Brewer & Brewer
[2019] FamCA 247
•18 April 2019
FAMILY COURT OF AUSTRALIA
| BREWER & BREWER | [2019] FamCA 247 |
| FAMILY LAW – DISCLOSURE – inadequate by husband – he applied for partial property payment – no clear picture of entirety of the asset pool. FAMILY LAW – SPOUSAL MAINTENANCE – whether need demonstrated – disclosure too inadequate to enable meaningful assessment of need to be undertaken. |
| Family Law Act 1975 (Cth) ss 72(1), 74, 75(2), 77(2), 80(1)(h), 83(2), 112AP, 117 Family Law Rules 2004 (Cth) ch 13, rr 1.07, 1.08, 13.07, 13.15(2) |
| Hall v Hall (2016) 257 CLR 490 In the marriage of Abdullah (1981) 6 Fam LR 654 In the Marriage of Black & Kellner (1992) 15 Fam LR 343 In the Marriage of Briese (1985) 10 Fam LR 642 In the Marriage of Chang & Sue (2002) 29 Fam LR 406 In the Marriage of Efthimiadis (1993) 16 Fam LR 384 In the Marriage of Giunti (1986) 11 Fam LR 160 In the Marriage of Mezzacappa (1987) 11 Fam LR 957 In the Marriage of Redman & Redman (1987) 11 Fam LR 411 In the Marriage of Stein (1986) 11 Fam LR 353 In the Marriage of Stein (2000) 25 Fam LR 727 In the Marriage of Tate (2000) 26 Fam LR 731 In the Marriage of Weir (1992) 16 Fam LR 154 James v Plummer (1888) 23 LJNC 107 Livesey (formerly Jenkins) v Jenkins [1985] 1 AC 424 Lonrho Ltd v Shell Petroleum Co Ltd [1980] 1 WLR 627 Mitchell v Darley Main Colliery Co (1884) 1 Cab & EL 215 Myers v Elman [1940] AC 282 Oriolo & Oriolo (1985) 10 Fam LR 665 Palmdale Insurance Ltd (in liquidation) v L Grollo & Co Pty Ltd [1987] VR 113 Strahan v Strahan (Interim Property Orders) (2009) 42 Fam LR 203 TNT Management Pty Ltd v Trade Practices Commission; Brambles Holdings v Trade Practices Commission (1983) 47 ALR 693 |
| Bray, Edward, Digest on the Law of Discovery with practice notes (Sweet & Maxwell, 1904) Cronin J, ‘The obligation to disclose; but what if they don’t’ (conference paper, National Family Law Conference, April 2008). O’Ryan QC, Stephen, ‘Attempts to Deal with Undisclosed Wealth in Property Settlement Proceedings’ (1994) 8 Australian Journal of Family Law 96 Richardson SC, Graham, ‘A Beginner’s Guide to Property Settlement and Related Proceedings in the Family Court’ (1998) 17 Australian Bar Review 48 Williams, Sidney Edward and Frank Guthrie‑Smith, Daniell’s Chancery Practice: being a treatise on the practice of the Chancery Division and on appeal therefrom (Sweet & Maxwell, 8th ed, 1985) |
| APPLICANT: | Ms Brewer |
| RESPONDENT: | Mr Brewer |
| INTERESTED PARTY: | P Pty Ltd |
| FILE NUMBER: | MLC | 7271 | of | 2017 |
| DATE DELIVERED: | 18 April 2019 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | The Honourable Justice Wilson |
| HEARING DATE: | 8 April 2019 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms E Swart |
| SOLICITOR FOR THE APPLICANT: | Baker Jones Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr D Brown, One of Her Majesty’s Counsel |
| SOLICITOR FOR THE RESPONDENT: | Carew Counsel Pty Ltd |
| COUNSEL FOR THE INTERESTED PARTY | No appearance |
| SOLICITOR FOR THE INTERESTED PARTY: | Gadens Lawyers |
Order
All applications by the husband in the application in a case filed on 27 November 2018, as amended on 27 March 2019, are dismissed.
Direction
The further hearing of this proceeding is referred to a registrar for ongoing case management.
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 Brewer & Brewer 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).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 7271 of 2017
| Ms Brewer |
Applicant
And
| Mr Brewer |
Respondent
REASONS FOR JUDGMENT
Introduction
The issue in this interim application was whether, having regard to the husband’s present financial circumstances –
a)orders should be made relieving him of the requirement imposed by orders made by Thornton J for the payment of monthly spousal maintenance of $2 500; and
b)he should receive a partial property settlement of $100 000.
The wife opposed both applications. She submitted that –
a)the husband failed to demonstrate that those orders were needed in the circumstances;
b)the disclosure given by the husband so far has been deficient and is inadequate to enable a realistic view of the parties’ financial position to be ascertained;
c)in any event, the wife has not yet considered the position she will ultimately adopt towards amending her case so as to put in issue all aspects of the alleged sale of a company associated with the husband.
