Garvey & Jess
[2021] FamCA 102
•12 March 2021
FAMILY COURT OF AUSTRALIA
Garvey & Jess [2021] FamCA 102
File number(s): BRC 2175 of 2016 Judgment of: BAUMANN J Date of judgment: 12 March 2021 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – Where the issues for determination were alleged non-compliance in respect of disclosure; extent of disclosure relating to third parties; what property needs to be valued and how the costs should be shared initially, appointment of an accountant and what trial directions should be made – Orders made for the parties to circulate minutes of proposed orders consistent with these Reasons Legislation: Family Law Act 1975 (Cth) s 79
Family Law Rules 2004 (Cth) rr 13.01, 13.02(2), 17.02
Cases cited: Number of paragraphs: 58 Date of hearing: 8 July 2020 Place: Brisbane Counsel for the Applicant: Mr P Hackett Solicitor for the Applicant: Hirst & Co Counsel for the First Respondent: Mr T Kirk QC Solicitor for the First Respondent: Barry Nilsson Lawyers Counsel for the Second Respondents: Mr G Richardson SC Solicitor for the Second Respondents: Mills Oakley Lawyers ORDERS
BRC 2175 of 2016 BETWEEN: MS JESS
Applicant
AND: MR GARVEY
First Respondent
Mr Z GARVEY AND Mr Z GARVEY AS CASE GUARDIAN FOR Ms GARVEY
Second Respondents
ORDER MADE BY:
BAUMANN J
DATE OF ORDER:
12 March 2021
THE COURT ORDERS:
1.That the Applicant shall within fourteen (14) days circulate to the other parties a minute of order consistent with the Reasons for Judgment delivered 12 March 2021.
2.That the Respondents shall within seven (7) days of receipt of the said minute of order provide their written response.
3.That these proceedings be adjourned for Case Management Hearing for pronouncement of orders and directions for an allocated trial date, at 11.00am on … April 2021 in the Family Court of Australia at Brisbane.
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 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Jess & Garvey has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
BAUMANN J:
INTRODUCTION
In March 2016 the husband Mr Garvey filed an Application seeking enforcement of a financial agreement dated 3 August 2006 which he asserted was binding upon the parties. The wife Ms Jess claimed the said financial agreement was not binding upon the parties. In respect of that core issue:
(a)on 3 August 2017 Carew J dismissed the wife’s Application for the financial agreement to be found “not binding, enforceable or effective”;
(b)the Orders of Carew J were the subject of an unsuccessful Appeal (dismissed 18 March 2018) and an unsuccessful Application to the High Court for special leave;
(c)on 9 September 2019 Hogan J made Orders directing the parties to file an amended Initiating Application and Response which were filed by the Applicant wife on 23 December 2019 and Respondent husband on 30 January 2020 respectively;
(d)in the wife’s amended Application she named Ms Garvey and Mr Z Garvey as further Respondents. Her amended Application also sought specific orders as to the division of property to give effect to the binding financial agreement (“BFA”) and a declaration that some shares, superannuation and other interests in real property are held on trust by the Second and Third Respondents for the husband, and therefore not covered by the BFA;
(e)on 20 March 2020 I ordered that the enforcement proceedings be consolidated with the substantive property proceedings and made directions for filing of submissions in respect of disputed discovery issues;
(f)in respect of the asserted trust issue now raised, on 22 April 2020 the wife filed a Statement of Claim; on 29 May 2020 the husband filed a Defence and on 3 June 2020 the Second and Third Respondents filed a Defence. Clearly those pleadings provide a context for some of the discovery issues raised; and
(g)on 8 July 2020, submissions were received from Counsel representing the parties:
(i)Mr Hackett for the wife;
(ii)Mr Kirk QC for the husband; and
(iii)Mr Richardson SC for the Second and Third Respondents.
The Reasons which follow explain the basis for the Orders made, which appear at the commencement of these Reasons.
For completeness, the husband and wife as the parents of C (aged 13 years) and D (aged 11 years) have contested parenting proceedings also before the Court at this time – although interim parenting Orders made for an equal time arrangement on 3 August 2017 are in effect. On 25 November 2020 an updated family report by Ms Y was filed and has been released to the parties. Although there has been some earlier discussion about bifurcating the property proceedings and the parenting proceedings, no orders to that effect have been made.
