Tsiang & Wu (No 2)
[2023] FedCFamC1F 23
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Tsiang & Wu (No 2) [2023] FedCFamC1F 23
File number(s): SYC 1529 of 2016 Judgment of: ALTOBELLI J Date of judgment: 1 February 2023 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – Where the wife seeks leave to reopen and adduce further evidence – Where evidence was available but not relied upon – Where granting leave would be futile and not in the interests of justice – The wife’s application is dismissed.
FAMILY LAW – SECURITY FOR COSTS – Wife’s application for security for costs – Where the wife alleges there is a risk that the husband may dispose of the property – Where it is alleged the order would not be oppressive or stifle proceedings – Husband restrained from disposing of or dealing with the property.
FAMILY LAW – COSTS – Where husband seeks costs on an indemnity basis – Where the second respondent was wholly unsuccessful – Where the husband made multiple requests for document production – Where the requisite threshold for an award of indemnity costs has not been met – Costs ordered on a lump sum basis.
Legislation: Family Law Act 1975 (Cth) s 117
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 12.02, 12.13, 12.17
Cases cited: Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc (1981) 148 CLR 171; [1981] HCA 39
AMP Investments Pty Ltd v Trade Practices Commission and Ors (1983) 49 ALR 475; [1983] FCA 248
Colgate-Palmolive Company and Anor v Cussons Pty Limited (1993) 46 FCR 225; [1993] FCA 801
Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) & Fish & Another (2005) 33 Fam LR 123; [2005] FamCA 158
Kohan and Kohan (1993) FLC 92-340; [1992] FamCA 116
Live Board Holdings Pty Ltd v Cody Live Pty Ltd [2017] NSWCA 302
Malcher & Malcher (security for costs) (2017) FLC 93-803; [2017] FamCAFC 202
McDermott & McDermott and Ors [2016] FamCA 613
Medlon & Medlon (No. 6) (Indemnity Costs) (2015) FLC 93-664; [2015] FamCAFC 157
Mitty & Mitty and Ors (2010) 45 Fam LR 20; [2010] FamCAFC 256
Parke & The Estate of the Late A Parke (2016) FLC 93-748; [2016] FamCAFC 248
Penfold v Penfold (1980) 144 CLR 311; [1980] HCA 4
Phillips & Hansford (2020) FLC 93-94; [2020] FamCAFC 28
Re Taylor; ex parte NatWest Australia Bank Limited (1992) 37 FCR 194; [1992] FCA 296
Division: Division 1 First Instance Number of paragraphs: 72 Date of last submission/s: 9 December 2022 Date of hearing: 4 November 2022, 9 December 2022 Place: Sydney Counsel for the Applicant: Mr Cox SC on 4 November 2022, Mr Todd on 9 December 2022 Solicitor for the Applicant: Broaden Legal Counsel for the First Respondent: Mr Richardson SC with Mr Roche Solicitor for the First Respondent: Mills Oakley Lawyers Solicitor for the Second and Third Respondents: Juris Cor Legal ORDERS
SYC 1529 of 2016 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR TSIANG
Applicant
AND: MS WU
First Respondent
MR WU
Second Respondent
MR CAO
Third Respondent
order made by:
ALTOBELLI J
DATE OF ORDER:
1 February 2023
THE COURT ORDERS THAT:
1.The First Respondent wife’s Application in a Proceeding filed 22 November 2022 is dismissed.
2.The First Respondent wife’s Application in a Proceeding filed 10 August 2022 to vary the orders of the Full Court is dismissed.
3.The Applicant husband is restrained from disposing of, further encumbering, or otherwise dealing with the property at CC Street, Suburb Y NSW unless the parties agree in writing, or by way of Court order.
4.Within 28 days of the date of these orders, the Second Respondent must pay the costs of the Applicant husband, arising out of the Application in a Proceeding filed on 13 July 2022, fixed in the sum of $7,500.
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 Tsiang & Wu has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALTOBELLI J:
INTRODUCTION
By way of an Application in a Proceeding filed on 22 November 2022, the respondent wife in the substantive proceedings (“the wife”) sought leave to reopen proceedings which were heard on 4 November 2022 (for which the court reserved judgment). She sought to tender joint valuation reports (“the valuation reports”) of the properties located at M Street, Suburb N, O Street, Suburb P, and H Street, Suburb J (“the Suburb J property”). It is common ground that all of the valuation reports predated 4 November 2022 and were available to the wife.
The matter heard on 4 November 2022 was the wife’s Application in a Proceeding filed on 10 August 2022, and Response to an Application in a Proceeding filed on 13 September 2022 by the applicant husband in the substantive proceedings (“the husband”). After determining whether leave to reopen should be granted, the Court will determine the matter heard on 4 November 2022 and provide reasons for judgment in respect of both matters.
WIFE’S APPLICATION IN A PROCEEDING FILED ON 22 NOVEMBER 2022 FOR LEAVE TO REOPEN AND ADDUCE FURTHER EVIDENCE
Background
The wife’s Application in a Proceeding filed on 10 August 2022 sought to vary orders that the Full Court made on 31 July 2019, restraining the wife from dealing with the Suburb J property, and sought that the husband pay security for costs for the substantive proceedings between the parties in the sum of $630,000. In the alternative to the latter order, the wife proposed certain injunctions against the husband which would restrain dealings with his property at CC Street, Suburb Y (“the Suburb Y property”). The husband, in his Response to an Application in a Proceeding filed 13 September 2022, opposes the orders sought by the wife.
