PADANOWSKA & PADANOWSKI (No.3)
[2020] FCCA 3451
•23 December 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| PADANOWSKA & PADANOWSKI (No.3) | [2020] FCCA 3451 |
| Catchwords: INJUNCTION – Application to restrain solicitor from acting – interests of the administration of justice. |
| Legislation: Family Law Act 1975 (Cth), ss.79, 106B, 114 Evidence Act 1995 (Cth) s.75 |
| Cases cited: Blue Seas Investments Pty Ltd v Mitchell & Ors [1999] FamCA 745 Harris & Harris; Re Banaco Pty Ltd (No. 2) (1981) FLC 91-100 Holborow v MacDonald Rudder [2002] WASC 265 Jones v Dunkel [1959] HCA 8 Kallinicos & Anor v Hunt & Ors [2005] NSWSC 1181 Martin & Martin & Ors [2013] FamCA 222 Meeks & Meeks & Anor [2019] FCCA 638 Mitchell v Burrell [2008] NSWSC 772 Naczek & Dowler [2011] FamCAFC 179 Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia [1998] HCA 30 Sheehan & Sheehan [2019] FCCA 1085 Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729 |
| Applicant: | MS PADANOWSKA |
| First respondent: | MR PADANOWSKI |
| Second Respondent: | BN LAW LTD T/AS BARRY.NILSSON |
| Third Respondent: | MR DALECKI |
| Fourth Respondent: | MR BB PADANOWSKI |
| Fifth Respondent: | MR CC PADANOWSKI |
| File Number: | PAC 5760 of 2019 |
| Judgment of: | Judge Obradovic |
| Hearing date: | 2 December 2020 |
| Date of Last Submission: | 2 December 2020 |
| Delivered at: | Parramatta |
| Delivered on: | 23 December 2020 |
REPRESENTATION
| Counsel for the Applicant: | Mr Fermanis |
| Solicitors for the Applicant: | Phillip A Wilkins & Associates |
| Appearing for the First respondent: | Mr Dalecki |
| Solicitors for the First respondent: | Barry Nilsson Lawyers |
| Counsel for the Second and Third Respondents: | Mr Williams QC |
| Appearing for the Fourth Respondent: | In person |
| Appearing for the Fifth Respondent: | In person |
THE COURT ORDERS THAT:
Pursuant to section 114 of the Family Law Act 1975 (Cth):
(a)BN Law Limited trading as Barry.Nilsson is restrained by injunction from transferring, dispensing or otherwise dealing with the sum of $65,704.23 received by it from the first respondent on or about 10 September 2020;
(b)Mr BB Padanowski is restrained by injunction from transferring, dispensing or otherwise dealing with the sum of $20,000 received by him from the first respondent on or about 3 September 2020; and
(c)Mr CC Padanowski is restrained by injunction from transferring, dispensing or otherwise dealing with the sum of $50,000 received by him from the first respondent on or about 2 September 2020.
Within 48 hours:
(a)BN Law Limited trading as Barry.Nilsson shall transfer the sum of $65,704.23 to the trust account of Phillip A. Wilkins & Associates;
(b)Mr BB Padanowski shall transfer the sum of $20,000 to the trust account of Phillip A. Wilkins & Associates; and
(c)Mr CC Padanowski shall transfer the sum of $50,000 to the trust account of Phillip A. Wilkins & Associates.
BN Law Limited trading as Barry.Nilsson and Mr Dalecki are restrained by injunction from acting for and on behalf of the first respondent in these proceedings.
The applicant’s application for costs is stood over to be determined at the conclusion of the substantive proceedings.
THE COURT NOTES THAT:
A.The proceedings are listed for final hearing at 10am on 10, 11, 12 and 13 May 2021, as a reserve.
IT IS NOTED that publication of this judgment under the pseudonym Padanowska & Padanowski (No.3) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PARRAMATTA |
PAC 5760 of 2019
| MS PADANOWSKA |
Applicant
And
| MR PADANOWSKI |
First respondent
| BN LAW LTD T/AS BARRY.NILSSON |
Second Respondent
| MR DALECKI |
Third Respondent
| MR BB PADANOWSKI |
Fourth Respondent
| MR CC PADANOWSKI |
Fifth Respondent
REASONS FOR JUDGMENT
Introduction
In this fierce but relatively short running battle between the applicant Ms Padanowska and the first respondent Mr Padanowski, others have come into the fray.
