Willmann & Willmann (No 3)
[2022] FedCFamC1F 827
Federal Circuit and Family Court of Australia
(DIVISION 1)
Willmann & Willmann (No 3) [2022] FedCFamC1F 827
File number(s): SYC 6037 of 2021 Judgment of: CAMPTON J Date of judgment: 27 October 2022 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – Separating issues – Where the husband asserts a beneficial interest in a property held by the wife’s parents – Consideration of the appropriateness of hearing the husband’s claim against the wife’s parents as a separate issue – Application of r 10.10 and 10.11 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) – Consideration of the approach to be taken having regard to the family law practice and procedures as contained in s 67 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) – Separate determination ordered. Legislation: Family Law Act 1975 (Cth) ss 79, 117
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 67
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 1.04, 10.11, 12.02, 12.06
Cases cited: Luadaka & Luadaka (1998) FLC 92-830; [1998] FamCA 1520
Marley & Ormonde [2020] FamCA 1046
Penfold v Penfold (1980) 144 CLR 311; [1980] HCA 4
Southwell v Bennett [2010] NSW 1372
Tom Folino-Gallo & Sons Investments Pty Ltd v Zulian [2019] NSWSC 596
Division: Division 1 First Instance Number of paragraphs: 76 Date of hearing: 21 October 2022 Place: Sydney Counsel for the Applicant: Mr Williams KC Solicitor for the Applicant: Barkus Doolan Winning Counsel for the First Respondent: Mr Macauley Solicitor for the First Respondent: Sim & Co Legal Services Counsel for the Second and Third Respondents: Ms Petrie Solicitor for the Second and Third Respondents: Pigdon Norgate Family Lawyers ORDERS
SYC 6037 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS WILLMANN
Applicant
AND: MR WILLMANN
First Respondent
MR ANDREWS
Second Respondent
MS ANDREWS
Third Respondent
order made by:
CAMPTON J
DATE OF ORDER:
27 OCTOBER 2022
THE COURT ORDERS THAT:
1.Pursuant to r 10.11 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), the relief sought in paragraphs 3 – 7 of the husband’s Response to Initiating Application filed 18 October 2021 and as pleaded in his Points of Claim filed 15 December 2021, and the second and third respondent’s Response to Initiating Application filed 2 June 2022 and as pleaded in their Points of Defence filed 2 June 2022, be listed for trial over five days before Tree J commencing on 13 March 2023 at 10.00 am in person at the Sydney Registry (“the separate issues trial”).
2.The balance of the relief sought by the second and third respondents as contained in their Response to an Application in a Proceeding filed 8 September 2022 identified as being an application for security for costs be adjourned for hearing before Tree J in the separate issues trial, and the costs of the parties of and incidental to that Response to an Application in a Proceeding filed 8 September 2022 be reserved for hearing at the separate issues trial.
3.The competing applications of the husband and the wife for relief pursuant to s 79 of the Family Law Act 1975 (Cth) be listed for:
(a)Case management before me on 30 June 2023 at 10.00 am; and
(b)Trial before me over three days commencing on 11 September 2023 at 10.00 am in person at the Sydney Registry.
4.In the event the parties attend a private mediation subsequent to the conclusion of the separate hearing commencing on 13 March 2023 and prior to the case management date before me on 30 June 2023, the requirement of the husband and the wife to attend a conference with a registrar or deputy registrar of this Court is dispensed with pursuant to s 79(9) of the Family Law Act 1975 (Cth).
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 Willmann & Willmann has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CAMPTON J:
Mr Andrews and Ms Andrews (“the respondents”) by way to a Response to an Application in a Proceeding filed on 18 September 2022 seek that the Court list for a separate decision the determination of the relief sought in paragraphs 3 to 7 inclusive by Mr Willmann (“the husband”) in his Response to an Initiating Application filed on 18 October 2021. They also seek an order for security of their costs.
Ms Willmann (“the wife”), who is the daughter of the respondents, joins in with the relief as sought by her parents for the listing of a separate determination. She is “disinterested” in and did not wish to be heard in relation to their application for security as to costs. The husband opposes the relief sought.
For the reasons that follow, the relief sought in paragraphs 3 to 7 inclusive of the husband’s Response to an Initiating Application filed on 18 October 2021 shall be listed for hearing over five days before Tree J commencing on 13 March 2023, the respondents’ application for security for costs adjourned for determination at the trial before Tree J, and the s 90SM dispute between the husband and the wife shall be listed over three days before me commencing on 11 September 2023.
