Winter and Winter
[2011] FamCA 702
•27 June 2011
FAMILY COURT OF AUSTRALIA
| WINTER & WINTER | [2011] FamCA 702 |
| FAMILY LAW – COSTS – 2001 s 79 proceedings – Wife seeking cost against non-party – Costs application dismissed – 2008 s 79A proceedings – Wife seeking costs against second respondent – Costs application dismissed |
| Evidence Act 1995 (Cth) s 140(2) Family Law Act s 117, s 117AB, s 79A, s 79 Family Law Rules 2004 r 19.08, r 19.18 |
| Barker & Barker [2007] FamCA 13 Penfold and Penfold (1981) 44 CLR 311 Re Z (No 4) (unreported) NA54 of 1995, 6 March 1997 Sharma & Sharma (No 2) [2007] FamCA 425 S v S; The Child Representative; Victoria Legal Aid; The Chief Commissioner of Victorian Police (1997) FLC 92-762 |
| APPLICANT: | Ms Winter |
| SECOND RESPONDENT: | A Winter |
| FILE NUMBER: | BRC | 3781 | of | 2008 |
| DATE DELIVERED: | 27 June 2011 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | O’Reilly J |
| HEARING DATE: | 24 June 2011 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Baston (Direct brief) |
| SOLICITOR FOR THE SECOND RESPONDENT: | Mr Eleftheriou McInnes Wilson Lawyers |
Orders
The wife’s applications for costs against the second respondent in relation to these proceedings and proceedings BRF 8474 of 2001 are dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Winter & Winter is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 3781 of 2008
| Ms Winter |
Applicant
And
| A Winter |
Second Respondent
EX TEMPORE
REASONS FOR JUDGMENT
Applications
These proceedings were commenced by initiating application by the wife filed on 28 April 2008 and concluded by my judgment 15 October 2010 after a trial which proceeded over 18 days between 12 April and 24 June 2010.
The wife now has an application in a case against the second respondent A Winter filed 12 November 2010 that he pay her costs of and incidental to these proceedings, which were s 79A proceedings, including her costs of and incidental to her costs application, either fixed in a specific amount or assessed on the indemnity basis: rr 19.08 and 19.18 Family Law Rules 2004.
The wife has an application also that A Winter pay her costs of and incidental to proceedings BRF 8474 of 2001 on the indemnity basis. Those proceedings were s 79 proceedings commenced by the wife by initiating application filed 7 December 2001 and were concluded by a consent property order made 7 March 2005.
The wife’s application in a case filed 12 November 2010 claiming costs against A Winter of and incidental to the 2008 proceedings did not claim also her costs against him of the 2001 proceedings.
However, the wife’s initiating application in the 2008 proceedings and also her amended initiating application in the 2008 proceedings filed 14 April 2010 each sought that A Winter pay her costs of and incidental to the 2001 proceedings on the indemnity basis.
On 15 October 2010, at the conclusion of the 2008 proceedings, I made certain orders as between the wife and the husband, the late Mr Winter, and as between the wife and the seventh respondent in those proceedings, Mr MW, who is not involved in today’s application.
I otherwise ordered, including in relation to the claims concerning A Winter, that all other applications by the wife were dismissed.
It is implicit however that such order related to the wife’s substantive claims and not her costs claims.
Strictly, any claim for costs by the wife in relation to the 2001 proceedings, including against non-parties (A Winter not being a party to those earlier proceedings) ought to have been made within 28 days after the conclusion of those proceedings on 7 March 2005: r 19.08(2)(b) Family Law Rules 2004. It is now more than 6 years after their conclusion. As I have said however the wife’s costs application in respect of the 2001 proceedings was made by her initiating application in the 2008 proceedings. Even that was more than 3 years after conclusion of the 2001 proceedings.
Despite these matters, during argument I said that I am prepared to hear the wife’s costs application against A Winter in relation to the 2001 proceedings, being a costs application against a non-party to those proceedings, because of the nature of the statutory link between ss 79 and 79A proceedings, which perhaps is unique, and further because the wife seeks to link her costs applications against A Winter in both proceedings because of alleged dishonest conduct by him in both, submitting the existence of a causal connection between his conduct in each case and her costs in each case.
Service/appearance in the 2008 proceedings
A Winter was not a party to the 2001 proceedings.
In relation to the 2008 proceedings, A Winter was served with the wife’s initiating application filed 28 April 2008, in New Zealand, where he resides, on 2 February 2010.
He was served with the wife’s amended initiating application filed 14 April 2010 in New Zealand on 26 April 2010.
The 2008 proceedings occupied trial dates on 12, 13, 20, 21, 22, 23, 27, 28, 29 and 30 April, 5, 10, 11, 24, 25, 26 and 28 May and 24 June 2010.
A Winter did not appear in the 2008 proceedings until 24 May 2010, appearing on that date by Emerson Family Lawyers and Mr Galloway of Counsel. As I recall, that was by arrangement, in order to deal first, and discretely, with the wife’s case against the seventh respondent Mr MW, as to whether certain assets belonged to him or could be regarded as pool assets.
Applicable Family Law Rules
Rule 19.08 provides:
RULE 19.08 ORDER FOR COSTS
19.08(1)A party may apply for an order that another person pay costs.
19.08(2)An application for costs may be made:
(a) at any stage during a case; or
(b) by filing an Application in a Case within 28 days after the final order is made.
19.08(3)A party applying for an order for costs on an indemnity basis must inform the court if the party is bound by a costs agreement in relation to those costs and, if so, the terms of the costs agreement.
19.08(4)In making an order for costs, the court may set a time for payment of the costs that may be before the case is finished.
Rule 19.18 provides:
RULE 19.18 METHOD OF CALCULATION OF COSTS
19.18(1)The court may order that a party is entitled to costs:
(a)of a specific amount;
(b)as assessed on a particular basis (eg lawyer and client, party/party or indemnity);
(c)to be calculated in accordance with the method stated in the order; or
(d)for part of the case, or part of an amount, assessed in accordance with Schedule 3.
19.18(2)If costs are payable under the Act or these Rules, or the court orders that costs be paid and does not specify the method for their calculation, the costs are to be assessed on a party/party basis.
19.18(3)In making an order under subrule (1), the court may consider:
(a) the importance, complexity or difficulty of the issues;
(b) the reasonableness of each party's behaviour in the case;
(c) the rates ordinarily payable to lawyers in comparable cases;
(d) whether a lawyer's conduct has been improper or unreasonable;
(e) the time properly spent on the case, or in complying with pre‑action procedures; and
(f) expenses properly paid or payable.
Family Law Act
The relevant provisions of the Family Law Act 1975 (Cth) are as follows.
Section 117 provides:
SECTION 117 COSTS
117(1)Subject to subsection (2), subsection 70NFB(1) and ss 117AA, 117AB, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.
117(2)If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subss (2A), (4) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
117(2A)In considering what order (if any) should be made under subs (2), the court shall have regard to:
(a) the financial circumstances of each of the parties to the proceedings;
(b) whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c) the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f) whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g) such other matters as the court considers relevant. (emphasis added)
Section 117AB provides:
SECTION 117AB COSTS WHERE FALSE ALLEGATION OR STATEMENT MADE
117AB(1)This section applies if:
(a) proceedings under this Act are brought before a court; and
(b) the court is satisfied that a party to the proceedings knowingly made a false allegation or statement in the proceedings.
117AB(2)The court must order that party to pay some or all of the costs of another party, or other parties, to the proceedings. (emphasis added)
Principles
In Penfold and Penfold (1981) 44 CLR 311 the High Court said at 315:
It is an accurate description of s117(1) to say that it expresses a general rule, provided that it is firmly understood that the sub-section is not paramount to s117(2). As sub-s(1) is expressed to be subject to sub-s(2), the former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs.
Sub-section (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs…..(emphasis added)
As is plain, Penfold’s case deals only with s117, not s117AB, which is a mandatory provision if there be a requisite finding that a party to the proceedings knowingly made a false allegation or statement in the proceedings.
Section 117 provides a discretionary regime. Section 117(1) is prefaced that it operates “subject to” (relevantly) s 117AB, a mandatory provision.
However, because its mandatory effect applies only to a party to the proceedings, it is not invoked in respect of the wife’s costs application against A Winter in the 2001 proceedings.
Party/non-party
It is convenient that I proceed to deal first with the wife’s s 117AB costs application against A Winter in relation to the 2008 proceedings in respect of which he was a party, and then deal with her other costs applications against him both in relation to the 2008 proceedings and the 2001 proceedings in which he was a non-party.
I recognise however, in dealing separately with the wife’s costs applications that, as submitted by Mr Baston of Counsel, for the wife, there is a “common thread” in relation to the alleged conduct of A Winter namely that he (allegedly) knowingly made false statements in two affidavits, one in each of the proceedings, being his affidavit sworn or affirmed seemingly on or about 13 January 2004 in the 2001 proceedings and 7 July 2008 in the 2008 proceedings.
It is alleged that each affidavit was for the purpose of “bolstering” or “supporting” the late husband’s false and fraudulent case against the wife in the 2001 proceedings, that pretence being continued by him throughout the 2008 proceedings.
In short, in relation to both the 2001 and the 2008 proceedings, the wife’s case for costs against A Winter is that in each of his affidavits there was knowing falsity.
There is allegation also of material non-disclosure by A Winter in the 2008 proceedings, in which he was a party.
At this juncture, I would refer to the addendum to these reasons for judgment. It would appear that A Winter’s affidavit in the 2001 proceedings was never filed as a discrete affidavit. However, nothing turns on that. The only relevant matter is whether the wife relied on it in settling the 2001 proceedings, and if she did, what follows from that.
Wife’s grounds - s 117AB – 2008 proceedings – A Winter a party – A Winter’s 2008 affidavit – par 5
The wife seeks that I make a finding that in his affidavit sworn 7 July 2008 and filed 9 July 2008 in the 2008 proceedings A Winter knowingly made a false statement so that I must order that he pay to the wife some or all of her costs of those proceedings.
The statement alleged to be false is in par 5 of that affidavit namely that as at 7 July 2008 (the swearing or affirming date of that affidavit) A Winter was the sole shareholder of all of the shares in A Capital Limited, conveniently called A New Zealand:
5.That company has always been a wholly owned subsidury (sic) of [A Capital Ltd] ([ACL]) a New Zealand based company which (sic) I am the Director and sole shareholder. …
In par 5, the reference to ACL is the same company as conveniently called A New Zealand.
Some background is necessary.
In my reasons for judgment 15 October 2010 I said:
41.[A New Zealand] was incorporated on 3 August 2001. Its directors were, and are, the husband and his brother [A Winter]. It has 1 million issued shares initially held by [A Winter] from its date of incorporation until 11 March 2008 on which date all of the shares were transferred to [J Winter]. These matters are fully explained in the affidavits of [J Winter] and of [Ms JF], chartered accountant. See, in particular, annexure D to the affidavit of [Ms JF], p3. (Initially, the wife sought to set aside the share transfer however, expressly this was abandoned at the trial, there being full and adequate explanation by [J Winter] and [Ms JF] in their respective affidavits, showing that the transfer occurred in the aftermath of the Australia and New Zealand Banking Corporation calling up a guarantee which had been given by the Estate of the late [H Winter] in relation to [A Australia’s] purchase of [M Station]). I find, on the basis of the evidence of [J Winter] and [Ms JF], that the share transfer by [A Winter] to [J Winter] was a legitimate transaction, so that both control and beneficial ownership on 11 March 2008 passed to [J Winter] as trustee of the Estate of the late [H Winter]. The husband said in his trial affidavit, pars 60-62, that his understanding was that the share transfer had the effect that “there has been no beneficial interest change as [A Winter] is still the beneficiary”. His “understanding” plainly is erroneous having regard to the evidence of [J Winter] and [Ms JF] to which I have referred, and which I accept. (original emphasis)
In the earlier s 79 proceedings between the husband and the wife, that is, the 2001 proceedings in which A Winter was not a party, he had sworn or affirmed an affidavit seemingly on about 13 January 2004, in par 1 of which he said that he was the sole shareholder in A New Zealand (described in that affidavit as A Capital Limited). There is no challenge by the wife to the veracity and accuracy of that statement. Indeed, it was correct.
