Berge & Berge & Anor

[2012] FamCA 398

FAMILY COURT OF AUSTRALIA

BERGE & BERGE AND ANOR [2012] FamCA 398

FAMILY LAW - ORDERS - Variation – Application under s79A(1)(a) of the Family Law Act 1975 (Cth) – where the second respondent has suppressed evidence regarding the change in conditions imposed on the completion of the subdivision of a property and the likely cost to complete the subdivision – where the wife asserts that had the earlier judge known of the change in costs of the subdivision, he would have been more confident that the subdivision would be completed and that the valuation proposed by the joint expert would be less speculative – where the wife had commissioned a shadow valuation report and knew that the conditions had been changed and the cost of necessary work decreased – where the valuation of the joint expert was contingent upon the completion of works in accordance with the conditions originally imposed on the completion of subdivision - found that no miscarriage of justice occurred as a result of the suppression of evidence

FAMILY LAW - ORDERS - Variation – Application under 79A(1)(c) of the Family Law Act 1975 (Cth) – where the husband had failed to tender a sum of money to the wife as required by court order – where interest runs on the amount ordered to be paid to the wife and the wife had not sought enforcement for the order – found that it is not just and equitable to allow the wife to rely on the husband’s default to set aside the orders

Family Law Act 1975 (Cth) ss 79(1)(a), (c)

APPLICANT: Ms Berge

RESPONDENT: Mr N Berge

SECOND RESPONDENT: Mr J Berge

FILE NUMBER: SYF 4280 of 2006

DATE DELIVERED: 30 May 2012

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Rees J

HEARING DATE: 7 and 8 May 2012

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Hamish Cumming Family Lawyers

COUNSEL FOR THE RESPONDENT: In person

COUNSEL FOR THE SECOND RESPONDENT: Ms Goodchild

SOLICITOR FOR THE SECOND RESPONDENT: Franklin Bell Family Lawyers

Orders

1. That the application of the wife filed 22 March 2011 seeking orders pursuant to s79A of the Family Law Act 1975 be dismissed.

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 4280 of 2006

Ms Berge

Applicant

And

Mr N Berge

Respondent

And

Mr J Berge

Second Respondent

REASONS FOR JUDGMENT  

1. Before the court is an application by Ms Berge (“the wife”) for an Order pursuant to the provisions of section 79A of the Family Law Act 1975 arising out of her marriage to Mr N Berge (“the husband”). The parties commenced co-habitation in about August of 1996 and married in June 1999. They separated on 26 March 2004 and were divorced in December 2005.

2. Proceedings for property settlement were instituted by the wife on 16 November 2006. The husband’s father, Mr J Berge (“the second respondent”) was joined as a party to those proceedings and participated in the hearing before Fowler J who delivered judgement on 9 October 2009.

3. The proceedings before Fowler J concerned, inter alia, a property known as C property. The husband claimed to have no interest in that property. Fowler J dealt with the C property in Orders 5 and 6 made 9 October 2009 set out below:

   (5)Declaration that the husband and the second respondent hold the property known as [C property] in the State of New South Wales (“[the C property]”) as trustees for the benefit of the husband and the second respondent for their respective entitlements under the terms of a joint venture agreement made between them.

   (6)Declaration that the husband and the second respondent entered into a joint venture agreement for the subdivision and development of [the C property] and an adjacent parcel of 25 acres known as [Lot B], and the terms of which were:

   (a)the costs and profits of the joint venture were to be shared equally between the husband and the second respondent;

   (b)      the land was to be subdivided into three main lots;

   (c)the benefits arising from the joint venture were to be shared as follows; namely, that the second respondent was to retain for his own use one Lot with a home to be built on it for his use and benefit and at a cost to be financed from the second respondent’s share of the proceeds of sale of [Lot B]; and

   (d)from the proceeds of the sale of an adjacent parcel of land described as [Lot B], containing about 25 acres and adjacent to [the C property], the husband and the second respondent would, subject to an agreed reduction of the mortgage otherwise charged on [the C property] and the payment of a loan made in relation to the acquisition of [the C property], each receive the sum of $65,000.

