Ramsey & Ramsey
[2022] FedCFamC1F 396
•3 June 2022
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1) FIRST INSTANCE
Ramsey & Ramsey [2022] FedCFamC1F 396
File number(s): BRC 9850 of 2018 Judgment of: CAREW J Date of judgment: 3 June 2022 Catchwords: FAMILY LAW – PROPERTY – ISSUE ESTOPPEL – OPPRESSION - SHARE BUY BACK – Where an earlier judgment found oppression against the applicant – Where the applicant controls the third party company – Where the earlier judgment created an issue estoppel – Where the issue estoppel prevents the applicant from raising the option of the third party company buying out the third respondent company shareholding in the second respondent company – Where the second respondent company is ordered to buy back 49% shareholding of the third party company – Where contemporaneously with the share transfer the loan accounts for related interests of the applicant are credited with the shareholding value – Where funds held on trust by the first respondent’s lawyer be released to the second respondent company and credited against the loan accounts for the related interests of the applicant. Legislation: Corporations Act 2001 (Cth)
Family Law Act 1975 (Cth)
Federal Circuit and Family Court of Australia Act 2021 (Cth)
Federal Circuit and Family Court of Australia (Consequential Amendments and Transitional Provisions) Act 2021 (Cth)
Family Law Rules 2004 (Cth) (no longer in force)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)
Cases cited: Blair v Curran (1939) 62 CLR 464
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Costigan & Costigan and Ors (No 2) [2017] FamCA 886
C Pty Ltd and Ors & PGW as Liquidator of S Pty Ltd (in Liq) [2011] FLC 93-485
Fitzgerald v Fish sub nom PBF v TRF (FLR) (2005) 191 FLR 294
Idoport Pty Ltd v National Australia Bank Limited & Ors, Idoport Pty Ltd v Donald Robert Argus [2007] NSWSC 23
Kohan and Kohan (1993) FLC 92-340
Kuligoski v Metrobus (2004) 220 CLR 108
Lenova & Lenova (Costs) [2011] FamCAFC 141
Nada & Nettle (Costs) (2014) FLC 93-612
Nevins & Urwin [2022] FedCFamC1A 57
Parke & the Estate of the Late A Parke (2016) FLC 93-748
Penfold v Penfold (1980) 144 CLR 311
Prantage v Prantage (2013) 49 Fam LR 197
Re Wilcox, Ex parte Venture Industries Pty Ltd (1996) 72 FCR 151
Ramsey & Ramsey [2021] FamCA 405
Ramsey & Ramsey (No 2) [2021] FamCA 488
Spurling and Ors & Spurling [2019] FamCA 802
Stanford & Stanford (2012) 247 CLR 108
Stopford Malloy & Malloy(Costs) [2018] FamCAFC 6
Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507
Number of paragraphs: 143 Date of last submission/s: 20 May 2022 Date of hearing: 11 May 2022 Place: Brisbane Counsel for Applicant and Third Party: Mr Sams Solicitor for the Applicant and Third Party: John P. Bussa & Co First Respondent: Did not participate (no appearance required) Counsel for Second to Fourth Respondents: Mr Ivessa Solicitor for the Second to Fourth Respondents: Cooper Grace Ward Lawyers ORDER
BRC 9850 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR RAMSEY
Applicant
AND: MS RAMSEY
First Respondent
B PTY LTD
Second Respondent
C PTY LTD as trustee for the J FAMILY TRUST
Third RespondentMR FIELDS
Fourth RespondentD PTY LTD
Third Party
ORDER MADE BY:
CAREW J
DATE OF ORDER:
3 JUNE 2022
THE COURT ORDERS THAT:
1.By consent, D Pty Ltd is joined as a party in the proceedings.
2.The second respondent buy back D Pty Ltd's 49 per cent shareholding in the second respondent for the sum of $350,825 in the manner prescribed by paragraph (3) herein.
3.Contemporaneously with the share transfer, the loan accounts held by D Pty Ltd as trustee for the Ramsey Family Trust, Ramsey Pty Ltd as trustee for the Ramsey Family Trust and E Pty Ltd are to be credited with $350,825.
4.The applicant and second respondent sign all approvals necessary to give effect to the share transfer.
5.The applicant and second respondent sign all approvals necessary to cancel the 4 D class shares held by E Pty Ltd.
6.HH Lawyers is directed to release the $100,000 (together with any interest thereon) held in its trust account pursuant to the order made by consent by the Honourable Justice Baumann on 12 November 2021 to the second respondent.
7.Upon receipt of the $100,000 the second respondent extinguish the remaining loan accounts of D Pty Ltd as trustee for the Ramsey Family Trust, Ramsey Pty Ltd as trustee for the Ramsey Family Trust and E Pty Ltd.
8.The applicant pay the costs of the second and fourth respondent fixed in the sum of $50,000 within 60 days.
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 the pseudonym Ramsey & Ramsey has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CAREW J.
On 18 June 2021, another Justice of this Court (who has since resigned) delivered a judgment in relation to what was described as a ‘commercial dispute’ between Mr Ramsey (the applicant) and Ms Ramsey (the first respondent)[1] and other parties (“the respondents”) who were involved in a business together.
[1] To assist in the anonymization of these reasons I will refer to the applicant and the first respondent as the husband and the wife.
The husband and the wife were also in dispute about how their property should be divided consequent upon the breakdown of their marriage.
It was found by the trial judge that the respondents had engaged in oppressive conduct within the meaning of s 232 of the Corporations Act 2001 (Cth) (“the Corporations Act”) by issuing further shares in a company, the second respondent (“B Pty Ltd”), thereby converting the shareholding held by interests related to the husband and wife from a majority shareholding to a minority one[2] and further (although disputed by the husband), that the appropriate remedy under s 233 of the Corporations Act would be for the respondents to buy out the shareholding of the husband and wife (held through related interests) without any discount for their minority shareholding or for B Pty Ltd to be wound up.[3]
[2] Ramsey & Ramsey [2021] FamCA 405 at [242].
[3] Ibid at [245] – [251], [253], [254] and Ramsey & Ramsey (No. 2) [2021] FamCA 488 at [3].
Subsequent to the disposition of the commercial dispute, the husband and wife settled their property dispute as reflected in an order made by consent on 18 January 2022. As part of that settlement, the husband acquired the wife’s interests in certain entities and the wife relinquished any interest in any relief the husband might subsequently obtain as a consequence of the finding of oppression, and also to a sum of $100,000 which was being held on trust for the husband and wife and the respondents. The wife and the respondents also settled their dispute as reflected in an order made on 15 February 2022 in which the wife resigned as a director and secretary of B Pty Ltd and relinquished any interest in the $100,000.
Although the extent of the remaining dispute is contested by the husband (as discussed and determined in detail below), the making of a final order to reflect the findings made by the trial judge necessarily involves off-setting the loans owed by the husband’s related interests to B Pty Ltd from the value of the 49 per cent shareholding. Accordingly, I propose to adopt the minute of order sought by the respondents which will result in no money changing hands, as the loans owed by interests related to the husband exceed the value of the 49 per cent shareholding and the respondents have agreed to extinguish the balance of loans owing.
Before setting out my reasons, it will be helpful to provide some background (as found by the trial judge)[4] that will hopefully assist in following the reasons.
[4] Ramsey & Ramsey [2021] FamCA 405.
I should also record that neither party took issue with this matter being determined by a judge other than the trial judge, in circumstances where that judge has since resigned. While I initially had some concerns that the proceedings might properly be considered part-heard (and therefore require a re-hearing, save perhaps with the consent of the parties to an alternative course), or that I lacked the legal authority to determine the remaining issues in the absence of any provision in the relevant legislation permitting me to complete the proceedings (unlike judges hearing an appeal),[5] I have come to the conclusion that the commercial dispute is not part-heard and that I do have the legal authority to decide the remaining issues. This is because the cause of action i.e. the commercial dispute, was determined by the trial judge. I so conclude, notwithstanding the fact that an order is yet to issue giving effect to the judgment and notwithstanding the final form of relief is yet to be determined. It is not at all unusual for parties to be given the opportunity to make submissions about the form of order to be made, to give effect to the findings made by the Court. An appeal lies from a ‘judgment’[6] not just an order,[7] which fortifies my view that the judgment was a final decision.
[5] See s 17(2) Federal Circuit and Family Court of Australia Act 2021 (Cth) (“FCFCOA Act”).
[6] See s 26(1)(b) FCFCOA Act.
[7] See s 7 FCFCOA Act.
BACKGROUND
B Pty Ltd was originally a business through which the husband and wife, via a related entity, subcontracted for work.
In 2008, the husband and wife established D Pty Ltd (the third party added as a party to the proceedings by consent on 11 May 2022). D Pty Ltd is the corporate trustee of the Ramsey Family Trust. Up until the settlement of the s 79 Family Law Act 1975 (Cth) (“FLA”) property dispute i.e. the property dispute between the husband and the wife, the wife was the sole director of D Pty Ltd and the husband and wife were equal shareholders. Pursuant to the settlement reached between the husband and wife, the husband acquired the wife’s shareholding and he is the sole director.
In 2013, the husband and wife agreed to purchase the B Pty Ltd business from its previous owner for $800,000. When the husband and wife were unable to raise sufficient funds to do so, they obtained the agreement of Mr Fields (the fourth respondent) and Ms Fields to invest $400,000 (plus working capital of $50,000) in what became the joint venture between the Fields (Mr and Ms Field) and the Ramseys (the husband and wife). The husband and wife were to invest $400,000 (plus working capital of $100,000) and the assets of a related entity into the joint venture.
Subsequent accountancy advice resulted in the establishment of a structure which saw the Fields’ one third interest in B Pty Ltd held by a related entity, C Pty Ltd (the third respondent) as trustee for the J Family Trust and the Ramseys’ two thirds interest held by a related entity, D Pty Ltd (the third party) as trustee for the Ramsey Family Trust.
Unbeknown to the Fields, the Ramseys used the $450,000 invested by them for their own purposes and had no funds of their own to invest. By the time this came to light, the Fields were already committed to the joint venture so they agreed to the Ramseys (via B Pty Ltd) borrowing $560,000 from the National Australia Bank (“NAB”) which the Ramseys were to repay. The Fields provided guarantees for the loan. It subsequently transpired that B Pty Ltd, rather than the Ramseys, met the repayments to NAB including interest.
The Fields and the Ramseys were each supposed to receive $200,000 in remuneration. The Ramseys received substantially more than that.
