Cantwell and Cantwell
[2017] FamCAFC 209
•4 October 2017
FAMILY COURT OF AUSTRALIA
| CANTWELL & CANTWELL | [2017] FamCAFC 209 |
| FAMILY LAW – APPEAL – APPLICATION IN AN APPEAL – final property orders – whether the primary judge failed to take into account a liability – where the husband sought to adduce further evidence – where the further evidence included a loan agreement and mortgage debenture – where there was no adequate explanation for the failure to tender the documents at trial – where the documents had not been stamped in accordance with s 22 of the Stamp Duties Act 1923 (SA) – where the liability consisted of a loan allegedly owed indirectly to the husband’s parents as a result of money invested by them in third party corporations controlled by the parties’ accountant – where the accountant contended that the arrangement was entered into on the instruction of the husband’s parents – where the arrangement was not deposed to by the husband or the husband’s parents – where the evidence did not reveal any legal relationship between the husband’s parents and the parties – where the money was owed between two third party corporations and where the accountant owed independent duties as a director – where no error was demonstrated – application to adduce further evidence dismissed – appeal dismissed. |
| Family Law Act 1975 (Cth) s 117(2A) Stamp Duties Act 1923 (SA) s 22 |
| Af Petersens and Af Petersens (1981) FLC 91-095 Biltoft & Biltoft (1995) FLC 92-614 CDJ v VAJ (1998) 197 CLR 172 |
| APPELLANT: | Mr Cantwell |
| RESPONDENT: | Ms Cantwell |
| FILE NUMBER: | ADC | 1215 | of | 2014 |
| APPEAL NUMBER: | SOA | 24 | of | 2017 |
| DATE DELIVERED: | 4 October 2017 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Thackray, Strickland and Murphy JJ |
| HEARING DATE: | 4 October 2017 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 3 March 2017 |
| LOWER COURT MNC: | [2017] FamCA 117 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Richards |
| SOLICITOR FOR THE APPELLANT: | David Burrell & Co Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Tredrea |
| SOLICITOR FOR THE RESPONDENT: | Oliveri Rosa Beachside Legal Lawyers |
Orders
The appeal be dismissed.
The application in an appeal filed on 20 September 2017 be dismissed.
The appellant pay the respondent’s costs fixed in the sum of $10,000.
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 Cantwell & Cantwell 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).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT ADELAIDE |
Appeal Number: SOA 24 of 2017
File Number: ADC 1215 of 2014
| Mr Cantwell |
Appellant
And
| Ms Cantwell |
Respondent
EX TEMPORE
REASONS FOR JUDGMENT[1]
Murphy J
[1]As was stated would occur when this judgment was delivered orally, citations, quotations and the like referred to during oral delivery of these reasons have been added to the settled reasons. Headings have also been added to the settled reasons for ease of reference.
Orders made on 3 March 2017 by Berman J reflected the parties’ agreement that their existing interests in property and their superannuation interests should be divided equally between them.
However, a number of other controversies between the parties emanating from the parties’ “complex” financial affairs which involved “joint and several interests in various [Cantwell] entities”[2] required determination by his Honour prior to the making of orders giving effect to that agreement.
[2] [2017] FamCA 117 at [5].
Only one of those controversies is the subject of this appeal by the husband, which is opposed by the wife. If the appeal is successful, the parties agree that this Court should vary the orders of the primary judge by reducing the cash payment ordered to be made by the husband to the wife[3] by a sum that represents one-half of a debt which the husband contended before his Honour was owed to his parents. The husband contends that the liability should have been taken into account in arriving at the net value of “the property of the parties or either of them”. That is, he contends that the parties should have shared equally in that liability.
[3] Paragraph (1)(a) of the orders made by Berman J on 3 March 2017.
His Honour determined that the husband should be responsible for the asserted liability. The husband contends in his sole ground of appeal that his Honour erred in so finding.
The husband’s appeal is sought to be supported by an application to adduce further evidence.
