XU & PHAK

[2019] FamCA 83

FAMILY COURT OF AUSTRALIA

XU & PHAK [2019] FamCA 83

FAMILY LAW – PROPERTY – substantive proceedings alteration of property interests – interim property settlement.

FAMILY LAW – JURISDICTION – whether appropriate to make partial order.

FAMILY LAW – DISCOVERY – duty of full and frank disclosure owed to the Court and other party.

FAMILY LAW – COSTS – relevant consideration – wife ordered to pay husband’s costs on party/party basis

Family Law Act 1975 (Cth)
Evidence Act 1995 (Cth)
Family Law Rules 2004 (Cth)

Strahan & Strahan [2009] FamCAFC 166
Harris and Harris (1993) FLC 92 378

APPLICANT: Mr Xu

RESPONDENT: Ms Phak

FILE NUMBER: MLC 9662 of 2012

DATE DELIVERED: 1 February 2019

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Bennett J

HEARING DATE: 1 February 2019

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Sim, Solicitor

SOLICITOR FOR THE APPLICANT: Oakfair Lawyers

COUNSEL FOR THE RESPONDENT: In Person

SOLICITOR FOR THE RESPONDENT:

Orders

IT IS ORDERED THAT

1. Within 7 days the wife do all acts and things necessary to withdraw her caveat lodged for registration with Certificate of Title to the property located at DD Street, Suburb EE, in the State of Victoria in dealing number ...

2. In the event that the wife refuses or neglects to do any act or thing to sign the caveat or do all acts and things necessary to enable the practitioners for the husband to lodge a withdrawal of caveat in registrable form, pursuant to s. 106A of the Family Law Act 1975, the Registrar of the Family Court of Australia at Melbourne be and is hereby authorised to sign such document and to direct such things to be done in the name of the wife and it shall be sufficient evidence of non-compliance by the wife with execution of documents of this Order for there to be a narrative affidavit sworn by the solicitor with conduct of the matter on behalf of the husband to that effect.

3. There be liberty to apply in the event that the withdrawal of caveat is not a document that a Registrar of the Family Court can sign in the place of the wife.

4. The husband be at liberty to forthwith do all acts and things necessary to sell the property at DD Street, Suburb EE in the State of Victoria and upon he having sole conduct of the sale including but not limited to selling agent, conveyancer, mode of sale and setting the sale/reserve price. 

5. Upon completion of the sale, the sale proceeds be applied as follows:

   (a)       First, to pay all costs, commissions and expenses of the sale;

   (b)       To discharge any encumbrances affecting the real property sold;

   (c)       To pay the husband’s outstanding legal costs in the sum of not more than $160,000; and

   (d)       The balance, if any, to be retained by the husband’s solicitors in an interest bearing trust account pending further order of the Court.

6. The monies received by the husband as the net proceeds of sale of the property at DD Street, Suburb EE be and are hereby an interim property settlement made in his favour with the amount so received to be credited against his final entitlement on a dollar for dollar basis.

7. Paragraph 8 of the husband’s Application in a Case filed 3 December 2018 in relation to discovery be dismissed.

8. Paragraph 2 of the orders sought by the wife in her Response to an Application in a Case filed 7 December 2018 in relation to discovery be dismissed.

9. This matter be placed in the list of cases awaiting allocation to a judicial docket.

10. The husband’s costs of and incidental to his application be paid by the wife in accordance with Schedule 3 of the Family Law Rules 2004 and calculated on a party / party basis.

11. For case management purposes, this matter is listed on 13 February 2019 before Docket Registrar George at 9.30 am.

IT IS DIRECTED:

1. That my reasons for decision this day be transcribed and when settled placed on the Court file and a copy provided to the parties.

2. The evidence of the wife given this day be transcribed and placed on the Court file.

Note: The form of the order is subject to the entry of the order in the Court’s records.

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

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 9662 of 2012

Mr Xu

Applicant

And

Ms Phak

Respondent

EX TEMPORE REASONS FOR JUDGMENT

Introduction

1. This matter comes before me on the husband’s application filed 3 December 2018, in which he seeks orders for;

   ·          interim property settlement;

   ·          discovery;

   ·          allocation of a final hearing date -

   and the wife’s response thereto.

