Pacek & Saltzer

[2021] FamCA 224

FAMILY COURT OF AUSTRALIA

Pacek & Saltzer [2021] FamCA 224

File number(s):

MLC 2954 of 2020

Judgment of:

BENNETT J

Date of judgment:

12 April 2021

Catchwords:

FAMILY LAW – PRACTICE & PROCEDURE – where matter in need of judicial management – too many hearings – disproportionate costs.

Legislation:

Corporations Act2001 (Cth)

Family Law Rules 2004 (Cth)

Number of paragraphs:

40

Date of hearing:

12 April 2021

Place:

Melbourne

Counsel for the Applicant:

Ms Stoikovska SC with Ms Fisken

Solicitor for the Applicant:

Cornelius Family Law

Counsel for the Respondent:

Mr Campbell

Solicitor for the Respondent:

Melbourne Legal Chambers

ORDERS

MLC 2954 of 2020

BETWEEN:

MS PACEK

Applicant

AND:

MR SALTZER

Respondent

ORDER MADE BY:	BENNETT  J
DATE OF ORDER:	12 APRIL 2021

THE COURT ORDERS THAT:

1.The costs ordered on 4 February 2021 to be paid by the husband to the wife, be assessed in accordance with the Family Law Rules and the matter is referred to Registrar George for that purpose.

2.Within 14 days the husband file and serve an affidavit detailing legal costs paid by him or on his behalf to date and the source of any such payments.

3.Within 14 days the Proper Officer of the husband’s solicitors provide evidence on affidavit as to monies in and out of their trust account on behalf of the husband and provide to the wife any copy documents reasonably requested. The obligations created by this Order endure regardless of whether those solicitors cease to act for the husband.

BY CONSENT IT IS ORDERED UNTIL FURTHER ORDER THAT:

4.The husband and wife, in their capacity as co-directors of H Group, forthwith engage ZZ Consultants as the replacement IT provider for the H Group.

5.In order to give effect to paragraph 5 hereof, and pending further order, the husband and wife, in their capacity as directors of H Group, forthwith and within seven (7) days do all such acts and things as may be required to:

(i)enter into a contract and terms of engagement with ZZ Consultants which contract shall include in its terms an express clause that subject to the prior written consent of both parties,  communicated by their respective solicitors and/ or order of the court: ZZ Consultants only shall retain full administrative IT access; and

(ii)ZZ Consultants shall not permit or provide full administrative access to either of the husband or wife, or any servant or agent of either of them.

(Noting that these orders are without prejudice to any application whereby the husband may seek to vary such an order at the further hearing of this matter on 17 May 2021)

(iii)Thereafter, authorise OO Consultants to transfer only to ZZ Consultants full administrative access for the H Group.

(iv)Provide a sealed copy of these orders to OO Consultants and ZZ Consultants.

6.The further hearing of the wife’s application in a case be adjourned to 17 May 2021 before Justice Hartnett (“the next hearing”) which is also the first return date of the husband’s application for derivative leave pursuant to s 237 of the Corporations Act.

7.Costs be reserved. 

IT IS FURTHER ORDERED THAT:

8.In anticipation of the next hearing:

a.      the husband file and serve his response and all evidence in support of any orders he seeks by not later than Wednesday 28 April 2021 at 12.00 noon.

b.      the wife file and serve any reply and any evidence in reply by not later than 7 May 2021 at 12.00 noon.

9.To the extent that the parties need permission to do so, they may each cause an unlimited number of subpoenas to produce documents to issue provided that subpoenas are returnable and all documents are inspected prior to the next hearing.

IT IS DIRECTED:

10.That the minute of consent orders be marked Exhibit “A” and remain on the Court file.

11.The letter of costs notifications to the husband from Melbourne Legal be marked Exhibit “C1” and remain on the Court file.

12.The letter of costs notifications to the wife from Cornelius Law be marked Exhibit “C2” and remain on the Court file.

13.My reasons for decision this day be transcribed and, when settled, placed on the court file and a copy provided to the parties and sent to the Honourable Justice Hartnett in her capacity as the Case Management Judge.

AND THE COURT NOTES:

A.Each party agrees to these orders for the express purpose of maintaining the status quo re full administrative IT access pending the further hearing of this matter on 17 May 2021 and without prejudice to any application that either party may make to change these orders.

