Scott & Scott
[2003] FamCA 526
•19 May 2003
[2003] FamCA 526
FAMILY LAW ACT 1975
| IN THE FAMILY COURT OF AUSTRALIA AT SYDNEY | No. SY6811 of 2001 |
| IN THE MARRIAGE OF | SCOTT Jack Edward Applicant Husband |
| AND | SCOTT Eleanor May Respondent Wife |
| Coram: | The Hon. Justice Rose |
| Date of Hearing: | 9 & 19 May 2003 |
| Date of Judgment: | 19 May 2003 |
| Date of Orders: | 19 May 2003 |
REASONS FOR JUDGMENT
THE HONOURABLE JUSTICE ROSE
| Appearances: | Mr Mater, Counsel instructed by Michael Conley, Solicitors, |
| Mr Richardson, Senior Counsel instructed by Paul & Paul, Solicitors, |
SCOTT AND SCOTT
SYF6811 of 2001
Date of hearing: 9 & 19 May 2003
Date of judgment: 19 May 2003
PRACTICE AND PROCEDURE – INTERIM COSTS – application to set aside subpoenae to produce documents – abuse of process – whether such subpoenae are valid in circumstances where previous subpoenae in the same terms directed to the same witnesses have been set aside by a Registrar – whether the issues previously determined are re-litigated – INTERIM COSTS – lack of current evidence of the appellant’s financial circumstances.
Important cases: Walton v Gardiner (1993) 177 CLR 373 at 393; Rippon v Chillcox Pty Limited & Ors (2001) 53 NSWSLR 198; State Bank of New South Wales v Stenhouse (1997) Aust. Tort Reports 81-423 at 64,077; Penfold v Penfold (1980) FLC 579; Poletti and Poletti (1991-1992) 15 Fam LR 794 at 798.
INTRODUCTION
By his Application filed 14 November 2002 Jack Edward Scott (who for convenience I shall refer to as “the husband”) sought orders in paragraphs 1 and 2 against the wife for interim costs of $132,600, and that the husband apply that amount in payment of certain specific costs and disbursements in the course of preparation for the hearing of the substantive proceedings.
The husband also sought an order in paragraph 3 of his application, namely:
“That the costs be included as part of the Property Settlement the Husband may receive, pursuant to his Application for Final Orders, except that this Order shall not effect any other Order made by this Court, pursuant to Section 117 of the Family Law Act.”
It was properly conceded by his counsel that the last-mentioned order sought was an order for interim or partial property settlement. The controversy as to the correct description of such an order was not the subject of submissions as the order sought was not pressed.
The respondent Eleanor May Scott (who for convenience I shall refer to as “the wife”) sought an order that the husband’s application be dismissed.
Leave was granted unopposed for the wife’s parents Joan Elizabeth Downes and Robert John Frederick Downes (“the wife’s parents”) to make an oral application for orders setting aside part of the subpoenae to produce documents issued 1 May 2003 at the request of the husband requiring each of them to produce:
“Originals and/or copies of all current and past wills, codicils, testamentary dispositions and other documents evidencing dispositions by you and to be made by you.”
Only the “past” wills and other documents called for were the subject of challenge.
That application is implicitly made pursuant to Order 28 rule 7(1) of the Family Law Rules.
The application of the wife’s parents was contested by the husband.
At the commencement of the hearing I was informed by counsel that the foreshadowed application by the wife in relation to discovery would not be pressed.
HISTORICAL BACKGROUND
The following are brief relevant historical matters.
The parties were married on 19 November 1983.
They separated at the end of the year 2000 and have lived separate and apart from each other since that time.
There are three children of the marriage aged 15, 14 and 11 years of age respectively. The three children live with the wife.
On 21 December 2001 the wife filed an application seeking a mandatory injunction against the husband to pay certain taxation liabilities on her behalf, a declaration that each party is entitled to all property in the respective names or possession and an order that the husband pay the wife’s costs.
The husband opposed the relief sought by the wife in the substantive proceedings. He seeks orders for property settlement as set forth in his response filed 1 February 2002. He also seeks contact orders.
On 16 October 2002 Registrar Henderson made an order setting aside part of the subpoenae to produce documents issued at the request of the husband and directed to each of Joan Downes and Robert John Frederick Downes. Those subpoenae are in the same terms as the subpoenae the subject of these proceedings. In addition, an order was made providing for inspection of the remainder of documents produced in accordance with those subpoenae.