Documents relied upon
The respondents relied on the following documents:
·Response to Initiating Application filed on 2 June 2022;
·Points of Defence filed on 2 June 2022;
·Response to Application in a Proceeding filed 8 September 2022;
·Affidavit of the second respondent filed 8 September 2022; and
·A tender bundle marked as “A-1”, which became Exhibit 1.
The wife relied on the following documents:
·A Response to an Application in a Proceeding filed on 29 September 2022; and
·Her affidavit filed on 29 September 2022.
The husband relied on the following documents:
·Response to an Initiating Application filed on 18 October 2021;
·Points of Claim filed on 15 December 2021;
·His affidavit filed on 15 December 2021;
·His affidavit filed on 2 June 2022.
The parties each also read:
·The husband’s Financial Statement filed 2 June 2022; and
·The mother’s Financial Statement filed 4 July 2022.
It was agreed that I would read all of the orders made in the Division 1 proceedings. Each of the parties’ costs notices filed pursuant to the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) became exhibits to the proceedings.
The respondents filed a detailed Case Outline on 18 October 2022. The husband in opposing their application for a separate hearing filed extensive written submissions on 19 October 2022. The wife filed written submissions as to the separate hearing issue on 19 October 2022.
Background
The wife was born in 1981 and is 41 years of age. The husband was born in 1979 and is 43 years of age.
In the year of the wife’s birth, the respondents acquired a property at C Street, B Town NSW (“the D Property”). The second respondent’s affidavit records that since their initial purchase, he and the third respondent have added and sold a number of parcels of land making up the D Property. His evidence further records that:
(a)In 1985, the respondents completed construction of their family home on D Property and that they raised their four children, including the wife, in that home. The husband and wife lived in that family home for a period of about six years from 2011 to 2017. As I understand it, the husband’s relief sought by way of paragraphs 3 to 7 of his Response to an Initiating Application filed on 18 October 2021 is as to the block of land on which the family home is situated, being Dwelling 1, D Property, Folio …. I shall refer to this property as “the [Dwelling 1, D Property]” for the purpose of these reasons;
(b)In 1986, the respondents completed construction of a separate cottage on the D Property. The respondents lived in that cottage at various times, including while the husband and wife lived in the family home at Dwelling 1, D Property. The respondents’ son currently live in the cottage at D Property with his three children; and
(c)There are a number of other dwellings on the D Property, including work and residential buildings.
The respondents currently live in Sydney. They plan to return to the D Property upon retirement to live in the family home at Dwelling 1, D Property.
The husband and wife married in early 2008. There are two children of the marriage, presently aged 20 and 13 respectively. The husband and wife do not agree on the date of separation. The wife asserts that the parties separated on 1 January 2018, while the husband asserts that the parties separated on 12 March 2021. On 6 October 2022 an Order for Divorce was made by Judge Kirton of the Federal Circuit and Family Court of Australia (Division 2).
These proceedings were commenced by the wife on 18 August 2021 by way of an Initiating Application filed in the Family Court of Australia. She broadly sought orders for the adjustment of property pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”) that she receive 70 per cent of the property of her and the husband and that the husband receive 30 per cent of that property.
The husband filed a Response to that Initiating Application on 18 October 2021, seeking different orders to achieve an equal adjustment of the husband and wife’s property. By way of that Response the husband joined as parties to the proceedings the wife’s parents. As part of the husband’s final relief, he seeks a declaration that the respondents hold the property at Dwelling 1, D Property on trust for he and the wife as tenants in common in equal shares, and orders implementing the transfer of that entire property to he and the wife. In the alternative he sought a declaration that Dwelling 1, D Property was subject to an equitable charge in favour of he and the wife “for such amount as the court deems is just and equitable, for the contributions (financial and non-financial)” made and monies by way of damages for any prejudice he and the wife suffered relying on contended expectations created by the parents by the husband or wife to Dwelling 1, D Property. He sought further consequential orders for the sale of Dwelling 1, D Property so as to liquidate the contended interest he asserted as held by he and the wife.
On 8 April 2022, orders were made by Rees J for reasons then delivered confirming the joinder of the respondents to the proceedings.
On 2 June 2022, in their Points of Defence to the husband’s Points of Claim the respondents sought that the husband’s claim against them in respect of Dwelling 1, D Property be dismissed. The wife has not engaged in the pleadings as to Dwelling 1, D Property by way of filing a Defence or otherwise.
