Zane & Allan
[2008] FamCAFC 115
•31 July 2008
FAMILY COURT OF AUSTRALIA
| ZANE & ALLAN | [2008] FamCAFC 115 |
| FAMILY LAW – LEAVE TO APPEAL – Leave granted to appeal against Orders made by a judge that the final hearing be heard on an undefended basis FAMILY LAW – APPEAL – UNDEFENDED HEARING – Whether the trial judge erred in making Orders allowing a final property settlement hearing to be heard on an undefended basis FAMILY LAW - APPEAL – HELD (per Finn and Thackray JJ, May J dissenting) that the appeal be allowed – Orders allowing undefended hearing set aside – Respondent wife’s property settlement application remitted for rehearing FAMILY LAW - COSTS – Cost certificate for the appellant pursuant to s 9 of the Federal Proceedings (Costs) Act 1981 - Cost certificate for the respondent pursuant to s 6 of the Federal Proceedings (Costs) Act 1981 – Cost certificate for appellant and respondent pursuant to s 8 of the Federal Proceedings (Costs) Act 1981 |
| Family Law Act 1975 (Cth) Family Law Rules 2004 - Rule 11.02(2)(c) Federal Proceedings (Costs) Act 1981 |
| Abbott and Abbott (1995) FLC 92-582 |
| APPELLANT: | MR ZANE |
| RESPONDENT: | MRS ALLAN |
| FILE NUMBER: | SYF | 6790 | of | 2000 |
| APPEAL NUMBER: | EA | 98 | of | 2005 |
| EA | 58 | of | 2006 |
| DATE DELIVERED: | 31 July 2008 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Finn, May, Thackray JJ |
| HEARING DATE: | 28 June 2007 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 16 August 2005 & 11 April 2006 |
| LOWER COURT MNC: | [2005] FamCA 905 [2006] FamCA 285 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Broun QC |
| SOLICITOR FOR THE APPELLANT: | Luminous Legal |
| COUNSEL FOR THE RESPONDENT: | Mr Lloyd |
| SOLICITOR FOR THE RESPONDENT: | Paul & Paul Lawyers |
Orders
(1)That the application for leave to appeal the order made on 16 August 2005 that the matter be set down for hearing as an undefended final hearing for one day as soon as possible (“the order for an undefended hearing”) be granted.
(2)That the appeal against the order for an undefended hearing made on 16 August 2005 be allowed.
(3)That the order for an undefended hearing made on 16 August 2005 be set aside.
(4)That the appeal against the orders made on 11 April 2006 be allowed.
(5)That the orders made on 11April 2006 be set aside.
(6)That the application for property settlement filed by the wife on 1 September 2000 be remitted for hearing by a judge other than the Honourable Justice Le Poer Trench.
(7)That the Court grants to the appellant husband a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant husband in respect of the costs incurred by the appellant husband in relation to the appeal against the order for an undefended hearing made on 16 August 2005 and the appeal against the orders made on 11 April 2006.
(8)That the Court grants to the respondent wife a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent wife in respect of the costs incurred by the respondent wife in relation to the appeal against the order for an undefended hearing made on 16 August 2005 and the appeal against the orders made on 11 April 2006.
(9)That the Court grants to each party a costs certificate pursuant to the provisions of s 8 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to each party in respect of such part as the Attorney-General considers appropriate of any costs incurred by each party in relation to the new trial granted by these orders.
IT IS NOTED that publication of this judgment under the pseudonym Zane & Allan is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EA 98 of 2005
EA 58 of 2006
File Number: SYF 6790 of 2006
| MR ZANE |
Appellant
And
| MRS ALLAN |
Respondent
REASONS FOR JUDGMENT
Finn & Thackray JJ
By an application filed on 30 August 2005, the husband sought leave to appeal orders made by Le Poer Trench J on 16 August 2005 (in relation to which reasons for judgment were published on 16 September 2005). Those orders provided (inter alia) that an application which the wife had filed on 1 September 2000 for property settlement orders should “be set down for hearing as an undefended final hearing”.
On 29 and 30 November 2006 Le Poer Trench J heard the property settlement proceedings. He made orders and delivered reasons for judgment on 11 April 2006. His Honour explained in the second paragraph of his reasons that the wife had appeared at the hearing with her solicitor and counsel; that the husband had appeared through his solicitor and made an application for an adjournment which his Honour refused; that the husband’s solicitor advised his Honour that he would have someone from his office in court to observe what happened; but that the solicitor for the husband made no attempt to participate in the hearing nor did he make any other application.
His Honour further explained (at paragraphs 29 to 32 of his reasons) that his findings (and presumably his ultimate award) were based on the evidence set out in the affidavits relied on by the wife, on the wife’s oral evidence, on documents tendered at the hearing, and on “some of the husband’s affidavit evidence”.
On 5 July 2006 the husband was granted an extension of time by Boland J to file a notice of appeal against the orders for property settlement made by Le Poer Trench J on 11 April 2006. Such a notice of appeal was filed on behalf of the husband on 21 July 2006.
The husband’s appeal against the property settlement orders was heard by this Court at the same time as we heard the application for leave to appeal the orders made on 16 August 2005 which provided for the property settlement proceedings to be heard on an “undefended” basis. Argument in support of, and in opposition to, the application for leave to appeal was directed to the proposed grounds of appeal contained in a draft notice of appeal filed on 21 September 2005.
At the commencement of the hearing before this Court, there was an application made on behalf of the husband for an adjournment of the hearing because of the husband’s inability to attend due to ill health. That application was dismissed on the basis essentially that the husband’s appeal was to be argued by senior counsel; that in many cases in this Court where a party is legally represented at the hearing of an appeal, that party does not attend the hearing of the appeal in person; and no reason had been provided to us as to why it would be necessary in this case for the husband to be present at the hearing of the appeal.
The order of 16 August 2005 for an undefended hearing
It seems clear from his Honour’s reasons for judgment (published on 16 September 2005) in relation to the orders of 16 August 2005, that his order that the property settlement proceedings should be the subject of “an undefended final hearing” was made pursuant to the power contained in Rule 11.02(2)(c) of the Family Law Rules 2004 which provides:
If a party does not comply with these Rules, the Regulations or a procedural order, the court may:
…
(c) determine the case as if it were undefended
The expression “undefended” is not defined, or otherwise explained, in the Rules. However the Explanatory Guide to the Rules (which is expressly stated not to be part of the Rules) explains the term “undefended basis” in the following way:
… the court may order that a hearing or trial may proceed, because of the respondent’s failure to comply with a rule or order, as if a response has not been filed. The court may make orders set out in the application on being satisfied by evidence that the orders should be made.
The trial Judge’s understanding of the expression an undefended hearing
His Honour did not explain in his reasons for his orders of 16 August 2005 what he meant by an “undefended hearing”. His Honour had, however, foreshadowed what he contemplated in a notation to orders made on 18 October 2004. The notation was in the following terms (emphasis added):
In the event of the failure of the husband to comply with any of these Orders within the time provided by these Orders then the wife be at liberty to forthwith list the matter before me for the purpose of seeking that the application for final orders proceed on an undefended basis. NOTE The husband should be aware that if he does not comply with these orders the Court may conclude that he has decided to no longer participate in the proceedings. Further in the absence of compelling reasons for the failure to comply with these orders the Court may proceed, on the application of the wife, to finalise the proceedings in his absence.
We note that his Honour subsequently considered the meaning of an “undefended hearing” in the reasons he delivered for the substantive property settlement orders made on 11 April 2006. In those reasons his Honour said:
28. The following guidelines appear from the abovementioned cases and materials:-
(a) In an undefended case the Response becomes a nullity (Rules of Court)
(b) Where an Application has been struck out due to the default of a party to make a full frank and prompt disclosure of his/her financial affairs that party ought have no further right to be heard without order of the Court (Tate and Tate)
(c) In an undefended hearing the applicant has a duty to the Court to make full disclosure and deal with the Court in good faith (Krebs)
(d) In an undefended hearing the applicant must establish the case with admissible evidence (Tate)
(e) In an undefended hearing the trial Judge has the discretion to have regard only to the evidence of the party before the Court and not the affidavit evidence of the excluded party (Tate) [The converse of this being there must be a discretion to have regard to part or all of the affidavit evidence filed by the excluded party]
(f) The trial Judge in an undefended hearing may exercise a discretion to have regard to agreements reached between the parties prior to the hearing as to such matters as value of property where such agreements have been noted on the Court record or where there is admissible evidence establishing such agreement (Tate)
(g) Where a court does proceed to conduct a hearing as an undefended matter it is still bound by the same general requirements as to proof as in a defended matter. This does not mean that a court necessarily has to insist on detailed evidence, make elaborate findings and give reasoned decisions in undefended matters… Nevertheless it must be satisfied that the evidence supports its findings and orders.[1]
(h) Subject to matters of procedural fairness the trial judge may allow the remaining party in an undefended hearing to rely on affidavit material filed and served on the excluded party together with oral evidence and the tendering of documents to establish a case.[2]
(i) There is a wide discretion to be exercised by the trial Judge as to the extent of the involvement of the defaulting party in the undefended hearing. This discretion must be tempered with regard to procedural fairness, natural justice and the requirement to do justice to all of the parties. Each case will demand an individual assessment by the trial Judge as to the appropriate procedure to be adopted. In many cases the reasons giving rise to the determination that the case should proceed undefended will no doubt impact upon the decision of the trial Judge as to the method of hearing to be adopted. In many cases the trial Judge will have regard to the evidence of the remaining party only.
29. Given the circumstances outlined in my reasons for ordering the case to proceed undefended (I here incorporate my reasons delivered on the 16th September 2005) I am of the opinion that the husband has forfeited his right to have me read his affidavit evidence. In any event where his evidence was not corroborated I would be unable to accept it as there is no ability on the wife’s part to cross-exam[ine] him or his witnesses as they are not present.
30. I will have regard to the Court record in order to consider any agreements recorded for the purpose of the final hearing. I have also referred to some of the husbands’ evidence in the course of my reasons. The circumstances surrounding those references will appear in the context of the reference to that evidence.
31. At the commencement of the hearing the wife asked me to read the following documents.
(a) Affidavits sworn by the wife on 12th August 2004, 1st September 2004 (paragraphs 4, 5, 6, 7, 11 and 12), 16th September 2004 (paragraphs 2 to 8 and 11), 22nd March 2005, 3rd June 2005 (paragraphs 4 and 8), 13th July 2005, and 15th August 2005.
(b) Affidavit of [FX] sworn 29th October 2003
(c) Affidavit of [BJ] sworn 13th August 2004.
32. I have read all of those affidavits and my findings are based on the evidence set out therein, on the documents tendered in the hearing, reference to some of the husbands affidavit evidence or the matters of Court record referred to together with the wife’s oral evidence, unless I state otherwise.
i)[1] McMahon and McMahon (1976)FLC 90-128.
ii)[2] F and S (2005) FLC 93-208.
Given the view which we ultimately come to in relation to his Honour’s order for an undefended hearing, it is unnecessary that we express a view as to whether his Honour’s understanding of the expression “undefended” is or is not correct. The meaning of this expression was not a matter which was explored in any great depth before us. We thus proceed on the assumption (but without deciding) that the effect of an order that a hearing is to proceed “undefended” (made pursuant to Rule 11.02(2)) is that the hearing will proceed as described by his Honour in paragraphs 29 to 32 of his reasons of 11 April 2006. Put simply, this meant in this case that the husband would not be permitted to put his case in full. The question for us is whether in deciding to adopt this course his Honour’s discretion miscarried.