THE HUSBAND’S APPLICATION
The power to make an order for interim costs is found in s 117(2). As with an application for a final order as to costs, the power is a discretionary one requiring a finding of a circumstance that justifies the orders so sought and appropriate findings in relation to relevant matters pursuant to s 117(2A).[1]
[1] Penfold v Penfold (1980) FLC 579
In Poletti, the Full Court dispelled the controversy as to whether an order for payment of an amount of money by one party to the other for the purpose of enabling the latter to meet the cost of preparation for a substantive hearing can be supported under s 117(2) by answering that issue in the affirmative.[2] The Full Court then followed the High Court’s interpretation of s 117(2) in that the sub-section that:
“Requires a finding of justifying circumstances as an essential preliminary to the making of an order.”[3]
[2] Poletti (1991-1992) 15 Fam LR 794 at 798
[3] ibid
The Full Court in Poletti supported the trial Judge’s approach to making an order, in its view in effect for interim costs based on the factual issue of whether the wife in that case required “an immediate infusion of funds” having regard to the “funds available to her”.[4] The positive finding in relation to that matter was regarded by the Full Court as a justifying circumstance that attracted s 117(2).
[4] ibid, pp 796, 798-799
The thrust of the husband’s case in these proceedings is that he has insufficient funds to meet the reasonable costs of preparation for the substantive hearing. It is further contended by him that in those circumstances an order should be made against the wife who has ample financial resources to meet such an order.
Accordingly, it is critical to examine the evidence of the husband’s financial circumstances. I might add that the issue of whether the husband had demonstrated a prima facie case for property settlement whilst in contention, did not lie at the forefront of counsel’s submissions.
The evidence on behalf of the husband was that the fees incurred and likely to be incurred for his solicitor and junior counsel amounted to $90,100. He had incurred valuation fees of $10,000 with the prospect of incurring a further amount of $130,600 for that purpose. His expert accountant estimated his fees for preparation of a report in relation to the wife's interest in various commercial entities and attending Court to give evidence will be an amount of approximately $17,500. These amounts total about $120,000. In addition the prospect was raised of briefing senior counsel on behalf of the husband. No submission was made as to why such a brief was justified.
The net property of the parties as submitted by senior counsel for the wife is $943,747, subject to the value of the husband’s entitlements in the United States of America social security and retirement funds and the wife’s interest, if it can be valued, in the Brownlow Hill Trust (“the BH Trust), the Downes Investment Management Trust (“the DIM Trust”) and the Downes Operating Trust (“the DO Trust”). The wife is one of a number of potential discretionary objects of those trusts. There is no evidence before me that she exercises or potentially can exercise de jure or de facto control of any of such entities.
In those circumstances, I am not satisfied that it is reasonable to incur legal costs and disbursements of the magnitude referred to. However, I accept that the husband’s costs are likely to be substantial even though I cannot quantify them. A prospective hearing of five days with necessary preparation and briefing of counsel is sufficient to justify my conclusion.
Turning now to the critical issue of the husband’s financial circumstances. They are set out in his Amended Financial Statement sworn 1 November 2002. He reveals income of $462 per week gross almost totally derived from his solely owned company Australian Aerospace Consulting Pty Ltd (“the company”). The company is engaged in aerospace consulting as its name suggests. Note 3 to the husband’s amended financial statement states that the company had a gross income of $25,658 for the financial year ending 30 June 2002. Exhibit 4, the Australian security and investments search as at 9 May 2003, reveals that the company was incorporated on 17 May 2002. If the company commenced trading on that date then it generated that gross income over six weeks.
In his amended financial statement the husband revealed gross assets of $47,900 and liabilities including legal fees totalling $66,500. The remainder of the husband’s evidence is contained in his two affidavits sworn 1 November 2002 and 3 March 2003. The husband has retirement accounts with AIM Funds. The latest statement of the funds is the quarterly statement as at 28 March 2002. It shows a value of $187,450.24. I accept that there are tax consequences in relation to any withdrawal.
The evidence is not clear regarding the grounds upon which withdrawals may be made. I am prepared to accept that it may be financially onerous for the husband to make a withdrawal given his age and being engaged in full time employment. The evidence does not enable me to be more precise.
It is apparent that the evidence of the husband’s income, property and liabilities is approximately six months out of date. His only significant source of income is from the company. Its financial position so far as the evidence is concerned is limited to about the last six weeks in the financial year ended 30 June 2002 approximately 11 months ago. No attempt was made by the husband to bring that evidence up to date, notwithstanding that he swore an affidavit about two months ago on 3 March 2003. The only precise evidence of his gross turnover is that previously referred to by me. I am not able to make any findings as to husband’s current financial circumstances. The reason is simple. The evidence of those matters is woefully out of date as is apparent from my description as set forth in earlier parts of this judgment. Yet it is the limits of the husband’s current financial circumstances that are fundamental to the success of his case in establishing a circumstance that may justify an order for interim costs being made in his favour.