On behalf of the wife, Ms Swart of counsel contended that on present arithmetic the pool was valued in the vicinity of $1 million of which, so she argued, the husband’s entitlement was no more than 25%. On behalf of the husband Mr Brown One of Her Majesty’s Counsel contended that –
a)his client’s financial circumstances were parlous;
b)this application needed to be determined immediately;
c)the wife has been given until late May to amend her whole case, especially in respect of the alleged sale of business in respect of which her newly cast case has not yet been formulated;
d)his needs are acute;
e)he is likely to obtain in his favour after the trial of this proceeding a property division that exceeds the sum he presently seeks of $100 000; and
f)a sum in excess of that amount is in any event currently standing in the credit of the trust account maintained by one of the solicitors in this case.
Having raised with Ms Swart the immediacy of this application and contrasted that with her more leisurely proposal to amending her entire case, I asked Ms Swart whether it was more appropriate to first ascertain the manner in which she intended to amend, if at all. She told me that her client did not wish to adjourn the determination of the husband’s two applications and that instead the wife wished to proceed to an interim decision on point. Mr Brown QC told me he did not press his client’s application for orders compelling the wife to complete various returns relating to the assessment of liabilities to pay income tax.
Against that procedural background I was requested to determine the husband’s applications.
Synopsis
For the reasons that now follow, I order that all applications by the husband in the application in a case filed on 27 November 2018, as amended on 27 March 2019, are dismissed.
Relevant history
Some, although not all, of the relevant factual matters germane to this application were recorded by Thornton J in her Honour’s reasons given on 11 January 2018. As her Honour recited, this being an interlocutory application, the evidence is hotly contested and acceptance or rejection of it is necessarily premised on the logic of the event having occurred in the manner asserted or in the way corroborative evidence on a particular issue has been adduced. It is also relevant to observe at this early juncture in these reasons that disputes are ongoing over documentation produced in response to one or more subpoena. This case has not yet been the subject of a mediation.
Some uncontroversial details may be recorded. They include the following –
a)husband and wife married in 1999 and finally separated in 2015, although the precise date of separation was given differently by the husband and by the wife;
b)the husband is a qualified computer programmer and has been a director of a company called B Pty Ltd , which carries on business as the trustee of a unit trust known as the B Pty Ltd unit trust;
c)the trustee of that unit trust is Brewer Group Pty Ltd;
d)Brewer Group Pty Ltd is one of three unit holders in the unit trust;
e)in 2003 the husband and wife purchased a property in Suburb F for approximately $260 000 where they lived during 2003 and 2004, the registered proprietor of which is the husband;
f)the husband and wife lived between Sydney and Melbourne during the years 2004 and 2010 then permanently returned to Melbourne in 2010;
g)in 2010 they purchased a home in Suburb C, Melbourne, where they lived between 2010 or thereabouts and late 2016, that property being registered jointly in the names of the husband and the wife;
h)the Suburb C property was sold in 2016 for the sum of $1 370 000 the proceeds of which were applied partly in reduction of the overdraft of B Pty Ltd and as to $100 000 as a long‑term deposit in the husband’s name;
i)the balance of the proceeds of the sale of the Suburb C property was applied towards the wife’s acquisition of a unit in Suburb R, the purchase price of which was $865 000 that property being the dwelling where the wife has since lived with the two children of the marriage;
j)the wife is the sole registered proprietor of the Suburb R property yet both husband and wife are mortgagors in respect of that property; and
k)since December 2016 the wife has met all monthly mortgage payments payable in respect of the Suburb R property each in the sum of $2 295.90.
The husband and wife have two children, the eldest of whom has a condition the wife termed genetic disorder that requires assistance from different specialists including an endocrinologist as well as a speech therapist, physiotherapist and occupational therapist.
Both children attend primary school near their home.
On behalf of the wife a substantial body of affidavit material has been filed in this proceeding addressing what the wife said were difficulties in obtaining documentary and other information concerning B Pty Ltd interests. It seems those difficulties emerged in or prior to July 2017. According to Ms Swart of counsel who appeared before me on 8 April 2019 those difficulties are ongoing.
The wife’s financial circumstances as at July 2017 were bleak. She stated in her affidavit material that she –
a)continued to pay the monthly instalment in respect of the Suburb R property ($2 295.90);
b)had $41 000 in savings as at that date;
c)met her eldest child’s significant medical expenses;
d)earned $400 per week as a support officer plus $280 per week working a second job; and
e)received a fortnightly carer’s payment of $124.70 in relation to her eldest child.
In December 2016 the husband ceased contributing to the wife’s credit card although he did contribute $1 200 in maintenance. That left the wife’s source of funds as follows –
a)money derived from part‑time employment;
b)her carer’s payment;
c)maintenance of $1 200 per month; and
d)her savings, initially $41 000.
As information concerning B Pty Ltd emerged from documentation that the wife obtained, its organisational structure became apparent. Thornton J endeavoured to recite it in paragraph eight of her Honour’s reasons but that recital called for greater explication. Expressed in a most rudimentary way –
a)three groups had a proprietary interest in B Pty Ltd namely the N family, the T family and the Brewer family;
b)the trustees of the family trust of each family each held units in the B unit trust, those trustees being N Pty Ltd, T Pty Ltd and Brewer Group Pty Ltd;
c)the trustee of the unit trust made periodic distributions to unit holders which in 2017 amounted to a sum aggregating $494 000 in favour of Brewer Group Pty Ltd as trustee for the Brewer Family Trust;
d)the husband was a director of B Pty Ltd on and from 4 October 2007; and
e)the wife is and remains a 33% shareholder of B Pty Ltd.
