Petrone & Petrone
[2021] FedCFamC2F 332
•2 November 2021
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Petrone & Petrone [2021] FedCFamC2F 332
File number(s): NCC 2575 of 2017 Judgment of: JUDGE BETTS Date of judgment: 2 November 2021 Catchwords: FAMILY LAW – Property settlement – final hearing – husband seeks adjournment as his case is not ready for trial due to deficiency in his pleaded relief and his failure to join necessary parties (being the Trustees of a deceased estate in respect of which he seeks section 106B relief concerning the assets of the estate) – wife opposes the adjournment – adjournment granted – court to consider wife’s personal costs application against husband’s legal representatives on next occasion. Legislation: Family Law Act 1975, Pt VIII Cases cited: AON Risk Services Australia Limited v Australian National University [2009] HCA 27
Petrone & Petrone [2019] FCCA 2622
Division: Division 2 Family Law Number of paragraphs: 43 Date of last submission/s: 2 November 2021 Date of hearing: 2 November 2021 Place: Newcastle Counsel for the First Applicant: Ms Gillies SC
Mr GrahamSolicitor for the First Applicant: Gus Farland Pty Ltd Counsel for the Second Respondent: Mr Bateman Solicitors for the Respondent: Paton Hooke Lawyers ORDERS
NCC 2575 of 2017 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS PETRONE
Applicant
AND: MR PETRONE
Respondent
ORDER MADE BY:
JUDGE BETTS
DATE OF ORDER:
2 NOVEMBER 2021
THE COURT ORDERS THAT:
1.The trial dates of 2 and 3 November 2021 be vacated.
2.The final hearing of this proceeding is listed for 3 days with priority commencing at 10.00am on 28 February 2022.
3.Mr D and Ms C, the joint Executors and Trustees of the Estate of the Late Ms E be joined as the second respondents to these proceedings.
MATERIAL TO BE FILED & FILING DATES:
4.The Second Respondents are to file and serve a Notice of Address for Service within 7 days.
5.The First Respondent Husband is to file and serve a Second Further Amended Response which is to annex an amended Statement of Claim and any consolidated Affidavit of the Husband and any other witness he proposes to rely upon by close of registry filing on 7 December 2021.
6.The Applicant Wife is to file and serve any Amended Initiating Application, Consolidated Affidavit of herself annexing her defence or amended defence, and Consolidated Affidavit of any witness she relies upon by close of registry filing on 19 January 2022.
7.The Second Respondents are to file and serve a Response, any consolidated Affidavit of themselves annexing their defence, and any consolidated Affidavit of any witness they rely upon by close of registry filing on 19 January 2022.
SUBPOENAS, INSPECTION & PREPARATION OF TENDER BUNDLES
8.Any further subpoenae are to issue not later than 25 November 2021 and to be inspected no later than 29 January 2022.
9.Any addendum to the tender bundle be filed by close of registry filing on 18 February 2022.
CASE OUTLINE:
10.By close of registry filing on 25 February 2022 each party is to file and serve a Case Outline which:
(a)lists the documents relied upon by that party;
(b)contains a relevant chronology;
(c)in the case of the Husband and the Wife, annexes that party’s proposed Balance Sheet;
(d)in the case of the Husband and the Wife, contains a brief summary of the relevant evidence and contentions with respect to:
(i)whether it is just and equitable to adjust the respective property interests of the parties;
(ii)any contentious items in the Balance Sheet;
(iii)that party’s contributions-based entitlement expressed in percentage terms pursuant to s.79(4) or s.90SM(4) of the Family Law Act 1975 (Cth);
(iv)that party’s proposed adjustment expressed in percentage or dollar terms pursuant to s.75(2) or s.90SF(3) of the Family Law Act 1975 (Cth).
(e)in the case of the Second Respondent, sets out a summary of argument;
(f)annexes the precise minute of Orders sought.
OBJECTIONS TO EVIDENCE:
11.Parties exchange objections to evidence no later than 16 February 2022 with such objections to be dealt with at 9.30am on 18 February 2022.
PARTIES MUST ATTEMPT TO RESOLVE DISPUTE PRIOR TO HEARING:
12.No later than seven (7) days before the final hearing, each party is to make a written proposal to the other party setting out the terms upon which that party is willing to resolve all issues in dispute. Unless otherwise agreed in writing between the parties, such written proposals are “without prejudice” and only admissible on the issue of costs.
COSTS NOTICES:
13.Pursuant to r. 19.04(2) of the Family Law Rules, by no later than seven (7) days prior to the first day of trial each party’s lawyers are to provide to their client written notice of:
(a)the client’s actual costs both paid and owing and up to and including the trial;
(b)the estimated final costs of the party up to and including trial;
(c)any expenses paid or payable to an expert witness or, if those expenses are not known, an estimate of expenses.
