Vanguard and Trustee in Bankruptcy For v Vanguard

[2010] FamCA 989

FAMILY COURT OF AUSTRALIA

VANGUARD & TRUSTEE IN BANKRUPTCY FOR V VANGUARD AND ORS [2010] FamCA 989

FAMILY LAW – PROCEDURE – Trustee in bankruptcy for respondent husband and his parents – Intervening application for costs by solicitors – Discovery – Case management

Bankruptcy Act 1966 (Cth)
Family Law Act 1975 (Cth)

APPLICANT: MS VANGUARD

FIRST RESPONDENT: MR STILES (As registered trustee in bankruptcy for the husband)

SECOND RESPONDENT: MR NEWEL (As registered trustee in bankruptcy for the husband’s parents)

THIRD RESPONDENT: Z FIRM BARRISTERS AND SOLICITORS

FILE NUMBER: MLC 10379 of 2009

DATE DELIVERED: 27 OCTOBER 2010

PLACE DELIVERED: MELBOURNE

PLACE HEARD: MELBOURNE

JUDGMENT OF: YOUNG J

HEARING DATE: 27 OCTOBER 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Davis

SOLICITOR FOR THE APPLICANT: Pearce Webster Dugdales

COUNSEL FOR THE FIRST 

RESPONDENT:

Ms Stewart

SOLICITOR FOR THE FIRST 

RESPONDENT:

Taussig Cherrie

THE SECOND RESPONDENT: Mr Newel

THE SECOND RESPONDENT:

HLB Mann Judd

COUNSEL FOR THE THIRD

RESPONDENT:

Mr Goldblatt

SOLICITOR FOR THE THIRD

RESPONDENT:

Z Firm

Orders

IT IS ORDERED:

1. THAT all extant applications be adjourned for a one (1) day defended hearing on Monday 7 February 2011 at 10:00 a.m. before Young J.

2. THAT the matter be listed for case management and further mention on 17 December 2010 at 11.00 a.m. before Young J.

3. THAT within twenty-one (21) days of the date hereof each of the First Respondent and Second Respondent make, file and serve any further Application in a Case for disclosure or discovery of documents, and inspection thereof, provided that there is a clear and precise identification of any and all such documents sought and it is supported by appropriate affidavit(s).

4. THAT any response thereto is to be filed and served within fourteen (14) days thereafter and again any order then sought is to be clearly identified and supported by affidavit(s).

5. THAT any further affidavits to be relied upon in the 7 February 2011 hearing are to be filed and served by the First Respondent and Second Respondent on or before 4.00 p.m. 10 January 2011.

6. THAT the wife and the Third Respondent make, file and serve any further affidavits relied upon by 4.00 p.m. on 17 January 2011.

7. THAT all parties are to prepare a detailed summary of all relevant facts and of the legal argument, including cases to be relied upon, and that document is to be filed and served:

   (a)by each of the First and Second Respondents by 4.00 p.m. on 24 January 2011;

   (b)by the wife on or before 4.00 p.m. 31 January 2011;

   (c)by the Third Respondent on or before 12.00 noon Thursday 3 February 2011.

8. THAT the costs of and incidental to the hearing this day of all parties are reserved to be determined on the 7 February 2011 hearing date and in this regard all parties should in their written submissions address the issue of such costs and the quantum thereof as may be claimed.

9. THAT the extempore reasons for judgment delivered this day be transcribed, be placed upon the Court file and be made available to all parties.

IT IS CERTIFIED

1. THAT pursuant to Rule 19.50 of the Family Law Rules this matter reasonably required the attendance of Counsel for each of the wife, the First Respondent and Third Respondent and Solicitor appearing as Counsel for the Second Respondent.

IT IS NOTED

A.THAT the 7 February 2011 hearing is fixed for one (1) day only and it has been discussed in Court this day that there will be cross examination required of the solicitor, Mr Z and that the estimate given by Mr Davis is up to thirty minutes and by Ms Stewart is up to an additional sixty minutes.

