Tierney & Tierney
[2023] FedCFamC1F 315
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Tierney & Tierney [2023] FedCFamC1F 315
File number(s): MLC 2927 of 2020 Judgment of: CARTER J Date of judgment: 27 April 2023 Catchwords: FAMILY LAW – PROPERTY – partial property settlement application sought by the wife
FAMILY LAW – COSTS – where the wife sought costs against the husband on an indemnity basis
Legislation: Family Law Act 1975 (Cth) ss 75, 79, 117 Cases cited: Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225
D & D (Costs) (No. 2) (2010) FLC 93-435
Kohan and Kohan (1993) FLC 92-340
Limousin & Limousin (Costs) [2007] 38 Fam LR 478
Munday v Bowman (1997) FLC 92-784
Strahan & Strahan (Interim Property Orders) (2009) 241 FLR 1
Yunghanns v Yunghanns (2000) FLC 93-029
Division: Division 1 First Instance Number of paragraphs: 57 Date of hearing: 27 March 2023 Place: Melbourne Counsel for the Applicant: Martin Bartfeld KC Counsel for the Applicant: Dara Isaacson Solicitor for the Applicant: Sebastian Rubera Lawyers Counsel for the Respondent: Pierre Testart Solicitor for the Respondent: Collards Solicitors ORDERS
MLC 2927 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR TIERNEY
Applicant
AND: MS TIERNEY
Respondent
order made by:
CARTER J
DATE OF ORDER:
27 April 2023
THE COURT ORDERS THAT:
1.The oral application made on 27 March 2023 by the wife as to costs and for a partial property settlement be dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUSTICE CARTER
INTRODUCTION
This matter was listed for a final hearing to commence on 27 March 2023. It could not proceed on the basis that the valuation of various entities had not been completed. I was advised that Ms L – who had been engaged to complete the valuations – said she was over committed and unable to complete any valuation prior to 5 April 2023, at the earliest. Ms L said that was a tentative timetable, and she could not confirm her report would be completed by that time.
My chambers were made aware on around 20 March 2023 that the matter would be unable to proceed pending the finalisation of valuations. At that stage neither the property valuations nor the valuations of various entities had been completed.
The parties were provided with the opportunity for orders to be made in chambers simply vacating the trial and relisting to a later date, without the need for any appearances, if that was a matter of consent. However, the wife did not consent to that course of action. Accordingly the matter remained listed.
The parties were able to use part of the day on 27 March 2023 to have some discussions. They were unable to resolve the dispute.
I understand the substantial matters to which the parties cannot agree include:
(a)the appropriate assessment of the parties’ contributions, including the initial contributions made by the husband, as well as an assessment of contributions made during the relationship and post separation;
(b)whether any, and if so what adjustment is appropriate to be made under s 75(2) of the Family Law Act 1975 (Cth) (“the Act”);
(c)the manner in which the wife should be paid her entitlement;
(d)whether any capital gains tax should be included as a liability in the pool where there is no imminent sale of property; and
(e)how the husband’s significant tax liability owing to the Australian Taxation Office (“the ATO”), arising out of recent voluntary disclosures made by him, should be treated.
At the hearing on 27 March 2023, counsel on behalf of the wife made an oral application:
(a)for a part property distribution; and
(b)for the husband to pay the wife’s costs thrown away of preparation for the 27 March 2023 hearing, on an indemnity basis.
The husband initially sought costs against the wife in circumstances where her refusal to consent to chambers orders relisting the matter resulted in the matter remaining listed that day, at substantial costs to the parties. Sensibly, that application was withdrawn as the parties had used the opportunity to engage in discussions at Court.
BACKGROUND AND PROCEDURAL HISTORY
The parties’ separation and subsequent proceedings have been fraught. There have been several interim applications in these proceeding, including the wife’s successful application to restrain the husband from selling properties; an unsuccessful application by the husband to join a third party; and a successful application by the husband to sell a property in Western Australia. There have been costs orders made against the husband, and orders made reserving costs. There have been ongoing requests for, and orders made regarding discovery.
There are many factual disputes between the parties, which I cannot determine at this time. I will endeavour to set out the relevant factual background in a way that is not controversial.
The parties’ relationship spanned approximately 18 or 19 years, and produced two children. The parties do not agree as to when their relationship commenced, or when they finally separated. As of January 2019 it is understood that the relationship had definitely come to an end.
The husband ran a business throughout the course of the relationship, and continues to do so post separation. The husband also bought and sold a number of properties, before, during and after the parties’ relationship, through a number of different entities. According to his financial statement the husband derives an income of approximately $658,000 per annum.