14.Pursuant to r. 19.04(3) on the first day of trial each party’s lawyer must give to the court a copy of the notice given to the party pursuant to sub rule (2).
COSTS HEARING
15.The Wife’s costs thrown away of and incidental to this week’s hearing on an indemnity basis are listed for hearing on 16 December 2021 at 2.15pm.
16.The Wife file and serve written submission in support of her costs application which quantifies the costs claim (to the extent that this can be done) by close of registry filing on 2 December 2021.
17.The Respondent Husband’s solicitor (Mr Paton) and Counsel (Mr Bateman) are each to file and serve submissions in reply to the Wife’s application for costs by close of registry filing on 14 December 2021 NOTING THAT the Wife seeks a personal costs order against the Husband’s solicitor and counsel pursuant to rule 12.15(1)(b), 12.15(1)(c) and 12.15(1)(d) and 12.15(2)(c) and 12.15(2)(d) of the Federal Circuit and Family Court Rules 2021.
18.Mr D’s costs application for the inspecting of subpoena are reserved until 16 December 2021.
19.Mr D is to file and serve written submission in support of his costs application which quantifies the costs claim by close of registry filing on 2 December 2021.
PAYMENT OF HEARING FEES:
20.Unless a fee waiver has been obtained:
(a)The Respondent is to pay to the Family Law Courts at Newcastle the setting down fee and the fee for day 3 of hearing if applicable, by close of registry filing on 21 February 2022.
(b)The Applicant is required to pay the daily hearing fee for the second day of hearing and the fee for day 4 of the hearing if applicable, by close of registry filing on 21 February 2022.
NOTATION:
A.Parties and legal representatives are reminded of Rule 2.01(1) of the Federal Circuit Court Rules which is expected to be strictly complied with.
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 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Petrone & Petrone has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE BETTS
These reasons for judgment were delivered orally. They have been corrected from the transcript so as to make them more readable.
These are property settlement proceedings arising out of the breakdown of the marriage between the applicant wife, Ms Petrone and the respondent husband, Mr Petrone, conducted pursuant to the provisions of Part VIII of the Family Law Act.
The proceedings have had something of an unfortunate history. They were commenced way back in 2017 and, having been set down for trial last year, the trial was then unable to proceed due to circumstances beyond anyone’s control. Instead, on 29 September 2020, the proceedings were adjourned for final hearing with priority for three days commencing this week, namely 1, 2 and 3 November 2021.
Regrettably, the trial this week has had to be adjourned for reasons that I will shortly come to.
By way of brief background, the parties were in a lengthy relationship, but it can fairly be said that the overwhelming assets in this case are assets held by the estate of the wife’s late mother, Ms E, who passed away in 2015. The Will of the late Ms E expressly vested her estate in her then solicitor, Mr D, and her dear friend, as she is described in the Will, Ms C, both of Town F.
Clause 7 of the deceased’s will provided as follows:
I DIRECT that my Trustee not administer my estate so as to see a benefit pass to any of my named beneficiaries in circumstances where such administration would put at risk a gift to the beneficiary through a property settlement pursuant to the Family Law Act, a claim from a creditor, or other obvious wastage. In these circumstances my Trustee has absolute discretion as to when and if a gift under my will should vest in any beneficiary notwithstanding any age requirement of my Will or other condition…
And the clause goes on to say other things that are not directly relevant.
I should add here that the wife in this case is the only child of the deceased; that the assets of the deceased dwarf the assets held by the parties in this case in their own names, which primarily comprise superannuation in preserved form.
The matter has already come before me previously and this was on an application to restrain Mr D from continuing to act on behalf of the wife. It was reported in Volume 60 of the Family Law Reports at page 108 as Petrone & Petrone. I do not propose to restate what I said in that decision, but it forms part of the relevant background to the case.
Subsequent to my decision at that time, which was that Mr D not be restrained from continuing to act, the husband filed a Further Amended Response on 24 May 2020. That Further Amended Response expressly struck out the husband’s previous claim for relief pursuant to section 106B of the Family Law Act, which relevantly sought to set aside clause 7 of the Will.
In this case, section 106B is potentially engaged on the evidence of the husband. Essentially, in round terms, his case is that the late Ms E held her interest in her home, which forms part of the estate, on trust for the parties pursuant to a constructive trust. There is also a claim of equitable estoppel that the husband brings and there are various other equitable claims.
But the husband’s case as pleaded in the Further Amended Response had some fatal flaws when the matter came before me for trial yesterday. In the course of discussing the section 106B aspect of the case, as well as questions concerning the parties to the proceedings, it became quite apparent that there was no pathway to the relief pleaded by the husband. In a practical sense this case is only commercially viable for the husband if he succeeds in clawing back the estate assets of the wife’s late mother - or bringing her estate into the Balance Sheet – which is vigorously opposed by the wife.