Accordingly, I do not find that a circumstance has been established pursuant to s 117(2) for the purpose of potentially making an order for interim costs in favour of the husband. Therefore the husband’s application will be dismissed.
APPLICATION TO SET ASIDE PART OF SUBPOENAE TO PRODUCE DOCUMENTS ISSUED 1 MAY 2003
The subpoenae the subject of challenge were issued on 1 May 2003. They are in identical terms to the subpoenae issued on 17 September 2002, also at the request of the husband and directed to the wife’s parents. As previously referred to, on 16 October 2002 Registrar Henderson made an order setting aside part of the subpoenae issued on 17 September 2002 by deleting the words “and past” appearing after the word “current” and before the word “will”.
An application to review that order was not made by the husband, nor was any application made for an extension of time to file an application for review.
In support of the application of the wife’s parents it is submitted that the subpoenae should be set aside in part as an abuse of process representing a re litigation of issues already determined in the proceedings or, alternatively that issue estoppel applies.
Counsel for the husband submitted that neither of those grounds relied upon apply as the terms of a past will of each of the wife’s parents may be relevant to the issue of control of the BH Trust, the existence of which was only disclosed by the wife subsequent to the order made on 16 October 2002.
The BH Trust was established by deed dated 7 August 1974. The trustee is Brownlow Hill Properties Pty Ltd, a company beneficially owned and controlled by the wife’s parents. The power of appointment for removal of a trustee and appointment of a new trustee is held by Robert John Frederick Downes. He is also the guardian named in the Deed and as such his consent is necessary for the purpose of the trustee exercising its power pursuant to clause 20 of the Deed to revoke, add or to vary all or any of the BH Trust created in the Deed.
In the circumstances there is no issue that the BH Trust is in reality currently controlled by the wife’s parents.
ABUSE OF PROCESS
The principles that apply were stated in the joint judgment of Mason CJ, Deane and Dawson JJ in Walton v Gardiner as follows:
“Yet again, proceedings before a Court should be stayed as an abuse of process if, notwithstanding that the circumstances do not rise to an estoppel, their continuance would be unjustifiably vexatious and oppressive for the reason that it is sought to litigate anew a case that has already been disposed of by earlier proceedings. (see eg Reishel v McGrath (1889) 14 All Cas 665 at 668; Connolly v Director of Public Prosecutions (1964) AC 1254 at 1361-1362) The jurisdiction of the superior court in such a case was correctly described by Lord Diplock in Hunter v Chief Constable of the West Midlands Police as ‘the inherent power which any Court of justice must possess to prevent misuse of its procedure in a way which although not inconsistent with the literal application of its procedural rules would nevertheless be manifestly unfair to a party to litigation before it or would otherwise bring the administration of justice into disrepute amongst right thinking people’.”[5]
[5] (1993) 177 CLR 373 at 393
The most recent exposition of the law upon this subject as far as I am aware, is contained in the judgment of Handley J of the New South Wales Court of Appeal in Rippon v Chillcox Pty Ltd & Ors.[6] Handley J cited with approval the judgment of Hunt J v Australian Broadcasting Corporation where his Honour considered that striking out pleadings or causes of actions as an abuse of process required that the issues sought to be re-litigated had previously been determined adversely to the party seeking to propound it again, that the issue was “necessarily determined” and important to the result. Gyles J in State Bank of New South Wales v Stenhouse held that “the guiding considerations are oppression and unfairness to the other party to the litigation and concerned for the integrity of the system of administration of justice”.[7]
[6] (2001) 53 NSWLR 198
[7] (1997) Aust Tort Reports 81-423 (64,077)
It is clear that pursuant to clause 20 of the Deed both the trustee and the wife’s parents must act in concert to so amend the Deed as to advance the potential entitlement of the wife as a beneficiary, or to otherwise repose in her any control of the BH Trust. It is not merely a matter of what was the testamentary disposition of Robert John Frederick Downes in a past will which in any event no longer has any legal effect. The fact that on 11 October 2001 Robert John Frederick Downes consented to an amendment of the Deed whereby the position of appointer was to be created by his testamentary disposition is of no relevance to the issue of the validity of the subpoena in relation to the production of a past will.