The Fields and the Ramseys (via their respective entities) continued the joint operation of the business until 2018, when the husband ceased his involvement. With the wife’s assistance (the husband and wife having separated in 2016) the husband was removed as a director of B Pty Ltd in mid-2018.
Prior to 2 November 2018 the shareholding in B Pty Ltd was comprised as follows:
(a)D Pty Ltd as trustee for the Ramsey Family Trust held 67 ordinary shares;
(b)C Pty Ltd as trustee for the J Family Trust held 33 ordinary shares; and
(c)E Pty Ltd held 4 D class shares with no voting rights.
E Pty Ltd was a company of which the wife was the sole director and the husband and wife held an equal shareholding. Pursuant to the settlement reached between the husband and wife, the husband acquired the wife’s shareholding, and he is the sole director.
It is agreed that the E Pty Ltd shareholding should remain with the controller of B Pty Ltd.
On 2 November 2018, 37 additional shares were issued to C Pty Ltd for a capital sum that exceeded the likely market value of the shares at the time, and in calculating the sum payable by C Pty Ltd to B Pty Ltd, the loan accounts balances for C Pty Ltd were taken into account.
The current shareholding in B Pty Ltd is comprised as follows:
(a)D Pty Ltd as trustee for the Ramsey Family Trust holds 67 ordinary shares;
(b)C Pty Ltd as trustee for the J Family Trust holds 69 ordinary shares; and
(c)E Pty Ltd holds 4 D class shares with no voting rights.
The commercial dispute was determined as a discrete issue over four days concluding on 25 August 2020.
Upon delivery of his judgment on 18 June 2021, the trial judge made the following order:
1.This proceeding be listed for a directions hearing at 9:30 am on 23 June 2021 for the purpose of making directions concerning further hearing from the parties about the terms of orders to be made to give effect to the findings recorded in Reasons for Judgment delivered on 18 June 2021.
There were a number of further court appearances relating to disputes about disclosure. On 7 July 2021, the trial judge appointed FF Valuers as a single expert to prepare an updated valuation (at the insistence of the husband and wife) of a block of land owned by B Pty Ltd and Mr DD was appointed as a single expert to thereafter prepare an updated valuation (at the insistence of the husband and wife) of B Pty Ltd, and the 49 per cent interest in B Pty Ltd held by D Pty Ltd on the basis that there was to be no discount for the minority interest.
During the course of the hearing on 7 July 2021, then counsel for the husband conceded that any dispute about the accuracy of the loan accounts could only arise for the period subsequent to the date considered in the judgment delivered on 18 June 2021. The following exchange took place between the trial judge and the husband’s then counsel:
HIS HONOUR: Right. Okay. So sorry, I interrupted you. So the husband joins the wife in seeking that I make orders, firstly, for [JJ Valuers] to give an updated valuation. In terms of those orders, though, I mean, it’s sort of being asked for that [JJ Valuers] do some kind of audited loan accounts, isn’t it?
[MR KK]: Only- well, it could only apply – given your Honour’s reasons, it could only be- if it’s not evident on the fact of the orders, if could only apply to the treatment of the loan accounts post the date that was considered in your reason, I would have thought.
HIS HONOUR: Well, except (c) seems to be a wide ranging kind of inquiry. Assuming, you know, 200,000 in management fees and/or not specified as to years and the like, etcetera. I mean, the incontrovertible evidence is that, on the financial accounts prepared of [B Pty Ltd] ----
[MR KK]: Yes
HIS HONOUR: ---- 200,000 a year was attributed to the [Fields] side ---
[MR KK]: Yes
HIS HONOUR: ---- 200,000 a year to the [Ramsey] side. I appreciate your client had other things to say about that, but I found against him about that claim ----
[MR KK]: Yes
HIS HONOUR: --- So the accounts are the accounts.
[MR KK]: Yes.
HIS HONOUR – so are we down to then, since the trial or what? In terms of some look at the – I meant, that’s a matter for [JJ Valuers], isn’t it? To determine on a proper valuation, and parties have their right to have some input into it – as would be the usual course if [JJ Valuers] to a valuation, to say what the loan accounts are.
[MR KK]: Yes
Further, in the ex tempore reasons delivered on 7 July 2021, the following matters were noted by the trial judge:
(a)Other than the claim for oppression, all other claims for relief by the husband and wife had been dismissed;[8]
(b)The form of relief was limited to either the Fields’ interests acquiring the Ramseys’ interests in B Pty Ltd or B Pty Ltd being wound up;[9]
(c)The current evidence establishes that the sums owing to B Pty Ltd by the Ramseys’ interests are greater than any realistic fair value of the shares held by D Pty Ltd on the current valuation;[10]
(d)The Fields had made a fair offer to cancel out the debts owing by the Ramseys’ interests to B Pty Ltd;[11]
(e)If the Ramseys wish to agitate for an audit for the loan accounts post the date in the judgment they can retain the single expert to do so at their cost.[12]
[8] Ramsey & Ramsey (No.2) [2021] FamCA 488 at [2].
[9] Ibid at [3].
[10] Ibid at [9].
[11] Ibid.
[12] Ibid at [16].
Mr DD’s single expert report is dated 13 January 2022 and in it he concluded, among other things, as follows:
18. The following table summarises my assessment of the current value of the Company [B Pty Ltd] and [D Pty Ltd’s] 49% interest in the company excluding any discount for minority interest
Table 1 Summary of Results Description Value ($) Value of Company $712,118 [D Pty Ltd’s] Pro Rata Interest $350,825 19. I note that the values identified:
19.1 includes amounts owed to the Company by parties associated with the Applicant Husband, Respondent Wife and [Mr Fields] which are assumed to be fully recoverable;
and
19.2 do not take into account the circumstances of a specific purchaser and therefore the actual price paid for each of the entities may be higher or lower than indicated above.
20. My analysis indicates that, as at 30 June 2021:
20.1 [E Pty Ltd] owed the Company $15,791;
20.2 [D Pty Ltd] owed the Company $236,484; and
20.3 [Mr Ramsey Family Trust] owed the Company $366,607.
21. The above loans are included as assets of the Company in the valuation and therefore it may be appropriate to take account of the correspond[ing] liabilities in assessing the matrimonial pool.
On 20 January 2022, the husband emailed Mr DD and requested an estimate of time and costs to audit the loan accounts. The husband did not provide Mr DD with any instructions to conduct an audit of the loan accounts.
The husband accepts the valuation of B Pty Ltd as assessed by Mr DD (although continues to dispute the accuracy of the loan account balances).
The husband’s challenge to the accuracy of the loan account balances is referred to in Mr DD’s report where he says the following:
88. Details of the related party loan transactions from 2019 to 2021 are provided in Annexure 19.
89. I note that the Applicant Husband disputes the balances of the related party loans. I have reviewed the related party loan account transactions and have not identified any issues further to the issues raised by the Applicant Husband regarding the treatment of the:
89.1 $450,000 provided by [C Pty Ltd] to the Company in or about February 2014;
89.2 agreement between the parties that each ‘family’ was entitled to remuneration of $200,000 per year;
89.3 proceeds from the sale of the [recreational vehicle] of $374,436.
90. I note the Orders [this is a reference to the judgment issued on 18 June 2021] indicate the Company’s financial statements and loan accounts are accurate with regard to the issues identified in the order (refer Annexure 5). Accordingly, I have proceeded on the basis the financial statements accurately reflect the financial position of the Company as at 30 June 2021.
WHAT ORDER IS SOUGHT BY EACH PARTY?
By the husband:
The husband seeks an order in the following terms, and contends that his dispute about what money is owed to B Pty Ltd by interests related to him will require a hearing in another forum:
(1)An order that D Pty Ltd (as trustee for the Ramsey Family Trust) buy out the shares in B Pty Ltd owned by C Pty Ltd, for the sum of $234,999, or for another price determined to be fair by the Court;
(2)In the alternative to paragraph 1, an order that C Pty Ltd (as trustee for the J Family Trust) buy out the shares in B Pty Ltd owned by D Pty Ltd for the sum of $551,800.98 or for another price determined to be fair by the Court;
(3)That the Third and/or Fourth Respondents pay the husband’s costs of these proceedings.
The sum sought by the husband to be paid by D Pty Ltd (the husband’s related entity) to C Pty Ltd (the Fields’ related entity) in paragraph (1) above represents 33 per cent of a 2018 valuation for B Pty Ltd and, in the alternative, the sum sought to be paid to D Pty Ltd by C Pty Ltd in paragraph (2) above represents 67 per cent of the 2022 valuation for B Pty Ltd.
By the respondents:
The respondents seek an order in the following terms in order to finalise the commercial dispute:
(1)The second respondent buy back D Pty Ltd's 49 per cent shareholding in the second respondent for the sum of $350,825 in the manner prescribed by (2) below.
(2)Contemporaneously with the share transfer, the loan accounts held by D Pty Ltd as trustee of the Ramsey Family Trust, Ramsey Pty Ltd as trustee for the Ramsey Family Trust and E Pty Ltd are credited with $350,825.
(3)The applicant and second respondent sign all approvals necessary to give effect to the share transfer.
(4)The applicant and second respondent sign all approvals necessary to cancel the D class shares held by E Pty Ltd.
(5)HH Lawyers is directed to release the $100,000 held in its trust account pursuant to the orders of Justice Baumann to the second respondent.
(6)Upon receipt of the $100,000 the second respondent extinguish the remaining loan accounts of D Pty Ltd as trustee of the Ramsey Family Trust, Ramsey Pty Ltd as trustee for the Ramsey Family Trust and E Pty Ltd.
(7)The applicant pay the costs of the second and fourth respondent fixed in the sum of $352,486.33.
ISSUES
The issues requiring determination by me were articulated by the husband and the respondents on 17 February 2022 as follows:
(1)Whether or not there is an issue estoppel arising as a result of the earlier judgment of the trial judge that the applicant cannot buy out the respondents’ interests in B Pty Ltd?
(2)What amount should be paid to the applicant for the oppression as found by the trial judge (if there is a finding that the applicant cannot buy out the respondents’ interests)?
(3)As an alternative to buy out should B Pty Ltd be wound up?
(4)Who should pay the costs of the proceedings?
An additional issue was identified by the parties at the hearing before me. It can perhaps be best articulated as follows (and should be considered as part of issue (2)):
(5)Who should receive the $100,000 held in trust for the parties by HH Lawyers and should that sum be off-set against the loan accounts for the related interests of the husband in B Pty Ltd?
