Zubcic & Zubcic (No. 2)
[2020] FamCA 1024
•9 December 2020
FAMILY COURT OF AUSTRALIA
Zubcic & Zubcic (No. 2) [2020] FamCA 1024
File number(s): SYC 6290 of 2013 Judgment of: REES J Date of judgment: 9 December 2020 Catchwords: FAMILY LAW – DISCHARGE OF TRUSTEES – Where trustees are permitted to retire once the funds under their control have been distributed – Where the assertion by the husband and the wife that the quantum of the trustees’ expenses and remuneration was too high does not constitute evidence capable of demonstrating that the charges are unreasonable – Where the Trustees would be justified in retaining fund under their control to be held as security for the costs of any proceedings brought – Where the Trustees may retain these funds for four months. Legislation: Family Law Act 1975 (Cth) s 79
Trustee Act 1925 (NSW) s 63
Cases cited: Adsett v Berlouis (1992) 109 ALR 100
Mullane & Mullane (1983) 158 CLR 436
Slapp & Slapp (1989) FLC 92-022
Number of paragraphs: 96 Date of last submissions: 25 November 2020 Date of hearing: 2 December 2020 Place: Sydney Counsel for the Applicants: Mr Golledge SC with Mr Parrish Solicitor for the Applicants: Roser Lawyers First Respondent: In Person Second Respondent: In Person Solicitor for the Third Respondent: Australian Government Solicitor Solicitor for the Fourth Respondent: John de Mestre & Co Pty Ltd ORDERS
SYC 6290 of 2013 BETWEEN: MR WILLIAMS
First Applicant
MR XAVIER
Second Applicant
AND: MS ZUBCIC
First Respondent
MR ZUBCIC
Second Respondent
COMMISSIONER OF TAXATION
Third Respondent
(and another named in the Schedule)
ORDER MADE BY:
REES J
DATE OF ORDER:
9 DECEMBER 2020
THE COURT ORDERS:
1.That upon distribution by the First and Second Applicants (“the Trustees”) of all of the funds under their control in accordance with the Orders made on 6 March 2018, as varied by the Full Court on 9 October 2019, the Trustees be discharged from office.
2.That pursuant to section 63 of the Trustee Act 1925 (NSW), the Trustees would be justified in retaining, from the funds under their control, the sum of $200,000 (“the Retained Amount”), to be held as security for the costs of any proceedings brought against them as referred to in Order 3 below.
3.That the Trustees be released from any and all claims whatsoever and howsoever arising from their appointment made pursuant to the Orders of 6 March 2018, unless such claim is instituted within four months of the distribution paid to the wife and the husband pursuant to Order 1, or within such longer period as the Court may on application made before the expiry of that period allow.
4.That if no proceedings as referred to in Order 3 above are commenced within the period allowed, the Retained Amount shall be distributed by the Trustees in accordance with the Orders made by the Full Court on 9 October 2019.
5.That there be no order as to costs as to the Application in a Case filed by the Trustees, or the Responses to the Application in a Case filed by the First and Second Respondents, but the Trustees’ reasonable legal costs of these proceedings shall form part of the Trustees’ costs pursuant to paragraph 9.1 of the Orders made on 6 March 2018 and varied by the Full Court on 9 October 2019.
6.That the response of the wife filed 7 August 2020 is dismissed.
7.That the response of the husband filed 14 October 2020 is dismissed.
8.That from the amount otherwise payable to the husband pursuant to Order 1, the Trustees shall pay to the trust account of John de Mestre & Co Pty Limited the sum of $426,090.79 to be held pending the determination of the quantum of the fees outstanding to the husband’s former solicitors (“the Fourth Respondent”).
THE COURT NOTES:
9.That the Trustees will pay to the Commissioner for Taxation such sums as have been assessed against the wife and the husband by way of Capital Gains Tax together with any interest and charges attaching to such assessment, noting that the assessment of the tax liability of the wife is $25,944.20 and the assessment of the tax liability of the husband is $170,866.40.