The present application arises out of circumstances where the first respondent sold the parties’ former matrimonial home and disbursed the proceeds of sale in the face of competing interim applications as to how those funds should be disbursed, in a manner which was not communicated to the applicant until after proceeds had been disbursed, and without her consent. Part of the moneys were used towards legal costs owed to the first respondent’s lawyers (the second and third respondents herein). Part of the proceeds were used to pay back alleged loans to the respondent’s brother and father (the fourth and fifth respondents herein), which was money said to have been lent for the purposes of funding the family law proceedings, including for the provision of experts’ reports, and associated criminal law proceedings. As at 1 September 2020, the first respondent received $201,915.32 from the proceeds of sale and as at the time of this application only $35,000 remained, the rest having been disbursed in a manner described in further detail later in these reasons.
The applicant seeks orders for the first respondent’s lawyers to be restrained from further acting for the first respondent, certain asset preservation orders and for the first respondent’s lawyers and the first respondent’s brother and father to be joined to the proceedings.
The first respondent, the fourth respondent and the fifth respondent did not rely on any evidence in answering the present application. The second and third respondent relied on a short affidavit of the third respondent.
The precise chronology of when and how the funds were disbursed is very important. In that regard, it is also important to understand the chronology of the proceedings and the parties’ actions at various points in time when considering the applications before the Court. The matters noted below are findings of fact:
DATE
EVENT
1995
First respondent migrates to Australia from Country G
2013
First respondent and applicant (“parties”) meet in Country G and commence relationship
2014
Parties marry in Country G
2014
Applicant arrives in Australia, parties commence cohabitation in Australia
2015
Applicant granted partner visa
Circa 2015
Applicant granted permanent residence in Australia
2016
Parties’ first child born
2018
Parties’ second child born
19.11.2019
Parties separate
Applicant remains living in the former matrimonial home, namely the property at C Street, Suburb D (“C Street, Suburb D property”)
21.11.2019
Applicant files an Initiating Application in Federal Circuit Court of Australia (“FCC”) commencing parenting proceedings only, in respect of the parties’ two children; applicant represented by Phillip A Wilkins & Associates
24.11.2019
First respondent files Response seeking parenting orders only; first respondent represented by AS Family Lawyers
25.11.2019
First return of Initiating Application, proceedings adjourned to 27 November 2019
27.11.2019
Interim parenting orders made
10.12.2019
Applicant files Application in a Case seeking urgent relief, inter alia to discharge certain of the interim parenting orders made on 27 November 2019, and seeking further interim parenting orders and a recovery order
16.12.2019
Mention before FCC, matter adjourned to 19 December 2019 for further interim hearing
17.12.2019
First respondent files Amended Response in respect of parenting orders sought
19.12.2019
Further interim parenting orders made by consent, matter adjourned to 30 January 2019 for directions
20.12.2019
Applicant files a Notice of Appeal with respect to the interim parenting orders of 27 November 2019
30.01.2019
Proceedings in FCC adjourned to 6 February 2020 for directions; order for appointment of an Independent Children’s Lawyer made
06.02.2019
Proceedings in FCC adjourned to 19 February 2020 for directions
07.02.2019
Orders made by consent for provision of material to expert for purpose of preparation of a report in the parenting proceedings
19.02.2020
Proceedings in FCC adjourned to 3 March 2020, procedural orders made
03.03.2020
Orders made by consent for appointment of Dr H to provide an expert’s report with the first respondent to pay the fees of the expert; Proceedings in FCC adjourned to 19 March 2020 and 27 May 2020 for directions
09.03.2020
Applicant files an Application in an Appeal seeking to have the appeal expedited
10.03.2020
Notice of Address for Service for first respondent filed, naming Barry.Nilsson as the solicitor on record
17.03.2020
Applicant files further Application in a Case seeking to vary interim parenting orders of 27 November 2019
Applicant files an Amended Application in a Case on the same day seeking parenting orders
19.03.2020
Parties appear before FCC and further Interim parenting orders are made
02.04.2020
Urgent re-listing of matter before FCC, orders for changeover varied
08.04.2020
First respondent files an Amended Response to Initiating Application joining property proceedings to the proceedings before the FCC; the Amended Response seeks property adjustment orders and parenting orders on a final basis; It was a document prepared by Mr Dalecki from Barry.Nilsson.
09.04.2020
First Respondent files an Application in a Case (returnable on 27 May 2020) seeking interim property orders, including an order for the sale of the C Street, Suburb D property, and for the distribution of the proceeds of sale. The application for the interim property matter to be dealt with at short notice was refused. The Application in a Case was a document prepared by Mr Dalecki from Barry.Nilsson.
