Chang and Chen

[2019] FamCAFC 105

FAMILY COURT OF AUSTRALIA

CHANG & CHEN [2019] FamCAFC 105

FAMILY LAW – APPEAL – Application for security for costs – Where the application is brought bona fide – Where the respondent had previously failed to give full and frank disclosure as to her financial circumstances – Where it cannot be found that an order for security for costs would stifle the appeal – Application allowed.

Family Law Act 1975 (Cth) s 117
Family Law Rules 2004 (Cth) rr 19.05, 22.12

Sawer & Sawer [2007] FamCA 140

APPLICANT: Hwei Ching Chang

RESPONDENT: Mei-Ling Chen

FILE NUMBER: SYC 2741 of 2014

APPEAL NUMBER: EAA 31 of 2019

DATE DELIVERED: 21 June 2019

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Ryan J

HEARING DATE: 13 June 2019

LOWER COURT JURISDICTION: Family Court of Australia

LOWER COURT JUDGMENT DATE: 27 February 2019

LOWER COURT MNC: [2019] FamCA 97

REPRESENTATION

COUNSEL FOR THE APPLICANT: Dr Barnett

SOLICITOR FOR THE APPLICANT: Linden Legal

SOLICITOR FOR THE RESPONDENT: WB Legal

Orders

1. That Mei-Ling Chen pay to the trust account of Linden Legal $20,000 as security for any costs ordered in the appeal (EAA 31 of 2019) within twenty-one (21) days from the date of these orders.

2. That in the event that security as provided in Order 1 herein is not paid, then the appeal be stayed pending compliance with the orders.

3. That the costs of this application are reserved to the appeal hearing, however, in the event that the appeal is deemed abandoned or is dismissed, the applicant (Hwei Ching Chang) has twenty-eight (28) days within which to relist his application for costs determination.

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

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

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

THE APPELLATE JURISDICTION OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY

Appeal Number: EAA 31  of 2019
File Number: SYC 2741  of 2014

Hwei Ching Chang

Applicant

And

Mei-Ling Chen

Respondent

REASONS FOR JUDGMENT

1. By an Application in an Appeal filed on 22 May 2019, Hwei Ching Chang (“the applicant”) seeks an order that Mei-Ling Chen (“the respondent”) pay $56,000 to his solicitors as security for any costs awarded to him in appeal EAA 31 of 2019, and that the appeal be stayed until payment is made.  This appeal is instituted by the respondent against orders made by the primary judge on 27 February 2019, dismissing the respondent’s application for property settlement orders.  

2. The respondent resists the application.

Relevant background

1. So as to give this application context, it is necessary to refer to some brief background facts.  These are taken from her Honour’s reasons and the documents filed by the applicant in this application.  No documents were filed by the respondent.

2. The parties married in 1989 and have one, now adult child together.  The respondent is a resident of Taiwan and travels to Australia on a tourist visa.  The applicant lives in an Australia.  The marriage ended in 2014 and in the same year the respondent commenced property proceedings in the Federal Circuit Court of Australia, seeking an order which would divide the parties’ property between them in equal shares.  The applicant sought an order for that application to be dismissed.  The matter was transferred to the Family Court of Australia and in February 2019 the hearing took place over three days before the primary judge. 

3. One of the main issues at trial was the respondent’s lack of financial disclosure. The primary judge ultimately determined that a “consequence of the [respondent’s] failure to make full and proper disclosure is that I am unable to conclude that it is appropriate to make an adjustment in her favour” [172].

4. On 26 March 2019 the respondent filed a Notice of Appeal which was later deemed abandoned pursuant to r 22.12(3) of the Family Law Rules 2004 (Cth) (“the Rules”) as the draft appeal index was not filed by the due date. On 14 May 2019, Aldridge J ordered that the appeal be reinstated and that the respondent pay the applicant’s costs in the amount of $500.

