sec 117(2A), in considering what order if any should be made under sec 117(2), the Court is required to have regard to:

   (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 their conduct 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, in accordance with sec 117C or otherwise, made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer (as to which, see ¶61-190); and

   (g)  such other matters as the court considers relevant.”

2. Subsections (4) and (5) of s 117 appear to have no application to the present case.  The relevant parts of sub-s (2A) are generally speaking subparagraphs (a), the financial circumstances of the parties; and (g) such other matters the Court considers relevant.  However, in the present case both parties have also made reference to sub-par (c) which deals with the conduct of the parties in the proceedings.  The other matters set out in sub-s (2A) appear to have relevance to circumstances after a case has been concluded, rather than to an application such as the present one.

3. There is authoritative discussion by the Full Court in Luadaka (1998) FLC ¶ 92-830, and Jones (2001) FLC ¶ 93-080. Subsequently rules have been incorporated in the Family Law Rules and they are set out in rule 19.05. However, Luadaka or parts of it are still relevant and of assistance.  I refer in particular to pars 39, 61 and 62 which observe:

   “[39]An order that an applicant provide security for costs may be made in appropriate circumstances. However, it must be established that there are circumstances justifying the making of such an order. In considering whether to make such an order regard must be had to the provisions of s 17(2A).  The Family Law Act does not separately list factors which should be taken into account when dealing with an application for security for costs of a pending application for relief pursuant to provisions of the Act.

   …

   [61]In our opinion, when dealing with an application for security for costs the general rule provided for in s 117(1) applies, namely that subject to s 117(2) each party to proceedings shall bear his or her own costs. However, if the court is satisfied that there are circumstances that would justify an order then the court may, subject to s 117(2A), make such order for security for costs as the court considers just. It is not necessary to establish that there are special circumstances. However, it is necessary to establish that there are justifying circumstances. The decision to order security for costs is discretionary, both as to whether to order security, and as to the amount to be secured.

   [62]The purpose of an order for security is to secure justice between the parties by ensuring that an unsuccessful party does not occasion injustice to the other. In considering whether or not to make an order, apart from those referred to in s.117(2A), matters which may be relevant include the following:

   [62.1]It may be relevant to take into account the means of an applicant to satisfy an order for costs if he or she is unsuccessful.  Ordinarily the means of the applicant is not alone sufficient to justify an order for costs because of the rule that poverty should be no bar to justice.  This is reinforced by s.117 (1).  However, the financial circumstances of the applicant do not prevent an order being made if there are other grounds which justify an order.  Financial weakness may be relevant, for example, if the applicant is a company.  In relation to the means of the respondent, who is the applicant for security, it was held by Goldstein J in Alexander and Alexander (supra) and Gee J in B and B (supra) that the question is whether or not the respondent is able to pay his or her costs.  Section 117(2A)(a) requires consideration of the financial circumstances of both parties.  However, we do not accept that it will only be in cases where the applicant for security does not have the means to meet his or her costs that an order would be made.  In appropriate circumstances an order may be made even if the applicant for security has the means to pay his or her costs.

   [62.2]The prospects of success is a relevant matter to take into consideration: Parkinson & Co Ltd v Triplan Pty Ltd (supra). However, ordinarily the court will not undertake a detailed assessment of the likelihood of the applicant's success unless it can be demonstrated that there is a high probability of success or failure: Porzelack KG v Porzelack (UK) Ltd [1987] 1 WLR 420; Appleglen Pty Ltd v Mainzeal Corporation Pty Ltd (1988) 79 ALR 634; Equity Access Ltd v Westpac Banking Corporation (1989) ATPR ¶40-972. This is because of the lack of material at the time the application is dealt with. However, such an assessment may be possible in circumstances where, as in this case, affidavits have been filed in which the case sought to be made out is set out.

   [62.3]It is a relevant consideration whether the applicant's claim is made bona fide, whether it is genuine and not trivial, vexatious or a sham: Parkinson & Co Ltd v Triplan Pty Ltd (supra); Lynnebry Pty Ltd v Farquhar Enterprises Pty Ltd (1977) 3 ACLR 133; J & M O'Brien Enterprises Pty Ltd v Shell Company of Australia Ltd (1983) 7 ACLR 790.

