Giacobetti & Giacobetti (No 3)
[2023] FedCFamC1F 1126
•20 December 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Giacobetti & Giacobetti (No 3) [2023] FedCFamC1F 1126
File number(s): SYC 5998 of 2021 Judgment of: CURRAN J Date of judgment: 20 December 2023 Catchwords: FAMILY LAW – PRACTICE & PROCEDURE –Application for leave to amend application – Where application made on the final day of hearing – Where leave required pursuant to rule 2.50 – Where adjournment sought until February 2025 – Where leave to amend application refused Legislation: Family Law Act 1975 (Cth) s 79
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 r 2.50
Cases cited: Aon Risk Services v Australian National University (2009) 239 CLR 175 Division: Division 1 First Instance Number of paragraphs: 39 Date of hearing: 19 December 2023 Place: Sydney Counsel for the Applicant: Mr Harper Solicitor for the Applicant: Uther Webster & Evans Counsel for the Respondent: Mr Othen Solicitor for the Respondent: Newnhams Solicitors ORDERS
SYC 5998 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS GIACOBETTI
Applicant
AND: MR GIACOBETTI
Respondent
ORDER MADE BY:
CURRAN J
DATE OF ORDER:
20 DECEMBER 2023
THE COURT ORDERS THAT:
1.The Oral Application to amend the final application is refused.
2.The Application filed in court to amend the final application to seek that orders in respect of B Pty Ltd be adjourned pursuant to section 79(5) and 79(6) is refused.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Giacobetti & Giacobetti has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE
REASONS FOR JUDGMENTCURRAN J:
These reasons for judgment were delivered orally and have been corrected from the transcript.
ORAL APPLICATION FOR LEAVE TO FILE A FURTHER AMENDED APPLICATION
On the third day of the final hearing, counsel for the wife made an oral application for leave to amend her application to include an order to adjourn the determination of the issue of the treatment of the shares in B Pty Ltd to 2025 or later pursuant to ss 79(5) and (6) of the Family Law Act 1975 (Cth) (“the Act”).
This occurred after I had raised with the parties the possibility of considering a s 79(5) application after the conclusion of the single expert, Ms D’s evidence. On one view, there is now a lacuna as to the value of the interest in the shares which the wife contends are worth up to $10 million and the husband contends have, in effect, no value after consideration of an associated debt pursuant to a security deed of $461,677.
I refused leave to make an oral application and directed that the precise orders sought should be articulated in writing for clarity, both for the Court and for the husband to understand the particulars. The applicant sought until 2.00pm to do such and the time was granted in circumstances where the parties were also seeking to compile tender bundles relied upon at the end of the evidence and prior to submissions commencing.
The orders sought became Exhibit 21, as I understand it there is no objection to the variation except proposed orders 11 to 15 which relate to ss 79(5) and (6) being applied. The basis of the application is a concern, as the wife’s counsel put it that “the court cannot do justice between the parties without knowing the value of the shares”. I infer that she says an adjournment is necessary for certain things to occur which will assist in ascertaining the value of those shares.
As indicated to counsel after the evidence of Ms D, I was concerned about the findings open to me as to the value of the shares based on the state of the evidence in that respect.
The husband opposes the application for leave to amend. The gravamen of the objection is that the husband, by way of his counsel, says that he cannot meet the amendment that was proposed yesterday. He says that he is prejudiced and should not be required to deal with the matter on the run and if leave were granted that he would need time to consider the evidence to be filed in response, possibly including evidence in respect of the arrangements of the ongoing capital funding for the venture and the evidence as to the security deed being extended or not. He contended that the wife has been on notice of the issue and the previous adjournment was granted for the purpose of addressing the late disclosure by the husband and to update the valuation.
Rule 2.50 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (“the Rules”) prescribes the time in which to file any Amended Application and that leave is required after the time has passed. An application is required to set out, with some particularity, the orders that are sought. The clear and obvious intention of the Rules and orders by way of case management is to ensure that, consistent with principles of natural justice, parties have appropriate notice of the case they are required to meet.
The High Court has said, on a number of occasions, that this Court as the superior court of record is obliged to afford procedural fairness to all parties. This Court does not operate on the basis of formal pleadings, but in the absence of established urgency, any litigant before this Court is entitled to receive fair and appropriate notice of the matters to be agitated before it.
The application for leave to amend the application was made and in support the wife relied upon the tender of three documents being: a deed of acknowledgement of debt; specific security deed; and deed of variation, such deeds becoming Exhibit 22.
The background to this point is not contentious that the husband signed share transfers and failed to disclose the transferring of shares in September, October, and November 2022 through brokers, until he disclosed those in August 2023. The earlier hearing date was accordingly vacated – primarily for the purposes of obtaining the updated valuation from Ms D following the discovery by the wife of the husband’s dealings with the shares.
That updated valuation was received on Monday 11 December 2023 and the trial began Friday 15 December 2023.
Ms D gave evidence on 18 December 2023 and her evidence, in essence, identified a raft of reasons as to why it was difficult to value the company, ultimately causing her to prepare a limited scope valuation. She had prepared an affidavit dated 15 December 2023 which annexed her report dated 11 December 2023 and her earlier report of 19 July 2022.
