Roland and ARGENTO & Anor
[2019] FamCA 550
•15 August 2019
FAMILY COURT OF AUSTRALIA
| ROLAND & ARGENTO AND ANOR | [2019] FamCA 550 |
| FAMILY LAW – PRACTICE AND PROCEDURE – Rule 6.15 Family Law Rules 2004 (Cth) – Where legal representative of deceased party makes application to be substituted in the proceedings – Where consideration of applicable principles – Whether proper for substitution order to be made – Where order made for substitution FAMILY LAW – PRACTICE AND PROCEDURE – SECURITY FOR COSTS – Where application made for security for costs against legal representative substituted for deceased party – Where consideration of applicable principles –Where application dismissed |
| Family Law Act 1975 (Cth) s 79, 117 Family Law Rules 2004 (Cth) r 6.15 |
| Limousin & Limousin (Security for Costs) [2007] FamCA 1179 Luadaka & Luadaka (1998) FamCA 1520 Murdoch & Brown (No 2) [2013] FamCA 732 S (deceased) & S [2002] FamCA 1281 Strelys, G.F. and Strelys, E.R. [1987] FamCA 54 Strelys & Strelys; Lukaitis (Executor) [1988] FamCA 1 |
| APPLICANT: | Mr Roland |
| RESPONDENT: | Ms Argento |
| INTERVENOR: | Mr Medland |
| FILE NUMBER: | PAC | 2474 | of | 2013 |
| DATE DELIVERED: | 15 August 2019 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Foster J |
| HEARING DATE: | 17 July 2019 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Coleman SC |
| SOLICITOR FOR THE APPLICANT: | Norris Sommers Maait Lawyers |
| COUNSEL FOR THE RESPONDENT: | Ms Bridger |
| SOLICITOR FOR THE RESPONDENT: | Jo-Anna F S Moy Solicitor |
| SOLICITOR FOR THE INTERVENOR: | Ms Nguyen |
Orders
That pursuant to Rule 6.15 of the Family Law Rules 2004 (Cth) Mr F as legal representative of the deceased husband Mr Roland be substituted for the deceased husband as a party in these proceedings.
That the wife’s application for security for costs is dismissed.
That any application for costs be by way of written submissions filed and served within one month from this date with any submissions in response to be filed and served within a further 14 days and upon completion of submissions judgment reserved to chambers.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Roland & Argento has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT PARRAMATTA |
FILE NUMBER: PAC 2474 of 2013
| Mr Roland |
Applicant
And
| Ms Argento |
Respondent
REASONS FOR JUDGMENT
During the course of protracted property proceedings as between the applicant husband and respondent wife the applicant husband died in 2016.
An interlocutory issue has arisen as to the further conduct of the proceedings with an order being sought under the provisions of rule 6.15 of the Family Law Rules 2004 (Cth). That Rule provides:
Death of party
(1)This rule applies to a property case or an application for the enforcement of a financial obligation.
(2)If a party dies, the other party or the legal personal representative must ask the court for procedural orders in relation to the future conduct of the case.
(3)The court may order that the legal personal representative of the deceased person be substituted for the deceased person as a party.
The rule is a facilitating provision that enables the appointment of a deceased party’s legal personal representative for the purposes of property proceedings continuing under the provisions of s 79(8) of the Family Law 1975 (Cth) (“the Act”). That section provides:
(8)Where, before property settlement proceedings are completed, a party to the marriage dies:
(a)the proceedings may be continued by or against, as the case may be, the legal personal representative of the deceased party and the applicable Rules of Court may make provision in relation to the substitution of the legal personal representative as a party to the proceedings;
(b)if the court is of the opinion:
(i)that it would have made an order with respect to property if the deceased party had not died; and
(ii)that it is still appropriate to make an order with respect to property;
the court may make such order as it considers appropriate with respect to:
(iii)any of the property of the parties to the marriage or either of them; or
(iv)any of the vested bankruptcy property in relation to a bankrupt party to the marriage; and
(c)an order made by the court pursuant to paragraph (b) may be enforced on behalf of, or against, as the case may be, the estate of the deceased party.