WHETHER OR NOT THERE IS AN ISSUE ESTOPPEL ARISING AS A RESULT OF THE EARLIER JUDGMENT OF THE TRIAL JUDGE THAT THE APPLICANT CANNOT BUY OUT THE RESPONDENTS’ INTERESTS IN B PTY LTD?
It is common ground that the 18 June 2021 judgment creates an issue estoppel as to the finding of oppression. However, the parties are at odds on whether an issue estoppel arises as to the remedy available and in particular, whether the husband is precluded from buying out the respondents’ interests in B Pty Ltd.
The husband contends that it remains open for the Court to decide on the appropriate remedy for the oppression and that he (via his entity D Pty Ltd) should be able to buy out C Pty Ltd’s shareholding (the Fields) and that it should be C Pty Ltd’s pre-oppression shareholding i.e. 33 per cent rather than its current shareholding of 51 per cent.
The husband purports to challenge the trial judge’s finding that that “[t]here is no realistic prospect of the husband and wife, either individually or collectively via [D Pty Ltd], having the capacity to buy out the [Fields’/D Pty Ltd’s] interests at fair value”. It is not open to the husband to challenge a factual finding of the trial judge before me. That would be a matter for appeal. However, I note the concessions made by the husband’s former counsel (when attempting to resist an order that his client be responsible for the cost of the updated valuation) that the husband’s financial circumstances (and those of the wife) were constrained. I further note that in the proceedings before me, the husband indicated a need to rely upon a loan from his brother if he were permitted to buy out C Pty Ltd’s shareholding in B Pty Ltd for $235,000.
The respondents, on the other hand, contend that the 18 June 2021 judgment determined that the only two options available as a remedy for the oppression were either that D Pty Ltd’s 49 per cent shareholding be bought out by B Pty Ltd or that B Pty Ltd be wound up.
The principles applying to issue estoppel, which preclude a person from challenging essential findings of fact or law in proceedings which determine the cause of action between the same parties, are not in dispute.[13]
[13] Blair v Curran (1939) 62 CLR 464 at 531 - 532; Kuligoski v Metrobus (2004) 220 CLR 363 at [21], [25], [39], [40], [47], [60] – [62]; Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507 at [22].
The husband submits that an issue estoppel does not arise because the issue determined by the trial judge was not the same issue as that to be determined now, and further that the decision was not final.
When deciding whether or not an issue estoppel arises, I am not restricted to the reasons for judgment but may have regard to any material that shows what issues were raised or decided including the transcript of the evidence.[14]
[14] Ebber v Isager (1995) 1 Qd R 150 at 151.
The judgment delivered on 18 June 2021[15] succinctly identifies the issues in dispute as follows:
2Overshadowing their property settlement proceedings is a commercial dispute involving the third parties joined to these proceedings (for convenience referred to collectively as “the respondents”). Resolution of that commercial dispute is required to enable the property interests of the parties to the marriage to be identified.
3That is so primarily because the husband seeks (and the wife joins him in seeking) that the Court grant a variety of relief under the Act and/or pursuant to the Corporations Act 2001 (Cth) (“the Corporations Act”) directed to the respondents which, if granted, would result in the property interests of the husband and wife as regards their interest in the company [B Pty Ltd] crystallising in a fundamentally different way to that as at present.
4Testament to the significance of the commercial dispute to these proceedings is that at the outset of the trial counsel for each of the husband and the wife respectively advised the Court to the effect that the husband and wife had resolved, as between themselves, all issues and were agreed upon a 50 per cent/50 per cent division of whatever their property interests were ultimately found to be. The trial proceeded on the basis that there were no issues as between the husband and wife. … In short, the trial proceeded on the basis that the husband and wife were in agreement that “appropriate” and “just and equitable” orders, within the meaning of s 79 of the Act, would see their property interests, in whatever form determined once the commercial dispute was resolved, divided between them on a 50 per cent/50 per cent basis.
5However, as will be seen, the nature of the issues raised in the commercial dispute, and more particularly the potential need for further expert accounting evidence depending upon the findings made in relation to those issues, dictates that the commercial dispute be resolved essentially as a discrete issue. The parties recognised that this may involve the proceedings being adjourned for the purpose of further expert accounting evidence to be obtained before final orders are made.
[15] Ramsey & Ramsey [2021] FamCA 405.
It seems tolerably clear that in order to complete the first step of the principles identified by the High Court of Australia in Stanford [16] i.e. to identify the existing legal and equitable interests of the husband and wife in property treated for the purposes of the s 79 proceedings as property of the parties or either of them, the commercial dispute had to be resolved so as to identify what those property interests were. The commercial dispute was determined as a discrete issue.
[16] Stanford & Stanford (2012) 247 CLR 108 (“Stanford”).
It also seems tolerably clear that findings made in relation to the commercial dispute were intended to result in a final determination of that dispute, save for an anticipation that further expert accounting evidence may be necessary before a final order was made. It is, of course, not unusual for parties to be given the opportunity for input into the form of an order consequent upon determination of a dispute.
After finding for the husband and wife in their claim of oppression, the trial judge then determined what remedy should be granted and relevantly found:
246. There is no realistic prospect of the husband and wife, either individually or collectively via [D Pty Ltd], having the capacity to buy out the [Fields’/C Pty Ltd’s] interests at fair value. Moreover, against the chronology that the [Fields], rather than the [Ramseys], have been the prime contributors to [B Pty Ltd] over recent years, it would not be an appropriate remedy to force their exit, contrary to their own wishes.
247. The only practical option appears to be for orders to be made to facilitate a buy-out of the [Ramseys’/D Pty Ltd’s] interests by the [Fields/C Pty Ltd] in [B Pty Ltd] at current fair value.
248. The alternative is to make an order for the winding up of [B Pty Ltd] given the breakdown of the relationships between the quasi-partners to the joint venture.
249. The parties ought be afforded an opportunity to address these options in the light of the findings made.
…
251. Whilst the valuation reports concerning [B Pty Ltd] of the single expert accountant [Mr K] are in evidence, I consider that the parties ought be afforded the opportunity to consider and make further submissions to the Court, in the light of the findings made, concerning the orders to be made to give effect to these findings. This would include submissions as to the fair value of [D Pty Ltd’s] shares, if that option is to be pursued, and the alternative of orders being made for the winding up of [B Pty Ltd].
…
253In my judgment, on the findings made and for the reasons discussed, other than the relief to be granted for the oppression found, the husband and wife do not establish any case for relief against the respondents otherwise, whether pursuant to the Corporations Act or pursuant to the Act.
It is important to note that the relief sought by the husband in the commercial dispute included the following:
28. That … the Husband and the Third Respondent shall do all acts and things and sign all documents necessary to transfer from the Third Respondent to the Husband the whole of the Third Respondent’s shares in [B Pty Ltd].
29. That contemporaneously with the transfer of shares in accordance with Order 28 herein, the Husband pay to the Third Respondent the sum equivalent to the value of the Third Respondent’s shares in [B Pty Ltd] as at the date of the transfer of the shares in accordance with Order 28 herein.
The husband’s prayer for relief expressed in paragraphs 28 and 29 of his Application was dismissed[17] i.e. his application to buy out the Fields’ interests was dismissed.
[17] Ramsey & Ramsey [2021] FamCA 405 at [253].
If there were any doubt about the finding made that the appropriate remedy was either a buy‑out by the respondents of D Pty Ltd’s 49 per cent shareholding or a winding up of B Pty Ltd (and I do not consider there is any doubt) the following observations by the trial judge on 7 July 2021 put the matter beyond doubt:
3. Since then, there have been further mentions and hearings in the matter with a view to advancing the case so far as finalising the relief to be granted with respect to the oppression found. As my substantive reasons for judgment record it was a matter of either a winding up of the company [B Pty Ltd] or for the interests of the [Ramseys] and associated entities to be removed from the company by the [Fields] interests. In short that the shareholding of [D Pty Ltd] be acquired by the [Fields] interests.
Conclusion – issue estoppel?
I conclude that an issue estoppel does arise which prevents the husband from raising the option of D Pty Ltd buying out C Pty Ltd’s shareholding in B Pty Ltd.
In my view, the trial judge disposed of the commercial dispute by determining that oppression had occurred and that the remedy for oppression would involve the respondents purchasing the husband’s 49 per cent interest (held via D Pty Ltd) in B Pty Ltd for a sum to be determined upon the completion of an updated valuation prepared at the insistence of the husband or for B Pty Ltd to be wound up. All other relief sought in the commercial dispute was dismissed.
WHAT AMOUNT SHOULD BE PAID TO THE APPLICANT FOR THE OPPRESSION AS FOUND BY THE TRIAL JUDGE (IF THERE IS A FINDING THAT THE APPLICANT CANNOT BUY OUT THE RESPONDENTS’ INTERESTS)?
The next question for determination is what amount should be paid to the husband (via D Pty Ltd) for its shareholding in B Pty Ltd.
The husband’s argument
The husband contends that he should be paid $551,800.98 for D Pty Ltd’s shareholding in B Pty Ltd. This sum is calculated on the basis of D Pty Ltd’s pre 2 November 2018 shareholding i.e. 67 per cent (rather than its current shareholding of 49 per cent) plus two per cent interest per annum.
In the proceedings before the trial judge, Mr K provided an indicative value for B Pty Ltd as at 2 November 2018 of $770,000 or $7,700 per share and this is relied upon by the husband to support his submission that fair compensation for the oppression would be $515,900 plus interest of $35,900.
The husband also resists any off-setting from the sum payable to him of the loans payable by the husband’s related entities to B Pty Ltd (recorded in B Pty Ltd accounts and included as assets in the calculation of value for B Pty Ltd) being a sum of $618,882 (in the Mr DD’s valuation).
The husband argues that the loans recorded in the B Pty Ltd accounts as payable by E Pty Ltd, D Pty Ltd and Mr Ramsey Family Trust, have to be determined in another jurisdiction as there remains a dispute (according to the husband) about the reliability of these alleged loans. The husband seeks to distance himself from E Pty Ltd, D Pty Ltd and Mr Ramsey Family Trust, and contends that they should have been joined as parties to the proceedings before the trial judge if B Pty Ltd was intending to claim the loans recorded in its accounts as debts.
The husband also contends that he should receive the $100,000 currently held on trust for the husband and the respondents by HH Lawyers and that it should not be off-set against the loans recorded as owing by his related entities.
The respondents’ argument
The respondents contend that the amount that should be paid to buy out D Pty Ltd’s 49 per cent shareholding should be $350,825 and off-set against loan accounts for the husband’s related entities in B Pty Ltd. It is further contended by the respondents that the $100,000 held on trust on behalf of the husband and the respondents should also be off-set against the loan accounts. The balance then owing to B Pty Ltd by the husband’s related entities, being the sum of $168,057, would be extinguished.