B.The husband agrees to these orders as “holding orders” in circumstances where he has an application on foot for leave to bring a claim against the wife pursuant to the Corporations Act, including orders for access to the records of various companies, including H Group.

C.The wife agrees to these orders whilst maintaining that there should be no change to the status quo pending the final resolution of these proceedings.

D.To date the wife has expended $421,634.40 in legal costs and the husband has incurred costs in excess of $847,866.15 of which $447,866.15 has been paid.  The husband is unable to recall what costs he incurred or paid to WW Lawyers and XX Lawyers.

Note:   The form of the order is subject to the entry in the Court’s records.

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 17.02 Family Law Rules 2004 (Cth).

IT IS NOTED that publication of this judgment by this Court under the pseudonym Pacek & Saltzer has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

EX TEMPORE REASONS FOR JUDGMENT

BENNETT J:

1. This matter comes before me in the judicial duty list.  It is the return date of the application of the wife filed on 25 March 2021, in response to actions which she complains were taken by the husband to compromise the provision of information technology to the family business.  These reasons are directed to my concern of the number of hearings in these proceedings to date and the lack of proportionality of costs incurred.  Further, the husband is a litigant with a disability who may also be vulnerable.

2. Very briefly, the applicant wife is 58 years of age.  She is not employed outside the home but is a director of the family business, which is run through a number of companies.  The principal one is the holding company, H Pty Ltd, an entity in which the husband and wife are directors and equal shareholders.  The husband is 59 years old.  He resides at K Street, Suburb L.  He describes himself as working in logistics. 

3. The parties married on … 2009.  They separated on a date which is in dispute.  The husband maintains the parties separated in 2017, and the wife maintains the parties separated in 2019. 

4. Neither party have any medical complaints.  The husband is illiterate and has given evidence briefly today, from which I surmise that he is highly reliant upon his assistant, Mr RR to understand documentation in the proceedings.  Mr RR was not at court.  The husband’s evidence was that Mr RR has taken over the previous role of the wife and previous accountants in the organisation of his business and legal affairs.  He does not recall all of the solicitors who have acted for him in these proceedings.  He did not know how much he has incurred or paid in legal costs. 

5. The controversy which is the subject of the wife's application was resolved on a temporary basis in terms of minutes which the parties sent in to my chambers late last week and sought be made by consent.  I have, with some amendments, made those orders.  The order has the effect of regularising what will happen to the information technology processes between now and the next date upon which the matter is otherwise listed before the Court on a separate application of the husband, being 17 May 2021 before Hartnett J.

6. I required the parties and counsel to attend court today because I was concerned, upon perusing the file, that the file has, to date, been conducted in a way which does not observe the proportionality rules laid down by this Court.  The matter has been in court either once each month or the equivalent of once each month since proceedings were commenced in March 2020. 

7. By joint practice direction 1 of 2020, Alstergren CJ published a statement of core principles for proceedings in both Family Courts.  It reads, inter alia:

   The overarching purpose to be achieved is to ensure the just, safe, efficient and timely resolution of matters at a cost to the parties that is reasonable and proportionate in all of the circumstances to the case, having regard to the significant impact of Family Law disputes on children and families.

8. The husband has incurred costs of some $850,000, of which he has paid some $447,000.  The costs incurred by the wife run at some $421,634.  The husband is subject to two costs orders in favour of the wife.  One of those orders is yet to be perfected by Judge Kelly of the Federal Circuit Court, who has called for submissions as to quantum.  They are indemnity costs.  Other costs are ordered to be paid but have not yet been quantified.  I have today referred that costs aspect matter to the docket registrar, Registrar George, to be assessed in accordance with the Family Law Rules2004 (Cth).

9. It is of some concern to me that the husband is rather unclear about which solicitors have previously acted for him.  There appear to be five relevant firms.  The first in time may be VV Lawyers, who acted for some months, although the husband doesn't seem to have a recollection of that firm.  The next in time were WW Lawyers, who acted for him when he initiated proceedings on 18 March 2020, but then ceased prior to the matter coming to Court on 27 March 2020.  XX Lawyers filed a notice of address for service for the husband on 27 March 2020.  On 22 April 2020, Dwyer & Co filed a notice of address for service acting on behalf of the husband.  The husband's current solicitors, Melbourne Legal, have acted for the husband since August 2020. 

