Bania and Bania

[2008] FamCA 1255

FAMILY COURT OF AUSTRALIA

BANIA & BANIA [2008] FamCA 1255

FAMILY LAW – PROPERTY – Application to set aside consent orders – Miscarriage of justice – fraud or suppression of information

APPLICANT: Ms Bania

RESPONDENT: Mr Bania

FILE NUMBER: ADF 1466 of 1997

DATE DELIVERED: 17 November 2008

PLACE DELIVERED: Brisbane

PLACE HEARD: Adelaide

JUDGMENT OF: Bell J

HEARING DATE: 2 October 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Berman of Counsel

SOLICITOR FOR THE APPLICANT: Randle and Taylor

COUNSEL FOR THE RESPONDENT: Mr A Jordan

SOLICITOR FOR THE RESPONDENT: David M Davidson

Orders

1. The application is dismissed.

IT IS NOTED that publication of this judgment under the pseudonym Bania & Bania is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT ADELAIDE

FILE NUMBER: ADF 1466  of 1997

MS BANIA

Applicant

And

MR BANIA

Respondent

REASONS FOR JUDGMENT

The Applicant’s Claim

1. The applicant wife alleges that the husband “failed to disclose to the Court the sum of $200,000 provided by his father – was provided as a loan and not for the purchase of the shares in the company” (See Application filed 16 May 2007). In this regard the wife seeks to invoke the Court’s jurisdiction under s 79(1)(a) of the Family Law Act (the Act) to set aside property orders in its discretion where there is a miscarriage of justice arising from, as is said in the application, by reason of fraud, suppression of evidence (including failure to disclose relevant information), the giving of false evidence on the part of the husband in the proceedings or alternatively other circumstances in that the husband failed to disclose to the Court the sum of $200,000 provided by his father, Dr Bania, was provided as a loan and not for the purchase of shares in the company.

2. The wife does not, as I understand her submissions, propose that the husband has given false evidence. As I understand her case she says that the husband suppressed evidence by failing to give evidence of the fact of the $200,000 advance being a loan and/or suppressed the evidence by failing to disclose relevant information. 

3. The wife purports to establish the suppression of evidence as causative of the apparent miscarriage of justice to the effect that non-disclosure was to reduce the net property pool by $251,747.  In a consent order, to which I will hereinafter refer, the pool was to be apportioned equally between the then parties and the wife claims half of the $251,747 plus interest from the husband.

The Grandfather’s Advance

1. The parties married in 1970.  The husband was employed at a hotel and the wife was employed at the same establishment.  In 1986 the wife’s sister and brother-in-law incorporated a company (‘the first company’) and each were appointed directors with an equal shareholding of 40 shares each.  In December of that year the first company purchased the leasehold estate in a hotel (‘the hotel’) for $300,000.  The husband was employed as a hotel broker at this stage and was involved in the sale and purchase of the hotel by the first company.

2. During 1988 the wife’s sister and brother-in-law expressed that they no longer wished to operate the hotel.  They resigned from their position as directors and transferred their shareholdings to the wife (1,400 shares) and an accountant (450 shares).  The circumstances surrounding the increase in the available shares are unclear on the evidence.  The husband was unable to acquire a shareholding in the first company due to his employment as a hotel broker, noted above, but was appointed a director during 1991 upon the resignation of the accountant.

3. In December 1988 a second company was incorporated to purchase the freehold estate in the hotel.  The first company owned five of the shares (that is, half) in the second company and the husband’s father (‘the grandfather’) and his wife (‘the grandmother’) owned the other five shares in the second company.  The wife, the husband and the grandfather were each directors of the second company.  The second company obtained finance for the purchase of the freehold estate by a loan of $630,000 from National Australia Bank and an advance of $200,000 from the grandfather for the purchase price of $830,000.  In 1993 the grandmother died and her shareholding in the second company and her interest as creditor of the loan advanced thereto passed to the grandfather.  The status of the $200,000 advance by the parents that vested in the grandfather upon his death is central to the instant dispute.