4. The wife, pursuant to Fowler J’s orders, was entitled to place a charge on the title of the C property and did so.

5. The husband appealed against the orders of Fowler J and the appeal was heard by the Full Court on 7 December 2010 and judgement was delivered by the Full Court on 6 April 2011. The appeal was allowed in part in that the Full Court reduced the amount to be paid to the wife by the husband but otherwise declined to interfere with the orders of the trial judge.

6. Before the judgement of the Full Court had been delivered, the wife, on 22 March 2011, filed the current application.

7. The matter was listed before me to determine, as a threshold issue, whether facts had been established to justify the setting aside of the property orders.

8. In a letter dated 3 June 2011 which is Annexure “O” to her affidavit, the wife’s solicitors particularised her claim as arising pursuant to section 79A(1)(a) and section 79A(1)(c) of the Family Law Act 1975 (Cth). The sections, upon which this claim is based, are set out below:

   79A  Setting aside of orders altering property interests

   (1)  Where, on application by a person affected by an order made by a court under section 79 in property settlement proceedings, the court is satisfied that:

   (a) there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance; or

   (c) a person has defaulted in carrying out an obligation imposed on the person by the order and, in the circumstances that have arisen as a result of that default, it is just and equitable to vary the order or to set the order aside and make another order in substitution for the order;

9. It is contended on behalf of the wife, in Annexure “O”, that “the hearing of the application for property settlement and the appeal proceeded on the basis that the subdivision did not proceed. It is accepted that the subdivision did in fact proceed and is now in a position for the subdivision to be registered”.

10. In relation to section 79A(1)(c), it is contended on behalf of the wife in Annexure “O” that “Notwithstanding the orders which were made in October 2009, we have not once received from you a proposal which involved the payment of any monies to our client. As pointed out in the Case Assessment Conference, we do not know whether the orders you presently propose are workable”.

11. When the matter first came before me, I directed that the wife file and serve particulars of her claim and she did so in a document filed 8 February 2012 which is reproduced below:

    PARTICULARS OF WIFE’S SECTION 79A APPLICATION

    1.   The wife relies on 79A(1) (a) and (c).

    2.   The Husband and the second Respondent suppressed evidence which included the failure to disclose relevant information.

    3.   The Husband and the second Respondent at the time of the hearing and up until the time of giving of the Judgment knew, or should have known, what stage the subdivision Application relating to [the C property] had reached.

    4.   The Husband and second Respondent had an obligation to inform the wife and the Court at the hearing and up to the time of giving of the Judgment of the progress of the subdivision Application.

    5.   The Husband and second Respondent knew that the single expert in coming to his opinion based this opinion on “…It must be accepted that the site is not subdivided and unless commencement is made prior to the expiration of the DA on 12 July 2009, the following commentary is of absolutely no consequence.”

    6.   The Husband and the second Respondent knew or should have known that the DA relating to the subdivision did not expire on 12 July 2009.

    7.   The Husband and the second Respondent should have advised the single expert, the wife and the Court that the DA relating to the subdivision was ongoing.

    8.   The Husband and second Respondent did not fully disclose to the wife or the Court full details as to the sale of [Lot C].

    9.   The Husband has not done all things reasonable, including providing to the Wife particulars requested in correspondence from January to June 2011 which would have allowed the subdivision to be registered, the sale of [Lot C] to take place and the likely payment to the Wife pursuant to the Orders of 9 October 2010 as amended by the Full court on 6 April 2011.

    10. The Husband has not made payment (including interest) pursuant to the Orders of 9 October 2009 as amended by the Full Court on 6 April 2011.

    11. Due to the delay caused by the Husband’s default in carrying out his obligation to make payment to the Wife pursuant to the Orders of 9 October 2009 as amended by the Full Court on 6 April 2011, [the C property] can now be subdivided.

    12. Due to the subdivision consent, the value of [the C property] has substantially increased.

    13. It would not be just and equitable for the wife not to receive some of the benefit of the increase in value of [the C property].