But the fundamental problem for the husband is that at no point have the Trustees of the deceased’s Will been joined as parties to the proceedings. This is despite the fact that:
(a)they have an obvious right to be heard in terms of the interpretation of the Will (specifically clause 7); and
(b)they have an obvious right to be heard in terms of the section 106B relief.
The husband’s section 106B claim forms part and parcel of his case but had apparently been inadvertently struck out in his Further Amended Response. I was advised that apparently this was due to some form of “clerical error”.
It is clear enough that the Trustees need to be parties. If the deceased was still alive and the husband was asserting the existence of a trust, she would clearly have a right to be heard, as the property would presumably still be in her name. The situation does not change with her passing away. The estate executors under her Will – the Trustees - have a right to be heard as to whether any part of that estate is subject to a constructive trust. The Will has been admitted to probate in the Supreme Court of New South Wales. They have a clear interest in upholding the Will. Indeed, they have a duty to do so.
Without having the Trustees as parties, I do not see how this trial could be conducted according to law, at least in terms of giving the husband the relief that he seeks.
This was observed both by Ms Gillies SC, who appears for the wife, and also by me yesterday. I indicated at that time that it seemed to be essential to have the Trustees as parties if the husband was going to be able to have any sort of arguable case. But it was also obvious from the submissions made by Ms Gillies SC that the wife did not want to see the matter adjourned (for that to occur) and would prefer to see the matter dealt with. The wife has had her own estate entitlements pursuant to this Will effectively on hold for quite some time, years in fact. And she had an interest in the matter proceeding to a conclusion, just as much as the husband did.
The matter was then stood down for a period of time, following which Mr Bateman tendered as exhibit 1 a document which particularised the husband’s section 106B claim (previously struck out) and which also sought, amongst other things, the joinder of the Trustees as Second Respondents.
It was indicated to me by Mr Bateman that effectively the striking out of the section 106B relief in the Further Amended Response was some sort of administrative error and effectively it was also conceded that the Trustees did need to be parties.
However, it is not conceded by the husband’s legal representatives that they ought to pay the costs of any adjournment in the event that the trial is to be adjourned (to enable this to occur).
The husband is under a legal disability. He suffered from a burst aneurysm or aneurysms in his brain, as a result of which he has memory and other difficulties and is in receipt of a Disability Support Pension. He is in something of a disadvantaged state in that sense. He has his brother act for him as Litigation Guardian.
In light of the wife’s foreshadowed costs application that may be made against the husband’s legal representatives in the event the adjournment was granted, the matter was stood down.
When the matter came back on, Mr Bateman advised that the husband had now instructed, or the Litigation Guardian had instructed, that the joinder of the Trustees was no longer being sought, nor was the section 106B application now being pressed. Effectively, the husband was retreating from the full ambit of his claim, in such circumstances where his access to relief would be limited to the identifiable matrimonial property, which is not part of the deceased’s estate, although I should mention that the husband also has a separate claim for spousal maintenance as well.
I invited Mr Bateman to outline to me the basis upon which the husband could in any way access the estate property in the event that he withdrew his 106B application and in the event that the joinder was not pressed.
Mr Bateman made various submissions to me, to the effect that there would still potentially be relief available to the husband in respect of the estate. He submitted that the formation of the trust in this case aligned with a constructive trust in that he said there was promise, reliance and damage in this case to the person acting in reliance - relevantly the husband. He submitted that the corpus of the trust was moveable, it was in the form of real estate now in the pool of an unadministered deceased estate and it was contended to me that an order could be made in respect of that corpus, transmogrified into its current form.
But with all due respect to Mr Bateman, the difficulty is as I identified earlier, that even if that was so, the Trustees of the estate have a right to be heard as to whether or not a constructive trust or other equitable relief ought to be granted by the Court. And there really is not any answer to that in my view fundamental and fatal flaw in the husband’s application.
At that time I indicated to Mr Bateman that, given the husband’s disability and given what I saw was effectively the husband pressing on with a case that was doomed to failure, that it was one of those unusual circumstances where the husband may need to obtain independent advice, ie. advice from someone other than Mr Bateman and his solicitor, Mr Paton.
I indicated this because it seemed to me that there was a potential for a conflict of interest between the husband on the one hand and his legal representatives on the other, given the potential for costs orders against the husband’s lawyers.