The wife’s submissions filed 1 November 2022 set out the orders sought, the documents relied on, and the submissions made in support. The case outline document filed on behalf of the husband on 2 November 2022 likewise sets out the orders sought, the documents relied on, and the submissions made in support. On 4 November 2022 both the wife and the husband were represented by senior counsel.
On 9 December 2022, submissions were made to the Court about whether leave should be granted to the wife to reopen proceedings heard on 4 November 2022 and to tender the valuation reports in question. The wife’s counsel, Mr Todd, submitted that these valuations were relevant to the issue of discharging the injunctions made against the wife by the Full Court. The evidence would support the wife’s contention that, in effect, even if the orders she proposed were made, there would be no prejudice to the husband, as the husband’s potential entitlement in the substantive proceedings would still be protected by virtue of the equity in the wife’s properties.
Applicable principles
Senior counsel for the husband referred the Court to the very useful decision of Foster J in McDermott & McDermott and Ors [2016] FamCA 613, where at [7]–[11] his Honour comprehensively summarised the relevant law:
Leave to Reopen: applicable principles
7.It is well settled that reopening of a case prior to delivery of judgment is an exception to, rather than the usual course of, a trial.
8. In Urban Transport Authority of NSW v Nweiser (1982) 28 NSWLR 471 at 478, Clarke JA (with whom Mahoney and Meagher JJA agreed) pointed to the relevance, in an application to reopen, of the question whether the interests of justice are better served by allowing or rejecting the application. His Honour observed that:
The principle which would guide the Court in determining whether to grant an application for leave to reopen is whether the interests of justice are better served by allowing or rejecting the application as the case may be. No doubt it is relevant to take account of a number of matters such as likely prejudice to the party resisting the application and the reasons why the evidence is not led in the first place.
9. In Australian Securities and Investments Commission v Rich [2006] NSWSC 826; 235 ALR 587 at [18], Austin J pointed to matters relevant to an application to reopen including:
a)The nature of the proceeding;
b)Whether the occasion for calling the further evidence ought reasonably to have been foreseen;
c)Considerations of fairness in respect of the defendant's notice of the case they have to meet;
d)The importance of the issues as to which the further evidence is sought to be adduced to the issues in the case;
e)The degree of relevance and probative value of the further evidence;
f)The prejudice to the defendant in terms of delay and the completion of the proceedings and consequential costs;
g)The public interest in the timely conclusion of the litigation; and
h)The explanation offered by the applicant for not having called the evidence-in-chief.
10.In this Court in Mallard & Mallard [2011] FamCA 876, Fowler J distilled the applicable principles thus at [91]–[92]:
The fundamental principle to be applied in determining whether to grant an application to reopen a hearing after judgment has been reserved is whether the interests of justice are better served by allowing the application or rejecting it: Urban Transport Authority of New South Wales v Nweiser (1992) 28 NSWLR 471 per Clarke JA at 476 with whom Mahoney JA and Meagher JA agreed; Gelly and Gelly (No 1) (1992) FLC 92-290 per Treyvaud J at 79, 146-148; Smith v New South Wales Bar Association (No 2) [1992] HCA 36; (1992) 176 CLR 256 per Brennan Dawson, Toohey and Gaudron JJ at 266-7 and Gaspaldi and Gaspaldi [2008] Fam CAFC 134 (unreported, Family Court of Australia, Bryant CJ, Thackray and Le Poer Trench JJ, 2 October 2007); Stephens & Stephens & Anor (Enforcement) [2009] FamCAFC 240.
The court has discretion to reopen a hearing and allow fresh evidence where:
- the fresh evidence was not easily available at the time of the trial and could not be discovered despite the exercise of due diligence and
- the fresh evidence is so material that the interests of justice require it and
-if believed, the fresh evidence would most probably affect the result of the trial and
- there would be no prejudice to the other party by reason of its introduction at a late point in time.
11. In similar circumstances to the present application in Summitt & Summit & Ors (Re-Opening) [2009] FamCA 365, Murphy J in considering the relevant principles said at [14]–[19]:
In a case involving an application for settlement of property, it can broadly be said that common law principles govern applications to re-open in this Court. (see e.g. Gelley & Gelley (1992) FLC 92-290 and the cases there discussed).
Those principles make it clear that the granting of leave to re-open is discretionary. That discretion is guided by the interests of justice. The essential question is, is the court more able to do justice in the facts and circumstances of the particular case if the application is granted. (see eg Smith v NSW Bar Association [1992] HCA 36; (1992) 176 CLR 256; Urban Transport Authority v NSEISER (1992) 28 NSWLR 471 at 478 and EB v CT (No. 2) [2008] QSC 306)
In cases where reasons for judgment have not been delivered, the High Court has held that the primary consideration should be embarrassment or prejudice to the other side. (see Smith above, at 266-267)
A recent decision of the Supreme Court of Queensland, EB v CT (No. 2) [2008] QSC 306 was referred to by both counsel for the husband and wife. That case involved an application for property settlement under (then applicable) State law with respect to a de facto relationship. In that case, Applegarth J summarised, by reference to earlier authorities, the (common law) principles applicable to a re-opening:
[2]The guiding principle in deciding whether to grant leave to re-open is whether or not the interests of justice are better served by allowing or rejecting the application. Reference is made in Finbrough Investments Pty Ltd v Airlie Beach Pty Ltd and in the cases referred to in it to the need for finality and litigation.
