Dinci & Smith
[2012] FamCA 840
FAMILY COURT OF AUSTRALIA
| DINCI & SMITH | [2012] FamCA 840 |
| FAMILY LAW – PROPERTY – partial property settlement – where the applicant husband seeks an order for partial property settlement pending trial – where the applicant has failed to comply with his obligations for disclosure – where there is no evidence before the Court regarding the “reversibility” of the order sought by the applicant – where highly likely that the applicant will receive less than what he is now seeking – whether an order for partial property settlement should be made – where application dismissed. |
| Family Law Act 1975 (Cth) |
| C v C (1996) FLC 92-651 Levy & Prain [2012] FamCAFC 92 Strahan & Strahan (2011) FLC 93-466 Zschokke and Zschokke (1996) FLC 92-693 |
| APPLICANT: | Mr Dinci |
| RESPONDENT: | Ms Smith |
| FILE NUMBER: | BRC | 10762 | of | 2008 |
| DATE DELIVERED: | 12 September 2012 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Murphy J |
| HEARING DATE: | 12 September 2012 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Baston |
| SOLICITOR FOR THE APPLICANT: | Lillas & Loel Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Wilson SC |
| SOLICITOR FOR THE RESPONDENT: | Murdoch Lawyers |
Orders
IT IS ORDERED THAT
The Application in a Case filed by the husband on 2 July 2012 is dismissed.
The costs otherwise of and incidental to such Application in a Case are reserved to the trial judge.
The Compliance Check listed for 14 September 2012 is vacated.
IT IS DIRECTED THAT
The legal practitioners for the parties confer with a view to arriving at consent minutes in respect of all such directions as might be necessary so as to facilitate the hearing of the trial on the dates to be allocated at the Callover on 19 September, the trial of which is anticipated to occur in February/March 2013.
(a) In the event that both parties agree on such directions they shall be handed up at the Callover on 19 September.
(b) If agreement is reached before that date, the parties are at liberty to email such consent directions by jointly signed correspondence to the email address ... in which case such directions, if considered suitable, shall be made in chambers.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Dinci & Smith has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC10762/2008
| Mr Dinci |
Applicant
And
| Ms Smith |
Respondent
EX TEMPORE
REASONS FOR JUDGMENT
An Application in a Case was filed on behalf of the husband in proceedings for settlement of property on 2 July 2012. That application seeks orders as follows:
1.That the wife pay or cause to be paid to the trust account of the solicitors for the husband the sum of $250,000 to be applied as and towards the husband’s legal costs (including the costs of any expert) of and incidental to these proceedings;
Further and in the alternative:
2.That the wife pay or cause to be paid to the trust account of the solicitors for the husband to be applied as and towards the husband’s legal costs (including the costs of any expert) of and incidental to these proceedings:
(a)Within 14 days of the date hereof such sum as represent that amount incurred, whether paid or still outstanding, as represents her legal costs incurred in these proceedings t0 the date of this order; and
(b)Thereafter on or before the 14th of each month thereafter, days of such sum as represent that amount incurred, whether paid or still outstanding, as represents her legal costs incurred in these proceedings to and in respect of the preceding calendar month.
3.Notwithstanding any previous order that the wife be solely responsible for the costs of any real property, business or other valuation required for the purposes of these proceedings.
An additional order sought “any further order that the court deems appropriate” and an order for costs. That application is opposed by the wife.
The application might be seen to have reference to the power contained in section 117 of the Family Law Act 1975 (Cth) (“the Act”). As argument ensued during the proceedings before me, it became plain that the husband relied upon the power to make orders for settlement of property ahead of the trial – so-called “partial property orders”.
The prior history of this matter should be referenced briefly.
Proceedings for what might conveniently be called a “Hogan order”, were brought before Barry J. Those proceedings took place in June 2009 and on 7 December 2009 his Honour made an order providing for a sum of money to be paid to the husband.