In order to determine if his Honour’s discretion miscarried in his application of Rule 11.02(2) as is asserted by the husband, it is necessary to consider the findings which his Honour made concerning the husband’s non-compliance with the Rules or procedural orders for the reason that such non-compliance would form the basis of the exercise of the power to order that proceedings are to be heard on an undefended basis.
In the first one hundred paragraphs of his reasons, his Honour set out the history of the proceedings from 1 September 2000 when the wife filed an application for property settlement up until 16 August 2005 when the order for the undefended hearing was made. However, for present purposes it is only necessary to refer, in addition to his Honour’s description of the asserted property of the parties, to his Honour’s findings regarding either non-compliance by the husband with the Rules or procedural orders, or matters which are apparently relevant to his final conclusion to proceed on an undefended basis.
The parties’ assertions as to their property
As to the asserted property of the parties, his Honour referred to the wife’s affidavit evidence in support of her initiating application (filed 1 September 2000) being that the parties are the only shareholders in and directors of the Australian company and the Hong Kong Company; that at the date of the swearing of the affidavit the Australian company had the sum of AUD$1,210,580 funds standing to its credit with the Bank of China; that the husband and wife were joint creditors of the company in the sum of $610,340.00 each. The wife also annexed to her affidavit the Balance Sheet for the company for 30 June 1999 which showed borrowings of $1,220,680.00 comprised of 2 loans: one loan to the husband of $610,340.00 and one loan to the wife of $610,340.00.
In this context of the parties’ property, his Honour stated that “(t)he former matrimonial home is in a suburb near Sydney… purchased in the husband’s sole name and … currently occupied by the wife”, and “unencumbered by any mortgage”, and that “at the date of separation the parties had 2 cars, namely a 1998 Mercedes Benz and a 1988 Honda”.
His Honour also referred to two affidavits sworn by the husband on 4 September 2000. In one affidavit the husband claimed the debt expressed in the 1999 Balance Sheet for the Australian company was not a debt owing to each of the parties but in fact a debt owing to the Hong Kong company. The husband said the accounts had been recorded the way shown in the wife’s affidavit at the insistence of the wife.
In the second affidavit filed by the husband on 4 September 2000 the husband provided a history of the parties’ financial relationship.
The history of the proceedings according to the trial Judge
As to the history of the proceedings between the parties, his Honour recorded that on 4 September 2000, Lawrie J made orders essentially restraining the husband from disposing of company funds in excess of $5000 “save in the usual course of business and upon the provision of not less than 3 working days notice in writing to the solicitors for the wife”, and the wife from disposing of any interest in any real estate in China.
His Honour further recorded:
37. On the 16th of December 2002 Court orders were made for the wife to have exclusive occupation of the former matrimonial home. On that same day the parties were ordered to attend a financial Conciliation Conference on 18 March 2003.
…
40. On the 5th of February 2003 the husband was ordered to file and serve a Financial Statement by the 24th of February 2003.
41. …On the 26th of February 2003 the husband filed a Financial Statement. In that document as part of annexure “A” the husband advised that between May 2002 and August 2002 he had withdrawn AUD$107,520.00 which he said was the equivalent of 20 months salary.
[It should be noted that his Honour observed at this point: “As best I can determine this contravened the orders made by Lawrie J on the 4th of September 2000”.]
42. On the 17th of March 2003 the Judicial Registrar granted an extension for filing affidavits to 7 days prior to the Pre Trial Conference listed for the 25th of November 2003.
43. On the 18th of March 2003 a Trial Notice issued. This required the parties to file and serve affidavits by the 6th of November 2003. A Pre Trial Conference was listed for the 25th of November 2003.
44. On the 17th September 2003 a Judicial Registrar made [further procedural orders and restraining orders against the husband].
45. On the 10th of November 2003 a further Trial Notice issued. This required the parties to file and serve affidavits by the 1st of July 2004.
46. On the 13th of August 2004 the matter was listed in the Defaulters List. Further orders were made for the parties to file affidavits by the 27th of August 2004. Financial Statements were to be filed by the 16th of September 2004.
His Honour then explained that the matter first came before him on 1 September 2004 when the wife made an application for expedition and that on 10 September 2004 he had made the following orders (which it is important for present purposes to set out):
1. That the husband file and serve his principal affidavit for the final hearing and any other affidavits in support by the 11th of October 2004.
2. That the husband file and serve a Statement of Financial Circumstances by himself by the 11th of October 2004.
3. That the solicitors for each of the parties confer within 7 days of today’s date in relation to the appointment of a single expert or experts to value all assets about which there is a dispute as to value.
4. I note that the wife alleges the husband has failed to comply with directions of the Court requiring that he give discovery.
5. I mark as exhibit “A1” a “Minute of Order” sought by the wife as set out hereunder: -
1. That the Respondent husband do forthwith authorise and direct the Bank of china [sic] (Hong Kong) Limited to forward to the wife’s solicitors statements of all accounts conducted by [the Hong Kong Company] with the bank and all such other records relating to the conduct of such accounts by that company with all banks as the wife’s solicitors may request.
6. I grant the wife leave to make an application in those terms and I adjourn that application for mention at 4.00 on the 21st of September 2004 before me…
His Honour also stated:
48. On the 14th of October 2004 I first raised with the husband’s legal representative the possibility that in the event of the husband failing again to file his principal affidavit I would thereafter consider any application of the wife for the matter to proceed undefended. The wording of the orders made that day indicate I was anticipating such an application from the wife if the husband failed to comply.
However as his Honour went on to explain (in paragraph 53), the husband filed his evidence in chief on 26 October 2004, which was in accordance with an extension of time granted by his Honour on 14 October 2004. His Honour had previously noted (in paragraph 50) that the wife had filed her “principal affidavit” on 12 August 2004.
Later (in paragraph 66) his Honour recorded that on 15 October 2004 the husband filed an affidavit of documents.
His Honour then recorded (in paragraph 67) the terms of the orders and directions he made on 18 October 2004 for the appointment of various single experts:
1.1 That the Wife’s Solicitor by 9.30am on Monday 25th October 2004 make application in the form annexed and marked “A” to the President of the Association of Chartered Accountants in Australia (“the President”) for the appointment by the President of a single expert (“the expert”) for the purpose of valuation of the interests of the parties in the following corporate entities:
1.1.1 […] [the Hong Kong company];
1.1.2 […] [the Australian company] and;
1.1.3 [the Beijing company] The [sic] corporation formed by the wife in Beijing.
1.2 That the husband by 9.30am on Monday 25th October 2004 provide to the wife a copy of his letter to the President in the terms annexed.
1.3 Order No. 1.2 is not intended to preclude the husband from making any other request of the expert nominated by the President.
1.4 That each party do accept the terms of the appointment of the expert conveyed to them by such expert within 4 working days of the receipt of such terms on the basis that pursuant to an Order made by this Honourable Court on 14th October 2004 that the husband shall in the first place be responsible for payments of the costs of the expert. Any disagreement about the terms of the expert’s retainer is to be listed urgently before me by the parties.
1.5 That the Husband do pay to the expert within seven days of being requested to do so all such other monies for the fees of the expert as the expert shall require.
1.6 That the Husband do pay to the expert on account of the costs of the valuation such sum as the expert shall require within seven days of being requested to do so.
1.7 In the event of the failure of the husband to comply with any of these Orders within the time provided by these Orders then the wife be at liberty to forthwith list the matter before me for the purpose of seeking that the application for final orders proceed on an undefended basis. NOTE The husband should be aware that if he does not comply with these orders the Court may conclude that he has decided to no longer participate in the proceedings. Further in the absence of compelling reasons for the failure to comply with these orders the Court may proceed, on the application of the wife, to finalise the proceedings in his absence.
1.8 That each party shall, within seven days of being requested so to do by the expert, provide the expert with instructions in writing, documents and records in relation to the carrying out of the valuation as the expert shall require.
1.9 Contemporaneously upon compliance with Order 1.8 each party shall provide to the other a copy of the instructions, documents and records provided to the expert.
2.1 That the Husband’s Solicitor forthwith make application to the President of the Real Estate Institute of New South Wales (“the President”) for the appointment by the President of a single expert (“the expert”) for the purpose of valuation of the interests of the husband in the property[in a suburb near Sydney](“the property”).
2.2 That the husband by 9.30am on Monday 25th October 2004 provide to the wife’s solicitors a copy of his letter to the President.
2.3 That the husband do accept the terms of the appointment of the expert conveyed to him by such expert within 48 hours of the receipt of such terms on the basis that pursuant to an Order made by this Honourable Court on 14th October 2004 that the husband shall, in the first place, be responsible for payments of the costs of the expert including any charge made by the President.
2.4 That the Husband do pay to the expert on account of the costs of the valuation such sum as the expert shall require within seven days of being requested to do so.
2.5 That the Husband do pay to the expert within seven days of being requested to do so all such other monies for the fees of the expert as the expert shall require.
2.6 The provisions of order 1.7 shall likewise apply to any default of the husband in the engaging of an expert to value the real estate or the motor vehicle referred to hereafter.
2.7 That the wife shall within 48 hours of being requested so to do by the expert provide the expert access to the property.
3.1 That the Husband’s Solicitor forthwith make application to the President of the National Roads & Motorists Association (NRMA) (“the President”) for the appointment by the President of a single expert (“the expert”) for the purpose of valuation of the motor vehicle used by the wife being a Mercedes Registered No. […] (“the vehicle”).
3.2 That the husband’s solicitor by 9.30am on Monday 25th October 2004 provide to the wife’s solicitors a copy of this letter to the President.
3.3 That the husband do accept the terms of the appointment of the expert conveyed to him by such expert within 48 hours of the receipt of such terms on the basis that pursuant to an Order made by this Honourable Court on 14th October 2004 that the husband shall, in the first place, be responsible for payments of the costs of the expert including any charge made of the President.
3.4 That the Husband do pay to the expert on account of the costs of the valuation such sum as the expert shall require within seven days of being requested to do so.
3.5 That the Husband do pay to the expert within seven days of being requested to do so all such other monies for the fees of the expert as the expert shall require.
3.6 That the wife shall within seven days of being requested so to do by the expert provide the expert with such access to the vehicle for the purpose of carrying out the valuation as the expert shall require.
3.7 That each expert engaged by these orders is to be served by the husband with a copy of these orders at the time of appointment.
3.8 That the experts or any of them have liberty to cause this matter to be re-listed before me, having first advised the parties and also obtaining a suitable date from my Associate […], in relation to any question which may require clarification or direction or in the event of failure by either party to reasonably assist the valuer in the carrying out of his/her valuation.
3.9 That the valuer appointed for the purpose of valuing the corporate interests of the parties consider whether it might be advisable to appoint a valuer or valuers outside Australia to assist him/her or independently value part of the corporations. Upon considering the matter the valuer is to advise both parties in writing and supply a copy of such letter to my Associate.
DIRECTIONS: -
1.BY CONSENT – That the husband execute the original of the Authority to the Bank of China (marked as exhibit “W1”in these proceedings) and cause it to be delivered to the wife’s solicitors by 4.00pm on the 19th of October 2004.
2.I note the husband’s solicitor has no objection to witnessing the husband’s signature on the Authority as the document requires.
3.I direct that the matter be listed before me for any further Court attendances prior to the final hearing.
4.I adjourn the return date for the subpoena addressed to the Department of Immigration to the 3rd of November 2004 before me should those documents not be produced by that date.
5.I grant leave to both parties to inspect the documents produced by DIMA should they be produced prior to the 3rd of November 2004 subject to any privilege claimed by the Department.