   [62.4]It may be relevant to consider whether or not an order for costs would be oppressive or stifle the litigation. In Mantaray Pty Ltd v Brookfield Breeding Co Pty Ltd (1990) 8 ACLC 304 Byrne J said at 306:

   ‘A factor in deciding whether security should be required is that the order may well mean that the action cannot proceed. That prospect does not require refusal of the application but it is often a significant matter.’

   See also Rosenfield Nominees Pty Ltd v Bain & Co (1988) 14 ACLR 467 and Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 5 ACLC 480.

   [62.5]It may be relevant to consider whether or not the litigation may involve a matter of public importance: Equity Access Ltd v Westpac Banking Corporation (supra); Jodast Pty Ltd v A & J Blattner Pty Ltd (1991) 104 ALR 248. In Quick on Costs at [ 4.9440] it is said that this will militate against the making of an order.

   [62.6]It may be relevant to consider whether or not there has been delay in bringing the application. An application may be refused if there is delay in making the application and prejudice is caused to the respondent to the application: Buckley v Bennell Design & Constructions Pty Ltd (1974) 1 ACLR 301 and Loreva Pty Ltd v Cefa Associated Agencies Pty Ltd (1982) 7 ACLR 164.

   [62.7]Other relevant matters may include any difficulties of enforcing an order for costs and the amount of costs to be incurred. ”

4. It is also important to note that in par 63 the members of the Full Court held that they were not suggesting that the matters which they had listed were exhaustive of what might be taken into account.

5. In Jones where the question was whether or not there should be an order for security for costs of an appeal the Full Court referred to Luadaka in pars 18 and 19.  Commencing at par 20 the Full Court went on:

   “[20]There is no doubt that the wife is impecunious, that she may well be unable to proceed with the appeal if she is ordered to provide security and will be unable to meet an adverse order for costs in the appeal.  The prospect, however, of the husband being left without a remedy in respect of the costs order if the appeal is dismissed is significant.

   [21]It has long been recognised that, as a general rule and in the exercise of an unfettered discretion, mere impecuniosity of a litigant who is a natural person, will not of itself be a basis for ordering that person to provide security.  There is however an exception to that general rule, namely in the case of appeals . . .

   [22]The fact that the wife would be unable to pay the costs awarded against her, if her appeal was dismissed, is, in our view, a significant factor to take into account in considering whether to exercise the discretion to order security in favour of the husband, but it is not the only or deciding factor.

   [23]If an appeal appears to have little merit, a court may be more disposed to make an order for security for costs.  Whilst we have not had the benefit of submissions on behalf of the wife, the appeal does not appear to raise matters of principle.”

Discussion

1. In the submissions filed on behalf of the wife reference is made to various decisions of the Full Court in which consideration has been given to the test for prospects of success.  Reference was made in those submissions to Evans and Rochford (2003) FLC ¶ 93-147 and Simpson and McGuran (2005) FLC ¶ 93-223. Part of the factual situation in Simpson and McGuran was highlighted as being apposite to the circumstances of the present case.  I say at once that the significant distinction between the present case and the earlier is not just one was an appeal and this is not, but that Simpson and McGuran case involved a child and Full Court ultimately, as was pointed out in the submissions, dismissed the application because the making of such an order could have precluded the father from pursuing his appeal against orders which deprived him of personal contact with his child and which of course restricted his access to the Court.

2. The nub of what was put on behalf of the wife in the current proceeding is, I think, what is set out and appears in par 14 on p 79,687 and it is in the following terms in Simpson and McGuran:

   “14. The father’s case (as it emerged from his affidavit and his oral submissions to us) appears to be that he has no funds from which he could satisfy an order for security for costs. A possible source of such funds was identified by the wife's solicitor in her affidavit (paragraph 5(c)), being a fund of $20,900. The father concedes that he received such sum. Beyond asserting that he ‘no longer’ has such sum, the father has, as he conceded during the course of the hearing of the application, declined to provide documentation which might reasonably be thought to be capable of casting useful light on that topic.”

3. That would appear to be a matter of relevance because of the deterioration which appears to have taken place in the husband's financial circumstances over the last couple of years.