As can be seen the provisions of s 79(8) of the Act somewhat circumscribe the Court’s general powers under s 79 to make orders for property adjustment requiring the Court to consider whether it would, absent the death of the party, have made an order for property adjustment and that subsequent to the death of the party, it is still appropriate to make such an order.
The discrete application for determination is the Application in a Case filed on behalf of the husband’s estate on 29 April 2019. The application relevantly seeks an order that Mr F in his capacity as special administrator ad litem for the estate of the late husband Mr Roland be appointed as the legal representative for the applicant husband, the late Mr Roland.
The applicant for substitution Mr F relies upon his affidavits filed 23 April 2019 and 1 July 2019.
It appears that in circumstances where there were negligible assets in the estate of the deceased applicant with the only prospect of realising assets in the estate being the outcome of the present proceedings under s 79 of the Act, the deceased’s children Mr N Roland, Mr D Roland and Ms C or any of them were unwilling to make an application to the Supreme Court of New South Wales so as to be appointed as the legal representative or legal representatives of the deceased.
In such a circumstance, Mr F, a friend of the deceased, made an application by way of summons to the Supreme Court of New South Wales for appointment as special administrator ad litem of the estate of the deceased.
On 15 March 2019 orders were made in the Supreme Court of New South Wales as follows:
(1)That a grant of special administration ad litem be granted to Mr F (“the administrator”) to represent the estate of Mr Roland (“the deceased”), late of 25 July 2016, (“the estate”) in the proceedings between the deceased and Ms Argento in Suit number 2474 of 2013, which is pending in the Family Court of Australia at Parramatta, and in any appeal arising from the determination of such proceedings (“the Family Court proceedings”).
(2)That the administrator open and maintain an account in the name of “Mr F as administrator ad litem of the estate of Mr Roland, deceased” with the Commonwealth Bank of Australia (“the estate bank account”) pending further order of the Court.
(3)That the administrator deposit to the estate bank account all monies received by him during the pendency, or upon completion of the Family Court proceedings.
(4)That the administrator has leave to pay disbursements, including court filing fees, service of process fees, lay and expert witnesses’ expenses, copying, faxing, search and other out-of-pocket expenses out of the estate bank account.
(5)That the administrator has leave to retain the services of solicitors, and counsel, including Senior Counsel, real estate and other valuers, and such other expert or lay evidence as the administrator is advised in and for the purpose of conducting the Family Court proceedings, but that the costs incurred from these appointments are proportionate to the importance and complexity of the subject-matter in dispute.
(6)That, without limiting the right of the administrator to seek judicial advice, the administrator has leave to compromise the Family Court proceedings on such terms as senior counsel retained in the proceedings considered to be in the interests of the estate.
(7)That the administrator may only pay solicitor’s and counsel’s fees out of the estate bank account upon the prior leave of the Court. Bills should be produced to the court from time to time and no less than six weeks apart, accompanied by a brief explanation of the progress of the proceedings and likelihood of resolution.
(8)That the administrator file estate accounts within 28 days of completion of the Family Court proceedings, or within such longer period as the Court may allow upon the application of the administrator.
(9)That the administrator have leave to seek such further or other orders as he may be advised from time to time and as are reasonably necessary to conduct and conclude the family court proceedings on seven days’ notice.
(10)Publication of notice of intention to make this application be dispensed with.
(11)The administration bond and sureties be dispensed with.
(12)Further compliance with the Probate Rules be dispensed with in respect of this application.
(13)There be liberty to apply.
(14)That these orders be served on all persons with a beneficial interest in the estate of deceased.
It is common ground that the beneficiaries in the estate of the deceased are the deceased’s three adult children.
It is further common ground that the solicitors for the applicant Norris Somers Maait Lawyers are a creditor of the deceased estate and are owed significant fees arising from the contested property proceedings to date.