2. The husband seeks inter alia that the real property at DD Street, Suburb EE, in Victoria, be sold, and that the proceeds of sale be applied, first to pay the costs, expenses and commissions on the sale;  second, to discharge any encumbrance affecting the real property which I understand may not be any encumbrance;  and third, to “pay the husband’s outstanding legal costs of about $160,000”; and the balance (if any) to be retained in the husband’s solicitor’s trust account for the husband’s sole use and benefit.  Ancillary to the application for sale of the property at DD Street, Suburb EE, the husband seeks that the wife immediately withdraw a caveat that she has lodged against the certificate of title to the said property.  

3. The husband also seeks that until the wife complies with the discovery in relation to receipt by her of $357,000, she be prohibited from seeking further discovery from the husband.  The husband seeks that the matter be listed for final hearing.

4. The wife’s response is filed on 7 December 2019 and seeks a dismissal of the husband’s application in a case filed 3 December 2008 and “discovery orders I seek in my affidavit herewith (38 – 39)”.

5. These interim applications were first returnable on 12 December 2018 before Registrar George who ordered that the parties exchange financial documents and that each provide evidence to the other of receipt and disbursal of funds.  It was ordered that “either party may request an explanation and/or evidence in relation to specific deposits/withdrawals from bank accounts in the name or control of the other each was to provide that evidence and/or explanation within 14 days of the request. 

6. The husband’s application in a case and the wife’s response was listed to this judicial duty list by Registrar George.

Interim property settlement

1. The principles to be applied in an application for interim property settlement were articulated in Strahan & Strahan [2009] FamCAFC 166 (“Strahan’s case”).  There are two steps.

2. First, the Court must be satisfied of jurisdiction.  I am satisfied that the Court has jurisdiction to make orders for alteration of property interests because the binding financial agreement, which extinguished the Court’s jurisdiction, has been set aside and the jurisdiction is, thereby, revived.

3. Second, I must consider relevant factors under s. 79 of the Family Law Act 1975 (Cth) (“the Act”). In this respect, the overarching consideration is the interests of justice. All that is required is that the parties’ circumstances render it appropriate to exercise the power. The discretion is wide and unfettered but regard should be had to the fact that the usual order pursuant to s. 79 is a “once and for all” order made after a final hearing (per Boland and O’Ryan JJ in Strahan’s case [132] supra).

4. The “once and for all” power may, however, be exercised by a succession of orders until all property interests in respect of which an order could be made are exhausted (Strahan’s case [113] supra).

5. Where circumstances arise before a final hearing in respect of which justice dictates that a property order be made before a final hearing, an interim order can be made. Any such interim order may subsequently be adjusted for or against as part of the final exercise of the court’s power under s. 79.

6. Here, the husband as applicant bears the onus of demonstrating that the circumstances justify an exercise of the court’s discretion at this time and in the form he seeks it be exercised.  In Strahan’s case, Thackray J extracted a passage from the Full Court decision in Harris and Harris (1993) FLC 92 378 at paragraph [177]:-

   (3)Of necessity it is likely to be a somewhat imprecise exercise.  Consequently, it must be exercised conservatively and the Judge must be satisfied that the remaining property will be adequate to meet the legitimate expectations of both parties at the final hearing, or that the order which is contemplated is capable of being reversed or adjusted if it is subsequently considered necessary to do so…

   Thackray J went on to say at paragraph [266]:-

   [226] In my view, the two step approach advocated by senior counsel for the Wife aptly encapsulates the way the Court should approach an application for interim property settlement. The Court must first identify circumstances that make it appropriate to give consideration to exercising its power to make an interim order. It is at this stage that the Court has regard to the policy consideration that it is generally in the interest of the parties and the Court for there to be only one exercise of the s 79 power. However, once the Court has determined that the interests of justice require it to exercise the power, the conditions on which the power is to be exercised are governed only by the obligation to make an order that is “appropriate” and to ensure that the proposed order is “just and equitable” by reference to the matters set out in s 79(4).