4. Other Full Courts have looked at the question too.  One case which I think I should raise is the decision of a differently constituted Full Court, the then Chief Justice Nicholson, Kay and Young JJ in Pedersen v Vegahira, an unreported decision, (2003) FamCA 1383. The judgment was delivered on 17 March 2003. In dealing with the prospects of success of an appeal, as it was in that case, at par 14 Nicholson CJ (with whom Kay & Young JJ agreed) said:

   “[14]So far as the prospects of success of the appeal are concerned, it seems to me, without being definitive about it, that nothing has been shown that would suggest to me that there is a strongly arguable case on behalf of the appellant.  That does not mean that if the matter proceeds such a case may not emerge, but as at present it has not done so and since the appellant has had plenty of time to amend the grounds of appeal to indicate whether such an arguable ground exists and has failed to do so, the Court is simply left with the very vague grounds on which he relies.

   [15]It is always an issue as to whether or not an order for security for costs would be oppressive or would stifle the litigation.  On the other hand, that has to be balanced in the other direction by the oppressive nature of the appeal if it is to proceed, in relation to the finances of the other party.  It seems to me that on the face of this it is undeniable that an order for security for costs should be made in favour of the mother.”

5. That case was cited with approval in another unreported decision of Page and Page and Smith and Page (2005) FamCA 696, the Full Court comprising Kay, Coleman and May JJ, judgment being delivered on 7 June 2005. Whether or not in using a term such as “strongly arguable case” on behalf of the appellant the Full Court was intending to raise the bar a little or to distil the earlier decisions, is not altogether clear to me.

6. These cases can be distinguished readily from the present case because again, they were cases involving a child and such cases appear to be rather more liberally dealt with in the authorities in the sense that questions of obstruction of access to the courts and the rights of children are dealt with rather more cautiously.  At the end of the day, as I said, firstly it is a matter which has to be looked at and certainly has to be put into the balance.

7. The husband's case pursuant to s 79A of the Act was summarised in the written submissions filed on his behalf as being that as at the date the orders were made (10 March 2004), the wife knew and had failed to inform either the husband or the Court of certain matters. First, that on 13 January 2004 a particular company had converted from a proprietary to a public company. Secondly, on the same day the company changed its name. Thirdly, on 22 February 2004 the wife received just under three million shares in the newly named company in exchange for certain B-class shares which she had previously owned, and sold 50 per cent of the shares to the “float”.

1. I pause here to say that the matter involves, and I use only the very broadest description now, what turned out to be a float of a company which took place in the year 2004.

2. The first two matters, that is the conversion from a proprietary to a public company and the change of name, were noted in the submissions as being matters within the public domain, in the sense that notice was lodged with ASIC on 13 January 2004.  But it is said in the submissions that the husband remained unaware of those facts.  The third matter also formed part of the public record but not until the time when a notification of share buy-back details was lodged with ASIC.  That was 22 March 2004, after the orders were made.

3. Again in very broad terms, the husband contends that the wife was under an existing obligation to make full and frank disclosure of her financial circumstances.  The events which had occurred in respect to the company were all directly relevant to the matters in issue between the parties and before the Court, namely the valuation of her interests in the company.  She was a director and shareholder of the company and these matters were relevant and important for the husband if he was to make an informed decision as to whether to consent to proposed orders.

4. Both the husband and the wife have made reference to the proceedings before Young J and both in a sense rely on what was said there.  It is clear, at least from what is set out in the wife’s submissions, that his Honour inquired into some of the background of the company.  I pause here to say that I have not seen the whole of the transcript but it is not suggested that what has been contended in the wife’s submissions is inaccurate in any way.  The reference is par 30 of those written submissions, which commences at p 12.

5. I simply highlight certain of those matters.  His Honour said to Mr Strum, “The husband goes into this settlement with his eyes wide open.”  Mr Strum agreed with that.  His Honour said then, “If the favourable financial conditions continue and [J Company] is floated and the market accepts, then your client gets a bonanza;  it's all hers.”  Mr Strum agreed.  His Honour then turned to Mr Geddes, who appeared on behalf of the husband, inquiring whether that was all understood and Mr Geddes replied in the affirmative.