ISSUES FOR DETERMINATION
The Court expresses its regret to the parties that these Reasons and Orders were not published in a more timely manner.
After hearing submissions on 9 June 2020, the issues that required determination were identified as:
(a)alleged non-compliance with Order 1 and Order 3(b) of the Orders made 29 April 2020. In particular Order 3(b) provided that:
the Applicant, First Respondent and the Second Respondents shall provide disclosure of documents in their power or possession relevant to the issues raised in the Statement of Claim which remain in issue.
At the hearing on 8 July 2020, it was asserted by the Second Respondents that the obligation upon the Second Respondents was onerous, not contemplated when consenting to the said Order and/or nothing more than a fishing exercise by the wife when reference is made to the pleaded Statement of Claim;
(b)what property needs to be valued and how, as between the husband and wife, the costs of valuation should be shared initially;
(c)the appointment of an accountant for the entity N Holdings Pty Ltd (and the Trust thereunder) to complete financial statements for the years ended 30 June 2018, 2019 and 2020; and
(d)what trial directions should be made.
The most controversial issue pertains to discovery issues – particularly those obligations of the Second Respondents Mr Z Garvey (aged 80) and his wife Ms Garvey for whom her husband has been appointed case guardian.
Although these interlocutory Applications were originally to be dealt with on 29 April 2020, a significant volume of discovered documents (said to comprise over 800 pages – see Exhibit 2 being an Index) were produced to the wife shortly before the hearing – giving the context to Order I made 29 April 2020.
Before the hearing, the Second Respondents had in an Application in a Case filed 3 June 2020 sought a discharge of Order 3(b).
Counsel who’s appearances are set out in the title page of these Reasons provided both written and oral submissions – being Mr Hackett for the wife; Mr Kirk QC for the husband and Mr Richardson SC for the Second Respondents.
PRINCIPLES
Rule 13.01 of the Family Law Rules 2004 (Cth) provides a general duty to give full and frank disclosure of all information relevant to the case, in a timely manner.
In financial cases, this general duty does not apply to a party to a property case who is not a party to the marriage to which the application relates except to the extent that the parties’ financial circumstances are relevant to the issues in dispute (rule 13.02(2)).
A Court may order specific disclosure of documents to be produced, and to that extent the consent Order made 29 April 2020 at Order 3(b) clarified the Second Respondents’ duty to disclose “to the issues raised in the Statement of Claim”. This consent Order (where a solicitor appeared for the Second Respondents) is broad in its description but clearly directs attention to the Statement of Claim.
Mr Richardson SC, in seeking that Order 3(b) be discharged, contends that the Order can be set aside under rule 17.02, but that in any event, by reference to an examination of the wife’s Statement of Claim contends a foundation for relevance has not been established. Mr Hackett disputes this contention.
It is important to set a context from the pleadings as to issues properly in dispute which I do next.
THE WIFE’S CLAIMS AGAINST THE SECOND RESPONDENTS
A dispute exists as to whether the now BFA covers all the property and interests of the parties to the marriage or whether, as the wife asserts, there exists property that she has identified that could be subject to the property alteration powers under s 79 of the Family Law Act 1975 (Cth).
Although that issue came more into focus after at least the Full Court decision, the wife by an amended Initiating Application filed 23 December 2019 named the Second Respondents as parties and sought declarations that they hold interests outside the BFA on behalf of the husband. The Application was more clearly articulated in the amended Initiating Application filed 28 February 2020 at paragraph 35 as follows:
35.A declaration be made that the following interests in property and/or legal entities are held by the Second Respondents on constructive trust for the Husband:
a.2 ordinary shares held by Ms Garvey and Mr Z Garvey in B Pty Ltd;
b.Half share interest in the unit situated at T Street, Suburb M (Lot … on …) registered in the name of Ms Garvey;
c.B Super Fund membership entitlements held in the name of Betty and Mr Z Garvey;
d.Interest in the W Street, Suburb X property held in the name of Mr Z Garvey.
Having made this Application, directions have been made, and complied with, for the parties to plead their cases through the wife’s Statement of Claim (filed 22 April 2020) and the Defences/Response filed by the husband on 30 June 2020 and the Second Respondents on 3 June 2020.