Those orders were appealed. As a result of the unfortunate illness of Ms McMillan on two separate occasions, the hearing of the appeal was adjourned. Ultimately, orders were made by consent in the Full Court, the effects of which were that the order to which I have just referred, was set aside and that the issue under consideration would become live in this court upon application by the husband.
There is some dispute about the manner in which that application was prosecuted, but I do not consider it necessary to traverse the contested contentions in that respect for the purpose of these reasons. Subsequent to the filing of the application by the husband, the matter came before a Registrar. The purpose of that listing was to ensure that the matter be ultimately listed for the hearing of the property trial between the parties. The Registrar made various orders and directions in respect of the filing of material.
It is important to note, in the context of an application, where the husband seeks to have this court exercise a discretion and, in particular, exercise a discretion ahead of a trial, that the Registrar ordered that documents ordered to be filed by the husband have not been filed. Against the background of financial proceedings yet to be determined, which have been on foot for some considerable period of time, it is crucial to observe that, despite filing a purportedly comprehensive affidavit on 22 August 2012, annexing some four centimetres of annexures, the husband at no time in these proceedings has made disclosure of even the most basic financial documents required by the Rules.
It is important to state, yet again, that which has been stated innumerable times by the Full Court of this Court and judges of first instance. The obligation to disclose is a fundamental obligation. It is cast upon every litigant who comes to this Court. It should be observed that the obligation to disclose, self-evident one would think in any event, is enshrined both in the pre-action protocols and in the rules themselves.
Crucially in that respect, the Family Law Rules 2004 (“the Rules”) make it abundantly clear that it is not merely documents that need to be disclosed but also information. So much is made plain by the general rule contained at rule 13.01. In the case of financial proceedings, the rules descend into specific requirements. For example, rule 13.04, specifies firstly the fundamental requirement to “make full and frank disclosure”. (It might be observed that those two adjectives are conjunctive, that is to say, the disclosure that needs to be made is not only to be honest, but to be “full”.) The rule goes on to provide a number of specific matters that any litigant in financial proceedings in this Court must disclose. Reference to them will indicate that the information required can be described as basic to any application involving financial relief in this Court.
As if this is not sufficient, the Rules go on to provide specifically at rule 13.05 that a party to proceedings has cast upon them a mandatory requirement to file a financial statement (rule 13.05). Furthermore (and, again, as if this was not sufficient) the Rules go on to provide, effectively, for a specific duty of disclosure in respect of documents in the possession, power or control of litigants.
In circumstances where a party comes to this Court seeking to have the Court exercise a discretion in their favour, and, in particular, one might think, a discretion ahead of an ultimate trial, in interim proceedings that must be conducted within the confined circumstances to which the Full Court has made reference (see, for example, in C v C (1996) FLC 92-651) compliance with the obligations of disclosure can be seen to be of paramount importance.
In this case: the husband has failed to file a financial statement since 2009; the husband has not filed a statement of assets, liabilities and financial resources despite a specific direction by the Registrar to do so; the husband has not made disclosure of tax returns, bank statements or any other documents evidencing his financial position in the last three years; despite the nature of the application and the background to which I have earlier referred, the husband’s affidavit, despite containing very many annexures, contains no financial documents subsequent to 2003; the husband’s affidavit contains no copies of any bank statements; rather the husband’s own “summary” is included as an annexure, and even then that summary does not continue beyond May 2011, that is to say, some 15 or 16 months ago.
The husband annexes to his affidavit a document entitled Curriculum Vitae in which is contained an assertion as to his activities as “entrepreneurial, business and property developer – 1999 to current”. It is said there that he has been responsible for “oversight of a succession of successful real estate development facilitation and construction entities and associated projects”.
No details whatsoever are provided within the affidavit or the annexures to it as to what that might mean. Such financial documents as the husband has filed include reference to a corporate entity. No details in respect of that corporate entity are provided by the husband.
I observe, then, that contrary to those provisions of the rules to which I have referred, let alone obligations that might be cast upon a litigant seeking to have the Court exercise a discretion in his favour, none of the required matters – all of which are basic –have been complied with by the husband.
