Willis & Sampson & Ors

[2012] FamCA 613

FAMILY COURT OF AUSTRALIA

WILLIS & SAMPSON & ORS [2012] FamCA 613

FAMILY LAW - COSTS – Where the Husband’s son was seeking indemnity costs from the Wife for his joinder – Where the Husband agreed to pay his son’s costs on an indemnity basis – Where all parties consented to the removal of the Husband’s son as a party to the proceedings – Where the Wife submitted that the joinder of the Husband’s son and the issuing of several subpoenas was necessitated by the Husband’s non-disclosure – Where the material before the Court and the cross-examination of the Husband supported the Wife’s submission that the Husband’s son’s joinder was necessitated by the Husband’s non-disclosure

Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)

Colgate-Palmolive v Cousins Pty Ltd (1993) 46 FCR 225
Kowaliw & Kowaliw (1981) FLC 91-092
Omacini & Omacini (2005) FLC 93-218
Penfold & Penfold (1980) 144 CLR 311
Townsend & Townsend (1995) FLC 92-569
Weir & Weir (1993) FLC 92-228
Yunghanns & Yunghanns (2000) FLC 93-029

APPLICANT: Mr J Willis

1st RESPONDENT: Ms Sampson

2nd RESPONDENT: Mr Willis

3rd RESPONDENT:  M Pty Ltd

FILE NUMBER: BRC 12125 of 2010

DATE DELIVERED: 31 July 2012

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Kent J

HEARING DATE: 31 July 2012

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Carew

SOLICITOR FOR THE APPLICANT: Michael Lynch Solicitors

COUNSEL FOR THE 1ST RESPONDENT: Mr Kirk SC

SOLICITOR FOR THE 1ST RESPONDENT: Hopgood Ganim

COUNSEL FOR THE 2ND RESPONDENT: Mr Paige SC

SOLICITOR FOR THE 2ND RESPONDENT: Hartley Healy

Orders by Consent

1. Mr J Willis be removed as a party to the proceedings.

1. Mr Willis pay to Mr J Willis, his costs of and incidental to the proceedings on an indemnity basis in the sum of AUD$17,000.00.

Orders

1. The Husband must pay the costs of the Wife on an indemnity basis as agreed or in default of agreement as certified under the Family Law Rules 2004 (Cth), the relevant costs being the Wife’s costs of and incidental to:

   (a)       the joinder of Mr J Willis to the proceedings;

   (b)       all costs incurred by the Wife from 22 September 2011 to the date of these Orders in relation to the Wife seeking disclosure in respect of all funds transferred from M Pty Ltd and the application of those funds;

   (c)       the Wife seeking a response to questions concerning the use or dispersal of $210,000.00 and in relation to the purchase of the … motor vehicle;

   (d)       the hearing today;

   (e)       the Wife’s Amended Response filed 27 July 2012.

2. It is certified that it was appropriate for the parties to be represented by Counsel at this hearing.

3. The following entities be permitted a further fourteen days to provide the documents requested by the Wife pursuant to the relevant subpoenas issued on 24 July 2012;

   (a)       B Pty Ltd;

   (b)       Westpac Bank;

   (c)       Woods Hatcher solicitors; and

   (d)       Ramsden Lawyers.

4. The parties be given leave to inspect and copy the documents produced on the subpoenas referred to in Order 5.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Willis & Sampson & Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 12125 of 2010

Mr J Willis

Applicant

And

Ms Sampson and Mr Willis and  M Pty Ltd

Respondents

EX TEMPORE REASONS FOR JUDGMENT

1. The substantive proceedings concern property proceedings between the Husband and the Wife. The parties commenced cohabitation in or about early 1986, married in 1986 and separated, on the Wife’s version, in July 2010, and on the Husband’s version, in late August 2010.

2. The interlocutory applications that came before me today concerned applications for costs in respect of the joinder of Mr J Willis, the Husband’s son from a previous relationship. I should note that there are two children of this relationship, now adults, namely M, born in 1989, and L, born in July 1994. As noted, Mr J Willis is a son of the Husband from a previous relationship, and is now about 31 years of age.