The wife stated that in March 2018 or thereabouts B Pty Ltd transferred the sum of $333 000 into the trust account of the husband’s solicitors. She said she does not accept that the husband had ceased working with B Pty Ltd. She contended that the husband formed a company known as Mr Brewer Pty Ltd which she said was likely to be involved in the restructuring of the business previously carried on by B Pty Ltd. She disputed that the sum of $333 000 paid into the husband’s solicitors’ trust account was connected with the sale of his interest in B Pty Ltd.
During debate on 8 April 2018 Mr Brown QC cautioned me from descending too deeply into the financial milieu of B Pty Ltd as he said those issues were to be determined at trial and not on this application. Conversely, Ms Swart said that it was necessary for me to understand the husband’s dealings with B Pty Ltd as that informed the competing contentions concerning the husband in fact and in law having no need for access to funds.
The net asset position of the parties was recorded by the wife in her 15 October affidavit. She spoke of the Suburb R property being valued at around $900 000 with joint borrowings owing in respect of it in the sum of $393 000 leaving a net estimated value of $507 000. She said the sum of $333 000 held by the husband’s solicitors in trust was jointly owned. She said that the sum of $100 000 retained by the husband from the NAB term deposit was jointly owned. She said she owed her parents $25 000 by way of loan and that she had a joint interest in the sum of $16 000 being an aggregate of amounts deposited for the couple’s children’s education.
The husband has married his new partner who the wife said works as a conference director.
As mentioned earlier, the wife contended that the factors relevant to a consideration of s 75(2) of the Family Law Act had the effect of adjusting the division of property to a division of 75% in favour of the wife and 25% in favour of the husband. The most significant of those factors were enumerated as follows –
i)her annual earnings of $56 000 to which she added her annual government benefits of $9 100;
ii)her eldest child’s medical issues for which she assumed sole responsibility; and
iii)the husband has declared his income from B Pty Ltd at zero.
Gaining a detailed understanding of the husband’s financial condition was less than straightforward. Recognising the husband’s financial interests are tied very closely to the business activities of B Pty Ltd and to Brewer Group Pty Ltd, one would expect to see documentary evidence of income and expenditure of those entities, especially of the trustee of the Brewer Family Trust, namely Brewer Group Pty Ltd. Bearing in mind that the wife spoke of at least one year’s distribution to Brewer Group Pty Ltd in an amount upwards of $400 000, that tended to suggest the existence of a valid entitlement under the relevant unit trust pursuant to which that distribution was made. The amount was not small. Documents evidencing the flow of funds into and out of one or more bank accounts maintained by Brewer Group Pty Ltd were the obvious sources of enquiry to gain a glimmer of insight into the husband’s financial circumstances. It seemed that the wife’s requests for documentary evidence of distributions of trust income have not been fully answered. The wife stated that she had an interest in obtaining financial information concerning B Pty Ltd because she had an interest as a beneficiary under the trust of which Brewer Group Pty Ltd was trustee. She said the value of Brewer Group Pty Ltd was relevant in this proceeding, a proposition that seemed to me to be unarguably correct. She gave several reasons for that contention, including the following –
a)it assisted in ascertaining the respective obligations of the husband and wife for income tax;
b)it assisted in explaining the relationship between the B unit trust and other entities in this case; and
c)it assisted in resolving the question whether in fact and in law the husband’s interest (directly or in a derivative manner) in B Pty Ltd had ceased, when and in what circumstances.
At the risk of repetition, husband’s position in argument before me, skilfully advocated by Mr Brown QC, was to the effect that the debate over discovery concerning Brewer Group Pty Ltd, about B Pty Ltd and about the sale of the husband’s interest was, at present, a distraction because the wife had not squarely raised any issue in this case concerning B Pty Ltd. It seemed to me that on the material surveyed above concerning the husband’s relationship with B Pty Ltd, while no relief was presently asserted against that company, documents in the possession, power and control of the husband ought to have been produced. So far as a party’s disclosure obligations are concerned in litigation this court, in the passages below I have addressed that and the ramifications in this case of defective disclosure.
As mentioned earlier, it fell to the applicant to persuade me that he was entitled to the orders he sought. The application returnable before me on 8 April 2019 was brought by amended application in the case dated 27 March 2019 filed by the husband. In it the husband sought the following (with errors in the original)[1] –
[1] Amended application in a case (filed on 27 March 2019) 3, pt D.
1.That the Orders made 11 January 2018 be discharged.
2.That within seven (7) days from the date of these Orders, the wife:
a.Provide the husband with a running balance she holds with the ATO for her Integrated Client Account and Income Tax Account from 1 July 2015 to today’s date;
b.Ms Brewer complete and amend her individual tax returns for the financial years ending 2016 to 2018 no later than 30 April 2019 to include the trust distributions she received from Brewer Family Trust; and
c.that any and all tax liabilities be paid from the joint funds held in the husband’s solicitor’s trust account.
3.That the sum of $100,000 be paid to
each partythe husband from the Husband’s solicitors trust account by way of interim property settlement.4.That the Applicant Wife pay the Respondent Husband’s costs of and incidental to these proceedings on an indemnity basis.