For Reasons which now follow, although the wife identified the interests to which the declaration is sought, her claims for discovery directed to the Second Respondents is much broader and I find akin to fishing for information to support her claim. This conclusion is not to suggest the wife is not able to establish the Trust she asserts – that is a matter for trial, and as the directions reveal an opportunity for the Second Respondents to file and Application for summary dismissal was offered but not taken up.
Rather I have formed the view that, as contended by Mr Richardson SC for the Second Respondents; that generally the wife calls upon the Respondents, in proving the negative (that no Trusts exist), to account for every dollar received from the “B Pty Ltd” company since 1998 (when it was established) in an endeavour to hopefully trace those funds into other assets and entitlements (e.g. contributions to superannuation benefits) “without a scintilla of a basis for a trust being established” having been properly particularised at this time.
In circumstances where the wife’s discovery under the Orders of 29 April 2020 have, it is submitted, not revealed one document in her possession, power or control to establish the Trusts, the Court accepts the wife is anxious to establish if any other documents exist in the possession, power or control of either the husband or his parents to do so.
However, the wife’s foundation is that the initial vehicle for income and benefits B Pty Ltd was “founded” by the husband and that the husband “in about April 2004 by words the substance and effect of which were that B Pty Ltd was his company and that shares were held in his parents’ names based upon advice he had received from Mr O, Financial Planner for both asset protection purposes and tax minimisation but that in fact it was entirely his company” (see particulars at paragraph 8 of Statement of Claim).
Furthermore the wife claims (see paragraph 9 of Statement of Claim) that “since the registration of B Pty Ltd, any benefits paid to the Second Respondents as shareholders of B Pty Ltd have been paid by [sic] the Second Respondents to or at the direction of the First Respondent”, but that the wife is unable to provide particulars of the amounts paid by B Pty Ltd “until after disclosure by the First Respondent and Second Respondents”.
These statements in paragraphs 8 and 9 are said to support a conclusion that:
(a)the benefits paid as shareholders “are either a Joint Asset FA or Joint Asset OFA” as defined; and
(b)the two shares in B Pty Ltd held by the husband’s parents “are held on trust for the First Respondent and were so held at the time the Applicant and First Respondent entered into the Financial Agreement and are a Joint Asset OFA”.
It is clear from the wife’s Statement of Claim that she asserts that the funds from the shareholding or interest in B Pty Ltd (vested in the Second Respondents) that they received has, without any other apparent concession that the Second Respondents may have had other sources of income or assets, been used to:
(a)make contributions to the B Super Fund such that at 30 June 2015 the Second Respondents’ member balances totalled $3,442,754 whereas the husband’s member balance was only $352,481 (paragraphs 19 and 20); and
(b)further, since the creation of the J Investment Trust in November 2011 the husband, as sole director of the Trust, has paid and will pay to his parents entitlements as beneficiaries such that past distributions are either a Joint Asset FA or Joint Asset OFA and that accrued unpaid entitlements “are held on trust for the” husband and are a Joint Asset OFA.
These three primary sources of benefit (identified by the wife at paragraphs 9, 19 and 26(a) of her Statement of Claim) which the wife says have flowed to the Second Respondents, can, she pleads, be traced to other assets in which the Second Respondents have a current legal interest, on the wife’s case.
Before moving to the Defences raised to these primary claims by the other parties, I record that Counsel for the husband Mr Kirk QC contended that the wife’s claim of a Constructive Trust “shows little prospects of success”. Clearly the success or otherwise of the claim is a matter for trial – especially where the wife relies heavily (at this point) on what she says were statements made to her by the husband. In that regard, Mr Richardson SC submits, even if such statements were made as the wife alleges, and the husband denies, there is no evidence that the Second Respondents ever made such an admission or statement; that, as against the parents, any statements in conversations with the husband which were never made in the presence of the parents (so it is claimed) are “inadmissible”. These are triable issues when the wife in her affidavit of evidence in chief discloses all the alleged comments made and the context.