6.I note I shall consider the matter of photocopy access to those documents produced by DIMA on the 3rd of November 2004.
7.I reserve both parties costs of attendance before me today.
As to events concerning the parties’ companies in Hong Kong and Australia, his Honour recorded:
55. On the 16th of December 2003 the wife instituted proceedings in the High Court of Hong Kong for the winding up of the Hong Kong company…
…
68. On the 17th of January 2005 the husband signed an affidavit in Hong Kong. This affidavit appears to have been prepared by [YE], a solicitor in Hong Kong. In that affidavit the husband advised that he had filed an application in the Supreme Court to wind up [the Australian company]. The husband asserted there had been an undeclared profit in Australia for the [Australian] company […] of $630,000. [H]e also asserted that US$605,000 was owning [sic] from the Australian company to the Hong Kong company.
69. As it transpired the application to wind up the Australian company was made by the husband to the Federal Court of Australia. The husband could have instituted those proceedings in the Family Court of Australia. An application to the Federal Court to transfer to the Family Court of Australia was made by the wife. This was opposed by the husband. The proceedings were transferred to the Family Court of Australia and a Judgment by Giles J accompanied the file.
70. On the 14th of January 2005 the husband filed a Form 2 Application which sought a stay of the orders of the Court and the proceedings pending the completion of the winding up proceedings for [both] […] Companies. In the alternative he sought an adjournment until after the 16th of February 2005.
71. On the 18th of January 2005 I made orders as follows :-
1. I dismiss the husband’s application filed on the 14th of January 2005.
2. That the husband pay the wife’s costs of and incidental to his application filed on the 14th of January 2005 on the basis that the only attendance at Court for which he should pay is the wife’s attendance at Court on the 18th of January 2005.
…
NOTATION
6. I note that the wife has today applied for an order requiring the husband to consent to the transfer of the winding up proceedings commenced in the Federal Court in relation to [companies] Hong Kong Account […] to this Court. The husband’s solicitor has not been able to obtain instructions in relation to that application. I can see no good reason for the husband to oppose the transfer and it seems to me eminently sensible that the liquidation proceedings be heard in conjunction with the Family Court proceedings between the parties as the only shareholders and directors of the subject company are the husband and the wife. The ultimate benefit which might be available to the parties as a result of the winding up of the company will be an integral piece of information for the Family Law proceedings.
…
In relation to the husband’s health his Honour recorded:
72. On the 23rd of February 2005 I made the following orders: -
…
2. I issue the following notice to the husband : -
2.1 If I do not receive on the 21st of March 2005 when the case is called before me a medical certificate in relation to the husband which clearly states he has, because of his illness, been incapable of giving instructions to his solicitors in relation to these proceedings since the 8th of February 2005 and in the event of his not having complied with the Orders made by the Court on the 18th of October 2004 I will in the absence of any good reason to the contrary proceed to hear and determine the wife’s outstanding property application in his absence.
…
73. On the 21st of March 2005 the husband filed an affidavit setting out details of his medical condition at the time. He claimed that between the 8th of February 2005 and the 9th of March 2005 he was not in any mental or psychical [sic] condition to contact his solicitors Messrs Guardian Legal. He said he was incapable of giving instructions. He said he felt better by the 9th of March 2005. He annexed some medical certificates which seemed collectively to satisfy my ultimation [sic] of the 25th of February [sic – semble 23 February] 2005.
As to the husband’s compliance or non-compliance with his Honour’s orders of 18 October 2004 for the appointment of a single expert, his Honour recorded:
74. On the 22nd of March 2005 the husband filed an affidavit in which he said he had complied with the orders of the Court made on the 18th of October 2004. He annexed a copy of a letter from Accentro Legal to the Institute of Charted Accountants dated the 20th of March 2005. The husband also annexed a demand from the provisional liquidator of the Hong Kong government demanding payment of US$757,500. The notice was addressed to [the Australian company] […]. The husband said the company had US$500,000 in assets. The husband outlined money he had borrowed and/or paid for legal fees. He said he was living on loans and had very little cash available.
75. On the 22nd of March 2005 I made orders as follows: -
1. That the husband within 48 hours cause to be delivered to the President of the Institute of Charted [sic] Accountants in Australia a letter withdrawing paragraph (ii) as it appears at the bottom of page 2 of the letter of copy of which is annexure “A” to the affidavit of the husband sworn and filed in Court on the 22nd of March 2005.
2. That within 48 hours the husband cause to be delivered to the wife’s solicitors a copy of the letter complying with Order 1 hereof
It should be noted that his Honour’s orders of 22 March 2005 contained the following notation of the agreement which had been reached between the parties as to the value of the former matrimonial home, of their motor vehicles, and of the wife’s property in Beijing; there was also provisional agreement as to bank balances:
3. NOTATION – I have been advised today by each of the parties who are present in Court through their attorneys on behalf of the wife Mr Paul and on behalf of the husband Mr Lin that there is agreement on the following assets in terms of preparing a balance sheet for a forthcoming hearing in this case as follows: -
a. That the value of the unit [in a suburb near Sydney] is $440,000.00 AU.
b. That the value of the Mercedes motor vehicle registered number […] is $28,500.00.
c. That the value of a 1987 Honda motor vehicle is $1,000.00.
d. That the value of a Daewoo motor vehicle is $1,600.00.
e. That the husband presently has in his account with the China Merchant Bank the equivalent of $44,000.00AU. This agreement is subject to the husband providing verification or evidence of the deposits in that account as at today date.
f. That the husband’s account with the Westpac Banking Corporation has a balance of $13,600.00. This agreement is subject to the husband providing verification of the balance of that account as at today date.
g. That the total value of the apartment in Beijing in which the wife has an interest (it being disputed whether the property is totally owned by her or whether she has a lesser interest) the equivalent of $87,620.00AU.
h. That the value of apartment number 2 which the wife owns in Beijing is $14,043.00.
i. That the wife’s deposits in her bank account […] is $200.00. I note that this agreement is subject to the wife providing evidence of the balance of the account as at today’s date.
4. I note the parties agree that the combined cash resources of the Australian and Hong Kong companies is approximately $800,000.00US which has a conversion rate of about $1,2540.61 as at today’s date. I note that this value is subject to liquidation proceedings currently underway in relation to both companies.
5. That Pending Further Order the husband be restrained from mortgaging, charging, encumbering, transferring or dealing with [the unit in a suburb near Sydney].
In relation to the affairs of the Australian company, his Honour further recorded:
76. On the 13th of April 2005 I ordered the Federal Court proceedings No […] be consolidated with the substantial [sic] proceedings in this Court.
77. On the 3rd of May 2005 the husband filed an affidavit signed by him in Hong Kong on the 25th of April 2005. It includes substantial detail of what he says was the true position in relation to the income of the […] Australia company.
…
The events in the two month period immediately preceding the order for an undefended hearing of the property settlement proceedings, and which appear to have precipitated that order, were then described by his Honour in the following way:
79. On the 7th of June 2005 the wife filed an application seeking the matter proceed to an undefended hearing. In support an affidavit was filed by the wife. It annexed a substantial quantity of correspondence. This includes a letter from H.L.B Mann Judge [sic] dated the 21st of April 2005 which notes that husband has returned a signed Terms of Engagement document where the husband had made alterations which were unacceptable to the Single Expert [Mr M]. Also annexed is a letter from Accentro Legal to Mr [M] received on the 28th of April 2005. The letter advises the husband had paid AUD$5,143.37 to the Expert’s account. The letter argues that the changes sought by the husband in the Terms of Engagement are reasonable and/or are simply comments. No unconditional authority has been signed by the husband. On the 27th of April 2005 the Expert [Mr M] wrote to Accentro Legal and to Paul & Paul Lawyers in relation to the husbands comments on the Experts appointment documents and the letter from Accentro Legal referred to earlier in these reasons. He pressed for his original document to be signed by the husband. In a facsimile to the wife’s solicitor dated the 2nd of May 2005 Mr [M] said he had received a 36 page facsimile from the husband. The husband had asked that the [sic] Mr [M] communicate directly with him. Mr [M] declined to do that. The wife’s solicitors wrote to the husband’s solicitors on the 3rd of May 2005 objecting to direct communication between the husband and the Court Expert. Notwithstanding that complaint the husband sent a 27 page facsimile to the Court Expert on the 7th of May 2005. The Court Expert pointed out the husband still had not signed his Terms of Engagement document in a form acceptable to the Court Expert. Further correspondence shows that as at 30th of May 2005 the husband still had not signed the Terms of Engagement document.
80. On the 22nd of June 2005 the husband made an Application to Stay the Family Court proceedings until his health had recovered. The application was filed by the husband’s solicitors Guardian Legal Lawyers […]. The application was supported by an affidavit sworn by Hudson Lu, solicitor. He said the husband was suffering health problems and emotional instability. He was in [a] Sichuan […] Hospital from the 9th of May 2005. There was a medical certificate attached. The documents did provide [sic] any indication of when the husband might be fit enough to provide his solicitors with instructions.
81. On the 4th of July 2005 a letter addressed to the Court from Baker Tilly in Hong Kong was tendered. The letter was dated the 2nd of July 2005. The letter requested that the Court not release AUD$200,000.00 from the funds of [the Australian Company] […]. The information leading to the letter being written seems to have emanated from the husbands solicitor Hudson Lu of Guardian Legal. It seems that Mr Hudson Lu has been receiving instructions from the husband either directly or through his agents since the 9th of May 2005 when the husband was hospitalised.
82. On the 4th of July 2005 I made orders in the following terms: -
1. I adjourn this matter to a date to be arranged before me upon the solicitor for the wife advising that documents have been received from the liquidators […]in relation to the proposed outcome of the liquidation of the Hong Kong company.
2. That the husband submit himself to a medical examination by a medical practitioner appointed by the wife. Such medical examination to take place as soon as possible with a view of providing the wife with a report as to the husbands current state of health, his ability to instruct lawyers on his behalf in the Family Court proceedings, when it is anticipated he might be fit to travel to Australia for the completion of the Family Law proceedings and any other relevant matter relating to his health and relating to the conclusion of the proceedings in this Court.
3. I reserve the question of the costs of obtaining the medical report so ordered.
4. The medical examination for the purpose of providing the medical report so ordered is to take place as soon as it can be arranged by the wife.
83. On the 9th of August 2005 a letter from Baker Tilly dated the 8th of August 2005 was tendered and marked as an exhibit “W8”. The letter clearly states that the liquidators had received further information from the husband following the 8th of July 2005. Further on the 1st of August 2005 they had received from the husband a “Statement of Affairs” document. Thus it appears the husband has been well enough the [sic] cope with this aspect of his financial affairs.
84. On the 9th of August 2005 the wife filed an affidavit. Annexed to the affidavit is a document being a report in relation to information provided by [ZB] […] who she said was the husband’s son in law. She had apparently ascertained that he had faxed documents to the liquidator on behalf of the husband. It seems that this gentleman may have been acting as an authorised agent of the husband.
85. Also annexed to that affidavit was a report of an attempted medical examination of the husband by medical personnel acting on behalf of the wife. This report states that on the 27th of July 2005 the legal representative of the wife and a forensic doctor attended at [a] Sichuan […] Hospital […]. The examination did not take place. The husband had refused to see the lawyer and the doctor appointed by the wife. These people were told that the husband when he entered the hospital had specifically instructed that his documents and information in relation to his medical condition was not to be released.