5. There are several grounds of appeal.  Stated broadly, Ground 1 asserts an error of fact, in that the primary judge incorrectly calculated the period of cohabitation.  Ground 2 challenges the primary judge’s exercise of discretion as to the weight afforded to the respondent’s parenting contributions.  Grounds 3 to 6 assert that the primary judge erred by failing to take into account certain considerations, including:

   ·“that the parties’ living arrangements were the result of a joint decision to improve their joint assets” (Ground 3);

   ·“the growth in the [applicant’s] cash assets and superannuation interests” (Ground 4);

   ·“the growth of the [respondent’s] contribution of $360,000 over a period of 15 years” (Ground 5); and

   ·“that the [applicant] controlled all of the investments in Australia” (Ground 6).

   (Respondent’s Notice of Appeal filed 26 March 2019)

6. Ground 7 asserts that the dismissal order was manifestly unjust.

7. The applicant bases his application on the proposition that, in the event that he is successful in the appeal and a costs order is made in his favour, he has no way of enforcing such order, as the respondent does not reside in Australia, is not an Australian citizen, and claims to have limited assets in Australia or abroad.  There is also an outstanding costs order against the respondent in favour of the applicant.  In any event, the applicant asserts that the evidence establishes that it is likely that the respondent in fact has the ability to meet an order for security costs and that such an order would not stifle the appeal.

The security for costs application

1. The principles governing an application for security for costs were set out by the Full Court in Sawer & Sawer [2007] FamCA 140:

   19. The power in this Court to make an order for security for costs is to be found in s 117(2) of the Act, which is in the following terms:

   If, in proceedings under this Act, the court is of [the] opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.

   …

   21. The authorities establish that in exercising the discretion to order security for costs, it may also be relevant for the Court to consider in addition to the financial circumstances of the parties and the other five specific matters mentioned in s 117(2A), the following matters:

   a)        the prospect of success of the litigation;

   b)       whether the claim for security is made bona fide;

   c)       whether or not an order for security would stifle the     litigation;

   d)        whether or not the litigation may involve a matter of public    importance;

   e)        whether or not there has been a delay in bringing the   application for security;

   f)         whether there would be difficulty in enforcing an order for    costs

   (Luadaka v Luadaka (1998) FLC 92-830; Jones and Jones (2001) FLC 93-080; Adult Guardian and Mother's Parents and B and Child's Representative (2002) FLC 93-116.)

2. These factors are largely reflected in r 19.05(2) of the Rules and relevant to this matter, r 19.05(2)(g) provides that the Court may have regard to any unpaid costs orders when determining an application for security for costs.

Prospects of success

1. It is the respondent’s contention that this is an appeal of importance which has some chance of success.  

2. Whilst the bar to appellate intervention on a challenge to the exercise of discretion is set high, it is not impossible.  Having regards to the primary judge’s reasons and that no challenge is raised in relation to the finding of deliberate non-disclosure made against the respondent, the prospects of the appeal being successful do not seem promising.  However, for the purposes of this determination, it is not argued that it is doomed to fail.  I am not persuaded the appeal is totally devoid of merit. 

Whether the claim for security is made bona fide

1. There is no doubt that the applicant’s concerns are sincerely held. Her Honour’s reasons demonstrate the respondent’s lack of integrity concerning financial disclosure [149]. The respondent’s “deliberate” failure to make proper disclosure demonstrates why the applicant has good reason to be concerned that the respondent would not readily comply with an order for costs against her in the appeal.

2. It is accepted that the application is brought bona fide.

Financial circumstances of the parties

1. At the time of the hearing the applicant was 76 years old and had been retired for several years.  He has assets of some real value and which are sufficient to enable him to meet his own costs.  The applicant deposes that his current costs in relation to the appeal are approximately $5,000; he has received a fee estimate from his solicitors totalling approximately $56,000 (which includes counsel fees). 

2. At the time of the hearing the respondent was 66 years old. On the evidence available, the primary judge was unable to make a finding about her employment status; but noted that her capacity for gainful employment would be limited by her age [169]. It is noteworthy that she chose not to file evidence in this application as to her financial circumstances. Furthermore, she has placed $20,000 in her solicitor’s trust account, which demonstrates she has access to funds of some magnitude.