It is the current will that is relevant so far as that matter is concerned unless it is contended that that will is invalid. No such submission has been made. Presumably, it has been inspected pursuant to the orders made on 16 October 2002. No submission to the contrary has been made.
Having regard to my interpretation of clause 20 of the Deed and my finding referred to in the last preceding paragraph in relation to the relevance of any past will, I have concluded that this is a clear case of abuse of process whereby that part of the subpoena under challenge is:
“… vexatious and oppressive and for the reason that it is sought to litigate anew a case which has already been disposed of by earlier proceedings.”[8]
[8] Walton v Gardiner, supra
I do not propose to consider the issue of estoppel in view of my conclusion in relation to the issue of “abuse of process”.
APPLICATION FOR COSTS BY THE WIFE
In these proceedings application is made on behalf of the wife that the husband pay her costs of and incidental to the husband’s Application filed 14 November 2002.
In addition application is made by the wife’s parents for an order that the husband pay the costs incurred by them in relation to their application to set aside part of the subpoena to produce documents issued at the request of the husband and dated 1 May 2003.
I have given judgment today in which I held that the application of the husband filed 14 November 2002 was in fact fundamentally flawed in that a crucial matter going to the question of whether or not there was a circumstance that justified an order for costs being made namely, the husband’s current lack of sufficient funds to pay his reasonable costs of the preparation for the pending substantive hearing, had not been addressed by him in his evidence. In that regard, for the purpose of demonstrating his financial position he relied upon his Amended Statement of Financial circumstances sworn some five months ago on 1 November 2002 which in turn relied upon the income generated by the company controlled by him for a maximum of 6 weeks for the financial year ending 30 June 2002.
As a consequence, it was obvious that in those circumstances his current financial circumstances were not put before the Court, notwithstanding two Affidavits that he swore on 1 November 2002 and an Affidavit sworn recently on 3 March 2003. Notes 1 and 3 to his Amended Statement of Financial circumstances make it clear that the husband’s principal sources of income from his company reflected what purportedly was its gross turnover described as “for the financial year ended 30 June 2002”. I will return to that matter shortly.
In addition, I gave reasons for judgment for purpose of making orders as sought by the wife’s parents on the basis that the subpoena to which I have referred amounted to an abuse of process.
Section 117 of the Act sets out the general rule that each party bears his or her own cost. Section 117(2A) gives the Court a discretionary power to make an order for costs should there be a circumstance that justifies an order being so made. In the event that there is such a circumstance then the Court must also consider the matters that are relevant pursuant to s 117(2A).
The case for the wife in relation to her application for costs is that the husband was wholly unsuccessful. In addition it is submitted that his lack of success in that regard was brought about by the failure to address the fundamental basis of his case namely, to put forward evidence of his current financial circumstances to demonstrate that he was indeed unable to have recourse to sufficient funds to meet his reasonable costs not only incurred to date, but to be incurred for the purpose of preparation for the substantive hearing.
The other matters referred to in s 117(2A) were not the subject of submissions by Mr Paul, solicitor for the wife.
When this matter commenced to be heard the husband was represented by an employed solicitor from his solicitor’s firm. It was obvious to me that the employed solicitor had little or no knowledge of the substance of the matter. Accordingly, in order to not unfairly prejudice the husband, I stood this matter down in the list to 11.45 am today to give an opportunity for the husband’s solicitor, who I was told was in the precincts of the Court, to appear and make submissions. That he has done.
The husband’s solicitor has sought that the application be adjourned to enable his client to put forward evidence of his current financial circumstances being a relevant matter to take into account pursuant to s 117(2A). He submitted that there has not been an opportunity for him to put forward his current financial circumstances as he has been overseas.
I do not propose to adjourn the application. I find the application for adjournment rather curious to say the least. The husband apparently gave instructions to his solicitor and counsel to enable his application for interim costs to proceed in his absence whilst he was overseas in circumstances where reliance was misplaced upon evidence of his financial circumstances which in part was 5 months old and otherwise was 11 months old. He was obviously content for the matter to proceed in those circumstances.
I have not received any evidence to persuade me that an adjournment is warranted. His solicitor has submitted that the husband might suffer an injustice if the matter was determined today in the absence of evidence of his current financial circumstances. I note that the husband has been represented at all material times by very experienced solicitor and counsel. It must have been obvious to them that not only was there was a risk in relation to not only a costs application being made, but that the manner in which the substantive case was presented and conducted left a considerable weakness in relation to the very basis upon which an order for interim costs was being sought.
