Tzirinis and Tzirinis and Ors
[2008] FamCA 395
•2 May 2008
FAMILY COURT OF AUSTRALIA
| TZIRINIS & TZIRINIS AND ORS | [2008] FamCA 395 |
| FAMILY LAW – PROPERTY – Application to set aside and vary orders |
| APPLICANT: | Mrs Tzirinis |
| 1st RESPONDENT: | Mr Tzirinis |
| 2nd RESPONDENT: | P Pty Limited |
| 3rd RESPONDENT: | Mrs M |
| FILE NUMBER: | SYF | 5062 | of | 1994 |
| DATE DELIVERED: | 2 May 2008 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Cohen J |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms R |
| SOLICITOR FOR THE APPLICANT: | R Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Lloyd |
| SOLICITOR FOR THE RESPONDENT: | Slade Manwaring |
Orders
The orders of the Court are to be:
That the wife’s applications:
a)pursuant to S79A Family Law Act to set aside the orders of the Court made on 15 December 1994;
b)pursuant to s79 of the Family Law Act for property settlement;
c)for arrears of spousal maintenance for any period prior to 1 September 2004;
d)for variation of spousal maintenance for any period prior to 1 September 2004;
e)for lump sum payment of more than $125,000.00 in lieu of future periodic payments of spousal maintenance;
f)for annulment of the husband’s bankruptcy which commenced on 6 March 1995 and continued until discharge on 14 May 1998;
g)for costs of any enforcement applications made by the wife in 1997;
h)for costs of her contravention and enforcement application in relation to spousal maintenance due to her from 30 August 2004 to 11 March 2005;
i)for any remedies against P Pty Limited; and,
j)for any remedies against Mrs M, the husband’s current wife
are hereby dismissed.
In the event that any or all of the orders in 1.a),b),c),d),e),f),g), and h) are set aside within one month of such order or orders being set aside the wife shall lodge, or cause to be lodged, security for costs in the sum of $50,000.00 and in the event of her failure to do so, the wife’s claims specified in such of the said orders which are set aside shall forthwith be permanently stayed.
Costs are reserved for one month.
IT IS NOTED that publication of this judgment under the pseudonym Tzirinis & Tzirinis is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYF 5062 of 1994
| MRS TZIRINIS |
Applicant
And
| MR TZIRINIS |
1st Respondent
And
P Pty Limited
2nd Respondent
And
Mrs M
3rd Respondent
REASONS FOR JUDGMENT
For some years while this matter has been before me, I have struggled to understand the wife’s case fully. I now accept that this is because it is virtually impossible to understand, if logic and rational thinking is applied. There is even confusion about whom the respondents are.
So far as I can tell, the wife is most recently seeking orders pursuant to s79A of the Family Law Act, 1975, to set out aside all the s79 orders made by the Court on 15 December 1994. She relies on the husband’s alleged fraud and non-disclosure. She asks that he pay her the current value of the former matrimonial home in place of those orders. Her most recent application has another aspect which is quite curious. It is an application to annul the husband’s bankruptcy. He became a bankrupt as a result of presenting a debtor’s petition on 6 March 1995. There is, before me, a certificate of discharge of bankruptcy dated 14 May 1998. The husband ceased to be a bankrupt on the date of that certificate.
The wife is also pursuing spousal maintenance and costs of some past proceedings. She seeks spousal maintenance orders against the husband and his current wife. One is for lump sum spousal maintenance in the sum of $500,000.00 payable to the wife by the husband for her future maintenance. She seeks an unspecified sum for past arrears. She asks for costs of enforcement proceedings relating to property orders which she took in 1997 and for contravention and enforcement proceedings in a claim she made for arrears of spousal maintenance from 30 August 2004 to 11 March 2005. In addition, she asks for orders over the husband’s property to secure performance of all the orders she seeks except for costs of the 1997 enforcement proceedings. Finally, she asks that the husband’s current wife’s property be made into security for any part of the orders against the husband which he fails to comply with. I do not know why she has named the company as a respondent in her most recent documents.
The husband seeks summary dismissal of all the wife’s claims and a permanent stay of the proceedings in the event that summary dismissal is refused for any of them. In the event of any lack of success in these endeavours, he seeks security for costs. It is the applications of the husband which I am dealing with in this judgement.
In dramatic contrast to the wife’s case, the husband’s case for the dismissal orders he seeks in this hearing is simple and clear. The principal submission of the husband is that the proceedings should be dismissed for want of prosecution. He also submitted that the balance of justice requires that they be dismissed in all the circumstances which apply here. He relies on Wade (formerly Trnka) v Trnka (1996) FLC 92-711, a decision of the Full Court of the Family Court of Australia.