[3]In Smith v New South Wales Bar Association the High Court stated that different considerations may apply depending on whether the case is simply one in which the hearing is complete, or one in which reasons for judgment had been delivered. As to the former situation, the Court said it was difficult to see why the primary consideration should not be that of embarrassment or prejudice to the other side.
[4]In Reid v Brett the criteria governing the exercise of the discretionary power to re-open a case to admit further evidence where the hearing has concluded but judgment has not been delivered, was said to be as follows:
(a)the further evidence is so material that the interests of justice require its admission;
(b)the further evidence, if accepted, would most probably effect the result of the case;
(c)the further evidence could not by reasonable diligence have been discovered earlier;
(d)no prejudice would ensue to the other party by reason of the late admission of the further evidence.
In addition, his Honour held that:
[5]Reference by the High Court to prejudice to the other party, and the guiding principle of the interests of justice, require account to be taken of the strain that litigation imposes on personal litigant. The prejudice caused by delay in the delivery of an expected judgment at the end of stressful litigation cannot always be measured in terms of money or cured by an order for costs. The interests of justice is served by finality in litigation, particularly where prolonged litigation imposes a strain on personal litigants.
Discussion
Whilst it is clearly not the only issue, perhaps the most significant one was why valuation evidence, which was clearly available on 4 November 2022, was not relied on. In this regard, Mr Todd read the affidavit of his instructing solicitor, Mr Li, filed on 22 November 2022. In this affidavit, Mr Li acknowledges that in drafting the wife’s affidavit he included a draft balance sheet, the purpose of which was to give evidence about loans secured over the wife’s properties. He deposed at paragraph 2:
I did not at the time consider the question of whether the value of [the wife’s] properties needed to be included in the evidence….
From the Court’s perspective, it is clear that the wife’s solicitor had turned his mind to the need to adduce evidence in the wife’s case about the equity in her properties, otherwise there would have been no need to provide evidence about borrowings. This impression is consistent with paragraph 12 of the wife’s submissions filed 1 November 2022, where senior counsel for the wife refers to the proposed variation of the Full Court’s orders having the effect of “…otherwise preserving the balance of the restraint…”.
Even though Mr Li stated in his affidavit filed 22 November 2022 that the purpose of including the balance sheet was to give evidence about the wife’s borrowings, the fact remains that the wife gave this evidence in her later affidavit filed 28 October 2022, also read in support of her Application in a Proceeding. In this affidavit at paragraph 3 she deposes to outstanding mortgages of $3,729,958, of which $2,433,320 related to the Commonwealth Bank and the rest to Westpac.
One significant issue for the Court is the equity that the wife has in the properties which are subject to the order of the Full Court, and the corresponding impact on this equity if one of the properties were to be sold. She proposes to sell the Suburb J property. If leave is granted to the wife to reopen so that she can tender the valuation reports, this will demonstrate that compared to the balance sheet annexed to her affidavit of 10 August 2022, the value of the properties has increased significantly – indeed, from a total of nearly $7 million to over $10,000,000. The Suburb J property is valued at over $4 million in the valuation sought to be tendered, but at under $3 million in the balance sheet annexed to the wife’s first affidavit.
The evidence sought to be led in the wife’s case is clearly important evidence from her perspective, and it is relevant to the Court’s assessment and determination of her application. The difficulty for the wife is that both the importance and relevance of this evidence should have been, and arguably was but for oversight, apparent to her on 4 November 2022. The wife’s counsel submits that it would not be open to the Court to find that there was a deliberate decision not to lead this evidence, but rather it was plain inadvertence. The Court observes that if that is the case, the inadvertence would arguably extend to senior counsel who argued the wife’s case on the day.
Counsel for the wife argues that there is no prejudice to the husband in her relying on evidence that was jointly commissioned with the husband and which is, for all practical purposes, the single joint expert evidence about the value of the properties in question.
Moreover, counsel for the wife submits that the admission of the evidence would establish that the husband is not prejudiced by the variation to the order proposed by the wife, because the increase in value of the properties more than adequately secures the husband’s interests even with the sale of one of the properties.
Senior counsel for the husband submits that Mr Li’s evidence at paragraph 2 of his affidavit is highly problematic and that the admission of the evidence is prejudicial to his client. In support of the latter proposition, an email sent on 9 November 2022 at 11:12am from the husband’s solicitor to the wife’s solicitor was tendered and became Exhibit A1. There is no evidence before the Court of any substantive reply to this email. From the Court’s perspective, this email raises important issues that go to the prejudice to the husband, and to how the Court would exercise its discretion in this case. The email is reproduced in full below: –
From: Carly Mirza-Price Sent: Wednesday, 9 November 2022 11:12 AM
To: 'Sean Li' <[…]@[…]>
Cc: [Ms FF] <[…]@[…]>; […] <[…]@[…]>
Subject: RE: [Tsiang & Wu] Family Law Matter Importance: High
Dear Colleague,
Thank you for your email.
Further matters we require clarity on:
1. Has your client obtained advice from her accountant as to any CGT payable in respect of [Suburb J] and if there is a written estimate, please provide same.
2. Can your client provide updated disclosure as to the Commonwealth Bank […] account numbers ending […97], […73] and […06] and further please clarify if the balance of the said accounts will be applied in reduction to the corresponding mortgage account and thereafter closed on completion of the sale.
