Elgin and Elgin (Re-opening)
[2012] FamCA 898
FAMILY COURT OF AUSTRALIA
| ELGIN & ELGIN (RE-OPENING) | [2012] FamCA 898 |
| FAMILY LAW – Property – Application in a Case – Leave to re-open – where property has been sold after trial – whether the sale price should be taken as value – whether the purchase of the property should bet taken as a premature distribution of capital and “added back” – where the applicant had not disclosed to the court that the property was on the market at time of trial – where the application is opposed – whether the interest of justice require re-opening a case – whether the loss should be born by the applicant – where the property was purchased with the use of joint funds – where the loss should be born by the applicant – where the amount is less than 0.15 per cent of the property pool – where the amount is not so material that the interests of justice require re-opening – where prejudice to the respondent if the application is successful – where the application is dismissed |
| Family Law Act 1975 (Cth) s 79 |
| In the Marriage of Kowaliw (1981) FLC 91-092 Gaskin v Ollerenshaw [2010] NSWSC 788 Gelley & Gelley (1992) FLC 92-290 Murray v Figge (1974) 4 ALR Omacini v Omacini (2005) FLC 93-218 Reid v Brett [2005] VSC 18 Summitt & Summit (Re-opening) [2009] FamCA 365 |
| APPLICANT: | Mr Elgin |
| RESPONDENT: | Ms Elgin |
| FILE NUMBER: | BRC | 2909 | of | 2010 |
| DATE DELIVERED: | 31 October 2012 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Forrest J |
| HEARING DATE: | 10 October 2012 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Hamwood |
| SOLICITOR FOR THE APPLICANT: | Reaburn Solicitors |
| COUNSEL FOR THE RESPONDENT: | Mr North SC |
| SOLICITOR FOR THE RESPONDENT: | Glezer Lanteri & Associates |
Orders
The husband’s Application in a Case filed 19 September 2012 is dismissed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Elgin & Elgin 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: BRC 2909 of 2010
| Mr Elgin |
Applicant
And
| Ms Elgin |
Respondent
REASONS FOR JUDGMENT
Introduction
The three-day trial of the wife’s application for property settlement was heard by the Court from 18 – 20 July, 2012. When it ended, a timetable was set for the delivery of written submissions by the parties. The issues in the case concerned valuation of the property of the parties, as well as determination of the contributions of the parties and their impact on the ultimate division of in excess of $40,000,000 in property.
Whilst the written submissions of the parties were still being prepared, the husband filed an Application in a Case in which he seeks leave to re-open the proceedings for the purposes of adducing evidence regarding the value of an apartment property in a building called “B” in Queensland.
The B apartment was sold by contract entered into shortly after the conclusion of the trial. The husband contends that he should now be granted leave to re-open his case so that he can put evidence before the Court going to establish the net proceeds of sale of the apartment so that amount can be included in the pool of property that is to be considered as the property to be divided between the parties, rather than a higher figure that would be included having regard to the evidence about the matter at the trial.
The wife opposes such leave being granted.
The Background Facts
On 24 January 2011 the husband gave an undertaking to the Court as follows:
That should he personally or as a director of a company wish to enter into a transaction including purchase, sale, mortgage or guarantee of a value in excess of $1,000,000 save in the ordinary course of business, he shall give the Wife seven (7) days notice in writing, and in any event, the Husband shall provide notice to the Wife’s solicitor of such transaction within seven (7) days of its being entered into.
Evidence adduced at the trial established that the B apartment was purchased by the husband’s current wife in November 2011 for $1,130,000 and that $45,000 stamp duty on the purchase was also paid. The husband’s evidence was that he funded his current wife’s purchase of the apartment.
No notice was given to the wife of the husband’s current wife’s purchase of the unit or of the fact that the husband advanced her the funds to purchase it and also paid the stamp duty on its purchase.
The husband filed a Financial Statement on 31 January 2012. Nowhere in that document did he assert that he had either a beneficial interest in the B apartment or that he had advanced any amount of money to his current wife, either as a loan or a gift, for, or in connection with, her purchase of the B apartment.