Mr Baston submits that:
(a) A Winter’s statement in his affidavit filed in the 2008 proceedings sworn or affirmed 7 July 2008 that as at that date he was the sole shareholder was false; and
(b) A Winter knowingly made that false statement.
Mr Baston submits that A Winter motive in knowingly making the false statement was to conceal the share transfer to J Winter, the eighth respondent. This is illogical. There was nothing to “conceal” because, as ultimately acknowledged by the wife, and as I determined at the trial, the share transfer to J Winter was a legitimate transaction. It would be different altogether if the share transfer to J Winter had been fraudulent or illegitimate, as then there would or might have been something to “conceal”. Dishonest persons usually try to “conceal” fraudulent transactions, not legitimate transactions. It is illogical to suggest any rational basis to “conceal” legitimate and honest transactions, or to be dishonest about them. However, leaving aside motive, the questions for my determination are:
(a)Was A Winter’s statement false as at 7 July 2008?
(b)If so, was the false statement “knowingly” made by A Winter?
In relation to the word “knowingly” in s 117AB(1)(b), the Full Court in Child Support Registrar & Kanavos [2010] FamCAFC 244, after examination of Charles & Charles [2007] FamCA 27 at [24] per Cronin J and Sharma & Sharma (No 2) [2007] FamCA 425 at [13] per Ryan J, held in essence that for a statement to be made “knowingly” there must be a “conscious mental element” involved in making the statement, the Full Court accepting Ryan J’s analysis at [13] in Sharma that it is the “mental element” which “turns a wrong statement into a deliberate falsehood”: see at [84].
Further, as observed in Charles at [24] per Cronin J, the “serious subjective element” involved in a finding that a false statement was made “knowingly” has the effect that s 140(2) of the Evidence Act 1995 (Cth) must be observed, that provision in effect giving statutory status to the Briginshaw test: Briginshaw v Briginshaw [1938] 60 CLR 336.
In my reasons for judgment 15 October 2010 [41] I determined that A Winter had held the shares until 11 March 2008, and that on 11 March 2008 control and beneficial ownership of A New Zealand passed to J Winter as trustee of the Estate of the Late H Winter (the Estate). For the purpose of disposition of the matters then in issue, that determination was sufficient, and no deeper analysis of the evidence was required. The matter had ceased to be an issue by concession by the wife that the share transfer was valid, and abandonment by her thus of her claim to set aside the share transfer. In this context, the date 11 March 2008 did not assume any importance or significance. However, as now there is a direct allegation that A Winter lied in his affidavit, the basis of the allegation being the date 11 March 2008, I need to look carefully at the precise evidence surrounding the share transfer. I would reiterate, this was not necessary at the trial, but now is.
Thus, the allegation now made by the wife that A Winter knowingly lied in his affidavit sworn or affirmed 7 July 2008 has the effect that a deeper analysis of the evidence is required, and that, if necessary, there be further findings. Such is permissible in costs applications: Bischof v Adams (1992) 2 VR 198 at 200.6.
Accordingly, I set out now the full (relevant) text of the letter by Ms JF, chartered accountant, annexure D to her affidavit filed 24 May 2010, p3, referred to at [41] in the reasons for judgment 15 October 2010. The letter by Ms JF is dated 26 February 2010, addressed to the Court, being a covering letter in answer to a subpoena to her issued on 12 February 2010, pursuant to an order made 10 February 2010. An identical subpoena issued to J Winter also on 12 February 2010 pursuant to the same order made 10 February 2010. The letter enclosed documents in answer to the subpoena to Ms JF. Before setting out the relevant text of the letter, it is necessary to observe that much of it is responsive to two letters from the wife to Ms JF 12 February 2010 and 24 February 2010, annexures A and B to Ms JF’s affidavit, the second of which (at p3) directly asks:
· The share transfer signed by both [A] and [J] [Winter] on 11 March 2008 and entered in the share register held by your firm was not registered with the New Zealand Companies Office until late March 2009. Why the delay registration?
· [A Winter] deposed in his Family Court Affidavit sworn on 7 July 2008 some 4 months after signing the share transfer (apparently falsely) that he was still the sole shareholder of [A New Zealand]. Likewise, the 2008 annual return for the company which your firm lodged on 28 November 2008 with the New Zealand Companies Office recorded [A Winter] as still being the sole shareholder. Why the discrepancy? (emphasis added)
Ms JF’s letter 26 February 2010, bearing in mind that she was the chartered accountant for the Estate (see her affidavit pars 1 and 2) provides:
5.Printout from Banklink for April 2007 is enclosed showing the amount paid to the bank in Australia. We have no idea of what the reference refers to as it is the same reference as per the $2.4 million that was paid on the 11th March 2008. [The wife] advised that no other bank statements were required.
6.The two bank statements are the only evidence we have of any funds that were ever transferred to Australia. As stated in our previous correspondence, no money ever went from NZ to Australia other than the two amounts on the ledger printout. Conversely no Australian funds were ever sent to New Zealand.
7.Mortgage documentation showing the refinance of the existing loans plus the $2.47 million sent to Australian (sic) is enclosed. The $2.47 million was originally added to the existing overdraft as it was only going to be a short term arrangement for no more than three months. However it became apparent that it was going to be for a much longer period and therefore the bank refinanced it on a longer term basis. Please note that the entire loan is only secured over the [agricultural] properties.
8.We do not have any further documentation on this as the arrangement was finalised by telephone between [A Winter] and [the husband]. You already have a printout of the bank statement and the share transfer form. Basically what happened, the Estate signed a guarantee for the loan for [M Station] never really expecting it to be called up.
They ended up paying one lot of bank fees of $23,663.32 in April 2007 when the loan was rolled over. However we understand that the bank called up the guarantee in March 2008 hence the payment. The intention was that the money would be repaid within three months.
When it became apparent that the money was not going to be repaid, the issue of tax deductibility of the interest on the loan arose. Effectively [A Winter] had “borrowed” from the Estate and rather than the payment being treated as a loan to [A Winter], the Estate wanted to treat the payment as a direct investment in [A Capital Ltd] so that the interest was deductible for tax purposes.
The share transfer form was therefore prepared and dated the 11th March 2008 as this was the date that the payment had been made and therefore the effective date of the share transfer. When our staff filed the annual return for [A Capital Ltd], I forgot to tell them that the shareholding needed to be updated and consequently the return was filed showing [A Winter] still being the shareholder.
At the time when [A Winter’s] affidavit was filed in July 2008, we were only beginning to realise that the $2.47 million was not going to be repaid and that we needed to do something about the shareholding in [A Capital Ltd]. Hence the conflicting information between the Companies Office website and our records.
The companies office have always maintained that the only information that can be regarded as reliable is the information in the company’s share register. Although they would like to think that their website is accurate, they manually update it if a return has been filed showing different shareholders than on their website.
9.All the information we have been able to obtain from the bank is enclosed
10.You have the share transfer – refer to my comments in (8).
11.There was no correspondence, emails or other documentation between our office and [J] and [A] [Winter] regarding the exchange of shares for the payment of the guarantee, it was only a verbal discussion. There is no funding secured against the value of these shares.
…
14. We have never heard of [U Finance Pty Ltd], [G Nominees Pty Ltd] or anything about other secured creditors. We can assure you that the Estate [H Winter] did not have anything to do with refinancing other than the bank guarantee that was called up on the 11th March 2008. (underscoring and emphasis added)
I accept Ms JF’s evidence. There was no challenge to it. It was given by her in her capacity as the chartered accountant for the Estate, and thus a person with knowledge of the matters the subject of the wife’s request for information, and the documents and transactions set out in the schedule to the subpoeanae to Ms JF and J Winter.
There is however other relevant evidence. In relation to the refinancing referred to in par 7 of Ms JF’s letter, annexure C to Ms JF’s affidavit includes a copy Loan Agreement between ANZ Bank and the Estate for an advance of $3.6 million “in one full amount on 18 July 2008” signed by J Winter on 15 July 2008 and by A Winter on 14 July 2008.
On the evidence which I accept:
·there had been a borrowing of $2.47 million from the ANZ Bank for the purchase of M Station in Queensland
·the Estate guaranteed that debt
·the Estate had given the guarantee “never really expecting it to be called up”
·the guarantee by the Estate was called up on 11 March 2008 and was met initially by increase of $2.47 million in the Estate’s overdraft
·the $2.47 million increase was only to have been a “short term” arrangement, “no more than 3 months” and repaid to the Estate
·it was only “at the time when [A Winter’s] affidavit was filed in July 2008”, that “we” were “beginning to realise” that the $2.47 million (paid out by the Estate on 11 March 2008) was not going to be repaid (to the Estate) such that “we needed to do something about the shareholding in [A Capital Ltd]” (A New Zealand)
·the Estate thus, and then, refinanced its existing loans “plus the $2.47 million” (that refinance being evidenced independently by the Loan Agreement part of annexure C to Ms JF’s affidavit, being copy Loan Agreement ANZ/Estate signed by J Winter on 15 July 2008 and A Winter on 14 July 2008)
·it was only “when it became apparent that the money [$2.47 million] was not going to be repaid”: this being July 2008: only “at the time when [A Winter’s] affidavit was filed in July 2008”: third and fifth new paragraphs in par 8 in the letter: that “the issue of tax deductibility” of the interest on the loan arose so that the payment by the Estate be “treated” as a direct investment by the Estate in A New Zealand (third new paragraph in par 8) and “we were only beginning to realise … that we needed to do something about the shareholding”.
·it was only then, that is, plainly, after these events in July 2008, or at least after the filing of A Winter’s affidavit sworn 7 July 2008, that the share transfer form was “prepared” and “dated” 11 March 2008, because, as explained by Ms JF, that was the date that the payment had been made, so that, retrospectively, as it were, such was “constructed” (or “treated”) as the effective date of share transfer
·there was no correspondence or other documentation regarding the exchange of shares, only verbal discussion.
From all this, it seems inevitable to conclude, which I do:
a.It was only “when [A Winter’s] affidavit was filed in July 2008” that there was realisation by the Estate that the $2.47 million added to the Estate’s overdraft on 11 March 2008, which was meant to be short term, about 3 months, was not going to be repaid, such that “we needed to do something about the shareholding”.
b.The refinance Loan Agreement between ANZ Bank and the Estate $3.6 million (including the $2.47 million) expressly was effective 18 July 2008, J Winter having signed it on 15 July 2008 and A Winter on 14 July 2008, this being after the date of signing of the affidavit 7 July 2008.
c.The “exchange of shares” was “for the payment of the guarantee”, but this idea developed only when the Estate began to realise that the $2.47 million was not going to be repaid, which was only “when [A Winter’s] affidavit was filed” in July 2008 being more than 3 months since 11 March 2008 so that the repayment $2.47 million had not occurred within the 3 months as expected.
d.The share transfer form thus was “prepared” and “dated” 11 March 2008, plainly, retrospectively, to “match” the date of the call up of the guarantee and the addition on that date thus of $2.47 million to the Estate’s overdraft, to allow tax deductibility from that date.
e.As at the date A Winter signed his affidavit 7 July 2009 and when it was filed 9 July 2008 it was true that as at that date he was and remained the sole shareholder in A New Zealand.