3. I note your client also holds the following disclosed mortgages with the Commonwealth Bank:
a. Home Loan […77] secured against (we assume) [EE Street, Suburb FF] and
b. Home loan […22] secured against (we assume) [GG Street, Suburb HH].
While I note your client does not propose to discharge these mortgages from the sale proceeds of [Suburb J], please provide confirmation from the mortgagee as to the security for each loan.
4. Please other provide confirmation from the mortgagee that there is no Commonwealth Bank liability secured on any other property which may give rise to an issues with collateral security when seeking to discharge the three CBA mortgages secured against [Suburb L (…73)], [Suburb P (…06)] and [Suburb N (…97)].
Kind regards,
Carly Mirza-Price | Partner | Accredited Specialist in Family Law MILLS OAKLEY
The matters raised in this email go to what the Court considers to be the central issue of the wife’s equity in the properties covered by the Full Court order, and the impact of the security given to the husband if the orders sought by the wife are granted. Currently, there is no evidence before the Court about the following matters: the capital gains tax implications of the wife’s proposal; the extent to which, if at all, what are presumably credit balances in certain stated Commonwealth Bank accounts in the wife’s name will be applied to the reduction of indebtedness to the bank; the impact of the wife’s proposal on other Commonwealth Bank mortgages in relation to properties that she owns; and the broader impact of possible cross-collateralisation of bank securities on the wife’s proposal.
The Court observes that none of this evidence would have been difficult to obtain. Counsel for the wife submitted that on his instructions, there would be no capital gains tax implications on the wife’s proposal because the property sought to be sold was the wife’s residence. Whilst counsel could not point to any specific and direct evidence of the wife in this regard, the Court notes that in a power of attorney she signed on 25 August 2022, she represented that she was living at the property that she now proposes selling. This is not, of course, conclusive on the issue of capital gains tax liability.
Thus, even if leave were granted for the wife to rely on the valuations that she proposes to tender, it would not necessarily assist her case in the absence of further evidence addressing the highly relevant issues raised in the email of 9 November 2022. The granting of leave would thus be futile, even if the Court were prepared to exercise its discretion to grant leave in circumstances where it is not satisfied as to the explanation for why the evidence was not adduced when it should have been.
In any event, it is the view of this Court that the interests of justice are better served by rejecting the application given what the Court considers to be the futility of the admission of the valuation reports.
The wife’s Application in a Proceeding filed 22 November 2022 is dismissed.
WIFE’S APPLICATION IN A PROCEEDING FILED ON 10 AUGUST 2022 TO VARY THE FULL COURT INJUNCTION
Background
In her case outline document filed 1 November 2022 prepared by her senior counsel Mr Cox, the orders sought by the wife were modified as follows:
i.That the orders made by the Full Court of the Family Court of Australia on 31 July 2019 be varied to permit the first respondent to sell the property she owns at [H Street, Suburb J].
ii.That the Applicant is to pay into Court security for costs in the sum of $630,000.
iii.In the Alternative to order (ii), the applicant is restrained from disposing of, further encumbering, or otherwise dealing with the property contained in folio number […], being the property located at [CC Street, Suburb Y] NSW.
In substance, the wife’s application raises two issues. Firstly, she wishes to vary orders made by the Full Court on 31 July 2019 so that she can sell her property at Suburb J. Secondly, she seeks an order for security for costs against the husband either by way of payment of $630,000, or alternatively, and in a different fashion but to the same effect, by an injunction restraining the husband from dealing with the Suburb Y property. The husband opposes the wife’s application and seeks for it to be dismissed.
The matter came before the Court on 4 November 2022 with both parties represented by senior counsel, and further submissions were made.
The order in question was made by the Full Court on 31 July 2019. The relevant order is Order 5 which states:
(5) Pending determination of the substantive orders sought by the Appellant Husband as against the Respondents as to financial matters arising in relation to [G Partnership] ([…] Registration no. […]) (“the substantive proceedings”), the First Respondent Wife be restrained from dealing with or further encumbering the following properties:-
a. [H Street, Suburb J] in the State of New South Wales […] being all of the land comprised in Folio Identifier […];
b. [K Street, Suburb L] in the State of New South Wales […] being all of the land comprised in Folio Identifier […];
c. [M Street, Suburb N] in the State of New South Wales […] being all of the land comprised in Folio Identifier […]; and
d. [O Street, Suburb P] in the State of New South Wales […] being all of the land comprised in Folio Identifier […].
The Full Court partially allowed an appeal from the decision of the primary judge who had dismissed the husband’s interim application for injunctions against the wife. In making the orders, the Full Court was clearly satisfied that there was a serious issue to be tried and that the balance of convenience favoured the making of the order. The order was made to preserve the status quo pending the resolution of the substantive litigation. It was made in the face of an identified risk that the wife might dispose of assets in Australia in her name, in order to defeat the husband’s claim in respect of an asset the value of which was estimated to be approximately $8.8 million.
It is important to recognise that the injunction related to only four of the wife’s properties in Australia. When one has regard to the wife’s own evidence about her Australian real estate holdings, found in the balance sheet annexed to her affidavit of 10 August 2022, it is clear that she has five other properties. The said balance sheet is a representation by the wife that the value of her real estate holdings in Australia at that time totalled $13.6 million. In her affidavit of 28 October 2022 she deposed to total monies owed secured by mortgages granted to the Commonwealth Bank and Westpac of $3,729,958. According to the wife’s balance sheet, she owns property in Australia to the value of $4.8 million that is not covered by the injunction.