10.That the Trustees are authorised to make the following payments:
i.the sum of $83,936.25 to Mr B Zubcic pursuant to the Orders dated 13 March 2020, such sum to be paid from the amount otherwise payable to the wife pursuant to Order 1; and
ii.the sum of $16,948.33 to the wife pursuant to the Orders dated 25 September 2018, such sum to be paid from the amount otherwise payable to the husband pursuant to Order 1.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Zubcic & Zubcic has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
Rees J:
Protracted proceedings for property settlement between Ms Zubcic (“the wife”) and Mr Zubcic (“the husband”) were determined by reasons for judgment delivered and orders made on 6 March 2018.
Order 8 made that day provided:
That Mr Williams and Mr Xavier of Y Partners Chartered Accountants be appointed trustees for sale of the property at B Street, Suburb C (“B Street”) and the husband and the wife do all acts required to procure that appointment.
On 9 October 2019, the Full Court ordered:
Paragraph 9 of the property settlement order made by Justice Rees on 6 March 2018 be varied by deleting paragraph 9 and inserting in its place a paragraph in the following terms:
9.That upon the sale of the property at B Street, the trustees of sale shall apply the proceeds in the following manner and priority:
9.1in payment of the costs of sale, including but not limited to the costs of the trustees for sale, agents’ commission, legal fees on the conveyance;
9.2in payment of any amount of Capital Gains Tax in relation to B Street assessed against either the husband or the wife;
9.3payment to Centrelink of the sum of $59,150;
9.4payment to the wife of the sum of $36,710;
9.5payment to the wife of 66.35% of the balance;
9.6payment to the husband of 33.65% of the balance;
9.7on the basis that the property at B Street has sold for $2,900,000, payment to the wife of 55% of the net increase in the sale proceeds over the proceeds from a sale for $2,800,000, and payment to the husband of 45% of that increase; and
9.8the husband is to pay from his share of the balance the following:
9.8.1in payment of the sum of $65,000 to the wife by way of maintenance for [the parties’ child] in accordance with Order 6;
9.8.2in payment of the costs of Mr and Ms Gomes incurred in these proceedings in accordance with orders made on 1 March 2018; and
9.8.3in payment of the sum of $100,000 to the husband’s solicitors, to be held by them until the determination of the dispute over the payment of costs of the proceedings in the Supreme Court of New South Wales Case Number 2015/… and distributed in accordance with that determination.
The application now before the Court for determination is the application of Mr Williams and Mr Xavier, as trustees (“the trustees”), filed 17 July 2020 in which orders are sought in the following terms:
1.That paragraph 9 of the Property Settlement order made on 6 March 2018, be varied so that the Trustees of Sale shall pay all funds presently held by them, after payment of their claim for outstanding remuneration and costs, including the costs of this application, into a Trust Account established by the Applicants at an Australian deposit-taking institution, with such account to be opened in the name of both the husband and the wife.
2.That the husband and the wife be required to provide whatever information or documentation is required by the Trustees for Sale to enable the establishment of that bank account.
3.That upon payment being made into the bank account, in accordance with paragraph 1 hereof, the Trustees of Sale be discharged from office as Trustees and be released from any and all claims whatsoever by either co-owner or any third party arising from their appointment as Trustees pursuant to the orders of 6 March 2018.
4.Such other and further orders as the Court deems fit.
That application is opposed by both the wife and the husband, each for different reasons.
The wife seeks the following orders:
1.That the Orders sought as Orders 1, 2, 3 and 4 of the Application of the applicant trustees filed on 17 July 2020 be dismissed.
2.That no later than 7 days of order the applicant trustees do all acts and things, sign all documents necessary and give all authorities and instructions to pay to the respondent wife the sum of $1,500,000 from the trust funds held by them.
3.That within 7 days of order the applicant trustees within 14 days of this Order provide to the parties a full and proper accounting of their receipt and administration of the Trust Funds including but not limited to provision of –
a. a complete Statement of Account of all monies received and or withdrawn from the Trust funds;
b. Invoices / tax invoices prepared and or generated by the applicant trustees;
c. Invoices / tax invoices received from the applicant trustee’s legal representatives or any other person relevant to the administration of the Trust funds;
d. copies of all relevant bank statements;
…
4.That the applicant trustee pay the respondent wife’s costs of and incidental to these proceedings.
5.That on the application of the applicant trustees otherwise stand adjourned until XXXX
(As per the original)
The husband seeks the following orders:
1.Seek leave to file, serve, and rely on my material a few days late due to non compliance by the applicant trustees with serving documents late, as per Orders 14 September 2020 Registrar McNamara.