On all of the evidence, thus, I find that A Winter’s statement in his affidavit filed 9 July 2008, par 5, that he was the sole shareholder of the one million shares in A New Zealand on that date was not false but true, and that the share transfer arrangement was made after that date, probably indeed after 18 July 2008, the date of the Loan Agreement. Ms JF is clear in her evidence that the share transfer form was “prepared” and “dated” 11 March 2008 as this was the date that the payment “had been” made, the words “had been” indicating past tense, and thus retrospective dating in the context of her other evidence contained in the letter, in particular that it was only “at the time when [A Winter’s] affidavit was filed in July 2008” we were “only beginning to realise” that the $2.47 million was not going to be repaid and that “we needed to do something about the shareholding”.
It is plain also that the benefit of the transaction relating to tax deductibility was for the benefit of the Estate, not A Winter.
As to the annual return of A New Zealand, lodged subsequently on 28 November 2008, seemingly for the year ended 30 June 2008, a matter raised by Mr Baston in his written submissions as an allegedly “false” return, with alleged blame on A Winter, I accept Ms JF’s evidence in her letter that:
When our staff filed the annual return for [A Capital Ltd], I forgot to tell them that the shareholding needed to be updated and consequently the return was filed showing [A Winter] as still being the shareholder.
As I have found that par 5 of A Winter’s affidavit was true, as at the date of its signing, and not false, there is no circumstance to consider whether the statement, if false, was knowingly false.
The result is that the wife fails in her claim for a mandatory costs order against A Winter under s 117AB in the 2008 proceedings for want of proof of her allegation that the statement in par 5 of his affidavit was a false statement knowingly made.
I will add that even if my analysis of Ms JF’s evidence should be said not to support a positive finding that the statement in par 5 at the time it was made was true (which I have determined it is), her evidence is of such strength, nonetheless, to raise sufficient doubt as to not enable a finding that it was false, having regard to the seriousness of such allegation and the matters in s 140(2) of the Evidence Act 1995 (Cth) and the Briginshaw matters.
I will add further that even if I should have found objectively that as at 7 July/9 July 2008 A Winter’s statement in par 5 was false, the hurdle for the wife in proving that the (if false) statement was made “knowingly”, meaning, with a “conscious mental element”, on Ms JF’s evidence, as discussed, is insurmountable. In short, even if objectively I were to determine A Winter’s statement to be false, the evidence to which I have referred has effect, inevitably, of inability on my part to be satisfied as to any “conscious mental element” in any such falsity, having regard to the seriousness of such allegation and the matters in s 140(2) of the Evidence Act and the Briginshaw matters. Indeed, on the state of the evidence to which I have referred, and which I have said I accept, it would be impossible, in my view, to so determine.
Wife’s grounds
– S 117AB – 2008 proceedings – A Winter a party – Other alleged falsities in A Winter’s 2008 affidavit
In order to deal with other alleged falsity in A Winter’s affidavit filed in the 2008 proceedings, it is necessary to do so in light of his affidavit filed in the 2001 proceedings. Further, it is convenient and sensible, chronologically, to deal first with the affidavit filed in the 2001 proceedings.
Affidavit 2001 proceedings
1.I am the director and sole shareholder of [A Capital Limited] (“[A]”) and have been a director of that company since approximately August 2001.
2.This company fully owns the shares in [A Capital Pty Ltd] which company has never actually traded.
3.[A] is an investment company and I have provided for all of the initial capital requirements.
4.[The husband], my brother has never contributed any capital to the company nor has he loaned any monies to the company.
5.[The husband] became a director of [A] about six weeks after I did and his role is to conduct the day to day operations of the company including identifying business opportunities.
6.[The husband] is employed by the company and receives Five Hundred Dollars ($500.00) per week plus the company pays various expenses including the rental of his premises and some motor vehicle expenses.
7.There have been various loans made to my brother over the years as detailed in the attached extract of the Records of the Company.
8.The company previously held security over shares in VL Inc in the United States and I now believe these shares are worthless. No other security is held.
9.As the company’s affairs have nothing to do with [the husband’s] personal affairs, I am not prepared to provide any further information in relation to the financial activities of the company.
Affidavit 2008 proceedings
1.In relation to my brother [the husband’s] previous Family Court proceedings on or about 13th January 2004 I sent an affidavit for filing in those proceedings.
[There is no paragraph 2]
3.I have now an opportunity to re-read that Affidavit and I note in paragraph 2 there is reference to a company [A Capital Pty Ltd].
4.In fact the company I was referring to is [A Capital (Aust) Pty Ltd] ACN […] (“[A]”). There has never been a company [A Capital Pty Ltd].
5.That company has always been a wholly owned subsidury (sic) of a [A Capital Ltd] ([ACL]) a New Zealand based company which (sic) I am the Director and sole shareholder. In Australia [A Capital (Aust) Pty Ltd] purchased property near [Town M] which was purchased for the specific commercial enterprise of developing a farm.
6.I and my brother have a long history of a farming background and an association with [specialty] horses as my uncle was a [specialty] horse trainer. We both effectively grew up around [specialty] horses. I refer to the affidavit of [the wife] sworn 6 June 2008 at paragraph 12. I confirm that as an overall investment strategy nine horses were purchased in 2004 for approximately $180,000.00. The funds used were those of [A’s] being monies provided to it by [ACL]. My brother did not provide any funds for the purchase. I saw this purchase as a way to promote the business interests of [A] and [V] be being involved in the community most likely to invest in such projects such as [V]. Likewise with [the yacht] which was used to sail in [a high profile event in] 2004. This vessel’s livery included the name “[of the company]” on the side, and the […] logo on the sails, which is the name of the product of [V]. I believe that both the interest in the [specialty horses] and the yacht were distinctive marketing techniques to use in the market were it was intended to attract investors of substantial wealth.
I note that in my previous Affidavit I said that my brother had never contributed any capital or loaned any monies to [ACL] and/or [A Capital (Aust) Pty Ltd]. That was then, and remains, the same situation today.
7.My brother continues in his role to conduct the day to day operations of [A Capital (Aust) Pty Ltd] in same manner as before.
8.Exhibited here to mark (sic) with the letters “ABW1” is a copy of my previous affidavit.
Affidavit 2001 proceedings
Mr Baston submitted that A Winter’s affidavit filed in the 2001 proceedings, par 3, that he had provided “all of the initial capital requirements” for A New Zealand is false because A Winter had agreed in cross examination in the 2008 proceedings that he had put “no money” into either A New Zealand or A Australia: reasons for judgment 15 October 2010 [71]. Paragraph 3 however refers to A Winter having provided all of the “initial” capital requirements, which, conceivably, could be a reference to set-up capital rather than investment capital. Thus, his oral evidence in cross examination in the 2008 proceedings might have meant no “investment” money. Alternatively, par 3 could be true, and the 2008 oral evidence false. That is to say, the existence of the 2008 oral evidence and that it appears to contradict par 3 of his earlier affidavit does not mean necessarily that the latter is to be preferred to the former. There is thus no basis to determine that par 3 was false, as opposed to his oral evidence in the 2008 proceedings and in these circumstances no proven or demonstrated falsity in par 3 of the affidavit.
I had some ill-ease, in writing the previous paragraph, in case that analysis be too generous to A Winter. However, since, I have re-read the wife’s affidavit filed 16 April 2010, par 34(f), in relation to the books and records of A New Zealand:
(f)No mention is made in the New Zealand company accounts of the “start up capital” provided by [A Winter] to [A Capital Ltd] deposed to by [A Winter] in his affidavit sworn on 13 January 2004 (Tender Bundle, Vol 2 Section S) and presumably to enable it to open an Australian bank account with Westpac and ultimately need a cheque account facility (Tender Bundle, Vol 2 Section O). (emphasis added)
Thus, even the wife, when it suited her to do so, gave the expression “initial capital requirements” its sensible meaning of set-up capital or “start up capital”, rather than investment capital. Further, A Winter’s oral evidence, in the context of the cross examination, as I have explained, could well have related to investment capital rather than set-up or start up capital. In any event, if, in context, “no money” was intended by him to refer to investment capital then the 2008 oral evidence would not necessarily disprove the par 3 evidence.
However, little turns on this, for the following reason.
Even if par 3 is false, and even if the wife relied on it in settling the 2001 proceedings (to which she does not depose – I will deal with this later) at all times money in A New Zealand was other people’s money, not the husband’s money, as I determined in the 2008 proceedings: reasons for judgment 15 October 2010 [392]:
392.[The husband’s] life story, since his USA dealings commencing in the 1990s, described in his affidavit in ex 14 Vol 5 pp610-617, shows a pattern of convincing persons to invest in projects identified or developed by him, living a glamorous lifestyle funded totally by investor and borrowed moneys, then financial failure.
Thus, any money, or indeed wealth, in A New Zealand or via A New Zealand was not the husband’s but belonged to investors so that if all of the truth were in evidence in the 2001 proceedings, as emerged in the 2008 proceedings, then despite the husband’s fraud on her between 2001 and the consent order made 7 March 2005 it is unlikely that the wife would have received more in the 2001 proceedings than she got, which was most of the pool: reasons for judgment 15 October 2010 [15]-[20].
I turn now to deal with each of the other paragraphs in the 2001 affidavit and Mr Baston’s submissions concerning each individually then by collective effect.
Looking at A Winter’s affidavit in the 2001 proceedings:
·Mr Baston conceded that par 1 is true.
·Mr Baston conceded that there is not evidence either way to show that par 2 was true or not. (It was proved that A Australia was a wholly owned subsidiary of A New Zealand. Hence, Mr Baston’s submission I take to refer to the statement that as at 2001 A Australia had never traded).
·I have dealt with par 3 (alleged falsity in relation to the “initial capital requirements”).
·Mr Baston conceded that pars 4, 5 and 6 are true. He said however that whilst true they are only “technically true” because they “disguise other truth”, in particular that the two companies were, as I determined in the 2008 proceedings, alter ego companies of the late husband. Mr Baston contended that if A Winter had been “up front” in his affidavit in the 2001 proceedings and not intending to deceive the Court he would have said candidly to the effect “[the husband] runs the companies and I know nothing about them.”
·in relation to pars 7, 8 and 9 Mr Baston put a similar submission. In particular, in relation to par 9 he said that “overall” it is clear that the purpose of the affidavit was to “bolster” the husband’s case of failing to disclose to the wife and to her solicitors, Barry & Nilsson, the fact that A New Zealand and A Australia were the husband’s alter ego companies.
Mr Baston contended thus that what is misleading in A Winter’s affidavit in the 2001 proceedings is what it did not say rather than what it did say, because it did not say, as was true, that the late husband was in complete control of A New Zealand and A Australia.
There is a difference however between what might be “technically true”, that is, true in fact for as much as is stated, and actual falsity.