The wife is a director of M Company. According to her Financial Statement filed 21 March 2023, the wife earns $144,508 per annum. That document also records the wife has in excess of $198,000 in her bank accounts, and her solicitors have $90,156 on trust on account of costs and disbursements.
The former matrimonial home was sold in late 2018/early 2019 as was another property in Suburb C. There is a dispute as to whether the sale of those properties was agreed between the parties, or a unilateral decision made by the husband, who pressured the wife into the sales. Part of the proceeds of the sales were placed on trust, and part of the funds were re-invested.
In June 2020 orders were made by consent for the wife to receive $200,000 from the proceeds of sale of the former matrimonial home, of which $40,636 was to be applied towards her tax liability for the year ended June 2018. The characterisation of the payment to the wife was left to be determined at trial. The husband received $48,780 similarly to be characterised at trial. At that time the wife stopped receiving payments from the business.
On 18 May 2021 her Honour Justice Johns made orders by consent restraining the husband from dealing with the proceeds of sale of the Suburb C property, and those funds were to be placed in trust. Further consent orders were made restraining other funds in a term deposit being disbursed.
The parties attempted mediation in 2021 and in 2022, but were unable to resolve their dispute.
On 6 July 2022 further orders were made by a Senior Judicial Registrar permitting the husband to sell a property, N Street, Suburb P, Western Australia (“the Suburb P property”), with the proceeds of same to be held on trust. At that time further orders were made regarding discovery and valuations which had not yet been completed.
On 22 August 2022 his Honour Chief Justice Alstergren set the matter down for a final hearing before me to commence on 27 March 2023.
As already indicated, the matter could not commence on that day. It has been adjourned to 27 November 2023. The parties are to attend mediation once the valuation report from Ms L has been completed.
In early March 2023 the husband made a voluntary disclosure regarding the use of Division 7A loans between the financial years 2018 to 2021 inclusive. This has triggered a significant tax liability of around $1,774,000, and the husband anticipates that there may be further taxes and penalties imposed by the ATO which have not yet been determined. There is some dispute as how this liability should be dealt with.
It is part of the husband’s case that the proceeds of sale of the Suburb P property should not be divided at this stage, but rather quarantined to be applied in due course to any further taxes and penalties imposed by the ATO as a result of his voluntary disclosure.
THE WIFE’S PART PROPERTY APPLICATION
The wife pressed an oral application – unsupported by an affidavit – for a partial division of property to her pursuant to s 79 of the Act, of $1,797,423 as follows:
(a)the sum of $511,813 currently held in a term deposit with the National Australia Bank;
(b)the sum of $599,599 currently held on trust by the conveyancer; and
(c)the sum of $686,011 currently held on trust by the husband’s solicitors (being the proceeds of sale of the Suburb P property).
That application was opposed by the husband.
As best I understand the wife’s case, she asserts the pool of assets is around $11,000,000. The husband asserts the pool is around half that, when various liabilities are factored in. I note the wife seeks an equal division of the pool. The husband proposes that an appropriate division is 40% to the wife and 60% to him. On the wife’s formulation, she would be entitled to receive at final settlement well in excess of the amount she is seeking be distributed to her by way of a part property determination. On the husband’s formulation, if the funds she has already received are treated as part property, she would be entitled to receive an amount not dissimilar to (and potentially less than) the total amount sought by her at this interim stage.
The Full Court authorities make it clear that when considering an interim property application the Court must adopt a two stage process. The first, or procedural stage, requires me to determine whether it is appropriate exercise the power. If I decide it is appropriate to do so, the second, or substantive stage requires me to consider how that power ought be exercised. At that second stage I must consider the factors under s 79 that are relevant to the exercise of that power.
As their Honours Boland and O’Ryan JJ said in Strahan & Strahan (Interim Property Orders) (2009) 241 FLR 1 (”Strahan”) at [118]:
There are two stages to the hearing of such an application where the power is to be exercised pursuant to s 80(1)(h) of the Act. This is recognised by the fact that although the power under s 79 should ordinarily be exercised on a once only basis, “circumstances may arise before there can be a final hearing” where the power is exercised. Thus the first step is to resolve whether to exercise the power before a final hearing and if it is resolved to do so then the second step involves the exercise of that power.
I must also consider what the authorities have referred to as the ‘adjustment issue’ or the ‘claw back issue’.
In considering whether to exercise the power to make an interim property order (the first stage), the interests of justice must be my overarching consideration.