Rule 13.04 deals specifically with the matters to which disclosure should be addressed. That has not been complied with by the husband. That non-compliance occurs in circumstances where not only does the husband seek to have the Court exercise a discretion in his favour as earlier referred to, but where there is also a significant disparity in the factual and other contentions with respect to the ultimate discretion which the husband would have this Court exercise. As but an example, the husband contends that, ultimately, he should be awarded 45 per cent of the property of the parties or either of them. The wife contends that he should be awarded 10 per cent of that property.
The substance of the husband’s application can be seen to fall into two, or perhaps three, parts.
First, an order is sought that would permit the husband to pay moneys which he deposes are already owed to his solicitors in a sum of about $130,000. The second part refers to prospective expert’s fees. Although there is no precise figure in the affidavit material before me, counsel for each of the parties agree that such additional valuation evidence as might be obtained will likely cost in the region of $50,000. Thirdly, the husband deposes to the need to pay, potentially, $100,000 for each of his solicitors and counsel in order to prepare and conduct the trial. The total, therefore, of the amounts sought by the husband is about $380,000.
As argument transpired, counsel for the husband effectively made an alternative submission that, if the court was not persuaded that the amounts already owing should be paid, there should be an order made for what might conveniently be called a dollar for dollar order. In what might be seen as an additional alternative argument, counsel contends that if the court was not persuaded that either past or prospective legal fees ought be the subject of an order, that, at least, the approximately $50,000 in valuation fees should be ordered.
The principles in respect of applications of this type are well known. They are outlined in a series of decisions of the Full Court, including Zschokke and Zschokke (1996) FLC 92-693 and Strahan & Strahan (2011) FLC 93-466, counsel for the wife provided to the court a recent exemplification of those principles in the decision of the Full Court in Levy & Prain [2012] FamCAFC 92. I am aware of those principles and it is those principles which I apply in arriving at my decision in this case.
Having said that, it seems to me that the decision in this case revolves crucially around the evidence before the court, or, more accurately, the lack of evidence before the court.
The exercise of discretion in cases of this type is informed by the need to effect justice between parties to litigation by ensuring, to the extent, that it is possible, “a level playing field”. But, those proceedings, and that aim, are also judged by reference to a principle which indicates that a decision made on an interim basis in respect of the payment of legal costs and expenses, should not usurp the ultimate determination of the court, and, in particular, orders that effect ultimate justice and equity.
It is for these reasons, principally, that the question of “reversibility” or “clawback”, as it has been called in the cases, is such an important matter in respect of the exercise of the discretion under consideration.
Other important considerations in the exercise of the discretion include whether there is a relative position of financial strength on the part of one party when compared to the other. Secondly, whether there is a capacity on the part of the person from whom the order is sought to meet any such payment, and, thirdly, the impact that any such interim order might have on orders which are ultimately sought by each of the parties at the ultimate trial.
I have already referred to the fact that these are interim proceedings and are, accordingly, conducted within the confines of curtailed procedures (see C v C earlier referred to). But, the fact that these proceedings which must be conducted on the basis of facts which are, essentially, uncontroversial, or which can’t be the subject of serious challenge, does not obviate the need for there to be reliable evidence upon which the court can proceed in support of, or resistance to, the orders sought.
Here, the issues that need to be determined are clouded by the fact that it cannot be determined with even tolerable confidence what the “property of the parties or either of them” is within the meaning of section 79 of the Act. However, and this is important, on this and other relevant issues, it is the husband who bears the onus in seeking to convince the court that the order should be made.
On any view of the evidence before me, he has failed, in even basic respects, in his duty to disclose and, I repeat, that failure pertains to even the most basic of financial information. Further, in that respect, the husband puts forward no evidence by which a “pool” of property might be calculated with any degree of tolerable accuracy. The best evidence in respect of that particular matter comes from the wife, albeit that her assessment of the “pool” is heavily caveated by assertions that, as a result of the lack of disclosure by the husband, there are many aspects of his financial circumstances which are unknown.