10. A costs notification which I requested be provided last week is on the Court file.  I will mark it exhibit “C1”.  It indicates that Melbourne Legal have been provided with records from the previous solicitors, Dwyer & Co, to whom they refer as Dwyer Vlahos Legal, showing that the husband has paid $203,912.76 in payment of professional fees, barristers' fees and valuation or expert fees.

11. The husband's current solicitors have work in progress of some $400,000, which they have not yet billed. 

    RECORDED  :  NOT TRANSCRIBED

12. I am informed that the husband’s solicitors hold some $200,000 being the proceeds of funds which counsel for the husband says was disbursed to the husband, pursuant to orders made in December 2020.  Additionally, they have paid out sums on account of the husband from trust for disbursements of some $243,953.39.

13. The asset pool is considered to be somewhere between $7 million and $9 million. 

14. The husband was unable to give instructions to his counsel today about the costs which he had incurred.  The husband has agreed to provide in affidavit material within 14 days details of legal costs paid by him to date to all practitioners retained by him, and the source from which such payments have come.  It is also agreed, and I have ordered, that within 14 days the husband's current solicitors provide evidence on affidavit as to the moneys in and out of their trust account on behalf of the husband, and provide such copy documents as are reasonably requested, and do so regardless of whether those solicitors cease to act for the husband between now and the hearing before Hartnett J.

15. The substantive proceedings were initiated by the husband on 18 March 2020.  They were filed in the Federal Circuit Court.  I understand that the application itself did not specify precisely what orders were sought, but it was supported by an affidavit which referred to an equal division of assets between the husband and the wife.  The wife's response thereto was filed on 23 March 2020.  In response, the wife sought an equal division of non-superannuation assets but her orders were not otherwise particularised. 

16. The matter came before Registrar Matthews for a directions hearing on 23 March 2020.  That was the first hearing in this matter.  Ms YY, solicitor of WW Lawyers, appeared for the husband, and Ms Fisken of counsel appeared for the wife.  The matter was adjourned to 14 April 2020 for an interim determination.

17. On 14 April 2020, the matter came before Judge Kelly.  The husband at that point appeared in person and Ms Fisken appeared for the wife.  On 14 April 2020, orders were made for a sale of property, for a disbursement of proceeds of sale, and a restraint on the husband interfering with the sale.  The wife's costs were reserved. 

18. The matter was next before the Court on 27 April 2020 in the discrete property list before Registrar Matthews.  Mr Howard of counsel, instructed by Dwyer & Co Solicitors, appeared for the husband and Ms Fisken appeared for the wife.  Orders were made by consent, which provided for financial discovery, valuation by experts, including J Group and SS Valuers, in anticipation of a private mediation to which the parties agreed, to be convened by Mr TT.  Each party received $215,000 on account of ultimate property settlement.

19. On 8 May 2020, the husband filed an application in a case for restraints against the wife from executing contracts of sale in relation to the property which he had agreed to be sold.  This husband was still represented by Dwyer & Co Solicitors at this stage.  On 18 May 2020, the wife filed her response to those proceedings.  That dispute came before Judge Kelly on 21 May 2020.  Ms Jenkins of counsel appeared for the husband and Ms Fisken appeared for the wife.  The husband's application of 8 May 2020 was dismissed, and the wife was permitted to enter into the contracts of sale as she proposed, the husband being required to execute documents.  The husband was restrained from interfering with the sales, and the husband was ordered to pay the wife's costs on an indemnity basis.  The matter was fixed for a final hearing before Judge Kelly on 4 February 2021.  The costs of the wife of 21 May 2020 were ordered on 22 July 2020 to be paid by the husband on an indemnity basis.  Quantification of the indemnity costs remains a matter reserved to Judge Kelly.

20. On 28 May 2020, the husband filed an application in a case for a stay of Judge Kelly's orders made on 21 May 2020, and a stay pending an appeal.  The wife filed her response on 2 June 2020, seeking a dismissal of the husband's stay application and costs.  On 3 and 4 June, the matter proceeded before Judge Kelly.  A stay was granted on certain undertakings of the husband, and the costs of both parties were reserved.  Dr Smith of counsel, instructed by Dwyer Vlahos Legal, appeared on behalf of the husband, and Ms Fisken appeared on behalf of the wife.  The reserved costs were subsequently the subject of an order made by Judge Kelly on 22 July 2020 that the husband be ordered to pay the wife's party/party costs and costs of and incidental to the proceedings determined by him on 4 June.  Those costs have not been quantified.  They are subject to the reserved decision of Judge Kelly, together with the indemnity costs from May 2020.