The party seeking the order is not required to establish compelling reasons for the order. Boland and O’Ryan JJ in Strahan at [132] stated:
It is not necessary to establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power. In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.
Their Honours in Strahan went on to say at [139]:
We also emphasise that in order to establish an appropriate case for an interim property settlement order more is required than the mere fact that upon a final hearing the applicant would receive the property being sought (or an amount in excess of the funds being sought) from the other party.
Thackray J emphasised this at [224], setting out the reasons why “the Court should maintain its traditional stance that there should ordinarily be only one hearing of disputes concerning alteration of property issues”. His Honour said:
In every defended case one of the parties will claim they are entitled to a payment or transfer of property from the other party. In many cases the other party will acknowledge they are likely to be ordered to transfer property or make a payment. That, however, could not of itself be sufficient to make it appropriate for the Court to make an interim order. Circumstances may change radically during the course of proceedings, as has been seen with recent severe fluctuations in the market. The personal circumstances of the parties may change dramatically. Furthermore, although a party may anticipate ultimately being ordered to transfer property or make a payment, they may legitimately expect to obtain an order for costs against the other party which will be satisfied from funds or property that would otherwise have been transferred.
Accordingly, I must first be satisfied that it is “appropriate” to make the order sought. Do the interests of justice require it, or is it a proper case in which to make such an interim order? It is necessary to do justice? In terms of the considerations that might be identified as relevant to the exercise of my discretion, Boland and O’Ryan JJ in Strahan referred to the circumstances where it might be appropriate for the power to be exercised as including where:
·it is agreed by both parties;
·it is urgent and necessary to avoid injustice; and
·one party requires funds to meet the costs of litigation, in circumstances where injustice may be caused if funds are not made available.
That is not, of course, an exhaustive list.
The wife did not, in my view, articulate why a part property order would be appropriate beyond an assertion that she would be entitled to at least that amount sought at the final determination.
I note the wife is in paid employment, and earning a reasonable income. She does not identify pressing liabilities that need to be satisfied. She has access to in excess of $198,000 across a number of bank accounts. Her solicitors have $90,000 in their trust account to meet her costs and disbursements.
I understand the wife says the husband’s behaviour as a litigant has drawn out these proceedings, and resulted in her paying more in legal fees than she otherwise would have paid. However, in my view those matters do not materially assist my determination at this procedural stage. This is particularly so as there is a dispute between the parties as to whether the husband has or has not discharged his obligations to provide disclosure. At any rate, those matters may be more properly argued in relation to a costs application.
In my view, the justice of the case does not favour an order being made for partial property at this stage – and the wife did not identify circumstances that in my view make it appropriate to give consideration to exercising the power to make an interim order.
Accordingly, I am of the view it is not appropriate to make the order sought, and the oral application is dismissed.
Although not strictly relevant to my consideration, I note further that the amount sought by the wife is not a trifling amount. It may be more appropriate for such an application to be brought in the usual manner – with the timely filing of an Application in a Proceeding, supported by affidavit, and with the other party on proper notice.
THE WIFE’S COSTS APPLICATION
The wife made an oral application for costs on an indemnity basis. No costs agreement was initially provided but that has now been forwarded to chambers. The wife’s costs application was opposed by the husband.
The general rule in relation to costs is that each party will bear their own. That is set out in s 117(1) of the Act. However, that rule is subject to the provisions of s 117(2). That subsection provides that a court may make such order for costs as it considers just if “the court is of opinion that there are circumstances that justify it in doing so…”
Subsections 117(2A)(a)-(g) of the Act set out the matters the Court must consider in determining whether to exercise its discretion and make an order as to costs. No one factor must be present, and no particular factor is to be given more or less weight than any other. The factors to which the court must have regard 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.
As already set out, the wife sought indemnity costs. The authorities make it clear that it will only be in exceptional circumstances that a costs order will depart from the general rule that costs – if awarded at all – are calculated on a party/party basis (Kohan and Kohan (1993) FLC 92-340; D & D (Costs) (No. 2) (2010) FLC 93-435; Limousin & Limousin (Costs) [2007] 38 Fam LR 478). Accordingly, the Court must be satisfied that there is something special or unusual in the matter that might justify the awarding of indemnity costs before determining to exercise its discretion to do so.