2.That the Orders sought as Orders 1, 2, 3 of the Application of the applicant trustees filed on 17 July 2020, be dismissed.
3.That the quantum of the Trustees’ costs be as assessed.
4.That the Applicant Trustees pay out funds, in accordance and compliance, as per Orders of the Full Court on 9 October 2019
9.2 in payment of any amount of Capital Gains Tax in relation to B Street assessed against either the husband or the wife;
9.3 payment to Centrelink of the sum of $59,150;
9.4 payment to the wife of the sum of $36,710;
9.5 payment to the wife of 66.35% of the balance;
9.6 payment to the husband of 33.65% of the balance;
5.In the alternative to above point 4, if 9.1 and 9.2 of those Orders is unable to be resolved due to costs dispute between the trustee and beneficiaries then an amount be quarantined and held, pending Costs assessments of the Trustee, and payment of CGT Assessments of the respondents, and the remainder paid out as per the Orders 9.2 to 9.6, Orders of the Full Court on the 9 October 2019
6.In the alternative to above point 5, the applicant trustees do all acts and things, sign all documents necessary and give all authorities and instructions to pay to the respondent wife the sum of $1,000,000, and to the respondent husband $500,000, from the trust funds held by them, and the remainder of funds held in trust pending costs assessments of Trustee Costs and payment of CGT as assessed for both parties.
7.The amount of $100,000 ( from funds held by the Trustee on our behalf from Orders of the Full Court on the 9 October 2019) be released to me, and an equivalent amount to the First Respondent Ms Zubcic, to enable me to engage legal representatives.
8.That within 14 days of this Order provide to the respondent beneficiaries a unredacted, full and proper accounting of their receipt and administration of the Trust Funds including but not limited to provision of a complete Statement of Account of all monies received and or withdrawn from the Trust funds, and unredacted tax invoices and itemized accounts received from the applicant trustee’s legal representatives, and all other documents related the administration of the trust funds.
9.An Order that the applicant trustees, and or, their legal representatives be found to be in contravention of the Orders of The Honourable Justice REES, Orders 6 March 2018, 9.2 onwards or in the alternative, as varied by the Orders of the Full Court of Strickland, Ryan and Watts 9 October 2019, Orders 9.1 to 9.6 , and specifically 9.2.
10.That the applicant trustee pay the respondent husband’s costs of and incidental to these proceedings.
11.That the applicant trustee pay the respondent wife’s costs of and incidental to these proceedings.
(As per the original)
Both the wife and the husband represent themselves.
On 14 September 2020, a registrar ordered that each party file any and serve any written submission upon which it was sought to rely no later than seven days before the hearing. All parties have filed written submissions.
The trustees relied on two affidavits of Mr Williams sworn on 16 September 2020 and 3 November 2020 together with 1,066 pages of documents annexed.
The wife relied on an affidavit sworn by her on 7 August 2020.
The husband relied on an affidavit sworn by him of 22 October 2020.
The third respondent is the Commissioner for Taxation (“ATO”), who was a party in the substantive proceedings, sought leave to be heard in relation to this application because, on one interpretation of the competing application of the trustees, there was a possibility that the payment of Capital Gains Tax (“CGT”) would be left to the parties, rather than effected from the trust fund.
The fourth respondents are the solicitors who acted for the husband in the substantive proceedings also sought to intervene in the proceedings, relying on an irrevocable authority signed by the husband which authorised the payment of their outstanding fees, together with counsel’s fees, from the husband’s share of the proceeds of sale of the trust property. They sought leave to intervene and an order that the amount they claimed be paid into the trust account of their solicitor until the claim was assessed or agreed. That application was opposed by the husband.
The sale of the B Street property for $2,900,000 was completed by the trustees on 5 November 2018.
The trustees’ application was filed on 17 July 2020. At that time, neither the husband nor the wife had obtained an assessment of the CGT which was payable on the sale of the B Street property. That was not an exercise which could have been undertaken by the trustees since the information which was required to be provided to the ATO in order for an assessment to be issued, could only be provided by each of the wife and the husband.
The trustees received the wife’s tax assessment on 27 July 2020 and the husband’s assessment on 14 September 2020. The wife was assessed to pay $25,944.20 and the husband was assessed to pay $170,866.40. The trustees queried the accuracy of the husband’s assessment.