6. Subsequently, as is set out in par 31 of the wife’s written submissions, there was a further exchange between Mr Geddes and his Honour, where Mr Geddes sought to clarify something which had earlier been said.  What he pointed out was that there had not been any independent financial inquiry conducted on behalf of the husband.  His Honour noted that he understood that, suggesting that it was his recollection that a valuation had been prepared by C Capital.  Mr Geddes confirmed that was so.

7. His Honour then said, “But the husband has read that and he understands that there may be issues in the marketplace that might cause the valuation of the wife's shareholding, if acceptable to the public, to be worth a lot of money.”  Mr Geddes then sought to explain, again by way of clarification, a difficulty which related to the signing of a confidentiality agreement and again told his Honour that there had been significant difficulties there and went on to say:  “So there has been no independent assessment made on behalf of the husband, but this settlement has been arrived at by the husband stating what he would be prepared to accept in order to resolve the matters.”

8. His Honour then said:  “That might be a pragmatic way of dealing with the case, but the husband then takes on the obligation of understanding that if he settles for this, that's final.  On that basis, the orders are made and they have to bring finality.  If there's a financial bonanza in the future -  and I've got no idea whether there will or will not be - it’s likely to be that the children will also share in that benefit because of lifestyle, education and other matters."

9. On the face of it that would appear to raise significant difficulties for the husband.

10. Added to that, and commencing at par 28 of the wife's written submissions, reference is made to the Certificate of Independent Legal Advice by the husband's solicitor which was annexed to the Binding Financial Agreement.  Not only were the required statutory matters set out in that certificate, but also certain other matters were volunteered.  In particular, it was stated that the husband had told his solicitor that he understood the nature and effect of the document and the obligations and risks involved in signing it and continued:

    “1.      …  It appeared to me that he did have such understanding.

    2.My client stated to me that he was signing the document freely, voluntarily and without pressure from the other party to the Deed or from any other person.”

11. At par 29 in the wife's written submissions a letter of advice from the husband's solicitors to him is set out.  I incorporate that by reference.  It is sufficient to note here that the advice was to the effect that the solicitor doubted that the wife’s entitlements in J Company had no value, particularly if the company were to float in the short term.  Indeed it was said by the husband’s solicitors that it appeared most likely that the shares currently had a significant value, let alone their potential value on a float.  Further, there might be further significant related benefits that might flow in the event of a float.

12. They confirmed that they were not in a position to advise whether the husband should accept the proposal and provided reasons for that.  They noted:

    “…  You have advised that you believe a float of [J Company] is imminent and as a result the wife may be entitled to a large sum of money.  Without a valuation report we are unable to advise you as to what the wife's likely entitlements may be if this were to occur …”

13. In previous proceedings in this Court extensive orders for further and better provision of documents was sought.  In the event Brown J made certain orders on 9 November 2006.  In those proceedings, as was the case in the present proceedings, the wife, herself, had not filed any affidavit material.  Her solicitor, Ms Cherrie, had done so on her behalf.  She did so on the basis of information which she had received from her client.  Mr Peterson, whose affidavit is also relied upon by the wife in the present proceedings, had also filed an affidavit on 19 October 2006, which set out the wife’s position.

14. In that case, that is the proceedings before Brown J, the husband had sought to have a significant number of documents which were set out in pars 3(a) to 3(f) of his amended response, filed 20 September 2006, and in the event her Honour made orders only in respect of one aspect of it.  That was for the provision by the wife of an affidavit in a period of 14 days in which she was to state whether she had in her possession or control the forecast earnings document or documents prepared for the potential IPO referred to in par 4 of the affidavit of Mr Peterson, filed 19 October 2006 and then certain other orders followed, as a consequence of whether the answer was no or otherwise.

15. The wife did in fact comply with that order, her affidavit being filed on 23 November 2006.  She said that in par 3:

    “That the forecast earnings document or documents prepared for the potential IPO referred to in paragraph 41 of the affidavit of Mr Peterson, filed 19 October 2006, that I have in my possession or control are those contained in section 6 of the draft prospectus dated 11 March 2004 and sent to me via email from […], dated 12 March 2004, both of which documents have been disclosed by me in accordance with orders made by her Honour Dessau J on 9 August 2004.”