Salient features of the litigation between the parties are:
a. The s79 orders were made on 15 December 1994.
b. The significant orders are:
i. that the husband transfer to the wife all his right title and interest in the former matrimonial home at C of which he was then the legal and beneficial owner;
ii. that the husband continue to meet the mortgage instalments on the home until discharge of that mortgage;
iii. that the mortgage be discharged within 3 months; and,
iv. that the husband pay spousal maintenance of $300.00 per week.
c. On 27 February 1995 the husband provided the wife with a signed transfer of his interest in the property but did not discharge the mortgage.
d. Before he was obliged to discharge the mortgage pursuant to the order and before the home was transferred to the wife, the husband filed a debtor’s petition and became bankrupt from 6 March 1995.
e. The mortgagor exercised its power of sale over the home on 17 June 1996 and the balance remaining after sale and discharge of the mortgage was paid to or taken by the husband’s trustee in bankruptcy.
f. The notice to the creditors of the husband which was sent to them by the trustee in March 1995 noted that the former matrimonial home was worth $200, 000.00. The mortgage was for $140, 000.00. There was $85, 000.00 in debts to other secured creditors. Unsecured creditors claimed $182, 912.00. Thus, overall, the husband’s assets, including the former matrimonial home, were deficient to the extent of $207, 912.00.
g. The wife was, however, said by the trustee to be claiming the surplus of $60, 000.00 in relation to the former matrimonial home pursuant to the orders of 15 December 1994. The trustee declared that he was “investigating” this claim.
h. The wife did nothing to enforce her claim for the $60,000.00 against the trustee.
The husband’s submission is that the wife could, and should, have sued the trustee for any part of her claimed entitlement but failed to do so. It is submitted that, in the circumstances, this was her only remedy in relation to her property claims.
The husband’s counsel pointed out that the vexed question of a wife’s entitlements as against a trustee in bankruptcy has been the subject of a significant decision, Official Trustee in Bankruptcy v Mateo (2003) 30 FamLR 122. On my understanding, this case which is a decision of the Full Court of the Federal Court of Australia, recognises that the orders for the husband to transfer the former matrimonial home to the wife gave the wife an equitable estate in it. Under the s79 order, the wife may have had the right to the husband’s legal interest but it had no real and practical value. Her equitable interest might have been converted into a right to $60,000.00 in cash from the sale of the home. The trustee was not entitled to rely on the doctrine of relation back to avoid the s79 orders, but the trustee could, should and would probably have sought to set aside the s79 orders by reliance on s79A and, because of the failure to disclose the husband’s insolvency when they were made, would have had a very high chance of success. This is despite the fact that the orders made on 15 December 1994 were not consent orders. The husband did not appear and it must not have been brought to the notice of the Registrar who made the orders that the effect was to potentially deprive his creditors in circumstances where he was insolvent if his statement of affairs was accurate.
In August 1994, In the Marriage of Lanceley (1994) 18 FamLR 71, was decided by the Full Court. The facts are nearly identical. The Full Court refused a wife’s appeal from a first instance decision where the wife’s application for a declaration of interest in real property had been refused because the husband’s creditors were not given notice of the application. In the situation in that case, as in the case now before me, no injustice would have been occasioned to the wife in not receiving property in the former matrimonial home if the husband really was insolvent when the matter was due to be decided by the Family Court. In each instance, one of the parties knew or ought to have known s79 orders may deprive creditors of a party who was or was likely to become insolvent and bankrupt. This may, at least in part, explain some of the subsequent events. In reality, one ought to characterise the subsequent evolution of the situation as “inactivity” by the wife rather than as “events” between 1995 and late 2004. One is left to wonder whether at the relevant times the wife had been advised of the effect of Lanceley.
10. The wife did take some action in relation to enforcement of the spousal maintenance order made in December 1994, but did absolutely nothing to advance any of her property rights after the property orders were made in December 1994. Her failure to seek to enforce her equitable estate in the house prevented the trustee from having the opportunity to seek to rely on s79A. It is highly likely that he would have succeeded had he been put in a situation of being forced to rely on s79A because the wife was prosecuting her claim under the s79 orders.
11. Her efforts to enforce the spousal maintenance order resulted in consent orders, made on 13 October 1995, for the husband to pay the wife $15,000.00 to cover maintenance arrears of $9000.00, various costs which were to come from a business associate of the husband and a garnishee order against a company which employed the husband. Further consent orders were made on 21 April 1997 which provided that the husband pay the wife $23,700.00 in spousal maintenance arrears claimed to be due to 11 April 1997 at the rate of $25.00 per week. At that rate, the arrears would not have been extinguished for more than 18 years. From 1 May 1997 the rate of spousal maintenance was varied from $300.00 to $25.00 per week. Both lots of $25.00 per week were the subject of a new garnishee order. The consent orders seem to me to recognise the husband’s actual inability to pay more.
12. The husband’s financial fortunes did not improve much over the years between his discharge from bankruptcy and late September 2001 if his claims about it are to be believed. On 25th September 2001, he entered into a composition with creditors. His stated secured creditors were owed $2,110,000.00 and the security, his home, was worth $850,000.00. His unsecured creditors were owed $1,983,000.00 and he had virtually no assets apart from his home. The composition required him to pay only $20,000.00 to his unsecured creditors.