The gravamen of the case prosecuted by the husband as against the respondents is that between 2009 and 2010 the second respondent represented to him and the wife that if they lived at Dwelling 1, D Property and maintained it, the respondents would transfer the property to them for no consideration. As I understand the construction of the husband’s case, the property would be transferred on an unencumbered basis.
A reading of the affidavit material relied upon for the purpose of this determination reveals that the foundations of the husbands claim against the parents is primarily grounded from disputed conversations occurring more than 10 years ago, and other contended contributions made to the improvement of Dwelling 1, D Property. The husband also agitates issues as to the adequacy of his remuneration for a corporation that employed him as part of what the parties describe as the “E Group”.
It is the case of the respondents that the husband’s claim in respect of Dwelling 1, D Property has little merit. It is their case that the husband and wife lived at the family home on Dwelling 1, D Property without paying any occupation fee from 2010 or 2011 until the breakdown of their marriage in late 2017 while the husband was fully employed. They contend they met the outgoings in respect of Dwelling 1, D Property. They contend that such benefits to the husband alone would be comfortably sufficient to outweigh any detriment pleaded by him in his case. They make further complaint as to the absence of evidence as to reasonable reliance as pleaded by the husband on the oral representation of the second respondent alone.
For the purposes of the determination of the issues before me, it was broadly agreed that:
(a)The parents contend that the property at Dwelling 1, D Property is valued at approximately $14-$15 million. The husband says that it is valued at least that, if not more. The wife made no assertion as to its value;
(b)The respondents hold 39 per cent of the shares of the corporations making up the “E Group”, the wife holds 11 per cent, and the husband two per cent of those shares;
(c)The husband and the wife have instructed a single forensic accounting expert to opine as to the value of their interests in the E Group pursuant to orders made on 26 September 2022. The process of instructing the expert has just commenced. It is not anticipated that the expert will furnish an opinion as to the value of the interests of the husband and the wife in the E Group for a significant period of time, such delay compounded by the likelihood that the 2022 published financial statements of the Group will not be available in the near future;
(d)The husband and the wife are yet to engage in a Conciliation Conference for the purposes of the s 79 dispute. They have not participated in a private mediation. It appeared to be accepted by each of the husband and wife that either of such processes cannot occur until after the single forensic accounting opinion as to the value of their minority interests in the E Group is completed.
The fact and value of the claim made by the husband to Dwelling 1, D Property is a pivotal issue underscoring any compromise of the s 79 dispute.
The application for a separate decision
Consideration and applicable principles
Rule 10.10 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) provides that:
10.10 Application for separate decision
(1) A party may apply for a decision on any issue, if the decision may:
(a) dispose of all or part of the proceeding; or
(b) make a trial unnecessary; or
(c) make a trial substantially shorter; or
(d) save substantial costs.
(2)An application under this rule must be made by filing an application in accordance with the approved form.
Rule 10.11 of the Rules further provides that:
(1) On an application under this Part, the court may:
(a)dismiss any part of the proceeding; or
(b)decide an issue; or
(c)make a final order on any issue; or
(d)order a hearing about an issue or fact; or
(e)with the consent of the parties, order arbitration about the proceeding or a part of the proceeding.
(2)If the court makes orders against a party who is claiming relief against the party who obtains the orders, the court may stay execution on, or other enforcement of, the orders until determination of that claim.
For the purposes of the Rule, the word “issue” may be an issue of fact or an issue of law. The construction of the Rule is broad, providing the Court with a wide discretion to utilise the powers identified in the Rule with reference to the Act.
In Marley & Ormonde [2020] FamCA 1046 (“Marley & Ormonde”), DCJ McClelland set out the considerations to be taken into account in determining whether to make an order for a separate determination of an issue, as summarised by Hallen AsJ (as his Honour then was) in Southwell v Bennett [2010] NSW 1372 at [15]-[17]. Those considerations include:
15. …
(e)As a general rule, the discretionary power to order separate determination of a question should be approached with caution.
(f)In exercising its discretion, the overriding purpose of the Civil Procedure Act 2005, namely the just, quick and cheap resolution of the real issues in the proceedings (s 56) must be given effect.
(g)Generally, all questions of fact and law should be determined at the one time. If the court is to depart from that position, the party seeking the separate determination of a question must satisfy the court that it would be “just and convenient” for that order to be made.
