Yum and Wen

[2011] FamCA 591

FAMILY COURT OF AUSTRALIA

YUM & WEN [2011] FamCA 591

FAMILY LAW – COSTS – considering the relative financial position of the parties after s 79 order – where after the decision on costs had been reserved the husband became a bankrupt – where there had been non disclosure by the husband – where the wife had joined four other respondents against whom she had been wholly unsuccessful – no order for costs as between the wife and the husband.

Bankruptcy Act 1966 (Cth)

Family Law Act 1975 (Cth)

D & D (Costs) (No. 2) [2010] Fam CAFC 64; (2010) FLC 93-435

Penfold v Penfold (1980) FLC 90-800

APPLICANT: Ms Yum

RESPONDENT: Mr Wen

FILE NUMBER: SYF 3985 of 2005

DATE DELIVERED: 27 July 2011

PLACE DELIVERED: Cairns

PLACE HEARD: Sydney

JUDGMENT OF: Watts J

HEARING DATE: 28 January 2011

WRITTEN SUBMISSION RECEIVED 9 March 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Jamieson

SOLICITOR FOR THE APPLICANT: Di Lizio & Associates

COUNSEL FOR THE RESPONDENT: Mr Dura

SOLICITOR FOR THE RESPONDENT: Marando Solicitors

Orders

1. The wife’s application for costs is dismissed.

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

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FAMILY COURT OF AUSTRALIA AT CAIRNS

FILE NUMBER: SYF 3985 of 2005

Ms Yum 

Applicant

And

Mr Wen

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

1. This is a cost application made by a wife against a husband following the conclusion of a contested matter between them relating to the alteration of their property.

2. The history of the litigation involved four other respondents (apart from the husband). The proceedings against the 2^nd and 3^rd respondents were abandoned by the wife prior to the final stage of the hearing. At the commencement of the final hearing, the wife pressed her application for a declaration that the 4^th and 5^th respondents held property on trust for the husband.

3. The hearing took place over five days. The first three days of the hearing focused upon the wife’s claim against the 4^th and 5^th respondents. She was wholly unsuccessful in that claim.

4. The wife seeks a general cost order against the husband on an indemnity basis and in the alternative, on a party/party basis. Whilst it is not absolutely clear, it seems that the wife wishes that order to be made in relation to the entirety of the proceedings which were originally commenced by her in 2005.

5. On 7 June 2011 the court received a facsimile from the husband’s trustee in bankruptcy that the husband was made bankrupt on 13 April 2011 and which sought access to the file. The wife’s lawyers had no objection to the husband’s trustee in bankruptcy inspecting the file. Consequently, the husband’s trustees have been given the opportunity to inspect the court file but have not sought to have the costs hearing reopened. The interaction between cost orders against a party personally and the impact upon assets of a husband’s bankrupt estate pursuant to the provisions of the Bankruptcy Act 1966 (Cth) (“BA”) is discussed by the Full Court in D & D (Costs) (No. 2) [2010] FamCAFC 64; (2010) FLC 93-435 particularly at paragraph 67.

6. Section 58 BA provides a general rule for the vesting of a party’s property upon bankruptcy in the Official Trustee. Section 59A provides that s 58 BA has effect subject to an order under Part VIII Family Law Act 1975. The orders that I made on 30 November 2010 do not affect the provisions of s 58 BA in any way.

7. The effect of a cost order against the husband would be that the wife would become one of the creditors in the husband’s bankruptcy. Under one of the orders I made (order 7), the wife was to pay the husband $19,129 and she has an obligation to pay the husband’s trustee that amount. On the other hand, it is arguable that the wife would not necessarily get one dollar in the dollar for any costs order that was made in her favour.

8. In the end however, as will become clear in this matter, the husband’s creditors will not need to be worried by any cost order against the husband in the wife’s favour. 

DOCUMENTS RELIED UPON

1. The wife relies upon:

   9.1.Application in a Case dated 22 December 2010;

   9.2.Affidavit of Mario Fiorenzo Di Lizio dated 22 December 2010. This affidavit simply annexes a detailed account by the solicitor for the wife of work done pursuant to a costs agreement dated 26 July 2005 and a copy of that cost agreement;

   9.3.Written submissions dated 28 February 2011 and received 27 February 2011; and

   9.4.My Reasons for Judgment dated 30 November 2010.

2. The husband relies on his submissions in reply dated 9 March 2011 and received that day. Those submissions also refer to my Reasons for Judgment dated 30 November 2010.

THE LAW TO BE APPLIED

1. Section 117(1) Family Law Act 1975 (Cth) (“FLA”) provides that each party to proceedings under the FLA shall bear their own costs. Section 117(2) FLA provides that if the court is of the opinion there are circumstances that justify it in doing so, the court may make such order as to costs as the court considers just. In considering what cost order is to be made, I must have regard to the matters set out in s 117(2A) FLA.