3. The Application in a Case brought by Mr J Willis was that the Wife pay his costs of and incidental to his joinder to the proceedings on an indemnity basis. In the result, as matters have progressed during the hearing, the Husband reached agreement with his son, Mr J,Willis that the Husband would pay Mr J Willis’ costs of and incidental to Mr J Willis’ joinder on an indemnity basis in the amount of $17,000.00, reserving to himself that those costs would be in issue at the trial of the substantive proceedings.

4. For the purpose of the application this morning, the Husband was cross-examined on aspects concerning disclosure in particular before me.

5. The issues that gave rise to Mr J Willis being joined to the proceedings might be summarised as the Wife seeking to know how funds had been applied from the sale of a Resort in the South Pacific Ocean, previously managed by the parties, and of which the Husband historically held a 32 per cent interest as I understand it.

6. It appears that since at least September 2011, the Wife has been seeking from the Husband an explanation as to the disposal of the funds, said to be about AUD$3,500,000.00 or their equivalent and in particular, as to the disposal of five particular amounts totalling some $953,000.00 paid from the company M Pty Ltd, which is the company which originally received the sale proceeds.

7. On the Wife’s case, having had no satisfaction in terms of a proper and full explanation from the Husband as to the disposal of those funds, the Wife initially sought subpoenas with respect to Mr J Willis, who has historically been a shareholder of the company, M Pty Ltd, until recently, and on the material before me, it appears there has historically been a close financial connection between Mr J Willis and his father. That led to the Wife ultimately joining Mr J Willis to the proceedings and it is said that finally, in about June or July, when there was proper explanation of the disposal of the funds, the Wife agreed to Mr J Willis no longer remaining a party to the proceedings, and I have made an Order by consent today in which he is no longer a party.

8. It is trite to note that the first step in an application for final property Orders is to identify the property liabilities and financial resources of the parties as at the time of the hearing. That step can be complicated in any given case by issues concerning whether or not there has been, post-separation, some premature distribution of property that might otherwise be available to the parties in what is known as the Townsend sense, a reference to Townsend & Townsend (1995) FLC 92-569; whether there has been waste of property produced by wanton, reckless or negligent conduct, in what may be termed the Kowaliw sense, a reference to Kowaliw & Kowaliw (1981) FLC 91-092; or whether there have been funds expended post-separation which are said to be unreasonable in their nature or scope or both, such that the funds ought be notionally added back to the pool of assets available for distribution.[1]

   [1] Omacini & Omacini (2005) FLC 93-218.

9. It is thus critical to the first step referred to that each party make full and frank disclosure of all relevant financial documents, but also all relevant financial information. It is sometimes misunderstood that there is a significant difference in civil proceedings, where cases are the subject of pleadings and the issues are there identified by the pleadings, that discovery relates to the discovery of documents relevant to an issue. In stark contrast, in this jurisdiction, in relation to a property case, it is not simply the discovery of documents with which the Court is concerned. Both parties to such an application have an obligation to make disclosure of information and reference to the relevant Family Law Rules 2004 (Cth) (“the Rules”) makes it readily apparent as to that distinction. For example, Chapter 13 of the Rules, which sets out the obligations as to disclosure between parties, sets out in r 13.01 the general duty of disclosure as follows:

   (1) Subject to (3), each party to a case has a duty to the court and to each other party to give full and frank disclosure of all information relevant to the case in a timely manner;

   …

10. There are many decisions of this Court and of the Full Court of this Court referring to the duty of disclosure being an absolute duty. In Weir & Weir (1993) FLC 92-228, the Full Court held:

    This Court has pointed out in a line of cases leading up the recent decision of the Full Court in Black & Kellner (1992) 15 Fam LR 343; [1992] (sic) FLC 92-287, that it is the duty of a party involved in property proceedings in this jurisdiction to make full and frank disclosure of their financial affairs. …

    …

    Irrespective of any obligation created by the Family Law Act or the [Family Law Rules] that we have identified, in our opinion, the obligation of full and frank disclosure applies because of the duty of the court to consider all the circumstances of the case. This is particularly important in cases where the financial circumstances of the party may be relevant. It is not sufficient for a party to simply adhere to the obligations as defined by the rules of court. If the relevant rules are deficient in identifying aspects of the party’s financial circumstance, then this is not a basis that there was non-disclosure because the rules did not identify an aspect of a party’s circumstances that may be relevant.