The respondents argue that the calculation of the amount to be paid for D Pty Ltd’s 49 per cent shareholding should be based on the valuation prepared by Mr DD, the single expert appointed at the insistence of the husband on 7 July 2021.
Should the shareholding be 67 per cent or 49 per cent?
The trial judge already determined that the remedy for oppression would be either a buy-out of D Pty Ltd’s 49 per cent shareholding or a winding up of B Pty Ltd. The trial judge rejected the husband’s contention that the 2 November 2018 share issue to C Pty Ltd which diluted D Pty Ltd’s shareholding should be set aside. The submission for a buy-out of a 67 per cent shareholding is nothing more than an attempt to re-litigate a matter already determined by the trial judge.
Which valuation should be used to calculate the amount payable?
When the matter was before the trial judge on 7 July 2021 it was apparent that unless the value of the real property owned by B Pty Ltd had increased in value, or an audit of B Pty Ltd’s loan accounts post Mr K’s April 2020 report indicated that the recording of the loans for the husband’s related interests was incorrect, that the husband could well be worse off with an updated valuation. This was a point specifically identified by the trial judge as the following exchanges between the trial judge and then counsel for the husband and counsel for the wife demonstrate:
HIS HONOUR: But assuming that – assuming the correctness of the figures outlined in [Mr Fields’] affidavit, you would need [JJ Valuers] to come up with a valuation way above the existing valuation of [Mr K] for there to be any nett benefit to your client, would you?
…
HIS HONOUR: Well, no, it’s not, with respect. It’s an attempt to demonstrate that by a cancelling out of the – what’s owing by the loans is - - -
[MR LL]: Yes.
HIS HONOUR: - - - an opportunity that your client and the husband should be grabbing, basically. Because it means, effectively, that rather than what the value of the shares is, he’s prepared – what he is saying is, “We will do the trade-off of cancel out all the debts.” Which is likely to be significant – on that approach, likely to be significantly more than the valuation of the shares.
[MR LL]: Yes.
HIS HONOUR: So he’s not trying to say what the value is, he’s simply trying to say that the performance hasn’t been great financially in terms of the financial performance of the company, ergo it’s likely to be worth less than the valuation of [Mr K]. Even on the valuation of [Mr K], 500,000 being paid to – for the – as a trade-off for the shares would place the value of the company at about a million, which is significantly above [Mr K’s] best value. I mean, I just hope that your client with a parlous financial circumstances, and indeed the husband and his circumstances, really appreciate what’s going to happen if this valuation is ordered and the like. I mean, they might end up with an order in terms of payment for their shares which still leaves them owing money to the company. Is that appreciated?
The husband (and wife) insisted on updated valuations and were given the opportunity to retain Mr DD to conduct an audit of the loan accounts for the period post Mr K’s valuation but Mr DD received no instructions to do so.
Mr K’s valuation of B Pty Ltd as at 2 November 2018 (the date the husband contends should be used) is $770,000 and D Pty Ltd’s 49 per cent shareholding would be worth $377,300. Mr DD’s valuation of B Pty Ltd as at 13 January 2022 is $712,812 and D Pty Ltd’s 49 per cent shareholding would be $350,825.
In my view, given that I have the benefit of the current valuation (which includes the updated valuation for the real property owned by B Pty Ltd), the value of D Pty Ltd’s shareholding should be assessed at $350,825.
Should there be an off-setting against the loan accounts?
In relation to the husband’s argument that there should be no off-setting because there has been no determination that debts are owing, I note that throughout the proceedings, E Pty Ltd, D Pty Ltd and Mr Ramsey Family Trust, have been treated as interests related to the husband (and the wife before settlement of their dispute). The issue about the loan accounts and whether they correctly recorded the sums owing to B Pty Ltd was an issue specifically raised by the husband at trial and his challenges to the loan accounts were rejected by the trial judge.
If, as the husband advocates, there should be no off-setting of the loans owing by his related entities to B Pty Ltd from the value of his related entity shareholding, then the loan accounts would have to be removed as assets of B Pty Ltd, which in turn would substantially reduce the value of B Pty Ltd and thereby the husband’s related entity shareholding in B Pty Ltd.
The additional difficulty the husband encounters with his opposition to the off-setting of the related loans is that this very issue was conceded on his behalf by his counsel on 7 July 2021 where the following exchange occurred between the husband’s then counsel and the trial judge:
HIS HONOUR: I mean, I gather there’s not – there’s just a question of what the loan accounts amount to. There’s no quibble from your side that it has to be balance off somehow in terms of an order for – I mean, which is essentially an order that’s sought is for the company to be buying – or returning the capital. So what’s proposed is basically a balance off between amounts owing and amounts to be paid. That’s an appropriate course, isn’t it?
[Mr KK]: That summary is an accurate summary of the process, yes, respectfully. There will be a netting off. Whatever they owe will be deducted from whatever they are owed as a consequence of whatever order is made.
In my view, the sum payable for D Pty Ltd’s 49 per cent shareholding should be off-set against the loan accounts for the husband’s related interests in B Pty Ltd.
Who should receive the $100,000 held in trust for the parties by HH Lawyers and should that sum be off-set against the loan accounts for the related interests of the husband in B Pty Ltd?
While the dispute between the parties about the $100,000 being held on trust for them jointly was not a matter separately identified as an issue when the matter was listed for trial, the parties seek a resolution of the issue. Supplementary written submissions on the issue were provided by the respondents (on the day of hearing) and by the husband (subsequent to the hearing as permitted by me).
The use of the $100,000 was not an issue determined by the trial judge as the sum was only retained in trust for the parties pursuant to an order made by consent by a different judge on 12 November 2021. The wife later relinquished any claim to the $100,000 when she and the husband settled their property dispute on 18 January 2022 and also when she and the respondents settled their dispute on 15 February 2022.
The sum of $100,000 was sourced from the sale of a property jointly owned by the husband and the wife at L Street, Town M. The husband and wife entered into a contract for the sale of that property but as it was cross-collateralised to secure financial arrangements between B Pty Ltd and NAB, the husband and wife sought the urgent intervention of the Court (an Application in a Proceeding was filed by the wife on 4 November 2021) to require the respondents to sign release documents and alter the guarantees provided to NAB.
The application was resisted by the respondents because, among other things, they were seeking that the sale proceeds be used to pay the loans owing by the Ramseys’ related entities to B Pty Ltd.
As a consequence of the pending settlement of the sale of the Town M property, the respondents consented to release the security provided by the property but on condition that $100,000 was retained in trust pending finalisation of the proceedings. It was at that time anticipated by the respondents that the shortfall between what the husband and wife would be owed by a buy-out of their interests in B Pty Ltd and their related entity loan accounts would be about $100,000. At that time, the value of the anticipated buy out of D Pty Ltd’s 49 per cent shareholding was based upon the higher value for B Pty Ltd assessed by Mr K and an anticipated loan account balance of $510,537.
The order made by consent on 12 November 2021 included the following provision:
(6)That the sum of $100,000 paid to the Trust Account of [HH Lawyers] pursuant to Order 3(c) (“the funds”) above shall be held by [HH Lawyers] as follows:
(a)Until fourteen (14) days from the date of this Order, the funds shall be held on trust on behalf of [Mr Ramsey], [Ms Ramsey], [Mr Fields], [Ms Fields] and [B Pty Ltd];
(b)If a Response is filed by either [Mr Fields] or [Ms Fields], the funds shall continue to be held on trust on behalf of [Mr Ramsey], [Ms Ramsey], [Mr Fields], [Ms Fields] and [B Pty Ltd] until the Application in a proceeding filed 4 November 2021 is determined and pending its outcome;
(c)…
The respondents’ Response to the Application in a Proceeding was filed on 23 November 2021 and makes their position clear i.e. that they were seeking the sale proceeds be used to repay the loan accounts. As a consequence of the filing of the Response, the $100,000 was to continue to be held on trust for the parties pursuant to the order made on 12 November 2021.
The husband resists the payment of the $100,000 to the respondents, contending that the related interests i.e. E Pty Ltd, D Pty Ltd and Mr Ramsey Family Trust, (referred to by the husband as “the non-parties”) who are recorded in B Pty Ltd’s accounts as owing funds to B Pty Ltd had no proprietary interest in the property at Town M and therefore no interest in the $100,000. Further, it is submitted by the husband that there is no evidence that the husband has personally guaranteed the “Asserted Non-Party Debts” and there is no evidence “to support a conclusion that [B Pty Ltd] holds security over or has charged the personal assets of [the husband] with respect to the Asserted Non-Party Debts”. Accordingly, it is argued that the funds cannot be off-set against the alleged loan account debts.
As already noted, throughout these proceedings, E Pty Ltd, D Pty Ltd and Mr Ramsey Family Trust have been treated as the related interests of the husband. They were treated as synonymous with the husband (and wife until the wife settled her claims). Further, a concession was made on the husband’s behalf on 7 July 2021 that - “Whatever they owe will be deducted from whatever they are owed as a consequence of whatever order is made”. It is true that the concession could not formally bind the husband in relation to the $100,000 as it did not then exist, but it is an important recognition of how the loan accounts of the husband’s related entities had been treated throughout the proceedings.
I conclude that in circumstances where the husband’s related interests will continue to have outstanding loan accounts with B Pty Ltd, for which he has, up to the time of hearing before me, treated as something for which he would bear ultimate responsibility, the $100,000 should be paid to B Pty Ltd as a further off-set to the husband’s related interests’ loan accounts.
Should interest be paid?
In circumstances where the sum payable to the husband (via D Pty Ltd) will not be sufficient to extinguish the debit loan account balances for the husband’s related entities, yet the respondents agree to nevertheless extinguish the balances, I do not see any utility in considering whether or not interest should be paid on the sum to be paid by the respondents for D Pty Ltd’s 49 per cent shareholding. It would be a futile exercise. I further note that no submissions were made about interest.
Conclusion – what amount should be paid to the applicant?
The husband is entitled to be paid fair compensation for the oppressive conduct found by the trial judge. The trial judge assessed fair compensation as being either a payment representing D Pty Ltd’s 49 per cent shareholding in B Pty Ltd or the winding up of B Pty Ltd.
I have three valuations for B Pty Ltd before me. Mr K valued B Pty Ltd as at April 2020 for the purposes of the trial before the trial judge. He also prepared an indicative valuation for B Pty Ltd as at November 2018. Mr DD prepared an updated valuation for B Pty Ltd and the 49 per cent shareholding of D Pty Ltd as at 13 January 2022.