7. This matter has a very involved and unusual history. 

8. The substantive application is for alteration of property interests pursuant to s. 79 of the Act the parties having entered into a binding financial agreement in 2012 which was set aside in 2015 after a contested hearing.

9. It is the husband’s case that is “appropriate” within the meaning of s. 79, for the court to give consideration to exercising its power to make an interim order to put him in funds which will enable him to continue to retain lawyers in this case.

10. It is a case peppered with non-disclosure, fraud and very high lack of trust.  Nonetheless, there are certain matters that appear to be common ground. They are:-

    a)In the wife’s affidavit sworn or affirmed on 3 October 2017 [20] she deposes to the parties or either of them, or entities controlled by them, own some 13 properties with a value of $6,239,500. 

    b)Only two of the properties described by the wife have been disposed of since her affidavit was sworn.  They are the property at X Street, Suburb W, which was included in the list at $495,000, and the real property at Z Street, Suburb AA, the value of which is included in the list at $430,000.  Both of those properties stood in the name of the husband.  

    c)Both properties were subject to mortgages registered in favour of Westpac Banking Corporation and when the husband sold those properties all net proceeds were remitted to Westpac Banking Corporation. 

11. I am satisfied that the other 11 properties remain in the names of the parties or either of them or under their control.  The property at DD Street, Suburb EE, is one of those properties.  The agreed value deposed to by the wife as at 3 October 2017 was $167,000.  I have earlier today been informed that TT Valuers had valued the property at some stage at $175,000, but I don’t see that anything turns on the discrepancy.

12. The parties have articulated the relief they seek by way of final property orders.  The wife did so in her application filed on 3 October 2017.  Under final orders sought the wife seeks to retain the property at B Street, Suburb T in specie.  A reading of paragraph 7 and 8 of the application indicates that the parties will otherwise retain all property of which they currently and then stand possessed.  Therefore, on the wife’s application for final orders, the husband would retain the property he now seeks be sold.

13. In the husband’s response to the initiating application filed on 17 October 2017, he makes clear in paragraph 1(d) that he seeks to retain to the exclusion of the wife the property at DD Street, Suburb EE. 

14. The wife does not contend that the husband’s eventual entitlement to an alteration of property interests will not comfortably exceed the value of the property he seeks by way of interim property settlement. The wife deposes in her affidavit made 3 October 2017 that she and the husband purchased 15 real properties during the course of the marriage.  Under the headings “Contributions during the marriage and Contributions generally” the wife deposes [77] that she and the husband made direct and indirect contributions to the acquisition, improvement and preservation of matrimonial assets and to general family expenses.  These contributions included their respective pre-marriage savings, income earned from employment, home duties and caring for the children.  The wife deposes [86] to her contributions post separation being superior to those of the husband in that she has solely supported their daughter  and paid for utilities and outgoings on the former matrimonial home.

15. The husband deposes in his affidavit in support of the application, affirmed on 30 November 2018, that originally his lawyers, Oakfair Lawyers, agreed that they would wait until the end of the property proceedings to render an account and require payment of his legal costs. He deposes at paragraph 4 that that was on the basis of the final hearing being concluded in October 2017. It was not. Indeed, in November 2018 there was a further defended hearing of an application by the husband which failed. Alteration of property interests pursuant to s. 79 of the Act is not resolved and the proceedings are very far from over.

16. The husband asserts that he has a liability for legal costs which is pressing and must be paid.  It is necessary for me to be satisfied as to quantum and liability.

17. The first is the quantum.  The husband deposes to a figure but does not provide details.  I would have expected that there would be a costs agreement attached to the affidavit and some correspondence evidencing demand for payment.  Instead, I was referred to an affidavit sworn by the husband, or affirmed on 5 July 2018. At paragraphs [79] to [85] of the husband’s affidavit sworn on 5 July 2018, he deposes to unpaid legal costs incurred between February 2016 and June 2018 in the sum of $157,986.27 [paragraph 84]  These costs represent only a portion of the husband’s legal costs.  For instance, they do not include the costs incurred by the husband for a hearing before Cronin J on 7 November 2018. 