13. In October 2004 the wife’s solicitor wrote to the trustees of the husbands’ estate under the Bankruptcy Act, complaining that the wife had not been given notice of the meeting of creditors. It asserted that she was a creditor pursuant to the orders of the Court made on 21 April 1997 for unpaid arrears of spousal maintenance. The response of the trustee was to state the obvious. It was that the composition which was made involved a return of 1.927 cents in the dollar. Her inclusion as a creditor would have been quite unlikely to significantly improve the lot of the wife. The wife could have taken action but failed to do so. The reason is obvious. Action was simply not worthwhile. It is difficult to accept that she should be entitled to improve her position as against other creditors and as against the husband by her failure to assert the rights she then had.
14. This seems to have been what she had already attempted to do by making fresh claims for relief in August 2004. She resurrected proceedings in this court rather than the Federal Court; proceedings which had been dormant for a long time and which would, for reasons I have explained, probably have resulted in the s79 orders being set aside by the trustee pursuant to s79A. If the husband was not insolvent, as he claimed, in the case of both the bankruptcy and the composition, she could and should have moved to set one or both aside. She had done nothing to assert her property rights since the husband’s bankruptcy in 1995 and nothing to assert her rights to spousal maintenance since April 1997 until she filed in the Family Court of Australia, on 30 August 2004, an Application for Final Orders.
15. This application seems to have made the husband and his current wife the respondents although in some documents the wife has named a company as the second respondent. For added precaution I shall regard the husband’s wife as the third Respondent. The actual application seems to be misguided. There is no claim for any remedy pursuant to s79A but the claims appear to be more in the nature of enforcement and a claim that the husband’s second wife holds her property as trustee for the husband that the wife holds some form of charge over it.
16. The wife has had until now to show she at least has a prima facie case to support her 2004 claims and has also had plenty of time to formulate her case. I became so frustrated with my own inability to understand the wife’s case or the wife’s inability to present it that I made these orders on 4 June 2007:
1. The wife’s application to re-open is stood over for mention for 2 hours at 10:00am on Friday 5 October, 2007.
2. That the wife is directed to file and serve on or before Friday 3 August 2007:a.a list of all final and interim orders the wife now seeks;
b. a specific list for each order of all allegations which are said to found each order listed in (a);
c. a specific list for each allegation of all facts upon which the wife relies to support each allegation listed in (b);
d. a specific list for each fact of the evidence including the precise parts of any documents upon which the wife relies to prove facts listed in (c);
e. the wife’s specific submissions in relation to the manner in which each item of evidence supports each allegation listed in (b);
f. the wife’s specific submissions for each order in support of each order she seeks.
17. The wife has purported to comply with these orders. Her compliance does not help me in limiting and appreciating what the wife says her case is. It does not show that she can prima facie prove major aspects of it or that, if she could, it would lead to granting her the relief she seeks, except to a minor extent.
18. There seems to me to be virtually no evidence, even if unchallenged, in the case against the husband which would warrant any orders against the husband’s current wife. I am satisfied that if this is the high point of the wife’s argument against her, then it has no reasonable prospect of success.
19. In the wife’s overall arguments internal inconsistencies are immediately apparent if one compares pages 5 and 6 of the bundle of documents which the wife’s solicitor filed on 27 August 2007 with the list of orders she seeks which is under the heading “B, Orders The Wife Now Seeks” which is on page 9 of the same bundle. The wife’s case has constantly changed. The time should already have come when it became finally known to the Husband. It has not come and is not likely to come in the foreseeable future. I am not satisfied that any further adjournment or orders will allow me or the husband to finally know what it is.
20. Presently there is an obvious failure to provide any indication that the wife might be able to prove her case on the main causes in these proceedings. That she has not yet been able to provide anything more than a succession of allegations which might tend to show the husband is something of a rogue but do not amount even to prima facie proof was admitted during her address to me by Ms R, the solicitor who acts for her. When I confronted her with this, her response was that there were many subpoenas which were yet to be issued and would provide the material to fill the gaps. The wife has so far issued dozens of subpoenas; far too many. Her main assertion is that the husband should not have become a bankrupt in 1995 because he was not insolvent, and that he has fraudulently concealed or disposed of his assets. Despite the subpoenas, prima facie proof of this is quite lacking. The likelihood that, after the issue of so many subpoenas, the further issue of subpoenas will provide documents which relate to commercial activities and accounts from 1994,1995 and prove the existence of assets or the falsity of claimed debts which the wife has so far simply failed to find any real evidence of, is quite remote. In any event, her proper remedy was to challenge the bankruptcy and the composition, not wait for years and do nothing.
21. What is obvious is that the husband has been confronted with an avalanche of largely irrelevant or marginal and quite non-specific documents and opaque attempted inferences and claims which, on the face value of the evidence, are not supported. The wife seems at this stage to have virtually no chance of establishing most of her claims in view of the lack of worthwhile evidence and the effect of the husband’s bankruptcy and subsequent composition with creditors. Only small claims for arrears of spousal maintenance, variation of maintenance and for future maintenance have much prospect of success. The claims for costs of already resolved issues seem hopeless. Some of these issues were resolved by consent. Costs were not reserved in any instance and no order for costs was sought at the time. Given that the husband was probably in no position to pay costs at the relevant time, the failure to seek them is not surprising.