The amended Response of the husband to the wife’s Statement of Claim, relevantly for the purpose of this discovery Application:
(a)says that since 18 May 1998, the Second Respondents have remained shareholders of B Pty Ltd (paragraph 6(f));
(b)that any dividends by his parents as shareholders were retained “to the knowledge of the first respondent, by them and applied at their discretion” (paragraph 9(a)); and
(c)says the B Pty Ltd Super Fund was established in November 2002 “by all three members” and specifically, by reference to paragraph 19 of the Statement of Claim says any benefits paid to the member benefit accounts of his parents for the benefit of his parents that have subsequently been received by them, to his knowledge, have been retained by them and used at their discretion.
The Defence of the Second Respondents filed 3 June 2020 simply denies paragraph 9, paragraph 19 and paragraph 26 of the Statement of Claim – effectively putting the wife to proof. There is no doubt that the wife will bear the evidentiary onus to establish that the Trusts asserted existed and that the funds received by the Second Respondents can be traced in the way the wife contends.
In concluding at this stage of the pleadings (noting no fulsome trial material has been filed), that the request for much of the disclosure sought from the Second Respondents is not, on the basis pleaded, proper discovery about a relevant issue in dispute or is akin to “fishing” for evidence where no proper foundation for production has been stablished or is otherwise onerous, the following additional matters have shaped the exercise of my discretion, namely:
(a)Although the broad disclosure obligation contained in Order 3(b) was consented to, I am satisfied that disclosure to the extent sought should only be required on issues where a proper foundation can be established for such disclosure. If this amounts, as Mr Hackett submits, to a variation of the Order made 29 April 2020, then I am satisfied the Rules and the interests of justice empower me to do so;
(b)Much of the discovery sought by the wife against the Second Respondents seek to question events and actions taken in 1998 (when B Pty Ltd was established) and in 2002 (when B Super Fund was established). At those dates (all taking place before the parties commenced cohabitation and were married in 2006), the husband was 22 years and 26 years respectively;
(c)The alleged words spoken by the husband to the wife in April 2004 was at a time when the parties had not commenced cohabitation;
(d)The critical initial dates for the creation of the asserted Trusts in respect of the shares in B Pty Ltd and the member benefits in the B Super Fund were the dates of their creation;
(e)Whatever benefits as shareholders (likely to be principally dividends) the Second Respondents received from 1998 are able to be ascertained from the company’s financial statements and arising from decisions of directors which should be minuted. To expect, in the absence of any detail of dividends or benefits received, the Second Respondents to reveal how they may have used funds received since 1998, is oppressive and not proportional to the issue in dispute as currently pleaded;
(f)The operation of the Superannuation Fund is undertaken by the Trustee; requires minutes to be maintained; requires annual auditing and taxation compliance. Without accepting at this stage the concerns expressed by Counsel for the parents as to how any declarations could affect the operation of the Fund and/or its obligation to comply with the legislation, I take the view that, similar to the shareholding benefits arising from B Pty Ltd, expecting the Second Respondents to identify how they may have either contributed to their member benefits or, if assessed over time, used their member benefits since, is oppressive and not proportional to the issue in dispute as currently pleaded. However the yearly financial statements of the Superannuation Fund (which would normally include member statements revealing contributions and payments) to the extent they are available should be disclosed at this stage;
(g)In reaching these conclusions, couched cautiously as they are, I also regard it as relevant to the exercise of my discretion that:
(i)the father of the husband is 80 years old and not in good health;
(ii)the mother of the husband lacks some capacity (such that her husband has been appointed Case Guardian);
(iii)some of the discovery sought from them is over 20 years ago; and
(iv)although the parties to the marriage separated in April 2015, this line of claim by the wife was not formally launched until the Initiating Application was filed in December 2019. It is not an adequate answer to this delay to say that the wife may have wished to exhaust all her remedies about the binding nature of the financial agreement before taking the actions she has.
I accept that if something arises from the limited documents produced from the records of B Pty Ltd or the Superannuation Fund that gives some support to the further discovery sought against the Second Respondents, then the Court may be moved to do so. At this point in time it is not.