B.THAT if any other witness is required to attend for cross examination formal notice thereof is to be given between solicitors no less than seven (7) clear days prior to hearing.

IT IS NOTED that publication of this judgment under the pseudonym Vanguard & Trustee in Bankruptcy for V Vanguard is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MEBOURNE

FILE NUMBER: MLC 10379 of 2009

MS VANGUARD

Applicant

And

MR STILES (AS REGISTERED TRUSTEE IN BANKRUPTCY FOR THE HUSBAND)

First Respondent

MR NEWEL (AS REGISTERED TRUSTEE IN BANKRUPTCY FOR THE HUSBAND’S PARENTS)
Second Respondent

Z FIRM, BARRISTERS AND SOLICITORS, PTY LTD
Third Respondent

REASONS FOR JUDGMENT

1. The proceedings before me today arose primarily out of the wife’s amended application seeking a property division pursuant to s 79 of the Family Law Act.  The matter was last before me on 21 September of this year when different Counsel then appeared for both the wife and for the Trustee in Bankruptcy of the husband, who currently is overseas with his whereabouts unknown.  I made procedural orders on that day by consent in the form drafted by Solicitors or Counsel.  The effect of those orders was to require notice to be given to the firm of solicitors Z Firm, Barristers and Solicitors, Pty Ltd, and accordingly they are here and represented by Mr Goldblatt of Counsel this day.

2. Mr Davis of Counsel now represents the wife.  Ms Stewart of Counsel represents Mr Stiles as registered Trustee in Bankruptcy for the husband, who I will refer to as the First Respondent.  Mr Newel, accountant, is before the Court by leave as the Trustee in Bankruptcy of the parents of the husband.  Neither of those individuals are in Court.  I am advised that one of them, the father, is in gaol and the other, the mother, is in a location unknown to the Court.  Mr Newel has on short notice appeared, and he will be obtaining legal advice in due course and may hereafter be represented in the further adjourned proceedings.

3. This morning, Mr Heerey of Counsel appeared to mention on behalf of D Inc various issues.  They are not a party to the proceedings.  He had no formal application before the Court.  He is not an intervenor.  Whilst he was listened to by the Court, he has otherwise at the invitation of the Court now departed and will not be further identified within the orders included within this Judgment.

4. The further application that was filed subsequent to the last Court hearing is that of 11 October 2010, which is an application made by the First Respondent to be released from an undertaking provided to Z Firm, Solicitors, to hold on trust a sum of $404,000 approximately, plus interest, in a separate interest-bearing account.  That application received passing attention today, but I have a very firm statement provided by Ms Stewart of Counsel for the First Respondent and given on instructions that those moneys will be held and retained pending agreement of all parties or further order of this Court and that there is no need to further injunct or deal with those moneys as they will be before the Court and subject to Court order on the adjourned hearing date.

5. There was a response filed 25 October of this year by Z Firm, solicitors seeking a declaration that they are a secured creditor of the husband and that his property is charged as a consequence of that security so as to facilitate payment out to them of the sum which they claim as legal costs and disbursements for interest or other matters of and arising therefrom.  Those matters remain to be determined.  They sought that the application in a case filed 11 October 2010 be dismissed and that matter, along with the earlier interim application which is outstanding, all remain to be heard and determined on the adjourned hearing date.  The orders that I have made today will consolidate each of that application and response to a date to be fixed.

6. As background to various interim orders for the release of funds on an urgent basis which Mr Davis made on behalf of his client I was referred to the order made by consent in this Court on 7 December 2009 as to a restraint upon the First Respondent save for the costs of administration of the estate and more particularly then to the subsequent orders by consent varying that initial order.  Those orders were made by consent by Registrar Sikiotis on 25 February 2010 upon hearing the solicitors for each of the applicant wife and the first respondent.