Mr Brown QC told me the husband relied on the husband’s affidavit made 23 November 2018 and on his affidavit made 27 March 2019.
Some key material arose from those affidavits. They included the following –
a)the husband had been assessed to pay $54 per week in child support;
b)he married his current wife on 11 November 2018;
c)his current wife was made redundant from her employment on 9 November 2018 and was unemployed as at the date of the affidavit;
d)the wife (he believed) had re‑partnered;
e)he gave as his assets solely in his name the estimated sum of $233 955 held in his solicitors’ trust account being the remaining proceeds of the sale of real estate in Suburb F;
f)his solicitors held an estimated sum of $335 574 for the joint benefit of the husband and wife being the sale proceeds of B Pty Ltd shares; and
g)he had his own cash reserves in an estimated sum of $2 204.
The husband addressed squarely the use of $100 000 from the NAB term deposit. Among the payees of that sum were –
a)his own solicitors for fees;
b)an amount for “collections”;
c)a credit card payment;
d)council rates;
e)owners’ corporation fees;
f)primary school fees, the sum of $2 300 in spousal maintenance; and
g)utilities due and an amount of $34 065 described as “repayment of loan to my now wife”.
He said the balance of a little over $28 678 was used to meet ongoing living expenses, although he did not give details so it was not possible to assess whether those expenses were properly characterised as the payment of discretionary amounts or as payments of essential amounts.
The husband gave some, albeit limited, information about his resignation of his directorship and his cessation of employment. He said by 11 January 2018 when Thornton J made orders he had resigned as a director, although of what company he did not say nor did he exhibit an ASIC document that recorded any such filed resignation. The husband said he resigned as a director of ZZ Group in December 2017 since which time he worked for a retail entity between February 2018 and June 2018. He said he cared for his elderly father between June and August and upon his father’s passing in October 2018 he commenced employment as a commission agent.
He said his fixed weekly expenses are $1 321 and as he is not in receipt of income he incurs a weekly indebtedness of that amount that he said he has so far funded from his cash at bank which, as at November 2018, stood at $2 200.
He said all of his assets in his sole name were “crystallised and remained quarantined” in his solicitors’ trust account. That statement was a little vague. It was true, a substantial amount was held by the husband’s solicitors in their trust account. However, according to information given by the wife, the husband owned Bank shares and he was entitled to an inheritance from his late father’s estate. The husband made no mention of the Bank shares nor any inheritance so I was unable to understand what he meant when he said all his assets had been crystallised. That said, the husband asserted that without access to funds in his solicitors’ trust account he could not support himself.
In a separate segment of his November 2018 affidavit the husband cast his application for an interim partial property settlement for $100 000 on the basis that he needed funds to pay for the ongoing legal costs of this litigation.
The second affidavit on which the husband relied was affirmed on 27 March 2019. In it he described himself as a former director of Z Pty Ltd and B Pty Ltd. He said he was the sole director of Brewer Group Pty Ltd. He said he resigned his directorships of those three companies on 7 December 2017, the effective date of which was 5 January 2018. The husband exhibited an historical company search of B Pty Ltd current as at 28 September 2017 showing the husband as a director along with Mr M and Mr N being the other directors. The shareholders were shown as the wife who held 40 of the 120 issued shares in the capital of the company, Mr M who held 40 of the 120 issued shares in the capital of the company and Ms N who held 40 of the 120 issued shares in the capital of the company. No historical company search was exhibited in relation to Z Pty Ltd.
In his March 2019 affidavit the husband stated that on 25 March 2019 a partial property settlement in favour of the wife was made in the sum of $100 000. He said that was in addition to the net proceeds of the sale of the former matrimonial home totalling $76 440. He agreed that he paid his last amount of spousal maintenance in the sum of $2 300 in December 2018. He denied receiving income of $400 000 per annum. He said his father’s estate was near valueless so he did not apply for probate.
The husband relied on his financial statement made on 27 March 2019. In it he said he had zero by way of income, the estimated value of property owned by him was $405 000 and his estimated liabilities were $291 000. He said his total financial resources were not known. It seemed to me that the husband’s financial disclosure was incomplete. He said he had no income. He said he neither paid a mortgage debt nor did he pay rent. He said he incurred an estimated sum of $125 per week for food yet he did not identify the source of monthly income to meet the corresponding monthly expenditure of $500 for the food. He said he estimated a weekly petrol expenditure of $100 but he did not identify the source of income giving rise to that expenditure.
It may fairly be said that two very different versions of the husband’s financial circumstances have been advanced. The wife propounded a version of events to the effect that the husband’s sale of his interest in B Pty Ltd was unclear (at the most innocuous) or positively suspicious (at the most sinister). The husband said –
a)he works in a new job as a commission agent and does not receive an income;
b)he is in a serious financial situation;
c)he needs access to money now held in his solicitors’ trust account; and
d)the characterisation of any order giving him access to such funds may be legal funding or it may be a partial property settlement.
The wife resisted the grant of an order for the release of $100 000 to the husband. She adopted that stance because –
a)he had not demonstrated need;
b)he has constantly failed to disclose information that he was required to disclose;
c)when his financial situation is carefully examined in truth he does not need any such amount;
d)his legal fees can be met from other sources; and
e)if he is given access to the $100 000 that he seeks, that money will be exhausted never to be seen again.