It is readily apparent that without more, this Court would have every reason to appoint Mr F as the deceased’s legal representative for the purposes of rule 6.15.
However, in her Response to the Application in a Case the wife; the respondent in the primary proceedings, sought that the Application in a Case be dismissed save for the order sought as to expedition to trial of the pending property proceedings.
In the alternative, the respondent wife sought orders as follows:
(1)That in the event that Mr F or other named person is appointed as the legal representative of the estate of Mr Roland (the deceased) the legal representative of the said estate within 21 days of the date of the order lodged with the Registry Manager of the Parramatta Registry of the Family Court of Australia the sum of $120,000 as security for costs;
(2)That in the event the legal representative of the estate does not lodge the security as provided for in Order 1, the application for alteration of property interests as filed by the deceased be stayed or otherwise dismissed;
(3)That the legal personal representative of the deceased be restrained from instructing or continuing to instruct Norris Somers Maait Lawyers during the currency of the proceedings in the Family Court of Australia file number PAC 2474 of 2013; and
(4)Alternatively, John Maait, solicitor, or such other solicitor of Norris Somers Maait Lawyers be restrained from advising and/or acting for the estate of the deceased and all the legal personal representatives of the said estate during the currency of the proceedings in the Family Court of Australia file number PAC 2474 of 2013.
The respondent wife relied upon her affidavits filed 28 March 2019 and 6 June 2019.
The respondent wife’s opposition to the current solicitors for the applicant administrator arises from circumstances where the solicitors are a significant creditor as to the deceased estate and, in other circumstances, where it appears that the solicitor had obtained an assignment of the beneficiaries’ prospective interest in the estate apparently in seeking security for his outstanding costs.
Much was said about those circumstances during the course of interlocutory argument and the issues were ultimately resolved with the solicitor providing to this Court a signed undertaking (Exh “…H”) in the following terms:
John Maait hereby undertakes not to seek to enforce a Deed entered into by Mr Maait and [Mr D Roland] and [Mr N Roland] dated 11 August 2017 or otherwise receive any monies from the Administrator of the Estate of Mr Roland deceased other than in accordance with Order 7 of the orders of the Supreme Court of New South Wales of 15 March 2019 and provide a copy of this undertaking to the testamentary beneficiaries of the estate and the Supreme Court.
The Substitution Application
Nygh J in Strelys & Strelys; Lukaitis (Executor) [1988] FamCA 1 sitting as part of the Full Court, said:
...it is clear that in Australia at least... proceedings for property settlement under sec. 79 abate on the death of one of the parties... The reason for this is that the claim has been regarded as purely personal and incapable of surviving for the benefit of the estate. Section 79(8)(a) allows the proceedings to be continued by the substitution of the legal personal representative of the deceased. In my view, until and unless such a person is appointed, the proceedings are, as it were, suspended and no legally effective step can be taken either to continue or discontinue them.
In Strelys, G.F. and Strelys, E.R. [1987] FamCA 54 Frerico J concluded that Probate was not necessary, because the executor derived authority from the Will, as opposed to the Grant of Probate. He stated for the purposes of the Family Law Act “a grant of probate is not a prerequisite to the making of an order substituting the Legal Personal Representative for the deceased”.
In S (deceased) & S [2002] FamCA 1281 Mullane J at [25] said:
Subsection 79(8) does not give power to this Court to appoint someone as “legal personal representative” of a deceased party to be substituted to continue the proceedings or to be the person against whom the proceedings may be continued. It does not appear to contemplate an appointment by the Court of a representative like a guardian ad litem, for example. Indeed, par 79(8)(a) says:
“The applicable Rules of Court may make provision in relation to the substitution of the legal personal representative as a party to the proceedings.”
Clearly from the language of the section and the authorities, the person who is to be substituted must already be the legal personal representative of the deceased. This Court has no power to appoint a person as legal personal representative of the deceased.