The husband seeks to adduce as further evidence before us an agreement of loan between a company, “NOUT”,[4] which is controlled by the parties’ accountant, and “Cantwell Company”;[5] the former as lender and the latter as borrower.
[4] NO Pty Ltd atf NO Unit Trust.
[5] Cantwell Company Pty Ltd atf the CD Trust.
The husband also seeks to adduce as evidence a mortgage debenture between those entities securing that borrowing; a document described as a “Loan Addendum”; text messages between the husband and the parties’ accountant in March 2017 and an ASIC search of a company “XX Pty Ltd”.[6] The latter is also a company controlled by the parties’ accountant.
[6] XX Pty Ltd.
By reference to the principles emerging from the decision of the High Court in CDJ v VAJ[7] the husband admits that the documents sought to be tendered “could have been obtained and tendered into evidence at trial”.[8] He contends that his failure to do so was as a result of “oversight”. It is also conceded that the documents are not referred to in the affidavit or oral evidence of the parties or the accountant. The text messages and the loan addendum arose subsequent to the trial.
[7] (1998) 197 CLR 172.
[8] Appellant’s Further Submissions, filed by leave on 4 October 2017, paragraph 4.
Our conclusions in respect of the evidence at trial are crucial in informing our consideration of the husband’s argument that the evidence the subject of his application is “highly material to the determination on the issue to the extent that if the documents were tendered at trial a different result was at least likely, if not certain.”[9]
[9] Ibid, paragraph 8.
It is convenient, then, to consider first the primary judge’s findings and the evidence led before his Honour before returning to the application to adduce further evidence.
What are the Primary Judge’s Relevant Findings?
Neither of the husband’s parents swore an affidavit in the proceedings before his Honour and nor did either give oral evidence. No explanation was offered for their failure to do so.
It is important to emphasise that the husband’s contention, in respect of which he bore the evidentiary onus, was that the parties had a liability to his parents in respect of a loan made to the parties by them.
His Honour held:
·It does “not seem to be self-evident that the parties or any of their entities are in a direct contractual relationship with the husband’s parents” (at [184]);
·The husband’s parents “have not asked for their money back” (at [185]);
·Any demand by the parents “to crystalize their interest presumably would be directed to [XX Pty Ltd] which in turn would rely on [NOUT] to bring to account its asset base which presumably includes a loan to [Cantwell Company] in the absence of any clear demand by the husband’s parents” (at [185]);
·It is “open to the Court to consider the nature of the liability bringing to account concepts of whether it is vague or uncertain and the likelihood of the creditor pursuing the liability” (at [187]) and in light of the complete absence of any evidence from the husband’s parents “there remains the fundamental uncertainty as to their intention and expectation” (at [188]);[10]
·The orders proposed by each of the parties did “nothing to extinguish the purported liability to the husband’s parents” (at [189]); and
·“Whilst not the subject of submission, there exists the possibility that any claim by the husband’s parents may now be statute barred” (at [190]).[11]
[10] Referencing Biltoft & Biltoft (1995) FLC 92-614. See also, Af Petersens and Af Petersens (1981) FLC
91-095.
[11]Citing, Ogilvie v Adams (1981) VR 1041; Agius & Agius (2010) FLC 93-442; and Masoud & Masoud (2016) FLC 93-689.
The reference to the debt being statute barred is a reference, as it seems to me, to the possibility of the relationship involving the parents being one of loan whereas, as will emerge, the evidence pointed to the contrary.
How is the Alleged Debt to the Parents said to Arise?
It is, it seems, uncontroversial that money was advanced to XX Pty Ltd by the husband’s parents. The nature of the advance and whether, ultimately, it in fact gives rise to an enforceable obligation on the part of the husband to repay his parents that sum, or any sum, associated with the advance are entirely different questions each of which is central to the findings just set out.
It is necessary to set out the transactions, and the evidence before his Honour which supports them.