86. On the 9th of August 2005 I made the following orders : -
1. I note Mr Chan, solicitor appears today for the husband.
2 I Order Mr Chan to file and serve a Notice of Address for Service for the husband by the 12th of August 2005.
3 I note the contents of an affidavit filed by the wife in Court today which contains as annexures “C” and “D” a report relating to an attempted medical examination of the husband. Such medical examination was organised following orders made by myself on the 4th of July 2005 requiring the husband to submit himself to a medical examination.
4 I note I have been told by Mr Chan that he is instructed the husband has a different view of what happened when the attempted medical examination occurred as recited in the affidavit referred to earlier in these orders.
5 I adjourn this matter to 9.00am on the 16th of August 2005 for the possible hearing of the matter on an undefended basis.
6 I note I intend, in the absence of further evidence from the husband persuading me that a contrary procedure would be required, to hear on a final basis the wife’s case for final property orders on the 16th of August 2005. Should I do so I will give reasons for dealing with this matter on an undefended basis on that occasion.
87. On the 12th of August 2005 Guardian Legal […] entered an appearance for the husband.
88. On the 27th of July 2005 a Notice of Assessment was issued from the Australian Tax Office for the year ended 30th of June 1999. The assessment was addressed to […] (the Australian Company) care of [Mr T] […] NSW. It called for a payment of AUD$424,459.80.
89. The office of Mr [T] is the companies registered office. The wife says she was not consulted in relation to the change of address of the registered office nor advised of the change of address for the company.
90. On the 4th of August 2005 the sum of AUD$424,459.80 was paid from the Australian company’s account with the Bank of China to the Australian Tax Office.
91. It appears that the husband instructed the Bank of China by letter received on the 3rd of August 2005 to pay the Australian Tax Office. After the payment to the Australian Tax Office the amount standing to the credit of the company in the Bank of China is $239,000.00. The payment of the funds to the Australian Tax Office was in direct contravention of an injunction made by this Court on the 9th September 2000.
92. On the 25th of July 2005 the husband signed “Statement of Affairs” for the Hong Kong company. This document is annexed to the wife’s affidavit filed on the 16th of August 2005.
93. On the 11th of August 2005 the wife’s forensic medical practitioner again visited the Sichuan […] Hospital […] to examine the husband. The practitioner was met by two solicitors acting for the husband. These solicitors presented to the doctor documents relating to the husbands medical condition. He was not able to interview or examine the husband as he was undertaking treatment and also asleep. The forensic doctor spoke to the treating doctor who informed that the husband was “not fit for long distance travel or emotional fluctuations.” I assume this last term to mean emotional stress.
His Honour then recorded that on 16 August 2005 he had made the following orders:
1. I make orders pursuant to paragraphs 1, 2 and 4 of the Minute of Order filed in Court today by the applicant wife as set out hereunder: -
1. That the husband do forthwith pursuant to Section 203A of the Corporations Act tender to the registered office of [the Australian Company] […] (“the Company”) a letter of resignation as director of the company.
2. That the husband do forthwith tender to the wife’s solicitors a letter of resignation as secretary of the Company.
150. [sic] That the husband’s solicitors authorise the Registrar General to accept from the wife any application for the issue of a new or replacement Certificate of Title Folio Identifier […]
3. The husband within 14 days cause to be delivered to the wife’s solicitors the Certificate of Title folio identifier […] for the property [near to Sydney].
4. In the event of the husband failing to comply with order 2 hereof within the time stipulated then the husband is to immediately sign all documents tendered to Guardian Legal as may be necessary to transfer to the wife the whole of his right, title and interest in the property [near to Sydney].
5. Upon the transfer being effected to the wife of the husband’s interest in [the property near to Sydney] the wife is to hold her interest in that property upon trust for the parties pending further order of the Court.
6. Pending further order the wife be restrained from dealing with her interest in the property [near to Sydney] as required pursuant to these orders otherwise than as ordered by the Court.
7. In the event of the husband failing to sign and return documents produced the Guardian Legal pursuant to order 3 hereof within 10 days of delivery of the documents to that Firm the Registrar upon application by the wife is empowered to sign pursuant 106A of the Act all documents to necessary to effect the transfer of title to the wife in the name of the husband.
8. Pending further order the husband be restrained as follows:-
1. From exercising any duties, obligations or rights as a Director of […] (the Australia Company) otherwise than as requested by the wife.
2. Dealing with any payment due to or paid to him as a result of the winding up […] (the Hong Kong Company).
3. Any funds received as a result of his dealing with the property [near to Sydney].
9. Pending further order the wife is to act as the sole Director of […] (the Australian Company)
10. The wife forthwith do all acts and things and execute all such documents which are necessary so as to cause to be withdrawn from the accounts of the Australian Company with the Bank of China, […], Sydney and transferred to the credit of the Trust Account of Paul & Paul Lawyers with the ANZ Banking Group […] all of the funds standing to the credit of the company in that account.
11. Pending further order Paul & Paul Lawyers are to hold any funds received pursuant to order 9 hereof in trust for the company and the parties.
12. That the matter be set down for hearing as an undefended final hearing for 1 day as soon as possible.
13. That the wife’s solicitors cause to be delivered to my Associate within 7 days a list of all documents filed which the wife seeks to rely upon in the undefended hearing.
14. I reserve my reasons and will provided reasons for judgment in relation to proceeding on an undefended basis and the orders made today as soon as possible.
15. In the event of the husband failing to sign documents required by paragraphs 1, 2 and 4 of the Minute of Order filed in Court today within 10 days of the date hereof then the Registrar of the Court is appointed pursuant to section 106A to execute any documents or instruments to give effect to those orders in the name of the husband.
16. I reserve the wife’s costs.
These are the orders which the husband now seeks leave to appeal, although the submissions made on his behalf were directed only to Order 12 which provided for the undefended hearing, and to a limited extent to the short time provided to the husband under various other orders to do certain things.
The reasons for the order for an undefended hearing
Having set out his findings in relation to the chronology of the proceedings, his Honour can be read as then providing the following reasons for the order for an undefended hearing:
95. As at today’s date the wife is pressing for an undefended hearing. The husband has still not complied with the Orders of the Court made by on the 18th of October 2004. He has had nearly a year to do so. His failure includes the fact that he has still not signed the Terms of Engagement agreement for the Expert as required by the Expert.
96. On the 4th of August the Husband caused the sum of AUD$424,459.00 to be paid to the Australian Tax Office by [the Australian company]. Documentary evidence establishes the payment was made. The orders of Justice Lawrie made on the 4th of September 2000 clearly state that the husband must give not less than 3 working days notice in writing to the wife specifying full particulars of the type of transaction effected by the husband in this case namely the payment of AUD$424,459.00 to the Australian Tax Office.
97. The husband since the beginning of 2005 has continued to report poor health. Indeed at the time of the making of these orders I understand the husband is in hospital in China. Earlier in these reasons I referred to evidence provided by the husband that he was incapable of giving instructions to his solicitor during a particular specified period. Cleary [sic] as at the date he caused the payment to be made to the Australian Tax Office he had the capacity to conduct commerce. Even if that was not the case no application has been made for the appointment of a Case Guardian to conduct the proceedings on behalf of the husband. He further seemed capable of providing documents to the liquidators of the Hong Kong company in July this year. He has also in July this year, apparently been able to give instructions to his Australian lawyers.
98. Since I have had the role of case managing this matter the husband has opposed many of the orders I have made. He has commenced proceedings in the Federal Court for the winding up of [the Australian Company] […] . This seems, on its face, to have been a tactical move on the part of the husband to frustrate the wife. He could have commenced the proceedings in the Family Court of Australia. A central issue in the property dispute relates to loan accounts in the […] Australia company. The wife says that at the date of separation there were 2 loan accounts in the sum of about AUD$610,000.00 each. One evidencing funds owing by the company to the wife and the other evidencing a loan owing by the company to the husband. Following the separation the husband claimed the wife had caused these loans to be so designated in the company balance sheet and such designation was a misdescription. He said the loans should have reflected an advance from [the Hong Kong Company] and not from the parties.
99. The husband has since caused further balance sheets to be drawn by [the Australian Company] which show the loans the way he asserts they should be.
100. The position of these loan accounts is central to the wife’s property application. A determination of whether these are as she asserts or as the husband asserts will substantially effect [sic] the amount of property available for division in Australia. There is a dispute between the parties as to whether the tax paid by the [Australian] company […] on the 4th of August 2005 is properly owning [sic] or not.
His Honour then referred briefly to the decisions of the Full Court in Tate v Tate (2000) FLC 93-047 and B & B [2001] FamCA 520, before citing at length passages from the judgment of O’Ryan J in Brown and Brown [2004] FamCA 1067, concluding with the following:
156. What is very clear from the case law and the provisions of the 2004 Rules is that it is fundamental that the rules of Court and/or procedural orders must be obeyed and the Court should not be reticent about exercising the powers in r 11.02(2) in appropriate cases. In my view, it is not necessary that the circumstances be “exceptional”. No litigant, whether legally represented or not, should harbour any doubt that manipulation of the Court's processes, through disregard of and deliberate non-compliance with its orders and directions will attract other than the strongest measures from the Court.
157. The case law prior to the 2004 Rules was relatively harsh in responding to non-compliance. The new rules have adopted these case law principles as they place great importance on case management and the need to comply with court orders. As such, in my view, the new rules provide severe sanctions for non-compliance.
His Honour can then be read as providing further reasons for his order for an undefended hearing in the following penultimate paragraph of his reasons:
106. Drawing these matters together I am left with the conclusion that the husband is either deliberately trying to avoid the matter being heard by the Court and/or attempting to pre-empt the findings of the Court in relation to it’s determination as to what property is available for distribution between the parties in Australia. In such circumstances I find that the husbands’ actions amount to an act to defeat the attainment of justice for the wife. The delay which has been occasioned by the husbands’ failure to comply with the orders of the Court in respect of the instructing of the single expert has placed the wife in a difficult financial circumstance. She has been trying for some time to access some of the assets of [the Australian company]. She has legal costs to pay and she is being pressed for payment. She has been living on a meagre income. She is entitled to have the property proceedings determined in a timely manner.
Finally his Honour turned to matters raised by the wife in relation to the proceedings in Hong Kong to wind up the Hong Kong company:
107. One of the wife’s attempts to have the husband comply with Court orders seems to have provided a further platform for the husband to claim she had mismanaged the companies accounts. I refer to the winding up proceedings in Hong Kong. These proceedings occurred as a result of the wife registering in the High Court of Hong Kong an order made by a Judicial Registrar of this Court. She then used that registration to cause the winding up of the […] Hong Kong [company]. The liquidators are now pressing for the repayment of the intercompany loan. They, of course, rely upon the husbands evidence about the loan accounts in both [companies]. To make matters even more difficult for the wife it seems the husband has been instructing the accountants for each company and being the only Director providing them with information about the companies activities and accounts.
It thus appears from paragraphs 95 to 100 of his Honour’s judgment that his reasons for ordering an undefended hearing were:
the husband’s non-compliance for nearly a year with the orders of 18 October 2004, including his failure to sign the terms of engagement agreement for the expert (Mr [M]);
the husband’s failure to give the required notice to the wife as recognised by the orders of 4 September 2000 of the payment to the Australian Tax Office by [the Australian Company] of a sum of approximately $424,000 and the dispute between the parties as to whether that amount was properly owing;
the fact that notwithstanding the husband’s poor health and hospitalisation in China, he had been able to give instructions concerning the payment of the tax debt, the Hong Kong liquidation and other matters, but not give instructions in the property settlement proceedings in the Family Court;
the fact that the husband had “opposed many of the orders” made by his Honour in his Honour’s case management role;
the fact that the husband had commenced proceedings in the Federal Court rather than the Family Court for the winding-up of [the Australian Company];
the fact that the husband had caused further balance sheets to be drawn for [the Australian Company] to show that the loans asserted by the wife to have been made by the parties to that company (and which would therefore be a substantial asset in the property proceedings) had been made by the Hong Kong company.