The trustees asked each of the wife and the husband whether they agreed with the assessment obtained by the other. The wife advised the trustees that she did not agree with the accuracy of the husband’s assessment.
At the hearing of the trustees’ application, solicitor for the ATO confirmed that the ATO would be satisfied if the CGT were paid in accordance with the assessments.
The competing applications fall to be determined against that factual background.
THE LAW
In Mullane & Mullane (1983) 158 CLR 436, the High Court identified the characteristics of orders made pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”) in the following terms:
The effect of treating the order as if it had been made under s. 79 is that, subject to a limited jurisdiction to vary it or set it aside, the power of the Family Court to make an order under s. 79 is treated as having been exercised and as exhausted by that notional exercise. The limited jurisdiction to set aside or vary such an order is that conferred by s. 79A and exists only in special circumstances, namely, where the court is satisfied that there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence, the giving of false evidence or any other circumstance: s. 79A, and cf. In the Marriage of Taylor [(1977) 30 FLR 17; 15 ALR 266)] and on appeal sub nom. Taylor v. Taylor [(1979) 143 CLR 1]; In the Marriage of Branchflower [(1979) 44 FLR 16]. It is common ground that s. 79A has no application in the present case.
The Full Court of the Family Court, in Slapp & Slapp (1989) FLC 92-022 stated:
…Reference was made in support to a long line of decisions of this court starting with the remarks of the Full Court in In the Marriage of Kaljo (1978) 4 Fam LR 190, going on to In the Marriage of Molier and Van Wyk (1980) 7 Fam LR 18, and also In the Marriage of Ravasini (1982) 8 FLR 903.
It is not open to a court to make a substantive variation to orders previously made under S79. That proposition can today no longer be doubted. It is based upon the principle, endorsed by the High Court in the case of Taylor v Taylor (1979) 5 Fam LR 289, that an order under section 79 is a once and for all proposition.
Such an order can only be varied on appeal or, where the circumstances warrant the same, pursuant to section 79A.
The most recent statement of the law is found in the judgment of the Full Court in Reslan & Reslan [2020] FamCAFC 279:
The property settlement order made in February 2012 was intended to finally determine the financial relationships between the parties, as the Act implored be practicably done (s 81), and thereby exhausted the exercise of discretionary power under Pt VIII of the Act (Mullane v Mullane (1983) 158 CLR 436 at 440; Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 at [40]–[48]; Gabel & Yardley (2008) FLC 93-386 at [57]–[69] (“Gabel & Yardley”); Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466 at [108]–[113]).
Consequently, when the wife filed the fresh application in April 2020 seeking superannuation splitting orders to supplement the order made in February 2012, the Court’s jurisdiction was spent. The existing property settlement order could not be varied, reversed or supplemented outside the confines of an appeal or an application made at first instance under s 79A of the Act (Gabel & Yardley at [69]–[72]) and the proceedings initiated by the wife in April 2020 were neither of those things.
In so far as, by Order 1, the trustees sought to vary Order 9 as varied by the Full Court on 9 October 2019, that application was abandoned and the trustees sought to pay the CGT as assessed.
Senior counsel for the trustees helpfully reduced the issues for which the trustees advocated to the following four:
1.What is the trustees’ obligation in relation to the payment of the CGT having regard to the fact that the wife does not accept the accuracy of the husband’s assessment?
2.Whether the trustees, having distributed the funds held by them according to the orders, are permitted to retire.
3.Whether the trustees should be granted a release from liability.
4.The trustees’ remuneration.
I propose to deal with those four issues before moving to the separate issues advocated by the wife, the husband and the fourth respondent.
What is the trustees’ obligation in relation to the payment of the CGT having regard to the fact that the wife does not accept the accuracy of the husband’s assessment?
The gravamen of the wife’s submissions in relation to this issue is that she does not accept that the assessment obtained by the husband is accurate. In oral submissions, the wife said that she believed that the husband was deliberately inflating the amount of CGT to be paid by him in order to deprive her of funds. That submission is not, inherently, credible. The history of these proceedings is fraught with the efforts of both the husband and the wife to minimise their taxation liabilities.
However, assessments have issued and the ATO is bound by them.
The scheme of the orders is clear. The whole amount of the CGT, whether assessed to be paid by the wife or the husband, is to be paid in priority to all other claims on the funds except “the costs of sale, including but not limited to the costs of the trustees for sale, agents’ commission, legal fees on the conveyance”.