The Evidence of the Husband
At paragraph 176(w) of his affidavit of evidence in chief, the husband includes in his contentions as to the parties’ property and their liabilities an item described as a “Loan from parents via [NO Pty Ltd]” (emphasis added). A liability of $201,000 is there claimed.[12] The husband swears to that company being under the control of the parties’ accountant, Mr UU.
[12] Both counsel who appeared on the appeal, neither of whom appeared at the trial, were unable to
illuminate whether the figure is in fact $201,000 or $208,000 as referred to elsewhere in the evidence.
As can be seen from the two paragraphs of the husband’s affidavit of evidence in chief about to be quoted, the husband does not at all depose to the derivation of that alleged loan. Rather, the only deposition referred to is an assertion as to what the wife “has not accepted”.
The totality of the husband’s evidence in respect of the derivation of the alleged loan and the circumstances in which it arose is contained in those two paragraphs which are:
178.The wife has not accepted that there is a loan owing to my parents via [NO Pty Ltd]. My parents have indirectly loaned [CD Trust], a principle amount of $200,957.96 as at 31/03/15, through [NO Pty Ltd] ATF [NO Unit Trust (NOUT)] which is controlled by [Mr UU]. This debt has been noted on the financial statements of [CD Trust] since the 2007 financial year, which is when the loan was provided by [NOUT].
179.For the sake of completeness I advise that the loan from my parents was initially through another of the companies controlled by [Mr UU] – [XX Pty Ltd], which in turn has investments in [NO Unit Trust], which has lent money to [CD Trust].
The following points emerge from that evidence of the husband:
·What is meant by a loan owing to the parents “via” a company not controlled by the husband or what is meant by an “indirect” loan is not at all explained;
·As deposed to, the lender appears to be a third party corporation. Nothing at all is deposed to which would suggest that the third party corporation should not be accorded its separate legal personality;
·The third party is said to be the lender. The borrower is said to be a corporation as trustee of a trust. Even assuming that the husband can control completely that corporate trustee, it can only be to direct repayment of a loan to the asserted lender, namely the third party corporation;
·No evidence at all is offered that the third party lender has ever called for, or would likely call for, the repayment of the money owed to it;
·There appears to be an assertion that the books of account of the trust reflect the position just described and had done so for a period of approximately nine years prior to the trial before his Honour; and
·To the extent that any loan or borrowing is said to involve the husband’s parents it is said to be “through” another third party corporation, XX Pty Ltd. If the loan is made “through” that corporation (noting that what is meant by that term is not deposed to) it cannot be as a result of any direction of the parents because it is deposed that Mr UU also controls XX Pty Ltd. More will be said of this issue later.
The Evidence of the Wife
The wife deposed to the involvement of XX Pty Ltd only in respect of the purchase of shares in that company which, she deposes, invested in “building and development”.[13] She makes no mention of any investment in that company by the husband’s parents.
[13] Affidavit of the wife, filed 7 October 2015, paragraph 41.
The husband, too, deposes in his affidavit of evidence in chief to an investment in 2003 by the parties in XX Pty Ltd.[14] He, too, makes no mention of any investment or loan involving that company at that time by his parents.
[14] Affidavit of the husband, filed 12 November 2015, paragraph 66.
The Evidence of the Parties’ Accountant
It will be recalled that the parties’ accountant, Mr UU, controlled two corporate entities which were central to the husband’s claim that money was owed “indirectly” to his parents. He was the director of those entities. As such, he owed duties, including fiduciary duties, to those entities and the shareholders of them.
Mr UU did not swear an affidavit.
Nor was an application made by the husband to have Mr UU subpoenaed to give evidence; that application was made by the wife. His Honour issued the subpoena and Mr UU gave evidence accordingly.
I consider it necessary to set out significant parts of the evidence of Mr UU referenced from the transcript:[15]
[15]Transcript, 3 December 2015, p 40 ln 41 – p 42, ln 2.