Further, although I found that A New Zealand and A Australia were the father’s alter ego companies, they were vehicles of fraud by him concerning investor moneys in V, siphoned off to the A companies to support the husband’s false, extravagant and fraudulent lifestyle. As I have tried many times in this case to explain to the wife, in particular via the reasons for judgment 15 October 2010, and during argument, it is not as if the husband had genuine assets for her to have received in the property settlement more than she got. What was concealed from her was that the husband was living on other people’s money, not his own, invested into V, which only ever had a “paper value” unlikely ever to have turned into money or moneys worth, either in the “window” in 2004 before the shares became worthless, or at any other time. The wife could not have used or been given any of the moneys the husband was spending, or assets he was accumulating, without herself benefiting, consciously or unconsciously, from his fraud on others. What she “missed out on” at the time of the consent property order 7 March 2005 was the fruits of his fraud on others. In so saying I am conscious that in the reasons for judgment 15 October 2010 [117] I concluded that if the husband had disclosed his true role in the A companies, the wife would not have consented to the order to which she consented, and an order substantially different, whether by consent or as determined by the Court, would then have been made. This is undoubtedly true. However, the point of difference is that if the husband had disclosed the “whole” truth in the 2001 proceedings it would have included that he did not have entitlement to the apparent wealth he had. Nonetheless, the husband did deceive the wife in the 2001 proceedings by not disclosing his activities in the manner set out in the reasons for judgment 15 October 2010 [100]-[112]. Hence my determination that the property consent order be varied for the wife to have all existing assets of the husband which legally may be the subject of transfer to her: [390].
Mr Baston put that the duty of disclosure by the late husband in the 2001 proceedings was absolute, that the husband did not disclose that the A companies were his alter ego companies, there was a “large ownership” in A New Zealand of V shares of considerable value as at relevant dates in those proceedings, in particular 2004: see exs 29 and 30 set out in the reasons for judgment 15 October 2010 at [21]-[22] showing apparent wealth of some $84 million; and that “the reality” is that but for the late husband’s fraud upon the wife in those proceedings “she would have got some of that wealth”.
Mr Baston referred to the “window of high trade” of the V shares particularly in 2004 (V shares held by A New Zealand are shown in ex 29 about $67 million) until that company collapsed in March 2008, and pointed to the circumstance that the late husband in 2004 had control of such sum, and indeed, additionally, at that time was entitled to other moneys by way of a management agreement to which I have referred in the reasons for judgment 15 October 2010: [90] [104] [107] [361] [365], the last of which I will set out:
365.However, as is plain on all of the evidence, [V] declined very soon after the attraction of investor funds and, as was the fate of [VL], rapidly declined. The husband, it would appear, between late 2001 and [V’s] decline to the point of the revocation of its shares in May 2010, funded a false lifestyle by the use of investor funds paid through the vehicle of a management fee agreement. (emphasis added)
Further, Mr Baston relied on the circumstance that A Winter’s affidavit in the 2001 proceedings was used by the husband to resist a disclosure application by the wife against the husband, and thus in effect assisted the husband’s fraud on the wife. Mr Baston put that in the 2001 proceedings A Winter allowed himself to be used by the late husband to support his fraudulent case, the effect of which was that by omission, neglect or deliberate conduct he allowed himself to be “the shield” of the late husband in those proceedings, causing the wife loss. I will explain this further below by reference to various analogies relied on by Mr Baston during argument.
The difficulty however is that even if A Winter’s affidavit was false in some material respect, whether by inclusion or omission, that is not the full picture. The wife cannot selectively say that she wants to see only a little bit of the picture, namely that the husband had apparent wealth, without looking at the whole picture, namely that it was only apparent or “paper” wealth contrived as part of an elaborate fraud on investors with his lifestyle funded by investor and borrowed moneys.
Affidavit 2008 proceedings
The July 2008 affidavit was filed in interlocutory proceedings for injunctive relief dealt with by me on 9 and 10 July 2008, delayed by the intervention of Supreme Court proceedings on the evening of 10 July 2008 then taken up again by me on 24 September 2008.
Mr Baston submitted that it is plain that A Winter was aware of the existence of the 2008 proceedings, because he provided an affidavit, and aware that those proceedings “involved him” as second respondent. A Winter was not served however and thus properly joined as a party until 2 February 2010. The Rules as to service provide that a person becomes a party by being named as a party and served, not just by being named. Mr Baston submitted that it is plain also that A Winter was aware that the facts in dispute in the 2008 proceedings, as in the 2001 proceedings, were about the effective control of the two A companies.
Mr Baston submitted that whilst in the 2008 affidavit A Winter took care to correct the name of one of the A companies, in “the bulk” of the affidavit there were further mis-statements knowingly made.
Looking at the 2008 affidavit:
·pars 3 and 4 deal only with the name correction.
·I have dealt already with par 5 and rejected the alleged falsity.
·in relation to par 6, Mr Baston submitted that the several references to “I” intend the reader to understand that A Winter in his own name and for his own purposes purchased the 9 specialty horses. He referred to an invoice from a company dealing with specialty horses dated 20 May 2004 for the purchase of 12 specialty horses for $210,000, which seems to be the transaction referred to. The invoice is addressed to A Winter in New Zealand. It was paid from funds in a Westpac account of A New Zealand at T Property in Brisbane. Mr Baston submitted that whilst A Winter deposed in effect that he funded the purchase of the specialty horses, in reality the purchase solely was “[the husband’s venture”. However, A Winter did not depose that he funded the payment for the horses, but rather that A New Zealand did, the fifth sentence in par 6 of his affidavit providing squarely “The funds used were those of [A’s] being monies provided to it by [ACL]”, that is, A New Zealand. In these circumstances I am unable to see any dishonesty, falsity or inconsistency in the statement.
·the last (separate) sentence in par 6 “I note that in my previous Affidavit I said that my brother [that is, the husband] had never contributed any capital or loaned any moneys to [ACL] and/or [A Capital Aust Pty Ltd]. That was then, and remains, the same situation today”, seems to be on all of the evidence a true statement.
·in relation to par 7, Mr Baston repeated the submission as to “technical truth”, submitting that the falsity arises because of what the affidavit did not say rather than what it did say, namely, that in essence the late husband was in complete control of A New Zealand and therefore A Australia, and running them for himself and his own benefit as alter ego companies regardless of the identity of the shareholder. I would refer again to what I have said already as to the allegation of “technical truth”.
Moreover, s 117AB specifically requires a “false allegation” or “false statement”. Mr Baston has failed to identify in the 2008 affidavit any false allegation or false statement. I am not satisfied on the evidence, as explained, in particular having regard to the seriousness of the allegation and the matters in s 140(2) of the Evidence Act and the Briginshaw matters that any allegation or statement in A Winter’s affidavit in the 2008 proceedings is false. The question thus of whether any such allegation or statement was knowingly made does not arise. Section 117AB seems not to catch alleged falsity by omission. This is not surprising because of the mandatory penal nature of the provision and the nature of evidence required for proof of its application in a given case.
In any event, I am not satisfied that when A Winter swore or affirmed his affidavits in the 2001 and the 2008 proceedings he “knew” any more to “omit” relevant knowledge. This is speculation on the wife’s part. For example, specifically I did not make any finding at the trial that A Winter conspired with or was complicit in the husband’s deceit of the wife nor colluded with him for that purpose: reasons for judgment 15 October 2010 [69]-[89] [99] [101] [102] [109] [118]. I would emphasise that in paragraphs such as [102] and [109] the fraud I found was by the husband not A Winter. I make this clear in [118]:
118. Moreover, the husband’s fraud, as demonstrated, was elaborate, deliberate and intended.
It is essential to be understood that I made no finding in the 2008 proceedings that A Winter was complicit with the husband in his fraud upon the wife in the 2001 proceedings. Indeed, I could not have, as such was not a matter pleaded against A Winter, who was joined in the 2008 proceedings only in respect of the relief claimed in the wife’s amended initiating application filed 14 April 2010 (see also the original initiating application filed 28 April 2008).
My finding that A Winter held the shares in A New Zealand for the husband and that such was a disguise: reasons for judgment 15 October 2010 [89]: was relevant only to my determination that the two A companies were the husband’s alter ego companies. That was a finding of fact concerning A Winter on that discrete issue. There was no intention by me to infer by that finding at [89], or anywhere else in the judgment, that in the wife’s s 79 proceedings A Winter in any way assisted the husband fraud upon the wife in the 2001 proceedings.
This was not raised for determination in the s 79A 2008 proceedings, nor determined by me in those proceedings. It could not have been determined. It was not raised for determination.
Before leaving s 117AB, I will add that I incorporate by reference all of my further observations as to the evidence and the submissions in the paragraphs below concerning Mr Baston’s Barnes v Addy submission and indeed, all of what follows to the extent relevant, there being considerable complexity in Mr Baston’s submissions, with a great degree of overlap.
Both affidavits
– 2001 proceedings – Knight v Special Assets
– 2001 and 2008 proceedings – Barnes v Addy
In relation to both affidavits, the essence of the wife’s case is this.
A New Zealand and V were established in 2001 when the late husband knew he was about to divorce the wife: reasons for judgment 15 October 2010 [41] [43] [46] and [48]. A Winter “allowed” the husband, by the disguise of A Winter holding all of the shares in A New Zealand, to “hold” assets in A New Zealand including the V shares in A New Zealand, this being set up deliberately to deceive the wife in any later s 79 proceedings. The wife indeed was deceived in the 2001 s 79 property proceedings, such that she settled them on 7 March 2005 disfavourably to herself despite suspicion that the late husband indeed had great wealth at that time via the A companies. This fraud by the late husband, assisted by A Winter, was maintained throughout the s 79A proceedings until finally there was a determination that the A companies were alter ego companies of the late husband, but by then the late husband had lost his wealth, so that A Winter now is to be held responsible, on the indemnity basis, for all of the wife’s costs in both the 2001 and the 2008 proceedings by reason of a causal connection between her decision to settle the 2001 proceedings and her incurrence of costs in relation to them being ultimately costs “thrown away” (although she received a property settlement by the consent order of most of the pool: reasons for judgment 15 October 2010 [15]-[18]); and her decision to commence and prosecute the 2008 proceedings and her incurrence of costs in relation to them, as I perceive her argument, on the basis also that her costs were “thrown away”, because although she succeeded in those proceedings, by then the husband was insolvent, subsequently became a bankrupt and is now deceased.
Mr Baston submitted that to a person reading A Winter’s two affidavits, or either of them, it would not be unreasonable for the reader to form the view that the late husband had no interest in the A companies or V and that the interest was held by A Winter, such that any interest of the late husband was being denied; and that each of the two A Winter affidavits was selectively drawn to lead the reader to the intended inference that the case the wife sought to establish of the husband’s alter ego interest in “the wealth” of the two A companies had no basis.
Mr Baston submitted that regard must be had to each of the two affidavits of A Winter “as a whole”, not only their component parts, to see “this picture”, and intended conveyed meaning.
Mr Baston submitted that if being candid, rather than dishonest, or intending to make knowing false statements, A Winter could have said to his brother the late husband “I have no difficulty in holding the assets but I will not provide affidavits to the Court saying that the assets in New Zealand are mine”, and that a person who did not intend the Court to be deceived, let alone the litigant wife, Ms Winter, would have taken that stand against his brother and candidly stated to the Court in his two affidavits that at all times he held the shares in A New Zealand for his brother beneficially by way of blind trust.
I turn now to the analogies relied on by Mr Baston.
He put that the position is no different from a contention “often made in proceedings in this Court” of an alleged debt, drawn up falsely; and that it is often the case in this Court that when an affidavit of the alleged creditor is not forthcoming, the absence of such is questioned; but that when an affidavit of the alleged creditor is forthcoming, the debt might be accepted as existing, even if it is not. The argument was put thus of an analogous situation “well known in this jurisdiction” where a spouse will contend that moneys are owing to a parent, or a relation, put in dispute, but where the parent or relation swears an affidavit corroborating the existence of the alleged debt, the resisting party might be more inclined to accept defeat on the issue than to challenge the matter in the trial process by cross examination of both the spouse and the parent or relation.