CONSIDERATIONS

1. Neither party is the recipient of legal aid. Neither party has been wholly unsuccessful. Neither party relies upon any written offer that has been made.

2. As is clear from paragraph 205 of my Reasons for Judgment dated 30 November 2010, the division of assets between the parties was as to 72.5 percent to the wife and 27.5 percent to the husband.

3. However, on the evidence that I had before me, the husband had expended monies that he had received from the sale of a motor vehicle; the proceeds of withdrawals from various accounts after separation and monies that he had after separation as a result of the transfer of stock and equipment from the M Street, B Town business. Counsel for the husband submitted that the only “real” assets on the distribution table that came to the husband as a result of the final orders had a combined value of $19,129.

4. On the other hand, the wife received two pieces of real estate and other assets with a value of $620,000. It was only the add back of monies she received after separation (which was an amount of $446,500 at item 14 on the balance sheet) which was not a current concrete asset in her hands. A not insignificant proportion of those monies, I would infer, were paid to her lawyers as a result of their work in these proceedings (the wife’s lawyer’s affidavit in this application indicated the overall fees to be in the order of $192,000).

5. The wife submits that the Court is unable to ‘make a firm conclusion’ about the financial circumstances of the husband, given the failure of the husband to adequately explain his financial position to the court, which resulted in a percentage adjustment against the husband as a result of his apparent non-disclosure.

6. Whilst there is some force in that submission, there is likely to be a disparity of net assets between the parties in the wife’s favour as a result of the division of assets produced by the orders that I have made.

7. In relation to the earning capacities of each of the parties, the husband asserted in the hearing that he earned $60 per week income and $170 in sickness benefits. I found in the hearing that the husband was working but I was unable to reach any conclusion as to what was his level of income. The wife on the other hand had no significant earning capacity and still had all five children living at home.

8. The wife relied upon the conduct of the parties in relation to the proceedings. The wife asserted that there had been a failure to give proper disclosure which necessitated the seeking of orders by the wife prior to the hearing. No detail was given in respect of this assertion and there was no evidence in the affidavit upon which the wife relied in this application which could underpin that submission or make it clear to me the extent of the conduct that was being alleged.

9. It is true in my reasons I made significant findings against the husband. When dealing with the husband’s credit I found he was a very unreliable witness and gave inconsistent evidence on a number of occasions during the final hearing. I deal with those matters in paragraphs 20 to 30 of my reasons of 30 November 2010. On the other hand, I generally (there were some exceptions), found the wife to be a reliable witness and unless I indicated otherwise, preferred the wife’s evidence over the husband’s.

10. In relation to financial matters, there were parts of the husband’s financial statement that were inaccurate. I was left to wonder about the true nature of the husband’s business interests and his current hours of employment and income. My concerns in respect of those matters are set out in paragraphs 198 to 201 of my reasons dated 30 November 2010 and they led to me making an adjustment against the husband.

11. By way of a balancing consideration, the wife’s conduct in the litigation left a lot to be desired. At paragraphs 116 to 153 (inclusive) of the reasons, the wife’s application against the 4^th and 5^th respondents is outlined. That part of the application consumed the majority of the hearing. The evidence in relation to the wife’s application against the 4^th and 5^th respondents concluded on the third day of the hearing and that application was ultimately dismissed.

12. In addition, I have outlined in my reasons (at paragraphs 120 to 124) the paucity of evidence that the wife had to pursue her application against the 4^th and 5^th respondents.

13. Further, throughout the history of the litigation, the wife made various applications regarding the 2^nd and 3^rd respondents, only to eventually concede that those parties should be released from the proceedings with no order being made against them.

14. I do not intend to detail the course of the proceedings from September 2005 to finality involving the 2^nd, 3^rd, 4^th and 5^th respondents given that the wife has not attempted to outline failures by the husband throughout the course of the proceedings. A number of events occurred as a result of those parties being joined by the wife and costs were incurred by the husband in being involved in events which turned out to be futile.

15. It is alleged against the husband that he had not disclosed, at an appropriate time, that he had remarried the 4^th respondent. Counsel for the wife submits that:

    This court should make an order for costs against the husband so that a clear message is sent out by this court that non disclosure of marriage to a new party and non disclosure of financial information will not be tolerated.

16. It is clear that the non disclosure of information may be a circumstance which justifies an order for costs (see for example Penfold v Penfold (1980) FLC 90-800). I also accept the wife was put to some expense in attempting to obtain information about the husband’s financial position in which the husband was not willing to volunteer.

17. However, at the end of the day, I balance that conduct by the husband against the husband incurring the costs of being involved in the expansion by the wife of the wholly unsuccessful litigation against the 2^nd, 3^rd, 4^th and 5^th respondents in the proceedings. I also take into account what I have said about the parties’ current financial circumstances.

18. This is not a case where a costs order is appropriate and I accordingly dismiss the wife’s application.

I certify that the preceding twenty-nine (29) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts delivered on 27 July 2011.

Associate.

Date:  27.7.2011