Settled property proceedings

1. The parties disagree about the precise date of separation but for present purposes it is sufficient to note that the parties divorced in 1997.  The wife commenced property proceedings in April 1998, seeking orders in relation to the shareholdings in respect of both the first company and the second company.  By way of letter dated 9 September 1998 the husband’s solicitors at the time stated to the wife that ‘there was no loan and that [the grandfather] held his shares [in the second company] beneficially’.

2. On 10 September 1998 the wife filed an amended application seeking to join the grandfather as a party and seeking a declaration that the grandfather held his shares on trust for the husband and wife.  In a supporting affidavit the wife deposed to her belief that an oral agreement was entered into whereby the grandfather would convey his shareholding to the husband and wife upon the repayment by them of the amount advanced and that a weekly payment of $100 to the grandfather was made to that end.  The application for a declaration was discontinued by the wife in April 2000.

3. During the course of proceedings the grandfather filed an affidavit dated 25 January 1999 which was supplementary to an earlier affidavit filed by a solicitor instructed by him wherein each asserts the grandfather’s ownership of the shares without reference to the loan.  As counsel for the husband notes, “Neither affidavits referred to the loan, however, at some point in time it appears that [the grandfather] claimed that not only was he the beneficial owner of the shares but that he was also entitled to repayment of the loan account’.  In this regard it is noted that counsel for the wife asserts that the ‘alleged loan’ is recorded as such on the balance sheets of both the second company and the grandfather.

4. The hotel was sold in September 2000 and the proceeds were held on trust by a firm of solicitors directed to effect the properly settlement between the parties.  On 4 December 2000 interim consent orders were made by way of partial property settlement that the first company pay $350,000 to the wife.  The parties disagree as to whether the orders further provided that one half of that amount was to be paid to the husband but this is of little consequence for the reasons discussed below.

5. The property dispute was determined by way of consent orders issued on 24 April 2001 in accordance with an agreement reached after negotiations between the parties in December 2000.  Those orders provide that both the first company and the second company be wound up and that the parties share equally in the balance thereto after the payment of creditors, the determination of the grandfather’s claim and the adjustment of loan accounts.  Counsel for the respondent husband correctly observes that:  ‘The effect of the order was to leave the determination of the entitlements of [the grandfather] in [the second company] to the liquidator of [the second company] (not to be determined by the Court)’.

Liquidation of the companies

1. A liquidator was appointed in respect of both the first company and the second company on 11 October 2002.  The liquidator sought and received submissions from the interested parties which included the wife, the accountant and the grandfather.  The wife maintained that the grandfather’s shares were held on trust for the company.

2. The grandfather reiterated his position which counsel for the husband concedes emerged during the period between filing an affidavit in the property proceedings and furnishing submissions upon the liquidator, that he was both beneficial owner of the five shares and creditor in respect of the loan monies advanced.

3. The liquidator determined that the $200,000 provided by the grandfather and the grandmother to the parties was ‘intended to be for one half of the equity’ in the second company.  Counsel for the wife extracts the relevant paragraph explaining the liquidator’s reasoning at length:

   “In my opinion the monies provided by [the husband’s father] ought to reflect either a purchase of shares in [the] company or an advance to the company.  I believe that the information that has been provided to me provides sufficient evidence to indicate the intention of the parties at the time the transaction was effected.  In my opinion, the transactions have not been properly documented and I have adopted a commercial view of the transaction in determining the proper distribution.”

15. The liquidator made distributions to the grandfather.

Probate proceedings

1. On 17 December 2003 the grandfather died and bequeathed his entire estate to his two grandchildren, the children of the parties, which totalled $1,660,064. The husband filed a statement of claim in the Supreme Court of South Australia challenging the will under the provisions of the Inheritance (Family Provisions) Act 1972 (SA).  The matter was ultimately settled between the parties which involved the conveyance of real property to the husband. 