22. The wife has, in her case, attempted to answer the defence of gross delay. She relies on her mental illness and lack of funds to finance proceedings. The evidence she has provided so far in support of her answer is quite deficient. It demonstrates a close to complete lack of understanding of how to prove the elements of her case or that she has no case or both. The latter alternative seems to be the most probable one. She seems to think that assertions that she has a case, without declaring the evidence to support it, or showing that it could reasonably arguably result in an available remedy, can be continued indefinitely.
23. She says that, since 1995, she has lacked funds. She relies on a decision of the Legal Aid Commission refusing her application for legal aid to enforce spousal maintenance on the grounds that it was not satisfied her claim had reasonable prospects of success because the husband was a bankrupt. She appealed against the refusal and the appeal failed on the grounds that the cost of the proceedings did not justify the likely return. Nothing has really changed. The Legal Aid Commission’s reasons are as valid now as when it relied on them.
24. There is no satisfactory evidence that the wife’s mental illness has prevented her from acting promptly or at all. The only evidence of an admissible nature is a report dated 2 July 2007 from a Dr C who is a medical officer in the Mental Health Services Division of Sydney West Area Health Service. He says that the wife has been under the care of the West Area Mental Health Team since June 2001 for a chronic psychotic illness which had been in existence since about 1994 when her marriage broke down. She takes medication daily and is seen by Dr C or a case worker every 4 to 6 weeks. Her symptoms fluctuate in intensity and she is likely to remain under the care of the health service. There is nothing in Dr C’s report about inability to give instructions to a solicitor or lack of capacity to instruct a solicitor or any aspect of her illness which might excuse the delay. If the wife did not have the capacity to give instructions, there is nothing before me to suggest she has now regained it. The report does not seem to address the issue of delay. It appears to be directed at her ability to undertake gainful employment and says she will never be fit for it.
25. My involvement in these proceedings has satisfied me that one thing is so highly likely that it is nearly certain. It is that a hearing on the merits will largely fail and take weeks. It will involve many applications for adjournment by the wife in attempts to cure evidentiary deficiencies, still with little real prospect of ultimately proving the case she has brought.
26. The husband will have no practical remedy in costs in the likely event that they should otherwise be ordered against the wife. She has virtually no assets. The one aspect she has been able to satisfy me on is that she is now and probably has been for some years in straitened financial circumstances. She is a Disability Support Pensioner. In May 2007 her income was about $525.00 per fortnight. From that she had to pay about $150.00 per fortnight for subsidised rent in NSW government housing. Her total assets were listed as $11,000.00, approximately, in her Centrelink payment advice.
27. In the s79A claim, the wife recognises that it is no longer practical to transfer the former matrimonial home to her. That is why she now claims its value. She asserts that the husband committed fraud, not in obtaining the s79 orders but in both assuming the debts which contributed to his bankruptcy and in actually becoming a bankrupt. She argues, therefore, that, if s240(1) of the Bankruptcy Act is applied, the husband is not released from his bankruptcy debts and discharge of the bankruptcy is invalid, or the Registrar in Bankruptcy should not have accepted his petition and the bankruptcy should be annulled pursuant to s153B of the Bankruptcy Act.
28. The above argument is quite defective. S153B does provide that if there should have been no bankruptcy it can be annulled. However, the problem with the wife’s case is that the evidence does not suggest the husband was not insolvent at the relevant time. The wife says she can prove he had income of about $105,000 gross which he did not disclose for the 1993/4 financial year and about $6,500.00 for the 1994/5 financial year as well as the use of a car worth $89,000.00. It is also said that he failed to disclose as assets $89,000.00 and some business interests of no prima facie proven value in the 5 years before he presented the petition. On the evidence the wife has produced, none of these assertions, if true, would have made a difference to his bankruptcy. She has not provided prima facie evidence of anything like enough to make it seem remotely possible that she can establish that he was not insolvent. He became bankrupt for an amount in excess of his assets plus $89,000.00. The income she relies on seems to be irrelevant. Annulment is a discretionary remedy. It is unlikely to be granted so long after the event. As I have said, the wife should have acted much earlier.
29. The next aspect of the wife’s apparently paradoxical arguments is that the husband had much of his indebtedness because he defrauded financial institutions which lent him money. I cannot understand how this allegation can assist her. Assuming he did, he did not discharge the loans, so there was good reason for him to become a bankrupt. Any fraud he committed on financial institutions is not a reason why he should not have become a bankrupt or a reason to annul the bankruptcy, it is a reason why he should have been bankrupted. I note that annulment can be ordered even if the debtor was insolvent when the petition was presented. It is my understanding that the test relating to annulment if a person is insolvent when the petition is presented is based on the principle that there should be annulment if at the time the sequestration order was made a Judge should not have made it. Here it is clear that a Judge should have made it. There is no principle that it should not have been made because to do so would deprive the wife of the share of his assets which had been awarded to her by the Family Court, if to enforce that share would deprive bona fide creditors. The wife made no attempt at any appropriate time to claim the creditors were not bona fide and now produces no evidence which might reasonably be argued is, on its face, sufficient to establish that claim.