I note that, subsequent to November 2018, the husband and the original owner of B Pty Ltd have operated in competition with B Pty Ltd. Prior to this, B Pty Ltd had no direct competitor in Brisbane. I further note that, contrary to the expectations of the husband, the value of B Pty Ltd’s real property has substantially decreased since Mr K’s report in April 2020.
In my view, fair compensation will be achieved by the payment of $350,812 (being the current value of D Pty Ltd’s 49 per cent shareholding in B Pty Ltd as assessed by Mr DD) and off‑setting that sum against the loan accounts for the husband’s related entities i.e. E Pty Ltd, D Pty Ltd and Mr Ramsey Family Trust and the further off-setting of the $100,000 (together with any accumulated interest on that sum) which will be paid to the respondents. The respondents will thereupon extinguish the balance owing by the husband’s related entities to B Pty Ltd.
AS AN ALTERNATIVE TO BUY OUT SHOULD B PTY LTD BE WOUND UP?
The trial judge specifically found that it would not be an appropriate remedy to force the Fields exit, contrary to their wishes, and as fair compensation can be achieved without winding up B Pty Ltd, I do not propose to further consider this alternative.
WHO SHOULD PAY THE COSTS OF THE PROCEEDINGS?
The husband is seeking an order that that the respondents pay his costs on a party and party basis of the entire proceedings (in relation to the commercial dispute) or, in the alternative, from 18 June 2021. In the further alternative, the husband submits there should be no order for costs.
The respondents are seeking an order that the husband pay their costs of the entire proceedings on an indemnity basis or alternatively on a party and party basis.
Each side was given leave to file a further affidavit annexing a schedule of costs to assist in the fixing of a sum (although the primary position of the husband is for costs to be assessed). The husband and the respondents each filed a further affidavit on 20 May 2022.
On reviewing the schedules of costs relied upon by the husband, purportedly prepared on a party and party basis pursuant to court scales, I note that the schedules include items that are clearly solicitor and client costs e.g. scanning client’s material etc. The total fees and outlays billed to the husband during the period 30 May 2018 to 18 May 2022 appears to be $397,328 and on scale $290,073. The schedules also include work done in relation to the husband’s dispute with the wife.
On reviewing the schedules of costs relied upon by the respondents, purportedly prepared on an indemnity basis and party and party basis, I note that while the schedules include calculations made pursuant to court scales, the schedules include items that are clearly solicitor and client costs rather than party and party e.g. communications between solicitor and client etc. The total fees and outlays billed to the respondents during the period 4 September 2018 to 16 May 2022 appear to be $455,763 and on scale are $226,544. The schedules also include work done in relation to the respondents’ dispute with the wife. The respondents identify the costs incurred by the respondents prior to the oppression claim being added by the husband at $140,460 and the costs incurred after the 18 June 2021 judgment at $55,951.
It was submitted on behalf of the husband (without reference to any authority) that the costs applications should not be determined pursuant to s 117 of the FLA. It seems the basis for that submission rests on there being “two different proceedings” and that the “commercial dispute is not a proceeding under the [FLA]”.
It was submitted on behalf of the respondents (again without reference to any authority) that the costs applications should be determined pursuant to s 117.
I must say I find it disappointing to say the least that counsel would fail to prepare submissions addressing relevant authorities on this issue particularly when they were given the opportunity to do so.
Does s 117 of the FLA apply?
Section 117(1) of the Act provides that generally each party to “proceedings under this Act” shall bear his or her own costs. Section 117(2) of the Act empowers the Court to make an order for costs in “proceedings under this Act” where the Court is of the opinion that there are circumstances that justify it in doing so. Section 4 of the Act defines “proceedings” as:
a proceeding in a court, whether between parties or not, and includes cross-proceedings or an incidental proceeding in the course of or in connexion with a proceeding.
In Costigan & Costigan (No 2)[18] I reviewed a number of authorities that considered the term “proceedings under this Act”, in the context of a costs application arising out of proceedings in which I dismissed a husband’s application for a stay of a wife’s proceedings in Australia and granted an injunction against the husband restraining him from continuing his financial proceedings in a foreign jurisdiction. In that case it was argued by a wife that the proceedings concerning a stay of proceedings in favour of a foreign court were not proceedings under the Act and that the appropriate considerations on whether or not to award costs were those found under State legislation, which in that case was the State of Victoria. Rather than summarising my review of the authorities, it is probably convenient to simply quote from the relevant parts of that decision:
[18] [2017] FamCA 886.
44. In Skinner v Alfonso-Skinner (Costs) Murphy J held that s 117 of the Act did not apply when considering a costs application arising out of the granting of a stay on forum non conveniens grounds. His Honour accepted the submission that ‘proceedings under this Act’ is a proceeding which claims relief pursuant to a specified provision of the Act. Thus, it was held, proceedings brought under the Court’s ‘accrued equitable jurisdiction’ or ‘implied jurisdiction’ or pursuant to some other Act e.g. Corporations Act were not proceedings ‘under this Act’ within the meaning of s 117.
45. Murphy J applied that reasoning to a subsequent case, namely, Yeo & Huy (Costs) holding:
9. … proceedings for stay are an exercise by the Court of its accrued equitable jurisdiction or its implied jurisdiction (see CSR Ltd v Cigna, above at 391-392), and are not proceedings “under the Act”. Section 117, which contains the Court’s power to order costs, refers to proceedings “under the Act”.
46. The applicable source of power to award costs in those cases was found to be s79(1) of the Judiciary Act 1903 (Cth) which provides:
(1) The laws of each State or Territory, including the laws relating to procedure, evidence, and the competency of witnesses, shall, except as otherwise provided by the Constitution or the laws of the Commonwealth, be binding on all Courts exercising federal jurisdiction in that State or Territory in all cases to which they are applicable.
And as a result, the relevant State legislation relating to the making of costs orders applied.
47. Murphy J’s reasoning was followed by Kent J in Chen & Tan (No 2) and MacMillan J in Allen & Cortez (No 2).
48. However, Le Poer Trench J in Hampton & Farley & Ors (No 3) took a different view when considering a costs application arising out of proceedings which included the exercise of the Court’s accrued jurisdiction. His Honour said:
164. The decision of the Full Court of the Family Court in C Pty Ltd v S Pty Ltd is binding on trial judges. It also resolves the dilemma which is created by the words “proceedings under this Act” as the words appear in s 117 of the FLA.
165. Once “a proceeding” is a “matrimonial cause”, as defined by the definition of matrimonial cause in s 4 of the FLA, then s 31 of the FLA is called into play and the proceeding falls within the original jurisdiction of the court.
166. Consequently, once the court has determined that it is appropriate to exercise its accrued jurisdiction in relation to a proceeding which would otherwise be outside of the court’s statutory jurisdiction, then that proceeding will invariably become a matrimonial cause, as defined by s 4 of the FLA. Thus, s 117 of the FLA becomes available to the court should an application for costsbe made relating only to the proceeding which was considered by the court having to accrue jurisdiction to do so.
49. As to the impact of C Pty Ltd v S Pty Ltd on the earlier decision of Skinner Le Poer Trench J observed:
144. It is helpful to note, at this point, that the definition of “matrimonial cause” as referred to in C Pty Ltd v S Pty Ltd plays into s31 of the FLA which specifies the original jurisdiction of the Family Court of Australia. Given that Murphy J formed part of the majority in C Pty Ltd v S Pty Ltd, his Honour clearly would have to take a different position in relation to that taken by him in Skinner were those facts to be repeated in another case before him.
50. C Pty Limited and Ors & PGW as liquidator of S Pty Ltd (in liq) concerned an appeal against an order dismissing an application to transfer proceedings to the Supreme Court of New South Wales. There were completed proceedings in the Family Court pursuant to s 79 of the Act and subsequently an application was filed by the liquidator of S Pty Ltd to recover money the company had paid, as guarantor, to discharge a loan and an application by C Pty Ltd to reverse the decision of a liquidator to reject a proof of debt. There had been an order for the winding up S Pty Limited in the completed s 79 proceedings. In addition there was an application for security for costs pursuant to s 117 brought against S Pty Limited. The trial judge found that the applications were a matrimonial cause as defined in s 4(1)(f) of the Act. Any dispute over the implementation of the order made pursuant to s 79 or the winding up order itself or the proof of debt issue were held by the trial judge to be part of the one justiciable controversy of which the family law claim forms part and as such the jurisdiction to determine these matters arose pursuant to the Court’s accrued jurisdiction. The security for costs application was determined pursuant to s117 of the Act.
51. The Full Court observed that the Family Court had jurisdiction to hear the winding up proceedings pursuant to the power vested in the Court under s1337C of the Corporations Act but that did not prevent the proceedings also being a matrimonial cause. As to the claim arising out of the guarantee, the Full Court agreed with the trial judge and held that the guarantee proceedings were a necessary part of the winding up process that ensured that the efficacy of the s79 order and accordingly within the original jurisdiction of the Court pursuant to s 31(1)(a) of the Act. The Full Court also agreed with the trial judge that the determination of the claims (including the proof of debt) were alternatively within the accrued jurisdiction of the Court stating that it was:
… patently obvious that the winding up proceedings, being a matrimonial cause, and the guarantee proceedings which are brought by the Liquidator in the context of progressing the winding up proceedings, are part of the one “justiciable controversy”. The winding up proceedings have certainly not been completed and thus they satisfy the need for there to be a family law claim as part of the justiciable controversy….
52. The trial judge’s determination of the security for costs application pursuant to s 117 of the Act was held to be correct given that the guarantee proceedings were a matrimonial cause and thus ‘proceedings’ within the meaning of s 117.
53. Original jurisdiction is conferred on the Court by s 31 of the Act which relevantly provides:
(1) Jurisdiction is conferred on the Family Court with respect to:
matters arising under this Act … in respect of which matrimonial causes are instituted under this Act.