Then in paragraph 106 his Honour concluded that:
the husband was either deliberately trying to avoid the matter being heard by the court and/or attempting to pre-empt findings in relation to the property available for distribution in Australia;
the husband’s actions amounted to “an act to defeat the attainment of justice for the wife”;
the delay occasioned by the husband’s failure to comply with the orders for the appointment of a single expert had placed the wife in difficult financial circumstances.
The proposed grounds of appeal directed to the order for an undefended hearing
The husband’s first two proposed grounds of appeal challenge the validity of, and the exercise in this case of the discretion under Rule 11.02(2)(c).
The third and fourth proposed grounds are directed to the trial Judge’s finding that the husband had failed to comply with the orders for the appointment of the single expert, Mr [M].
The fifth and seventh proposed grounds are concerned with matters relating to the husband’s health.
The sixth proposed ground is directed to the trial Judge’s criticism of payment of the company tax debt.
The seventh proposed ground relates to the time limits which his Honour imposed in his orders of 15 August 2005 on the husband to do certain things.
The exercise of the discretion under Rule 11.02(2)(c)
The application for leave to appeal and the appeal against the order for an undefended hearing can, in our opinion, be determined in favour of the husband solely on the basis of the second ground of appeal, by which it is asserted that his Honour “erred in the exercise of his discretion” by making the order for an undefended hearing.
The submissions made on behalf of the husband in support of this ground were essentially that the matters relied on by his Honour in the exercise of his discretion to order an undefended hearing, did not justify such a course in the case of a party who had defended the proceedings and already filed a great deal of material.
As explained earlier in these reasons, the discretion to order an undefended hearing under Rule 11.02(2)(c) requires a finding of non-compliance with the Rules, the Regulations or a procedural order. It emerges from the analysis of his Honour’s reasons for ordering an undefended hearing (set out in paragraphs 37 and 38 above) that the non-compliance relied on by his Honour for the exercise of the discretion, was non-compliance by the husband with the obligations imposed on him by the order of 18 October 2004 for the appointment of the single expert as described by his Honour, particularly in paragraph 79 of his reasons (see paragraph 30 above).
It could well be argued, given the terms of the single expert orders of 18 October 2004 (see paragraph 24 above) which permitted the husband to make his own requests of the expert and which also provided for a re-listing of the matter by either party in the event of disagreement arising, that the husband’s alleged non-compliance with the order would not of itself justify an order for an undefended hearing.
We observe also that the orders of 18 October 2004 made specific provision authorising the expert himself to have the matter re-listed before his Honour in relation “to any question which may require clarification or direction or in the event of failure by either party to reasonably assist the valuer in the carrying out of his/her valuation”.
We think it also worth observing that the orders of 18 October 2004 for the appointment of single experts to value the real estate and the motor vehicle made no provision of the type contained in paragraph 1.3 and the final sentence of paragraph 1.4 of the orders. The inference we would draw from these differences is that it was contemplated there might well be difficulties associated with the settling of the terms of the retainer and the instructions to be given to the expert appointed to value the corporate entities.
But even if it is assumed that non-compliance with the single expert order would of itself justify an exercise of the power to order an undefended hearing, (and assuming that his Honour’s conclusions regarding the husband’s capacity to give instructions while hospitalised are accepted), there are, nevertheless, other matters which, having regard to the principles which govern appellate interference with discretionary judgments, would justify, indeed require, our interference with his Honour’s exercise of discretion.
The first such other matter is his Honour’s apparent failure to have regard to what in our view must be a relevant matter in a case such as this, and one which was relied on before us by senior counsel for the husband, being the fact that the husband had at the time of the order for the undefended hearing, already filed financial statements and affidavits. Moreover, it appears from the notation to the orders of 22 March 2005 (see paragraph 28 above) that in addition to filing material, the husband had been prepared to agree to valuations for much of the parties’ property.
It is true that his Honour’s chronology of the proceedings indicates that the husband’s documents were not, at least initially, filed within the required times. However, if past delays in complying with requirements in the Rules or orders for the filing of documents, constituted a further reason for the undefended order, it would have been of assistance if his Honour had explained this in his reasons.
The husband’s delay in complying with orders for the filing of documents would also have needed to be assessed in light of the wife’s own delay in filing of documents. In this regard, it will be recalled that on 17 March 2003 the Judicial Registrar had granted an extension for the filing of affidavits to 7 days prior to the Pre Trial Conference listed for 25 November 2003, but that the wife did not file her affidavit until 12 August 2004.
But again even if it can be assumed that, in exercising his discretion, his Honour did have regard to the fact that the husband had filed other required documents and had been prepared to agree valuations of much of the parties’ property, but then discounted these considerations because of the husband’s delays in filing required material, there remains a further matter, which, in our view, would undermine the exercise of the discretion.
That further matter is the reliance which his Honour appears to have placed in exercising his discretion on a range of other matters (in addition to non-compliance with the single expert order) being, the husband’s failure to give the notice required under the orders of 4 September 2000 to the wife of the proposed payment of the tax debt; the husband’s “opposition to many of” his Honour’s case management orders; the husband’s choice of the Federal Court (rather than the Family Court) for the winding up of the Australian company; and the husband’s preparation of further balance sheets to reflect his case in relation to the source of company loans.
The issues of the failure to give notice of the proposed payment of the tax debt and the preparation of the revised company balance sheets to support the husband’s case are clearly serious issues. But they are not issues to be resolved by ordering an undefended hearing. Rather the issues of the balance sheet and the company loans were matters to be explained and examined in the context of a defended hearing.
The failure to give notice to the wife of the payment of the tax debt was a matter for a contravention or contempt application. At the hearing of such an application the husband would be given an opportunity to advance any evidence on which he might wish to rely to explain his apparent breach of the injunction. We observe also that in the event the wife considered the payment of the tax debt was part of a scheme by the husband to defeat her claim, there were other remedies available to her, including those available under s 106B of the Family Law Act 1975 (Cth).
As to the husband’s opposition to case management orders and his choosing to commence winding-up proceedings in the Federal Court rather than the Family Court, these are matters which would be appropriately sound in costs, rather than in an order for an undefended hearing.
Events subsequent to the order for an undefended hearing
In opposing the husband’s application for leave to appeal and/or the appeal against the order for an undefended hearing, counsel for the respondent wife sought to rely on the fact that apart from filing his application for leave to appeal, the husband did nothing prior to, or at the hearing of the property settlement proceedings on 29 and 30 November 2005 to rectify or to explain the defaults or other conduct on his part which has caused his Honour to order the undefended hearing. In support of his submissions in this regard, counsel referred us to the following passage in his Honour’s judgment (delivered 11 April 2006) in relation to the property settlement proceedings, which had been heard on the undefended basis on 29 and 30 November 2005:
6. Before proceeding further it should be noted that I did not exclude the husband from any particular aspect of the hearing which proceeded before me on the 29th and 30th November 2005. The husbands’ representative made no attempt to participate in the hearing nor did he make any application to participate. It seems he accepted that a determination by me for the hearing to proceed as an undefended hearing meant that the husband could not participate in any way. Further I note that unlike Collier J in the case of B & B, referred to later in these reasons, I did not dismiss the husbands originating application/response at the time I ordered the hearing proceed undefended. As best I can determine an order made for a hearing to proceed undefended does not automatically exclude participation by the other party in some manner. It seems to me that the trial Judge would have the discretion to allow participation in any way which might be helpful to the Court or which may be seen as warranted in the particular circumstances of the case. In some cases it may be appropriate to exclude the other party from any participation at all.
The difficulty is, however, that these observations by his Honour were not made until well after both the order for the undefended hearing was made and that undefended hearing had been conducted. Indeed, his Honour had foreshadowed the way in which he anticipated the undefended hearing might proceed in the notation to his orders of 18 October 2004, which we have recited in paragraph 9 of these reasons. That notation would have suggested to those advising the husband that “in the absence of compelling reasons for the failure to comply” the Court would proceed to finalise the proceedings in the husband’s absence.
Moreover, nothing in those orders provided any mechanism for the husband to obtain relief from the order for an undefended hearing.
Conclusion in relation to application for leave to appeal and appeal against the order for the undefended hearing
It is only with extreme reluctance that we conclude that we should interfere with his Honour’s exercise of discretion in ordering an undefended hearing of the property settlement proceedings. This is because we readily acknowledge that his Honour had a far greater exposure to, and familiarity with, this case than do we. We recognise too, as was submitted by counsel for the respondent wife, that judges now have a responsibility to ensure the expeditious conduct of proceedings before them. However for the reasons we have explained, his Honour’s discretion under Rule 11.02(2)(c) must be regarded as having miscarried in this case. (We find support for this conclusion in the observations of members of the High Court in Queensland v JL Holdings Pty Ltd (1996-1997) 189 CLR 146, particularly of Kirby J at 172-174.)
Reluctantly, therefore, we conclude that both the application for leave to appeal and the appeal against the order for the undefended hearing must be allowed, with that order being set aside. The relevant notice of appeal stated that the appeal was against all orders made on 16 August 2005. But given the scope of the submissions made to us, we propose to set aside only the order for an undefended hearing.
The appeal against the orders made on 11 april 2006
In view of our conclusion that the order for an undefended hearing should be set aside, it must follow that the orders made on 11 April 2006 as a result of the undefended hearing which was conducted on 29 and 30 November 2005 and in the way described in paragraph 2 of these reasons, cannot stand. Accordingly, the appeal against those orders must also be allowed with those orders being set aside. We will remit the wife’s property settlement application for rehearing.
Costs of the appeals
Having regard to the submissions made in relation to costs at the conclusion of the hearing before us, and to the fact that we would allow both appeals because of the miscarriage of discretion constituted by the order for an undefended hearing of the property settlement proceedings, we would grant both parties certificates under the Federal Proceedings (Costs) Act 1981 (Cth) in respect of the costs incurred in relation to both appeals and also in relation to the retrial of the property settlement proceedings.
Proposed orders
Therefore the orders that we propose are:
(1)That the application for leave to appeal the order made on 16 August 2005 that the matter be set down for hearing as an undefended final hearing for one day as soon as possible (“the order for an undefended hearing”) be granted.
(2)That the appeal against the order for an undefended hearing made on 16 August 2005 be allowed.
(3)That the order for an undefended hearing made on 16 August 2005 be set aside.
(4)That the appeal against the orders made on 11 April 2006 be allowed.
(5)That the orders made on 11April 2006 be set aside.
(6)That the application for property settlement filed by the wife on 1 September 2000 be remitted for hearing by a judge other than the Honourable Justice Le Poer Trench.
(7)That the Court grants to the appellant husband a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant husband in respect of the costs incurred by the appellant husband in relation to the appeal against the order for an undefended hearing made on 16 August 2005 and the appeal against the orders made on 11 April 2006.
(8)That the Court grants to the respondent wife a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent wife in respect of the costs incurred by the respondent wife in relation to the appeal against the order for an undefended hearing made on 16 August 2005 and the appeal against the orders made on 11 April 2006.
(9)That the Court grants to each party a costs certificate pursuant to the provisions of s 8 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to each party in respect of such part as the Attorney-General considers appropriate of any costs incurred by each party in relation to the new trial granted by these orders.