3. As I have already mentioned, one of the main issues at trial was the respondent’s lack of full and frank disclosure, which makes the task of assessing her current financial position somewhat challenging.  At [149] the primary judge said:

   It was not submitted in the [respondent’s] case that any lack of disclosure was inadvertent. The [respondent’s] failure to make proper disclosure was deliberate, as was amply demonstrated in her cross-examination where she repeatedly said that relevant documents were in her possession in Taiwan or in the possession of her brother. It was peculiarly within the [respondent’s] power to make disclosure of her bank accounts in China and Taiwan and only she could have ensure that the statements and other relevant documents relating those accounts were before the Court. Similarly, it was only the [respondent] who could have put before the Court the documents relevant to the various transfers of the Taoyuan apartment which she said were in the possession of her brother. Absent any evidence on the part of the [respondent] that she had asked for the documents and that her brother had refused to give them to her, the conclusion that her failure to provide those documents was deliberate is inevitable.

4. At [171] the primary judge found that the respondent “lives, rent free, in an apartment in Taiwan in relation to which she has a lease for the next 19 years. She is not required to pay rates, levies or repairs.”  None of these findings are under challenge in the appeal.

5. The respondent has not said that she is impecunious or that if the order for security was made, she could not pay it.   

Whether or not an order for security would stifle the litigation

1. The next question to be answered is whether an order for security for costs would stifle the litigation.  The primary judge was not able to make findings as to the respondent’s property or assets [170], but noted the following:

   124.The [respondent] has sworn two Financial Statements in the proceedings, the first in May 2014 and the second in August 2018. In both those statements, she swore that she had no income, no bank accounts and no other assets.

   125.    That evidence was not accurate in a number of aspects.

   …

   137.I am not satisfied that the [respondent] is not the beneficial owner of the [Taoyuan] apartment.

   …

   146.I am not satisfied that the [respondent] has no money in bank accounts in China or Taiwan.

   …

   148.I am not satisfied that the [respondent] has made proper disclosure and I am unable to make a finding about what assets she may have in Taiwan.

2. To this end, the respondent has not presented evidence of her finances or any property or assets in her possession or under her control.  At this stage, the implication of the evidence is that the respondent has access to funds from which a costs order could be recovered.  However, it is far from clear where these funds are located.  I am satisfied that the applicant is likely to face greater than usual difficulties enforcing any order for costs made in his favour.  I am not persuaded that an order for security for costs would stifle the litigation.  These matters weigh heavily in support of the application.

Does the appeal involve a matter of public importance?

1. The appeal does not involve a matter of public importance.

Whether or not there has been a delay in bringing the application for security?

1. The Notice of Appeal was filed on 26 March 2019 and the application for security for costs was filed on 22 May 2019.  Given that the appeal was deemed abandoned and only recently reinstated, the applicant has moved promptly.

Would there be a difficulty in enforcing an order for costs?

1. This issue has been canvassed earlier in these reasons.  On 14 May 2019, Aldridge J ordered the respondent to pay the applicant’s costs of an Application in an Appeal that was before his Honour in the sum of $500, which has not been paid.  The only available conclusion is that the respondent would not voluntarily meet a costs order.

2. This consideration supports the application for security.

Conclusion

1. It should be noted that an order for security for costs is not to provide a fund from which the applicant can fund the litigation, it is a provision against injustice that might occur when a successful litigant is deprived of the benefit of a costs order.  In my view, there is sufficient evidence to establish that it is necessary to order the respondent to pay security for costs, but not to the extent of the amount sought.  The applicant deposes that he will be seeking costs on an indemnity basis.  The estimate is for solicitor’s costs of the appeal at $18,000, barristers’ costs at $33,000, together with the applicant’s costs to date of approximately $5,000.  In the absence of evidence as to precisely how that sum has been arrived at, I would not accept the estimate of $56,000 as a reasonable prediction of the costs likely to be recovered under a costs order.  Calculated on a party/party basis, the parties agreed that costs in the amount of $20,000 would be a reasonable estimate.  

2. In these circumstances there should be an order that the respondent pays security for costs in the amount of $20,000.

3. Although the respondent opposed any order that she give security for costs, in the event that an order was made, it was submitted the respondent should be given 21 days to pay.  The applicant agreed and the order will reflect the longer period.

I certify that the preceding twenty-nine (29) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Ryan delivered on 21 June 2019.

Associate:  K. Attard

Date:  18 June 2019