    RECORDED  :  NOT TRANSCRIBED

21. On 11 June 2020, the husband filed an amended application for final orders, in which he sought a 35/65 alteration of property interests.

    RECORDED  :  NOT TRANSCRIBED

22. On 9 July 2020, he filed an application in a case seeking to join two trusts to the proceedings.  One of the trusts is a trust under the control of one or other of the parties, and the other trust was the purchaser of the property which had been the subject of orders for sale.  He was seeking to set aside the contract of sale, permission to lodge a caveat, and that the wife pay his costs.  His solicitors were Dwyer Vlahos Legal. 

23. On 14 July 2020, the wife filed a response to the husband’s application.  The proceedings came before Judge Kelly on 22 July 2020.  Mr Eley of counsel appeared for the husband and Ms Fisken appeared for the wife.  Mr Fabianis appeared for F Pty Ltd which was the purchaser of the subject property at A Street, Suburb B.  Judge Kelly, by consent, discharged the stay order, released the husband from his undertaking as to damages, and ordered that the husband pay the costs which had been reserved on 4 June 2020.  The husband contemporaneously discontinued his appeal against the orders made by Judge Kelly on 21 May 2020.  The husband was ordered to pay the costs of the purchaser, F Pty Ltd.  Each of the husband and wife received a further $150,000 by way of part property settlement.

    RECORDED  :  NOT TRANSCRIBED

24. On 31 July 2020, the accountants, UU Accountants, who are the business's accountants, including Mr G, made application for costs in relation to a subpoena issued to UU Accountants, together with the costs of that application.

    RECORDED  :  NOT TRANSCRIBED

25. That matter came before Senior Registrar Hoult on 31 July 2020, when it was adjourned to the 7 August 2020, when Mr Eley appeared for the husband, Ms Fisken appeared for the wife, and Ms Coventry appeared for UU Accountants.  The matter was adjourned to 7 August 2020. 

26. On 7 August 2020, the matter came again before Senior Registrar Hoult.  The appearances were the same – Mr Eley, instructed by Dwyer Vlahos Legal, for the husband, Ms Fisken for the wife, and Ms Coventry for UU Accountants.  Upon conditions about the use of subpoenaed material, the objections to the subpoena were dismissed.  The release of the subpoenaed material was ordered.  The husband was ordered to pay the wife's costs fixed in the sum of $2750, which costs I understand have been paid.  Notably, this is the only costs order which has been paid by the husband to date.  It is the only costs order to have been quantified.

    RECORDED  :  NOT TRANSCRIBED

27. The husband was also ordered to pay the costs of the applicant accountants in the sum of $9500.  A private mediation was noted to be adjourned to 14 October 2020 and, notably, no such mediation has taken place.  It appears to me from this point that the matter is far too unprepared for any mediation to be productive at this time.

28. On 12 October 2020, the wife filed an application in a case seeking compliance by the husband with outstanding orders and that he be restrained from interfering with the sale of property including attending the property at Suburb B.  On 13 October 2020, the husband filed a response to the wife’s application in a case seeking the dismissal of it and discovery of documents from the wife and costs.  On 14 October 2020, the matter came before Judge Kelly.  Mr Dickson of Her Majesty's Counsel appeared with Mr Matson, instructed by Melbourne Legal Chambers, for the husband, and Ms Fisken appeared for the wife.  Orders were made which contemplated a private mediation before Mr TT and the husband was restrained from going to the property at Suburb B.  He was to withdraw a personal protection order which had been taken out by him against Mr G, the accountant of UU Accountants, and there were orders for the valuation of property, including properties in Country HH.  The wife’s costs were reserved, and the matter was adjourned for an interim hearing. 

29. On 16 December 2020, the wife filed a response to the husband's interim application, and the matter was before Judge Kelly on 17 December 2020.  Mr Matson appeared for the husband, and Ms Fisken appeared for the wife.  The matter was adjourned to 18 December, and costs were reserved.

1. On 18 December 2020, the matter came before Judge Kelly again.  Mr Brown of Her Majesty's Counsel appeared with Mr Matson for the husband, and Ms Stoikovska of Senior Counsel appeared with Ms Fisken for the wife.  Orders were made releasing a further $1million being $500,000 to each of the parties from the sale proceeds of the property at Suburb B and the provision of certain documents.  The date of the private mediation to which the parties had agreed was moved to 9 December 2020.