With that caveat, the net property of the parties or either of them by reference to that document is about $950,000. That assessment does not, however, take account of what is described in the document as “contingent liabilities” being a personal guarantee given by the wife for a corporation in the sum of more than a million dollars and a guarantee given for, it seems, the liability of a trust. The contingent liabilities are said to total about $1.2 million. If those contingent liabilities are taken into account, the property of the parties or either of them is said to be, in effect, a negative. I should note that the final relief sought by the wife is to the effect that she would retain all such property as she currently has.
With the exception of one matter to which reference will be made in a moment, the wife contends that, if she is to meet any order, whether it be for the total sum contended for by the husband or any component of it (including the $50,000 in prospective valuation expenses), it will be necessary for her to sell property. She says, that in that event, it is likely that the contingent liabilities just referred to will be activated. No evidence contradicts that assertion.
The matter that might see some difference to that position – relied upon, understandably enough by counsel for the husband – is a reference in the wife’s affidavit to an amounts that has been received by her and a further prospective amount which she deposes to being potentially received by her in September this year in an amount of $150,000.
In response, counsel for the wife points to the fact that those amounts are owing in respect of a development which has collapsed. The amount of $150,000 is owed by Business D. That corporation or entity is in liquidation, and that there is a very limited prospect of her receiving the money from that source. It is contended, therefore, on the wife’s behalf that any money that would be provided to the husband by way of the orders that he seeks, or any part of them, would need to be met by the sale of property.
Two aspects to which I have already referred are relevant to the discretion in that regard: first, those properties are intended to be retained, along with their liabilities, by the wife as part of any property settlement. Secondly, if they, or some of them, are to be sold now, then there is the prospect of contingent liabilities crystallising and becoming payable.
I have already referred to the fact that, at the ultimate trial, the wife’s contention is that the husband should receive 10 per cent of the property. The husband’s contention is that he should receive 45 per cent.
Appropriate conservatism should attend an application for partial property settlement which occurs ahead of the determinations necessary to found the ultimate decision about justice and equity. That should result, in my view, in the matter being approached by referencing the prospective entitlement of the husband as 10 per cent and the “pool” as contended by the wife, it representing, as it were, the “worst case scenario” ultimately for the husband.
Approaching the matter in that way (so that a relatively informed decision can be made about “reversibility” or “claw-back”) would see the husband retaining, ultimately, property to the value of between about $95,000 and $150,000, depending on the ultimate decisions made in respect of the contentions for the pool as it currently exists.
It might be thought, then, that an order that would see at least part of the amount sought by the husband would be “reversible” in the sense in which that expression is used in the authorities. However, it is contended on behalf of the wife that it is uncontroversial that the husband removed from a line of credit the sum of $190,000, which such line of credit remains in place. Of that sum, counsel contends the husband has repaid $50,000. It is said, then, that there is a very strong case for “add-back” in respect of $140,000.
The argument runs that, this being the case, there is a prima facie strong possibility that the husband would in fact receive nothing by way of ultimate adjustment in the property settlement, and that, accordingly, the current application cannot be seen, even if orders are made for part of it, to be “reversible” in the relevant sense.
It seems to me that there is considerable merit in that argument. On the basis of the evidence before me, I am not prepared to make a finding that any of the amounts paid or sought to be paid by the husband to him are “reversible” in the relevant sense.
Secondly, and again, I emphasise on the basis of the evidence before me, the mother has a limited capacity to borrow and would need to sell property. I have earlier referred to this issue; one of the serious concerns emanating from the need to sell any property is the activation of contingent debts. On the assumption that each of the parties should share the debts which might be crystallised by those actions, if the “pool” could otherwise be clarified with a tolerable degree of certainty, I would be less concerned about this factor. However, as I have said, there is at least a prima facie case that the husband may, in fact, receive nothing by way of property settlement when account is taken of the add-back to which I have earlier made reference.
That being the case, extra weight is, in my view, afforded to the argument that contends that the Court should, on an interim basis, be extremely reluctant to make orders, the effect of which might be irreversible in the sense that property needed to be sold in order to meet any such order would not then be available at trial.
