New South Wales Supreme Court CITATION : Megna & anor v Marshall & anor; Tory v Marshall & anor [2006] NSWSC 70 HEARING DATE(S) : 2 February 2006 JUDGMENT DATE : 2 February 2006 JUDGMENT OF : Brereton J EX TEMPORE JUDGMENT DATE : 02/02/2006 DECISION : Paragraphs [11] - [15] CATCHWORDS : FAMILY LAW – Binding Financial Agreements – setting aside – Jurisdiction – Jurisdiction of Supreme Court under Jurisdiction of Courts (Cross-Vesting) Act (Cth) – Costs – circumstances justifying a costs order in proceedings under Family Law Act. COSTS – Proceedings under Family Law Act – third party proceedings to set aside financial agreement. LEGISLATION CITED : Family Law Act 1975 (Cth), ss 40(3), 60G, 90K, 117 Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth), s 4 CASES CITED : Megna v Marshall [2005] NSWSC 1302 Megna v Marshall [2005] NSWSC 1347 (10261/04) Michael Megna (first plaintiff) Russell James Lloyd (second plaintiff) David John Marshall (first defendant) PARTIES : Richard Martin Tory (second defendant) (6166/05) Richard Martin Tory (plaintiff) David John Marshall (first defendant) Shirley Irene Marshall (second defendant) FILE NUMBER(S) : SC 10261/04; 6166/05 (10261/04) V Dominello (solicitor) (plaintiffs) D J Marshall (in person) (first defendant) COUNSEL : A T S Dawson (second defendant) (6166/05) A T S Dawson (plaintiff) D J Marshall (in person) (first defendant) A Clachers (solicitor) (second defendant) (10261/04) Etheringtons Solicitors (plaintiffs) SOLICITORS : Osborne Bricknell Howell (second defendant) (6166/05) Osborne Bricknell Howell (plaintiff) Thurlow Fisher (second defendant) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION & EQUITY DIVISION BRERETON J Thursday 2 February 2006 10261/04 Michael Megna & 1 Ors v David John Marshall & 2 Ors 6166/05 Richard Martin Tory v David John Marshall & Anor JUDGMENT (ex tempore) 1 HIS HONOUR: In proceedings 6166 of 2005, by consent of the first defendant and without opposition on the part of the second defendant, I make orders in terms of paragraph 2 of the summons filed 9 December 2005, namely that the Financial Agreement between the first and second defendants, David John Marshall and Shirley Irene Marshall dated 3 September 2005 be hereby set aside. 2 In proceedings 10261 of 2004, I note the undertaking of Shirley Irene Marshall, by her solicitor, to the Court: 1) That she will not, without first giving notice in writing to the solicitors for each party to these proceedings of her intention to do so, commence proceedings for an adjustment of property interests against the First Defendant, David John Marshall. 2) That in the event that David John Marshall commences such proceedings against her, she will forthwith give notice in writing to the solicitors for each party to these proceedings of their institution. 3 I order that paragraph 1 of the Order made on 22 November 2005 be discharged, as against Shirley Irene Marshall. 4 It remains to deal with the question of costs. 5 On 22 November 2005, I delivered a judgment which sets out the relevant history of the matter and reserved costs of the application, expressing the view that they should probably be dealt with in the proceedings in the Equity Division for the setting aside of the subject financial agreement under the Family Law Act, s 90K, which were then contemplated, and which have since been instituted. I remain of the view that the costs referred to in that judgment should be dealt with in the proceedings which have now been instituted in the Equity Division, and in respect of the costs reserved on 22 November 2005 and costs subsequently incurred on the motion filed on 14 November 2005 in the Common Law proceedings (10261/04), I order that those be costs in proceedings 6166 of 2005 in the Equity Division. 6 I turn to the costs of the proceedings in the Equity Division, including the costs of the Common Law proceedings which I have just ordered be costs in the Equity proceedings. Those proceedings are proceedings under the Family Law Act, in respect of which this court is exercising jurisdiction pursuant to the Jurisdiction of Courts (Cross-Vesting) Act (Cth), s 4(1), which invests all State Supreme Courts with jurisdiction with respect to civil matters with respect to which the Family Court of Australia has jurisdiction, subject to an irrelevant limitation in respect of proceedings under the Family Law Act, s 60G. That reinvesting of State Supreme Courts with jurisdiction supersedes the previous removal of jurisdiction in matrimonial causes from this court by proclamations made under the Family Law Act, s 40(3), in 1976 and 1983. 