54. In discussing the meaning of ‘matter’ in the context of jurisdiction Brereton J in Valceski & Valceski stated:
38. When a federal law confers jurisdiction on a court in respect of a “matter” arising under the Constitution or a federal statute, the jurisdiction extends to authorise determination of the whole “matter”. It has long been established that a matter is a “justiciable controversy”, the determination of which may involve both federal and state law …
39. Thus, when a federal court is invested with federal jurisdiction, it is also invested with the power to determine non-federal aspects of a justiciable controversy which involves the exercise of its federal jurisdiction, provided that the non-federal aspects of the controversy form an integral part of the same controversy [Stack v Coast Securities]. The scope of the “matter” in respect of which a federal court has jurisdiction is described by the ambit of the justiciable controversy. There is but a single matter, and the non-federal claims are within the accrued jurisdiction, where the different claims arise out of “common transactions and facts” or “a common substratum of facts” [Philip Morris, 512 (Mason J)], notwithstanding that the facts upon which the claims depend “do not wholly coincide” [Fencott v Muller, 607 (Mason, Murphy, Brennan and Deane JJ); Re Wakim, 586 [141]]; or where different claims are so related that the determination of one is essential to the determination of the other [Philip Morris, 512 (Mason J)]; or where, if the proceedings were tried in different courts, there could be conflicting findings made on one or more issues common to the two proceedings [Re Wakim, 586 [141]]. However, it must always be borne in mind that the ultimate question is not the existence of each of the several suggested indicia, but whether there is in substance a single justiciable controversy.
55. Murphy J in Daymond and Anor & Daymond and Ors (Costs) considered whether s 117 of the Act applied to an application for costs against a third party in which the Court had exercised its accrued jurisdiction. In dismissing a submission that the proceedings were not proceedings ‘under this Act’ as required by s 117, Murphy J undertook a review of relevant authorities (including Valceski and a number of decisions of the Federal Court of Australia) and concluded that as the ‘proceedings’ (as that term is defined in s4 of the Act) comprised claims under s 79 and claims pursuant to the Court’s accrued jurisdiction, the Court was exercising its original jurisdiction under s31(1) (a) of the Act, namely, with respect to ‘matters arising under this Act’. The reference to ‘matters’ being a reference to the ‘justiciable controversy’ comprising the “substratum of facts and claims representing or amounting to the disputed controversy” the determination of which involved both the federal and state law. Accordingly, His Honour concluded that the application for costs was properly considered under s 117 of the Act.
56. Murphy J referred to C Pty Ltd and Ors & PGW as Liquidatior of S Pty Ltd (In liq) and observed that no part of his analysis or conclusion was inconsistent with anything said by the Full Court in that case but His Honour considered it had no direct relevance to the meaning of the term ‘proceedings under this Act’ in s 117 as it was a decision that turned on the meaning of ‘in relation to’ in subsection (f) of the definition of ‘matrimonial cause’ in s 4(1).
57. In Esdale & Schenk Murphy J held that s 117 applied to a costs application (in the form of ‘litigation funding’) prior to the Court having determined whether or not it had jurisdiction to entertain the substantive claim stating:
21. Plainly, proceedings in which the Court is asked to determine if it has jurisdiction are not “proceedings under [the] Act” if that expression is confined to proceedings which find the head of power to which they relate specified in terms within the Act; no provision of the Act gives the Court jurisdiction to decide if it has jurisdiction.
22. Yet, as has been seen, plainly enough the Court does have such jurisdiction. And, that jurisdiction exists despite the fact that this Court, although a superior court of record, is a court whose jurisdiction and power is confined by statute. Where the Court has inherent jurisdiction, such as the jurisdiction to decide the facts upon which the existence of jurisdiction are based, the Court has all of the powers necessary or ancillary to the determination of that issue.
23. In my judgment, the expression “proceedings under [the] Act” in s117 includes proceedings brought to determine if there is jurisdiction in respect of proceedings under the Act. The power to award costs pursuant to s 117 is a power ancillary to the exercise of those powers in respect of those proceedings.
(Footnotes omitted)
I concluded in Costigan:
59. In my view the jurisprudence in relation to this issue has developed since Skinner such that the phrase ‘proceedings under this Act’ is now given a much wider meaning. Where once it was thought that s 117 applied only where a costs application arose out of a claim brought pursuant to a provision of the Act, it is now apparent that it applies in any case where the Court is called upon to exercise its original jurisdiction in a single matter before it, whether that involves an exercise of its ‘implied’ powers, accrued jurisdiction or a determination of whether it has jurisdiction at all.
In Spurling and Ors & Spurling[19] (“Spurling”) Benjamin J said in obiter and perhaps understandably (given the context) without discussion:
34. Certainly, when exercising original jurisdiction, such as under the Corporations Act 2001 (Cth), s 117 the Act would not apply.
[19] [2019] FamCA 802.
Spurling involved a property dispute between a husband and wife and the husband’s parents. The wife contended that certain property in the name of the husband’s parents was held on trust, relying upon what was then referred to as the Court’s ‘accrued jurisdiction’. While stating that he was “not sure whether costs in accrued jurisdiction are pursuant to section 117 or otherwise”, Benjamin J nevertheless proceeded to determine the application for costs pursuant to s 117 of the Act. Unfortunately, the reasons for so doing are not identified, although, in light of the Full Court’s decision in C Pty Ltd and Ors & PGW as Liquidator of S Pty Ltd (In liq)[20] (which was not cited) I respectfully observe that the costs application was rightly determined pursuant to s 117 of the Act.
[20] [2011] FLC 93-485; see also C Pty Ltd and Ors & PGW as Liquidator of S Pty Ltd (In liq) (Costs) [2012] FamCAFC 38.
Conclusion on whether s 117 of the Act applies
Notwithstanding that the original and associated jurisdiction of this Court are no longer conferred by ss 31, 33 of the Act,[21] and that the amendments introduced by Federal Circuit andFamily Court of Australia (Consequential Amendments and Transitional Provisions) Act 2021 (Cth) apply to these proceedings,[22] the proceedings pending in this Court as at 1 September 2021 are nevertheless within the Court’s jurisdiction.[23]
[21] Since 1 September 2021 the original jurisdiction is as set out in s 25 of the Federal Circuit and Family Court of Australia Act 2021 although the Court retains jurisdiction in matters pending as at 1 September 2021.
[22] Federal Circuit andFamily Court of Australia (Consequential Amendments and Transitional Provisions) Act 2021 (Cth) Item 229 of Schedule 1.
[23]Nevins & Urwin [2022] FedCFamC1A 57.
The substantive proceedings involved competing claims between the husband and the wife pursuant to s 79 of the FLA, and various forms of relief were sought against the respondents, pursuant to both the FLA and the Corporations Act (pursuant to the Court’s original jurisdiction). The proceedings determined discretely as the ‘commercial dispute’ can properly be described as a ‘matrimonial cause’ as defined in s 4(1)(f) of the FLA because they were proceedings “in relation to concurrent, pending or completed” property proceedings between the husband and the wife. As earlier observed, the identification of the property of the parties or either of them necessarily involved the determination of the commercial dispute. The fact that the proceedings also involved a claim for relief for oppressive conduct pursuant to the Corporations Act does not prevent the proceedings also being a matrimonial cause.[24]
[24] C Pty Ltd and Ors & PGW as Liquidator of S Pty Ltd (In liq) [2011] FLC 93-485 at [73].
Accordingly, s 117 of the FLA applies to the determination of the costs applications.
How are costs applications determined?
The list of matters to which the Court must have regard when determining a costs application are set out in s 117(2A) of the FLA and since the commencement of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (“the FCFCOA Act”) on 1 September 2021 there are now additional matters to which the Court must have regard.[25]
[25] The notation to s 117(2) of the FLA refers to s 69(4)(d) and (e) of the FCFCOA Act.
The matters set out in s 117(2A) of the FLA are as follows:
(a)the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g)such other matters as the court considers relevant.
When considering the factors set out in s 117(2A) of the FLA, it is sufficient for one factor to be present.[26]
[26] Fitzgerald vFish sub nom PBF v TRF (FLR) (2005) 191 FLR 294 at 301, [41].
Impecuniosity, of itself, is not a bar to making a costs order.[27]
[27] Nada & Nettle (Costs) (2014) FLC 93-612 at 79,589, [11]; see also Lenova & Lenova (Costs) [2011] FamCAFC 141 at 3, [12].
An additional source of power to award costs in an appropriate matter is to be found in s 69(4)(d) and (e) of the FCFCOA Act which simply empowers the Court to award costs against a party and that the costs awarded be assessed on an indemnity basis or otherwise.
There is an additional mandatory requirement created by s 68(4) of the FCFCOA Act which requires the Court to take into account any failure to comply with the duty imposed by ss 68(1) or (2) which requires the parties and the lawyers for the parties to conduct the proceedings in a way that is consistent with the overarching purpose of the family law practice and procedures provisions of the FCFCOA Act. The overarching purpose is set out in s 67 and requires, among other things, for the proceedings to be conducted as “quickly, inexpensively and efficiently as possible”.
At the time the substantive proceedings commenced, the Rules applicable to costs applications were contained in the Family Law Rules 2004 (Cth) (“the old Rules”), but the old Rules were repealed on 1 September 2021 by the Family Law Repeal Rules 2021 (Cth), and replaced with the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the new Rules”), with effect from 1 September 2021. Note 1 to r 1.02(2) of the new Rules states as follows:
… The new Rules apply to a proceeding that was commenced in accordance with the old Rules and was not determined before the repeal of the Rules.
Part 12.5 of the new Rules deals with ‘orders for costs’ and, among other things, empowers the Court to set a time for payment.[28]
[28] r 12.13(5) of the new Rules.
Part 12.6 deals with ‘calculation of costs’ and provides as follows:
12.17 Method of calculation of costs
(1)The court may order that a party is entitled to costs:
(a)of a specific amount; or
(b)as assessed on a particular basis (for example, party and party, solicitor and client or indemnity); or
(c)to be calculated in accordance with the method stated in the order; or
(d)for part of the proceeding, or part of an amount, assessed in accordance with Schedule 3.
(2)If costs are payable under the Family Law Act or these Rules, or the court orders that costs be paid and does not specify the method for their calculation, the costs are to be assessed on a party and party basis.
(3)In making an order under subrule (1), the court may consider the following:
(a) the importance, complexity or difficulty of the issues;
(b)the reasonableness of each party’s behaviour in the proceeding including by having regard to the matters set out in subrule 12.08(2);
(c) the rates ordinarily payable to lawyers in comparable proceedings;
(d)whether a lawyer’s conduct has been improper, unfair, unreasonable or disproportionate;
(e)the time properly spent on the proceeding, or in complying with pre‑action procedures;
(f)whether expenses (paid or payable) are fair, reasonable and proportionate.