Importantly in that respect, in the context of the evidence which I have before me, the wife would also lose the opportunity to contend for that which she seeks, namely, relief which would see her keeping the property which she currently has and its attendant liabilities.
I again refer to the importance of the state of the evidence before me and to what I consider to be the clear lack of disclosure by the husband. As a result, it seems to me that I cannot make a finding that there is a relative position of financial strength on the part of the wife when compared to the husband.
I again refer to the matters earlier canvassed, including, on the one hand, statements by the husband that he has been involved from “‘99 to current” in the “oversight of a succession of successive real estate development facilitation construction entities and associated projects” (Emphasis added). That statement occurs, I repeat, against the background where basic financial information has not been provided by the husband, including tax returns and bank statements.
In my view, the same evidentiary considerations apply to the contention on the part of the wife that she continues to meet significant liabilities and that such funds as she has are needed to meet those liabilities, and that, on the evidence before me, there is no readily identifiable fund of money or source of moneys so as to pay any of the amounts sought by the husband, save for the sale of the property. For the reasons I have earlier referred to, I am not prepared to so order.
In those circumstances, the husband does not satisfy me of a case by which the Court should exercise a discretion to order the payment of any sums, including the payment of any expenses in respect of valuations, ahead of the trial.
The last mentioned matter might be seen to fall into a different category. The Court must ultimately be satisfied, on the evidence before it, that it can make orders which are just and equitable. It can be argued that this cannot occur unless there is cogent evidence of the value of the relevant property.
I am told that Mr H, a single expert, has prepared a report which values the wife’s business. I am told by counsel for the wife that she is content to rely upon that report. I am told that Mr H’s report uses the cost figure for the various properties contained within the business as the basis for his valuation. Counsel for the husband indicates that he seeks to challenge that valuation by reference to the current valuation of real property contained within the business. In addition, there are, I gather, historical valuations prepared in 2010 with respect to other real property, namely, the former matrimonial home and investment properties that are owned, as it were, outside of the business.
In those circumstances, counsel for the wife contends that there is a sufficient evidentiary foundation for the Court to make at trial orders that are considered just and equitable. It is argued that, if the husband contends to the contrary, he can adduce evidence accordingly. I agree. It seems to me to be a matter for the husband to produce such evidence upon which he might rely to contend to that effect. So much is an ordinary incident of litigation. The only issue before me is whether, in effect, the wife should fund the husband to produce evidence which he seeks to adduce in support of his case.
For the reasons earlier given I am not persuaded that he makes out a case that the wife should do so. For those reasons, then, I dismiss the Application in a Case filed by the husband.
On 20 August I made orders for costs fixed in the sum of $7000 in relation to the costs thrown away by the appearance on that day.
Paragraph 6 of those orders contemplated, for reasons outlined during the hearing on that day, the prospect that an order might be made against the husband’s solicitor.
As it transpires, the husband’s solicitor apologises to the Court for his non-appearance on that occasion, and in an affidavit deposes as to the circumstances in which it occurred. The Court does not, in the circumstances deposed to, regard the solicitor’s non-appearance as a discourtesy. Mr Wilson SC, who appears for the wife, makes it clear that he does not seek an order for costs as against the solicitor; he seeks an order that the costs fixed by reference to paragraph 5 of those orders be paid by the husband.
Counsel for the husband contends that the execution of that order ought be stayed pending the trial. It seems to me that is appropriate. Although costs have been ordered and fixed in an applicable sum, the overall financial circumstances of each of the parties can only be ascertained after there has been a full trial of the issues, and it seems to me appropriate that any order for the execution of that sum await the trial.
For similar reasons, and by reference to section 117(1) of the Act and the specific factors referred to in section 117(2A) of the Act, it seems to me appropriate to otherwise reserve the costs otherwise of and incidental to the application in the case to the trial judge.
I certify that the preceding fifty-five (55) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Murphy delivered on 12 September 2012.
Associate:
Date: 19 September 2012