12. As it can be seen the basis of the wife’s claim as set out in the Particulars is different from the basis set out in the earlier letter and the matter has proceeded on the basis of the claim set out in the Particulars.

13. The determination of a claim based on ss79A(1)(a) and (c) involves four steps. In the case of a claim based on s79A(1)(a), the court must firstly determine whether there has been a suppression of evidence. Secondly, the court must determine whether the suppression of evidence amounted to a miscarriage of justice. In the case of a claim based on s79A(1)(c) the court must firstly determine whether there has been a default and secondly the court must determine whether, in the circumstances that have arisen as a result of that default, it is just and equitable to vary or set aside the earlier order. For claims based on either ss79A(1)(a) and (c) the court must thirdly determine whether it should use its discretion to vary or set aside the earlier order, and fourthly, whether it should make another order pursuant to s79.

14. In these proceedings, I am required to determine the first two steps.

15. The husband and the second respondent dispute the wife’s allegations and ask that her application be dismissed. Their case is that the evidence before Fowler J was that the subdivision was proceeding. I was referred to a number of transcript references from the hearing before Fowler J and to his Honour’s judgement. I was also referred to the judgement of the Full Court. It must be borne in mind that the evidence before Fowler J was completed on 2 July 2009 and judgement was delivered on 9 October 2009.

WAS THERE A SUPPRESSION OF EVIDENCE?

1. Annexure “B” to the affidavit of the husband is a portion of the transcript of the cross examination of the second respondent before Fowler J on 2 July 2009. Asked “Are you intending to proceed with the subdivision?” the second respondent answered “Yes”.

2. Asked “Why has it taken so long?” he answered “Short of funds”.

3. The second respondent gave evidence that “as things stand I would have to sell something as soon as the subdivision has come through. I would like to retain as much as possible until the market picks up again”.

4. In the context of questions about his intention to seek finance from other sources, counsel for the wife put to the second respondent “It couldn’t be, sir, that there’s really no need to ask your daughter for any financial assistance because you intend to complete the subdivision and share the profits with your son?” and he answered “No”.

5. In submissions at page 272 of the transcript on 2 July 2009, counsel for the wife said to his Honour:

   But the subdivision is all but completed. I think the words of (the second respondent) were, apart from a couple of weeks of hard work. I don’t think there was any evidence to suggest that there was (sic) large expenses required for power installation, because I understood that was in.

6. It was the wife’s case, in the hearing before Fowler J that the evidence before his Honour was that the subdivision was proceeding.

7. The evidence before his Honour in relation to the conditions which needed to be fulfilled is found in the report of the single expert valuer, Mr A. Mr A, at page 8 of his report, after expressing his opinion that the gross value of the three blocks after subdivision was $1,608,000,  says:

   In order to obtain such a result allowance has to be made for:

   1.Reticulation of services including power installation.

   2.Site clearance and remediation.

   3.Compliance with all conditions of D.A. including fire, Bush Fire Assessments, Geotechnical Surveys, Local Government conditions e.g. Integral Energy.

   4.Professional costs including:

   ·application fees

   ·engineers surveyors

   ·Council fees

   ·Legal fees

   5.Provision of access

   Whilst I am not qualified to apply a firm opinion of costs to the above items (my emphasis) I believe that an allowance of $400,000 would need to be made.

8. On that basis, Mr A gave a net value for the subdivision of $1,208,000. Mr A was not cross examined.

9. In submissions, Counsel for the wife urged his Honour to accept that sum as the value of the property for the purpose of the balance sheet.

10. His Honour declined to adopt that figure and his reasons are set out in paragraphs 80, and 86 to 91 as follows:

    80.What then is the value of the husband’s interest in the joint venture?  The property was valued as if in subdivided form and the father’s evidence is that the approval of the subdivision is proximate.  That valuation was $1,608,000.  The costs of development are said to be $400,000.  The net value on this basis is $1,208,000.  On its present unsubdivided form its value is $950,000 which I propose to adopt since it is not speculative.