2. Paragraph 8 of the statement of claim, which the wife relies upon as the evidence allegedly suppressed for the purposes of the instant case, provided:

   i.“The plaintiff had a good relationship with the deceased throughout his adult life.  The deceased was supportive of the plaintiff.  In 1985 with the assistance of the deceased the plaintiff bought the freehold [of the hotel].  The deceased lent the plaintiff $200,000. The hotel was subsequently sold at a profit in 2000.  The plaintiff returned to the deceased the sum of $600,000. At that time the deceased indicated to the plaintiff that one day he would be the beneficiary of these funds.”

Setting aside orders on the basis of miscarriage of justice

1. A discretionary power is conferred on the Family Court to set aside prior orders made pursuant to s79 of the Act and make orders in substitution thereto on application by a person affected by those orders in circumstances where inter alia, ‘there has been a miscarriage of justice by reason of …. suppression of evidence (including failure to disclose relevant information)’.  The Full Court has recently considered the constituent elements of an action under s79A(1) in Barker v Barker.  In particular, the Full Court noted that:

   ‘In order for a claim under s 79A(1) to succeed the court must be satisfied that a miscarriage of justice has resulted.  It is not sufficient to merely establish the existence of one or more of the stated grounds, such as suppression of evidence.  It is thus clear that the applicant must prove both the existence of a stated ground (in the instant case, the suppression of evidence) and that a miscarriage of justice has resulted.  The Full Court in Barker v. Barker also emphasised the discretionary nature of an order made in substitution under s 79A(1) such that even if the applicant party does establish both a stated ground and satisfies the Court that a miscarriage of justice has occurred, it is still open to the Court to refuse relief in appropriate circumstances’.

The alleged suppression of evidence

1. The first instance decision of Gee J in In the Marriage of Rohde, wherein His Honour examined when suppression of evidence will have occurred, is instructive.  Gee J established that ‘failure to adduce available material evidence of facts by the party who succeeds on the issues to which those facts are material’ will constitute suppression of that evidence whereas ‘failure by a party to give relevant evidence by choice or inadvertence’ will not.  In this relation, Gee J applied the pithy observation of Carmichael J of the New South Wales Supreme Court where the learned Judge remarked:  ‘To withhold facts is not to reveal them or suppress them.’  The propositions postulated by Gee J in this regard have not been subsequently considered by the Full Court but His Honour’s judgment has been affirmed in other respects.

2. It is important to highlight the distinction envisaged by Gee J to the extent that there will be no suppression of evidence where the failure to produce that evidence results from choice or inadvertence by a party but the failure to produce will amount to suppression of evidence if it meets the positive limb of Gee J’s exposition.  That is, (a) the evidence was material to a successful issue; (b) the evidence was available at the relevant time; and (c) the successful party failed to adduce that evidence.  In this regard, it is sufficient to state that it has not been proved by the applicant that the evidence in question was available to the respondent at the relevant time.

3. The wife alleges in the present proceedings that the statement in the statement of claim filed in the Supreme Court proceedings to the effect that ‘The deceased lent the plaintiff $200,000’ amounts to an admission that the monies advanced by the husband’s parents was by way of loan only and not in consideration for the shareholding of the company, or a mixture of both.  It is highlighted that the statement does not reflect the findings of the liquidator, who found that the monies were in consideration for the shareholding only.  That statement cannot be said to have been suppressed in the initial property proceedings, which counsel for the husband asserts is qualified in any event.  In fact, it would even be improper to suggest that it was withheld, to use Carmichael J’s dichotomy, because the husband was never called as a witness to deliver evidence in those proceedings insofar as the matter was settled.  It is additionally noted in this regard that the statement of claim itself cannot be said to have been suppressed insofar as it did not exist at the relevant time, but this was not contended by either party.  Further, the wife sought to join the grandfather in the initial property proceedings for the express purpose of seeking a declaration to judicially determine the ‘meeting of the minds’ in this respect, which she discontinued.  As demonstrated above, the grandfather appropriately disclosed his interest at the relevant time and thereafter before the liquidator.

4. Further, it appears to me that nowhere up until the statement of claim has the father contended other than he was of the view that his father purchased an interest in the hotel or in the company by way of the expending of $200,000 for which he received, as he believes, the five shares.