I should also add here that Ms Gillies SC fairly and squarely foreshadowed that if the husband proceeded to trial on this more limited basis, that she would be making submissions that that estate aspect of the case should be struck out. This was entirely appropriate with respect to Ms Gillies SC. She was demonstrating candour and fairness in her dealings with her opponent and in my view it was entirely appropriate that she put on record her intention to make such application - which frankly I think would have been unanswerable.
On that basis, the matter was stood over to today and the husband has, again through Mr Bateman, changed his position. He has renewed his application for joinder of the Trustees. He has renewed his reliance upon exhibit 1, which was tendered yesterday. Ms Gillies SC has properly and fairly conceded that it cannot be said that if the husband’s case was properly pleaded that it is “doomed to failure”.
And in those circumstances, the question before me relevantly becomes whether:
(a)I press on with the trial, forcing the husband to run a case that is clearly not ready to run in terms of the relief sought; or
(b)I adjourn the trial with obvious disadvantage to everyone involved but with the advantage that at least the case can be presented properly and in a way that squarely and fairly raises the issues for the Court’s determination.
Ms Gillies understandably relied upon the High Court’s decision in AON Risk Services Australia Limited v Australian National University [2009] HCA 27, which I do not propose to repeat at length, beyond observing that the High Court made clear that a “just” resolution to a case does also involve questions of speed and efficiency in the sense of minimum delay and expense. The High Court observed that these things are essential to a just resolution to proceedings. A party should be given a proper opportunity to plead their case, but limits may be imposed on a party’s right to re-plead their case in the event that they leave it too late or conduct their case in such an inefficient manner as to create real prejudice to the administration of justice.
The days have long gone when the parties conduct litigation and the judges adopt an entirely passive observer role. Courts are expected to, consistent with the objects and principles of their enabling Acts, administer justice in a timely and efficient manner. The Australian public demands no less, particularly in this Court where emotions sometimes get the better of people and many families wait anxiously for a day in Court relating to children.
This is not such a case, but I highlight that what has happened here, is that there was another trial which had to be adjourned because of this case. So that other family has had to take an alternative hearing date next year. These are exactly the considerations that the High Court identified in AON Risk (supra).
And it is certainly not the case that a party who wishes to amend their pleadings or their evidence or to seek joinder in this case, can expect that simply by paying a costs order that they will get the adjournment they seek. It is always a discretionary matter.
In this particular case, however, the discretion in my view favours the granting of the adjournment and the making of the orders that I’ve indicated. I say that because the husband is under a legal disability. He is at a great disadvantage in that sense. It is clear to me from the submissions made, quite appropriately by Mr Bateman, that whatever slip or error occurred cannot realistically be sheeted home to the husband. I simply do not see how that could be so. And if it is submitted or contended that the Litigation Guardian gave instructions not to join the Trustees, or not to pursue a section 106B application, then it seems to me that those instructions could never logically have been accepted by the husband’s legal representatives. Put shortly, his case for a share of the estate was doomed if he took that position.
So sitting here, I do not realistically see how the Litigation Guardian could be at fault for what has occurred here. Indeed it seems to me, from everything submitted to me, that the error (or problem) in the conduct of the case very much arises by the Litigation Guardian’s and Husband’s legal representatives.
The “price” of this trial being adjourned is almost certainly a costs order and one would think almost certainly an indemnity costs order, given the conduct of the matter.
It would be entirely unfair of me today to hear an application for indemnity costs quite properly brought by the wife against counsel and a solicitor who have not had the opportunity to provide the Court with submissions and to be heard. There may also be relevant insurance issues, as evidenced by the fact that Mr Moran now appears on behalf of Mr Paton today. It is not a case where the husband’s legal representatives are accepting or admitting a liability to pay costs. There is no concession made but I make clear that I see the making of a costs order against one or both of the legal representatives as highly likely on the next occasion.
This trial is being adjourned through no fault of the wife. If the husband is ultimately unsuccessful at his trial in terms of his claim against the estate, the fact is that the wife has limited prospects of recovering from him any costs that she may incur. In that sense, the husband does not have the financial means to be able to meet the costs order. This is another factor, combined with delay, which causes me great concern. The circumstances of the case are somewhat unusual, the husband being under a disability.
It seems to me that in the interests of justice, it is a better and more appropriate exercise of my discretion, to give the husband the adjournment he seeks on the - I would think fairly clear understanding - that I will be making a costs order on the next occasion. There is a price to an adjournment, and it seems to me that in this case, absent some most extraordinary circumstance that I cannot presently imagine, that price is going to have to be paid.
There is also a separate question that has arisen in relation to a subpoena directed to Mr D. That is a relatively small issue in the grand scheme of things but any costs application in that regard can also be dealt with on the next occasion.
For these reasons, I propose to make the orders that I have earlier identified.
I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Betts. Associate:
Dated: 5 November 2021
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