Burt & Merrill (No 2)
[2024] FedCFamC1F 514
•13 August 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Burt & Merrill (No 2) [2024] FedCFamC1F 514
File number: MLC 9912 of 2013 Judgment of: MCGUIRE J Date of judgment: 13 August 2024 Catchwords: FAMILY LAW – PROPERTY – Consideration of s 90SN of the Family Law Act 1975 (Cth) – where applicant seeks to set aside final orders made 10 August 2018 on the basis of s 90SN(1)(a), (b) or (c) – orders made by Berman J on 10 August 2018 be set aside – trial directions made in relation to the substantive proceedings Legislation: Family Law Act 1975 (Cth) ss 79, 90SM and 90SN(1) Cases cited: Barker & Barker [2007] FamCA 13; (2007) 36 Fam LR 650
In the marriage of Cawthorn v Cawthorn [1998] FamCA 37; (1998) FLC 92-805 at 85,061.
In the marriage ofHolland v Holland [1982] FamCA 31; (1982) FLC 91–243
In the marriage of Molier v Van Wyk [1980] FamCA 85; (1980) FLC 90–911 at 75,767
In the marriage of the Rohde v Rohde (1984) FLC 91–592 at 79,768
Trustee of the Bankrupt Estate of Hicks & Hicks and Anor [2018] FamCAFC 37; (2018) FLC 93-824
Division: Division 1 First Instance Number of paragraphs: 49 Date of hearing: 15 July 2024 Place: Melbourne Counsel for the Applicant: Mr Gronow Solicitor for the Applicant: Vasilaras & Co Solicitor for the First Respondent: Litigant in Person Counsel for the Second Respondent: Mr Galvin KC Solicitor for the Second Respondent: McKean Park Lawyers Counsel for the Intervener: Mr Eley Solicitor for the Intervener: Serong Legal ORDERS
MLC 9912 of 2013 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR BURT
Applicant
AND: MS MERRILL
First Respondent
MR COUPE AS TRUSTEE OF THE BANKRUPT ESTATE OF MS MERRILL
Second Respondent
MR PQ IN HIS CAPACITY AS LIQUIDATOR OF C PTY LTD (IN LIQUIDATION)
Intervenor
ORDER MADE BY:
MCGUIRE JJ
DATE OF ORDER:
13 AUGUST 2024
THE COURT ORDERS THAT:
1.The final property Orders made by his Honour Berman J on 10 August 2018 be set aside pursuant to section 90SN(1)(a) and (c) of the Family Law Act 1975 (Cth).
2.The substantive proceedings be listed for final hearing in the Federal Circuit & Family Court of Australia at Melbourne before me commencing 10.00am on Monday 3 February 2025 (with a time estimate of two (2) days).
IT IS DIRECTED
3.The parties make, file and serve their trial affidavits no later than twenty eight (28) days prior to the commencement of the final hearing.
4.That no later than seven (7) days prior to the commencement of the hearing the parties make, file and serve a document setting out:
(a)the orders sought;
(b)a list of documents to be relied upon; and
(c)a brief summary of argument.
5.The applicant be responsible for the payment of any fee including a setting down or hearing fee pay or cause to be paid such of the fees as shall be payable by that party in accordance with, and within the time specified in, the Family Law (Fees) Regulation 2022 (Cth).
AND THE COURT NOTES THAT
6.In the event of non-compliance by any party with the orders, directions, Rules or Regulations of this Court relating to the filing of documents or any other procedural issues, the application may be struck out, the proceedings may be directed to proceed undefended or the trial date may be vacated and the party in default or their solicitor may be ordered to pay the costs of the other parties wasted as a result of the default.
7.To the extent that it is or may be practicable to do so, a compliance check is to be carried out by an associate or deputy associate of the trial judge, or by another appropriate court officer, shortly prior to the final hearing date.
8.Leave be given to the parties to apply for further procedural and/or interlocutory orders.
THE COURT NOTES THAT
9.If in any proceedings there are allegations of family violence and the provisions of section 102NA of the Family Law Act 1975 (Cth) (see Family Violence Information sheet attached to the Orders on the Court Portal) apply any unrepresented party will not be permitted to personally cross-examine the other party/parties.