2. On 1 February 2021, the husband filed a case application seeking a transfer of the final hearing to this Court.  That application was made only three days before the matter was due to commence a final hearing before Judge Kelly in the Federal Circuit Court of Australia.  That final hearing had been appointed nine months earlier on 21 May 2020.  The husband flagged relief to be sought by him under the Corporations Act2001 (Cth) (“Corporations Act”), in particular leave pursuant to section 237 to institute derivative proceedings in the name of the holding company, H Pty Ltd, against the wife and the family accountant, Mr G, of UU Accountants and a number of other entities.

   RECORDED  :  NOT TRANSCRIBED

3. On 4 February 2021, Mr Geddes of Her Majesty's Counsel appeared with Mr Matson for the husband and Ms Stoikovska of Senior Counsel appeared with Ms Fisken for the wife. The matter was transferred to this Court, this Court having original jurisdiction under the Corporations Act. An order for costs was made but has not yet been quantified. It is the subject of an order which I have made today, referring that matter to the docket registrar, Registrar George, for a costs assessment. There was also provision for questions to be asked of the expert witnesses by the husband.

4. On 24 March 2021, the wife filed the application which is before me today, seeking a replacement of the information technology provider and a restraint on the use of information technology.  It was listed to me in the JDL and was the subject of a minute of order sought by the parties, which I have amended slightly and made.

5. The next matter before the Court will be an application filed by the husband on 1 April 2021, in which he now finally seeks leave to institute the derivative action pursuant to section 237 of the Corporations Act2001 (Cth). It is returnable on 17 May 2021 before Hartnett J. Hartnett J is the Case Management Judge for the Southern Region. She is also the National Case Management Judge. It is my recommendation, which hopefully these reasons support, that this matter is a matter requiring not only the attention of the capable docket registrar, Registrar George, but judicial case management as well. Hartnett J may allocate this matter to a judge for case management and/or up until a final hearing.

   RECORDED  :  NOT TRANSCRIBED

6. On 6 April 2021, the matter was listed before Registrar George on transfer from the Federal Circuit Court pursuant to the orders made by Judge Kelly on 4 February 2021.  It has been adjourned to 1 July 2021, which is a date after the hearing before Hartnett J.  Her Honour may consider the utility of yet another listing. 

7. Notably, the mediation with Mr TT has not taken place, and it remains my view that the matter is not ready to proceed to a mediation.

8. As indicated, the husband gave some limited evidence today, during which it was apparent that the husband is under a particular but discrete inability to be able to read or write.  I am not able to say the extent, if any, to which that may impede his ability to run these proceedings.  However, I consider that those he instructs today are on notice that they need to make an assessment about that matter.  Their client has incurred what appears to be a disproportionate amount of legal costs in the conduct of this proceeding, not only to them but to other practitioners.  I am not saying that those costs have not been properly incurred and that the solicitors concerned have not done the work for which they have charged.  What I am concerned about is whether it was necessary that all those costs were incurred, and whether the husband is under such a disability that he does not fully appreciate or adequately appreciate the implications of proceedings, so he has been permitted to incur costs which he ought not prudently have incurred.  I stress that I'm not making any finding against practitioners involved, but they are going to have to figure out what they do going forward, as he does appear to be in some respects, although perhaps limited respects, a vulnerable litigant.

   RECORDED  :  NOT TRANSCRIBED

9. For the wife's part, she concedes that the husband may have difficulty in reading and writing, but says that that is the extent of his disability, and that he is not a vulnerable litigant.

10. I will direct that a copy of these reasons be sent to Judge Kelly so that his Honour is aware that there was no upsetting of the quantification of costs which is still reserved before him and outstanding, that is, the quantification of the costs from 4 June 2020 and 21 May 2020.  Otherwise, I have already marked the costs information from the husband's solicitors exhibit “C1”, and directed that that remain on the Court file.  I mark the correspondence of 9 April 2021 from the wife's solicitors exhibit “C2”, and direct that that remain on the Court file.

    RECORDED  :  NOT TRANSCRIBED

11. The matters that are before Hartnett J on 17 May, is the husband's Corporations Act application returnable that day as a first return date, and also the determination of the wife's application in a case filed on 25 March 2021 in relation to information technology. There are orders for the filing and service of the husband's response to that application and the wife's entitlement to reply.

I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Bennett.

Associate:

Dated:       27 April 2021