30. The wife’s reliance on s240(1) of the Bankruptcy Act is symptomatic of much of her case. The reliance is entirely misguided. Section 240(1) relates to Part X arrangements not Bankruptcies and is irrelevant to the argument about the husband’s 1995 bankruptcy. It is even more so because s240 has been repealed since December 2004, and I have no power to act on it.
31. There are other matters relied on by the wife in relation to various elements of what she says is prima facie proof of her s79A claim. It is so difficult to understand how they are part of or relevant to or advance the wife’s case or any cogent case that I could not regard them as prima facie proof of any relevant matter. However, I do appreciate that they in some instances amount to matters which raise suspicion that the husband has been dishonest, although I cannot appreciate their relevance to the remedies the wife seeks.
32. The wife claims increased assessment of past and future spousal maintenance. I am quite satisfied the wife has prima facie established her need once she became a disability pensioner in 2006. The husband is, however, only a few months behind in his payments for agreed arrears and already assessed or agreed spousal maintenance up to 10 March 2007. The wife has not had employment or income for years and has few assets. There is no evidence that since his composition with creditors in 2001 the husband has held substantial property or earned other than a minimal income. Any significant holdings and income are said to be in his current wife’s name. This does not mean that there is any evidence of impropriety by the husband or his wife in reaching this position. Nevertheless, the husband holds shares in companies, a car and a boat. The wife’s case for increased spousal maintenance for the period after she became a disability pensioner to date, given the prima facie evidence, is not hopeless. Much the same can be said about her claim for future spousal maintenance.
33. The claim for the $500,000.00 lump sum for future maintenance is not in the same situation. It too seems to be hopeless. The wife’s weekly entitlement to spousal maintenance does not appear to me to indicate much chance of success of a claim to a large weekly sum in the future. The Court would have to conclude that the husband will for many years evade making a proper weekly payment of a large sum which he will always be able to afford to warrant a large lump sum in lieu of weekly payments. By way of example, if the wife needs $500.00 per week and the husband can afford to pay it for the next ten years, the proper lump sum which reflects that extent of maintenance, assuming it will earn 3 per cent net but be extinguished by use of $500 of it each week, is $225,850.00. In my opinion, given that each party is now about 50 years old, it would be improper to grant a lump sum to cover more than 5 years into the future, given the uncertainties of life. A lump sum which approximates the present value of any weekly future income which might realistically be held to be appropriate will not be anything approaching the claim the wife has made. Much of the supposed evidentiary support for her case for a large lump sum for past arrears is based on alleged activities of the husband which do not provide a logical connection to any ability in him to pay spousal maintenance at any time since the time when he made the composition with creditors. As, in April 1997, he was of obliged to pay only $25.00 per week and as the wife has done nothing to gain any increase in the sum payable for years, it would not be fair to the husband to now require him to pay past maintenance, except in the near past, at any much higher rate. A lack of prospects of any order for payment of a significant lump sum in arrears or in the future is the inevitable result.
34. I must consider the likely prospect that the wife will prolong the hearing by asserting matters and raising issues which are no more than unwarranted diversions. The wife’s response to my orders made 4 June 2007 provides many examples to satisfy the Court that she is highly likely to try to engage in prolonged proceedings in order to prove a case or part of it which is unlikely to succeed. The history of the proceedings confirms this. One example is the statement of the wife’s case on the issue of the wife’s need for maintenance. Notwithstanding s75(3) of the Family Law Act, a sub-section which has been part of the Act since 1987 and which provides that in exercising its jurisdiction to order and determine the question of spousal maintenance the Court must disregard the wife’s income from her disability support pension, pages 68 to 70 inclusive of her response to my orders are taken up arguing that even though the wife receives a pension she still has a need to top it up. There is a reference to case after case which was decided before 1987 and a complete failure to refer to s75(3) or its effect. The wife then goes on to assert that the husband’s “misconduct in relation to the 1995 bankruptcy is an extreme case which was a deliberate act to worsen the wife’s financial position and was a contributing factor to her mental health issue.” It is only necessary to repeat this submission which is not supported by evidence of value, to demonstrate the hopelessness of its chance of success. Unfortunately this is quite typical.
35. The wife’s solicitor goes on to argue that conduct can be taken into account because of s75(2)(o) in exceptional cases. She does not seem to appreciate that to become bankrupt when ones debts so outweigh assets could not be regarded as waste or exceptional conduct. Nor could a failure to make spousal maintenance payments in the assessed amount, especially when it is virtually at nominal level.
36. Even more bizarre is the wife’s reliance on the bankruptcy as conduct causing her lack of earning capacity and her use of this to justify the assessment of past spousal maintenance arrears and the lump sum future spousal maintenance award she seeks. It seems to be suggested that the quantum of spousal maintenance should be larger because of the husband’s conduct. There seems to be a lack of understanding that reasonable need in the circumstances and the husband’s ability to pay are really the determining factors for spousal maintenance. In any event, there is no medical evidence before the Court which is sufficient to establish any conduct of the husband has caused her lack of earning capacity due to her illness. At its highest, the medical evidence suggests “alleged family violence” and that the marital breakdown caused her “distress” in 1993-4. It also suggests the wife’s mental illness could have predated the episode of distress which resulted in her being referred to the health service in 1993-4.