May J
Introduction
This case concerns two separate appeals filed by the appellant husband against orders made by Justice Le Poer Trench on 16 August 2005 and 11 April 2006. Although the subject matter of both appeals is related, they will be dealt with separately. The appeals concern the exercise of judicial discretion in hearing a matter on an “undefended” basis and the division of property between the parties.
On 30 August 2005 the husband filed an Application in a Case seeking leave to appeal the orders of Le Poer Trench J made on 16 August 2005. On 2 September 2005 the wife filed a response to that application and sought orders that the husband’s application for leave be stayed or summarily dismissed. These applications were listed before the Full Court on 27 October 2005. On 27 March 2006 the Full Court delivered judgment dismissing the wife’s application and ordering that the husband’s application filed 30 August 2005 be listed for a further procedural hearing on a date to be fixed.
In a Notice of Appeal filed on 21 September 2005 the husband appeals against the interlocutory orders of Le Poer Trench J, delivered on 16 August 2005, when it was ordered that the property matter between the parties would be heard on an undefended basis (EA 98 of 2005). It is described in this judgment as the first appeal.
The second appeal (EA 58 of 2006) was instituted by a Notice of Appeal filed on 21 July 2006. The husband appeals against orders delivered on 11 April 2006 on the basis that his Honour erred both in hearing the matter on an undefended basis and in reaching certain conclusions regarding the property of the parties.
The husband asked in an application filed 16 June 2006 for leave to extend the time for the filing of the second appeal as it was filed out of time. In a further application leave was asked to appeal the order of 16 August 2005. The matter came before Boland J on 5 July 2006 where leave was granted and directions were made that the appeals (EA 98 of 2005 and EA 58 of 2006) should be heard at the same time.
On 26 June 2007 the appellant filed an application seeking an adjournment of the appeal hearing for a period of three months. The affidavit in support of the application referred to the appellant’s ill health and his inability to be present at the appeal hearing. This application was heard at the commencement of the hearing and was dismissed.
Background
I will at first provide a brief overview of the history of the parties and the facts relevant to this litigation. This does not represent an exhaustive account, but is intended to provide an adequate context necessary to understand the appeals before us.
The husband was born on February 1940 and the wife was born March 1953.
There is some contention as to the history of the parties’ marriage. It is the wife’s evidence that they were married September 1988. Certainly the parties underwent a marriage ceremony November 1997. The trial Judge accepted the wife’s evidence that the parties had cohabited since the date of their ‘original’ marriage in 1988.
The husband acquired Australian citizenship status sometime in 1996 or 1997. In the course of acquiring this status, the parties apparently perpetrated some deception which suggested they were divorced or separated at this time. The details of such events are irrelevant in light of this appeal and it is sufficient to note that the parties underwent a marriage ceremony in 1997, at which time the husband was an Australian citizen.
The parties separated on 26 August 2000. On 8 January 2003 a decree nisi of dissolution of marriage was granted for the ‘second’ marriage, which became absolute on 9 February 2003. There were no children of the marriage.
On 28 March 1992 the wife established a Software company. The directors included the wife and two others and the capital used to establish the business came from both the husband and the wife.
In 1993 the husband joined his wife in working at the company. He had previously been employed as the General Manager for another company.
Initially, the Software company could not do business with foreign contracts in its own right and a Hong Kong company was used to process any off-shore business. In September 1994, the Hong Kong company was established. The parties were equal shareholders and directors of that company.
In April 1995 the parties attended the Po Sang Bank in Hong Kong and obtained a US$1,000,000.00 facility for the Hong Kong company.
In July 1996 the parties incorporated the Australian company.
The former matrimonial home is a unit located near Sydney. The property was purchased in the husband’s name with funds from the Australian company.
In 1998 the parties tried to acquire property in Beijing, China. This was ultimately unsuccessful and the monies paid were refunded to the wife.
The wife owns two properties in China. The first was purchased in 1993. The second is owned jointly by the wife and her son and was received as part of an inheritance.
There is much conflicting evidence from the parties concerning the financial transactions and success of the companies. The parties disagree as to the value of the companies and as to the financial transactions undertaken during the course of business operations.
The wife says that between 1998 and September 2000 the companies were very profitable. It seems that in 2000 they were trading very well. Annexed to one of the wife’s affidavits before the trial judge were documents relating to the business of the companies in the year 2000. Between March and October 2001, the wife claims that the companies should have received US$3,250,370.00 pursuant to completed orders. According to the wife’s evidence, the company would normally be expected to realise a profit of 25 per cent to 35 per cent on sales.
The wife estimated the profit of the companies for 2001 to be US$858,541.00. She further speculated that the profit for 2002 was either US$618,927.00 or US$768,789.00. Her evidence is that all of the profit has been retained by the husband.
Sometime between September 2000 and January 2002 the husband incorporated or acquired a new company. The Directors of this company are the husband and his daughter. The trial judge found that the husband then caused or allowed this company to take over the two other Software companies which the parties owned jointly:
59.On the 4th September 2000 the wife obtained interim orders from this Court. On the 5th September 2000 the husband incorporated or acquired a new corporate structure to trade through. The [new] company was called […]. The husband caused or allowed this company to take over all of the business previously created by the [other] companies owned by the parties.
60.In January 2002 the husband incorporated or acquired a new company in Hong Kong. This company was called [the new Hong Kong company] […]. The husband then used these companies to take over the business of the [other] companies which the parties had owned jointly.
His Honour then found:
66.Annexures to the wife’s affidavit show that post separation the husband received large deposits into his personal account with HSBC in Hong Kong. It is reasonable to assume that this was from income generated by him or the companies owned by the parties or the new companies established by the husband with others at about that time.
67.In a Financial Statement filed by the husband on the 25th of February 2003 in annexure “A” thereto the husband says he no longer holds any shares in the [new companies] having sold them for $25,000. The wife castes [sic] doubt that such is the case and I share her scepticism.
Procedural History
The two appeals follow a number of procedural and interlocutory proceedings in both Australian and Hong Kong courts. I will set out the history of the proceedings and parties’ involvement in some detail as it is essential to the question of whether the judge was correct in determining that the matter should be heard “undefended”.
On 1 September 2000 the wife filed an application for final property orders and also asked for interim orders in the Family Court of Australia. This application was supported by an affidavit which indicated that the parties were shareholders and directors of the Australian company and the Hong Kong company. At the date of the swearing of the affidavit, the wife said that the Australian company had funds to its credit in the sum of AUD$1,210,580.00 with the Bank of China. She said that the husband and wife were joint creditors of the company in the sum of $610,340.00 each. The Balance Sheet for the Australian Company as at 30 June 1999 was annexed to the affidavit and showed that the company had borrowings of $1,220,680.00. This liability was comprised of two loans: one loan said to be to the husband of $610,340.00 and one loan said to be to the wife of $610,340.00.
On 4 September 2000 the husband swore an affidavit which directly contradicted the wife’s evidence. He claimed that the debt expressed in the Balance Sheet referred to above was in fact a debt owing to the Hong Kong Company, not a debt owing to each of the parties. He further asserted that the accounts had been expressed in the manner demonstrated in the wife’s affidavit at her insistence.
In a separate affidavit sworn on 4 September 2000, the husband set out some financial history. He claimed that the Beijing residential flat owned by the wife was purchased with funds from the Australian Company and the Hong Kong Company. He claimed that this flat was specifically purchased in her name to attract certain tax concessions.
On 4 September 2000 Lawrie J made orders largely in terms of the wife’s application. These orders restrained the husband from dealing with any deposit or fund in the companies in excess of $5,000.00 save in the usual course of business and upon provision of three working days notice in writing to the wife’s solicitors. The orders restrained the husband from interfering with the wife’s right to utilise the credit card facilities provided by the Companies. The orders also prevented the wife from disposing of, encumbering or otherwise dealing with any interest in any real property in Beijing.
On 18 November 2002 the husband filed an application seeking exclusive occupation of the former matrimonial home. The wife had first vacated the property in March 2001 because of an arrangement that the husband would pay AUD$4,000.00 per month towards her support. It was the husband’s evidence that this arrangement terminated in June 2002 when the parties agreed to resolve all property matters. However, sometime in October 2002 the wife gained entry into the former matrimonial home and took up residence there again. The husband had been travelling in China at the time.
On 16 December 2002, orders were made for the wife to have exclusive occupation of the former matrimonial home. The parties were also ordered to attend a financial Conciliation Conference on 18 March 2003. The conference was adjourned on several occasions and each party was given an extension of time to file affidavits.
On 26 February 2003 the husband filed a Financial Statement which indicated that between May and August 2002 he had withdrawn AUD$107,520.00. He claimed that this was the equivalent of 20 months salary. The solicitors who filed the document on the husband’s behalf were the fourth firm who had filed a Notice of Address for Service. The trial judge later decided that these withdrawals contravened the orders made by Lawrie J on 4 September 2000.
On 17 September 2003 a Judicial Registrar made directions requiring both parties to file affidavits giving discovery on or before 7 November 2003. These orders also restrained the husband from dealing with the Companies except for the purpose of drawing AUD$4,000.00 per month for living expenses. The matter was adjourned to the Judicial Duty List for hearing on 10 November 2003.
On 10 November 2003 a further Trial Notice was issued which required the parties to file and serve affidavits by 1 July 2004. Neither party complied and on 13 August 2004 the matter was listed in the Defaulters List. Further orders were made for both parties to file affidavits by 27 August 2004 and Financial Statements by 16 September 2004.
On 1 September 2004 the matter first came before Le Poer Trench J. At that time, the wife made an application for expedition of the hearing. In an affidavit of the husband he said that he had returned to Hong Kong to seek specialist legal advice and investigate the wife’s activities in relation to the Hong Kong Company.
Ultimately, the Full Court rejected Drummond J’s approach:
95.In the exercise of its jurisdiction under the Family Law Act, this Court ought in the exceptional case where a matter is ordered to proceed “undefended'', not follow the approach adopted by Drummond J (above). The Family Court of Australia is all too frequently confronted with litigants who fail in their duties of full and frank (and prompt) disclosure of their financial affairs. Where such failure results in a Form 7A being struck out, as here, then that party ought have no further right to be heard without further order of the Court which is a matter for the judge in his or her discretion.
Le Poer Trench J also concluded that a trial judge has discretion to exclude affidavits from witnesses who are unavailable for cross-examination, as discussed in Chang and Su (2002) FLC 93-117 (Finn, Kay and Dawe JJ).
The trial judge also quoted from the decision of Abbott and Abbott (1995) FLC 92-582 (Fogarty, Baker and Kay JJ), where the Full Court considered the nature of an undefended proceeding, at 81,774:
It appears to us that a proceeding will be treated as “undefended” where the respondent does not challenge or put in issue any of the components of the cause of action in question. The fact that the respondent is opposed to the Court making the order in question and/or wishes to defend the granting of the order which is sought does not make the proceedings defended if the issues raised by the respondent are irrelevant to the issues constituting the cause of action.
In that decision, the Full Court also cited the decision of Lanceley and Lanceley (1994) FLC 92-491 (Barblett DCJ, Frederico and Lindenmayer JJ). In that case, their Honours considered the nature of an undefended hearing, and concluded at 81,104:
Unlike some other jurisdictions, such a circumstance does not and cannot lead, in this Court, to a “judgment by default” in favour of the applicant, because the Court must still decide, on the evidence before it, that the applicant is entitled, in law, to the relief claimed and that, in the exercise of its discretion, it is appropriate to grant that relief. Nevertheless, the proceedings in such a case are clearly “undefended”, and it would be a misuse of language to describe them otherwise. They certainly could not be described as “defended”.