The wife said the husband could return to the workforce in a field in which he is qualified earning up to $200 000 per annum. She said that without her consent the husband took $100 000 from the term deposit and exhausted that sum in eight months, not having paid sums previously ordered by way of child support. The wife continues to harbour suspicions, if not positive opposition, to the husband’s version of events about the sale of his interest in B Pty Ltd. She deposed in considerable detail to what she said was the reality that the Brewer Family Trust was owed about $235 000. She said the trustee (controlled by the husband) did not act in the best interests of the beneficiaries of the trust in allegedly compromising with B Pty Ltd for the payment of $97 000 or even $333 000 when reputable valuers placed a value Brewer Group Pty Ltd’s interest at over $2.6 million.
Expressed in that manner, the wife was foreshadowing a breach of fiduciary duty claim against the husband. She said such a claim lay in his conduct in procuring Brewer Group Pty Ltd to behave detrimentally to the interests of beneficiaries whose interest Brewer Group Pty Ltd was required by law to advance.
Whether such an assertion will ultimately prevail must await another day. It is likely that I will not be the trial judge because the author of a key S Group report was once my personal accountant.
Some preliminary factual matters
Recognising that this is an interlocutory application in which a great detail of the evidence is disputed and none has yet been tested, it is possible to state certain propositions of fact even at this embryonic juncture of the litigation. Those matters include the following –
a)the parties were married for a significant period of time;
b)they have two children the eldest of whom has considerable present and future needs;
c)the husband in happier times earned substantial sums each year which, when passed through various trusts, were distributed to the husband and wife;
d)the husband has re‑married and since late 2018 has ceased working in his profession and instead has worked as a commission agent for which he has derived no recorded income;
e)very considerable doubt surrounds the circumstances of the husband’s sale of his interest in B Pty Ltd and an argument exists about whether he has sold that interest at all or, if so, whether that was for a proper value;
f)the wife has foreshadowed bringing a breach of fiduciary duty claim against the husband; and
g)disclosure in this case is presently defective, especially by the husband.
Disclosure generally
In the specific context of family law litigation ch 13 of the Family Law Rules governs a party’s obligations concerning disclosure. The centuries of learning concerning civil litigation in courts of common law and chancery as recorded, for example, in Daniell’s Chancery Practice[2] have been largely supplanted by ch 13. In what can only be described as “clear and unambiguous terms”, as Cronin J called the phrase when referring to the rule in his Honour’s extrajudicial speech entitled ‘The obligation to disclose; but what if they don’t?’,[3] ch 13 sets out not only what to disclose but how to do so. By way of emphasis, the provisions of ch 13 are to be read in conjunction with the provisions of r 1.08 that imposes upon each party a responsibility to promote and achieve the main purpose recorded in the seven sub‑paragraphs of r 1.07. Among those are timeliness, proportionality and cost efficiency in the conduct of family law litigation. In many respects, the legislative aspirations evident in the Civil Procedure Act of the State of Victoria and its counterpart in New South Wales have been largely replicated, consonant with a legislative imprimatur across many jurisdictions of the Commonwealth of Australia that compels parties to get to the heart of disputed issues quickly, time and cost efficiently while concurrently keeping uppermost in mind the proportionality of the disputed issues relative to the overall contest.
[2] Sidney Edward Williams and Frank Guthrie‑Smith, Daniell’s Chancery Practice: being a treatise on the practice of the Chancery Division and on appeal therefrom (Sweet & Maxwell, 8th ed, 1985).
[3] Justice Paul Cronin, ‘The obligation to disclose; but what if they don’t’ (conference paper, National Family Law Conference, April 2008).
The disclosure obligation is a continuing obligation. That point is traceable to older English decisions such as Mitchell v Darley Main Colliery Co[4] and Myers v Elman.[5] Yet the proposition was not as clear as it was once thought to be having regard to other earlier observations to the contrary, such as those emanating from the Divisional Court in James v Plummer.[6] For that matter, in the Full Court of the Federal Court of Australia in TNT Management Pty Ltd v Trade Practices Commission; Brambles Holdings v Trade Practices Commission[7] Sheppard J pointed out that the authorities said to impose the obligation of continuing discovery were not even referred to in Bray’s Digest on the Law of Discovery.[8]
[4] (1884) 1 Cab & El 215.
[5] [1940] AC 282.
[6] (1888) 23 LJNC 107.
[7] (1983) 47 ALR 693.
[8] Edward Bray, Digest on the Law of Discovery with practice notes (Sweet & Maxwell, 1904).
Rule 13.07 of the Family Law Rules describes the obligation of disclosure as a “duty”. Mirroring equitable principles, that rule provides that the duty of disclosure applies to each document that “is or has been in the possession, or under the control, of the party disclosing the document”. Noticeably, the word “power” was omitted from r 13.07, the word “power” having attracted a rash of judicial intrigue in common law courts such as in Lonrho Ltd v Shell Petroleum Co Ltd[9] and in Palmdale Insurance Ltd (in liquidation) v L Grollo & Co Pty Ltd.[10] At all events, severe consequences befall a party who deliberately withholds a document. In his Honour’s paper cited above, Cronin J observed that when it comes time to list a proceeding for trial each party is required to undertake that they have disclosed everything and if that undertaking is false on the basis that all documents have not been disclosed, the party in default thereby exposes himself or herself to the offence created by r 13.15(2). That offence is additional to the contempt power reposed in s 112AP of the Family Law Act.