The wife contends that the respective CGT liabilities should be paid from their respective entitlements. As I understand her submissions, she asserts that the CGT owed by her should be paid from her entitlement and the husband’s from his. This, she submits, would be fair and to require her, in essence, to be burdened with a share of the husband’s assessment would be unfair.
I am not required to determine that argument.
The order of payment specified by the Full Court is clear. The whole of the CGT is to be paid before any distribution to the wife and the husband. That is a substantive order and cannot be varied absent an application pursuant to s 79A.
The trustees should pay the CGT as assessed.
Whether the trustees, having distributed the funds held by them according to the orders, are permitted to retire
Both the wife and the husband oppose the trustees’ being permitted to retire.
As I understand their respective submissions, they each assert that the trustees have overcharged them as beneficiaries or, in the case of the husband, that the trustees acted in breach of their obligations or negligently or improperly in their carriage of the sale of the B Street property.
Senior counsel for the trustees submitted that, at general law, a court may order the discharge of a trustee once the object of the appointment has been achieved. I accept that proposition.
Senior counsel for the trustees further submitted:
As a general rule, a receiver will not be discharged while some relevant claim remains unsatisfied or unresolved. The [husband] objects to a discharge on the basis that he wishes to make a claim against the Trustees for selling the Property at an undervalue. Despite raising this complaint in 2018, the [husband] has not taken any steps to initiate or advance any complaint about the Trustees’ conduct in the time since. If it was a legitimate claim, it would have been pursued during the 2 years which have elapsed. The Trustees ought not to remain in office indefinitely simply because [the husband] makes an allegation against them. Such would simply delay the distribution and increase costs.
(Footnotes omitted)
Neither the wife nor the husband advanced any reason to require the trustees to continue after the fund has been distributed.
The discharge of the trustees does not act as a bar to any claim made against them in their role as trustees and their continuing to act serves no ascertainable purpose.
The trustees are permitted to retire once the fund has been distributed.
Whether the trustee should be granted a release from liability.
The husband opposes the release sought by the trustees.
I infer that the wife does not oppose the release since, in her oral submissions, she said that although she does not agree that the trustees acted properly, she wishes the litigation to come to an end and would not be pursuing any claim against them.
In his oral submissions, the husband said that he wished to proceed against the trustees who, he alleges, have sold the property at an undervalue.
That has been the husband’s position since at least October 2018 when he filed an application in the Family Court of Australia submitting, inter alia, that the trustees had exchanged contracts at a price below market value. At that time, the trustees had already commenced proceedings in the Supreme Court of New South Wales (“the Supreme Court”) in relation to the caveat lodged by the husband against the title of the B Street property.
The trustees exchanged contracts on 16 August 2018. Settlement was to take place on 4 October 2018. The caveat was lodged by the husband on 4 October 2018, prior to settlement.
The trustees filed an application in the Supreme Court on 10 October 2018. On 1 November 2018, judgment was entered and it was ordered, inter alia, that the husband remove the caveat. There is no evidence that the husband, in the course of those proceedings, instituted a claim referable to the alleged breach of duty of the trustees.
The husband is not an inexperienced litigant. He has instituted and represented himself in proceedings in the Supreme Court in relation to the sale of another property owned by the husband and the wife at H Street, he represented himself in relation to a number of applications before me and he acted for himself in the appeal against the orders made on 6 March 2018.
In his oral submissions, the husband’s position was that he should have one year in which to institute proceedings against the trustees.
Senior counsel for the trustees, in his written submissions stated:
The intention of the present application is that the appointment will come to an end and the Trustees will distribute all monies presently held by them. The existence of the unprosecuted by [the husband] will delay that process. Prior to making a final distribution, the Trustees would be entitled to an indemnity from those monies, supported by a lien, as security for any costs incurred in defending themselves against claims for breach of duty arising from their appointment. At general law, the trustee is entitled to retain possession of the trust estate (even if removed from office) to secure the right of indemnity. Given the threats of litigation which have been made by [the husband], the Trustees would be entitled to retain those monies pending a release from those claims or the expiration of any Limitations period in respect of such claims. In like circumstances involving Court Receivers, the Courts have recognised an inherent power to grant such a release in favour of its officer.