It is unclear when the Application in a Case was served.[1]
23.04.2020
Full Court of Family Court hands down judgment in the parenting appeal, and the matter is referred to a different judge in the FCC for re-hearing of the interim parenting application
30.04.2020
Orders made in chambers listing the matter before Judge Obradovic on 27 May 2020
19.05.2020
Applicant files Response to Application in a Case, seeking for the C Street, Suburb D property to be sold and orders as to the disbursement of the net proceeds of sale, namely that after payment of mortgage and costs of sale, and $20,000 to each of the parties the balance of the proceeds of sale be held in a controlled moneys account.
27.05.2020
Parenting proceedings listed for urgent interim hearing on 1 June 2020, no relief in respect of property orders was pressed, and interim applications for sale of C Street, Suburb D property and distribution of proceeds of sale remain outstanding.
28.05.2020
Applicant files Amended Initiating Application joining issue of property adjustment orders, both interim and final property adjustment orders sought. The interim orders reflect the orders sought in the Response to Application in a Case filed 19 May 2020. The final orders sought by the applicant included the following:
That the balance of funds from the sale of the property situate and known as C Street, Suburb D in the State of New South wales held in a controlled monies account be divided 40% to the wife and 60% to the husband.
01.06.2020
FCC hears interim parenting applications in respect of which judgement is reserved, the parties are ordered to attend a Conciliation Conference before a Registrar with respect to the property proceedings on 5 August 2020 and matter listed for directions on 28 August 2020. Interim applications for sale of C Street, Suburb D property and distribution of proceeds of sale remain outstanding
10.06.2020
Judgment delivered and interim parenting orders made. Reasons for judgment note in respect of the C Street, Suburb D property:
[125]. … the parties both make an application that the dwelling should be sold at an interim stage of the proceedings, if and when such a sale might be affected is not known…
12.06.2020
First respondent files a Notice of Appeal in respect of interim parenting orders made on 10 June 2020
15.06.2020
First respondent files an Application in a Case for a stay of the interim parenting orders
17.06.2020
First respondent files an Application in an Appeal seeking to have the appeal expedited
26.06.2020
Justice Aldridge dismisses first respondent’s application for expedition
06.07.2020
C Street, Suburb D property sold by first respondent. Disclosure of sale not made by first respondent until 13 July 2020
09.07.2020
Applicant learns through discussions with real estate agent acting on the sale that the C Street, Suburb D property has been sold. Email from applicant’s solicitor to first respondent’s solicitor dated same day reads:
I am instructed that the property at C Street, Suburb D is currently under contract. The DD Real Estate Website confirms the same. I advise there has been no discussion and or disclosure with respect to the sale price nor have the orders been made with respect to the sale of the property.
I await your urgent instructions.
13.07.2020
First respondent’s solicitors respond to applicant’s solicitor’s email advising that the C Street, Suburb D property was sold on 6 July 2020.
21.07.2020
Expert Report of Dr H released to the parties
27.07.2020
Applicant files Response to Application in a Case filed 15 June 2020, seeking that the application for a stay be dismissed
28.07.2020
First respondent files an Application in a Case for the appointment of Mr EE as a single expert, in respect of particular text messages, being an important aspect of the parenting proceedings.
29.07.2020
Court makes orders for preparation of matter for trial, the listing of 28 August 2020 in respect of the Application in a Case filed on 28 July 2020 is vacated. Interim applications for sale of C Street, Suburb D property and distribution of proceeds of sale remain outstanding and are not pressed.
Application for a stay of the parenting orders is withdrawn.
05.08.2020
Conciliation Conference before Registrar, matter “not able to be progressed” due to appeal in relation to interim children’s issues.
07.08.2020
First respondent discontinues appeal.
10.08.2020
Orders made by consent in chambers for the preparation of an expert’s report of Mr EE and that the costs of Application in a Case filed 28 July 2020 be reserved. The costs of the report was to be met by the first respondent at first instance, with the Court to determine at trial who should meet the costs of the report.
24.08.2020
Applicant’s solicitor emails first respondent’s solicitor as follows:
… We note the property is due to settle on 31 August 2020. Can you please confirm that the proposed orders previously provided with respect to an interim property distribution are still being proposed by your client and confirm that the balance of the proceeds will be placed in a controlled monies account upon settlement.
No response was received by the applicant’s solicitor.
25.08.2020
Applicant’s solicitor again emails the first respondent’s solicitor as follows:
… We further request your client’s instructions in relation to the previous proposed interim orders with respect to an interim distribution and confirmation the balance of the proceeds of sale will be placed in a controlled monies account. In the event that there is no agreement about interim distribution, we confirm the whole balance of proceeds of sale will need to be placed into a trust account.
No response was received by the applicant’s solicitor.
31.08.2020
At 7.48am, the applicant’s solicitor again emails first respondent’s solicitor as follows:
I confirm settlement of the C Street, Suburb D property is due to occur today and there has been no response to my correspondence with respect to the proceeds of sale.