Only a few days before the trial commenced, the wife’s solicitors wrote a letter to the husband’s solicitors requesting details of any property owned by the husband’s current wife and the source of the funds used for the purchase of any such property (exhibit 5 at the trial). After receiving that request, the husband swore an affidavit in which he deposed to, amongst other matters, the purchase by his current wife of the B apartment and that he had “advanced” her the funds for the purchase. He annexed to that affidavit, marked ‘C’, a copy of the stamped contract of purchase. That affidavit was filed on 17 July 2012, the day before the trial commenced. The husband sought leave, which was given unopposed by the wife, to rely on that evidence in his case at the commencement of the trial. That affidavit was the first time the husband had disclosed to the wife or the Court any details of the B purchase.
There was no evidence adduced by the husband at the trial as to whether he had any beneficial interest in the B apartment. Although in the affidavit filed on 17 July 2012, the husband had simply said he “advanced” the funds to his current wife for her to purchase the B apartment, without deposing as to whether the advance was a loan or a gift, he did say under cross-examination at the trial that he “gave” her the money.
Additionally, there was no expert evidence sought to be adduced by the husband at the trial as to the value of the B apartment at that time. The wife, of course, given the late disclosure by the husband, did not seek to adduce any expert evidence as to the apartment’s value either. Counsel for the husband simply stated, on the application for leave to rely upon the evidence contained in the affidavit, “we will not be contending other than that they [the properties listed in the affidavit, including the B apartment] should be taken into account as part of the pool. The wife’s counsel made no argument in respect of that matter at the time.
On 19 September 2012, before written submissions had been filed, the husband filed the Application in a Case now under consideration. He also filed an affidavit sworn by him in support. He annexed a number of documents to that affidavit that evidenced that his current wife had sold the B apartment for $920,000 shortly after the trial concluded and that the net proceeds of sale were $895,632.76. Annexure ‘A’ to that affidavit was a copy of a letter from the real estate agents who had acted as the vendor’s agent on the sale. It evidenced, amongst other things, that the B apartment had actually been for sale on the open market at the asking price of $1,250,000 at the time of the trial. The husband had not disclosed that fact in the affidavit he filed on 17 July nor in his oral evidence given at the trial.
At the hearing of the Application in a Case, the written submissions of the parties in the substantive proceedings, that had by that date been filed, were referred to. Relevantly, for the wife, in her written submissions, it was said:
The property held in the parties’ personal names or held beneficially for them (as submitted by the wife) is as follows:
There is then a table that includes “B [in Queensland]” and the figure of “$1,100,000” with the footnote saying:
This is the amount the husband deposed to as the purchase price…
As I have already noted, the evidence allowed to be relied upon by the husband at trial was that the apartment had been purchased for $1,120,000 not $1,100,000. It appears that the wife’s legal representatives have mistakenly overlooked that and have rounded the figure down to $1,100,000.
In the husband’s written submissions, “B [in Queensland]” is listed as an asset and ascribed the value $895,632.76, presumably in reliance on expected success in this application now under consideration.
The husband’s submissions in support of the re-opening of the trial
For the husband, it was submitted[1] that the “primary responsibility” of the trial judge is to assess the value of the “pool”. I understand the reference to the “pool” in that submission to be a reference to “the property of the parties or either of them” that is to be subject to orders altering the interests of the parties in that property pursuant to s 79 of the Family Law Act.
[1]Oral submissions only were made by counsel for the husband. No written submissions were received.
It was further submitted that the husband’s evidence filed in support of the application proved that there has been a change in the value of an asset that occurred shortly after the conclusion of the evidence in the proceedings and that such change, being of an amount of approximately $200,000, is not an insignificant change. It was submitted that the value of the apartment had been determined by the market and not by the exercise of valuation principles. Accordingly, it was submitted, the interests of justice require a re-opening of the case so that this evidence could be adduced by the husband and the actual value of the B apartment could be included in the “pool” of property to be subject to the Court’s orders. It was also submitted for the husband that to the extent that the wife had any concerns about the “arm’s length” nature of the sale, she could be given leave to cross-examine the husband about the matter and that would take care of those concerns.
By what principles is this application to be determined?
It appears to be well settled law that common law principles govern applications to re-open property settlement proceedings in this Court and that the granting of leave is discretionary.[2] The discretion is guided by the interests of justice. Accordingly, leave to re-open a hearing to adduce further evidence is likely to be granted where justice is more able to be done in the particular case if such leave were granted.[3]
[2]See Smith v New South Wales Bar Association [1992] HCA 36 and, in this Court, Gelley & Gelley (1992) FLC 92-290, Summitt (Re-opening) [2009] FamCA 365, Aheb & Aheb (No 3) [2009] FamCA 524, Cook and Cook (No 6) [2010] Fam CA 810
[3]See Summitt (Re-opening) [2009] FamCA 365 per Murphy J at [15] and EB v CT (No 2) [2008] QSC 306 per Applegarth J at [2].