    86.The evidence of the father was that after a slow and somewhat tortuous history the subdivision was nearing completion particularly with work done by the father on the property since his retirement this year.  He said that he was but a few weeks away from being able to lodge a linen plan of subdivision.

    87.It was pointed out that whilst the plan of subdivision might be able to be registered there were significant other works which were required to be done before the blocks complied with the requirements imposed by the council as necessary to enable them to be sold at the value ascribed to them in subdivided form.

    88.Those works included, inter alia, the reticulation of electricity and water and compliance with all conditions of the development application including appropriate site clearance and remediation.  The valuer estimated a figure of $400,000 to the cost of such works (some of which have been done).

    89.The total value of the subdivision was estimated at $1,608,000 less the estimated development costs of $400,000, giving a net value of $1,208,000.

    90.If the subdivision did not proceed the value ascribed to the land was $950,000.  I accept this value.

    91.It is not possible to say, having regard to the fact that the valuation was dated 21 November 2008, how much of the work to which the valuer ascribed at a cost of $400,000 has been done.  On the evidence of the father there has been significant clearing which he describes as almost complete.

11. Prior to the commencement of the hearing before Fowler J the wife commissioned a valuation from a shadow expert, Mr F. Mr F’s report is dated 3 June 2009. Mr F’s report was not in evidence before Fowler J but was available to the wife’s legal advisers prior to the commencement of the hearing. 

12. Mr F, in his report, refers to the work which had been done in relation to the subdivision constituting “substantial commencement, thereby preserving the consent as active”.

13. Mr F states:

    This issue is of significance to our approach in valuing the property as it means the subdivision consent no longer requires renewal. As a consequence, in our valuation, we can assume the property retains an ongoing right to subdivide into three allotments and that the 2004 consent lapses in July 2009 is not of any consequence.

14. In so far as Paragraphs 5, 6 and 7 of the Particulars suggest that the wife was not aware of the fact that the consent would not lapse and was not so advised by the husband and the second respondent I find that she was aware from the report of Mr F and this ground must fail.

15. Mr F, in the course of his valuation, made enquiries of the Council and was advised that the conditions of subdivision had been changed. At paragraph 13.10 of his report he says:

    Our approach to the [local] Shire Council to clarify matters concerning the subdivision has generated a new letter from Council setting out its requirements for completion of the subdivision and issue of a Subdivision Certificate, thus enabling registration of title and sales of the allotments. A copy of that letter is annexed as Schedule No. 8.

16. The “letter” which is annexed is an email from the senior Subdivision Engineer of the Council to Mr F dated 18 June 2009.

17. Mr F, presumably on the basis of the information he had received from Council, estimated the costs of the development as follows:

    Site

    Purchase costs  $54,815

    Development

    Construction  $43,794

    Professional fees  $  9,475

    Contributions and charges  $         0

    Other costs

    Land Holding          $  12,771

    Finance Charges  $     8,003

    Interest 6.25%           $   79,865

    GST$   44,173      $250,895

    (I note that the total of the figures set out above is $252,896 but nothing turns on that error).

18. The wife was aware before the commencement of the hearing that there was evidence that the costs of subdivision were considerably less than Mr A’s estimate. How much less depends on a comparison of the two calculations.

19. Mr A makes no allowance, in his calculation, for purchase costs, land holding, finance charges, interest or GST. If those amounts are deducted from Mr F’s estimate to enable a “like for like’ comparison, Mr F’s estimate of the costs of the work is $53,269 (the total of the items listed under the heading “Development”).

20. These matters were not put to Mr A.

21. The only evidence before Fowler J at the conclusion of the hearing was that the anticipated cost of subdivision was $400,000.

22. On 4 July 2009, two days after the completion of the hearing, the second respondent wrote to a prospective purchaser in the following terms:

    Court proceedings are now over. We have been told that we can proceed with the subdivision. On Monday I will apply for a fire permit. [Business D] cannot be found, so we will ask Council to do the inspection.

    The clearing work is nearly all done. It is just a matter of getting rid of the material. A few weeks should see the matter finalised.