37. It should not be overlooked that spousal maintenance of $23,700.00 was due as at 11 April 1997. It had accumulated at the rate of $300.00 per week. $10,250.00 of this is alleged by the wife to have since been paid, leaving $13,450.00. From 1 May 1997 to date, $25.00 per week was payable; that is $14,300.00 fell due in that 11 year period. The husband paid spousal maintenance at the rate of $25.00 per week for the last eight years, being $10,400.00 approximately, and paid a lump sum of $2,600.00, making $13,000.00 in total payments. This leaves $1,300.00 due. Thus, the actual current amount due from the husband for maintenance arrears would be $14,750.00, if his bankruptcy and the composition did not extinguish pre-existing debts for arrears. If they did, and I think they probably did, a virtually nominal sum is outstanding, ie. $1,300.00.
38. Wade (formerly Trnka) v Trnka does not quite involve the same situation as the present proceedings. Here, one of the applications is reliant on s79A of the Family Law Act; a situation where some delay is usually inherent in the circumstances upon which the application is based. Wade (formerly Trnka) v Trnka involves delay in advancing a property application. Nevertheless, the issue of dismissal for failure to prosecute an application, whatever it might be, is at the heart of both cases. The Full Court decision, which has stood since 1996, establishes the test to be applied. It is simply expressed. The Court is required to weight the justice of the case for delay warranting dismissal against the case for allowing the proceedings to continue. It must be recognised that in this exercise it is the prejudice caused by delay to the party seeking dismissal which is at the root of that party’s case, but there is nothing in the cases to suggest that other factors should not be taken into account in favour of that party when balancing the conflicting demands of justice. After all, the party opposing the dismissal is entitled to marshal any matter which might be weighed in his or her favour.
39. A statement of principle in Roebuck v Mungovin (1994) 2 AC 224 at 240 which was approved in Masel and Ors v Transport Industries Insurance Co Ltd (1995) 2 VR 328 was accepted by the Full Court in Wade (formerly Trnka) v Trnka. It is:
“… if an inordinate and inexcusable delay gives rise to substantial risk that a fair trial cannot be had or is likely to cause or have caused serious prejudice to the defendant the result is, not that the action must in all circumstances be dismissed, but that the discretionary power to dismiss may be exercised.”
40. Here, in the s79A proceedings, the wife is relying on the fact that the husband should not have become a bankrupt in 1995 because he did it to defraud her of s79 rights because he had more property and income than he admitted in the bankruptcy. However, the wife had a right to attempt to enforce the husband’s obligations under the orders. She did not do so because she knew he was insolvent and/or bankrupt. Alternatively, she would have discovered this if she had attempted to enforce the orders. In the circumstances, the wife could have made the complaints she now makes, including her claim that the bankruptcy should be annulled, and it then would have been dealt with at the appropriate time, not more than 10 years later at a time when the husband has had, prima facie, the statutory right to have been relieved of the debts he had at the time of the first bankruptcy for more than 10 years.
41. Of course, this situation is exacerbated by the fact that the wife then did nothing until 2004 and in the meantime, the husband had entered into the part X composition with creditors. It is not really an excuse for the wife that the husband did not include her as a creditor and that she received no notice of this insolvency. The fact is that she claims to have rights which continued after the bankruptcy. These, if properly acted on by the wife, irrespective of the result, would have been ended by the composition. If she had taken action at a reasonable time after the husband’s bankruptcy any remaining property rights she had would have been merged in her rights under the composition. It is not suggested by the wife, and there is no realistic attempt to prove, that the husband would not have had to enter into the Part X arrangement if he had not earlier become or remained a bankrupt. Any failure of the husband to include her as a creditor does not excuse the wife’s failure to act to assert her rights promptly. The wife seems to think that because of her delay she can better her position. I must bear in mind that spousal maintenance liability is intended to reflect the ability at the time maintenance falls due from the person who is liable to make payments, as well as the needs of the payee at that time. Bankruptcy and a Part X arrangement, prima facie, is more likely to demonstrate lack of ability of the payer to pay more than the contrary.
42. In the case of each insolvency, the husband is entitled, because that is the essential purpose of insolvency law, to emerge from his indebtedness clear of debt in due course unless there is some disqualifying factor. If there is such a factor, it should be dealt with at the appropriate time, not years later, if it is discovered or reasonably discoverable. Here the wife’s allegations were reasonably available to her years ago and she would, if exercising a proper degree of diligence, at least, have discovered his bankruptcy and second insolvency and would have had a better chance than she now has to successfully enforce her claimed rights, whatever they were. I regard this as a clear case where to open these issues now will cause great injustice to the husband who was, because of the wife’s delay, entitled to assume he had cleared himself of debt and was and should have been able to get on with his life without its burden.