I await your urgent response.
No response is received by the applicant’s solicitor.
Settlement of C Street, Suburb D property occurs. First respondent receives $138,054.62 into his FF Bank Account ending in ...4 from proceeds of sale of C Street, Suburb D property, being first part payment. Disclosure of these funds being received by the first respondent not made until 9 September 2020.
01.09.2020
First respondent receives $63,860.70 into his FF Bank account ending in ...4 from proceeds of sale of C Street, Suburb D property, being the second and final part payment. Disclosure of these funds being received by the first respondent not made until 9 September 2020.
02.09.2020
At 5.14pm the applicant’s solicitor emails first respondent’s solicitor seeking disclosure in relation to the sale of the C Street, Suburb D property. The first respondent is put on notice that in the event no response is received by 4pm on 3 September 2020, the applicant intended to file an Application in a Case.
On the same day, the first respondent makes the following withdrawals from his FF Bank account ending in ...4 into which he had transferred $201,915.32 being the total proceeds of sale:
· $5,504.00 Go To Court Lawyers
· Origin Energy totalling $1,044.33
· $50,000 to “Ms GG” being payment to Mr CC Padanowski as clarified on 9 September 2020
· $20,000 “Money owing to Mr BB Padanowski For Mr BB Padanowski” which is reversed the same day and made again the following date, see below
Disclosure to the applicant of these payments is not made by the first respondent until 9 September 2020.
03.09.2020
At 3.44pm the first respondent’s solicitor emails the applicant’s solicitor as follows:
We anticipate being in a position to respond to your email below this afternoon but it may not be before 4pm.
The first respondent does not provide any disclosure as foreshadowed.
On the same day the first respondent makes a further withdrawal from his FF Bank account ending in ...4 being a payment of $20,000 with reference “Loan Payment to Mr BB Padanowski”. This is a payment to the first respondent’s brother Mr BB Padanowski (which appears to have automatically been reversed the previous day).
Disclosure to the applicant of this payment is not made by the first respondent until 9 September 2020.
04.09.2020
Applicant files Further Amended Initiating Application seeking only final parenting and property orders. The final order which was included in the Amended Initiating Application filed 28 May 2020 in respect of the balance of the sale proceeds of the C Street, Suburb D property was removed and no longer sought.
At 4.30pm the applicant’s solicitors emails the first respondent’s solicitor as follows:
… you indicated you would be in a position to provide your client’s instructions in relation to the settlement of the C Street, Suburb D property. It is unclear why this information has not been forthcoming.
I put you on notice, that I am instructed to file an application in a case and seek costs against your client.
07.09.2020
First respondent makes a further withdrawal from his FF Bank account ending in ...4 being a payment of $7,000 with reference being “Court and Bill to Crimi Go To C…” which was a payment to the first respondent’s solicitors who acted for him in relation to related criminal law proceedings.
Disclosure to the applicant of this payment is not made by the first respondent until 9 September 2020.
08.09.2020
First respondent makes a further withdrawal from his FF Bank account ending in ...4 being a payment of $163.99 to Origin Energy. Disclosure to the applicant of this payment is not made by the first respondent until 9 September 2020.
09.09.2020
The first respondent makes the following further withdrawals from his FF Bank account ending in ...4:
· At 10.14am “Barrister Payment Stefan” in the amount of $2,400
· At 10.19am “Barrister Fees David Dur” in the amount of $14,740
· At 10.47am “Barrister Robyn Druitt” in the amount of $358.77
First respondent’s solicitor’s letter (which is emailed at 1.47pm) to the applicant’s solicitor reads:
… We advise that the sale of the C Street, Suburb D property completed on 31 August 2020…
As you will see from the enclosed documents our client received the sum of $138,054.62 and $63,860.70 into this personal bank account. Our client then transferred the sum of $201,915.32 into his FF Bank ...4 account.
… Our client has applied the proceeds of sale as follows:
1. In payment of the outstanding accounts to Origin Energy (as referenced above).
2. In payment of $50,000 to his parents in repayment of the loan from them.
3. In payment of $20,000 to his brother in payment of the loan from him
4. In payment of $5,504 to his lawyers representing him in the criminal proceedings.
5. In payment of $7,000 to his lawyers representing him in the criminal proceedings.
6. In payment of $358.77 for outstanding fees to Robyn Druitt.
7. In payment of $2,400 for outstanding fees to Stefan Schonell.
8. In payment off $14,740 for outstanding fees to David Dura.
Our client intends to make the following further payments:
1. $20,000 to be paid to your client as an interim property payment noting that our client will contend that this payment is an advance to your client and forms part of her overall entitlement.