Thus, Mr Baston submitted that A Winter, in agreeing to provide the late husband with a “corroborative” affidavit in the 2001 proceedings, was not a circumstance in which A Winter was passive, but, indeed, was active in the deception by the late husband of the wife, and thus A Winter engaged in conduct in the 2001 proceedings in providing his affidavit in those proceedings for the purpose of being seen as supportive of the husband’s case in those proceedings, or indeed corroborating him. Further, Mr Baston submitted that in the 2001 proceedings the late husband could have got “an accountant, bookkeeper or other person” to be registered as the shareholder, but instead chose and asked his brother, who agreed, to provide “the shield”, and that the shield was not used “just in practice”, but the deception continued to the Court, in both the 2001 and the 2008 proceedings.
Mr Baston put that whilst recognising the need for a “causal connection” to reach costs against a non-party (2001 proceedings) he relied on A Winter’s conduct in providing his affidavit in the 2001 proceedings as having the effect of a direct relationship with the incurrence of the wife’s costs in the 2001 proceedings.
Mr Baston referred to the operation of s 79(4), and to Livesey v Jenkins, as discussed in Barker & Barker [2007] FamCA 13 at [123] (reasons for judgment 15 October 2010 [32]), in relation to the “nexus” between non-disclosure and setting aside a s 79 order especially in the context of the s 79 order being by consent and “induced” by the non-disclosure of material facts, in particular, the non-disclosure of material facts by A Winter, who could have “disclosed” them.
Mr Baston put that in order to support the late husband’s non-disclosure, and stance that the A companies were not his, the husband solicited the assistance of his brother, A Winter, and that A Winter gave it to enable the husband to use A Winter’s affidavit in the 2001 proceedings fraudulently to hold the wife out of her claim. A Winter, it is alleged, had to have known that the affidavit was not full and complete and did not present the “true picture” that the A companies indeed were the husband’s alter ego companies.
It was put thus that A Winter, by his active conduct in the 2001 proceedings, assisted the late husband in holding the wife out of a property settlement in 2005 based upon full disclosure by the husband. A Winter, according to the submission, “actively participated” in that.
When asked how that relates to the wife’s costs of the 2001 proceedings, Mr Baston replied “It was wasted money,” in the sense that all of the wife’s costs in the 2001 proceedings were “thrown away” because of “the deception”, that is, of the late husband, and a witness, A Winter.
This, I think, is a difficult reach. A Winter was a witness in the 2001 proceedings, not a party. However, I will turn to the relevant principles below, as to costs claims against non-parties, which include that the “categories” of circumstances and of persons is not closed, and that even a witness can be the subject of a non-party costs order.
In relation to the 2001 proceedings, when asked as to the effect of the circumstance that A Winter’s affidavit was sworn or affirmed on about 13 January 2004, more than two years after those proceedings were commenced on 7 December 2001, and only about one year before they were settled by the consent order 7 March 2005, Mr Baston contended that such is irrelevant “because it is the effect of the conduct on [the wife’s] decision to settle the matter that is important”. Mr Baston submitted that the late husband, assisted by A Winter, hid the full nature and extent of his financial circumstances, and the 2001 proceedings in effect ended up “aborted” because the wife had “no evidence to challenge the stance of [the husband] corroborated by [A Winter]”.
Mr Baston went so far as to submit – a matter not sworn to by the wife – that had A Winter not sworn his affidavit in the 2001 proceedings “things could have been different”, at a trial, by the wife proceeding to trial and the cross examination process, with cross examination of the late husband, in particular, and of A Winter, going to the indicia of control of and true ownership of the two A companies, so that in effect there could have been a different result for the wife in the 2001 proceedings. He said that however, because of the affidavit of A Winter filed in the 2001 proceedings, he “put to bed”, as it were, “all endeavours by [the wife] to find out [the husband’s] true wealth and position”, drawing upon the analogy mentioned.
I do not accept the proposition based on the “alleged debt, drawn up falsely” analogy. A litigant always has the opportunity, as the wife did in the s 79 2001 proceedings, to proceed to trial and to cross examination of the husband and A Winter in those proceedings. She chose not to, and instead, to settle on 7 March 2005. The argument in my view fails because, as I have said, the wife could have continued to trial and there is not any evidence that she relied on A Winter’s affidavit in relation to her decision to settle the 2001 proceedings.
Thus, the difficulty for Mr Baston’s submissions in relation to his treatment of A Winter’s evidence in the 2001 proceedings in this way, that is, by way of his “analogy” argument, is that nowhere in her affidavits in the 2008 proceedings has the wife sworn that she relied on A Winter’s affidavit in the 2001 proceedings in relation to her decision to settle them. On the contrary, as I found in the reasons for judgment 15 October 2010, in several places the wife deposed to her reliance on the late husband’s statements and affidavits in the 2001 proceedings. I would refer in particular to the reasons for judgment 15 October 2010, pars [33] [34] [35] [36] and [37] in which she made clear to me in her evidence that in the 2001 proceedings specifically she relied on the late husband’s sworn evidence in the 2001 proceedings.
The paragraphs are important, and I will set them out together with the relevant subheading from the judgment showing that her case was concerned only with deception of her by the husband, no-one else:
Was there fraud, suppression of evidence, failure to disclose relevant information and/or the giving of false evidence by the husband in the earlier proceedings?
Wife’s case as to husband’s evidence in the earlier proceedings
33. The wife's case is that at the time the consent property order was made on 7 March 2005 she relied on the following evidence by the husband as to his property, assets and financial circumstances as contained in the husband's affidavit filed on 23 February 2004:
15.The Respondent has claimed throughout the property proceedings that I possess and/or control a large amount of wealth in certain Companies. This is despite my providing evidence to the contrary. I have been employed as a company director of [A Capital Limited] (“[A]”) since August 2001. I receive an income of $500.00 gross per week if funds are available in the Company. My employer pays for my rent of $675.00 and motor vehicle loan expenses of $250.00 per week as part of the employment contract as I use my home as my fulltime office and I need the vehicle for work related travel. These are my only sources of income and beneficial payments.
16.Further, I have had to obtain loans in excess of $150,000.00 to assist in payment of debts, including legal fees and living expenses. I continue to borrow money when necessary to pay for my expenses. I currently owe in excess of $30,000.00 in legal fees. Annexed and marked with the letter "H" is a copy of the Affidavit of the Director of [A] and my tax returns for the years 1997 to 2002 together with a letter of my solicitors dated 12 December 2003 explaining in detail that the alleged wealth does not exist and the respondent's perceptions that I have access to large quantities of money either directly or by way of financial resources is without foundation.
17.I do not have an interest in any other company by way of shares, beneficial interest or otherwise.
34. The husband exhibited to that affidavit a letter from his solicitors to the wife's solicitors dated 12 December 2003, annexure H, in which it was asserted that the husband had not "secreted away wealth", “particularly in the United States”, and that "the only assets available are those being the proceeds of the sale of 16 [D Street] and the household furniture and effects …".
35. It is self evident by these materials that the wife, prior to the making of the consent property order, had alleged that the husband had assets which he had failed to disclose to her.
36.The wife, in her affidavit filed on 28 April 2008, in support of the current proceedings, said:
6.In settling all claims that I had against [the husband] in the original proceedings, I relied on his evidence in his affidavit sworn on 20 February 2004 and his Financial Statement filed in the original proceedings. Specifically I relied upon [the husband’s] sworn evidence that he had no assets and earned a weekly wage of $500 per week.
37. The wife's case is that throughout the earlier property proceedings disclosure by the husband was “always difficult” and that she had “held suspicion” that information was being withheld. In her affidavit filed on 16 May 2008 (incorporated by reference in her trial affidavit filed on 16 April 2010, but not referred to other than in this respect) she provides detail of the effort made by her solicitors to obtain full disclosure by the husband of his assets: see pars 3-34 and 40 of that affidavit, and par 41, in which she deposes as to her reliance on the information provided by the husband in entering into the consent property order. (underscoring and emphasis added except in subheading)
Her affidavit filed on 16 May 2008, par 41, provides in full:
41.In entering into those Orders I relied on the information sworn by the First Respondent on 20 February 2004 as to his financial circumstances and resources and also disclosed documents. (emphasis added)
Further, in her affidavit filed 16 April 2010, the wife deposed, par 4:
4.In settling all claims which I had against [the husband] in the original proceedings, I relied on his Affidavit evidence and Financial Statements filed in the original proceedings. Specifically, I relied on his evidence in his Affidavits sworn 20 February 2004 (Tender Bundle, Vol 3 Section Y) and 3 December 2004 (Tender Bundle, Vol 3 Section Y) and his Financial Statement filed on 6 December 2004 (Tender Bundle, Vol 3 Section Y) in which he deposed to earning a weekly wage of $500 per week and that he had next to no assets. (emphasis added)
In her affidavit filed 18 May 2011, after the wife had become aware that the late husband had become a bankrupt on 28 October 2010 (affidavit, par 3) she included a section in the affidavit headed “Non-disclosure and False Evidence of Second Respondent” and the following paragraphs:
Non-disclosure and False Evidence of Second Respondent
20.The Second Respondent was not a party to the original proceedings although he did swear an Affidavit in support of his brother in January 2004 (Tender Bundle Volume 2 Section S pp1-3) which has now been established as patently false and misleading. However, then, without fill disclosure, I was unable to disprove the matters deposed to therein.
21.At paragraphs 3-41 of my Affidavit sworn in the present proceedings on 16 May 2008 (and incorporated by reference in my trial Affidavit sworn 16 April 2010), I deposed to the extensive and frustrated efforts of my solicitors in the original proceedings to obtain full disclosure (by way of non-party disclosure) of the complete financial records of the Third and Fourth Respondents (which were found at paragraph 89 of the Judgment delivered on 15 October 2010 to have been the alter ego of the First Respondent) and of which at all material times the Second Respondent was a director.
22.I recall that the original proceedings were commenced on or about 7 December 2001 and concluded on 7 March 2005. Much of this time was occupied with my attempts to obtain disclosure. I recall that I always suspected that the Second Respondent was shielding his brother. I recall that I was frustrated by the evidence in the Second Respondent’s January 2004 affidavit. The documents in Tender Bundle Volume 4 Section Y pp 14-19 suggested to me and my then-solicitors that instructions were being provided by the Boards of the corporate Respondents (and inferentially at the behest of the Second Respondent personally as the alleged “controlling mind and will” of those companies) to provide as little as possible even though we had a Court Order to do so (e.g Volume 5 Section Z pp 343-345).
23.I recall that by the beginning of 2005, I was tired and financially exhausted and, in effect, gave up and settled.
I appreciate that in par 23 of that affidavit the wife has sworn in effect that she “gave up and settled” at the beginning of 2005 because she was “tired and financially exhausted”, suggesting that this was caused by A Winter rather than the husband, having regard to the subheading and pars 20-22 set out. However, pars 20-22 need close refutation. I deal with them below, and incorporate that discussion here by reference.
Despite this “gap” in the evidence, Mr Baston invited that I infer that the existence of the affidavit of A Winter in the 2001 proceedings must have had some influence on the wife and her cognitive process and in particular her decision to settle the 2001 proceedings, to satisfy the “causal connection” requirement.
I am not prepared to draw this inference. The wife has had opportunity to swear such as early as 2008, and has sworn no evidence as to any causal connection. Further, having regard to her specific evidence of reliance on the husband’s evidence and conduct, such cannot be inferred. The inference would impeach or at least call into question the veracity of her existing sworn evidence.