[9] [1980] 1 WLR 627.
[10] [1987] VR 113.
It will be immediately apparent that the legislature has taken the view that parties’ disclosure duties are very serious and disobedience towards them or dereliction in a party’s approach in relation to them will not be trifled with.
In this case the issue of the sale of the husband’s interest in relation to all aspects of the B Pty Ltd enterprise remains a very important issue. I was not persuaded, at least not at this stage of the interlocutory process of the case, that the full, complete and exhaustive duty concerning disclosure has been diligently discharge by the husband. That failure has obvious consequences to an overall understanding of the husband’s financial circumstances. In turn, that bore upon whether I was satisfied of the matters that the husband needed to prove on this application, one of which was the reality of his needs. It was one thing for the husband to assert that he was unable to support himself from income and that he said he was a commission agent entitled to “commission” as opposed to regular income. It was an altogether different thing for him to fully and completely discharge his duties of disclosure concerning his interest (direct and indirect) in relation to all corporate and trust entities associated with all facets of the B Pty Ltd operations. To the extent that he asserted that he had sold some or all of his interest that he once owned, he was required (and currently remains required) to reveal all aspects of that sale. That encompassed all documents evidencing the offer, the acceptance of that offer, the written agreement that thereby came into existence by acceptance of that offer, the performance of that agreement according to its terms and other things. Of the latter point, the fact of payment and amounts paid are obvious matters calling for documentation. Performance will also be evidenced by the transfer of shares scrip, the registration of the transferees in the share registry of the company and ASIC documentation. So far as other evidence of payments is concerned, self‑evidently contemporaneous bank documentation will be especially relevant, not only as to the amount of the payment but as to the source of funds giving rise to the payment.
Those observations are scarcely new law. The modern genesis of the need for proper disclosure emanated from the House of Lords decision in Livesey (formerly Jenkins) v Jenkins.[11] There, Lord Brandon of Oakbrook held as follows –
I stated earlier that, unless a court is provided with correct, complete and up‑to‑date information on the matters to which, under section 25(1), it is required to have regard, it cannot lawfully or properly exercise its discretion in the manner ordained by that subsection. It follows necessarily from this that each party concerned in claims for financial provision and property adjustment (or other forms of ancillary relief not to reel in the present case) owes a duty to the court to make full and frank disclosure of all material facts to the other party and the court. This principle of full and frank disclosure in proceedings of this kind has long been recognised and enforced as a matter of practice. …
[11] [1985] 1 AC 424, 437‑438.
All other members of the House of Lords agreed in the observations of Lord Brandon of Oakbrook.
Those observations were adopted by Smithers J in In the Marriage of Briese.[12] There, Smithers J placed significant store in the observation of the House of Lords in Livesey (formerly Jenkins) v Jenkins. His Honour held as follows –
Although the case relates to quite different circumstances, I believe that the conclusion in the House of Lords in the case of Livesey (formerly Jenkins) v Jenkins [1985] 1 All ER 106 is apposite, namely that in financial proceedings between spouses each party must make a full and frank disclosure of all material facts. In that case it was made clear that full and frank disclosure was required as a matter of principle the in light of the fact that it was the duty of the court, taking into account a number of designated criteria, to make a decision which basically involved the exercise of a discretion. This is quite different from common law litigation between strangers, in which such a general duty does not exist, and obligations would only exist insofar as statute or court rules required.
In my view it is fundamental to the whole operation of the Family Law Act 1975 (Cth) in financial cases that there is an obligation of the nature to which I have referred. Livesey (formerly Jenkins) v Jenkins makes it clear that mere compliance with rules of court or practice directions does not alter the basic principle of the need for full and frank disclosure by the parties. The fact that in the present case it is not a question of ultimate nondisclosure of a matter relevant to the orders made, but is of a different nature being relevant to delay and expense, does not in my view prevent the principal being applicable here as to the matter of costs. There is an obligation on each party to act so as to provide a basis upon which the two of them are in a position to resolve the case by agreement, or proceed to a hearing, as expeditiously as may reasonably be done.
[12] (1985) 10 Fam LR 642, 662.
The decision of Smithers J in Briese was handed down on 27 June 1985. Almost six months later the Full Court adopted the observations of the House of Lords and of Smithers J as mentioned above in Oriolo & Oriolo.[13]
[13] (1985) 10 Fam LR 665.
Very shortly thereafter a differently constituted Full Court in In the Marriage of Giunti[14] applied Briese as well as Oriolo. In Giunti, the Full Court held as follows[15] –
It is obviously desirable as a general principle that the court should first of all identify the pool of assets available and evaluate it. If each party complies with his or her obligation to make full and substantive disclosure of their financial affairs – see In Marriage of Briese (1985) 82 FLR 369, affirmed by the Full Court in In Marriage of Oriolo [1985] FLC 80,254 – there is no problem, although there may be disputes as to valuation.