(h)While it may appear attractive, superficially, to order the trial of a separate question, experience often shows that it will not be so, for example, because of the complications that can arise in relation to appeals, or to overlapping factual issues, or to questions of credit, if the same witnesses have to give evidence in relation to a question that is separated and those questions that are not.
…
(j)Before a question is to be separately determined, it must be possible to clearly see that it will facilitate the quicker and cheaper resolution of the proceedings.
(k)Where findings as to the credit of a witness is, or of witnesses are, or may be, involved in the consideration of the evidence relevant to the question, it is inappropriate to order a separate trial.
(l) Often, a separate question is heard on the basis of:
(i)agreed statements of fact;
(ii)a narrow point to be determined; and
(iii)a hearing that is able to be conducted within a short time (or a short time relative to the total length if the hearing of the separate question were not to be dealt with).
(m)Factors that tend to support the making of an order, include that the separate determination of the question may:
(i)contribute to the saving of time and cost by substantially narrowing the issues for trial, or even lead to disposal of the proceedings;
(ii)contribute to the settlement of the litigation.
(n)It may be appropriate to determine a separate question, even if it will not resolve all the issues, provided that there is a strong prospect that the parties will agree upon the result when the core of the dispute has been decided, or if the decision will obviate unnecessary and expensive hearings of other questions. The determination of the one question should enable a sensible reassessment of litigation risks, which is generally likely to encourage some form of settlement discussions.
(o)Relevantly, one factor that may tell against the making of an order would be where there is likely to be a significant overlap between the evidence adduced on the hearing of the separate question and at trial — possibly involving the calling of the same witnesses at both stages of the hearing of the proceeding. There is always a risk of inconsistent findings arising from determination of separate questions.
(p)Whilst the decision is ultimately one for the court to determine, it will have regard to the attitude of the parties.
(q)It is a relevant consideration to weigh the time likely to be taken in the hearing of a separate question and the availability of hearing dates for that purpose, against the time and expense of a substantive hearing and the length of time likely to elapse before such a hearing will take place.
(r)Each case will have its own dynamics that dictate the relative importance of various factors to be considered in exercising the discretion conferred.
(s)It is necessary that there be precision, both in formulating the question, and in specifying the facts upon which it is to be decided.
(Citations omitted)
The decision to which DCJ McClelland referred (as is the case for much of the case law on this topic) relates to proceedings in the Supreme Court of New South Wales, to which the Civil Procedure Act (NSW) applies. The equivalent legislation in this jurisdiction is the Federal Circuit and Family Court of Australia Act 2021 (Cth) (“the FCFCOA Act”). In making any determination, the Court is obliged to implement s 67 of the FCFCOA Act, which provides:
(1)The overarching purpose of the family law practice and procedure provisions is to facilitate the just resolution of disputes:
(a) according to law; and
(b) as quickly, inexpensively and efficiently as possible.
Note 1: See also paragraphs 5(a) and (b).
Note 2:The Federal Circuit and Family Court of Australia (Division 1) must give effect to principles in the Family Law Act 1975 when exercising jurisdiction in relation to proceedings under that Act.
(2)Without limiting subsection (1), the overarching purpose includes the following objectives:
(a)the just determination of all proceedings before the Federal Circuit and Family Court of Australia (Division 1);
(b)the efficient use of the judicial and administrative resources available for the purposes of the Court;
(c)the efficient disposal of the Court's overall caseload;
(d)the disposal of all proceedings in a timely manner;
(e)the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.
(3)The family law practice and procedure provisions must be interpreted and applied, and any power conferred or duty imposed by them (including the power to make Rules of Court) must be exercised or carried out, in the way that best promotes the overarching purpose.
(4)The family law practice and procedure provisions are the following, so far as they apply in relation to civil proceedings:
(a)the Rules of Court;
(b)any other provision made by or under this Act, or any other Act, with respect to the practice and procedure of the Federal Circuit and Family Court of Australia (Division 1).
I was not taken to any relevant authority by the parties as to how the provisions of the FCFCOA Act interact with the principles identified in Marley & Ormande as to the ordering of a separate hearing. In my view, it is appropriate to take the approach that insofar as there is any conflict between the principles identified in the case law and the legislative mandates codified by the FCFCOA Act, greater weight ought be placed upon the latter in reaching my decision.