Cronin J in Murdoch & Brown (No 2) [2013] FamCA 732 said:
Rule 6.15 of the Family Law Rules requires the legal personal representative to ask for procedural orders, and the Court may substitute the legal personal representative for the deceased, as a party. Nothing in that rule alters the legal position of the legal personal representative obtaining his or her rights from the will. Procedural orders are, in effect, an authentication of the legal personal representative’s position. Thus, it is not critical that probate be granted unless a party joins issue with a legal personal representative as to their title under the will. There have been examples of this Court where this Court has adjourned proceedings to await a grant of probate, but they refer to the executors regularising their legal position. See, for example, Korsky & Bright & Anor [2007] FamCA 245, and specifically at paragraph 20.
The suspension of the proceedings, as I have indicated, however, does not obviate the fact that the executor still has the right, the entitlement, and the responsibility from the will, pending the authentication by the probate. As such, nothing I have found suggests that a legal personal representative cannot be appointed before probate is granted, provided there is no suggestion that the other party joins issue with the entitlement under the will. …
In the present circumstances of course the applicant is not the deceased’s executor deriving his position as legal personal representative from the deceased’s will.
The applicant has obtained from the Supreme Court a limited grant of administration specifically for the purpose of the s 79 proceedings in this Court.
The discretion in rule 6.15 as to “may” imports considerations of being proper or appropriate in the circumstances. The legal representative is obliged by reason of Rule 6.15(2) that provides:
If a party dies, the other party or the legal personal representative must ask the court for procedural orders in relation to the future conduct of the case.
In the absence of any application for procedural orders by the wife in this matter (of which there is none), the legal representative is required to make an application for procedural orders. His standing is by reason of his appointment by order of the Supreme Court of New South Wales. The validity of such order is not in dispute. In such a circumstance it is proper on that basis that he be substituted for the deceased.
It is, otherwise, proper to have the legal representative substituted by reason of the issues for determination. The wife gives a short history of the parties’ relationship.
The wife is aged 66. The husband died in 2016 then aged 79.
The parties married in 2004 and separated in June 2012 when the husband left the then matrimonial home.
At the time of his death, the husband had little or no estate save for his interest in the present proceedings.
The parties commenced cohabitation in early 2003 at about the time the wife purchased a property at G Street, Suburb H.
At the commencement of cohabitation the wife had assets of some significance including an investment property home unit at Suburb K purchased by her in 1999, the property at Suburb H although subject to a mortgage encumbrance in excess of its purchase price, funds owing to her in the sum of $50,000 by her son, a motor vehicle, some savings, personalty and superannuation.
At the commencement of cohabitation the husband had a joint interest in a home at Suburb K with his former wife having a value of about $1.7 million, a superannuation benefit of $700 per week in the pension payment phase, a car and shares in three private companies.
In July 2003 the wife commenced working for the husband who was engaged in management of strata schemes.
The wife asserts that she and the husband kept their finances separate and that the husband made little financial contribution to their household.
However, the company, M Pty Ltd, was incorporated with the husband and wife as directors and shareholders. That company subsequently undertook maintenance, management and administration of various strata title units. Both parties worked in the company. The wife asserts that during cohabitation funds in excess of $1 million were paid by the husband into the company, Huonbrae Pty Ltd from various sources including the strata management company.
About 18 months after cohabitation the wife asserts that the husband received about $400,000 by way of property settlement from his previous marriage with those funds being applied by him to the purchase of public company shares using a margin loan facility.
In 2008 the husband and wife established a self-managed superannuation fund; the Roland Argento Superannuation Fund. Both parties were members and trustees of the fund. The wife asserts that she rolled her then superannuation entitlement into the fund. The assets of the fund comprise publicly listed shares.
In 2009 the wife purchased from her son property at L Street, Suburb J. She presently retains that property which is subject to a mortgage of about $288,000.
Shortly prior to separation and in late October 2011 the wife sold her investment home unit at Suburb K for about $600,000 and gifted the net proceeds of sale to her daughter.
The wife retains her Suburb H property.