    (footnotes omitted)

11. For present purposes, it is to be noted that the obligation cast by r 13.04 of the Rules extends to parties providing full and frank disclosure of parties’ financial circumstances, including under sub-paragraph (g), the disposals of property both in the twelve months immediately before separation of the parties or since the final separation of the parties.

12. I am satisfied on the evidence that the Wife legitimately pursued questions concerning the dispersal of the sale proceeds from the relevant resort. I accept the submissions on her behalf that she pursued a number of steps to seek to obtain information that in fact ought to have been provided by the Husband voluntarily. That is, in analysing the question of disclosure in this sense, it is not necessarily relevant to look at the questions asked by one party of the other. The question is the surrounding circumstances, and whether, having regard to the obligations to make full disclosure, the party nevertheless, irrespective of any questions, was bound to supply the information.

13. In this case, the Wife, by her solicitors, commenced corresponding to the Husband’s solicitors on 22 September 2011, and that process continued from then until 20 January 2012 over four letters, seeking explanation of payments totalling almost $1,000,000.00 and disclosure of relevant documents. By 20 January 2012, the Wife, by her solicitors, foreshadowed that a range of subpoenas would be issued and foreshadowed to the Husband that he would be responsible for the Wife’s costs of obtaining information by alternate means if she was given no option. There was no meaningful response on the evidence before me to that correspondence.

14. Thereafter, the Wife issued subpoenas, both to Mr J Willis and to his wife, given their involvement so far as the Husband is concerned in a range of financial transactions. The material before me details the extent of those transactions. In addition to the subpoenas, the Wife then sought, as already noted, to join Mr J Willis as a party to the proceedings. I am satisfied on the evidence that it was not until June or July of 2012 that the Wife finally had satisfaction in relation to a matter she has been agitating since September last year in relation to the provision of information.

15. In assessing the Husband’s position, it is also relevant to note that only recently did the Husband reveal that in late 2010, post-separation of the parties, he expended some $447,000.00 to purchase a motor vehicle. There was also an issue raised as to the use of $210,000.00 by the Husband, provided to the real estate agents, E, again unexplained until, if it can be termed an explanation, the Husband gave oral evidence under cross-examination today.

16. It is submitted on behalf of the Husband that the live issue before me today related to Mr J Willis’ application for costs against the Wife and that the Husband did not anticipate that the Wife’s pursuit of costs against him would be a live issue today, and if given the opportunity, the Husband would seek to provide evidence to the Court.

17. Whether or not there are issues concerning the Wife’s non-disclosure, as was asserted from the bar table without an evidentiary basis, is a matter that can be reserved to the trial and can be agitated by the Husband at trial. That is, if the Husband can demonstrate in relevant respects where the Wife has failed to meet her obligations as to disclosure, that will remain a live issue that can be dealt with by a trial judge. However, I am satisfied that in relation to the aspect before me, there was a discrete issue to be considered. By her Amended Response filed on 27 July 2012, the Wife made plain the Order that she would be seeking from the Husband.

18. That aside, it would be illusory to suggest that the Husband, having joined issue in the proceedings and supported his son’s application for indemnity costs against the Wife, would not reasonably anticipate that the Wife’s position would be as it has always been, that is, that the involvement of Mr J Willis via subpoenas and also via joinder as a party was only necessitated out of the Husband’s own failure to make true and full disclosure of the relevant aspects from the very outset when this issue arose.

19. Section 117 of the Family Law Act 1975 (Cth) (“the Act”) provides the source of statutory power for the Court to make an Order for costs. That section was considered by the High Court in Penfold & Penfold (1980) 144 CLR 311 (“Penfold”), and the High Court made it plain that the discretion conferred by s 117 is a wide discretion, and s 117(1) is not to be read as paramount to s 117(2), that is, in Penfold, the High Court observed that what had to be found was justifying circumstances for an Order for costs, but that was not one and the same as finding something exceptional in nature with respect to justifying an Order for costs.