It strikes me as being strange to say the least that for an application for interim costs no adjournment is sought even though there was not any evidence of his current financial circumstances, yet in order to resist an application for costs of the proceedings an adjournment is sought. In my view it smacks of an attempt at the last moment to rectify what should have been glaringly obvious to the husband and those advising him prior to the hearing which took place last week.
Litigation carries with it risks as to costs not only in this Court but in other Courts. I have to consider not only the husband but the other parties to the litigation especially in circumstances where I have dismissed the husband’s application for interim costs on the basis that a necessary part of his case was simply not met with the evidence that was presented on his behalf.
Accordingly, I will proceed with the hearing and the determination of the application for costs as to do otherwise will only incur further costs for all parties, not to mention taking away Court time which might otherwise have been used for parties who in all respects are and have been ready to proceed.
It is quite clear that under s 117(2A) the husband has been wholly unsuccessful.
In relation to his financial circumstances I have referred to the absence of his evidence of current financial circumstances which he has had ample opportunity to address. In relation to his absence overseas, I was not informed as to how long he had been absent overseas, or why he could not have addressed the obvious namely, evidence of his current financial circumstances.
I will take into account the evidence of the husband’s financial circumstances as best I can. They demonstrate that the husband receives a modest income and his liabilities exceed his assets. In addition he has very significant entitlements pursuant to the AIM Fund as referred to in the judgment. Otherwise, apart from the absence of legal aid, there did not appear to be any other matter raised by the solicitors for either party.
I have concluded that there should be an order for costs in favour of the wife. The basis for coming to that conclusion is that the husband’s application was wholly unsuccessful and failed to address a fundamental plank of the case that was being put on his behalf namely, the limitations of his financial circumstances as being such that they create an inability to meet the reasonable costs of further preparation for the hearing. That evidence was aged and obviously so.
I am in some doubt as to the husband’s ability to immediately comply with an order for costs. In the circumstances I will hear from the solicitors for the parties as to the possibility of me making an order whereby the terms upon which costs should be actually paid are determined by the trial Judge, or otherwise by agreement between the parties.
So far as the application for costs made by the wife’s parents, I have held as earlier referred to that the subpoena to produce documents issued on 1 May 2003 should be set aside in part. The circumstances which gave rise to that conclusion have been set out in my judgment and I do not propose to reiterate them. Suffice it to say that I held that the relevant subpoena was an attempt to re-litigate issues that had already been determined in October 2002.
APPLICATION FOR COSTS FOR THE THIRD PARTIES
Different considerations apply in that it is not usual for their financial circumstances to be put before the Court. I find that there is a circumstance that justifies an order for costs being made to which I have referred. The husband’s solicitor’s application for an adjournment is on the same basis as that previously made in relation to the wife’s application for costs. For the reasons that I have rejected that application in relation to her application for costs, I also reject it so far as the application for costs made by the wife’s parents.
I have heard submissions from the solicitors for the parties in relation to the terms upon which the proposed cost order will be made in relation to costs sought by the wife as well as the costs sought by the wife’s parents. So far as the wife is concerned, it emerged that there was agreement that the terms upon which actual payment of costs should be made should be decided by the trial Judge, or by agreement between the parties, whichever first occurs. With regard to the costs sought by the wife’s parents, there is agreement that the quantum be $1,000 payable within 5 months from today.
ORDERS
The orders I make are as follows:
1. That the Application of the husband filed 14 November 2002 be dismissed.
2.That each of the subpoenae to produce documents issued on 1 May 2003 directed to Joan Elizabeth Downes and Robert John Frederick Downes be set aside in part by omitting the words “and past” that appear after the word “current” in the first line.
3.That the husband pay the wife’s costs of and incidental to his Application filed 14 November 2002 as assessed and agreed upon or otherwise as taxed and that payment of such costs by the husband be on such terms and conditions as may be imposed by agreement between the parties or failing agreement as determined by the trial Judge.
4.That the husband pay the costs of Robert John Frederick Downes and Joan Elizabeth Downes in the agreed amount of $1,000 on or before 20 October 2003.
5.That the parties have leave to obtain a new Pre Trial Conference date for a date to be fixed after 1 August 2003.
6.That the proceedings be stood over for directions in the Deputy Registrar’s List on 2 June 2003 for the purpose of issuing a new Trial Notice.
I certify that the preceding 65 paragraphs
are a true copy of the reasons for judgment
delivered by the Hon. Justice Rose
……………………………..
Associate
Key Legal Topics
Areas of Law
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Civil Procedure
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Administrative Law
Legal Concepts
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Judicial Review
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Jurisdiction
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Standing
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Procedural Fairness
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Abuse of Process
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Costs
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