18. I am satisfied that the costs which the husband claims have been incurred on his behalf and owing to his solicitors would be not less than the amount claimed by him.

19. The second aspect is whether the arrangement which the husband had with his solicitors in July 2018, to ‘pay at the end’, subsists.  In paragraph 84 of his affidavit made 5 July 2018, the husband states that his solicitors have a continuing sympathetic approach to his circumstances.  However, in his most recent affidavit (sworn 30 November 2018), the husband deposes that that arrangement no longer subsists.  He deposes [5] that his barrister, whom he identifies, has threatened to issue proceedings to recover unpaid fees.  That statement is hearsay, but this is an interlocutory application in which hearsay evidence is admissible by virtue of s. 75 of the Evidence Act 1995 (Cth).

20. The wife, on the other hand, disputes that the husband’s solicitors will cease to act for him or that there is any urgency about them receiving payment.  The wife referred to the husband being represented at court today by a lawyer from the very firm he says will not act for him unless they are paid.  That speculation does not sit comfortably with me.  There is a consistency about the husband being represented by the firm that wants him to recover the fees that he owes them.

21. Given that unpaid costs stretch back to February 2016, I am reasonably satisfied that his solicitors will not continue to act in this matter without some payment, particularly when there are unencumbered properties available to be liquidated by the parties or either of them. 

22. I asked the wife why and how she would be prejudiced in the event that the property at 117 DD Street, Suburb EE was sold and the proceeds used by the husband.  On a number of occasions she referred to the fact that the husband had already sold the properties at Z Street, Suburb AA, and X Street, Suburb W.  She refers to the pool of assets divisible between them thereby being “diminished” and “compromised.”  She submitted that she does not want the asset pool to be “further compromised” by selling the property at DD Street, Suburb EE.  I have difficulty with the wife’s reasoning.  The wife agrees that the total net proceeds of sale of both properties was paid to Westpac Banking Corporation.  Therefore, the sale of those properties appear to me to have been asset neutral transactions in that the parties are still entitled to the same amount of net property that they were entitled to prior to the sales. 

23. I do not understand how the property interests of the husband and wife were “compromised” or “diminished” by the realisation of property to retire debt.  However, I do recognise that the husband’s now seeks that an asset standing in his name be sold to meet liabilities which are solely his liabilities.  He does so on the basis that this will form part of his entitlement on a final alteration of property interests.

24. The wife also submitted that there are other liabilities or expenses that the husband should be paying before he pays legal costs.  If that was an outcome that the wife sought in the interests of justice and as an appropriate interim settlement, the wife should have formally sought orders for those payments to be made instead of merely opposing the husband’s application for an interim sale of the property.

25. I am not satisfied that the wife will sustain any prejudice by virtue of the property at DD Street, Suburb EE being sold, as the husband proposes.

26. As to the husband’s need for the relief he seeks, I have had the benefit of perusing the reasons for decision of Cronin J delivered on 7 November 2018.  Those reasons make apparent that there are significant allegations of non-disclosure and fraud in this matter.  The wife remains unwilling to disclose some details of her property situation or incidental information such as the name, address and telephone number of the financial adviser who she has variously said today is either RR or the person who operates an account called RR.  I will discuss principles of full and frank disclosure later in these reasons. Within the context of an appropriate use by the court of the power to award an interim settlement of property, in my assessment the substantive applications bear all the hallmarks of a difficult case in which a party who seeks representation should, all things being equal, be given the opportunity to retain representation.

27. I am satisfied that it is appropriate within the meaning of s. 79 to release what is in the scheme of things a relatively small amount of property to the husband on the basis that it be taken into account as an interim property settlement and will be treated as moneys received by him on account of his eventual entitlement. Accordingly, I will accede to the application of the husband that he be able to sell the property at DD Street, Suburb EE.