20. I am satisfied in the circumstances of this case that there are justifying circumstances for a costs Order, relying primarily upon the Husband’s conduct as referred to in terms of what I find is an abject failure to meet his absolute obligation of disclosure. I am satisfied on the material before me that the financial circumstances of both parties are sound and I note in respect of the Husband’s affidavit filed 16 April 2012 that the Husband himself records what he suggests to be the then-available pool. Cross-examination of the Husband establishes that that suggested pool does not include the Ferrari motor vehicle purchased for $447,000.00, or the sale proceeds of that car of $260,000.00, nor does it include reference to the shop purchase the Husband referred to in his oral evidence in relation to his expenditure of $210,000.00.

21. Obviously enough, there may be other issues concerning disclosure and the extent to which the Husband’s evidence about what he says are the assets, liabilities and financial resources of the parties may have to be approached with some caution.

22. In circumstances where the Wife was ultimately successful in obtaining, via the involvement of Mr J Willis, some real answers to the questions she had posed since about September of last year, it follows that that is the relevant consideration with respect to the question of costs with respect to success in the proceedings.

23. Plainly enough, there is power to order costs, but the power to order indemnity costs is confined to those cases where something exceptional must be shown to exist.[2] Likewise, the Full Court of this Court reviewed the approach in Yunghanns & Yunghanns (2000) FLC 93-029, and noted that the making of an indemnity costs Order is, “…a very great departure from the normal standard,” referring to Colgate-Palmolive.

    [2] See, for example, Colgate-Palmolive v Cousins Pty Ltd (1993) 46 FCR 225 (Shepherd J) (“Colgate-Palmolive”).

24. In this case, the relevant considerations include the quantum of the amount queried, namely an amount approaching $1,000,000.00 and the extent of the steps that the Wife has had to take to obtain some satisfaction in relation to those queries. It is axiomatic that the difference between party and party costs and indemnity costs, already significant, becomes increasingly significant as to the extent of the proceedings that ensue. That is, where there are multiple letters having to be written, multiple steps having to be taken, over a significant period of time, the gap between party and party costs and indemnity costs means that it may, in the end result, be somewhat pyrrhic to succeed in obtaining an Order for simply party and party costs.

25. Also relevant to the consideration is the nature of the conduct referred to. I have already identified the authorities that make it plain, and it is obvious in any event, that full and frank disclosure lies at the heart of the integrity of a s 79 process. The Court ultimately is charged with the responsibility to make Orders which are just and equitable to both parties. It can only do so where there has been full and frank disclosure and the absolute duty in respect of disclosure has been met. Once a party fails to meet that obligation, significant further costs are occasioned to both parties, or at least the party seeking remedies.

26. In this case, I am also mindful that, throughout the proceedings, the Husband has been represented by a well-known and competent firm of solicitors practising in this jurisdiction, and I note that he is represented by Senior Counsel today. I note that on this application, initially he did not have hesitation in supporting his son’s application that the Wife pay his son’s costs on an indemnity basis. In circumstances where I am satisfied that the son’s involvement was predicated upon the Husband’s failure to make full and true disclosure, it is consistent with the Husband’s approach to costs that the costs be on an indemnity basis.

27. It was asserted from the bar table, but unsupported by evidence, that there would be a range of documentation that could be provided by the Husband in answer to the application for costs sought by the Wife. It was suggested that there would be no prejudice to the Wife by having this aspect of the matter dealt with on another occasion. I am not satisfied of those things for a number of reasons. First and foremost, the Husband has known at least since September last year that it has been a live issue, as far as the Wife was concerned, as to the dispersal of the relevant funds. It was readily open to him, in his support of initially his son’s application that the Wife pay indemnity costs, to put before the Court evidence that would demonstrate, in some way or another, that the Husband had somehow provided the relevant information to the Wife prior to it being provided by his son. No submission has been made to me, nor has it been pointed to, that the information ultimately provided by the son in June or July of this year that finally answered the Wife’s queries was not within the means or scope of knowledge of the Husband and had not been previously provided.

28. In all the circumstances, I am satisfied that there are justifying circumstances within the meaning of s 117 of the Act for an Order for costs in favour of the Wife, and that in the exceptional circumstances concerning the Husband’s conduct, that Order should be made on an indemnity basis.

29. I therefore make Orders as set out at the commencement of these reasons.

I certify that the preceding twenty-nine (29) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Kent delivered on 31 July 2012.

Associate: 

Date:  1 August 2012