5. .The wife also had evidence in the books of account,  I believe it was C Hotel, showing that in fact the grandfather was a shareholder of the company and that he was receiving payments of $100 per week is shown in the liquidator’s report I believe to the extent of some $210,000 (see the liquidator’s report page 20, 6.5, wherein he says that the company books and records and the financial statements show Dr Bania as a shareholder and he has received $210,000 by way of dividends since the sale of the hotel.  This does not seem to gel with the wife’s view and which was not accepted by the liquidator that in fact Dr Bania held the shares as trustee for herself and the husband, a view which she subsequently resiled from by discontinuing her action against the grandfather or that the money was only lent.

6. What evidence could be said to be available to the respondent.  It is his belief, as I find it, up until the statement of claim that in fact this money was advanced to the company as and by way of purchase of shares.  This was a belief held by the husband and also by the paternal grandfather.  It was also found by the liquidator who was empowered with a quasi-judicial position as and by way of the consent order.  The only material which causes, as I interpret the wife’s submissions, any concern is the statement of claim which is referred to in the submissions of the husband.  At page 7 thereof it is set out and that is paragraph 8:

   “The plaintiff had a good relationship with the deceased throughout his adult life.  The deceased was supportive of the plaintiff.  In 1985 with the assistance of the deceased the plaintiff bought the freehold of the [C] Hotel at [C].  The deceased lent the plaintiff $200,000.  The hotel was subsequently sold at a profit in 2000.  The plaintiff returned to the deceased the sum of $600,000.  At that time the deceased indicated to the plaintiff that one day he would be the beneficiary of those funds.” (my emphasis)

7. As has been conceded in argument, virtually every allegation contained in paragraph 8 of the statement of claim is wrong, save that the hotel was sold at a profit.  In the view of the husband, the husband says that he did not believe that the deceased lent the plaintiff $200,000 and in fact if any moneys were advanced they were advanced to the company and not to him, that in fact he did not return to the deceased the sum of $600,000 and there is no evidence that in fact the husband did return to the grandfather the sum of $600,000.  As I have said, the only matter that was correct in that paragraph was the fact that the hotel was sold at a profit.

8. To me I cannot see how it could be submitted that the husband suppressed this evidence.  There is no evidence which convinces me that the husband was of the belief as at the time alleged by the wife, which could either be at the date of settlement or during the investigation by the liquidator, that he was of the belief that in fact the money had been lent.  All other evidence seems to suggest that for the money he received the five shares.

9. Consequently, since I am of the opinion that the husband has not suppressed any evidence, nor do I believe he has given any false evidence, that the applicant has failed in her application.  I do not believe that there is any evidence whatsoever to support an allegation that there has been a miscarriage of justice.  I do not in the circumstances deem it necessary to consider whether I should exercise my discretion to enable the matter to proceed any further.

10. The Application is dismissed.

The apparent miscarriage of justice

1. It is not necessary to consider this further ground in light of the findings just made but it should be noted that in determining whether a miscarriage of justice has arisen by reason of the alleged suppression of evidence, it is necessary to distinguish between a miscarriage of justice and the justice or equity of a particular order; that is, the two are not necessarily synonymous.  In the instant case, it may be that the justice or equity of the order made by the trial Judge does not resonate with the applicant, but it cannot be suggested that those failings are a result of the conduct of the proceedings in this jurisdiction.  As the submissions of the parties reveal, the technicalities of how the property settlement was to be effected was determined entirely beyond the view of the Court and in fact was essentially deferred to the liquidator in the winding up of the companies.  It may be entirely open to the applicant to seek redress in a court of general jurisdiction but such a remark should not be perceived as prejudging any such action should it be pressed.  It is entirely a matter for the applicant and her legal counsel.

2. Further, to the extent that the applicant has failed to establish the constituent elements to arouse the Court’s discretion under s 79A of the Act the application must be dismissed.

I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Bell.

Associate:     

Date:              17 November 2008