The starting position in this contest is that all questions of fact and law should be heard and finally determined together, unless there is a good reason to order the separate determination of a particular issue that in doing so would give effect to the overarching purpose of the Rules and the FCFCOA Act (see Tom Folino-Gallo & Sons Investments Pty Ltd v Zulian [2019] NSWSC 596). The Court’s task in determining whether such warrant exists requires a balancing of considerations as to whether the separate listing will achieve a just determination in the circumstances of this case, efficiently using the resources of the Court so as to dispose of the proceedings in a timely manner at a financial and resource-based cost that is proportionate to the importance and complexity of the matters in dispute. For the purpose of this determination, I shall take into account each of those considerations as are relevant and engaged by these proceedings.
Nature of the issues
It was the husband’s position that listing the his claim to Dwelling 1, D Property for a separate determination:
…would involve the separate determination of a factually dense claim, that overlaps with issues raised in the proceedings between the [husband] and the [wife] and involves questions of credit.
King’s Counsel for the wife resisted that contention and submitted with some vigour that the husband’s claim as against the parents is factually discrete from the s 79 litigation.
Counsel on behalf of the husband submitted that some factual issues to be determined as part of the husband’s claim to Dwelling 1, D Property were also relevant to the substantive dispute between the husband and the wife, for example, as to the provision of free accommodation in exchange for assistance on the property and the husband’s contribution to the property. As was indicated to the parties during the course of the hearing before me, any findings of fact made in the process of a separate, and first-in-time determination, would bind the parties and the trial judge for the purpose of the s 79 hearing. That includes findings of fact that might be made as to the husband’s financial and non-financial contributions to the property at Dwelling 1, D Property. Hence I am not satisfied that there is a risk of inconsistent findings being made upon the determination of each portion of the proceedings if that occurred sequentially, or of the same evidence being heard twice (and therefore wasting time and resources on rehearing matters) as was foreshadowed by the husband.
On a reading of the material that I have been taken to by the parties thus far, I am of the view that the wife and the respondents’ assessment as to the discrete nature of the issue is more accurate. I do not accept that there will be a significant overlap in the evidence to be adduced at each hearing. The metes and bounds of the husband’s claim to Dwelling 1, D Property are confined by way of his Points of Claim and the respondents’ Points of Defence – the questions to be determined at a separate, first-in-time hearing are narrowly and clearly defined by those pleadings. I am satisfied that the father’s claim against the respondents raises factual issues and points of law which are substantially discrete from the s 79 property adjustment proceedings between the husband and the wife.
Time and witnesses
The wife and the respondents contend that the hearing of the discrete issue would occupy approximately four to five days of the Court’s time. Counsel on behalf of the husband suggested that the discrete issue as to Dwelling 1, D Property is likely to take some eight days of trial.
It was not controversial that while the husband’s case as against the respondents is a factually intensive piece of litigation, it is not one that on its face will attract significant consideration of documentary evidence. This portion of the litigation is likely the more complex aspect of the proceedings and will engage the greatest value of legal costs to conduct, it being identified by counsel for the husband in submissions as the “rump” of his claim in the proceedings.
The husband indicated that the witnesses in his case pertaining to the discrete issue would be himself, four lay witnesses who he anticipates will give evidence as to the his work undertaken on the D Property, and potential expert witnesses as to the value of that work (if established on the evidence). The husband agreed that as a matter of fairness, it would be necessary for him to file his affidavit material on this matter before the respondents should be obliged to file their material. It was submitted by counsel on his behalf that the husband could file all of his lay evidence by Christmas this year. I do not accept that, having regard to the calibre of the husband’s legal representatives and the benefit he has received from the interim property order made on 15 September 2022 so as to fund his costs of the litigation, that he could not file and serve his own and any lay affidavit evidence within a few weeks from this determination, in circumstances where the pleadings have been closed since June 2022.
The respondents made it clear that there would be 12 witnesses in their case pertaining to the beneficial ownership of Dwelling 1, D Property, including the wife. They reserved their position as to whether they would seek to adduce any expert evidence going towards the value of the husband’s contended work undertaken on the D Property.
The wife, although she will remain a party to the proceedings, was uncertain as to the role that she may seek to take in the determination of the husband’s claim against the respondents. She sought to reserve her position until she receives the husband’s affidavit evidence relevant to this claim.
There is a risk that ordering the separate determination may lead to each of the parties (including, potentially, the respondents) giving evidence twice. As I understand it, the witnesses identified by each of the husband and the respondents to be relied upon for the purpose of the Dwelling 1, D Property determination, will not be relevant to the s 79 dispute if the Dwelling 1, D Property determination is made first in time.