2. The balance of approximately $80,704.23 (after payment of the above amount to your client) will be used by our client to meet his obligations in respect of his legal fees with this firm and the payment to KPMG for the mobile phone expert report.
Please let us know your client’s bank account details for the payment of the sum of $20,000 to her.
…As your client is aware, our client has borrowed funds from his parents and brother to meet the costs of part of his legal fees, the costs of the Family Report and whilst not yet billed, the costs of the single expert associated with the mobile phones. Our client has legal fees to meet in respect of these proceedings and the Local Court proceedings...
We note your client is in recept of legal aid and has not incurred any legal fees to date and does not appear that she will incur any legal fees in the future.
The funds to be received by your client and by our client will be deemed a partial property payment and will be included in the balance sheet.
There is equity in the Suburb Q property of approximately $140,000. The equity in the Suburb Q property together with the partial payment to your client are more than sufficient to meet your client’s claim...
In response, the applicant’s solicitors wrote (in an email sent at 4.23pm):
... Your client had not (sic) right to disburse the balance of the proceeds of sale without the consent of our client. We confirm there had previously been an agreement in principal for each party to receive an interim property distribution of $20,000.00 and the balance to be held in trust. We note we wrote to you prior to settlement on 31 August 2020 being 24, 25 and 31 August 2020. You indicated on 3 September 2020 that you would be in a position to provide a response that afternoon but no response was forthcoming. We again raised it with you on 4 September 2020 which was again left unanswered.
Regardless of what you or your client considers our client is likely to receive on a final basis with respect to any settlement, it was not up to your client to disburse the proceeds of settlement particularly when he had an application in a case before the Court and there are ongoing proceedings on foot. Your client’s conduct in this regard is appalling. Your client has diminished the pool by expending funds on legal fees our client says he should be liable for from his share not joint funds. On this basis, the net pool is greater therefore, even on your client’s case our client would be entitled to receive more than suggested by your client.
Later and on the same day, the first respondent at 5.02pm withdrew $65,704.32 from his account, via the internet, with the reference on the payment being “Barry Nilsson Lawyers Le”. Disclosure to the applicant of this payment is not made by the first respondent until 18 September 2020.
10.09.2020
Applicant files an Application in a Case seeking urgent freezing orders in respect of the balance of proceeds of sale of the C Street, Suburb D property (namely $100,704.23).
16.09.2020
First respondent files a Further Amended Response to Initiating Application
18.09.2020
First Return date of the applicant’s Application in a Case filed 10 September 2020, which is listed on an urgent basis.
The first respondent makes known to the Court and the applicant for the first time, through his Counsel, that the first respondent has disbursed a further $65,704.23 of the proceeds of sale of the C Street, Suburb D property by way of payment of legal fees to Barry.Nilsson and that only $35,000 of the proceeds of sale remains.
[1] Respondent’s solicitor’s letter dated 28 April 2020 refers to “our letter of even date and our client’s Application in a Case seeking orders for the sale of the C Street, Suburb D property.”
It is trite to say that the applicant must prove her case and that she bears the burden of proving it on the balance of probabilities. In interlocutory proceedings, the hearsay rule does not apply to evidence if the party who adduces it also adduces evidence of its source.[2] There is limited evidence as to what occurred in respect of the disbursement of the funds from the sale of the C Street, Suburb D property before the Court, such evidence being evidence in the applicant’s case and being for the most part, hearsay.
[2] Evidence Act 1995 (Cth) s.75.
“The evidence against a man may be greatly strengthened by his failure to give an explanation, or by the inadequacy of the explanation which he does give…”[3]
[3] See D Byrne and J Heydon, Cross on Evidence (Butterworths, 3rd ed, 1986), [1.41].
The first respondent has chosen not to file any evidence in respect of the present application, nor has he chosen to make any submissions. There are matters relevant to the present applications which are squarely within the first respondent’s knowledge which he has chosen not to put before the Court.