Finally, the trial judge summarised what he concluded were the guidelines extracted from the above materials and cases.
28.The following guidelines appear from the abovementioned cases and materials:-
(a)In an undefended case the Response becomes a nullity (Rules of Court)
(b)Where an Application has been struck out due to the default of a party to make a full frank and prompt disclosure of his/her financial affairs that party ought have no further right to be heard without order of the Court. (Tate and Tate)
(c)In an undefended hearing the applicant has a duty to the Court to make full disclosure and deal with the Court in good faith. (Krebs)
(d)In an undefended hearing the applicant must establish the case with admissible evidence. (Tate)
(e)In an undefended hearing the trial Judge has the discretion to have regard only to the evidence of the party before the Court and not the affidavit evidence of the excluded party. (Tate) [The converse of this being there must be a discretion to have regard to part or all of the affidavit evidence filed by the excluded party]
(f)The trial Judge in an undefended hearing may exercise a discretion to have regard to agreements reached between the parties prior to the hearing as to such matters as value of property where such agreements have been noted on the Court record or where there is admissible evidence establishing such agreement.(Tate)
(g)Where a court does proceed to conduct a hearing as an undefended matter it is still bound by the same general requirements as to proof as in a defended matter. This does not mean that a court necessarily has to insist on detailed evidence, make elaborate findings and give reasoned decisions in undefended matters. ……… Nevertheless it must be satisfied that the evidence supports its findings and orders.(footnote omitted)
(h)Subject to matters of procedural fairness the trial judge may allow the remaining party in an undefended hearing to rely on affidavit material filed and served on the excluded party together with oral evidence and the tendering of documents to establish a case. (footnote omitted)
(i)There is a wide discretion to be exercised by the trial Judge as to the extent of the involvement of the defaulting party in the undefended hearing. This discretion must be tempered with regard to procedural fairness, natural justice and the requirement to do justice to all of the parties. Each case will demand an individual assessment by the trial Judge as to the appropriate procedure to be adopted. In many cases the reasons giving rise to the determination that the case should proceed undefended will no doubt impact upon the decision of the trial Judge as to the method of hearing to be adopted. In many cases the trial Judge will have regard to the evidence of the remaining party only.
Having provided the above guidelines, his Honour concluded that the husband had forfeited his right to have his affidavit material read. He said:
29.Given the circumstances outlined in my reasons for ordering the case to proceed undefended (I here incorporate my reasons delivered on the 16th September 2005) I am of the opinion that the husband has forfeited his right to have me read his affidavit evidence. In any event where his evidence was not corroborated I would be unable to accept it as there is no ability on the wife’s part to cross-exam him or his witnesses as they are not present.
30.I will have regard to the Court record in order to consider any agreements recorded for the purpose of the final hearing. I have also referred to some of the husbands’ evidence in the course of my reasons. The circumstances surrounding those references will appear in the context of the reference to that evidence.
31.At the commencement of the hearing the wife asked me to read the following documents.
(a)Affidavits sworn by the wife on 12th August 2004, 1st September 2004 (paragraphs 4,5,6,7,11 and 12), 16th September 2004 (paragraphs 2 to 8 and 11), 22nd March 2005, 3rd June 2005 (paragraphs 4 and 8), 13th July 2005, and 15th August 2005.
(b) Affidavit of [FX] sworn 29th October 2003
(c) Affidavit of [BJ] sworn 13th August 2004.
32.I have read all of those affidavits and my findings are based on the evidence set out therein, on the documents tendered in the hearing, reference to some of the husbands affidavit evidence or the matters of Court record referred to together with the wife’s oral evidence, unless I state otherwise.
Having reiterated the relevant background facts (which have been referred to extensively above), his Honour then set out the substance of his reasoning regarding the property division. This is extracted from the judgment:
THE BALANCE SHEET
92.The balance sheet proposed by the wife includes items calculated on the basis of the report of Mr [J]. The conversion rate from US$ to AUD$ is at the rate of 1.35 which is a rate of .74 for the conversion of AUD$ to US$. This was the rate applicable at the date of the hearing.
93. I find the assets and liabilities of the parties to be as follows:-
ASSETS AND LIABILITIES OF THE PARTIES
ASSET OWNER WIFE’S VALUE Unit [near to Sydney] Husband $440,000 Mercedes motor vehicle registered number […] Joint $28,500 1987 Honda motor vehicle Joint $1,000 Daewoo motor vehicle Husband $1,600 Costs paid by the wife Wife $73,591 * Husband’s account with Westpac Banking Corporation Husband $13,600 Wife’s Beijing Apartment Wife 50% her son 50% $87,620 Old Beijing unit Wife $14,043 Wife’s Cash Wife $200 Remaining cash resources of the parties’ Australian Company Joint $243,185 Remaining cash resources of the Hong Kong Company approximately $US300,000 converted at .74 AUS/AUD$1 Joint $405,460 Good will of the jointly owned companies retained/taken by husband $US1,021,023 converted at .74/1.35 USD/AUD$1 Husband
$1,378,381 Profits of jointly owned companies retained by Husband US$985,814 converted at
.74/1.35 USD/AUD$1Husband
$1,330,849 Notional interest on retained profits received or available by to the Husband 1 July 2001 – 30 June 2005 at say 4% of $1,330,849 on annual rests. Husband
$257,193 Total: $4,275,222 94.* Based upon the Full Court decision in Chorn and Hopkins these should probably be included as they have most probably been paid from the lump sum paid by the husband to the wife as recorded in these reasons and/or the payments of $4000 per month from the company which appear to have been received by the wife as payments of capital and not income.
95.The wife has an outstanding liability for legal costs and associated expenses of $192,038 as referred to in the costs application which was made at the hearing before me. The final amount of the claim is contained in a letter from the wife’s solicitors to my associate dated the 1st of December 2005. This letter was provided together with copies of all costs invoices issued by the solicitors, at my request made during submissions in the case.
96.As will be seen hereafter I propose to make a costs order against the husband however, it will not be for the full amount of the costs claimed.
97.I do not propose to include the legal costs as a liability. There is no doubt that the husband has incurred legal costs however, I doubt they will be as high as the wife as she has had to engage Mr [J]. It also seems that she has been required to have more legal work done on her behalf because of the default of the husband.
98.The orders made by this Court on the 22nd of March 2005 note an agreement between the parties as to the values of some of the assets. Those notations are as follows:-
1.NOTATION – I have been advised today by each of the parties who are present in Court through their attorneys on behalf of the wife Mr Paul and on behalf of the husband Mr Lin that there is agreement on the following assets in terms of preparing a balance sheet for a forthcoming hearing in this case as follows: -
1.That the value of the unit [near to Sydney] is $440.000.00 AU.
2.That the value of the Mercedes motor vehicle registered number […] is $28,500.00.
3.That the value of a 1987 Honda motor vehicle is $1,000.00.
4.That the value of a Daewoo motor vehicle is $1,600.00.
5.That the husband presently has in his account with the China Merchant Bank the equivalent of $44,000.00AU. This agreement is subject to the husband providing verification or evidence of the deposits in that account as at today date.
6.That the husbands account with the Westpac Banking Corporation has a balance of $13,600.00. This agreement is subject to the husband providing verification of the balance of that account as at today date.
7.That the total value of the apartment in Beijing in which the wife has an interest (it being disputed whether the property is totally owned by her or whether she has a lesser interest) the equivalent of $87,620.00AU.
8.That the value of apartment number 2 which the wife owns in Beijing is $14,043.00.
9.That the wife’s deposits in her bank account HSBC is $200.00. I note that this agreement is subject to the wife providing evidence of the balance of the account as at today’s date.
2.I note the parties agree that the combined cash resources of the Australian and Hong Kong companies is approximately $800,000.00US which has a conversion rate of about $1,2540.61 as at today’s date. I note that this value is subject to liquidation proceedings currently underway in relation to both companies.
99.The balance of the items on the balance sheet comes from the report of [Mr J] as have been referred to above.
THE CONTRIBUTIONS OF THE PARTIES
CONTRIBUTIONS OF THE WIFE
(a) Income earned during the cohabitation.
(b)Contribution to the business and companies business owned by the parties during the cohabitation.
(c)The wife asserts, and I accept, that she worked long hours for the business/companies. She was able to draw on her personal relationships to promote the businesses in China.
(d) The inheritances received by the wife.
CONTRIBUTIONS OF THE HUSBAND
(a) Income earned during the cohabitation.
(b)Contribution to the business and companies business owned by the parties during the cohabitation. There is no complaint by the wife about the way the husband worked. I can only conclude he worked as hard as the wife for the business/companies.
CONCLUSION BASED ON CONTRIBUTION
100.The conclusion urged on me by the wife’s counsel is that the parties contributions should be assessed as equal to all of the assets including those retained or redirected as referred to by Mr [J] in his report. I agree with that submission and so find.
CONSIDERATION OF SECTION 75 (2) FACTORS
101.It was submitted that on balance there should be no adjustment based on an assessment of the matters referred to under section 75(2) of the Act. The wife’s counsel submitted that the husband should be given the “benefit of the doubt” as to the state of his health. This was a reference to evidence which had been placed before me in the lead up to this hearing as to the state of the husband’s health. As I am invited to take into account this material by the wife I feel that I should. In so saying I conclude it is very fair of the wife to take this stand.
102.The evidence before me had been that the husband had been receiving treatment in a hospital in China for a number of serious and seemingly life threatening illnesses. It seems from that evidence that the husbands working future may not be good if it exists at all.
103. The husband is 65 years of age. The wife is 52 years of age.
104.The wife does not have a great earning capacity at this time although she does no doubt retain the skills which enabled her to contribute to the parties businesses. She is presently retraining and she has a part time job. She occupies the former matrimonial home and has done so since about November 2002.
105. The wife has a new partner and resides in a de-facto relationship.
106. I do not know the financial circumstances of the husband.
107.I know that the wife has outstanding costs and expenses associated with these proceedings in the sum of $192,038.
108.I must reasonably assume that the husband also has outstanding costs and expenses associated with his involvement in the proceedings. I also know that I propose to make a substantial costs order against the husband as set out hereafter.
109.In the circumstances I conclude that the submission of the wife should be acceded to and a determination made that there be no further adjustment under section 75(2).
JUST AND EQUTIABLE
110.I have found the net pool of assets to be $4,275,222. An equal division will mean each party receives $2,137,611 worth of assets. I have doubts that the wife will ever be able to enforce the full extent of the orders in her favour. I propose therefore that she should receive all of the assets which are within the Commonwealth of Australia.
111.In the circumstances I conclude that the determination has some chance of reflecting a just and equitable division of the parties’ net assets.
THE PROPERTY DIVISION ORDERS TO BE MADE BY THE COURT
112.The wife will need to retain all the assets which are in Australia. In the circumstances that will mean that she receives the property [located near Sydney] together with the motor vehicles. Further the husband should be required to transfer his entitlements and ownership in the […] Aust company. The company will then become the absolute property of the wife and she can direct what happens to the balance of the funds remaining in the Bank of China in Sydney.
113.The husband should also be required to transfer, to the wife, his interest in the […] Hong Kong company.
114.The wife will receive the house the cars, her costs, her savings, the remaining resources in the Australian and Hong Kong companies. On the balance sheet that adds up to $1,295,199.
115.The balance of the monies due to the wife which is the sum of $842,412 the wife will have to enforce as best she can. I have grave doubt she will ever recover that sum or the amount of the costs order I propose to make in her favour (as appears hereafter) from the husband.