10.Affected unrepresented parties may apply to the Commonwealth Family Violence and Cross-Examination of Parties Scheme (“the Scheme”) for representation but any such application must be made at least 12 weeks prior to the final hearing.
11.Further information about the legislation and the Scheme can be found at Part 4 of the Family Violence Information Sheet.
12.If section 102NA of the Family Law Act 1975 (Cth) applies and a party becomes unrepresented after trial directions have been made, that party is required to promptly advise the Court.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym of Burt & Merrill (No 2) has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
McGUIRE J:
APPLICATIONS
This is an application pursuant to s 90SN of the Family Law Act 1975 (Cth) (“the Act”) by Mr Burt to set aside final property settlement orders made by his Honour Justice Berman on 10 August 2018.
The first respondent, Ms Merrill, the former de facto wife, represented herself before me and consents to the order.
The second respondent who is the trustee of the first respondent’s bankrupt estate does not consent to the orders sought by applicant but does not actively oppose such orders.
The intervenor and proposed third respondent in the substantive proceedings, Mr PQ in his capacity as Liquidator of C Pty Ltd (In Liquidation) did not participate in this discrete preliminary application under s 90SN of the Act.
It was agreed that the application pursuant to s 90SN be heard as a preliminary application where the applicant has filed for relief pursuant to s 90SM of the Act.
BACKGROUND
After a trial of some eight days duration, Berman J made final orders on 10 August 2018 providing inter alia as follows:
(1) …
(a)That on or before forty five (45) days from the date of this order the husband pay the wife the sum of SIX HUNDRED AND FOURTEEN THOUSAND ONE HUNDRED AND NINETY SEVEN DOLLARS ($614,197) (“the settlement sum”);
(b)That contemporaneously with the payment of the settlement sum the wife shall transfer her estate and interest in a property situate at [L Street], [Suburb E] … to the husband;
(c)That within fourteen (14) days of this order wife do sign the settlement agreement with the Australian Taxation Office (“ATO”) with respect to the taxation liabilities in the total sum of TWO MILLION FIVE HUNDRED AND THIRTEEN THOUSAND SEVEN HUNDRED AND SEVENTY THREE DOLLARS ($2,513,773) for the following entities:-
(i) [C] Pty Ltd;
…
(f)That if in the discharge of the wife’s liability to the ATO or in respect of her other liabilities she proposes to sell any or all of the real property held by [C Pty Ltd] THEN the wife shall give the husband thirty (30) days’ notice of any intention to sell and the husband will have the first right of refusal and a first option to purchase the nominated property or properties at the following value: –
(i)[2 and 3 M Street], [Suburb D] $1.9 million;
(ii)[1 M Street], [Suburb D] $630,000;
(iii)[N Street], [Suburb D] $750,000;
(iv)[…] [L]ots [5, 6 and 7] at [N Street], [Suburb D] $65,000;
…
(j)that in default of the payment of the settlement sum and should the default continue longer than fourteen (14) days, the parties will cause the property situated [L Street], [Suburb E] to be placed on the market for sale by public auction or private treaty with the net proceeds of sale to be applied in the following manner…
In his Reasons for Judgment Berman J identified an issue in dispute being the wife’s contention that she had a taxation liability both personal and in respect of her associated entities that should be recognised and brought to account at $2,513,773.
At [97] – [103] of the Reasons his Honour notes:
97.The wife contends that in late 2013 she became aware that there may be a significant taxation liability.
98.The wife’s evidence is that even with the assistance of her accountants she was not able to ascertain the extent of the potential liability.
99.The wife specifically instructed Ms F to assist her in determining the potential liability and then if possible to negotiate a settlement with the ATO.
100.Consequent upon the evidence of Ms F and her colleague Mr DD (“Mr DD”), the wife seeks that the collective taxation liability both personal and of her associated entities should be brought to account at $2,513,773.
101.The parties disagreed as to the extent to which documents that may have been in the possession of the husband were withheld from the wife thereby hindering her from more easily assessing the extent of the taxation liability.
102.The husband does not deny that a tax liability may exist.