[COUNSEL FOR THE WIFE:] Right. Now there has been some evidence in this case about moneys that are said to be owed … to [Mr Cantwell’s] parents. Figure of about 200,000 dollars. Do you have any knowledge of that loan?---Yes, I do.
Yes. Can you tell us the history of it?---Yes. The history was that [Mr and Mrs Cantwell] senior had money invested in another one of my entities.
Which one?---[XX Pty Ltd].
Right. Go on?---That entity invested in [NO Pty Ltd]. And [NO Pty Ltd] as part of its business activity lent money to the [CD Trust].
…
[COUNSEL FOR THE WIFE]: So the debt really – I withdraw that. The money hasn’t been repaid, to your knowledge, to [Mr and Mrs Cantwell] senior?---No. The money – there is still a debt owing to [NO Unit Trust], yes.
Of how much?---Approximately 200,000 dollars.
HIS HONOUR: Sorry. I’m lost. [Mr and Mrs Cantwell] senior had money invested in [XX Pty Ltd]?---That’s correct.
So if I looked at the balance sheet of [XX Pty Ltd], would I find reflected in the current balance sheet any liability outstanding to [Mr and Mrs Cantwell] senior?---Yes, you would.
I would?---Yes.
Of 200 - - -?---Possibly around 600,000.
I see. All right. Which incorporates the money that we’re now talking about? Or we talking about something different?---No. That’s a separate deal. That’s a separate transaction.
All right. Well, let’s talk about this transaction you’ve indicated you know something about. Does the balance sheet separate the liability that [XX Pty Ltd] has to [Mr and Mrs Cantwell] senior? That would enable us to identify – enable me to identify how much if any of the 200,000 dollars that’s the subject to these questions is still outstanding to them?---There is a loan – not a loan. There is – if you look at the balance sheet of [XX Pty Ltd] you would see that that entity invested in [NO Unit Trust]. [NO Unit Trust] conducts business with a range of entities, and as part of its business at that time it lent money to the [CD Trust].
Yes?---Of which interest is paid every month, and the loan is still outstanding from the [CD Trust] to [NO Unit Trust].
Right. That’s fine. But what’s that got to do with a suggestion that the parties or [CD Trust] is in some way still indebted to [Mr and Mrs Cantwell] senior for 200,000 dollars?---Well, they’re not directly. No. The debt is with [NO Unit Trust].
…
The questions posed by his Honour to the accountant continued:[16]
[16]Transcript, 3 December 2015, p 42 ln 27 – p 43, ln 5.
… I’m only interested in getting to the bottom of this particular transaction defined by the husband, not raised by the wife, defined by the husband as a liability that in some way I should bring to 30 account. That’s what this is about?---There is a debt in the books - - -
Of - - -?---[CD Trust].
Yes?---For around 200,000 dollars.
In favour of [Mr and Mrs Cantwell] senior?---No. In favour of [NO Unit Trust].
Right. And then if I go to [NO Unit Trust] do I then – that would be an asset then?---That is correct.
In [NO Unit Trust] and – sorry. [NO Unit Trust]. And then there would be a liability?---That’s correct.
And that liability would be to [Mr and Mrs Cantwell] senior?---The liability is to [XX Pty Ltd].
All right. And then that would appear then as an asset in [XX Pty Ltd]?---Yes.
And then in [XX Pty Ltd] I would look and see a liability in favour of [Mr and Mrs Cantwell] senior for 200,000 dollars?---You would see them as share-holders having equity accounts in that entity. …
…
Counsel for the wife again took up the questioning:[17]
…
[COUNSEL FOR THE WIFE]: Well, my question is this. Did [Mr and Mrs Cantwell] senior loan [XX Pty Ltd] 200,000 dollars, or did they invest and buy shares in [XX Pty Ltd]?---They invested and bought shares in [XX Pty Ltd].
Right. So there’s no loan in the name of [Mr and Mrs Cantwell] senior in the accounts of [XX Pty Ltd]. Is there?---No.