43. There are other aspects of injustice to the husband which these proceedings must visit upon him but which are not really attributable to delay. The major one is the likely length and cost of the proceedings and the great likelihood that they will fail, except possibly for the claim for arrears of varied maintenance accumulating after August 2004 and a claim for future maintenance as varied for a period, possibly payable in a modest lump sum. There is no substantial material which could prima facie prove any greater claim. The claims which are made for arrears, and for variation after 2004, are likely to involve relatively small sums. The case for the application for variation, on the material before me, is weak. It is not however so unlikely to be successful that the prosecution of it visits injustice on the husband, especially because his true financial situation is not known because he and his wife have not filed up to date financial statements. However, a claim for a lump sum of $500,000.00 is ridiculous.
44. The problem of proof caused by the wife’s delay is not only one which the husband will be faced with. It is the wife who has the onus of proving the matters relating to the husband’s financial circumstances on which she relies. Her delay makes it likely that the documents she still hopes to rely on will not be forth coming if the subpoenas she hopes will produce them are issued. However, that does not mean the problem of proof and the difficulties met which are likely to be caused by delay are solely problems of the wife. Her case is largely inferential. To avoid the risk that she might be able to successfully make the inferences she seeks, the husband may have or wish to produce hard evidence. The delay is highly likely to have undermined his ability to do so.
45. Against the relevant type of prejudice suffered to the husband by continuation of the proceedings, the Court must balance the prejudice likely to be suffered by the wife if the proceedings are dismissed for want of prosecution. The prejudice is not great. As a matter of law, she is quite unlikely to be able to establish her case for property settlement and s79A orders. At its highest, that is; based on the relevant factual allegations she has made, it is quite bereft of the likelihood of success because it is illogical, does not follow the law and is not based on relevant and necessary admissible prima facie evidence. The same can be said of her case for variation after the composition and before she made her application. The reality is that the wife will not be disadvantaged by dismissal at this stage of the property proceedings. Of the claims for variation and arrears of spousal maintenance, the wife’s case for arrears up to the composition with creditors is, in my opinion, virtually hopeless even though she was not a party to the composition because, had she been, her return would have been so small. The claim for variation too, is extremely weak for any period prior to the filing of her application on 30 August 2004. I am of the view that justice requires dismissal of the wife’s property claim, her claims for arrears of spousal maintenance and for variation of spousal maintenance for any period prior to the filing of her most recent application on 30 August 2004.
46. The wife asserts that because of rule 10.12(d), even if her application has no reasonable likelihood of success, there is no jurisdiction to make a summary dismissal order. The grounds for this submission is that the rule in question provides that a “party may apply for summary orders after a response has been filed…”. This submission assumes this rule is prescriptive rather than permissive. I do not accept that it is. The rules do not define the Court’s jurisdiction; the Family Law Act and any other act which gives it jurisdiction does. The rules really exist so the Court’s procedures are generally known and undertaken with consistency in order to advance the cause of justice and fairness. In fact, the rules specifically allow the Court to dispense with any rule where justice requires departure from it. The rule which provides for this applies in reference to rule 10.12(d). Even if there had been no such rule, the Court has inherent power to ignore rules where justice demands it do so. Here, justice requires that the husband should not have to answer the wife’s claims to the extent that I have already held on the grounds that I have already stated. There are additional grounds. The case is too confusing, constantly changing and so extreme and unrealistic that the husband should not be put to the expense of attempting to answer it. A proper response can only be attempted if the claim being made can be fully understood. I cannot fully understand it and I do not accept that it could be fair for the husband to be required to file a response to a case which cannot be understood properly and is still evolving but is not likely to reach the stage when it can be understood. The cases against the husband’s wife and the company seem to be beyond redemption on the presented evidence. They are so weak because they have not been explained in a manner which can be understood and cannot be understood. It would be grossly unfair to allow them to proceed. Nothing the wife has presented would provide even the slightest justification for remedies against these parties.
47. The husband seeks security for costs in the sum of $50,000.00 if his application for summary dismissal fails. This sum is, in my opinion, too low if the wife’s major claims are not summarily dismissed. Despite this, the husband has made no formal application for a higher level of security so, if security is warranted, it should be in the sum of $50,000.00. In deciding whether to grant an order for security for costs, the Court must apply s117 of the Family Law Act. Because security for costs is not mentioned in s117(1), I do not have to presume that usually there should be no security for costs order. Nevertheless, s117(2) requires the Court to be satisfied that there are circumstances which justify a security for costs order and, if there are, after consideration of the matters listed in subsection (2A), make the order which the Court considers just. I shall proceed to consider the matters in subsection (2A). They are:
a.The parties’ respective financial circumstances - Those of the wife are parlous. Those of the husband are not fully known but can be assumed to be much better than the situation the wife is in because he has placed no evidence of his situation before the Court. The wife’s poor financial situation is so much more to the wife’s disadvantage in this aspect of the proceedings than to her advantage, as she has little hope of success in the major part of her claim and, in attempting to prove it, is likely to take much hearing time with numerous adjournments and amendments. The husband is therefore likely to be put, and must already have been put, to enormous expense relative to the likely result in favour of the wife in defending her claim.