Rule 12.08(2) (referred to in r 12.17(3)(b)) provides as follows:
(2)In considering whether a party’s legal costs have been fairly, reasonably and proportionately incurred, regard must be had to all relevant matters including, but not limited to, whether a lawyer representing the party, a lawyer representing any other party, or any self‑represented litigant has:
(a)complied with all relevant rules and orders of the court, including requirements that documents be filed or provided to other parties by a given date; and
(b)acted reasonably in raising, pursuing or contesting a particular allegation or issue; and
(c)made reasonable efforts, subject to the client’s instructions, to resolve the dispute through negotiation, mediation or arbitration; and
(d)made reasonable efforts to narrow the issues in dispute; and
(e)filed no more interlocutory applications than are reasonably necessary in the circumstances of the proceeding; and
(f)filed no more affidavits or other documents than are reasonably necessary in the circumstances of the proceeding.
(g)filed no more affidavits or other documents than are reasonably necessary in the circumstances of the proceeding
When determining an application for costs, the Court may make such order as to costs as it considers just.[29] An applicant for costs bears no “additional or special onus” other than the establishment of “justifying circumstances”.[30]
[29] s 117(2) FLA.
[30] (1980) 144 CLR 311 at 315 (“Penfold”).
As to the identification of such circumstances by the Court, the High Court of Australia in Penfold v Penfold[31] said the following:
Sub-section (2) [of s 117] does not in our view as a matter of law require the judge to specify the circumstances which justify the making of an order. It does not expressly say so, and in the context of the making of an order for costs there is no sufficient basis for making an implication. Judges very frequently make orders for costs without giving reasons or making findings, even when costs are in issue. The absence of reasons or findings does not in itself indicate that a judge has erroneously exercised his discretion to award costs, though it will place an appellate court in the position of examining the circumstances and of determining for itself whether the circumstances show that the discretion was erroneously exercised. Accordingly, in the absence of some positive legislative indication we should not attribute to Parliament the requirement that a judge must make particular findings in relation to an order for costs.
[Citation omitted]
[31] Penfold at 316.
A court will not lightly make an order for costs to be paid on an indemnity basis. There needs to be some circumstance of an exceptional kind to justify that course.[32]
[32] Kohan and Kohan (1993) FLC 92-340 at 79,614; Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233 (“Colgate-Palmolive”).
The tensions created by the differing objectives sought to be addressed by a costs order awarded on a party and party basis as opposed to an indemnity basis were discussed in Re Wilcox, Ex parte Venture Industries Pty Ltd[33] where the Full Court of the Federal Court said at 156:
The issue whether costs should be ordered on a party and party basis or on an indemnity basis has acquired increasingly greater significance as the gap between the two bases appears to have grown.
The gap has highlighted the conflict between two seemingly irreconcilable objectives. The first is protecting access to justice by only exposing an unsuccessful litigant in the usual course to an order for scale costs on a party and party basis. The second is relieving a successful litigant from the burden of costs which that litigant should not have been required to incur. These and other policy factors have been considered by the courts over a very long period in order to arrive at the principles which govern the undoubted discretion of courts to depart from ordering costs on a party and party basis and ordering costs on an indemnity basis. The principles were stated by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225.
[33] (1996) 72 FCR 151) at 156 (‘Re Wilcox’).
The Full Court went on to restate the principles from Colgate-Palmolive[34] in the following terms:
a)the Court ought not to depart from the rule that costs be ordered on a party and party basis unless the circumstances of the case warrant the Court in departing from the usual course;
b)the circumstances which may warrant departure from the usual course arise as and when the justice of the case so requires or where there may be some special or unusual feature in the case to justify the Court in departing from the usual course;
c)whilst the circumstances in cases in which indemnity costs have been ordered offer a guide, the question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for costs other than on a party and party basis. [35]
[34] Colgate-Palmolive (n 32).
[35] Re Wilcox (n 8) at 156 – 157.
While there is no exhaustive list of what circumstances may warrant an order for costs to be paid on an indemnity basis, some particular circumstances that have been found to justify such an order were identified by Sheppard J in Colgate-Palmolive[36] as follows:
a)Making allegations of fraud knowing them to be false;
b)Making irrelevant allegations of fraud;
c)Evidence of particular misconduct that causes loss of time to the Court and to the other parties;
d)Commencing or continuing proceedings for some ulterior motive or in wilful disregard of known facts or clearly established law;
e)Making allegations which ought never to have been made or the undue prolongation of a case by groundless contentions; and
f)An imprudent refusal of an offer to compromise.[37]
[36] Colgate-Palmolive (n 32).
[37] Colgate-Palmolive (n 32) at 233.
Not only does this Court have the power to order a specific amount for costs,[38] it has been the policy (at least of the former Appeal Division of this Court) for a specific amount to be ordered rather than requiring an assessment of costs.[39] This is because the latter approach will inevitably involve the parties in yet further conflict, delay, and cost.[40]
[38] See r 12.17(1)(a) of the new Rules.
[39] Stopford Malloy & Malloy (Costs) [2018] FamCAFC 6, [10]–[12] (“Stopford”).
[40] Stopford.
In Parke & the Estate of the Late A Parke[41] Murphy J quoted with approval the observations made by Einstein J in Idoport Pty Ltd v National Australia Bank Limited & Ors, Idoport Pty Ltd v Donald Robert Argus[42] when that court was considering an analogous provision to that contained in r 12.17(1)(a) of the new Rules:
130.If the court is to fix a sum it should be “fixed broadly having regard to the information before the Court” (Beach Petroleum NL v Johnson (No 2) [1995] FCA 1250; (1995) 57 FCR 119, at [24]cited in Idaport at [9]). The process does not “by its very nature ... envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place”. (Idaport at [9](v), citing Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738).
131.Obviously enough, the court must act judicially in fixing or specifying a sum of costs, but:
...the requirement that the power to award a gross sum should be exercised judicially does not mean that it must be exercised in any scientific or formulaic manner. At the heart of the judicial function is the responsibility to weigh up competing factors and considerations, many of which might conflict, to reach a determination. Acting judicially carries with it an obligation to apply the rules of natural justice, to act impartially and to apply the law to the facts. ...
[41] (2016) FLC 93-748 at 81,943–81,944, [122]–[134].
[42] [2007] NSWSC 23 at [9].
The competing submissions for costs
Submissions made on behalf of the husband in relation to costs were brief and can be summarised as follows:
(a)The husband succeeded against the respondents in his oppression claim and should therefore be awarded his costs of the whole of the commercial dispute proceedings;
(b)If he is not awarded costs of the proceedings, given that he and the respondents each had some success, he should be awarded costs since 18 June 2021, “on the basis that those costs have been incurred in relation to determining the appropriate remedy as a result of the respondents’ oppression”.
The husband did not address the s 117(2A) considerations.
The respondents did address the s 117(2A) considerations and particularly focussed on the substantial failure of the husband’s claims against the respondents and his conduct during the proceedings. Their submissions can be summarised as follows:
(a)To award costs on an indemnity basis represents a “great departure from the normal standard” but should be awarded in this case as the respondents were strangers to the matrimonial litigation with no real interest in the subject matter of the proceedings and as strangers they “should be more protected because it was not their family law dispute”;
(b)The husband was specifically warned by another judge of this Court that “costs were a consequence of unsuccessfully adding third parties to marital proceedings”;
(c)The husband sought 23 different orders against the respondents and did not raise the oppression issue until 3 days before the scheduled commencement of the trial on 6 July 2020;
(d)The husband failed on all claims against the respondents save the finding of oppression by their diluting the shareholding of D Pty Ltd, but even then the husband failed in the remedy sought for the oppression, resulting in much of the evidence adduced and the time spent in trial being unnecessary e.g. of the 44 pages of the respondents’ submissions at trial only three were relevant to the oppression claim;
(e)The husband failed in his attempt to have the issue of shares to C Pty Ltd set aside and to have C Pty Ltd’s shares in B Pty Ltd transferred to him;
(f)At trial, in responding to the order sought by the husband, substantial evidence was required to establish:
(i)the original set-up of B Pty Ltd;
(ii)the initial contribution of $400,000 by C Pty Ltd;
(iii)the agreed remuneration for each family;
(iv)whether there was an agreement regarding B Pty Ltd’s vehicles;
(v)whether Mr Fields breached his obligations as a director;
(vi)whether the Husband breached his obligations as a director;
(vii)whether the removal of the Husband as a director was valid;
(viii)whether Mr Fields engaged in oppression of D Pty Ltd as a shareholder;
(ix)whether the share issue should be set aside;
(x)whether C Pty Ltd was entitled to receive the dividend payment of $335,786 in September 2018;
(xi)whether the vehicle proceeds ought to have been applied towards B Pty Ltd’s NAB debt;
(xii)whether B Pty Ltd’s financial statements and loan accounts accurately reflect the true position of B Pty Ltd; and
(xiii)whether the B Pty Ltd financial statements and loan accounts accurately reflect the amount of annual remuneration and/or management fees to be paid to the Ramseys and/or D Pty Ltd.
(g)Following the 18 June 2021 judgment, the respondents opposed the need for obtaining an updated valuation and sought to have the matter resolved by having the husband’s shares (D Pty Ltd’s shares) in B Pty Ltd acquired for nil value taking into account the existing loan accounts for the husband’s related entities. The risks associated with further valuations were made clear to the husband by the trial judge on 7 July 2021;
(h)The updated valuation from Mr DD, which was insisted upon by the husband, did not assist the husband (as predicted by the respondents);
(i)The respondents claim to be impecunious.
Conclusion on the issue of costs
I have very little, if any, evidence before me about the respective financial circumstances of the parties.
The husband was successful in his oppression claim against the respondents but this claim was not made until July 2020 and only shortly before the commencement of the trial. Although the oppression claim succeeded, the husband was unsuccessful in relation to the remedy sought and was otherwise wholly unsuccessful in relation to the remaining 22 orders sought against the respondents. The matter could have been resolved on a final basis if the husband had accepted the very reasonable offer made by the respondents on 7 July 2021. I propose to dismiss the husband’s application for costs.
The respondents were unsuccessful in relation to the oppression claim but so much of the work involved in these proceedings involved the various other unsuccessful claims made against them by the husband. I accept the respondents’ submissions that the overwhelming percentage of their costs related to the matters other than the oppression claim. The respondents were ultimately successful on the form of relief proposed and as to the use of the $100,000 held in trust. The respondents made an open offer on 7 July 2021 to acquire D Pty Ltd’s shareholding in B Pty Ltd and off-set the payment against the outstanding loan accounts. The trial judge made it very plain to the husband that the offer was a very good one.
While I am not persuaded that there is anything exceptional in the circumstances of this case that would warrant an award of costs on an indemnity basis, I am persuaded that an award for costs is justified.
I propose to order the husband to pay a fixed sum of $50,000 within 60 days.