…
[17]Transcript, 3 December 2015, p 43 ln 26 – p 43, ln 32.
After then establishing that the husband’s parents had invested the subject funds in exchange for preference shares redeemable at call, the questioning continued as follows:[18]
[18]Transcript, 3 December 2015, p 44 ln 22 – p 46, ln 21.
…
[COUNSEL FOR THE WIFE]: So when did [Mr and Mrs Cantwell] senior buy their redeemable preference shares?---Approximately 2005.
And how can it therefore be said that the liability, if there was one, to [Mr and Mrs Cantwell] senior passed on to [NO Pty Ltd]?---There is a loan between [NO Unit Trust] and the [CD Trust].
When was that loan?---(omitted) March 2007.
Right. So two years later – after the [Cantwell] seniors purchased their redeemable preference shares?---Approximately, yes.
Yes. So I take it that there is – that the funds didn’t start with the [Cantwell] seniors, then go into [XX Pty Ltd], then at some later stage move over to [NO Pty Ltd] and then at some later stage move over to the [CD Trust]. That’s not a path. Is it?---That is – it is actually a path.
It is a path?---Yes.
Well, let’s assume they put in 200,000 dollars, and they bought their preference shares in 2005. At some later stage does the 200,000 dollars they’ve spent on these shares – is that loaned to [NO Pty Ltd]?---It’s invested in [NO Pty Ltd] by subscribed units, yes.
So [XX Pty Ltd] purchases subscribed units in the [NO Unit Trust]. Is that right?---Yes. Yes.
For the same amount of money?---No. I think the amount was around four or five 5 hundred thousand.
So that transaction has got nothing to do with [Mr and Mrs Cantwell] senior. Has it?---That’s an incorrect statement.
Incorrect. Why – how could it be incorrect?---Because I was instructed by [Mr and Mrs Cantwell] senior to advance the money through that entity, which is – from [XX Pty Ltd] to [NO Unit Trust], and then lend the money from that entity to the [CD Trust].
Two years later?---Yes. That’s correct.
I will come - - -
HIS HONOUR: You’re instructed by them to do that?---Yes, I was, your Honour.
Without advice from anybody?---That is correct.
They had an understanding of the interrelationship between these four entities?---That’s correct.
…
And at the time that that [money was invested in XX Pty Ltd] clearly there was no contemplation by them that any of that money would have ultimately found itself to the [CD Trust]?---At the initial instigation that is correct.
Couldn’t have been the case. So it was money sitting there, and then presumably because there was some discussion between the parties and/or [Mr Cantwell’s] parents a decision was made that the money would be on – provided?---That is correct.
…
The Husband’s Argument on Appeal
Counsel for the husband effectively conceded, as with respect, was entirely proper, that on his own evidence, the husband could not sustain the central proposition contended for before his Honour. Nor, as a necessary corollary, can error be established in respect of his Honour’s finding by reference to that evidence.
Counsel argues that the husband’s evidence needs to be seen in the light of, and effectively in combination with, the evidence of Mr UU given in cross‑examination.
It is accepted that the evidence of Mr UU establishes that, by reference to what is known of the legal relationships revealed by that evidence, such rights that the parents had in respect of the subject sum arise as against XX Pty Ltd and from their position as the holders of redeemable preference shares which, it appears to be accepted by all parties, are redeemable at call.
The evidence of Mr UU does not reveal any legal relationship as between the husband’s parents and the parties, by which the parties are indebted to the parents in the sum alleged or at all. Rather, third party entities owe money to each other.
In essence, the argument put on behalf of the husband suggests that Mr UU’s evidence reveals what was described as “an arrangement” by which the parents are paid a sum representing interest. This “arrangement”, said to be commercial, sees the parents being paid a sum which represents a return of 12.5 per cent on their “investment”. It is said that this “arrangement” emerges plainly from the combined evidence of Mr UU and the husband and that his Honour erred in failing to take that evidence into account.