23. On 15 July 2009 or 4 August 2009 the second respondent wrote to the St George Bank in the following terms:

    We have nearly finished the subdivision of our property and have two blocks for sale.

24. Annexure “A” to the wife’s affidavit is a letter from the solicitor for the second respondent dated 5 January 2011, advising that the plan of subdivision had been prepared and approved by Council. The letter attached the plan and a draft section 88B instrument and sought the wife’s consent to the registration of the plan.

1. On 22 March 2011 the wife filed the present application.

2. Before me, the second respondent was cross examined. He conceded that he was aware, in about September 2009 (noting that judgement was not delivered until 9 October 2009) from discussions with Council that he did not have to do all of the work previously required. When asked whether he communicated this to the husband, the second respondent stated “not necessarily, probably, but as he’s not involved in the subdivision not necessarily.” The husband was not cross examined as to whether the second respondent had communicated this information to him. The second respondent’s evidence was that between September and November 2009 he completed the work required at a cost of about $50,000.

3. The wife was not advised by the second respondent that there had been a material change in the conditions imposed by the Council.

4. The second respondent, upon learning that there was a significant change in the conditions imposed for the completion of the subdivision and, consequently, a significant change in the likely cost of completion, had an obligation to bring that matter to the attention of the wife and of Fowler J. He did not do so.

5. I find that the wife has established that there was a suppression of evidence for the purpose of s79A(1)(a).

was there a miscarriage of justice by reason of the supression of evidence?

1. The evidence which was suppressed by the second respondent was that the conditions imposed on the completion of the subdivision had been changed to his and the husband’s advantage and that the likely cost to complete the subdivision was $50,000 rather than $400,000 as was the evidence before Fowler J.

2. Although that circumstance had not been communicated to the wife by the second respondent or the husband, she was aware, by virtue of the report of Mr F, that the conditions had been changed and that the cost of the necessary work, as calculated by Mr F, was greatly less than the cost estimated by Mr A.

3. Mr F’s report was not put into evidence before Fowler J and Mr A was not cross-examined to put in issue his estimate of the costs necessary to complete the work.

4. Fowler J in the passages of the judgement referred to at Paragraph 25 of these reasons, refused to speculate on the likely value of the subdivided lots.

5. The Full Court at Paragraph 15 of their judgement say:

   His Honour adopted the undeveloped value of the land, finding that to accept the higher valuation would involve considerable speculation as to the course of the proposed development. At the date of the hearing the subdivision had not occurred although it was in train. There was no challenge to His Honour’s finding of value.

6. The wife was the respondent to the appeal. She did not file a cross appeal to challenge his Honour’s finding as to the value of the relevant property, or to assert that his Honour was in error in refusing to adopt a speculative approach.

7. At paragraph 127 of the judgement, Fowler J said:

   127.The borrowing of those funds at the time that they were borrowed relied on the continuing liability being assumed by the husband for what he asserts is his father’s debt.  His father since that borrowing is said to have retired and become a pensioner.  The father’s only income is the pension and the rents received from the Darwin property.  The asset/liability ratios may change significantly if the proposed subdivision of [the C property] goes ahead but the husband asserts that his father has taken no further steps in that regard since the claim of the wife that the property is partly in the husband’s ownership.

8. Before me, the wife contends that, had Fowler J known that the costs of subdivision were $50,000 rather than $400,000, his Honour would have been more confident that the subdivision would be completed and that the valuation proposed by Mr A would be less speculative.

9. That submission has a number of difficulties.

10. Firstly, the wife had the report of Mr F and did not seek to put the report before his Honour.

11. Secondly, the ability of the second respondent to raise $50,000 remained speculative having regard to his Honour’s findings about the second respondent’s financial position.

12. Thirdly, Mr A’s valuation of the subdivided lots was contingent upon the spending of about $400,000 on work. Mr A’s evidence was that to achieve a sale price of $1,608,000, work to the cost of $400,000 needed to be done. His Honour could not have assumed that if work to the value of $50,000 were done, the same sale cost could be achieved. Thus his Honour would still have been left in the position where he was required to speculate about the likely sale price of the subdivided lots.