MISCELLANEOUS
Application to rely upon further expert report
At the commencement of the hearing before me, the husband sought to rely upon a further expert report from a chartered accountant, Mr MM. It was determined on 11 May 2022 that leave was required and leave was refused. I indicated I would provide my reasons at a later time. My reasons are set out below.
It was argued on behalf of the husband that leave to rely on Mr MM’s report was not required because the report dealt with an audit of B Pty Ltd’s loan accounts which was not the subject of the single expert’s report. It was further submitted that the only reason the report was sought to be relied upon was to demonstrate that there is a dispute between the parties about the loan accounts but no findings on that issue would be sought in these proceedings, which should be (it was argued) determined in another forum.
The respondent opposed leave being granted on numerous grounds. Firstly, that the husband had not complied with the requirements of r 7.10 and 7.11 which are (relevantly) in the following terms:
7.10 Permission for expert’s reports and evidence
(1) A party must apply for the court’s permission to tender a report or adduce evidence at a hearing or trial from an expert witness, other than a single expert witness.
(2) …
7.11 Application for permission for expert witness
(1) A party may seek permission to tender a report or adduce evidence from an expert witness by filing an Application in a Proceeding.
(2) The affidavit filed with the application must state the following:
(a) whether the party has attempted to agree on the appointment of a single expert witness with the other party and, if not, why not;
(b) the name of the expert witness;
(c) the issue about which the expert witness’s evidence is to be given;
(d) the reason the expert evidence is necessary in relation to that issue;
(e) the field in which the expert witness is expert;
(f) the expert witness’s training, study or experience that qualifies the expert witness as having specialised knowledge on the issue;
(g) whether there is any previous connection between the expert witness and the party.
(3) When considering whether to permit a party to tender a report or adduce evidence from an expert witness, the court may take into account the following:
(a) the purpose of this Part (see rule 7.02);
(b) the impact of the appointment of an expert witness on the costs of the proceeding;
(c) the likelihood of the appointment expediting or delaying the proceeding;
(d) the complexity of the issues in the proceeding;
(e) whether the evidence should be given by a single expert witness rather than an expert witness appointed by one party only;
(f) whether the expert witness has specialised knowledge, based on the person’s training, study or experience:
(i) relevant to the issue on which evidence is to be given; and
(ii) appropriate to the value, complexity and importance of the proceeding.
(4) If the court grants a party permission to tender a report or adduce evidence from an expert witness, the permission is limited to the expert witness named, and the field of expertise stated, in the order.
Secondly, it was argued that Mr MM’s report seeks to revisit matters that have already been the subject of findings by the trial judge as follows:
171. There is no doubt that the evidence establishes that the [vehicles] were treated as a “personal use asset” (by the [Ramseys]) within [B Pty Ltd]. There is equally no doubt that the husband and wife met the running costs of their personal use of the [vehicles]. However, there is no evidence to support the proposition that the husband and wife were responsible for the costs of the [vehicles] beyond their running costs. To the contrary, the financial records of [B Pty Ltd] as established on the accounting evidence at trial reflect that [B Pty Ltd] met the loans and associated costs with respect to each of the [vehicles].
…
194.To this may be added the observation that, as already referred to, there is ample evidence that the husband was obtaining withdrawals of funds from [B Pty Ltd] for his own purposes. I accept the submission that by spending company money and using company assets for his own personal use, without an agreement that he so do, the husband was in breach of his director’s duties prior to his removal.
Thirdly, to the extent that the treatment for accounting purposes of further loan account sums are the subject of Mr MM’s opinion, they are matters that the husband ought to have raised at trial as they were “significantly connected” to the matters that were raised at trial and about which the trial judge made findings.
Fourthly, the husband is bound by his former counsel’s concession given on 7 July 2021 in the context of the husband then raising issues about the loan accounts, that any audit “could only apply to the treatment of loan accounts post the date that was considered in [the] reasons”.
Fifthly, it was submitted that Mr MM’s report fails to comply with the requirements of such a report in that it does not identify the instructions provided or list any of the documents relied upon in the preparation of the report or reveal the methodology and calculations used to create a single table of recalculated loan figures that would enable the Court or the respondent to understand how those calculations were made.
Sixthly, the report, such as it is, was served nearly a year after the trial, four months after the single expert opined on the value of the loan accounts and only three business days before the hearing.
Lastly, the report, even if admitted, would only complicate the resolution process by adding to its cost and delay.
In reply, the husband submitted that there is a “general question of leave” and while the report was filed prior to receiving the respondent’s case outline, it was only upon receiving it the day before the hearing, that it became apparent that “the court is now being asked to make findings as to those debts …if [B Pty Ltd] wanted to make a res judicata such that there be a finding that debts are owed by these three companies to [B Pty Ltd], it was incumbent upon them to have brought a third party claim in the proceeding before the trial judge, joined them as parties, and put them on fair notice of the case against them that there is loans owing”. It was further submitted that “if the Court is minded to embark upon a question of determining whether or not the loans are due and owning … directions should be made that the three parties that [B Pty Ltd] asserts debts against be added, that they be given proper notice of the claim against them, and a property opportunity to respond to those claims before the court embarks on any determination of that particular issue”.
Leave was not granted for the following reasons:
(a)Some of matters raised in Mr MM’s report have already been the subject of findings by the trial judge. The husband was, in effect, seeking to re-litigate those matters;
(b)Other matters raised in Mr MM’s report should have been raised by the husband at trial as they were significantly connected to the matters about which findings were made;
(c)The husband is bound by his then counsel’s concession on 7 July 2021 that any audit of the loan accounts could only deal with matters subsequent to the date considered in the 18 June 2021 reasons;
(d)To the extent that Mr MM’s report purported to provide an audit of the loan accounts after the date considered by the trial judge, the husband had the opportunity to request the single expert to undertake the task and chose not to do so. No explanation for the failure to engage the single expert was provided;
(e)The Rules provide an orderly process for the adducing of evidence from an expert. The husband did not comply with that process in any respect and provided no reason for failing to do so;
(f)Mr MM’s report does not comply with the requirements of such reports to disclose the letter of instructions or list any of the documents relied upon in the preparation of the report or reveal the methodology and calculations used to create a single table of recalculated loan figures that would enable the Court or the respondent to understand how those calculations were made;
(g)Mr MM’s report was served nearly a year after the trial, four months after the single expert opined on the value of the loan accounts and only three business days before the hearing;
(h)Receiving the report into evidence would necessarily have involved delay and further costs or alternatively would have been of no utility (if the report was only relied upon to demonstrate an ongoing dispute by the husband as to the accuracy of the loan accounts).
Adjournment application – reasons for dismissal
Shortly after the commencement of the hearing before me, the husband contended that the outstanding dispute between him and the respondents about the alleged debt owed by his related entities and B Pty Ltd could not be determined by this Court and if the Court was against him on that submission the matter ought be adjourned.
The husband’s application for an adjournment was dismissed and I indicated I would provide my reasons at a later time. My reasons are set out below.
The husband contended that he was caught by surprise when reading paragraph 4.27 of the respondents’ case outline which is in the following terms:
4.27 The appropriate order in the circumstances is to:
(a) make a finding as to the amount owing by the applicants and their entities to [B Pty Ltd] (which the respondents submit is $618,882) and;
(b) make a finding that a fair price for [D Pty Ltd’s] shares in [B Pty Ltd] in the circumstances is $350,825;
(c)order [D Pty Ltd] to transfer back its shares to [B Pty Ltd] for the fair price on the basis that it is entitled to pay the fair price by reducing the amount owing by the applicants and their entities by $350,825.
I note that the form of order sought by the respondents in the hearing before me is as set out above at [31].
The husband contended that there is a dispute about the loans allegedly owing by his related entities to B Pty Ltd and, indeed, contended the he or his entities are in fact owed money by B Pty Ltd. Further, the husband submitted that no order, as sought by the respondents, could be made as no relevant findings have yet been made as to the loan account debt. Further, he contended that “[B Pty Ltd] … never brought a counter-claim or a third party claim in this proceeding so they’ve never put in issue that the court should make a declaration or a finding of the existence of those debts until the outline was served yesterday afternoon”. It was submitted that the three parties that B Pty Ltd claims owe it money are not parties to the proceedings. Lastly, it was submitted that as the family law proceeding has been determined “the ancillary jurisdiction of the court to deal with other matters related to the family law proceedings would not … extend to determining a debt claim between [B Pty Ltd] … and the three parties it now claims a debt against”.
One purpose of the adjournment, it was submitted, would be to later transfer the proceedings to another court for determination of the dispute. Further, if it be determined that this Court does have jurisdiction to determine the debt issue then an adjournment would nevertheless be required so that proper notice could be given to the three additional parties.
The adjournment application was opposed by the respondents on the following bases:
(a)The loan accounts form the basis, at least in part, for the valuation of B Pty Ltd and the 49 per cent shareholding of D Pty Ltd;
(b)The payment for the 49 per cent shareholding of D Pty Ltd has always involved a setting off against the loan accounts of the husband’s related entities as conceded by his then counsel on 7 July 2021;
(c)The respondent is not seeking monetary relief against persons who are not parties to the proceedings. In fact, the order sought by the respondents will have the effect of cancelling the loan accounts;
(d)The Court has jurisdiction to make orders that will finalise the proceedings in order to give effect to the trial judge’s findings;
(e)An adjournment would only delay the proceedings further and at further cost to the parties.
In dismissing the application for the adjournment I had regard to the following matters:
(a)Mr DD’s single expert report assessed the value of B Pty Ltd by including the loan accounts as an asset;
(b)Mr DD quantified the loan account balances for the husband’s related interests as follows:
(i)E Pty Ltd owes B Pty Ltd $15,791;
(ii)D Pty Ltd owes B Pty Ltd $236,484; and
(iii)Mr Ramsey Family Trust owes B Pty Ltd $366,607.
(c)There could have been no doubt that the respondents were seeking to off-set the amount payable to the husband for D Pty Ltd’s 49 per cent shareholding in B Pty Ltd against the loan account balances owing by the husband’s related interests, as this was squarely raised on 7 July 2021, and indeed conceded as appropriate by the husband’s then counsel;
(d)There is no detriment to non-parties by the cancellation of their loan account balances;
(e)The Court has an obligation pursuant to s 43 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) to grant all remedies so that as far as possible all matters in controversy may be completely and finally determined and all multiplicity of proceedings concerning any of those matters may be avoided.
I certify that the preceding one hundred and forty-three (143) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Carew. Associate:
Dated: 3 June 2022
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