Central to the acceptance of that argument is the proposition that the parents, as the owners of redeemable preference shares in XX Pty Ltd, could give “instructions” to Mr UU. Mr UU, of course, owes independent duties as a director of XX Pty Ltd to it and its shareholders as a whole. The instructions to Mr UU (as the director of XX Pty Ltd) can only be to invest money which belongs to XX Pty Ltd pending any call for redemption of the shares. How that can occur is not explained.
Thereafter, the argument continues, Mr UU, as the director of another company which he controls (NOUT) then loans its money to the trust which the husband controls. The books of the trust show, understandably enough, it owing money to NOUT.
It appears to be said that the “arrangement” somehow circumvents the legal relationships just described. Yet, the “arrangement” is not deposed to by the husband in terms at all. Nor, of course, is it deposed to by the parents. Nor is at all explained how the parents who, on the evidence before his Honour, had legal rights against XX Pty Ltd by reference to them owning redeemable preference shares, somehow had rights as against the husband or the husband and wife.
Not only is it not explained how his Honour is said to have erred in light of those matters, I am respectfully unable to see how his Honour could come to any conclusion different to that which his Honour reached in respect of the asserted liability.
Certainly it cannot in my view be said that the husband discharged his onus of establishing the asserted liability.
In my view, no error is demonstrated.
The Application to Adduce Further Evidence
The husband’s application to adduce further evidence should, in my view, be dismissed.
The loan agreement and the loan addendum sought to be tendered as evidence are not stamped. Section 22 of the Stamp Duties Act 1923 (SA) provides:
22—Except as aforesaid no unstamped instrument to be received in evidence
No instrument chargeable with duty executed in any part of South Australia, or relating, wherever it was executed, to any property situated, or to any matter or thing done or to be done, in any part of South Australia, shall, except in criminal proceedings, be pleaded or given in evidence, or admitted to be good, useful or available at law or in equity, unless duly stamped.
The loan agreement merely seeks to corroborate a loan as between NOUT and the trust controlled by the husband. That document and indeed the evidence of a loan between those entities more broadly, does not address the central difficulty earlier referred to. That is, the document does not go to the central issue of what the primary judge was asked to find and does not assist in demonstrating error.
Otherwise, the husband contends that the document – a document he now says is central to his case – was overlooked. There is no adequate explanation for the failure to tender the document at trial. Moreover, it is not merely the failure to tender the document; it was not at all mentioned in the husband’s evidence.
The same considerations apply to the loan addendum signed after conclusion of the trial which apparently seeks to extend the term of the loan between the entities for another 10 years. The prospect of the original loan concluding shortly after the trial was not at all referred to in the evidence before his Honour and nor was the prospect of any “extension” of the loan. I am similarly unable to see the relevance of the balance of the documents sought to be tendered in evidence before us.
Conclusion and Orders
For the reasons I have just advanced, in my opinion, the application in an appeal should be dismissed as should the appeal.
As to costs, each of the parties’ counsel submitted that “costs should follow the event”. The Full Court has said that, whilst of course not determinative, a party being “wholly unsuccessful” in the context of an appeal can be a particularly important justifying circumstance within the meaning of s 117(2A) of the Family Law Act 1975 (Cth) given that a party is prima facie entitled to the fruits of their judgment and a trial judgment is presumed correct until appealable error is established.
I would order that the appellant pay the respondent’s costs.
We sought from the parties submissions in respect of fixing costs. Counsel for the wife suggested a figure of $10,000 be fixed in respect of those costs. No objection was taken by counsel for the husband to that sum and I would so order.
Strickland J
I agree with the reasons delivered by Justice Murphy and with the proposed orders.
Thackray J
I also agree with the reasons of Justice Murphy and with the orders that he proposes.
I certify that the preceding fifty-one (51) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Thackray, Strickland & Murphy JJ) delivered on 4 October 2017.
Associate:
Date: 16 October 2017
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