All parties agreed that the substantive property adjustment case between the husband and wife was not complex and would occupy in the vicinity of three to four days of the Court’s time.
Having regard to all of the witnesses to be called and issues to be addressed as identified by the parties, I am of the view and find that it is appropriate to allocate five days to the hearing of the husband’s claim against the respondents to Dwelling 1, D Property and three days to the substantive s 79 determination. Provided that the parties discharge the obligations imposed on them by s 67 of the FCFCOA Act and r 1.04 of the Rules to conduct facilitate the resolution of their dispute as quickly, inexpensively and efficiently as possible, I am confident that they will be able to comfortably conclude the hearing of all matters in that timeframe.
Conduct of the hearings
Notwithstanding the wife being the applicant in the proceedings, it was agreed that it would both procedurally and substantially prejudicial to the respondents (and potentially the wife) if the husband did not adopt the position of being the applicant in the claim against the respondents. This claim would take a more ‘plaintiff’ (husband) and ‘defendant’ (respondents) adversarial form of litigation, in which the husband alone would agitate relief that is opposed without cross-claim. This is to be contrasted with the s 79 portion of the litigation where each of the husband and wife would in reality adopt a position as applicants for property adjustment.
This factor weighs in favour of an order for a separate hearing of the husband’s claim to Dwelling 1, D Property.
The respondents’ involvement in the substantive proceedings
The respondents are not interested in the s 79 dispute as between the husband and the wife. They have no interest in the evidence as to what items would form the pool of property available for adjustment between the husband and wife (save as to the Dwelling 1, D Property claim), the value of those items, nor in the myriad of evidence as to the contributions of them and the adjustments thereto. In the event of there being a separate determination of the husband’s claim to the property at Dwelling 1, D Property, there appears no material reason for the respondents to continue to be engaged as parties for the s 79 portion of the proceedings.
This factor weighs in favour of an order for a separate hearing of the husband’s claim to the property at Dwelling 1, D Property, provided it occurs before the s 79 hearing.
Costs
The costs notice filed on behalf of the respondents pursuant to r 12.06 of the Rules, which became Exhibit 4, record that they have incurred approximately $60,000 in costs (including counsel’s fees) in the proceedings as at 8 September 2022. Their future fees to the conclusion of a four day trial (that is, if the husband’s claim to Dwelling 1, D Property were to be heard as a discrete issue) were estimated to be $217,735. If the respondents were to attend an eight-day hearing (being if the claim was not heard as a discrete issue), their future fees were estimated to be $316,955, being an additional $100,000. Those estimates were not the subject of dispute at the hearing before me. I accept the submission that hearing the husband’s claim against the respondents would save them significant legal costs by way of avoiding their participation in any substantive s 79 dispute.
I am mindful that the parents are strangers to the marriage and are reluctant participants to these proceedings. There is some evidence as to litigation causing them stress. That is an outcome that ought to be avoided. I give the issue as to the expense and burden incurred by the respondents by their involvement in these proceedings matter significant weight.
Credit
It was suggested by counsel for the husband that a resolution of the husband’s claim to Dwelling 1, D Property will “raise and turn upon questions of credit” and hence it would be inappropriate to be determined first in time. I accept that there may be some concern as to the possibility that the judge determining the husband’s Dwelling 1, D Property claim may be required to make findings as to the credit of witnesses in any separate hearing if ordered. However, in my view, concerns arising from adverse findings of credit will be mitigated in circumstances whether the separate hearing will be heard by a different judge of this Court.
This factor weighs slightly against an order for a separate determination of the Dwelling 1, D Property claim.
Likelihood to assist in the resolution of outstanding matters
Determination of the husband’s Dwelling 1, D Property claim against the respondents is necessary to ascertain the pool of property available to the husband and wife for distribution. The balance of that pool is somewhat modest when compare to the value of Dwelling 1, D Property. In broad terms it consists of:
(a)The net proceeds of sale after release of funds pursuant to orders made on 15 September 2022 of F Property, being of approximately $750,000. The costs of the single forensic accounting expert is agreed to be in the range of $250,000 and that amount will be paid from the net proceeds of sale, and hence the balance remaining will be in the range of $500,000;
(b)The wife’s savings of approximately $130,000;
(c)The husband’s nominal savings of approximately $9,000;
(d)The husband’s motor vehicles, which he contends have a collective value of approximately $95,000 (and at least one of which is subject to a loan of approximately $47,000);
(e)The wife’s motor vehicle, which she contends has a value of approximately $57,000; and
(f)The husband and wife’s household contents and personal effects, including jewellery, interests in boats (including a boat which the wife estimates to have a value of $80,000); and
(g)The husband and wife’s minority shareholdings in a number of companies that form the “E Group”. The wife contends that their value will be less than the costs of obtaining the expert forensic accounting valuation. The respondents insofar as it is relevant contend that the value of the husband and wife’s interests are de minimis, especially having regard to the incapacity of the husband and the wife to achieve a disposal liquidation of those interests. The husband implicitly contends that the interests are valued at greater than $250,000 but does not specify an amount.