The first respondent provides no evidence whatsoever to explain:
a)Whether or not the first respondent was aware that his Application in a Case filed 9 April 2020, was outstanding as at the time of the listing of sale of the C Street, Suburb D property, and if he was so aware why he deemed it appropriate to deal with the proceeds of sale without Court order and/or the applicant’s consent or knowledge;
b)Whether the first respondent was aware that the applicant’s Response to his Application in a Case filed 19 May 2020, was outstanding at the time of the listing of sale of the C Street, Suburb D property, and if he was so aware why he deemed it appropriate to deal with the proceeds of sale without Court order and/or the applicant’s consent or knowledge;
c)Whether the first respondent says the applicant consented to the sale of the C Street, Suburb D property before the property was listed for sale;
d)What communications, if any, were had with the applicant and/or her solicitor, about such sale;
e)On what date the C Street, Suburb D property was listed for sale, who decided on the listing price and what if any consultations there were with the applicant and/or her solicitor, about such listing price;
f)What the first respondent’s intention was in respect of the sale proceeds and what was communicated to the applicant and/or her solicitor about such intention;
g)Whether the applicant had consented to the distribution of the sale proceeds in any way;
h)How the proceeds of sale were distributed, in particular, when was it that the first respondent decided that he would make the payments referred to in his solicitor’s letter of 9 September 2020;
i)Why the first respondent considered it was appropriate to disburse the funds from the sale of the C Street, Suburb D property in the manner he did;
j)The retainer with his solicitor;
k)Any invoices issues to the first respondent by his solicitor (including disbursements for Counsel’s fees) and any demands for payment;
l)How the first respondent came to make the various payments via electronic transfer and how and by whom the relevant details were provided to him so that those payments could be made; and
m)The circumstances of the alleged loans to the first respondent’s father and brother and any evidence of fact to support the assertion that there was a “debt” owed.
The second respondent has put on a very short affidavit which is relied upon. It does little to illuminate relevant matters.
In respect of the second respondent, his evidence does not explain:
a)Whether the second and/or third respondents issued any invoices to the first respondent, and if so the details of those invoices including disbursements;
b)Whether the second and/or third respondents made any demands for payment to be deducted from the proceeds of sale of the C Street, Suburb D property;
c)At whose direction the first respondent transferred moneys into the account presumably of the second respondent;
d)At whose direction, counsel’s fees were paid directly to counsel by the first respondent in circumstances where it was the second and/or third respondent who briefed counsel and who presumably had the professional duty to meet those fees; and
e)The lack of response to the applicant’s solicitor’s enquires between 9 July 2020 and 3 September 2020.
The fourth and fifth respondents to the Application in a Case have chosen not to put any evidence before the Court in respect of the present application. Only brief submissions were made, such submissions having no evidentiary basis whatsoever.
In respect of the fourth respondent he does not rely on any evidence to explain:
a)The circumstances of the alleged loans made by him to the first respondent, the terms of such alleged loan(s) and any evidence of fact to support the assertion that there was a debt owed.
In respect of the fifth respondent he does not rely on any evidence to explain:
a)The circumstances of the alleged loans made by him to the first respondent, the terms of such alleged loan(s) and any evidence of fact to support the assertion that there was a debt owed.
In the circumstances of this case the Court draws a Jones v Dunkel[4] inference in respect of evidence in the respondents’ cases.
[4] [1959] HCA 8
Should the solicitor be restrained from further acting in the proceedings?
The Court has implied or incidental power to restrain a solicitor from acting for a party in proceedings before it where the interests of justice so require.[5]
[5] See for example the discussion in Sheehan & Sheehan [2019] FCCA 1085
Relevantly, the test to be applied, in determining an application to restrain a solicitor from continuing to act in proceedings, is whether a fair minded, reasonably informed member of the public would conclude that the proper administration of justice requires that the legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and due administration of justice, including the appearance of justice.[6]
[6] Naczek & Dowler [2011] FACAFC 179 (“Naczek”); Kallinicos & Anor v Hunt & Ors;[2005] NSWSC 1181; (2005) 64 NSWLR 561 per Brereton J at [76] (“Kallinicos”)
The first respondent received $201,915.32 from the sale of the C Street, Suburb D property on or about 31 August 2020 and 1 September 2020. As at 18 September 2020, the first respondent had disbursed without the applicant’s consent or knowledge $166,915.32, which is approximately 83% of those funds. This was done in circumstances where:
a)There were outstanding interim applications by both the applicant and the first respondent, inter alia, as to how the proceeds of sale of the C Street, Suburb D property were to be disbursed pending the final hearing of the matter;
b)The first respondent must have known, or is taken to have known as a result of correspondence received by his solicitor, that the applicant did not agree to him disbursing the proceeds of sale except with her knowledge and consent, and foreshadowing an application to stop him from disbursing the funds. Notwithstanding this, the first respondent disbursed all except $35,000 from the net proceeds of sale, including to his lawyers and family members;
c)The second and third respondent were, at all relevant times, the solicitors on record for the first respondent and acted for him in respect of the Application in a Case filed 9 April 2020, and the proceedings at large; and
d)The second and third respondents must have, as a result of being the first respondent’s solicitors, known at all relevant times of the correspondence received by them from the applicant’s solicitors in respect of requests for disclosure of the details of the sale of the C Street, Suburb D property and the applicant’s lack of consent to the first respondent disbursing the funds except with her knowledge and consent.