The applicable law
The applicable law was not in dispute. For all practical purposes both parties agreed that the Court has the power to vary an injunction where there has been a change in the parties’ circumstances since the injunction was made: Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc (1981) 148 CLR 171 at [178]. This has been applied by the Full Court in cases such as Mitty & Mitty and Ors (2010) 45 Fam LR 20. The principle was extensively discussed by the Full Court of the Federal Court in AMP Investments Pty Ltd v Trade Practices Commission (1983) 49 ALR 475. The judges in that case at [5] emphasised the need for a significant change in circumstances by way of new facts “…which would not reasonably have been known or foreseeable at the time…”. The original correctness of the injunction was not in question. The onus clearly lies on the party seeking to have the existing order set aside or varied. Even if there is a detriment to a party, whether the variation is granted or declined, the task of the Court will not involve a mere reassessment of the balance of convenience.
The evidence
In support of her case, the wife relied on the following material:
(a)Her affidavit filed 10 August 2022;
(b)Her affidavit filed 28 October 2022;
(c)Affidavit of Mr JJ dated 28 October 2022;
(d)Submissions filed 1 November 2022; and
(e)Document tendered and marked as exhibit A1.
In support of his case, the husband relied on the following material:
(a)Third Further Amended Initiating Application filed 10 August 2022;
(b)Points of Claim filed 24 August 2021;
(c)Wife’s Defence to Points of Claim filed 1 October 2021;
(d)Response to an Application in a Proceeding filed 13 September 2022;
(e)His affidavit filed 12 July 2022, plus Exhibits;
(f)His affidavit filed 13 September 2022, plus Exhibits;
(g)His affidavit filed 2 November 2022;
(h)Affidavit of Carly Mirza Price dated 2 November 2022;
(i)Case outline filed 2 November 2022; and
(j)Various documents tendered and marked as exhibits R1–R3.
The wife’s case
The wife’s case is cogently summarised by her senior counsel at paragraph 9 of his submissions filed 1 November 2022. In short, the wife has incurred substantial legal costs in the proceedings to date, and those costs are likely to increase not just because of the anticipated final hearing, but also because of the very high cost of expert evidence. Her ability to sell, or borrow against the properties covered by the Full Court’s order, to fund the proceedings, is stymied by the order. The wife cannot fund her legal costs from rental or other business income, whether Australian or foreign. Thus, the Full Court’s order operates unjustly on her by impeding her ability to fund legal representation. Moreover, the very nature of the litigation has changed, submits the wife. In particular, the husband’s assertion that the business entity which was the focus of the present application had a value of $8 million is now subject to considerable doubt. In addition, the husband had added to the proceedings the second and third respondents.
Reference to the wife’s affidavits filed in support of her application really take the matter no further.
Discussion
The wife’s claim fails. The onus was on her to establish that new facts came into existence or were discovered which render the continuation of the injunction unjust.
The focus must be on new facts, not mere assertions. The wife asserts, for example, that even the admissions made by the husband since the injunction was granted indicate that his claim cannot be in respect of an asset with a value of $8 million. Nonetheless, the fact remains that the entity in question has not been valued despite an agreement by the parties to value the same. Even if the evidence before the Court ultimately leads to a finding that the asset in question has a value less than $8 million, that is not necessarily determinative either of the claim by the husband, or of the loss suffered by the husband, if any.
The reality that the wife has incurred substantial legal fees since the injunction was made, and will incur further substantial legal fees before the final hearing, is not a new fact for present purposes. Nor is the delay in the final hearing of what is clearly a complex matter a new fact for present purposes. The matter is not a new fact if it was reasonably foreseeable at the time the injunction was made. At the time this injunction was made both parties knew, or should have known, that the issues raised in the litigation were complex (both factually and legally) and that the conclusion of the matter, absent settlement, was likely to take time and involve substantial expenditure in professional fees. In any event, the wife’s evidence about her legal costs, and the submissions made on her behalf in relation to the same, had an accusatory tone. The Court infers that the wife was blaming the husband for increasing the costs of the present proceedings. Clearly that cannot be determined at this time.
In the absence of evidence of new facts, this Court does not consider itself compelled to consider issues of balance of convenience. It bears remembering that the Full Court was satisfied both that the husband had a serious issue to take to a hearing, and that the balance of convenience favoured him. This Court cannot see how anything has changed. It would be wholly inappropriate for this Court to, in effect, review the decision made by the Full Court. The decision of the Full Court is the starting point, and its correctness is not in question.
In many respects, the substance of the wife’s case was that she was prejudiced by an order that, she contends, prevents her from financing the legal proceedings. Senior counsel for the husband submitted that the wife made no submission about this issue, either in front of the trial judge who initially declined to make the order sought by the husband, or in front of the Full Court who ultimately made the order the husband sought. Senior counsel for the wife did not challenge this submission. A reasonable inference to draw in all the circumstances is that financing the wife’s legal costs in the proceedings was neither an issue for her then, nor is it an issue now, having regard to her financial circumstances both in Australia and overseas. This was the essence of the husband’s case opposing the wife’s application to vary the injunction. Even on the wife’s own evidence, she has considerable assets both in Australia and overseas and the mere assertion by her that she cannot access her foreign assets, in fact cannot even travel to that country, does not establish those facts.
The wife’s application to vary the orders of the Full Court is dismissed. There are no new facts, let alone significant facts, that warrant revisiting the injunction made by the Full Court.