However, if as is here, one party fails to fulfil that obligation, is it open to that party then to rely on the absence of satisfactory evidence to prevent the making of an order against him or her which otherwise justice and equity would require? It would be simple, if that were the case, to evade the jurisdiction of this court, not by outright refusal which would attract sanctions but by obfuscation and evasion. …
[14] (1986) 11 Fam LR 160.
[15] Ibid 165.
Subsequent decisions of the Full Court, consistent in approach, emerged in In the Marriage of Stein,[16] In the Marriage of Mezzacappa[17] and In the Marriage of Black & Kellner[18] as well as In the Marriage of Tate[19] and In the Marriage of Chang and Sue.[20]
[16] (1986) 11 Fam LR 353.
[17] (1987) 11 Fam LR 957.
[18] (1992) 15 Fam LR 343.
[19] (2000) 26 Fam LR 731.
[20] (2002) 29 Fam LR 406.
In Tate’s case, the Full Court (Nicholson CJ, Kay and Waddy JJ) referred to the continuing process of discovery, citing TNT Management Pty Ltd v Trade Practices Commission; Brambles Holdings v Trade Practices Commission.[21] In Tate’s case, the Full Court compared the rules of courts relating to discovery in the High Court, the Federal Court of Australia and in the High Court of Judicature in the United Kingdom.
[21] (1983) 47 ALR 693.
For decades this court has encountered situations where the court has been unable to fully ascertain the extent of a party’s financial position by reason of a lack of full and frank disclosure. Illustrations have emerged in cases such as In the Marriage of Stein[22] and In the Marriage of Weir,[23] the latter authority standing for the proposition that where there has been nondisclosure by one party, the court should not be unduly cautious about making findings in favour of the other party. For that matter, as was held in In the marriage of Abdullah,[24] undisclosed funds or hidden funds did not render those funds unascertained or unascertainable. Slightly later the Full Court in In the Marriage of Efthimiadis[25] followed Black’s case and Weir’s case.
[22] (1986) 11 Fam LR 353.
[23] (1992) 16 Fam LR 154.
[24] (1981) 6 Fam LR 654.
[25] (1993) 16 Fam LR 384.
Many of the issues addressed above were canvassed by Stephen O’Ryan QC in his article ‘Attempts to Deal with Undisclosed Wealth in Property Settlement Proceedings’.[26] Likewise, Graham Richardson SC made a very useful contribution to the learning in his article ‘A Beginner’s Guide to Property Settlement and Related Proceedings in the Family Court’.[27]
[26] (1994) 8 Australian Journal of Family Law 96.
[27] (1998) 17 Australian Bar Review 48.
The way this application was formulated
Mr Brown QC informed me that his client sought orders in the nature of a spousal maintenance order.[28] He also cast the application as a partial property settlement. Different legal principles apply, depending on the characterisation of the application. Yet both applications are underpinned by the same factual scenario, outlined above with all its apparent deficiencies in respect of disclosure. Bearing in mind that the husband brought the applications, the evidentiary burden has fallen upon him to discharge the relevant proofs on the balance of probabilities. Equally, on the husband’s version of events –
a)he says he is without access to funds generally;
b)he says he needs funds to meet his existing legal expenses and future legal expenses in default of which is likely to be unrepresented in the ongoing aspects of the case;
c)he says the orders made on 18 January 2018 that currently bind him cannot be met; and
d)he says the sum he seeks ($100 000) will be an amount which he is likely to receive on a final property adjustment.
[28] Transcript of proceeding (8 April 2019) 3, ln 47.
As mentioned earlier, the wife foreshadowed an amended application that she says will recast her case so that the percentage claim she asserts will be a division of assets in her favour of 100%.
Spousal maintenance claim
So far as the spousal maintenance claim is concerned, ultimately the issue is determined by application of the principles in s 72 and s 74 of the Family Law Act, a matter addressed by the Full Court in In the Marriage of Stein.[29] There, the Full Court (Kay, Holden and Dessau JJ) held as follows[30] –
Spousal maintenance is ultimately governed by the provisions of ss 72 and 74, namely there being no right to spousal maintenance unless there is a capacity to meet it and an inability by the claimant to meet the claimant's own self-support.
[29] (2000) 25 Fam LR 727.
[30] Ibid (at [55]).
In Hall v Hall[31] the High Court described the legislative gateway to the operation of Part VIII of the Family Law Act in relation spousal maintenance be as being s 72(1) of the Family Law Act. The High Court pointed to the power conferred by s 74(1) to make an interim order as distinct to the power conferred by s 77 to make an urgent order. Under s 77 two preconditions were required, namely, the immediate need of financial assistance and, second, it must not be practicable in the circumstances to determine immediately what orders if any should be made. Conversely, under s 74 the making of an interim order calls for satisfaction of the threshold requirement in s 72(1) plus any relevant matter in s 75(2). On that last issue the High Court affirmed the observations of the Full Court of the Family Court in In the Marriage of Redman and Redman.[32] Hence, the High Court in Hall v Hall held that in an application for an interim order under s 74 the court cannot determine the application without finding on the balance of probabilities on the evidence before it the threshold requirement of s 72(1) are met plus any relevant matters in s 75(2).
[31] (2016) 257 CLR 490.
[32] (1987) 11 Fam LR 411.