Matters to consider in the exercise of the discretion have been held to be:
(a)whether the further evidence is so material that the interests of justice require its admission;
(b)whether the further evidence, if accepted, would most probably affect the result of the case;
(c)whether the further evidence could not by reasonable diligence have been discovered earlier; and
(d)whether no prejudice would ensue to the other party by reason of the late admission of the further evidence.[4]
[4]These matters were set out in Murray v Figge (1974) 4 ALR 612 and followed in Watson v Metropolitan (Perth) Passenger Transport Trust [1965] WAR 88 and in Reid v Brett (2005) VSC 18 and again in Summitt (supra), EB v CT (No 2) (supra) and Cook and Cook (No 6) (supra).
Other matters to consider have also been listed as:
(a)the nature of the proceedings;
(b) whether the occasion for calling the further evidence ought reasonably to have been foreseen;
(c) the consideration of fairness that the defendant is entitled to know all of the evidence he has to meet in taking forensic decisions as to cross-examination, and the nature and extent of the evidence he will himself adduce on the matters in question;
....
(e)the importance of the issue on which the further evidence is sought to be adduced to the pleaded issues in the case;
(f) the degree of relevance and probative value of the further evidence sought to be adduced and its potential to involve an undue waste of time;
(g) the prejudice to the defendant in terms of delay in the completion of the proceeding and the consequential costs;
(h) the public interest in the timely conclusion of litigation; and
(i) what explanation is offered by the plaintiff for not having called the evidence in chief.[5]
[5]See Gaskin v Ollerenshaw [2010] NSWSC 788 per Garling J cited with approval by Young J in Cook & Cook (No 6) (supra).
Of course, this is not an exclusive list of matters to consider in the exercise of the discretion.
The wife’s submissions against the re-opening of the trial
In the wife’s written submissions on this application, it was submitted that the further evidence sought to be adduced is not so material that the interests of justice require its admission. This submission was made, it was observed, because the difference between the purchase price and the sale price is approximately $200,000 in a “pool” of property that is in the order of $45,000,000 to $50,000,000 and because, in any event, pursuant to the principles in Kowaliw (1981) FLC 91-092, the loss should fall at the feet of the husband.
It was submitted that the Court should have regard to the fact that the husband purchased the property with the use of joint funds, secretively and in apparent breach of the undertaking he had given the Court in January, 2011. It was submitted that the Court should also have regard to the fact that he did not disclose the purchase until the day before the trial, failed to disclose that the apartment was on the market at the time of the trial, and only chose to disclose the fact it was being sold after a contract for sale was in place that resulted in the apartment being sold for a loss.
It was submitted that the Court should have regard to the fact the wife has suffered and continues to suffer the stress associated with a lengthy court process, and throughout the process to date, the husband has continually delayed finalising the matter. In this regard, it was also submitted that if the trial was re-opened, the wife would again wish to cross-examine the husband about the issue, particularly as to whether the sale is at “arm’s length”.
Most telling, in my opinion, at the hearing of this application, Senior Counsel for the wife made further oral submissions on an alternative basis. He urged the Court to take note of the fact that the trial was conducted by the wife, at least, against the disclosure by the husband, only the day before the trial commenced, of the details surrounding the purchase of the B apartment, and without knowledge on the part of the wife that it was actually back on the market at that time. He submitted that it is against the facts, now revealed, that the apartment was sold for a loss compared to its purchase price, that closer scrutiny of the question as to how the property is to be treated in the “pool” in the substantive proceedings is actually required. He submitted, although the wife’s written submissions in the substantive proceedings referred to the apartment as being properly included in the pool on the basis of the wife’s contention that the husband held the beneficial interest in the property, that another manner of treating the issue was available to the Court, that would make the evidence the husband is now seeking to adduce completely immaterial in any event.
He submitted that the evidence of the husband adduced at the trial supported a finding that the sum of money advanced by him to his current wife for her to purchase the apartment could be seen, in effect, as a premature distribution of the capital of the husband and the wife, and, on that basis, in accordance with principle[6], the amount the husband “advanced” to his current wife could quite properly be notionally “added back” to the “pool”, thus making evidence of the recent sale of the apartment for an amount less than it was purchased for completely irrelevant.