On King’s Counsel for the wife’s calculation, not including any interest they may have in Dwelling 1, D Property, the net value of the assets available for adjustment is not much more than $850,000, less the fees to be paid to the single forensic accounting expert witness (of approximately $250,000).
As recorded in each of their costs notices filed pursuant to the Rules, the wife’s total estimated costs to the conclusion of the s 79 proceedings are up to $700,000, and the husband’s are up to $939,000. The result of the separate hearing of the husband’s Dwelling 1, D Property claim may therefore seriously impact the proportionality of their costs to be incurred as against their available pool, and cause the parties to sensibly reassess the reasonableness of them continuing to litigate there substantive proceedings.
Further, I find (and it is the Court’s experience as occurred in Marley & Ormonde) that a separate hearing is likely in those circumstances to provide significant assistance to the husband and wife in compromising their substantive dispute in that it is likely to crystalise their position for the purpose of the s 79 determination.
In my view, determining the issue as to the beneficial ownership of Dwelling 1, D Property shall allow the husband and wife to focus with laser like precision on the s 79 dispute and use their best efforts to engage in meaningful discussions to attempt to resolve the dispute, or if a compromise is not possible, then use those efforts to ensure the matter is well-prepared for trial.
This factor weighs in favour of an order for a separate hearing.
Other matters
Insofar as it may be contended by the husband that Rees J determined any application by the respondents pursuant to r 10.10 on 8 April 2022, I reject such contention. The determination of Rees J was restricted to the fact of the joinder of the respondents to the proceedings.
I accept that it is generally preferable that all questions of fact and law at the same time, that being consistent with s 67 of the FCFCOA Act. This factor weighs against an order for a separate determination. However, having regard both to judicial availability and the timeline of the process of obtaining the relevant expert evidence, that will not be possible in the circumstances of these proceedings.
Judicial availability
Should the husband’s Dwelling 1, D Property claim be heard separately and the length of that trial confined to five days, the Court is able to allocate trial dates for the hearing of that matter with a judge other than myself in March 2023. With the benefit of judgment being delivered as to the Dwelling 1, D Property issue, the husband and wife would be able to then engage in a financial conciliation conference or a private mediation in mid-2023. By that stage, the parties are likely to have the benefit of the single expert report as to the value of their interests in the E Group. This would permit s 79 dispute would then be listed for trial in September 2023 (seven months after the hearing of the Dwelling 1, D Property claim).
Should the matter proceed to be heard as a whole, I would not have availability to list an eight-day trial before me until at least early 2024.
It was conceded by counsel on behalf of the husband that this was a factor which weighs in favour of an order being made for a separate decision. I find that the capacity of the Court to finally determine the proceedings in a shorter timeframe if the Dwelling 1, D Property claim is heard separately than if it were not is a weighty consideration in favour of such an order.
Conclusion as to listing a discrete issues hearing
In circumstances where the Court will be able to provide a final hearing date for the husband’s Dwelling 1, D Property claim within 16 months’ of the filing of the husband’s Response to an Initiating Application, and thereafter a final hearing for the s 79 proceedings within 24 months of their commencement, I find that managing the determination of the proceedings in this manner will allow the Court to discharge its obligations to implement the overarching purpose identified in the FCFCOA Act, being to dispose of disputes as quickly and efficiently as possible, reducing expense for the benefit of the parties to the proceedings and all of the stakeholders in the administration of the FCFCOA (Division 1).
A particularly important issue is the expense and delay that would occasion to the respondents, in my view unnecessarily, should they be required to participate in the full s 79 trial. In circumstances where a judge can be available to hear in five days against them in a short compass of time, it appears nonsensical to leave the parties lingering in a litigation quagmire pending trial dates.