28. The Suburb EE property stands in the name of the husband.  The only impediment to him contracting to sell is that the wife has lodged a caveat on the certificate of title to the property on or about 16 July 2014.  I will require the wife to remove the caveat within seven days.  If the caveat is not removed by the wife, as I now order it be removed, then a Registrar of this Court will be empowered to sign such documents as are necessary for the withdrawal of caveat to be perfected an to sign in the wife’s place.  There is some suggestion that caveats are now withdrawn by electronic means rather than by requiring the execution of an instrument which is lodged for registration.  If that is the case the parties have liberty to apply for further or other orders to facilitate the withdrawal of the caveat. 

Discovery

1. The husband seeks that until the wife complies with orders relating to discovery of an amount of $357,000 “she be prohibited from seeking further discovery from the husband.”  It is, with respect, an ill-founded application and one to which I will not accede.  I have heard evidence from the wife which satisfies me that, at least at this juncture, the wife is not making adequate or proper disclosure and that she is refusing to do so.  There will be a transcript of evidence given by the wife this day.

2. I expect that the wife’s non-disclosure will be the subject of some other application, potentially contravention or contempt, in due course but consideration of contravention or contempt is for another day and perhaps another judge.  For today’s purposes, suffice it is to say that non-compliance by the wife with her obligation to make full and frank disclosure does not entitle the husband to be relieved from his obligation to make full and frank disclosure.

3. I will dismiss paragraph 8 of the husband’s application.  However, given the wife’s entrenched refusal to reveal information about the $357,000 and “PJK”, I want to say something about the parties’ obligations to make full and frank disclosure, in particular, those aspects of which the parties appear not to be aware or, at the very least, are failing to observe in this proceeding.

4. Jurisdictions differ on the extent of a party’s obligation to disclose as they do on the consequences of a failure to disclose.  In general terms there is a stark difference between civil jurisdictions and common law jurisdictions.

5. The position in Australia finds expression in Part 13.1 of the Family Law Rules 2004 (Cth) (“FLR”). Relevantly, r.13.01(1) provides that:

   […] each party to a case has a duty to the court and to each other party to give full and frank disclosure of all information relevant to the case, in a timely manner.

   NOTE: Failure to comply with the duty may result in the court excluding evidence that is not disclosed or imposing a consequence, including punishment for contempt of court.  This chapter sets out a number of ways that a party is either required, or can be called upon, to discharge the party’s duty of disclosure, including:

   (a)disclosure of financial circumstances (see Division 13.1.2);

   (b)disclosure and production of documents (see Division 13.2.1); and

   (c)disclosure by answering specific questions in certain circumstances (see Part 13.3).

6. Notably, the duty to give full and frank disclosure of relevant information is owed by a party to the other party to the litigation and to the court. 

7. The consequences of a failure to make full and frank disclosure can be severe.  

8. The ways to compel disclosure, as listed in r.13.01(1), do not exhaust the means by which the husband and wife are required to divulge information.  Another measure is an order of the court such as the Order made by Registrar George and referred to above.

9. A party’s duty to make full and frank disclosure inures independently of a financial statement or compliance with a specific order.  No doubt the extensive nature of the duty of disclosure was adumbrated in the proceedings before Cronin J in October 2017 which dealt largely allegations of fraud by non-disclosure.  At paragraph 7 of his Honour’s reasons for decision, his Honour observes “despite her protestations to the contrary, I find the wife misled the Court and, more importantly, misled the husband.  I find that her conduct was fraudulent […]”.

10. Rule 13.01(2) provides that the duty of disclosure “starts with the pre-action procedure for a case and continues until the case is finalised.”  There is no doubt that both parties are subject to a duty, to each other and to the court, to make full and frank disclosure.  It would be wholly inappropriate for the husband to be relieved of his duty of full and frank disclosure on the basis that the wife is non-compliant, hence his application in this regard has been dismissed.  

11. The wife applies for “discovery orders I seek in my affidavit (38-39)”.  Paragraphs 38 and 39 run for some four pages and paragraph 38 has 18 subparagraphs.  The description of documents, if it be a description at all, is at times inflammatory and argumentative.  For instance:

    ·“8:  all proof and evidence reconciling his fraudulent retention and dissipation of $326,000 on settlement of the now set-aside BFA.” 