I will now discuss other discovery sought by the wife – whist relying on the other findings above already made and with an eye to the matters set out in the letter of 8 June 2020 referred to in the further written submissions by Mr Hackett filed 8 July 2020. Using the numbering from the wife’s Statement of Claim:
(a)Paragraphs 5, 7, 8, 9 and 19 – have been dealt with above in my view. If the wife believes the file from Hunt and Hunt is both available and relevant to the creation of B Pty Ltd, she could file a subpoena;
(b)Although the husband’s interest in the T Street property is a “Mr Garvey Assets” under the BFA, the Statement of Claim at paragraph 12 asserts the husband’s mother held her interest in the unit “upon trust for the” husband and particularises conduct she says which evidences the Trust. The acquisition occurred in 1997 (when the husband was 21 years old). In the husband’s Response he particularises a number of documents around the time of acquisition in 1997. If any documents exist about the source of the deposit and repayments of the EE Bank mortgage they should be produced;
(c)The J Investment Trust was created in November 2001 (when the husband was 25 years of age) and the Second Respondents were beneficiaries. The wife asserts at paragraph 26 that any payments made to the Second Respondents or due to them were so made to them “on trust” for the husband. I take the same view about legal entitlements received as a beneficiary under this Trust as I do as a shareholder in B Pty Ltd or as a member of the B Super Fund. The Trust financial statements will reveal any payments made. It is oppressive and not proportional to the issue to require the Second Respondents to disclose what they did with any payments received.
(d)As I understand paragraph 28 of the Statement of Claim, the wife asserts two Loan Agreements dated 18 September 2012 are “shams” used to “mask some of the transactions referred to in paragraphs 9, 19 and 26(a)” which I have discussed above. It is not immediately apparent to me why a loan in 2012 is relevant – other than if the husband seeks to bring it into account in some way should the Court be required to exercise the s 79 power over some assets. I do not propose to order at this time that the Second Respondents produce any of the documents requested of them by the wife in respect of these “loans” at this stage. It will be a matter for the husband, if he seeks to establish a loan for some purpose, to do so;
(e)At paragraphs 30 and 31, the wife asserts that the second named Second Respondent purchased a property at W Street, Suburb X “at the direction of the husband and using funds referred to in paragraph 9, 19 and 26(a)” such that she asserts the property is held on trust for the husband and is a “joint assets OFA”. Apart from acknowledging that the purchase was partly funded by a loan of $550,000 from B Pty Ltd (paragraph 30(b) of the husband’s Response), the husband says he does not know how the Second Respondent funded the purchase. The Second Respondent puts the wife to proof about the existence of the Trust – seemingly again asserted by tracing other funds. I do not propose to order the Second Respondents to produce anything further in respect of the Suburb X property;
(f)At paragraphs 30 and 31, the wife asserts that the second named Second Respondent purchased a property at W Street, Suburb X “at the direction of the husband and using funds referred to in paragraph 9, 19 and 26(a)” such that she asserts the property is held on trust for the husband and is a “joint assets OFA”. Apart from acknowledging that the purchase was partly funded by a loan of $550,000 from B Pty Ltd (paragraph 30(b) of the husband’s Response), the husband says he does not know how the Second Respondent funded the purchase. The Second Respondent puts the wife to proof about the existence of the Trust – seemingly again asserted by tracing other funds. I do not propose to order the Second Respondents to produce anything further in respect of the Suburb X property;
(g)The wife seeks discovery from the Second Respondents as to certain transactions relating to some units at AA Street, Suburb L. I deal with the requests as follows:
(i)Units 1, 2, 2, 4 and 5 AA Street – the husband’s mother became the owner of this property before 1 April 1996 – before the establishment of B Pty Ltd, the Superannuation fund or cohabitation between the parties. A demand for documents “to reveal the payment of the purchase price and acquisition costs and where those funds originated from” is not relevant and to expect the Second Respondent to produce any documents is oppressive. As to how the transfer of the unit to the Superannuation Fund on 28 February 2005 is dealt with in the accounts of the Superannuation Fund should be transparent – especially in circumstances where it may have been a form of “contribution” that then is represented by an increase in the members benefit. No further documents need to be disclosed at this stage. In my view, the same applies to unit 6, 12, 13 and 18; and
(ii)Units 6, 7 and 8 AA Street were acquired by J Pty Ltd (as Trustee) on 19 December 2014; 19 December 2003 and 29 October 2009 respectively. No discovery from the Second Respondents is sought and no trust concerning the Second Respondents in respect of these units is asserted.