The third respondent, who is a principal of the second respondent, says:
a)That he read the content of the applicant’s solicitor’s letter dated 9 September 2020 that evening; and
b)That the first respondent paid the sum of $65,704.23 to the second respondent on 9 September 2020, with such funds being receipted by the accounts department and applied towards outstanding invoice on 10 September 2020. Therefore this was done by the second respondent with the second and third respondent’s knowledge of the applicant’s opposition as outlined in her solicitor’s letter of 9 September 2020.
There is a strong possibility that the third respondent may be a witness in the substantive proceedings. However, the mere circumstance that a solicitor will be a material witness, even on a controversial matter, does not of itself justify restraining a solicitor from continuing to act.[7]
[7] Mitchell v Burrell [2008] NSWSC 772 per Brereton J at [20] (“Mitchell”)
However, “…the line is crossed only when the solicitor has a personal stake in the outcome of the proceedings or in their conduct, beyond the recovery of proper fees for acting, albeit that the relevant stake may not necessarily be financial, but involves the personal or reputational interest of the solicitor, as will be the case if his or her conduct and integrity come under attack and review in the proceedings. The presence of such circumstances will be a strong indication that the interests of justice – which in this field involve clients being represented by independent and objective lawyers unfettered by concerns about their own interests – require the lawyer to be restrained from continuing to act.”[8] Circumstances where a solicitor may be called on to defend their own actions or advice are cases where it is inappropriate that they continue to act.[9]
[8] Mitchell [2008] NSWSC 772 per Brereton J at [20]
[9] Mitchell [2008] NSWSC 772 per Brereton J at [20] referring to Kooky Garments Ltd v Charlton [1994] NSLR 587
The second and third respondents oppose the application that they be restrained from further acting for the first respondent. The Court has had regard to the submissions of learned senior counsel in this regard.
These proceedings are not a matter where the cause of the dissipation of the proceeds of sale occurred due to the first respondent failing to disclose and taking those concerned with the proceedings by surprise. It occurred in the face of a live dispute before the Court, instigated by the first respondent, where the second and/or third respondents stood as beneficiaries.
The dissipation of the funds will no doubt be a live issue at the final hearing. In those circumstances, it might be expected that there will be serious allegations made against the third respondent, and by extension the second respondent, in respect of the third respondent’s role in the transactions and subsequent disbursing of the funds from the sale of the property. Already, those matters are called into question.
What tips the balance in favour of the applicant is the fact that the second respondent and/or the third respondent accepted the payment of moneys from the first respondent after receiving notice of the applicant’s opposition to those funds being disbursed in the manner foreshadowed by the first respondent. While the duty of a legal practitioner is not to his client’s opponent[10], the paramount duty of all legal practitioners is to the proper administration of justice.[11]
[10] Holborow v MacDonald Rudder [2002] WASC 265 at [30] referred to in Naczek at [68].
[11] Rule 3 of the Legal Profession (Solicitors) Conduct Rules 2015
Both the law and the public expect lawyers to exhibit the basic ethical attributes of unselfishness and honesty.[12] A “... profession’s most valuable asset is its collective reputation and the confidence that it inspires.”[13] As noted by the learned author Dal Pont “[i]n an area as fundamental to society as the proper administration of justice, a lack of public confidence is a real concern.”[14]
[12]Dal Pont, Lawyers Professional Responsibility (Thomson Reuters, 5th ed, 2013), [1.75]
[13] Ibid at [1.85] quoting Bolton v Law Society [1994] 1 WLR 512 at 519 per Sir Thomas Bingham MR
[14] Ibid at [1.85]
The jurisdiction to restrain a solicitor from continuing to act is regarded as exceptional and is to be exercised with caution.[15] Due weight must be given to the public interest in a litigant not being deprived of a lawyer of his choice without due cause.[16]
[15] Kallinicos [2005] NSWSC 1181 at [76]
[16] Kallinicos [2005] NSWSC 1181 at [76]
The timing of the application may be relevant, in that the cost, inconvenience or impracticality of requiring lawyers to cease to act may provide a reason for refusing to grant relief.[17] There is no evidence in the respondents’ cases as to any of these matters.
[17] Naczek [2011] FACAFC 179 at [65]
The applicant has brought the present application with haste and it was heard at the first available opportunity. The matter is presently listed for final hearing in respect of both property and parenting on 10, 11, 12 and 13 May 2021 (as a reserve matter). The parties have filed their trial affidavits and all expert evidence has been prepared.
In the Court’s experience a period of almost 5 months is likely to be sufficient for a new solicitor to familiarise themselves with the matter and represent the first respondent’s interest at the hearing.