2001 proceedings – Knight v Special Assets
In Knight v FP Special Assets Limited (1992) 174 CLR 178, Mason CJ and Deane J at 192-3 relevantly said:
For our part we consider it appropriate to recognize a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of case consists of circumstances where the party to the litigation is an insolvent person or a man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made. (emphasis added)
It is readily seen that this category of case has 4 elements:
·the party to the litigation is an insolvent person or a man of straw
·the non-party has played an active part in the conduct of the litigation
·the non-party or some person on whose behalf he or she was “acting” or by whom he or she has been “appointed” has an interest in the subject of the litigation
·the interests of justice require that a costs order be made.
In Factory 5 Pty Ltd v State of Victoria (No 2) [2011] FCA 323, Bromberg J recently, 6 April 2011, considered a costs application against a non-party. In [27] of the reasons is the well known passage just set out. It is convenient to set out the following paragraphs in Bromberg Js decision, as I have found the reasoning helpful:
28. M2006 contends that the four elements referred to in Knight are all satisfied. F5 was insolvent; the liquidators played an active part in the conduct of litigation; they had an interest in the subject of the litigation; and the interests of justice require that a costs order be made against them.
…
31. I accept that two of the four factors identified by Mason CJ and Deane J in Knight are satisfied. …
32. However, as a Full Court held in Gore (t/as Clayton Utz) v Justice Corporation Pty Ltd(2002) 189 ALR 712 at [62], the passage in Knight is not to be regarded as laying down principles, each of which must be present before a stranger to the litigation could be made liable for costs.
33. In the later Full Court decision of Kebaro Pty Ltd v Saunders[2003] FCAFC 5 Beaumont, Sundberg and Hely JJ reviewed the authorities including Gore and concluded at [103] that the authorities established the following propositions:
A non-party costs order is exceptional relief, although some categories of factual situations are now recognised as within the discretion, for example, the situation described by Mason CJ and Deane J in Knight at 192–193. The width of the jurisdiction is illustrated by a recent English decision that there can be circumstances in which it would be appropriate to order costs in favour of a non-party against a party (see Individual Homes v Macbreams Investments, 23 October 2002, High Court of Justice Chancery Division at 8).
Whilst such an order is extraordinary, the categories of case are not closed, although in order to warrant its exercise, a sufficiently close connection, or as Gobbo J expressed it, a “real and direct and … material” connection with the principal litigation, must be demonstrated; in the words of Callinan J, the non-party can fairly be liable if adjudged by its conduct, to be a real party to the litigation, even if not the real party.
34.In my view, M2006 has failed to establish a sufficiently close connection between the liquidators and the litigation. I do not regard the liquidators as being “real parties” to the litigation. In particular I consider that the requisite connection is absent because I do not think that it can be said that the liquidators were acting in their own interests rather than the interest of the creditors and shareholders of F5. I am fortified in that view by reference to a number of English authorities in which the position of liquidators has been directly considered. (underscoring and emphasis added)
In Factory 5 thus, Bromberg J determined that two of the four factors identified by Mason CJ and Deane J in Knight were satisfied, but not the balance. However, it is not the case that each of the four elements in Knight must be satisfied before the discretion to award a non-party costs order is exercised; and the categories in which such may occur are not closed.
Nonetheless, in Kebaro at [103] (see Factory 5 at [34]), it is made clear that a requisite connection is one of interest in the outcome of the litigation so that the non-party “can fairly be adjudged … to be a real party to the litigation even if not the real party”.
In JJT; Ex parte Victoria Legal Aid (1998) 155 ALR 251; [1998] HCA 44 Callinan J said in effect that Knight applies in the Family Court of Australia so as to award costs against a non-party “in an appropriate case”: [150]; Hayne J assumed such without deciding: [96].
Earlier, in M v D; Australian Capital Territory (1995) FLC 92-584 Murray J in this Court specifically was asked to make a costs order against a witness, in that case an expert witness. Her Honour, after referring to Knight, said at 81,792:
I do not see the general category referred to by Mason CJ and Deane J as being exhaustive of situations where an order for costs against a non-party may be made (Pagliarella and Pagliarella (No 3) (1994) FLC 92-460), nor do I see the first set of circumstances referred to by Mason CJ and Deane J as necessarily being a prerequisite in Family Law matters, because of the provisions of Sec. 117(1).
With the greatest of respect I agree with Hannon J in Pagliarella (supra) where he says at 80,756:
“It can now be taken as clear law that this Court has jurisdiction to make an order for costs against a non-party at least if that person plays an active part in the litigation and has an interest in the subject of the litigation …”
but I would take it a little further.
If I am to make any order for costs against a non-party in a case of this nature, I am of the view that there are at least three prerequisites –
(a)A sufficient connection must exist between the non-party and the proceedings to provide a proper basis upon which to award costs against it (Knight’s case at 202) or, to put it in a more summary form, the non-party must be the “real party” to, or the “real instigator” of the litigation.
(b)There must be a causal connection between the non-party and the incurring of costs (Bischof and Anor v Adams and Ors (1992) 2 VR 198 at 204), (Oz B & S Pty Ltd v Elders IXL Ltd (1993) 117 ALR 128), and
(c)The interests of justice and reason demand that such an order be made (Burns Philp and Co Ltd v Bhagat (1993) 1 VR 203).
In Re Z (No 4) (unreported) NA54 of 1995, 6 March 1997, Nicholson CJ and Frederico J (p 9) agreed with the following in Pagliarella and Pagliarella (No 3) (1994) FLC 92-460 at 80,756 per Hannon J:
Although Mason CJ and Deane J referred to the recognition of a general category of case, it seems to me that they were not stating that category as being exhaustive so as to exclude other cases where specific circumstances may justify an order for costs being made against a non-party in the interests of justice. This was adverted to by Nicholson CJ and Maxwell J in McAlpin and McAlpin [in the passage at 80,215] and by Gobbo J in Bischof & Anor v Adams & Ors [1992] 2 VR 198 at page 204 when he said that a relevant consideration was whether there was a causal connection between the non-party and the incurring of the costs, that being a matter that bears directly on the justice of whether he should pay costs that he has caused to be incurred. (See also the comments of Nicholson CJ and Fogarty J in Re P (a child); Separate Representative (1993) FLC 92-376.) It can now be taken as clear law that this Court has jurisdiction to make an order for costs against a non-party at least if that person plays an active part in the litigation and has an interest in the subject of the litigation. (emphasis added)
In S v S; The Child Representative; Victoria Legal Aid; The Chief Commissioner of Victoria Police (1997) FLC 92-762 at 84,381 Nicholson CJ referred to Re Z (No 4) as having “specifically disapproved” that part of M v D that the non-party must be the “real instigator” of the litigation, and referred to the approval in Re Z (No 4) of Pagliarella per Hannon J as set out. As I read Re Z (No 4) there was implied rather than specific disapproval. However, nothing turns on that.
In Hartnett & Sampson (Costs) [2007] FamCA 1456 Benjamin J collected the authorities concerning non-party costs. His Honour’s judgment first dealt with the question of power in this Court to order non-party costs: [13]-[21]. That was not in issue here. At [22] his Honour referred to Pagliarella and at [23] observed:
23.… Dawson J’s comments Knight v FP Special Assets Ltd (above) should be remembered. His Honour said at page 203:
The circumstances in which it would be appropriate to award costs to a non-party would necessarily be confined, but that is a question of discretion, not jurisdiction.
Finally, I would observe that there is no suggestion that costs cannot be ordered again a witness in an appropriate case. Indeed in Bischof v Adams (1992) 2 VR 198 Gobbo J at 204 gave the example:
…if a witness deliberately refuses to answer a subpoena and thereby causes the case to be adjourned and so increases costs to the parties, I would have thought that it was very much arguable that he should bear these extra costs. …
In this example, however, the aspect of causation of costs is clear.
Applying the principles in the authorities referred to, it is plain that A Winter was not a person with an interest in the outcome of the 2001 litigation. That is to say, it cannot be said in any sense that by any act or conduct A Winter was “acting in [his] own interests” for benefit for himself: Kebaro at [34]. He thus had no “requisite connection” with it.
I am unable to determine that A Winter played an “active” part in the litigation, in the sense meant in the authorities. For example, there is no evidence that he, rather than the husband, was giving instructions for its conduct. He was merely a witness. There was nothing in his affidavit that I could identify as false, as already determined. In relation to allegations of non-disclosure by A Winter, I have said already that these paragraphs require close refutation. They are dealt with below and again I would incorporate that discussion here by reference.
The finding thus is that A Winter held the shares and that this was a disguise as to the true position.
This factual circumstance does not have effect that such was conduct in or in relation to the proceedings. Rather, this was conduct prior to the commencement of the proceedings, in the conduct of their lives. Moreover, in the conduct of their lives, as previously illustrated, it would appear that even A New Zealand’s accountants did not know of the husband’s activities in Australia and the USA concerning A New Zealand and the use to which he put it, so there is no rational basis to suggest A Winter would have known of this. In this regard it appears that it is more likely than not that the husband deceived A Winter as well as the accountants. As the passages extracted above show, A Winter said in his evidence that “[The husband] operated the company on the day to day basis” and “Look, I don’t babysit him”, this evidence tending to show, I think, that the husband concealed his activities via A New Zealand from both the accountants in New Zealand and his brother A Winter in New Zealand.
When the matter is narrowed down to A Winter’s conduct in swearing or providing the July 2008 affidavit, the difficulty for the wife is that despite it she obtained the injunctive relief she sought. It is not as if A Winter’s affidavit had the effect of her being denied that relief. I am thus unable to be satisfied that if that affidavit had not been filed then the wife would not in any event have incurred all of the costs in the 2008 proceedings which in fact she incurred. That is to say, she got her injunctive relief and continued on despite A Winter’s affidavit, not because of it.
Indeed, it is not as if her claim in relation to the 2008 proceedings is for costs thrown away by settlement of those proceedings. On the contrary, they were continued until the bitter end, with ultimately the finding made which the wife sought, which is that the A companies were alter ego companies of the husband.
I have mentioned already that it is not as if any admission by A Winter in the 2008 proceedings that the two A companies were alter egos of the husband would have shortened the trial, because the husband denied that until the end so that full determination of the matter was required.
Non-disclosure by A Winter
A Winter was not served and thus did not become a party to the 2008 proceedings until 2 February 2010, a short two months before the commencement of the trial.
A Winter’s obligation to make disclosure, in my view, in his capacity as a party to the proceedings, commenced on that date.
By that date, however, the wife already had filed on 28 January 2010 an application in a case for my leave for subpoenae to be served in New Zealand on Ms JF and J Winter.
The annexures to Ms JF’s affidavit filed 24 May 2010 show that all of the material the wife sought in the subpoenae, amounting to some 16 detailed items, was available for the wife as early as 26 February 2010, but was not given by Ms JF to the wife because the wife had not paid Ms JF’s fees.
The position concerning A Winter’s alleged conduct in not making disclosure is thus between the narrow window of 2 February 2010 and 24 May 2010. Ms JF’s affidavit and J Winter’s affidavit were each filed on that date by Mr Galloway of Counsel, instructed by Emerson Family Lawyers, the filing being on behalf of A Winter and J Winter, being the commencement of their participation in the trial process. It was he and she who obtained the affidavit of Ms JF, incurred the cost of its preparation, filed it, and thus provided to the wife into her hands that which she could have had two months earlier on 26 February 2010 if she had paid Ms JF’s fees.
I formed the view as the trial judge that once the importance of the matter was communicated to A Winter, by the late husband, which during the trial I urged the husband to communicate to his brother in New Zealand, A Winter (and J Winter) attended by solicitors and Counsel, attended for their evidence by telephone; and participated in the trial in a helpful way. Indeed, as the s 79A 2008 proceedings primarily concerned his brother, the husband, in Australia, A Winter (and their mother J Winter) would have had no reason to concern themselves personally with the proceedings in Australia until joined.