103.Paragraph 286 of the husband’s trial affidavit is relevant:-
I note [the wife’s] complaints that tax returns were not filed for the entities that she now controls. I admit that due to my health problems, as detailed above, I was simply not capable of preparing and filing tax returns from approximately 2009 onwards.
His Honour noted the submission of the applicant that there was no evidence that would elevate the proposed liability to ATO determined following negotiations with the ATO to be accorded the status of a debt. The applicant arguing that no tax liability has been proven, no deed of settlement had been reached and without there being certainty, the alleged tax liability should not be brought to account.
In summary, his Honour made findings and determined to deal with the issue by ordering the wife to within 14 days sign an agreement with ATO in a total sum of $2,513,773..
The parties were in a de facto relationship from 1987 until separation on 17 October 2013.
The applicant is 72 years of age and was a professional. The first respondent is 54 years.
The applicant suffers ill health and is not in employment having lost his ability to practice professionally in 2011.
There are four children of the relationship none of whom remain dependent.
On 7 September 2018 the applicant lodged an appeal against the Final Orders of Berman J.
On 27 September 2018 Berman J made an order staying the Final Orders.
On 10 July 2019 the company C Pty Ltd, of which the first respondent was the sole director, was placed into liquidation and Mr PQ was appointed as the liquidator.
On 3 September 2019, the applicant’s appeal was withdrawn with a right to seek reinstatement on the basis of he bringing this application pursuant to s 90SN of the Act. That application was filed 19 September 2019.
On 19 December 2019 the first respondent became bankrupt with Mr Coupe appointed as her trustee in bankruptcy. On 18 February 2023 the first respondent was discharged from her bankruptcy. The Trustee remains active in these proceedings on the basis of creditors not having been satisfied.
Where Berman J found the property of C Pty Ltd to have a total value of $3,345,000, the first respondent ostensibly placed C Pty Ltd into liquidation on the application of the State Revenue Office for unpaid land tax of $23,372.99. Similarly, the first respondent allowed herself to become personally bankrupt for a debt of unpaid fees of $23,000E.
It is not disputed that, contrary to the orders of Berman J, the first respondent did not enter into a settlement deed with the ATO. The best evidence before me is that the total ATO tax liability of the first respondent and the company C Pty Ltd (In Liquidation) is approximately $285,761 quantified by her bankruptcy trustee and the Liquidator of the C Pty Ltd.
RELEVANT LEGISLATION
Section 90SN of the Act provides the varying and setting aside orders altering property interests of de facto partners as in the same terms as s 79A of the Act provides for married persons, and as follows:
90SN Varying and setting aside orders altering property interests
(1)If, on application by a person affected by an order made by a court under section 90SM 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
(b)in the circumstances that have arisen since the order was made it is impracticable for the order to be carried out or impracticable for a part of the order to be carried out; 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; or
(d)in the circumstances that have arisen since the making of the order, being circumstances of an exceptional nature relating to the care, welfare and development of a child of the de facto relationship, the child or, where the applicant has caring responsibility for the child (as defined in subsection (3)), the applicant, will suffer hardship if the court does not vary the order or set the order aside and make another order in substitution for the order; or
(e)a proceeds of crime order has been made covering property of the parties to the de facto relationship or either of them, or a proceeds of crime order has been made against a party to the de facto relationship;
the court may, in its discretion, vary the order or set the order aside and, if it considers appropriate, make another order under section 90SM in substitution for the order so set aside.
(2)A court may, on application by a person affected by an order made by a court under section 90SM in property settlement proceedings, and with the consent of all the parties to the proceedings in which the order was made, vary the order or set the order aside and, if it considers appropriate, make another order under section 90SM in substitution for the order so set aside.
THE APPLICATION
By his further Amended Initiating Application of 27 February 2022, the applicant seeks to set aside the Final Orders of Berman J made 18 August 2018 on the basis of any or all of s 90SN (1)(a), (b) and (c) in that:
(a)orders were made where there was a miscarriage of justice or “for any other circumstance”;
(b)“in the circumstances that have arisen since the orders were made they are impracticable to be carried out and cannot be complied with”; and
(c)a party has defaulted on, in the sense that they have not complied with and in the present circumstances cannot comply with, the said orders and that by reason of the default it is just and equitable to set them aside.