7. The restraint now imposed by consent upon Mr Stiles is that he:

   ...is restrained from dealing with the funds except to meet the costs and expenses of administration of the bankrupt estate (S) including but not limited to statutory realisation, interest charges and the trustee’s remuneration.

8. What has occurred in this case is that the trustee, Mr Stiles, has elected not to continue to act for the husband’s parents and as a result Mr Newel and his firm are now the trustee for the parents, and they have, as Mr Newel has explained to the Court, much work in front of them, and investigations to undertake in that role as trustee to further, and better understand, and explain to the Court matters arising from their role.  All of those matters remain for another day.

9. The primary issue that was identified as the hearing for this day and which will be the subject of the adjourned hearing date is the validity of the security claimed or held by Z Firm, whom I will call the Third Respondent, for legal fees, charges and disbursements, and now understood to be a sum slightly in excess of $400,000 and is as identified in the papers before the Court.  Z Firm will seek to validate that security, which is challenged by the wife, and presumably by the Trustee or each of them, being the First and Second-named Respondents.  I make no further comment upon those issues which are outstanding and which will be before the Court hereafter.

10. What did become an issue and which has occupied much time this day was Ms Stewart on behalf of the First Respondent seeking to obtain further specific disclosure, discovery and inspection of documents of and related to that purported security.  Ms Stewart identified at least seven matters or areas upon which she sought inspection of documents as wide and diverse as the file and diaries of the solicitors, all emails passing between the respective respondents, particularly in their individual capacity including the husband and his parents and others, and all past accounts, including accounts paid to other Counsel, and a break-down of legal expenses.  I am not going to make any such particular order.  I am wholly uncertain as to the issues identified by Ms Stewart and clearly they should have been provided either in a form of application to the Court or at the least in a precise hand-written request so that other Counsel could read, understand and know the issues they were dealing with.

11. Mr Goldblatt did respond, and, although I truncated his response, he identified the obvious issues of legal professional privilege, of relevance, of the identity of the documents and other matters which are all reserved for future argument if and when they arise as an issue in the proceedings.  I emphasise that it is the equitable charge and the validity thereof over the security of the moneys invested and agreed to be held that is the first and primary issue to be hereafter determined.  It has been foreshadowed to the Court that there will then be consequential issues as to the quantum of charges, the accuracy of charges, and any apportionment as between Z Firm, Solicitors, acting for the husband, the parents or other corporate entities or others, and all of those matters may become relevant and may impact upon the quantum of any charge or payment, but that is for another day.

12. Mr Davis has been at pains to rightly identify the property interests of his client, who under section 79 of the Family Law Act 1975 has a valid and yet to be ascertained and determined claim before the Court. The primary issue in that hearing will be the identification of the pool of assets available for division under section 79 and for the purposes of concluding a just and equitable settlement of property under sub-section (2) thereof, which is no doubt the primary focus of the wife and her legal practitioners. That remains outstanding and is the founding application of proceedings in this Court.

13. Some time today has been spent on understanding or by explanation of the balance of moneys that the Trustee has had and has dealt with over the past few months, and in particular I was directed to paragraph 5 of the affidavit of Mr Stiles filed 8 October 2010.  At that time, there was a balance of perhaps $200,000 or thereabouts, subject to the specific arithmetic of that paragraph.  I was advised today that such a sum had reduced to $16,000 but that those moneys have in any event been expended but not paid.  That was a matter, understandably, of great concern to the wife and her practitioners, and an application was raised late in the day for at least that sum of $16,000 to be restrained pending further hearing or order in this matter.  I allowed Ms Stewart and her solicitor a brief opportunity to take instructions, and it was as a result of those instructions that I understand that the sum of $16,000 has been earmarked and expended.