(footnotes omitted)
The passage quoted above is a correct statement of the law.
The husband opposes the trustees’ being given a release, even after the expiration of a period of three months, and he opposes their retaining funds to secure their costs in the event that he should institute proceedings against them.
The trustees propose that there be a period of three months after they retire as trustees in which the husband can institute proceedings and for that period, the trustees propose to retain $200,000 from the trust fund as security for their costs. In the event that the husband does not institute proceedings, after the three months expires, the trustees will distribute the $200,000 to the wife and the husband. If he does institute proceedings, they will retain the funds and the amount will become subject to the determination of the court hearing the husband’s application.
The husband submitted that three months is too short a period for him to retain legal advice and institute proceedings. Whilst I do not necessarily accept that proposition, I am conscious that the holiday period is fast approaching and that lawyers’ offices close for a time. However, I consider that allowing the husband four months from the date of the orders to commence proceedings would do justice both to the husband on the one hand and to the wife and the trustees on the other by allowing the husband adequate time to institute his proceedings. All of the relevant documents are available in the material filed in respect of this application.
The orders will provide for the trustees to retain the sum of $200,000 and to be released if no claim is filed within four months of the date of these orders.
The trustees’ remuneration
Both the wife and the husband challenge the trustees’ remuneration. Each asserts that the charges are excessive.
Senior counsel for the trustees submitted:
The Regime specifically authorised the Trustees to be paid their costs in priority to all other distributions although it did not specify how those costs were to be calculated. In the absence of some different formula, the Trustees’ position is that they are entitled to be paid a reasonable amount for work done and are entitled to be reimbursed for expenses reasonably incurred.
(footnotes omitted)
That proposition arises from a long line of authority summarised in the decision of the Full Court of the Federal Court in Adsett v Berlouis (1992) 109 ALR 100.
Neither the wife nor the husband, in either their written or oral submissions, sought to distinguish between the expenses charged by the trustees and their remuneration.
In relation to the expenses incurred by the trustees, the wife, in her oral submissions, referred to two instances of the trustees’ claimed expenses where she asserted that the solicitors instructed by the trustees had charged excessively. In one instance, in relation to their response to a letter from a third party and in the other in their having charged for the preparation of invoices.
The husband did not refer to any other specific instance which, he asserted, constituted an unreasonable charge.
Neither the husband nor the wife pointed to any item of remuneration claimed by the trustees as being unreasonable.
Neither the wife nor the husband adduced any evidence from any expert in the area of trustees’ remuneration to suggest that the expenses of the trustees or the remuneration of the trustees was not reasonable.
The trustees relied on an affidavit of Mr Williams sworn on 3 November 2020 in which, at paragraph 93 to 107, he set out the evidence upon which they relied in support of their contention that their expenses and their remuneration were reasonably incurred. Annexed to that affidavit were some 216 pages of documents related to their expenses and their remuneration.
Once the wife and the husband disputed the reasonableness of the trustees’ charges, the onus was upon them to rebut the evidence of reasonableness upon which the trustees relied.
The mere assertion that the quantum of the trustees’ expenses and remuneration is too high does not constitute evidence capable of demonstrating that the charges are unreasonable.
Order 3 of the wife’s response filed 7 August 2020 and Orders 3, 5 and 8 of the husband’s response filed 15 October 2020 will be dismissed.
The wife’s response
In so far as, in Order 2 of the wife’s response, she seeks an interim distribution, that application is otiose since the trustees are now in a position to distribute the whole of the funds.
The husband’s response
In so far as, in Orders 6 and 7 of the husband’s response, in which he seeks an interim distribution, those applications are also otiose since the trustees are now in a position to distribute the whole of the funds.
Order 9 of the husband’s response can be dealt with shortly.
The trustees were appointed by the Court and they are entitled to seek guidance from the Court in the execution of their obligations.
The trustees’ application was filed on 17 July 2020. At that time, the trustees were not in a position to distribute the funds held by them in accordance with Order 9 made on 6 March 2018, as varied by the Full Court on 9 October 2019 (“Order 9”) because neither the husband nor the wife had obtained an assessment of his or her respective CGT liability from the ATO.
In so far as the trustees have not, to date, distributed the funds held, they have not done so pending the determination by the Court of the issues which have been raised by the trustees.