The applicant relies on the following material:
(a)affidavit of Mr G filed 7 September 2018;
(b)his affidavit of filed 19 September 2019;
(c)his affidavit filed 10 January 2020;
(d)his affidavit filed 27 January 2022;
(e)his Further Amended Application filed 27 February 2022;
(f)his affidavit filed 14 December 2022;
(g)his affidavit filed 14 June 2023;
(h)affidavit of Mr Coupe filed 24 July 2023;
(i)his affidavit filed 9 July 2024; and
(j)affidavit of Mr BC filed 5 July 2024.
The first respondent was present at court unrepresented but made no submissions and relied on no particular material. She confirmed her consent to the setting aside the orders.
The second respondent relied only on the Response filed 5 July 2022.
The matter proceeded on submissions and on the face of the material where the Court had been provided with helpful written submissions by counsel for both the applicant and the second respondent.
Where the applicant relies on any of s 90SN(1)(a), (b) and (c), it is opportune to deal with the evidence in respect of each notice of each subsection separately.
Section 90SN(1)(a)
The applicant argues a miscarriage of justice by reason of “any other circumstance”.
This is a broad subsection intended to activate the discretion in the Court to set aside or vary orders with emphasis on there being a miscarriage of justice and not simply a, fraud, duress, suppression of evidence or any other circumstance.
This section concerns circumstances that existed either prior to or at the time of the s 90SN order being made.[1] The “miscarriage of justice” is not to be read as synonymous with a lack of fairness but where the order was obtained contrary to the justice of the case.[2] That is, the emphasis is on the integrity of the judicial process. The test for miscarriage of justice might be where the circumstance results in the Court making an order that is “substantially different” from the order that would be made absent to that particular circumstance.[3]
[1] In the marriage of Molier v Van Wyk [1980] FamCA 85; (1980) FLC 90–911 at 75,767.
[2] In the marriage ofHolland v Holland [1982] FamCa 31; (1982) FLC 91–243.
[3] Barker & Barker [2007] FamCA 13; (2007) 36 Fam LR 650.
Where the section particularises circumstances that may lead to a miscarriage of justice including fraud, duress, or suppression of evidence, the phrase “or any other circumstance” is given it’s broad meaning.[4] The limitation, however, remains that the circumstance must be existing prior to or at the time of the making of the order.
[4] Trustee of the Bankrupt Estate of Hicks & Hicks and Anor [2018] FamCAFC 37; (2018) FLC 93-824.
Relevantly, Berman J made final orders taking into account a liability of the first respondent/C Pty Ltd in a sum of $2,513,773 although there was no evidence before his Honour that the liability had crystallised and hence his Honour making the assertive order that the first respondent enter into a settlement agreement with the ATO. Nevertheless, the property pool was settled inclusive of a liability in the hands of the first respondent at $2,513,773.
The best evidence now is that the actual amount owing to the ATO as at the date of his Honour’s orders was far less than that indicated in the evidence before his Honour. In fact the best evidence quantifies the liabilities of the first respondent and C Pty Ltd at no more than $285,761.
In context, the asserted liability to the ATO of $2,513,773 amounted to approximately 30 per cent of the property pool. Where his Honour made orders broadly effecting a 57/43 percentage split of the property pool in favour of the applicant, the orders would have been substantially different had the asserted liability to the ATO not been taken into account at $2,513,773 but say $285,761. It follows that his Honour’s order that the applicant pay the first respondent a lump sum of $614,197 would not have been made and, should the assets have rested where they currently do, then any cash adjustment may have favoured the applicant.
The second respondent, although not assertively arguing against the application to set aside his Honour’s orders, argues against the applicant’s s 90SN(1)(a) – miscarriage of justice argument. Essentially, the second respondent argues that the best evidence available to his Honour as of 18 August 2018 was that the ATO debt amounted to $2,513,773 and hence this was the “circumstance” existing at the date of his Honour’s orders.