[6] See Townsend v Townsend [1995] FLC 92-569
In response, counsel for the husband submitted that this alternative submission was not available to the wife as it was inconsistent with the position “agitated by the wife” at the trial as “evident from the submissions” that were prepared in writing on her behalf following the trial. He submitted that the wife should be held to the position that the B apartment itself is part of the “pool” and, now that it has been sold, its net sale proceeds are what should be included in the “pool.”
Conclusions
Firstly, I do not accept the submission that the wife is not permitted to make a submission in the course of this application, that goes to the substantive issues in the trial in an alternative fashion to a submission she has previously made, particularly when this application is being heard and determined after the close of the evidence but before delivery of the judgment in the substantive proceedings.
The general principle is that the Court takes the property of the parties or either of them as it finds it at the date of trial. In this case, the B apartment at the time of the trial was legally owned by the husband’s current wife. There was no evidence put before the Court that the beneficial ownership of the apartment was not otherwise in accord with its legal ownership. The husband gave no such evidence, nor did he adduce any evidence from his current wife going to the issue. He simply swore that the purchase of the apartment was by his current wife and that he funded the purchase by giving her the money. Against the backdrop of that very limited evidence he stated, through his counsel, that he would not be contending that the B apartment should not be “taken into account as part of the pool”.
The wife, only learning of those facts on the eve of the trial, and being anxious for the trial to proceed, was not in any position to have the apartment expertly valued or to further investigate the nature of the transactions surrounding its purchase before the commencement of the trial. In the circumstances, the wife could not be criticised for simply relying on the husband’s counsel’s statement that the husband would not be contending for anything other than the apartment being “taken into account as part of the pool”. She could hardly be criticised for submitting that the amount that was paid for it should be the amount included in the “pool”.
However, in my opinion, issues such as the proper treatment of these factual circumstances are to be determined by application of principle to the evidence that is adduced, not simply by what the parties may submit is the way to treat them.
According to principle, exceptions to the general rule that the Court takes the property of the parties or either of them as it finds it at the date of trial exist where one party has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets; or where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the effect of which has reduced or minimised their value or the pool of assets[7].
[7] In the Marriage of Kowaliw (1981) FLC 91-092
The questions that must be considered and answered around issues such as this have often been grouped under the general descriptor of “add backs”. But, as Murphy J pointed out in Challen and Challen[8], determining these questions is actually just part of the overall s79 exercise, governed by principles of justice and equity.
[8] [2007] FamCA 1292 at [75]
In Omacini v Omacini[9] the Full Court observed that it is appropriate to notionally add back to the “pool” in three clear categories of circumstances: where the parties have expended money on legal fees; where there has been a premature distribution of matrimonial assets; and in the circumstances outlined in Kowaliw referred to above.
[9] (2005) FLC 93-218
In the circumstances of this case where the husband:
(a)has secretively “advanced” $1,120,000 to his current wife to facilitate the purchase by her of an apartment without disclosing to the wife in these proceedings, or this court, that he had done so until she pressed him for details on the eve of trial; and
(b)gave evidence during his cross-examination at the trial that he “gave” the money to his current wife for the purchase of the apartment; and
(c)did not disclose at the time of the trial that his current wife had the apartment listed for sale at $1,250,000 at that time; and
(d)seeks to re-open the case to put further evidence before the Court only after his current wife enters into a contract to sell the property for less than it was purchased for; and
(e)adduces no evidence at all as to the basis for his current wife selling the apartment at this point in time and, therefore, as to why it might have been reasonable for her to sell it for less than she purchased it for; and
(f)adduces no evidence as to what his current wife has done with the sale proceeds;
it is, at least in my opinion, completely appropriate, and in accordance with principle, for the actual amount of money advanced by the husband to his current wife for the purchase of the B apartment to be considered and treated as a premature distribution of capital that would have otherwise formed part of the “pool” of property to be subject to property settlement orders and to be “added back” to that “pool”. I consider this to be the appropriate treatment of the issue, regardless of the fact that the husband would prefer, in hindsight, given that the property has sold for a loss, for the Court to determine that he always owned the beneficial interest in the property and to allow him now to re-open the case to adduce the evidence of the recent sale for the purposes of determining the value to be ascribed to the interest.