The Court expresses its surprise that this aspect of the case could not have been settled. The strong impression formed from the totality of the evidence is that if the wife had clearly outlined to the husband precisely how she would use the proceeds of sale of the Suburb J property to retire debt in such a way as to maintain sufficient equity in her properties to give the husband the security that he was in substance granted by the Full Court, there must have been a prospect of settlement. There were probably many other options available to the parties.
THE WIFE’S APPLICATION FOR SECURITY FOR COSTS
The applicable law
An application for security for costs is governed by r 12.02 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (“the Rules”):
12.02 Application for security for costs
(1)A respondent may apply for an order that the applicant in the proceeding give security for the respondent’s costs.
(2)In deciding whether to make an order, the court may consider any of the following matters:
(a) the applicant’s financial means;
(b) the prospects of success or merits of the application;
(c) the genuineness of the application;
(d)whether the applicant’s lack of financial means was caused by the respondent’s conduct;
(e)whether an order for security for costs would be oppressive or would stifle the proceeding;
(f)whether the proceeding involves a matter of public importance;
(g)whether a party has an order, in the same or another proceeding (including a proceeding in another court), against the other party for costs that remain unpaid;
(h)whether the applicant ordinarily resides outside Australia;
(i) the likely costs of the proceeding;
(j) whether the applicant is a corporation;
(k) whether a party is receiving legal aid;
(l) any other relevant matter.
(3) In subrule (1):
respondent includes an applicant who has filed a reply because orders in a new cause of action were sought in the response.
The opening proposition in s 117(1) of the Family Law Act 1975 (Cth) (“the Act”) is that each party should pay and bear their own costs. The onus is on the wife to establish that there are circumstances that justify a departure from this general rule.
The Full Court’s decision in Malcher & Malcher (security for costs) [2017] FamCAFC 202 at [14] expanded the list of matters to be considered under s 117(2)(g) to include:
·The prospects of the success of the appeal;
·Whether the claim for security for costs was made bona fide;
·Whether or not an order for security for costs would stifle the litigation;
·Whether or not the litigation may involve a matter of public importance;
·Whether or not there had been a delay in bringing the application for security; and
·Whether or not there would be difficulty in enforcing an order for costs.
The wife’s case
The wife’s argument had a number of bases.
She contended that the husband is ordinarily resident in City C and thus in accordance with well-recognised principles, including r 12.02(2)(h) of the Rules, an order for security for costs should be made. The Court does not accept this. Firstly, it ignores the fact that the husband has a property in Suburb Y which the wife contends has a value of $8 million. The husband’s own evidence suggests it is subject to a loan of $4.8 million, but that still leaves $3.2 million in equity in the property. Secondly, the submission that the husband is ordinarily resident in City C is problematic both on a factual and legal basis. The husband denies that he resides in City C and asserts that he lives in Australia, but has substantial business interests in that country. Moreover, he refers to the fact that the wife consented to their daughter living with him in Australia, and it is non-contentious that she attends school in Sydney. The husband has been filing tax returns in Australia, relating to his overseas business income. Until a finding of fact is made about this issue, the wife’s submission is merely an assertion. In any event, both senior counsel referred to Nygh’s Conflict of Laws in Australia (10th edition, 2020) (“Nygh”) at paragraphs 13.34–13.36. The Court is satisfied, therefore, that unlike “domicile” there is no single concept of residence and that the meaning of this term must be construed by reference to its context. Rule 12.02(2)(h) of the Rules states: “whether the applicant ordinarily resides outside Australia.” Thus, in the present context the issue is whether the husband “ordinarily resides” outside of Australia, with the word “ordinarily” qualifying the concept of residence. As the learned authors of Nygh point out at paragraph 13.35, the phrase “ordinarily resident” has been the subject of judicial interpretation by Lockhart J in Re Taylor; ex parte NatWest Australia Bank Limited (1992) 37 FCR 194 (“Re Taylor”) at [198]:
To say that a person is ordinarily resident in Australia must mean something more than that he is resident in Australia. The word ‘ordinarily’ connotes a comparison, a measure of degree. A person may have more than one residence, but he is not necessarily ordinarily resident in each of them. The question must be determined … at a particular time. One must ask the question whether at that time the person was ordinarily resident in Australia. The concept of ‘ordinary residence’ for the purposes of the Act, in my opinion, connotes a place where in the ordinary course of a person’s life he regularly or customarily lives. There must be some element of permanence, to be contrasted with a place where he stays only casually or intermittently. The expression ‘ordinarily resident in’ connotes some habit of life, and is to be contrasted with temporary or occasional residence.
This passage demonstrates the limitations in the wife’s submission that, in effect, just because the husband is presently in City C, he is not ordinarily resident in Australia. The husband’s presence in City C can easily be explained by reference to his overseas business interests. In any event, as Lockhart J recognised in Re Taylor at [199]–[200], a person may have more than one ordinary residence at a time.
The wife contends that there remains a risk that the husband will sell the Suburb Y property and remove the proceeds of sale from Australia. This is directly contrary to the husband’s evidence at paragraph 51 of his affidavit of 12 September 2022 in which he gives what seems to be a prima facie plausible explanation for listing the property for sale for a short period. The wife’s contention extends, however, to the risk that he will further erode the equity in the property, thus increasing her own vulnerability of recovering a costs order in this litigation. There is merit in this contention. The costs of this litigation are likely to be exceedingly high for both parties and thus both the prospect of a costs application, and the possibility that it will be for a very large amount, is a realistic one. Whilst the husband in his evidence establishes that he told the wife about the increase in the loan secured on the property from $1.98 million to $4.8 million, nowhere does he suggest that he gave her advance notice, or that he accounts for the use of the funds. This is a strong point in the wife’s favour which is not adequately dealt with in the husband’s case.