    ·“11:  all proof and evidence reconciling is $90,000 gift to his mother which to date he has refused to provide and which constitutes material non-disclosure.” 

    ·“15:  all travel/movement records from the Department of Immigration, now called Home Affairs, since 2005 which to date he has refused to disclose.” 

12. It is not a request with which the husband can reasonably be expected to comply.  The wife is being argumentative.  If the husband were to produce documents, I anticipate that the mother would contend that he was thereby accepting the accuracy of the inflammatory accusations embedded in her description of documents.

13. At such time as the wife puts her request for discovery of documents or disclosure of documents in a proper form the court will consider what order ought to be made. I am not prepared to grant the relief that she seeks in its current form.  I dismiss her response. 

14. The result is that the application of each party in relation to discovery, is dismissed.

Future conduct of the case

1. The husband seeks that this matter be listed for a final hearing.  It appears that this is a matter has not been placed in a judicial docket.  This matter is not going to get better with time.

2. Delay will produce fertile ground for more interim applications.

3. I will now place the substantive s.79 proceedings in the list of cases which are awaiting allocation to a judicial docket.

Costs

1. The husband applies for the wife to pay his costs of and incidental to his application filed on 3 December 2018. 

2. The general position, pursuant to s. 117(1) of the Act is that each party pay their own costs unless there are circumstances which justify one party paying the costs of the other party.

3. The wife has been wholly unsuccessful in opposing the husband’s application for a sale of this property and for the application of the proceeds of sale more or less as he sought in his application.  Both parties have been unsuccessful in the orders they sought in relation to discovery.  I am satisfied that there are circumstances which justify a costs order being made in this proceeding.  

4. When considering what order (if any) should be made under s. 117(2), I am directed to take into account the matters set out in s. 117(2A) of the Act. I took the wife through the enumerated factors.

5. In relation to financial circumstances of the parties, the wife commented that it was not so much whether or not she could pay.  She then referred to having some liabilities or having incurred some liabilities.  In any event, impecuniosity is not a defence to an application for costs nor does it provide an immunity for costs. 

6. I find that subparagraphs (c) and (d) have no application to the application for costs. 

7. Subparagraph (e) provides that I take into account any party to the proceedings has been wholly unsuccessful in the proceedings.  The wife submitted that she had a case to argue.  I agree but, in the result, she was wholly unsuccessful.  She sought only two orders and obtained neither.  I have regard to the wife’s lack of success and consider that s. 177(2A)(e) supports a costs order being made in favour of the husband.

8. I am informed, and it is not disputed, that the wife was advised in correspondence from the husband’s solicitors that, in the event that the husband’s application was successful, an application would be made for her to pay the husband’s costs. I consider that to be relevant in the context of s. 117(2A)(f) and accord it significant weight. The wife was forewarned. She proceeded with notice of a potential liability by her for costs.

9. The wife is not legally represented today.  She describes herself as “self-representing by choice” in paragraph 1 of her affidavit sworn 7 December 2018.  I consider it relevant that the wife has not incurred the cost of legal representation to appear today and take that into account pursuant to s. 117(2A)(g).  In contrast, the husband has paid to be represented.   

10. In all the circumstances, I am satisfied that the wife should pay the husband’s costs of and incidental to this day.

11. As to quantum of costs, they should be limited to those which are prescribed in Schedule 3 to the FLR under the Scale of Costs. That is, not costs pursuant to any costs agreement or costs on an indemnity basis or solicitor/own client costs. I mean party/party costs drawn on scale.

12. Regrettably, the practitioner who appears on behalf of the husband is unable to give me an estimate of the quantum of costs drawn in accordance with Schedule 3 to the FLR. If she had been able to do so I would have been inclined to fix the amount of any costs to be paid. Fixing costs would have saved the parties considerable time (and money), and the Court considerable resources, in not having to assess the quantum of costs. The parties will now have to follow the assessment process. That process is costly in itself and, ultimately, one or other party may be held by the Registrar to be liable for the other party’s costs associated with the assessment of costs.

I certify that the preceding sixty-three (63) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Bennett delivered on 1 February 2019.

Legal Associate: 

Date:  22 February 2019