16. She also deposed she had not in her possession or control any other forecast earnings documents.  I refer to this matter because Mr Peterson's affidavit was relied upon, as I said, by the wife in the present proceedings also and also because parts of it were taken up by Mr North on behalf of the husband, one of which was par 41.  It is clear that the forecast earning documents had been the subject of earlier affidavit material but what however Mr Peterson went on to do in par 41 was to depose to documents which in his opinion were such that the wife would have been privy to and set out a list in accord with his recollection of the various classes of documents.

17. It is only the first six of those documents which can be of relevance because of the dates which are set out.  The first concerns an email to the wife and others dated 9 January 2004 in respect of capital structure.  Next there was said to be a notice of general meeting dated 13 January 2004.  Next an amended constitution of J Group Ltd.  Next an email in respect of something called L.  Next an email to the wife and others, dated 24 February 2004 with respect to the shareholders’ meeting on 27 February 2004 and finally a notice of General Meeting on 27 February 2004.

18. It is effectively suggested on behalf of the husband that the wife therefore had information which she did not disclose.  Whilst I cannot describe the husband's case as elegantly as his Senior Counsel did, it seems to me to be based at least in part, on the fact that whilst he took a risk, let us say, it was not a fair risk because information was not given to him, that information being within the wife's knowledge but not his.

19. The other affidavit to which I want to refer in particular at this stage is that of the husband, filed 3 November 2006 and to which reference was made.  Commencing at the bottom of p 5 he says that on numerous occasions prior to 10 March 2004, having had discussions with the wife and asking whether the company was to float.  He said that on each occasion she denied that it was.  On p 6 of his affidavit he said, amongst other things, that he was aware from his discussions with the wife that the Annual General Meeting which usually took place mid-year, had been brought forward to the first week of February 2004 and took place at E.  He recalled that the conference was scheduled for one week’s duration.  At the time he did not think that this was significant and he has a certain and different view in hindsight, that is of course speculation.

20. Relevantly on p 8 (in par 5(vi)) the husband deposed to various communications between the parties’ respective solicitors.  He received a telephone call from the wife (on 4 February 2004) during the course of which she said that the company was “not going to float” but even if it did "it will take 5 years to receive any money if it does."  He has annexed to his affidavit copies of certain emails which he sent to the wife on 5 and 6 February 2004 which confirmed the content of the conversation.  In particular reference should be made to the last of the documents which is included in Annexure “PN4” which says this:

    “[wife], if [J Company] is now not going float as you mentioned yesterday, and it will take 5 years to receive any monies if it does, please make this information known to Landers.

    (That is to say the solicitors.)

    This will confirm any doubt of a financial windfall in months to come.”

21. The wife has not responded to that in any way.

22. I further note that Ms Blizzard who acted for the husband in the earlier proceedings, swore an affidavit in connection with the discovery proceedings, which was filed on 20 September 2006.  Commencing at p 9 in par 6 of that affidavit Ms Blizzard deposed to having had the opportunity to review certain “public domain” documents relating to the IPO.  They included notification of a resolution dated January 2006, which provided that the company was converting from a proprietary company to a public company, subject to approval at a general meeting, a change of name would follow;  again subject to approval, the constitution would be changed.  Notification was lodged with ASIC on 13 January 2004, according to Ms Blizzard.

23. The next document was a notification of share buy-back details lodged on 22 March which is of course after the orders were made but it includes recitals which refer to an agreement by the shareholders at a general meeting on 27 February 2004 to sell the shares to the company, with a corresponding agreement that the company would purchase them in the terms set out in that agreement.  Ms Cherrie responded to that affidavit, her affidavit having been filed on 19 October 2006.  She dealt with the contents of Ms Blizzard’s affidavit seriatim and provided explanations and clarifications in many respects.  In responding to what was par 6 of Ms Blizzard’s affidavit said, “I do not admit same.”  It was neither of course admitted nor denied.

24. When I turn to look at the financial circumstances of the parties (one of the matters referred to s 117 and also the Rules), and look at the parties’ respective Financial Statements, it is clear that the wife’s financial situation is greatly superior to that of the husband.  That of course is one factor, and only one factor.