I have dealt with the discovery issues, at this time, relating to the Second Respondents.
DISCOVERY BY THE HUSBAND
As a party to the marriage, as already noted, the husband’s general duty for disclosure is broader than that required of third parties in the nature of the Second Respondents.
It was not my understanding from submissions ultimately made on 8 July 2020 (and after the wife and her lawyers had viewed the significant volume of documents produced) that two areas of disclosure were still in dispute. It may be that since this matter was adjourned, awaiting this Judgment, those two categories of concern have been resolved, however I deal with them as follows:
(a)BB Company & CC Company
The wife asserts that a dispute exists as to whether the husband or the B Super Fund made this investment. The husband contends that all documents have been disclosed and reveal:
(i)that BB Company changed names to CC Company and they are one and the same investment;
(ii)that the investment was acquired by B Super Fund and not by the husband; and
(iii)as the BFA identifies the B Super Fund as a “Mr Garvey Assets”, and where proper disclosure has in any event been made, the wife’s continued agitation for further disclosure is “onerous, expensive and irrelevant”.
In response, Mr Hackett for the wife says that amongst the 800 pages of documents provided on 28 April 2020, the husband did disclose a loan application he made personally to acquire one of the investments. In the belief that the investment revealed in B Super Fund is in reality the same investment that related to the loan application, the wife (so as to establish it is not an B Super Fund asset covered by the BFA), seeks that the husband provide disclosure of the source of the funds that was used to acquire “those investments”. As earlier discussed, an examination of the financial statements for the B Super Fund should adequately reveal the source of the funds for what is now claimed to be an B Super Fund asset. In those circumstances, and considering the evidence of the husband at paragraphs 59 to 76 (on which he can be cross-examined at a final hearing), I am satisfied no further discovery on this issue is required.
(b)DD Company
The husband says (at paragraphs 77 to 89) that he has made full disclosure of all documents – even though it is his position that it is not a “Joint Asset” within the BFA as asserted by the wife. In particular he says investments into DD Company were made by the J Investment Trust between March 2015 and November 2018 at a total quantum of $111,926.13.
The wife contends that, in circumstances where the wife does not accept the accuracy of the financial statements for the J Investment Trust (relied upon by the husband and prepared on his instructions), she is entitled to documents establishing the source of funds from which the investment(s) were made.
Considering the evidence of the husband on this issue (on which he can be cross-examined) I am satisfied no further discovery on this issue is required.
FINANCIAL STATEMENTS FOR N TRUST
An impasse has arisen between the parties, who are the joint Directors of the Trustee company and therefore have a statutory duty to consider the accounts of the Trust and approve them in the usual manner on an annual basis, as to which firm of accountants should prepare financial statements for the 2017, 2018, 2019 and I assume now also the 2020 financial years.
The husband has had returns prepared, on his instructions, by the “long standing accountants for the Trust”.
The wife says “for years” (at least it seems since separation) she has raised issues with respect to the impartiality of the accountants based in part on her difficulty in obtaining copies of documents.
The wife has expressed a concern that no source documents to evidence whether the loan recorded in the name of the husband in the accounts of the N Trust was in fact advanced by him or jointly or by someone else, have been produced. The “loan” seems to have been in existence for many years, demonstrated by Exhibit 3, which reveals a loan to Mr Garvey of $455,484 as at 30 June 2012.
I agree with the submissions of Mr Kirk QC for the husband, that whether the longstanding recording of a loan in the name of the husband is accurate or not, is a matter capable of determination at the trial. A tracing of the first entry of the loan in the Trust’s financial statements would be the start – and the husband (at paragraph 44) says at least disclosure for recent years and working papers have been provided to the wife.
In the circumstances of this case, I do not accept that the husband engaging longstanding accountants to prepare the returns was inappropriate. I note the 2012 returns were prepared, for example, by the same firm. Engaging a new firm is not justified – merely because the wife apparently believes the firm is under the control of the husband. There is no evidence to suggest they are doing anything other than taking source documents and preparing, according to requisite accounting standards, financial statements.
The “compromise” suggested by the wife to engage new accountants is a wasted exercise and not justified.