Other injunctive relief sought and the joinder of parties
The applicant seeks a freezing order in respect of funds paid by the first respondent to his lawyers, his brother and his father and thereafter an order that such funds be placed into a controlled moneys account pending further order.
The power under s.114 of the Family Law Act 1975 (Cth) (“the Act”), encompasses the power to issue an injunction directly against a third party.[18] The applicant applies for an order, in any event, that the parties against whom she seeks injunctive relief also be joined to the proceedings for the purposes of this application. All of the third parties have been served and have appeared before the Court, in response to the application.
[18] See for example Harris & Harris; Re Banaco Pty Ltd (No. 2) (1981) FLC 91-100
One of the primary purposes of a freezing order is to aid in the administration of justice.[19]
[19] See generally Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia [1998] HCA 30; (1998) 195 CLR 1; Cardile v LE Builders Pty Ltd [199] HCA 18; (1999) 198 CLR 380
The relevant principles in respect such injunctions may be summarised as follows[20]:
[20] Meeks & Meeks & Anor [2019] FCCA 638 per Judge Brown at [40]
a)It is a drastic remedy, which should not be granted lightly;
b)This is because it imposes a severe restriction upon a party’s entitlement to deal with his/her assets, in circumstances where the party seeking to impose the restriction has not as yet been able irrefutably to establish to the court any such entitlement to do so in concluded proceedings;
c)The purpose of such orders is not to provide de facto security in advance of judgment nor to improve the position of a plaintiff in the event of the insolvency of a defendant;
d)In this context, it is likely to be difficult to quantify, with precision, the amount of damages likely to be granted on judgment and as a consequence of which it is apprehended assets may be disposed.
e)This necessitates great care being taken in the framing of such orders, particularly the extent of any freezing order, as an order lightly or wrongly granted may have a capacity to impair or restrict commerce;
f)In this context, the court should consider matters relating to the practicality of the order concerned;
g)It is a discretionary remedy. As such, any Applicant for such relief must proceed diligently and expeditiously;
h)An Applicant must show a reasonably arguable case on both legal and factual matters.
No undertaking as to damages is provided by the applicant. In the circumstances of this case, no undertaking as to damages should be required.[21]
[21]Blue Seas Investments Pty Ltd v Mitchell & Ors [1999] FamCA 745; (1999) FLC 92 -856;
see also Martin & Martin & Ors [2013] FamCA 222
In proceedings for interlocutory injunctive relief the Court must be satisfied that there is a serious issue to be tried and the balance of convenience supports the making of the order.[22] In considering whether there is a serious issue the Court takes into account all the evidence.[23]
[22] Blue Seas [1999] FamCA 745 at [56]
[23]Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729 at 734
The applicant as a final order, presently seeks that she receive 40% of the net proceeds of sale of the Suburb Q property, together with a superannuation splitting order.
The argument that the applicant’s claim can be satisfied in its entirety without the need for any asset preservation order is, prima facie, a strong one. However, proceedings for property adjustment orders are not subject to strict pleadings, and more often than not (as has already happened here numerous times) the parties may seek to amend their respective applications as the proceedings progress and as information comes to light. The applicant has already foreshadowed a further amended application for final orders, same to include an order pursuant to s.106B of the Act, albeit such proposed further draft application is not annexed to her affidavit.
Except in so far as encompassed in the orders made on 18 September 2020 and the present application, the Court has not yet heard any aspect of the property proceedings. This is important because as things stand there is no expert evidence before the Court as to the value of the Suburb Q property nor have any such findings been made to date. In circumstances where a party has not complied with their obligations for full and frank disclosure, the Court should not be unduly cautious about making findings in favour of the innocent party.
Furthermore, the Court is not bound by either parties’ competing applications for final orders. The discretion pursuant to s.79 of the Act is a wide one. Any order the Court ultimately makes, must be just and equitable.
While the orders sought by the applicant might affect the interests of the second, third, fourth and fifth respondents, at present there is no evidence as to how they may be prejudiced if the asset preservation order is made. The relief sought is interlocutory in any event.
In circumstances where the first respondent has already disposed of what appears to be a significant portion of the non-superannuation pool of assets, and where he has done so without the consent or knowledge of the applicant, in the face of outstanding interim applications, the Court has little difficulty in exercising its discretion in a manner which will ensure that the applicant will not ultimately be denied the fruits of any litigation.
Costs
As part of her application, the applicant seeks certain costs orders against the first respondent, the second respondent and the third respondent. The costs argument will be stood over until after the conclusion of the substantive proceedings to be heard and determined then.
I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of Judge Obradovic
Associate:
Date: 23 December 2020
0
9
3