The husband commenced the present s 79 proceedings in June 2013. The wife asserts that at about that time the husband withdrew funds from the company trust account that held monies on behalf of its strata clients.
In January 2014 NSW Fair Trading appointed managers to the company and in June 2015 receivers. The wife asserts that the husband had withdrawn some $73,330.86 from the company trust funds and that she subsequently reimbursed those funds from her own money. The circumstances of the company were investigated by NSW Department of Fair Trading with costs of the investigation totalling more than $1 million. These costs were substantially funded from the sale of the company’s business in July 2014 for $760,000.
The receiver currently expects available funds to be about $270,000. The self-managed superannuation fund is expected to have funds available of about $118,000. (see Exh “D”)
As a consequence of investigations the husband strata management licence was cancelled in 2014. The wife retains her licence.
The liquidation of the company remains to be completed and it is expected that that liquidation will be finalised in the near future.
Clearly, there are significant issues for determination in terms of the parties’ contributions both financial and non-financial in the context of the present s 79 proceedings. As such, it is proper and appropriate that the administrator of the husband’s estate be substituted for the deceased husband in order that the proceedings may be brought to resolution by way of settlement for contested hearing.
Otherwise, the wife makes complaint as to Mr F himself notwithstanding his formal appointment by the Supreme Court of New South Wales for the purposes of these proceedings. She complains that previously Mr F had deposed to the wife’s refusal to provide to him, as the parties’ accountant, various company records including bank statements and trust account statements. It seems common ground that at about that time Mr F’s engagement with the parties on a professional basis ceased.
The wife provides no evidence as to any confidential information that may have come to the knowledge of Mr F that may compromise his position as administrator of the husband’s estate in the context of these proceedings.
By reason of the above discussion, it is patently clear that the Court should exercise its discretion and appoint Mr F in substitution for the deceased husband in these proceedings. Orders will be made accordingly.
Consequent upon an order substituting Mr F for the deceased, the wife seeks an order for security for costs. This is sought notwithstanding her clear evidence the deceased husband has no estate save for any prospective property adjustment order in the primary proceedings.
The Full Court considered security for costs in Luadaka & Luadaka (1998) FamCA 1520 (See also Limousin & Limousin (Security for Costs) [2007] FamCA 1179).
Whilst the presumption as to each party bear their own costs is implicit in s 117, the proceedings here involve a party, Mr F, who is in effect a stranger to the marriage.
The purpose of security for costs is to ensure that the unsuccessful party does not occasion injustice to the other. In this matter the concern would be to ensure that the present application, so far as it relates to the wife, if unsuccessful, does not render to her a financial injustice.
The Court should consider:
a) The means of the unsuccessful party to satisfy an order for costs:
Mr F has no personal means in his role as administrator of the deceased estate. Indeed, he has an indemnity against the estate where any liability is properly incurred.
b) The prospects of success:
The issue here is the estate’s prospects of success as against the wife by reason of property adjustment. There is at least on a prima facie level a serious issue to be tried. Clearly there are joint funds in the superannuation accounts and perhaps resulting from the company liquidation where orders will be necessary to resolve their disposition.
c) Whether the applicant’s claim is bona fide, genuine and not trivial, vexatious or a sham.
For the reasons discussed above there is a bona fide question to be determined.
d) Whether an order for security would be oppressive or stifle the litigation.
The wife is well aware of the circumstances of her husband’s estate. Clearly any order for security as sought would be unable to be satisfied and stifle the litigation.
e) The difficulties of enforcing any order for costs:
Any order for costs as against the estate would be only enforceable if the estate was successful in obtaining a property order.
f) Any other circumstance:
The wife will incur costs in these proceedings should they proceed to a hearing. Yet the appointment of the administrator may facilitate compromise and settlement.
Considerations above result in the application for security for costs being dismissed.
Orders will be made accordingly.
I certify that the preceding fifty-six (56) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 15 August 2019.
Associate:
Date: 15 August 2019
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