In those circumstances it is not necessary to deal with the technical defects in the husband’s application.
The husband’s application that the trustees be dealt with for contravention is dismissed.
The application of the fourth respondent.
The fourth respondents are the solicitors who acted for the husband in the substantive proceedings.
By their solicitor, they have sought leave to intervene in the proceedings and, if leave is granted, an order that from the funds due to be paid to the husband pursuant to Order 9, the sum of $426,090.79 be paid into the trust account of the fourth respondent’s solicitors, pending the resolution by agreement or assessment, of their claim against the husband for outstanding costs including counsel’s fees.
Leave to intervene was not opposed and is granted.
The fourth respondent relies upon an irrevocable authority signed by the husband on 21 November 2017 in the following terms:
I, [the husband]… HEREBY IRREVOCABLY AUTHORISE AND DIRECT you to pay to my Solicitors [named]… or as they shall direct, all outstanding fees and disbursements from my share of any controlled monies account, trust account and any monies from which I am entitled from the sale of [the B Street property].
The receipt of [the solicitors] shall be sufficient discharge for you.
This Authority and Direction is given for valuable consideration and relates to [the solicitors’] unpaid costs and disbursements in relation to work done by them for my Family Law proceedings. This Authority and Direction cannot be revoked without the written consent of [the solicitors].
(Emphasis in the original)
The husband does not deny that he signed the authority. In his submissions, the husband conceded that the quantum of fees owed to the fourth respondent was currently in the process of assessment and a firm of costs assessors has been engaged.
However, where the husband did not authorise the trustees to act in accordance with the authority, the trustees have declined to do so and sought guidance from the Court.
The husband, in oral submissions, said:
The court orders don’t say anything about [the solicitors]. The irrevocable offer that – or something you mentioned, I recollect, that’s pretty old. That was revoked a long time ago. There’s no need for this court to intervene.
The court orders of the Full Court, they’re fairly black and white. They don’t allow for every creditor I have and, your Honour, you might well imagine that I’ve been out of funds, really, for eight years now. I probably have more than one creditor. Do you really expect them all to come to this court and have you vary the court orders of the Full Court to have some funds go to some other persons? No. The funds go out as per the court order. I don’t think I’m being overly optimistic. I don’t think I’m desiring more than I’m entitled to.
I understand the gravamen of the husband’s submission to be that any direction that the trustees pay funds in accordance with his irrevocable authority would constitute an impermissible variation of Order 9.
I reject that submission.
The trustees, in distributing funds to the husband in accordance with Order 9, are entitled to do so having regard to the husband’s own direction about how those funds are to be applied. He has given an irrevocable authority to the trustees to direct those specified funds to the solicitors in the same way that he will, no doubt, direct the trustees to pay the balance of the funds into specified bank accounts. The trustees will do no more than follow the husband’s irrevocable authority.
The trustees are authorised, in accordance with that authority, to pay the sum of $426,090.79 into the trust account of John de Mestre & Co solicitors, to be held pending the determination of the amount of outstanding fees to be paid to the fourth respondent.
Outstanding costs orders
A number of orders for the payment of costs have been made in the course of these proceedings.
On 25 September 2018, the Full Court ordered that the husband pay to the wife costs fixed in the sum of $16,948.33.
On 13 March 2020, I ordered that the wife pay to Mr B Zubcic (the second respondent in the substantive proceedings) the sum of $83,936.25, such sum to be paid from the amount otherwise payable to the wife.
The wife has not been paid the amount ordered to be paid to her by the husband.
The wife has not paid the amount ordered to be paid by her to Mr B Zubcic and consents to that payment being made from the funds held on her behalf by the trustees.
To avoid any doubt, the trustees are authorised to make those payments.
Costs
Both the wife and the husband seek an order that the trustees pay their costs of these proceedings.
Those applications will be dismissed.
The wife and the husband have been wholly unsuccessful.
In any event, if the trustees were ordered to pay the costs of the wife and the husband, they would be entitled to pay those costs from the trust funds so that, in essence, the wife and the husband would be paying their own costs.
Thus there is, in any event, no utility in an order for costs as sought.
I certify that the preceding ninety-six (96) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Rees. Associate:
Dated: 9 December 2020
SCHEDULE OF PARTIES
SYC 6290 of 2013 Respondents
Fourth Respondent:
YZ LAWYERS
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