Sheppard J provided a number of examples of the types of circumstances that might attract an order for indemnity costs in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225. In Munday v Bowman (1997) FLC 92-784, at 84,660, Holden CJ drew from his Honour’s decision the following examples:
(a) Where it appears that an action has been commenced or continued in circumstances where a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts…
(b) Making allegations of fraud, knowing them to be false, and the making of irrelevant allegations of fraud…
(c) Evidence of particular misconduct causing loss of time to the court and to other parties…
(d) The making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions…
(e) An imprudent refusal of an offer to compromise.
The categories of circumstances which enliven the discretion to award indemnity costs are not closed: see e.g. Yunghanns v Yunghanns (2000) FLC 93-029. However, as indicated, the case law makes it clear that making an order for indemnity costs represents a very significant departure from the usual standard.
The thrust of the submissions by counsel for the wife focussed on the assertion that the husband’s failure to provide documents in reasonable time frame to the wife’s representatives, and also to the valuer had obstructed and delayed the proceedings. It was asserted the husband had “dragged his feet” throughout the proceedings, making only partial disclosure, and providing documents in “dribs and drabs” to the valuer. He said the husband had persistently not complied with orders for the production of documents. Counsel for the wife described the husband’s conduct in this regard as deficient and egregious, causing loss of time to the Court and costs to the wife.
Counsel for the wife submitted that the husband’s failure to provide documents to the valuer in a timely fashion had caused the delays in Ms L’s report being completed. He said if the husband had provided the documents as required, the valuation report would have been completed and the trial could have commenced.
Additionally, it was said the husband’s late voluntary disclosure also affected the ability of Ms L to complete her report. Counsel for the wife submitted the husband could have made that voluntary disclosure several years ago. Instead, by making that disclosure only a handful of weeks before the trial was due to commence, that impacted the valuation report, requiring the trial to be further delayed.
Counsel for the wife further noted his client does not have the ability to provide the documents to the valuer, which are all in the husband’s control. He said his client has expended significant funds in legal fees seeking disclosure so that she can ready her case, which has been delayed as a result of the husband’s failure to provide documents in an appropriate manner.
Accordingly, it was argued, the husband’s tardiness has resulted in the trial having to be adjourned. In those circumstances it was argued that it was a reasonable application for the wife to make that the husband meet her costs thrown away of preparing for the trial due to commence on 27 March 2023 on an indemnity basis.
The husband opposed any costs order being made. It was submitted that the matter could have been administratively adjourned the week before the hearing – with no costs being incurred for the hearing on 27 March 2023 by either party. That is, the hearing on 27 March 2023 was totally unnecessary. However, the wife had insisted on the matter remaining listed.
The parties advised chambers as early as 20 March 2023 that the valuations would not be completed.
I agree with the submissions made by senior counsel for the husband – that it would be premature to determine a costs application at this stage. The conduct of the husband – and whether he has been tardy in the provision of documents, or behaved poorly as a litigant such that his behaviour caused or was instrumental in causing the trial to be vacated – is not a matter that can be determined at this interim stage. That is particularly so in the absence of a proper application supported by an affidavit that carefully outlines the evidence to support the application. I note further that part of the husband’s case is that a former employee deliberately destroyed or corrupted documents, making it difficult to retrieve and provide them to the other party, rather than him deliberately delaying the provision of documents to drag out proceedings. Again, that is not a matter that I could determine at this stage.
I note further that Ms L’s letter on 23 March 2023 to the parties does not identify the husband’s late provision of documents or recent voluntary disclosure to the ATO as having affected her ability to prepare her report. Rather, she referred to having to complete a loss of earnings report in another matter, and having to attend a hearing in the Magistrates’ Court for a third matter, and therefore not having the time to complete her report in the extant case.
In terms of the s 117(2A) considerations, I note neither party appears to be in significantly strained financial circumstances. Both are in employment and appear able to meet their needs. Neither party is in receipt of legal aid. The conduct of the Husband as a litigant is very much in dispute. No doubt this will be explored at a final hearing. I could not be satisfied on the evidence currently before me that the trial had to be adjourned as a result of the failure of one party to comply with previous orders. Subsections (e) is not applicable – the husband sought the trial be adjourned and it was. I was not advised about offers made in writing.
In all the circumstances, it does not seem to me that there is a proper basis to make an order for indemnity costs, or otherwise at this time. There is nothing special or unusual in the matter that justifies the court making an award for indemnity costs, and nothing that justifies the court in departing from the usual rule that each party bears his or her own costs.
Accordingly, I dismiss the wife’s oral application for costs.
I certify that the preceding fifty-seven (57) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Carter. Associate:
Dated: 27 April 2023
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