13. Fourthly, the wife had the opportunity to put evidence before his Honour from Mr F about the value of the lots after the lesser work was done. She did not do so. 

14. Having regard to all of those matters, I fine that no miscarriage of justice occurred as a result of the suppression of evidence by the second respondent.

was there a default?

1. The judgement and orders of the Full Court were published on 6 April 2011. Pursuant to those orders the husband was to pay the wife the sum of $86,927 within one month.

2. There is no dispute that the sum has not been paid to the wife and neither has the sum been tendered.

3. The wife filed the present application on 22 March 2011. Her case is that she took no steps to enforce because any enforcement application would be likely to be met with the argument that she should prosecute her s79A application first.

4. The husband, on the other hand, argues that he attempted on at least two occasions to arrange for payment of the full amount to the wife.

5. On 23 February 2011 a letter was written to the solicitor for the wife by the solicitor acting for the husband and the second respondent with respect to the conveyance of a portion of the C property. The letter, inter alia, said:

   Upon registration of the plan of subdivision and settlement of the subject sale you will be advised of the time and place for settlement and requested to provide a release of the charge in registrable form in exchange for a bank cheque for the amount ordered to be paid to your client (subject, of course, to any supervening order on the appeal you mentioned).

6. On 23 March 2011, the wife’s solicitor wrote to the conveyancing solicitor saying:

   For your information, we would advise that our client has filed an Application in the Family Court seeking that the Orders made by His Honour Justice Fowler on 9 October 2009 be set aside and that the question of a property settlement be re-litigated.

7. The husband wrote a letter to the wife’s solicitor dated 18 April 2011 which states, inter alia:

   You have until Thursday April 21^st to agree in writing to the payment of $86,327 on the sale of [the C property] as per the Court Order. If you do not agree I will have no option but to request the Court to either enforce your compliance with the Court Order, or to request the court to rule there is no money payable.

8. There is no response to that letter in evidence.

9. He wrote again on 30 June 2011 advising that he wanted to arrange for payment and offering payment on the condition that the wife withdraw the s79A application.

10. The husband was cross examined in relation to his assertion that he had attempted to comply with the Orders of the Full Court. He accepted that at the time the letter of 18 April 2011 was written, the whole of the C property was encumbered by way of first mortgage to the St George Bank to secure advances of approximately $800,000 to $850,000. He agreed that the block which was being marketed was being offered for $420,000. There was no suggestion that the sale would be completed by 21 April 2011. There had been no arrangement made with the St George Bank to release any of the proceeds of sale for payment to the wife. The husband had made no arrangement to borrow the sum required so that he could make the payment. He conceded that he did not know “for sure” that he would be in a position to make the payment.

11. Similarly there was no evidence that, at 30 June 2011, he could have made the payment. In addition, the offer to pay was conditional upon the wife withdrawing her s79A application.

12. At no time has the wife sought to enforce the orders of the Full Court and her position before me was that it was inappropriate to do so having regard to the outstanding s79A application.

13. I agree that it was inappropriate for the wife to seek to enforce the order she was asking the Court to set aside but she cannot, in the circumstances of this case, at the same time, rely on the husband’s default as a ground to set aside the orders. S79A(1)(c) requires me to take into account “the circumstances that have arisen as a result of the default” when considering whether “it is just and equitable to vary the order or set the order aside”. Whilst the husband did not make payment to the wife within the timeframe stipulated by the Orders of the Full Court, I take into account the fact that interest runs on the amount ordered to be paid to the wife, at the rate prescribed by the rules, from the due date until the date of payment and that the husband will be required to pay that interest.

14. In my view, the wife’s filing of the present application and advising the husband that she sought to have the orders set aside is also a material circumstance.

15. I find that, in the circumstances set out above, it is not just and equitable to allow the wife to rely on the failure to tender payment, thus the ground is not made out and the wife’s application pursuant to s79A will be dismissed.

I certify that the preceding seventy-three (73) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 30 May 2012.

Associate: 

Date:  30 May 2012