At paragraph 5.2 of the submissions of Mr Kirk QC, Counsel contends that execution of the prepared returns would be “without prejudice to her rights to make any contentions she wishes at trial”. Penalties and adverse consequences may flow from the failure of the Trust (through its Directors) to sign and lodge returns. Obviously if that is the case, an argument at the trial as to who should bear any such costs is likely.
In my view, it is not unreasonable to expect the wife to sign the financial statements with the reservation conceded. She can, at her own cost, if she likes, have an accountant of her choice review the working sheets and financial statements.
If she fails to do so within 14 days from the Order to do so, then the husband’s alternate order (applied for in his application by way of Response filed 3 July 2020) will be listed for determination.
VALUATIONS
In her amended Application filed 28 February 2020, the wife seeks the appointment of single court experts to value a range of real and personal property. I will now make a decision as to what property is to be valued and how the costs of valuation shall be met by the parties. Neither of the parties submit that the Second Respondents should contribute to the costs of valuation.
There is agreement that K Street, Suburb L; V Street Suburb L and W Street, Suburb X be valued. I am confident that the parties can agree on who the single expert should be.
In the husband’s submissions, as the N Trust is an agreed “Joint Asset”, it should be valued and this would include H Pty Ltd which holds cash and which is owned by the N Trust.
The husband’s member entitlements in the B Super Fund and the shareholding in B Pty Ltd are, as described in the BFA, a “Mr Garvey Assets” as is the J Trust. Although I accept, as earlier discussed, the wife pleads that various interests held by the Second Respondents in a number of these entities are held by the Second Respondents on trust for the husband, the submissions by both Mr Kirk QC and Mr Richardson SC about the vague pleading persuades me that I would not order these entities to be valued.
I accept the wife says, for example, that the shareholding held by the Second Respondents in B Pty Ltd have a value because of the asserted constructive trust and should be brought into account as those shares are not a “Mr Garvey Assets”. A similar argument is advanced in respect of the Second Respondents member benefits in the B Super Fund, although in respect of that interest, discovery of the balance sheet of the B Super Fund will define the member benefits.
Similarly, I am not persuaded at this stage that there is any utility in valuing the AA Street units (whether part of the assets of the B Super Fund or not) or T Street.
My conclusion is that the wife’s application for these interests to be valued is akin to “pulling the cart before the horse”. I heard no submissions about the artwork, however I am happy to hear further submissions if that application for the various pieces at paragraph 6 to be valued remains in dispute.
COSTS OF VALUATION
The wife says the husband is in a much stronger financial position than she is and should pay any costs of the single expert initially.
The husband pointed, at the time of the hearing before me, to the wife having available funds of $150,000.
The Rules provide for the costs of the single expert to be shared equally. I see no reason to depart from the usual rule in respect of the three real properties and the N Trust.
If the wife wishes to pursue a valuation of other property or interests, my view is that she would need to pay those costs totally and entirely. I envisage, if that is her position, it may be necessary for orders to be made to facilitate inspections of property registered at this time in the names of the either the Second Respondents and/or the B Super Fund.
FURTHER DIRECTIONS
I accept that the Court’s delay in publishing these Reasons are likely to have caused some further anxiety to all the parties, and I regret that effect.
The Court will expedite this matter to a final hearing (Mr Kirk QC suggested five days), but in accordance with my practice will only do so on a timetable which allows the parties to:
(a)perfect an order consistent with these Reasons;
(b)inform the Court when the discovery and valuations will be complete;
(c)understand the timetable for filing of evidence. In that regard, I would require the wife to file her evidence in chief first, to be followed by the Respondents and then leave for the wife to file an affidavit in reply; and
(d)inform the Court, when making further directions, the issues, if any, still in dispute in relation to parenting arrangements, now that they have had an opportunity to consider the report of Ms Y filed 25 November 2020.
I will list the matter for pronouncement of orders (consistent with these Reasons), for the making of trial directions and for the listing of the matter for final hearing, at 11.00am on 9 April 2021. I will direct the solicitors for the Applicant wife to circulate a proposed minute as contemplated by these Reasons, to the other parties within 14 days, after which a response can be provided within seven days. On 9 April 2021 I will deal with any dispute as to the form of orders, and consider dates for the final hearing.
I certify that the preceding fifty-eight (58) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Baumann. Associate:
Dated: 12 March 2021
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