I am satisfied that by determining the issue of the treatment of the gift of the purchase money by the husband to his current wife this way, the evidence of the sale of the apartment subsequent to trial becomes completely immaterial, thus making the decision to refuse to grant leave to re-open the case an easy one. Accordingly, I do refuse to grant leave to the husband for the re-opening of the case so that he can adduce evidence of the sale, subsequent to trial, of the B apartment.
How would I exercise the discretion if that determination were wrong?
In the event that I am wrong in my determination to treat the issue as I have indicated I will in the substantive proceedings, I consider it necessary to go on and determine how I would otherwise decide the application for leave to re-open the trial if I was to consider the B apartment was actually property of the husband.
If the “pool” of property of the parties or either of them is around $45,000,000 then the difference between the sale price and the initial purchase price of the B apartment of $200,000 is actually only 0.444 per cent of the total of $45,000,000. On the husband’s case that he is entitled to 70 per cent of the total “pool”, the difference would mean that he has to transfer assets to the wife and/or pay her an amount equal to $60,000 less than he otherwise might if he is successful. That is the equivalent of 0.1333 per cent of the total $45 million “pool”. On its own, this is a fact that hardly qualifies as “so material that the interests of justice require its admission”. It would not, in my opinion, be materially different if the wife’s case for a 52/48 division in her favour is successful.
If the evidence now sought to be adduced was accepted in circumstances where the property was determined as being beneficially owned by the husband, it might very well result in a different result. Such a different result might accord with the figures just outlined in the previous paragraph. However, given that the B apartment was on the market at the time of the trial, a fact only known to the husband at that time and not revealed by him, he ought to have foreseen, at that time, the possibility that the apartment might sell for less than the figure he was then prepared to have included in the “pool” and, therefore, he ought also to have foreseen the “occasion” for the need to put further evidence before the Court on the point. He has given absolutely no explanation for not disclosing to the Court earlier than he did the circumstances of the apartment’s purchase. He has given absolutely no explanation for not disclosing to the Court at the trial that the apartment was then on the market for $1,250,000. That he did not disclose the fact that the apartment was on the market and seek to adduce evidence as to its actual value at trial raises serious concern as to whether the husband would have sought leave to adduce further evidence if the property had sold for more than its original purchase price. That is a matter I consider of some relevance, though not in itself determinative of the issue.
I do not accept that an expert valuer could not have been engaged in a timely fashion prior to the trial to value the B apartment had the husband given timely disclosure of its purchase and accepted, in a timely fashion, that its value be included in the “pool” of property of the parties or either of them. Given the contents of Annexure ‘A’ to the husband’s affidavit filed 19 September 2012 in support of his Application in a Case, and, for this specific purpose, accepting it to be correct, I do not accept that an expert valuer could not have come up with a valuation that approximated the sum for which the apartment was eventually sold.
The circumstances under which this application emerged, as set out already in these reasons, leaves me with no option but to conclude that prejudice would ensue to the wife if the evidence was allowed to be adduced now. She had absolutely no knowledge of the fact that it was on the market at the time of the trial. She had no say in the marketing of the property, or the terms and conditions of its sale. The prejudice this has caused if the evidence is allowed to be adduced is not cured simply by setting the matter down for further hearing and allowing her counsel to again cross-examine the husband. Further, she has an acute interest in the proceedings being finalised as soon as possible without any further imposition of costs on her. In addition, other parties waiting for trial dates and reserved judgments in this Court have legitimate interests that are to be considered in this process. So too, does the public have an interest in the principle that there is a need to bring expensive litigation in the courts to conclusion as soon as possible. These interests should not necessarily be subordinated to the interests of one of the parties to a particular proceeding, save in cases where the interests of justice clearly demand it.
Finally, it is, I consider appropriate to observe, just as Applegarth J did in EB v CT[10], that it is hardly just to allow one party to lead evidence of a change in value of one piece of his property after the trial and before judgment without opening up to all parties the right to have considered changes in value to other items of property that have occurred after the trial.
[10] Supra
I would, having considered all of these matters, not grant leave to the husband to re-open the case and to adduce evidence regarding the value of B, even if I was going to treat the issue of its purchase differently from the manner in which I have indicated I now intend to treat it in my substantive decision.
The husband’s Application in a Case filed 19 September 2012 is dismissed.
I certify that the preceding forty-four (44) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 31 October 2012.
Associate:
Date: 31 October 2012
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