The wife claims that if A Winter had given early, or any disclosure, she would not have joined J Winter in the proceedings. J Winter however was joined in the proceedings by order made by me on 13 April 2010. As I recall, the joinder was related to the wife’s case to have the Deed of Family Arrangement set aside, in respect of which J Winter was a necessary party, as a party to the Deed: reasons for judgment 15 October 2010 [1]-[2].
The wife thus cannot bring home by way of costs to A Winter her necessary joinder of J Winter, she, in any event, being a necessary party for the wife’s failed relief to set aside the Deed of Family Arrangement: reasons for judgment 15 October 2010 [255]-[296].
I have mentioned the subpoenae to Ms JF and to J Winter. They each were identical with 16 detailed items, concerning several issues, in particular concerning the Estate (dealt with above). It is not as if the subpoenae concerned only the issue of validity of the share transfer (dealt with above). Indeed only about 4 items (items 8-11) sought documents concerning the share transfer. The application in relation to the subpoenae for service in New Zealand in my view thus was necessary in any event in relation to the wife’s failed claim against the Estate (items 1-7) and other issues (items 12-16).
The wife in her material submits, unfairly, that Ms JF was not co-operative in relation to her duty to answer the subpoena to her. Emails annexed to Ms JF’s affidavit, annexure E, show this to be a false contention. By reference to the emails, it is plain that Ms JF bent over backwards to accommodate the wife’s demands upon her, but ultimately, as I have said, did not give over the documents in February as the costs of answering the subpoena were not paid.
When pressed as to what part of the wife’s costs it is submitted relate to the alleged non-disclosure by A Winter, Mr Baston said that it caused the wife to issue the two subpoenae in New Zealand to both Ms JF and J Winter, to seek that which much earlier A Winter as a party should have provided to the wife by way of disclosure. This is a wrong analysis. The subpoenae were issued to Ms JF and J Winter on 12 February 2010, after orders made by me on 10 February 2010 for their issue, A Winter having been served only 8 days earlier on 2 February 2010. As I have said, the wife’s application for leave to serve the two subpoenae in New Zealand was filed earlier on 28 January 2010. It is thus wrong to suggest that the issue of the subpoenae was caused by conduct of A Winter as a party by his failure earlier to make disclosure.
Even if overall I were to be satisfied that there was some conduct of A Winter in the 2008 proceedings responsible for some part of the wife’s costs, as to which I am not, that would be small indeed when the following matters are considered. By far the largest part of the proceedings, and the longest part of the trial duration, was the wife’s claim against Mr MW, the seventh respondent, which failed. This occupied all or most of the trial time until 24 May 2011. See the reasons for judgment 15 October 2010 [123]-[254] occupying some 37 pages plus associated issues [297]-[328] occupying a further 8 pages. The wife also wholly failed against J Winter in relation to the Deed of Family Arrangement, which took considerable trial time. In relation to the relief against J Winter I would refer again to the reasons for judgment [1] to [12] and [255]-[296] occupying about 8 pages.
Another factor – wife wholly unsuccessful against A Winter in the 2008 proceedings
There are other aspects of the matter to consider.
The wife directly sought relief against A Winter in the 2008 proceedings in two respects.
First, she sought to set aside the 1 million share transfer from A Winter to J Winter. That part of the wife’s case was discontinued on 26 May 2008, as evidenced by hand notation by me on the amended initiating application filed 14 April 2010, within 2 days of the provision by A Winter and J Winter of Ms JF’s affidavit on 24 May 2010. However, I have dealt already with that chronology.
The wife’s affidavit contends that she incurred significant costs in relation to the share transfer issue, alleging that it was “concealed”, and that it was not until “well into the trial” that she learned that the share transfer was valid. The wife’s costs cannot be sheeted home to A Winter. The wife did not serve him until 2 February 2010. I have referred already to the chronology concerning the subpoenae and the ultimate provision of Ms JF’s affidavit resulting in the wife discontinuing, properly, that part of her claim to seek to set aside the share transfer, 2 days after the provision of Ms JF’s affidavit.
I would go so far as to say that if the A Winter had not, on 24 May 2010, participated in the trial by briefing solicitors and Counsel and providing Ms JF’s affidavit, then, to this day, the wife still might not know, and I might not have been able to determine, that the share transfer transaction was valid, because until the wife paid June Ms JF’s fees, she was not going to give that material to the wife, which was available, as I have said, as early as 26 February 2010.
Secondly, there were two parts of the case that the wife, in fact, prosecuted against the A Winter, and in respect of which she failed.
The first was to seek to set aside the 1993 Deed of Family Arrangement. The wife failed in this relief claimed against him. She was wholly unsuccessful. He was wholly successful. The wife ought to have discontinued this part of her claim after the provision of J Winter’s affidavit filed 24 May 2010, J Winter having been joined only on 13 April 2010.
The second is that the wife claimed that once the 2005 consent property order be set aside, and the 1993 Deed of Family Arrangement be set aside, the proceedings otherwise be deferred until the death of J Winter, so that any award the wife might obtain against the husband be satisfied out of his (alleged) interest in the Estate of the late H Winter: reasons for judgment 15 October 2010 [1]. She failed in this. She was wholly unsuccessful. A Winter and J Winter were wholly successful: reasons for judgment 15 October 2010 [255]-[296], esp [296].
It seems to me, therefore, that even if, which I have not found, that any conduct of A Winter had a costs ramification to the wife in her 2008 proceedings, there is a balancing factor, namely that in any direct relief she sought against or concerning A Winter she wholly failed. In particular, A Winter is now the sole beneficiary of the Estate, by way of the Deed of Family Arrangement, and has been since 1993.
There was evidence by the late husband that he fully explained this to the wife during their marriage, and that she was aware, from 1993, that he had surrendered any entitlement to his father’s Estate to avoid prospective debt liability: reasons for judgment 15 October 2010 [262].
Financial circumstances
It remains for me to consider the financial circumstances of the parties.
There is no doubt that the wife is in parlous financial circumstances. Prior to the late husband’s death on 22 May 2011, he had become a bankrupt on 28 October 2010, two weeks or so after the judgment 15 October 2010.
His trustees reported on 8 February 2011 that his unsecured creditors were assessed as $3.2 million “optimistic scenario” and $13.2 million “pessimistic scenario”: annexure ALW3 to the wife’s affidavit filed 18 May 2011.
The wife deposes (affidavit filed 18 May 2011, pars 32-38 and 40-41) that she has remained unemployed since May 2010. She receives a fortnightly Centrelink pension of $436.40. She lives in a unit in the City with her daughter who is 18 years and a tertiary student. She deposes that her mother pays their rent and other necessaries. She is not in a relationship or otherwise supported. Shortly before Christmas 2010, she had a serious car accident in which both the vehicle she was driving, owned by her mother, and the other vehicle were written off. Her mother’s vehicle was uninsured because she (the wife) had forgotten to renew the insurance.
She deposes she has arranged a brief moratorium on her indebtedness to various creditors for storage and other loans totalling in excess of $70,000 and she also has a claim against her in respect of the other car in the accident for which she is uninsured. She sustained whiplash injury in the accident and has continual headaches, pain and sleep disorders. She is being treated for depression and takes Avanza and Serapax medication on prescription and is unable to hold a job in consequence. She is currently seeking professional assistance to prepare a schedule of her costs in the 2008 proceedings. She estimates that they are well in excess of $400,000. She remains indebted to some previous legal representatives, consultants and service suppliers. She is also indebted to her mother for in excess of $65,000. In addition, her costs in the 2001 proceedings exceeded $170,000.
Her financial circumstances mean that she cannot afford a solicitor or to continue to prevail on Mr Baston to assist her without fee. Mr Baston, on recent occasions, has announced his appearance for the wife on the pro bono basis.
Her depression and her “continued and paralysing anxiety” about her financial circumstances also have impacted severely, she said, on her capacity to complete her critical affidavit in her costs application.
As to A Winter, she refers to the circumstance that he is the sole beneficiary of the Estate of the late H Winter with the Estate having estimated wealth at the time of the 2010 trial of about NZD7 million: reasons for judgment 15 October 2010 [271].
J Winter is a discretionary beneficiary for her life as to the income of the Estate: reasons for judgment 15 October 2010 [255].
The wife deposed that it appears that A Winter has other interests as referred to by Ms JF in her affidavit filed on 24 May 2010.
However, on 9 March 2011, A Winter suffered two judgments against him in the Supreme Court of Queensland amounting to AUD14.68 million, ex 1. The two plaintiffs who obtained those judgments are recognised as those to whom the late husband and/or A Australia were indebted in relation to M Station: reasons for judgment 15 October 2010, [25] and [343].
On the present state of the evidence, if those judgments are good, it may be unlikely that A Winter will have the means to satisfy a judgment to the wife for costs even if the Estate’s assets were to be sold. A Winter is now the Estate’s sole beneficiary. However J Winter has a life interest in the income of the Estate.
On all of the evidence it would appear thus that a costs order in the wife’s favour on this financial analysis might be an academic exercise. However, if there were merit in the wife’s costs application by way of justifying circumstance I would not hesitate to order costs against A Winter regardless of his present or likely future financial circumstances. The difficulty I have is that I am unable to indentify a justifying circumstance as the necessary precondition to award the wife costs against A Winter.
Conclusion
On all of the evidence, I am not satisfied that any conduct alleged by the wife against A Winter should properly, in relation to the 2001 proceedings on the non-party basis, or in the 2008 proceedings on the mandatory s 117AB basis or the s 117(2) discretionary basis warrants any costs orders.
The wife’s applications for costs will be dismissed.
Before leaving the matter I wish to make some other observations.
Other observations
Falsity in the wife’s affidavits – mis-statements as to the reasons for judgment – thus misconceptions in her costs claims
Unfortunately, it is necessary that I observe that there is falsity, mis-statement and thus misconception in some of the wife’s affidavit material.
Wife’s affidavit filed 12 November 2010
The wife filed an affidavit on 12 November 2010 in support of her application for costs.
In par 2, she deposed that in my judgment 15 October 2010 I found that the husband and A Winter “had engaged complicitly in an elaborate fraud to conceal [the husband’s] true financial position prior to the consent property Orders being made on 7 March 2005”. This is wrong. My finding was that the husband committed an elaborate fraud on the wife: reasons for judgment 15 October 2010 [118]. I made no finding of complicity by A Winter: reasons for judgment 15 October 2010 [69]-[89] set out above and my discussion above in relation to of those and other paragraphs.
Wife’s affidavit filed 18 May 2011
In her affidavit filed 18 May 2011, par 2, is the same mis-statement. I make the same observations.
In par 20 of that affidavit, the wife deposes that A Winter’s affidavit in the 2001 proceedings “has now been established as patently false and misleading.” This is wrong. I have dealt with this aspect of the matter in detail already. It seems to me that the wife here has allowed herself loose comment rather than strict observation as to the findings made in my judgment.