14. Generally, and as this matter is likely to come before me again, I record the future issue of who will appear for the Trustee, and the role that the Trustee may take in his search for the overseas moneys or other assets allegedly of the husband or his extended family or others and how that will be funded.  More particularly the issue is who will appear to prosecute what argument or to address the Court on issues before the Court in relation to the security or the consequential decisions arising therefrom.  I make no further comment upon any of those matters but I merely highlight that there are issues which the Court must be kept informed of pending any further hearing.  I do so because no doubt every dollar is important to every party, and there is, on the current documents and evidence before the Court, a limited pool which is largely either accounted for or targeted in respect of the orders before the Court.

15. What I intend to do, and as I have foreshadowed to Counsel and subject to the timetable to which there appears at least some general acquiescence in view that it is now past 4.30 p.m. and we have been in Court since approximately 10.00 a.m. this day is to structure orders so that either of the first or Second Respondent have 21 days to make written application identifying documents to be disclosed, identified and thereafter inspected, subject to the right of any objection to be taken thereto for any proper reason.  If such objection is taken, a response must be filed within 14 days by such party or parties who may so object. 

16. I will list the matter before me for mention only on 17 December at 11.00 a.m., but I indicate to Counsel that I have another matter listed that day.  Thereafter, the further hearing on the validity of the security as claimed by the Third Respondent will be listed before me on Monday, 7 February.  It will be a one-day hearing and I have otherwise indicated my unavailability to Counsel.  It will proceed hopefully on the documents, though counsel have foreshadowed some required but brief cross-examination of Mr Z, and he is on notice as to that fact.

17. I will need to be somewhat abrupt with the filing dates for affidavits and required legal submissions of and related to that matter.  I am unsure what further affidavits will be filed, not on the wider issues in this case but on the security as sought to be validated and leaving aside the consequential issues that might flow as to quantum or extent of security or interest charges or otherwise costs in the proceedings, which are all other matters to be heard and determined at some other likely date.

18. What I will require is that First and Second Respondents, they being each of the Trustees, file any affidavits by 10 January.  Affidavits from the wife or the Third Respondent are to be filed and served by 17 January.  I well understand that is somewhat of a tight schedule, but that needs to apply if the affidavits are to be filed before any legal submissions are filed.  Those legal submissions are required and the Court will rely upon those submissions, and they are to be cross-referenced to cases and the particular paragraphs in cases to be relied upon.  I will at the request of Mr Goldblatt not put any limit on the document, but I do not want a book.  I make that abundantly clear - succinct legal argument relevant to the facts and the legal matter in issue. 

19. The Trustees will file by 24 January, the wife by 31 January, and the Third Respondent by 3 February.  Again, that is a very tight timetable, but it is the best that can be done accommodating the Christmas break, the filing of affidavits and allowing counsel some time to fine-tune those legal submissions.  I intend, against my usual practice and unless I hear otherwise from Counsel, to reserve the costs of the parties of and incidental to this day to myself on 7 February.

RECORDED   :   NOT TRANSCRIBED

1. I am not pre-judging any issue and I will reserve to myself, because it is before me, the ability to deal with all costs issues. That is not to say there will be a costs order made for anyone in any way. It is wholly discretionary, and I have identified section 117 of the Family Law Act to everyone earlier in the day.  I am not going to contemplate any tactical or other polite argument at this time on costs.  They can be dealt with in submissions.  I make it perfectly clear.  I have given these brief reasons for judgment for the purpose of having them transcribed, made available to everyone, so these matters can be understood in the considered light of preparation for hearing cost expenditure, and all of the legal issues before the Court.  As I have said, I will have those brief reasons transcribed, and I will understand they were more in the form of a summary of matters touched upon today, but I have done that to try and provide a better understanding of the events of this day on the adjourned date, and to limit the issues, and provide the parameters within which I am allowing the matters to go forward.

I certify that the preceding twenty (20)
paragraphs are a true copy of the reasons
for judgment of the Honourable Justice Young
delivered on 27 October 2010.

Associate: ……………………………………………………………

Date:  …………………………………………………………………