The wife further contends that this is not a case where the financial circumstances of the husband would cause any order for security of costs to be oppressive, or would stifle the proceeding. The Court agrees.
The Court notes that there was some suggestion in the submissions made on behalf of both parties that the other’s claim lacked merit. If this is the case, the Court would not rely on this in the context of the present application for security for costs, as it is simply not possible at this stage of the proceedings to form a meaningful view about the merits of the husband’s case, and the wife’s response to the same: see Live Board Holdings Pty Ltd v Cody Live Pty Ltd [2017] NSWCA 302 at [100]–[102].
The husband’s case
A number of submissions were made on behalf of the husband in opposition to the application. These will be dealt with briefly.
The absence of evidence indicating that the husband would be unable to pay a costs order if unsuccessful in the proceedings is not determinative. Both parties are wealthy. That does not necessarily mean that a costs order, if made, could be easily enforced, especially when the husband’s assets in Australia are limited to the Suburb Y property. Whilst he has equity in the property now, he also currently enjoys unfettered ability to reduce that equity. The equity in the Suburb Y property is the most likely source of satisfaction of any costs order in favour of the wife. The wife’s proposed order (iii), which is in effect an injunction, would preserve that asset. The husband’s recent actions in further encumbering the property suggest there is a risk to be managed, and the balance of convenience favours the wife in this regard.
The Court does not accept that there was a significant delay on the part of the wife in bringing the application for security for costs, and even if there were, there is no prejudice to the husband.
Discussion
It is unhelpful to go into the merits of the case that is both factually and legally complex but which has not yet been heard in opposition to the security for costs application. Issues of conduct in the proceedings, as well as asserted failures to comply with earlier orders of the Court, are matters best determined in the context of a hearing.
In all the circumstances, the Court accepts that the wife should have some benefit of an order securing her costs, but the Court’s preference is to make an order in line with order (iii) as proposed by her, and restrain the husband from disposing of, further encumbering, or otherwise dealing with the Suburb Y property unless the parties agree in writing, or the Court orders.
COSTS APPLICATION BY THE HUSBAND AND SECOND RESPONDENT
Background
On 13 October 2022 this Court published its reasons for judgment, and made orders in a dispute between the respondent husband in the substantive proceedings, and the second respondent, about the production of documents. The second respondent was wholly unsuccessful in the proceedings. The husband seeks an order for costs, preferably on an indemnity basis, but as an alternative on a party and party basis in accordance with Schedule 3 of the Rules. A lump sum is sought to avoid, no doubt, the delay and additional cost of assessment. The second respondent opposes the making of any order for costs against him and submits that the Court should make orders that each party bears its own costs.
These brief reasons for judgment explain why the Court has ordered the second respondent to pay the husband’s costs in a lump sum assessed at $7,500.
The applicable law
The law relating to costs in family law proceedings is well settled and is set out in detail in the Full Court decision of Parke & The Estate of the Late A Parke (2016) FLC 93-748.
An application for costs is governed by s 117 of the Act. Section 117(1) of the Act sets out the general presumption that each party to the proceedings shall bear their own costs. This is subject to s 117(2), which provides that:
If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A) and (5) and the applicable Rules of Court, make such order as the court may make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
Section 117(2A) sets out the matters that the Court is to have regard to:
(2A)In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(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.
Although the Court is required to consider each of the abovementioned factors, it is plain that their relevance to a particular matter will depend upon the circumstances of that case and they should be considered in that light. That is, no one factor prevails over another and it is a question of the weight that is to be afforded to each of the relevant factors depending on the circumstances of the matter (Medlon & Medlon (No. 6) (Indemnity Costs) (2015) FLC 93-664 at [24]). There is also “nothing to prevent any factor being the sole foundation for an order for costs” (Fitzgerald (as child representative for A (Legal Aid Commission of Tasmania)) & Fish & Another (2005) 33 Fam LR 123 at [41]).
Whilst the applicant in a costs application must establish the circumstances justifying the making of a costs order, the Court is not limited to making such an order only in what has been described as a “clear case” (Penfold v Penfold (1980) 144 CLR 311).
It is well settled that when costs are ordered by this Court, such costs are payable on a party-party basis. It has been held that the Court should not lightly depart from the ordinary rule (Kohan and Kohan (1993) FLC 92-340).
The provision relating to the calculation of costs is governed by r 12.17(1) of the Rules which is 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.
The rule further provides that:
(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 cases;
(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; and
(f)whether expenses (paid or payable) are fair, reasonable and proportionate.
In relation to an award of indemnity costs, the Full Court decision of Phillips & Hansford (2020) FLC 93-941, helpfully summarises the position as follows:
35.Indemnity cost orders are made only in exceptional cases (Kohan and Kohan (1993) FLC 92-340; Limousin v Limousin (Costs) (2007) 38 Fam LR 478; D & D (Costs) (No. 2) (2010) FLC 93-435).
36.Whilst the categories of cases in which indemnity cost orders may be awarded are not closed, it is accepted that such costs may be ordered where a case was pursued with “wilful disregard of known facts or clearly established law” and where there has been “an imprudent refusal of an offer to compromise” (Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233).