In par 21 of that affidavit, the wife refers to her attempts in the 2001 proceedings to obtain non-party disclosure against the third respondent and the fourth respondent, the two A companies, of which A Winter was a director. However, what the wife does not say is that any of those attempts was directed to A Winter rather than to the husband. Indeed, pars 3-41 of the wife’s affidavit filed 16 May 2008 (expressly referred to in par 21 as incorporated by reference in her trial affidavit in the 2008 proceedings) evidence that her attempts were directed to the “First Respondent”, the husband, and then by correspondence to the solicitors for the “Third to Sixth Respondents”. In relation to the two A companies (the third respondent and the fourth respondent) often one could presume that the instructions given to the solicitors for the two companies might have been by both directors, the husband and A Winter. However, as I have determined that these two companies were the alter ego companies of the husband, that cannot be presumed as actually having occurred, or even as likely to have occurred. There is no evidence therefore that the wife directed any request for third party disclosure to A Winter either in his own capacity or in his capacity as a director of the two A companies. Moreover there is no evidence of any court application for third party disclosure being directed to or brought to the attention of A Winter. Indeed, I would refer in this regard to the matters in the addendum to these reasons pars [9]-[11]. Paragraph 21, therefore, to the extent that it is capable of being read as giving the impression that the wife pursued A Winter personally in the 2001 proceedings in relation to disclosure would be a misleading impression. I do not suggest that such would have been intentionally misleading by the wife. However, the impression given must be corrected by reference to the facts of the matter, as I have done.
In par 22 of that affidavit, the wife deposes that she and her solicitors in the 2001 proceedings, in effect, were led to believe, by reference to the documents described in that paragraph “that instructions were being provided by the Boards of the corporate Respondents (and inferentially at the behest of the Second Respondent [A Winter] personally as the alleged “controlling mind and will” of those companies) to provide as little possible even though we had a Court Order to do so”. The awkwardness here is that I determined that the husband was the controlling mind of the A companies, not A Winter. It is difficult thus to understand if, as I perceive, the wife’s statement in par 22 was intended to reflect badly on A Winter. The “corporate respondents”, or at least the two A companies, were under the husband’s control, not A Winter’s control, as the husband’s alter ego companies, although at that stage A Winter was a director of and the sole shareholder in A New Zealand, which wholly owned A Australia. I would refer again to the addendum, pars [9]-[11]. The wife chased the husband, not A Winter, to provide discovery in relation to the “corporate respondents”.
In par 23 of that affidavit, the impression is given, by its position following pars 20-22, and under the subheading “Non-disclosure and False Evidence of Second Respondent”(earlier set out) that the wife “gave up and settled” the 2001 proceedings because of “non-disclosure” and/or “false evidence” by A Winter. As shown earlier however there was no “non-disclosure” by A Winter, nor any evidence of the wife seeking disclosure from him (he was not a party, and I have dealt above with the circumstance that the wife did not seek to involve A Winter in the third party disclosure process), and, as demonstrated elsewhere in these reasons there was no “false evidence” by A Winter. Paragraph 23 thus cannot validly be regarded as evidence by the wife that she relied on any conduct of A Winter in the 2001 proceedings in her decision to enter into a consent order. Indeed, I have referred already to three affidavits by her in which she deposed, expressly, that in relation to that decision she relied on the husband’s evidence and discovered documents: her affidavits filed 28 April 2008, 16 May 2008 and 16 April 2010, in the parts earlier referred to.
In par 24 of that affidavit, the wife refers to legal advice that there was “evidence” that A Winter had been “complicit” with the husband in his fraud on the wife leading to the 2005 consent property order. I have dealt with this. In the 2008 proceedings I made no such determination.
In par 25 of that affidavit, the wife refers to the 2008 proceedings in which she alleges, as if a false statement, that A Winter maintained that he was the sole shareholder in A New Zealand. I have dealt with this aspect of the matter. There was no false statement.
In par 26 of that affidavit, in relation to the share transfer issue, the wife says that the process concerning the issue of subpoenae to the accountants in New Zealand cost her “several thousand dollars”, which “could have been avoided had proper disclosure been made”, that is, by A Winter. This again is erroneous, as I have observed, chronologically.
In par 29 of that affidavit, the wife deposes that until “well into the trial” she did not understand the “precise details surrounding the transfer of the shares for value in March 2008” and that she had “no recourse in the present proceedings against [J Winter] or the Estate or any claim to the shares in [A New Zealand]”. The difficulty here is that the wife continued to proceed against J Winter (the Estate) in relation to seeking to set aside the Deed of Family Arrangement. Further, her statement confuses two issues, namely the transfer of the shares in A New Zealand from A Winter to J Winter (dealt with exhaustively above) and the separate issue of whether the 1993 Deed of Family Arrangement should be set aside. The wife discontinued in relation to the first issue, but continued to proceed in relation to the latter issue, despite the provision of J Winter’s affidavit on 24 May 2010.
In par 30 of that affidavit, the wife contends that if A Winter had not “lied” in his affidavit in the 2008 proceedings that he was “still the sole shareholder in [A New Zealand]”, and if “full and frank disclosure” had been given by A Winter, then the joinder of J Winter and the added trial time and costs could have been avoided. This also is erroneous. I have determined, by reference to the evidence of Ms JF, that A Winter did not lie in par 5 of his 2008 affidavit in relation to his “still” being the sole shareholder in A New Zealand. I have referred already also to the plain fact that it was necessary for the wife to join J Winter, in any event, in relation to her claim to set aside the Deed of Family Arrangement. This had nothing to do with disclosure or non-disclosure by A Winter because, despite all, the wife still sought to set aside the Deed of Family Arrangement, which required J Winter to be a party, and failed in that endeavour.
Mr Baston’s written submissions
I will also make observation that in Mr Baston’s supplementary written submissions, not only are there submissions based upon those aspects of the wife’s material which, as observed above, in my view are untenable, but there is also inaccurate reference to preliminary observations made by me on 15 June 2011.
First, in the supplementary written submissions, it is said that on 15 June 2011, I said that to succeed in her costs applications, the wife “must establish fraud by A Winter”, or conduct with costs ramifications. The first part is inaccurate. What I said was “I have not made any finding of fraud against A Winter”: (T8/2); and that it may be that A Winter was “as duped by the late [husband] as was [the wife]”: (T7/38).
Secondly, it is said that I said that the only inference available is that A Winter was “duped” by the husband, as much as was the wife. That is not the effect of the passage to which I have just referred.
In relation to these matters I would refer also to the hearing 4 March 2011: T7/30-40; T8/25-44; and further in relation to 15 June 2011 (transcript erroneously dated 16 June 2011) T7/30-T8/25. In particular, at T8/21, I said that there was an “equally available” inference that A Winter had been “duped” by the husband, as much as the wife and other persons – not that such was the “only available” inference.
Nowhere did I say that the wife “must” establish fraud by A Winter for there to be a costs order: 4 March 2001, at the parts referred to, and 15 June 2011, T9/1-10.
Thirdly, it is said that I said on 15 June that when the importance of the matter was brought home to A Winter, he appeared voluntarily at the trial with legal representation and made full disclosure of the March 2008 share transfer to his mother. What I actually said on 15 June 2011 (T8/31-36) is:
He appeared at the trial; he briefed solicitors and counsel – once the importance of the matter was brought home to him, he and [J Winter] readily got on to [Ms JF] which provided the affidavit which was very helpful concerning the deed of family arrangement. There was full disclosure as to the transfer of the 1 million shares from [A Winter] to [J Winter] after the bank called up the guarantee. …
That is a correct statement. The disclosure was made via Ms JF.
It is not necessary in disposition of the matter to refer further to the submissions made by Mr Baston in his written submissions, supplementary submissions and oral submissions. It goes without saying that I have carefully considered all of them and none have found favour with me as being contrary to the determination I have made to dismiss the wife’s costs applications.
The order I will make is that the wife’s cost applications against A Winter are dismissed.
I certify that the preceding two hundred and nineteen (219) paragraphs are a true copy of the reasons for judgment of the Honourable Justice O’Reilly.
Associate:
Date: 5 September 2011
Addendum to reasons for judgment concerning A Winter’s affidavit in the 2001 proceedings
Mr Baston annexed to his written submissions filed 17 June 2011 a copy of an affidavit by A Winter (2 pages) with no swearing date, no cover sheet and no file reference number. Although there is no cover sheet, the document is headed “Form 16 Affidavit”. The top of each page has a facsimile date “13/01/2004”.
A Winter’s affidavit filed in the 2008 proceedings, at par 1, refers to an affidavit by him in the 2001 proceedings as one which was “sent” “for filing in those proceedings” “on or about 13th January 2004”.
At the time of the hearing of the wife’s costs applications, 24 June 2011, the date of filing, if any, of A Winter’s affidavit in the 2001 proceedings was not available. The Court file in the 2001 proceedings was in archives. No request had been made to the Court for it to be available at the hearing.
Since delivery of the reasons for judgment on 27 June 2011, the Court file in relation to the 2001 proceedings was retrieved from archives, in order to ascertain the date of filing, if any, of A Winter’s affidavit in those proceedings.
There is no affidavit of A Winter on the file index.
However, there is an affidavit of the husband filed 23 February 2004 (folio 63) which, at par 16, refers to and annexes as part of Annexure H a copy of the same two paged affidavit as is annexed to Mr Baston’s written submissions, including the facsimile date at the top of each page “13/01/2004”. Paragraph 16 provides:
16. …Annexed and marked with the letter “H” is a copy of the Affidavit of the Director of [A] and my tax returns for the years 1997 to 2002 together with a letter of my solicitors dated 12 December 2003 explaining in detail that the alleged wealth does not exist and the respondent’s perceptions that I have access to large quantities of money either directly or by way of financial resources is without foundation.
There is a further affidavit of the husband filed 13 July 2004 (folio 82) which, at par 4, refers to and annexes as Annexure A a copy of the same two paged affidavit of A Winter including the facsimile date at the top of each page “13/01/2004”. Paragraph 4 provides:
4.I am a director of [A Capital Limited]. It is a New Zealand based investment company. I do not own any shares in this company. My brother, [A Winter], is the other director and sole shareholder. I am employed by the company. Annexed and marked with the letter “A” is a copy of an affidavit sworn by [A Winter] setting out my involvement in the company. A copy of this affidavit had been provided to the applicant previously in these proceedings and is further an annexure to my affidavit sworn 20 February 2004 and filed 23 February 2004. I do not hold any other beneficial or controlling interest in this company.
The husband’s affidavit filed 23 February 2004 appears to be his trial affidavit.
His affidavit filed 13 July 2004 however was in relation to an application by the wife in a Form 8A response (folio 69A) filed 25 March 2004 for “further and better discovery” by the husband and for “third party discovery” against four companies namely V Inc, V Pty Ltd, A Capital Ltd and SP Company Pty Ltd. The wife’s application was not directed to A Winter. Nor was he a respondent to it. On 6 April 2004 Smith JR had made an order for third party discovery by those four companies. On 29 June 2004 the wife had filed an application in a case (folio 80) seeking an order against the husband:
1.That in the event the Husband, as Director, fails to comply with the Orders made by Judicial Registrar Smith on 6 April 2004, the substantive Hearing of this matter be heard on an undefended basis.
The husband’s affidavit filed on 13 July 2004, as I have said, referred back to his earlier affidavit filed 23 February 2004 in relation to the annexure of A Winter’s affidavit, and re-annexed it.
On 13 July 2004, May J dismissed the wife’s application in a case filed 29 June 2004. By reasons for judgment delivered on the same date her Honour observed:
6.What must be understood at the outset is that no order was made at that time or since compelling the husband to comply with these orders of 6 April 2004.
…
10.… None of this changes what is well understood as to the capacity of a party to provide documents being those held by a company. Merely because the husband is a director of these companies does not of itself demonstrate that he has necessary possession, custody, power or control, to provide these documents. (emphasis added)
None of this changes my determination.
In context, it is a mere procedural anomaly that A Winter’s affidavit was annexed to the husband’s two affidavits in the 2001 proceedings and not independently filed.
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