25. Both parties raised matters concerning the other’s conduct.  It is the case that the husband resisted the production of documents on the grounds of legal professional privilege.  That is a matter also relied upon by the wife to the extent that it might explain what is said to be some delay.  I do not feel that the reliance in argument in respect of privilege of that nature is a matter which would properly be considered under the conduct section.  Nor do I place much significance on what was said on behalf of the husband in respect of the wife’s conduct.

26. I do not think either that there has been delay which has not been satisfactorily explained.  That said, however, the fact of the delay and the period of time which has elapsed since the proceedings were commenced mean that both the husband and the wife have expended quite a deal of money already on these proceedings.

27. It can be the case quite often in proceedings for costs that financial disparity alone can found an order for costs.  Financial superiority however need not necessarily be a bar to an order for costs in normal circumstances.  So much was made clear some years ago but in circumstances where the person in the inferior financial position took an unreasonable approach to the proceedings.  It is not a situation however, unlike many, where the wife would herself be in a position where she could not fund her own legal costs.

28. The wife has raised in the written submissions of the unexplained reduction in the husband’s financial strength.  It is common ground that the husband has resisted an explanation, although one has been sought.  His situation has deteriorated and reference is made to Financial Statements filed on 10 November 2005, just under two years after he received certain benefits pursuant to the Financial Agreement.  Pursuant to that Agreement, amongst other things, he got an item of real estate which was valued at about $520,000 unencumbered, together with a further payment of 55,000.

29. However in less than two years his net assets were said to be (not including superannuation) only $167,000, there having been incurred legal costs of $130,000 and a mortgage of $340,000.  By 26 February 2007, when the husband filed a further Financial Statement, he had a net shortfall of about $91,000.  The mortgage had increased to $510,000 and the legal costs had decreased to $120,000.  I pause there to say that as at November 2005 the husband also had had a term deposit of about $120,000 and that did not figure in his next Financial Statement.  According to another Financial Statement filed yesterday the value of the property has increased from $540,000 to an estimated $750,000.  The mortgage is now $600,000, an increase of about $90,000, and the legal costs have reduced by about $80,000, to $40,000.

30. The husband therefore has liabilities of $670,000 and property valued at $808,000.  The husband's income is now said to be (as at yesterday) $2377 per week but his personal expenditure totalled $3754 per week.  It is clear that there has been a diminution in the husband’s net asset position and it is not surprising that the wife is concerned about his ability to meet the existing costs orders, let alone any costs order which might be made in her favour if the husband does not succeed in his application.

Conclusion

1. In my view it is clear that the husband’s case has significant difficulties but then there are significant periods of time and no doubt significant Court appearances to follow in which what appears to be difficult now, may be seen not to be so.  It is not a case involving a child in the sense as being the subject of the present application, although I am aware that there are children of this marriage and there are proceedings in respect of those children.

2. I do not think that the husband's case is entirely devoid of merit, not that I think that that is necessarily the test in these cases.  But I do think, as I said, he has difficulties.  I have to balance all these matters as well as all the other matters set out in r 19.  I have to make sure in the exercise of my discretion that I do justice to each of the parties.  The order sought by the wife would require the husband to provide about $300,000.  I am not aware as to any suggestion as to the source of such an amount.  There is no fund as far as I am aware that has been identified as being available to be utilised as security.  At the same time I am concerned at the steady whittling away of the husband's equity in the real estate, coupled with a steadfast refusal it appears to explain why this has happened.

3. In the circumstances I am satisfied that the wife is entitled only to have security for costs which have already been ordered against the husband.  I do not mean by that that he should pay them now, that is quite contrary to the terms of the orders pursuant to which they were to be stayed.  But security should be given in some way and I would therefore propose to make an order that he be restrained from further encumbering the property in question by more than - I will have to work out the precise amount – but it would be about $75,000.  In doing that I am preserving the integrity of orders which have already been made by the Court.  I am not stifling the possibility of the husband being able to litigate the substantive proceedings.  Having balanced all relevant matters, it is in my view a proper outcome.

4. The liabilities are $670,000 and the value of the property was estimated at $750,000.  Effectively I will have to require that the husband not encumber it any further.

I certify that the preceding fifty (50) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Carter

Associate:                 

Date:    22 April 2008