37.In relation to the first category, it has been said that indemnity costs may be awarded where “the applicant, properly advised, should have known that he had no chance of success” (Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401) and where “a party persists in what should on proper consideration be seen to be a hopeless case” (J Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers – Western Australian Branch & Anor [1993] FCA 70 per French J at 5).
The evidence
The husband relies on the documents set out above at [28]. The second respondent relies on the following documents:
(a)Second Respondent’s case outline filed 3 November 2022;
(b)Husband’s case outline filed 2 November 2022;
(c)Wife’s Defence to Points of Claim dated 1 October 2021;
(d)Husband’s affidavit filed on July 2022; and
(e)Husband’s affidavit filed on 12 September 2022.
The submission of the husband and second respondent
The submissions made on behalf of the husband are contained at paragraphs 26–34 of his case outline filed on 2 November 2022. The submissions made on behalf of the second respondent are contained in written submissions filed on 3 November 2022.
The husband’s case is that the second respondent was wholly unsuccessful in the proceedings. In addition, the husband contends that a costs order is warranted because of the manner in which the second respondent conducted the proceedings, and opposed the production of documents.
The second respondent’s case is, in effect, that even though he was wholly unsuccessful, his submissions before the Court were not unmeritorious. On his behalf it was also contended that his financial circumstances should be taken into account as a reason for not making a costs order against him. Finally, on behalf of the second respondent it was contended that the husband’s conduct contra-indicated the making of a costs order in his favour because, in effect, the significance and relevance of the information sought did not become apparent until 24 August 2021 when the husband filed his Points of Claim.
Discussion
The Court accepts that the substantive litigation which involves two other parties is complex and drawn out. The Court will need to make findings of fact, as well as rulings of law. The matter has been listed for final hearing on 7 August 2023, with an estimated time of eight days.
The Court does not accept the submissions made on behalf of the second respondent. Even if the second respondent’s financial circumstances were known, which is clearly not the case, those circumstances would not be determinative of whether a costs order should be made against him. Even if, as the second respondent asserts, the significance and relevance of the information sought did not become apparent until 24 August 2021, the second respondent had ample time to resolve this matter without litigation. Moreover, even if the second respondent’s submissions were not unmeritorious, it does not change the fundamental fact that he was wholly unsuccessful in the proceedings.
The Court accepts the husband’s submissions about the conduct of the proceedings on behalf of the second respondent. These submissions were made at paragraphs 28–33 of the husband’s submissions filed on 2 November 2022 and are reproduced below:
28. In the present case, costs are sought on the basis that the Second Respondent has been wholly unsuccessful: s 117(2)(e). The Court granted the orders sought by the Husband in his application, and dismissed the Second Respondent’s objection to the subpoenas issued by the Husband.
29. An order that the Second Respondent pay the Husband’s costs is also appropriate given the second respondent’s conduct in the proceeding: s 117(2)(c).
30. Pursuant to s 68 of the Federal Circuit and Family Court of Australia Act 2021 (Cth), the parties in this proceeding – including the Second Respondent – must conduct the proceeding in a way that is consistent with overarching purpose, namely, to facilitate the just resolution of disputes, according to law, and as quickly, inexpensively and efficiently as possible.
31. This duty is expressed in the same terms as ss 37 and 37N of the Federal Court of Australia Act 1976 (Cth). In Skalvos v Australasian College of Dermatologists [2013] FCA 1065, [35], Jagot J observed, “These provisions are not merely exhortatory. The duty is real and can be enforced, if necessary, by appropriate costs orders”. This passage was cited by McClelland J in Baum v Lokare [2019] FAMCA 132, who went on to observe (at [24]), “This Court takes seriously the obligation on parties to make a genuine attempt to achieve a resolution of matters in dispute in order to avoid litigants incurring additional costs”.
32. In the present case, the Husband requested on two separate occasions (23 November 2018, and 12 June 2019) that the Second Respondent produce his Australian tax returns, and then (on 10 June 2022), requested the Second Respondent sign and return authorities to Centrelink and the ATO. On each occasion, the Second Respondent ignored the Husband’s request: [Tsiang] affidavit of 12 July 2022, [6] to [8].
33. The Second Respondent’s lack of cooperation has forced the Husband to incur additional unnecessary costs. It is appropriate that this sound in an order for costs against the second respondent.
The Court accepts that the matters raised constitute another reason that warrants the making of a costs order against the second respondent.
However, the husband’s case for indemnity costs is not made out, as the requisite threshold for an award of indemnity costs has not been met: (Colgate-Palmolive Company and Anor v Cussons Pty Limited (1993) 46 FCR 225).
The husband claims party and party costs totalling $8,582.45, consisting of solicitor’s fees of $2,424.49 and counsel’s fees of $6,157.96. Rule 12.13(1) of the Rules states that “The court may make an order for costs on its own initiative” and rr 12.17(1)(a) and 12.17(1)(b) state that the court may order that a party is entitled to costs “of a specific amount” or “assessed on a particular basis”. The Court assesses the husband’s reasonable costs on a lump sum basis of $7,500. The second respondent is to pay the husband’s costs arising out of the application that was determined by this Court on 13 October 2022 assessed at $7,500, and such costs are payable within 28 days.
I certify that the preceding seventy-two (72) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Altobelli. Associate:
Dated: 1 February 2023
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