Section 72(1) is in the following terms –
A party to a marriage is liable to maintain the other party, to the extent that the first‑mentioned party is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately whether:
(a)by reason of having the care and control of a child of the marriage who has not attained the age of 18 years;
(b)by reason of age or physical or mental incapacity for appropriate gainful employment; or
(c)for any other adequate reason;
having regard to any relevant matter referred to in subsection 75(2).
There was no evidence of the husband’s inability to support himself by reason of the matters in subsection (a) or (b) of s 72(1). So far as subsection (c) was concerned, I did not see evidence of a matter capable of constituting “any other adequate reason” having regard to the matters in s 75(2).
Here, the relevant issue was s 72(1). It turned on the wife’s capacity and an inability of the husband to self‑support. Of the last point, that is, an inability to self‑support, I was not persuaded of the husband’s inability by reason of the husband’s dubious approach to disclosure. Recognising that the relevant legislative provisions for interim maintenance orders are ss 72, 74 and 75(2), the husband’s own disclosure did not persuade me on the balance of probabilities of his inability to self‑support. His disclosure was inadequate.
I was not persuaded that the husband was entitled to an order for spousal maintenance.
Embedded in the husband’s application for orders discharging the orders made by Thornton J on 11 January 2018 was the recognition that he needed to satisfy s 83(2) of the Family Law Act. It is in mandatory terms, hence the use of the phrase “the court shall not make an order increasing or decreasing an amount ordered to be paid by an order unless it is satisfied” of several things. Relevantly here, the husband’s changed circumstances since Thornton J’s orders must be such as to justify the making of an order eliminating the husband’s liability to pay spousal maintenance.
Here, the husband’s overall financial position had not markedly changed since the January 2018 orders. He said he had ceased working for interests associated with B Pty Ltd entities since her Honour’s orders. In fact he had resigned his directorship prior to 11 January 2018. He had thereafter elected to work in retail for a time, then to care for his ailing father and then to commence in another field yet not in an employed capacity. The wife said the husband is capable of gaining meaningful, paid employment so as to generate an income in the vicinity of $200 000 per annum. The husband gave no explanation for his inability to earn a regular income, that is to say, to undertake employment instead of being a commission agent.
In any event, whatever may be the alleged changed circumstances, at least in respect of financial issues the husband gave next to no insight. That was largely due to his questionable approach to disclosure. He bore the onus of proof of demonstrating that s 83(2) had been met when it spoke of the court not making an order decreasing the amount previously ordered unless satisfied that circumstances existed “as to justify its doing so”, that is to say, making an order an order decreasing to the point of zero the sum ordered on 11 January 2018. I was not so satisfied on the material filed by the husband.
His application in paragraph one of his application in a case failed.
Interim property settlement
The husband’s application was cast on the alternative basis of an interim or partial property order. So far as authority on point was concerned it seemed to me to be unnecessary to go beyond the observations of the Full Court in Strahan v Strahan(Interim Property Orders).[33] There, the plurality of the court (Boland and O’Ryan JJ) held that by force of s 80(1)(h) of the Family Law Act, orders in the nature of interim property settlement orders may be made notwithstanding the purport and effect of s 79 of the Act that the usual order for the division of property is on a once‑and‑for‑all basis after a final hearing. Thus, an applicant seeking orders in the nature of interim property orders is not required to establish compelling circumstances that such an order should be made. Instead, as the Full Court held in Strahan the overarching consideration is the interests of justice. The Full Court held that all that is required in the circumstances is that it is appropriate to exercise the power.
[33] (2009) 42 FamLR 203.
On the financial information adduced thus far, Mr Brown QC and Ms Swart recognised that the pool in this case is relatively modest, aggregating something in the order of $1 million. In debate, both counsel used that arithmetic and what seemed to be either a concession or common ground that the husband would be entitled to an order in the vicinity of 25% of the asset pool. On that arithmetic, the projected division in his favour was $250 000 of which he sought less than half in this partial property settlement.
Ms Swart of counsel for the wife opposed the husband’s application when cast as a partial property settlement. She said that upon the re‑statement of her case the wife will be asserting an entitlement to 100% of the pool and when that is done, so Ms Swart said, any intervening partial property division will only serve to dilute the 100% division that the wife seeks.
Several things must be said in relation to that submission. First, her amended case has not yet been filed so it is not possible to tell precisely how the wife will cast it so any assessment of the strengths and weaknesses of her recast case must await the filing of her further amended initiating application (and not until). Second, an order for a party to receive a 100% division of the property pool is unusual and is ordinarily made upon the acceptance by the trial judge of cogent if not compelling proofs. Further, by reason of the defective disclosure in this case by the husband, I was unable to say whether the husband would be able to restore the sum of $100 000 if a partial property settlement was ordered.
In my view the husband failed to persuade me that it was presently appropriate to make the order he sought. He must exhaustively complete the tasks of disclosure in accordance with ch 13 of the Family Law Rules. Once he does so his financial circumstances will be better known. The wife must amend, if she chooses to do so. Once both are done, the husband may, if he is so advised, renew an application for a partial property division. On the material he presently advanced his application failed.
Further conduct
I direct that this proceeding is referred to the registrar for ongoing case management.
I certify that the preceding seventy‑one (71) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Wilson delivered on 18 April 2019.
Associate:
Date: 18 April 2019