On balance, having regard to the above principles, I am comfortably satisfied that it is both just and convenient to order a separate decision of the husband’s Dwelling 1, D Property claim. I find that the considerations identified by the husband in opposing that course are significantly outweighed by the benefits recorded earlier in these reasons, including the likelihood of there being reduced costs for all involved parties, the possibility to refine substantive issues in the proceedings, the unlikelihood that the same witnesses will have to give the same evidence at two hearings, and the likelihood that it will assist the husband and wife to finally compromise the substantive proceedings.
Security for costs
Section 117(2) is the source of power for the Court to make an Order for security for costs. It provides that the Court may make any order as to security for costs as it considers just, if it is of the opinion that there are circumstances justifying it doing so.
During the course of the hearing, counsel for the respondents accepted that the only source of funds from with the husband would be able to make any security for costs payment would be from the funds he received by way of the orders made on 15 September 2022 or from the remaining proceeds of sale of the F Property, currently held in the trust account of the wife’s solicitors. The respondents did not seek any security upon the said funds. Rather, the order sought by the respondents for security for costs is in the following terms:
3. That in the event a costs order is made against the [husband] in favour of the [respondents] as a result of the Orders sought by the husband against the [respondents] (“Order for Costs”), then the husband be restrained from distributing, transferring or applying any entitlement to the distribution of property ordered or agreed on a final basis as a result of these proceedings, other than as follows:
3.1. In satisfaction of the Order for Costs; and
3.2. The balance to the [husband].
The husband resists the security for costs claim of the respondents. His primary position is that the application should be dismissed on the basis that it is brought prematurely, in circumstances where the value of the parties’ assets is largely unknown and where no prejudice would occasion to the respondents should the questions of costs be delayed to the final hearing event.
The legislation does not specify the circumstances in which an order for security for costs will be made, however s 117 of the Act envisages that the circumstances of the case should justify such an Order. That provides the Court with a very broad discretion (see Penfold v Penfold (1980) 144 CLR 311) as to costs.
Further to the Act, r 12.02 of the Rules provides that a respondent may apply for an order that the applicant in the proceeding give security for the respondent’s costs. Subrule (2) lists a variety of matters which the Court may consider in exercising its discretion on this matter:
(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.
It is well settled that no one factor has priority under s 117(2A), nor must more than one factor be satisfied; any one factor maybe sufficient. The discretion conferred by s 117 of the Act is a broad one, and the factors under s 117(2A) are not to be read in a restrictive way. A similar approach should be adopted to r 12.02 of the Rules. I have considered each such relevant consideration as is relevant and engaged by each party in the circumstances of this costs application.
In Luadaka & Luadaka (1998) FLC 92-830, the Full Court said that the overriding purpose of an order for security of costs is to ensure that an unsuccessful party does not occasion an injustice to the other by way of the proceedings.
The husband is currently employed as a manager of the business G Company. He earns a salary of approximately $206,590 per year. His Financial Statement records that his weekly expenses are in excess of his weekly income received. I inquired of counsel for the husband as to whether an order for the payment of security for costs would stifle the husband’s ability to pursue the litigation by way of his current lawyers. To his credit, counsel said that would not be the case but that, as is to be expected, such an order would not be advantageous to the husband.
Neither of the respondents have filed a Financial Statement in these proceedings. It seems uncontroversial that they are in a superior financial position to each of the wife and the husband, at least by way of their relatively greater shareholdings in the E Group and their ownership of the property at Dwelling 1, D Property.
Counsel for the husband submitted that there was no proper basis for the respondents to fear that the husband would not meet any costs order if made down the line. He identified that the husband’s interest in the net proceeds of sale of the F Property remain held in a trust account, and that those funds are not accessible by either the husband or the wife. I accept that submission.
The order sought by the respondents, while framed as a security for costs order, in reality sought that as a matter of priority that any adverse costs order in their favour be paid before any other distributions out of the final property settlement in the husband’s favour. That is to say, even if the order as sought was made at this stage of the proceedings, it would not be enforceable until either the husband and wife reach a compromise of the s 79 litigation, or it is finally determined by the Court. In those circumstances I accept the submission of the husband’s counsel that the respondents’ application for security is brought prematurely.
It is appropriate that the respondents’ security for costs application be adjourned to be heard alongside the separate hearing of the husband’s Dwelling 1, D Property claim against the respondents.
For all of above reasons, I shall make orders as set out at the forefront of this judgment.
I certify that the preceding seventy-six (76) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Campton. Associate:
Dated: 26 October 2022
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