7 The order that I have already made in these proceedings today setting aside the financial agreement, was made pursuant to Family Law Act s 90K, and though made by consent of the First Defendant and without opposition by the Second Defendant, I should record that on the evidence adduced on the Notice of Motion which is summarised in my judgment of 22 November 2005, I was satisfied, and made the order on the basis, of at least the ground referred to in s 90K(1)(a)(ii), namely that Mr Marshall entered into the subject agreement with reckless disregard to the interests of a creditor or creditors of the party, if not subparagraph (i) namely, for a purpose or purposes that included the purpose of defeating a creditor. 8 Family Law Act, s 117(1), provides that in proceedings under that Act, subject to subsection (2) and certain other sections which are not presently relevant, each party shall bear his or her own costs. Subsection (2) provides that in any proceedings under that Act, if the Court is of the opinion that there are circumstances that justify it doing so, it may, subject to some further subsections, make such order as to costs as it considers just. Subsection (2A) requires the Court to take into account a number of relevant considerations, including the financial circumstances of each of the parties, whether any party is in receipt of assistance by way of Legal Aid, the conduct of the parties to the proceedings, whether the proceedings were necessitated by the failure of a party to comply with previous orders of the Court, whether any party has been wholly unsuccessful, whether any offer of compromise has been made and such other matters as the Court considers relevant. 9 Although these proceedings have ultimately been resolved by consent, they have been resolved in such a way that it can be said that the defendants have been wholly unsuccessful in the proceedings. It can also be said that the proceedings have been necessitated by what, on the evidence so far before me, I would accept is conduct of at least one of the defendants with reckless disregard to the interests of a creditor. 10 These are not conventional family law proceedings between separated spouses with respect to children or their property, but third party proceedings brought by a creditor whose interests were put in jeopardy by an apparent abuse of the facility of making a financial agreement, in the context of the pending defamation proceedings. While s 117 applies to such proceedings, the respective financial position of the parties is, though not irrelevant, of much reduced significance. Although there is not before me evidence of the financial circumstances of the parties, the nature and context of these proceedings is such that I would make such an order regardless of their respective financial circumstances; put slightly differently, no disparity in their financial circumstances would outweigh the considerations which persuade me that a costs order should be made. 11 Accordingly, I am satisfied that there are circumstances which, for the purposes of s 117(2), justify the court in making a costs order in favour of Mr Tory, in these proceedings, at least as against Mr Marshall. 12 Mr Tory and Mrs Marshall have agreed that the question of costs between them should be deferred, to enable them, if possible, to resolve that issue between themselves. 13 The Plaintiff in the Common Law proceedings, Mr Megna, has also sought an order for costs in his favour. However, Mr Megna has not been a party to the motion, although on 22 November, he appeared by counsel before me and made some submissions in support of the relief which Mr Tory sought. Nor is he a party in the s 90K proceedings. The question of the Plaintiff's costs ought properly be dealt with in the Common Law proceedings in due course, and those costs can be costs in the Common Law proceedings. 14 Accordingly, in proceedings 6166 of 2005 I make the following orders: 1) I order that the First Defendant pay the Plaintiff's costs. 2) I reserve further consideration of any application for a costs order against the Second Defendant. 3) I stand the proceedings over to 2 March 2006 at 9.30am for consideration of that question if it is not earlier resolved. 4) I direct that in the event that there is to be any contested application, the Plaintiff lodge with my associate and serve on the Second Defendant by 26 February, a submission setting out the order which it seeks and the reasons for it, and the Second Defendant lodge with my associate and serve on the Plaintiff by 28 February 2006 any response thereto. 15 In proceedings 10261 of 2004, I order that the costs of the Plaintiff of and incidental to the Second Defendant's motion filed on 14 November 2005, be costs in those proceedings. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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