There is a high likelihood of a costs order being made against the wife. If there is, she will be quite unable to meet it. It has been suggested by her solicitor that relatives may be able to be a source of finance to her, but there is no evidence that this is or may be the situation. I do not accept that the wife could meet anything but a minimal costs order. A security for costs order will, in any event, prove the wife’s capacity to rely on relatives. If they would be prepared to meet a costs order made against her because she is unsuccessful, they are more likely to provide security for costs because she has not yet been unsuccessful and must have a better prospect of being successful than she has after the event.
b.Legal Aid - The evidence is that neither party has legal aid.
c.The conduct of the parties of the proceedings – The husband’s conduct has been unexceptional in any relevant sense. That of the wife is so exceptional it warrants an exceptional order. The extent of delay, the fact that there is an inference that the delay was the result of a realisation that, if appropriate proceedings had been commenced at the appropriate time, they would have had little prosect of worthwhile success, the unmeritoriousness of most of the claims, their evolving and uncertain nature, the lack of prima facie proof, the reliance on material to be produced on subpoenas which have not issued in the face of the many subpoenas which have already issued and the ample opportunities the wife has had to issue the subpoenas she needs, the sheer volume of material the wife purports to rely on and the difficulty she will have to make it appear to be relevant and probative amount to conduct of the proceedings which warrant an order for security for costs.
In my opinion, the proceedings are, except for modest claims for arrears and variation for relatively recent periods and the future, vexatious in the sense that they have been and will continue to be a source of serious and unjustified trouble and harassment for the husband and, in the case of further subpoenas, others too. If this aspect had been specifically argued under s118 of the Act, I might have dismissed the wife’s claim on this ground. If ultimately the wife is able to resist dismissal, there should be an order for security for costs based on the wife’s largely vexatious conduct of the proceedings.
d.Failure to comply with orders - The proceedings are only in part a result of the husband’s initial failure to comply with orders in favour of the wife; the consent orders of 1994, and to a much lesser extent the original and varied maintenance orders. This is not, in my assessment, a telling point because of the wife’s delay. The wife has not necessitated these proceedings by any failure to comply with orders, although compliance with my orders made 4 June 2007 for the conduct of these proceedings has been unsatisfactory especially because of the prolixity of her response to them and the obvious weaknesses in the wife’s case which it highlights.
e.The lack of success of a party - The issue of who has been successful or otherwise cannot yet be decided on the question of whether or not there should be security for costs. The question of security will only be viable if orders dismissing the wife’s claims are not made or made then, on appeal, set aside.
f.& g.There has been no relevant written offer. I have referred to all matters which I regard as relevant in discussing the husband’s application for summary dismissal of the wife’s claim on the ground of delay, especially those relating to the circumstances in which delay took place, particularly the timing of the wife’s claims in respect to the husband’s bankruptcy and the composition with creditors and the effect of those aspects on the wife’s prospects of success.
48. I have little doubt that the husband’s costs will, in all, exceed $50,000.00. The volume of the file which requires several boxes, the number of documents the wife purports to rely on, the number of subpoenas to produce documents supposed to disclose the husband’s financial situation, the likely length of the hearing and the likely need for amendment of the orders the wife seeks, the prospects of adjournment and the difficulties the wife will have in proving her case will all result in increased length and complexity and increased costs to the husband in defending it above what would otherwise be expected. I would have ordered much more than security for costs of $50,000.00 if a formal application had been made for a greater sum. As it is, it is just to order the wife to lodge security for costs in the sum of $50,000.00 if the proceedings which I have held should be summarily dismissed ultimately are permitted to continue.
49. I shall, for the reasons stated above, dismiss the wife’s claims against the husband’s wife and the company, the s79A claim, her property claim and any related claim, including the claim to annul the bankruptcy, her claim for costs of previously completed proceedings, as well as her claim for variation and arrears of spousal maintenance accruing before the end of August 2004. I shall limit her claim to a lump sum for future maintenance to $125,000.00. I assess that as an amount which is highly unlikely to be exceeded. In saying this, I am not suggesting that a lump sum will be ordered or, if it is, that amount or anything close will be reached. It is an approximation of the present value of $500.00 per week for 5 years at 3 per cent interest. Nor am I suggesting the wife might be entitled to a variation of spousal maintenance to $500.00. I have chosen this level because I think it is clear that a weekly sum of $500.00 and a lump sum of more than $125,000.00 has no reasonable prospect of success and would place an unfair burden on the husband to defend claims to them. I shall restrict the claim and hopefully that will have the effect of putting a brake on the systems abuse which is a characteristic of the wife’s conduct of the proceedings. If my orders for dismissal are set aside, on failure to lodge the security within one month of setting them aside, the wife’s continuing claims pursuant to s79A and s79, the annulment claim, those for arrears of spousal maintenance up to 30 August 2004, for variation of spousal maintenance before that date, for costs of any aspect of proceedings which have been claimed and for any lump sum for future maintenance exceeding $125,000.00 should be permanently stayed. I shall make such orders.
I certify that the preceding forty nine (49) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cohen
Associate:
Date: 2 May 2008
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