116.The wife seeks that the payment of the $842,412 required to be paid to her by the husband be paid within 28 days. I think in the circumstances that three months should be allowed. The husband will have to be informed of these orders and then he should be given a reasonable period to consider what action he wishes to take. Further it is a large sum of money and if he has the funds off shore it may take some time to organise the payment.
It was for these reasons that his Honour decided that there should be an equal division of the property between the parties. This was to be effected by ensuring that the wife received the Australian assets and the husband, the foreign companies.
Appellant’s Submissions
The appellant’s first ground of appeal concerns the hearing of the property matter on an undefended basis. In the written submissions it was argued that the husband had been denied natural justice by the trial judge. This issue has been substantially dealt with in relation to the first appeal, and it is unnecessary to consider it further.
Regarding the manner in which the undefended hearing was conducted (ground two), counsel for the appellant argued that although the matter was heard on an undefended basis, the appellant’s material filed in court should have been received and considered. It was submitted that the method adopted by his Honour effectively prevented the appellant’s evidence from being considered at all.
In oral submissions, counsel for the appellant elaborated further on this point. He argued that the manner of the trial was such that the husband was precluded from participating because he could not cross-examine the wife’s witnesses or present his own material. Although a representative from the husband’s solicitors was present throughout the trial it was submitted that he could not participate in the proceeding and was there to take notes only. His Honour had “well and truly shut the door” on the husband’s participation.
The third ground of appeal asserts that the trial judge erred in his findings as to the value of the property pool, particularly the Australian and Hong Kong companies, in four ways. Firstly, his Honour should have taken into account that the winding up of the companies was inevitable. Therefore, it was argued, their value should have been assessed on the basis that they were about to be liquidated.
Secondly, counsel for the appellant submitted that the evidence upon which the trial judge formed his conclusions was out of date or inaccurate. It was argued that the evidence derived from the report of Mr J, an accountant employed by the wife, was up to five years old and therefore did not represent the true state of affairs. Additionally, his Honour failed to take into account the fact that contracts of the Australian Company were cancelled in September 2000 and that the bank balance of the company after the payment to the Australian Tax Office would only amount to US$18,000.00.
Furthermore, it was submitted that the documents upon which Mr J relied did not include a company search as to the state of the Hong Kong companies. As a result, the report does not disclose the fact that one of these Hong Kong companies had been wound up and the other, moribund for some time. Counsel for the appellant submitted that the wife’s solicitors had been advised that one of the companies had gone into liquidation but did not disclose this to Mr J. As a result of this material non disclosure, the report of Mr J, upon which the trial judge based many of his findings, was meaningless.
In oral submissions, counsel for the appellant elaborated further on this point. He argued that the trial judge’s final conclusion that sum total of the property pool ($4,275,222.00) was based on Mr J’s valuations, which did not represent the present state of the companies. Consequently, the trial judge’s orders regarding the manner of division of the property to give each party an equal share was premised on the basis that Mr J’s report was approximately correct. In reality, the wife received all the Australian assets and the husband received the “empty shell of the overseas companies,” one of which has been wound up and the other being in liquidation. This is connected with the fourth ground of appeal, which is discussed below.
Thirdly, it was argued that the interlocutory proceedings in this matter and the resulting injunctions adversely affected the value of the businesses after September 2000. In his written submissions, counsel for the appellant contended that this is evident from an affidavit which was not before the trial judge because of the undefended nature of the proceeding. It was also submitted that the wife did not properly disclose the true position of the companies to the trial judge.
The fourth point upon which it was submitted his Honour erred, was in failing to take into account the tax consequences of the Australian and Hong Kong companies, particularly given the failure of the Hong Kong businesses. It was submitted that the trial judge did not have regard to the substantial Australian tax liability of the business, which totalled approximately $488,711.45. In written submissions, counsel for the appellant briefly mentioned alleged tax evasion by the wife and its potential consequences in Hong Kong and Australia, but did not elaborate further on this point during oral submissions.
The thrust of the fourth ground of appeal is that the result of the trial judge’s orders would not have the effect of dividing the property between the parties on an equal basis. It was submitted that his Honour’s conclusion about the net asset pool was drawn from what was contended to be Mr J’s inaccurate and “valueless” report. It was submitted that as a result of the property orders, the wife received the Australian assets which represent the bulk of the net asset pool, and the husband received the foreign companies, one of which has been wound up and the other, in liquidation. Counsel also briefly remarked upon the fact that the wife retains ownership of the two Beijing units which were already held in her name.
It was submitted that in any event, the trial judge erred in the exercise of discretion by concluding that the property should be divided between the parties on an equal basis (ground five). It was submitted that the husband made substantially greater contributions to the assets of the parties because of his business activities, particularly through the business contracts he brought to the marriage. Consequently, the correct division between the parties should have been 60 per cent to the husband and 40 percent to the wife.
In the sixth ground of appeal, the husband seeks leave to adduce further evidence concerning his non compliance with orders and the true value of companies. This ground of appeal does not allege any error on the trial judge’s part. Rather, it is an apparent reference to the undefended nature of the proceeding. No application was filed to provide this further evidence. It is not a true ground of appeal and will not be considered further.
Respondent’s Submissions
Counsel for the wife did not respond to the first ground of appeal, as this matter has been substantially dealt with in the first appeal.
With respect to the second ground, counsel for the wife acknowledged that the trial judge did not explicitly indicate in his reasons that he took the husband’s material into consideration. However, during one of the prior interlocutory proceedings, his Honour sought from each party a list of the affidavits to be relied upon. Therefore, it was submitted that the trial judge read not only the wife’s material but also whatever material the husband had listed and requested to be considered at that time.
In any event, it was argued that the essence of an undefended hearing is that none of the material filed by the party in default is to be before the Court.
Counsel for the respondent made a number of written submissions refuting the assertion that the trial judge had erred in his findings regarding the value of the property pool. Firstly, it was argued there is no evidence to support the assertion in the appellant’s submissions that the companies would be wound up inevitably. This submission appears to be correct. Secondly, it was submitted that there was evidence that the husband continued to trade and that he “novated the contracts which subsisted as at the date of Justice Lawrie’s injunctions”. It was submitted that the husband traded through a new entity with a similar name, which was the Australian Company.
Concerning the third point, that Mr J’s report was inaccurate, counsel for the wife referred to the introduction of the report, which illustrates that the expert valued both the original companies and the husband’s new company as a whole. Mr J referred to them collectively as “[…]” the companies and his opinion as to value included consideration of the husband’s new company which was the then trading entity. When making his assessment, it is accepted that Mr J was entitled to consider the position of the businesses relying upon such evidence as had been provided to the wife by the husband during the discovery process.
Finally, regarding the tax consequences, it was submitted that the expert did have regard to the tax consequences and had assumed that tax would be paid in Hong Kong. This is evident in paragraph 40 of his report.
In written submissions, counsel for the wife indicated that he would address the husband’s fourth ground of appeal when the calculations and references which were relied upon by the husband were provided to him.
Finally, it was submitted that the husband’s contention that the trial judge erred in dividing the property on an equal share basis cannot be made out having regard to the principles of appellate review contained within House v the King (supra).
Conclusion
The argument in relation to the decision of the trial judge to order that the matter be heard “undefended” was considered in the previous appeal. The question then is whether the judge properly dealt with the matter.
If anything, it seems that the judge dealt with the matter in a manner that was somewhat generous to the husband. In any event, absent it being clear that the valuation evidence was imprecise or that there was any reason to doubt the figures as provided in the wife’s case, his Honour was entitled to make the findings he made about the parties assets and liabilities. The findings in relation to contribution were open to him. The judge otherwise followed the well known principles in relation to how assessments should be made leading to orders for property settlement. The appellant as unable to demonstrate that his Honour made any error in his approach to this matter, or in the orders made. The appeal should be dismissed.
In relation to both appeals it is appropriate to repeat here what was said by a previous Full Court in Tate v Tate (supra):
99.In attempting to match the limited resources of the Court to the demands of increasing lists, the principles of case management are assuming greater prominence. Never an end in themselves, they are and must always remain subject to and never prevail over the attainment of justice as “the paramount consideration” (State of Queensland v J.L. Holdings; supra). But justice in matters such as this is due to each party to litigation (see the comments of Kirby J in Allesch v Maunz [2000] HCA 40 at paras 38-40). Case Management guidelines, principles and orders are designed to facilitate the ends of justice by encouraging: full frank and prompt disclosure; settlement; identification of the matters genuinely in dispute needing the Court’s determination; and the expeditious marshalling and presentation of relevant evidence.
…
107.The Court, no less than those who litigate before it, is constrained by the interplay of competing principles. In the attainment of justice in individual matters, which will always remain the paramount consideration, appropriate sanctions are essential to see that its orders and directions are obeyed in the pursuit of that end. Such a goal overrides any notions of punishment for disobedience of such orders.
108.Where, as here, non-compliance with the orders and directions of the Court will, in the opinion of the trial Judge, defeat the attainment of justice, then suitable remedies must be found. In this instance the remedy necessarily excluded the husband from any further participation in the proceedings. Whilst such cases are “exceptional”, and indeed unusual, no litigant, whether legally represented or not, should harbour any doubt that manipulation of the court processes, (as was attempted and indeed partially achieved in this instance), through disregard of and deliberate non-compliance with its orders and directions will attract other than the strongest measures from the Court. In doing justice to both parties, the exclusion of a defaulter, whose defaults threaten the achievement of justice, is not only an option, but, in such circumstances, becomes a regrettable necessity.
I would dismiss the application for leave to appeal the order made on 16 August 2005, and also the appeal against the order for an undefended hearing made on 16 August 2005. I would dismiss the appeal against the orders made on 11 April 2006.
I certify that the preceding two hundred and thirty nine (239) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court.
Associate:
Date: 31 July 2008
ANNEXURE A – Documents Before the Trial Judge
Documents Relating to the Marriage
Decree Nisi 8 January 2003
Certificate of Divorce 9 February 2003
The Wife’s Documents
Application for Final Orders in Relation to Property 1 September 2000
Affidavit of the Wife 1 September 2000
Notice of Ceasing to Act by Wife 24 November 2000
Notice of Address for Service by Wife 30 November 2000
Notice of Address for Service by Wife 5 November 2002
Amended Application 4 September 2003
Affidavit of FX 29 October 2003
Affidavit of Wife (Principal) 12 August 2004
Affidavit of Mr J 13 August 2004
Affidavit of Wife 1 September 2004
Affidavit of Wife 16 September 2004
Affidavit of Wife 22 March 2005
Affidavit of Wife 3 June 2005
Affidavit of Wife 13 July 2005
Affidavit of Wife 15 August 2005
Letter from Wife’s Solicitors to Associate 1 December 2005
Minute of Orders Sought (tendered at hearing) 29 November 2006
Case Outline Document (tendered at hearing) 29 November 2006
The Husband’s Documents
Affidavit of Husband 4 September 2000
Affidavit of Husband 4 September 2000
Notice of Address for Service by Husband 13 October 2000
Application for Divorce by Husband 11 November 2002
Application in Form 8 by Husband 18 November 2002
Notice of Address for Service by Husband 22 January 2003
Financial Statement by Husband 25 February 2003
Affidavit of Evidence in Chief by Husband 26 October 2004
Affidavit of Husband 1 September 2004
Affidavit of Documents by Husband 15 October 2004
Affidavit of Husband 17 January 2005
Application in Form 2 by Husband 14 January 2005
Affidavit of Husband 21 March 2005
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