I do not accept the submission of counsel for the first respondent. Notably, his Honour made the assertive order that the first respondent enter into agreement, within 14 days, with the ATO so as to crystallise the debt of $2,513,773. She did not do so. That fact together with the evidence now available to the Court as to the quantum of the liability to the ATO would have resulted in a substantially different order and hence the integrity of the judicial process has been compromised.
I would make the order setting aside his Honour’s orders on the basis of s 90SN(1)(a). In case I am mistaken, however, I also consider the other subsections and argument.
Section 90SN(1)(b)
The applicant argues that it is impracticable and impossible for the final orders to be complied with by reason of the first respondent’s subsequent bankruptcy and the liquidation of C Pty Ltd.
The term “impracticable” in the section should not be read as synonymous with “impossible”. It is more properly understood as “not reasonably possible”.[5]
[5] In the marriage of the Rohde v Rohde (1984) FLC 91–592 at 79,768.
For obvious public policy reasons, the supervening circumstance making it impracticable should not be by reason of the applicant’s own making or default.[6]
[6] In the marriage of Cawthorn v Cawthorn [1998] FamCA 37; (1998) FLC 92-805 at 85,061.
Unlike the consideration at s 90SN(1)(a) the “relevant circumstances” here are those intervening since the making of the Final Orders.
In this matter, the applicant submits that it is not practical or possible for him to pay $614,197 to the first respondent where his current financial situation is such that he cannot raise that amount of money and where it was contemplated by his Honour’s orders that such payment would be contemporaneously accompanied by a transfer to the applicant of a property at L Street, Suburb E.
The applicant further identifies the first respondent’s bankruptcy (and the placing of C Pty Ltd in liquidation) as circumstances arising since the making of the orders that make it impracticable for the Final Orders to be carried out.
I would not accept the applicant’s submissions in respect of this subsection. Firstly, the first respondent’s bankruptcy may make more complex the transfer to the applicant of the property at L Street, in that there is the intervention of the trustee in bankruptcy. I note, however, the evidence generally that the bankrupt’s estate remains liquid and that of C Pty Ltd (In Liquidation) effectively remains liquid in that the value of the assets potentially again in the hands of the first respondent far outweigh her/C Pty Ltd’s liabilities. As such, I accept the submission of the first respondent that the Suburb E property is likely to remain in specie and still available for transfer to the applicant in accordance with the Final Orders. That is, the intervening difficulties caused by the first respondent’s bankruptcy and C Pty Ltd’s liquidation does not mean that it is impracticable or impossible for the order to be carried out.
I would not accede to the application on the argument of the applicant pursuant to s 90SN(1)(b) alone.
Section 90SN(1)(c)
The applicant argues that by default of the first respondent in carrying out order 1(c) of his Honour’s orders of 10 August 2018 namely that within 14 days of the date of those orders she sign a settlement agreement with the ATO in respect of taxation liabilities in the total sum of $2,513,773, it is just and equitable to set aside his Honour’s orders.
Perversely, the applicant also argues “default” by himself and not meeting his Honour’s order for a payment of $614,197 to the first respondent. Put simply, it would be contrary to public policy should a person be permitted by the legislation to apply to have a property settlement order set aside on the basis of their own default. The default of the first respondent, however, in not entering into the settlement agreement with the ATO pursuant to a direct order of his Honour is a default that impacts on the justice and equity of the very integrity of the orders. The fundamental rationale of his Honour’s orders emanating from the “first step” in identifying the legal and equitable interests of the parties in property, comprises the very integrity of the orders, in that by not complying with his Honour’s assertive order to reach a settlement agreement with the ATO in a prescribed amount then the fundamental basis of his Honour’s orders stemming from the “first step” of identifying the legal and equitable interests in property is without sound and evidentiary basis. That is, the other substantive orders including the cash payment from the applicant to the first respondent and the transfer of real property from the first respondent to the applicant are based on the first respondent’s compliance with order 1(c). This is not an incidental matter but one going to the very fundamental core of the property orders. Justice and equity, therefore, demands, that the orders would be set aside under this subsection.
CONCLUSION
I would therefore set aside the orders of his Honour Justice Berman made 10 August 2018 on the applicant’s application under s 90SN(1) of the Act either through subparagraph (a) or subparagraph (c).
I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McGuire. Associate:
Dated: 13 August 2024
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