Ms D valued the company on a net asset basis, on a basis which had regard to the taxation consequences arising from the R&D concessions, on a basis which had regard to expense on research and on an implied value-based sale of shares, noting the shares are not publicly traded, but on one view akin to a recent share trading history valuation.
The husband’s evidence, which is not in dispute, is that he understood that B Pty Ltd was in real danger of becoming insolvent and it was necessary to transfer 250,000 shares each to keep B Pty Ltd going. He did so contrary to a restraint made by this Court. He did not know who they were sold to or any other details of the purchasers other than the sales were made through a broker.
It is not contentious that the various investment capital attempts that have been made have been unsuccessful to date and the husband’s contention is the business has singularly failed to attract new investors.
The husband’s contention is effectively that the failure of the company to persuade an investor to put in the necessary capital to take the product to the next stage or level is important and, in the husband’s case, indicative of the lower value he contends should be applied to the shares.
One of the directors of B Pty Ltd sent a shareholder email in May 2023 with information that there was significant interest from seven wholesaler investors of $20-$25 million but no further evidence of this capital investment opportunity is before the Court. Other factors relied upon by the wife in seeking an adjournment of this issue included the current trial of the product at K Organisation and the recent applications for approvals internationally.
Ms D’s evidence was that she is not a product expert and therefore not in a position to opine for example as to the future value arising from intellectual property, patents, registrations and the like.
Ms D’s evidence was that one of the impediments on her capacity to determine the value was she was unable to determine who the transfers were to because the company has redacted the details of the relevant entities or people. The husband, who is a director of that company. has given no evidence other than he knows they were transferred through a broker.
I do not propose to detail all of the matters of uncertainty identified in Ms D’s report in these reasons. Counsel for the husband contends that the value of the company is able to be ascertained from the report. Counsel for the wife contends that it cannot. I have not yet had the benefit of their submissions in relation to this final aspect.
The husband’s evidence was that he had limited information about the financial aspects of the company and the only information about recent share sales was that they were transferred through the broker. He is a company director.
The only evidence from the lawyers for L Holdings, M Lawyers, is contained in Exhibit 18 and that is as at 30 October 2023, and again on 13 November 2023, they neither consent nor oppose the transfer of the shares and reserve their position with respect to other aspects.
The Rules provide that an application may be made to amend with leave.
Counsel for the wife acknowledged that he needed leave to amend his application at the hearing at the late stage. Indeed, in making the oral application he noted it would not be well received.
This application is a matter of discretion. Guidance in respect of the exercise of discretion in relation to the application for leave to amend is found in the oft cited decision of Aon Risk Services v Australian National University (2009) 239 CLR 175 (“Aon Risk”). The central questions as to whether to grant or refuse an application to amend, or to amend particulars thereof, would result in an injustice and in particular, in this case I must consider the:
(a)Explanation for the delay;
(b)Prejudice to the respondent and other court users;
(c)Whether the proposed application has merit; and
(d)Whether the prejudice may be able to be compensated by an order for costs.
Explanation for the delay
The explanation for the delay, which I accept, is the late receipt of the report following the late disclosure by the husband of his dealings with the shares, coupled with the state of the evidence at the conclusion of the Ms D’s evidence – leaves possibly unanswered questions in relation to value of the shares. It was myself who raised the question of a possible adjournment with the parties after Ms D’s evidence had been concluded. Those factors are in my view a satisfactory explanation for the delay in making the application and this weighs in favour of leave being granted.
Prejudice to the respondent and other court users.
I accept the submissions made by Mr Othen as to the requirement of the Court to administer justice in an efficient and cost-effective way, without undue delay, and in accordance with the overarching purpose. The passages he cited from Aon Risk are well cited in this Court where delay has unfortunately been a significant feature. They were conceded properly as weighty and appropriate considerations by Mr Harper. The respondent and other court users are entitled to expect that their litigation should come to an end in a timely way and the court is entitled to expect that the parties and their lawyers will comply with all of their obligations to ensure that this is so.
A further prejudice alleged to arise for the husband is the impact on his mental and physical health, and on his earning capacity as detailed by his medical witnesses in respect of the ongoing litigation. I am persuaded that in this case the strain of the proceedings as referred to in Aon Risk (at paragraph 100) is a relevant consideration. I note in particular the evidence of the husband’s treating psychologist and psychiatrist of the detrimental impact of ongoing litigation on him. The ongoing financial implications, including the ongoing obligation to pay spouse maintenance are also, in my view, relevant.
A just and equitable outcome cannot be secondary to the considerations articulated in Aon Risk and cannot be secondary to the overarching purpose. There is, however, a need to balance all of the factors which in this case, I must say, are very finely balanced. I accept, however, there is evidence of real prejudice to the husband by a further delay which weighs against leave being granted.
The merit of the application
In considering the merit of the proposed orders sought, taking the evidence at its highest, I have to be satisfied pursuant to s 79(5)(a) that there is likely to be a significant change in the financial circumstances of the parties to the marriage or either of them, and I have to have regard to the time when that change is likely to take place.
The wife relied on the specific security deed (Exhibit 22) which set out the relevant date for the payment due under clause 6.1, that unless the parties agree otherwise payment is to be made on demand and at the latest 31 March 2025.
In addition, the wife relied on factors as I referred to such that the K Organisation's trial is now in progress, and that there are some overseas approvals that have occurred and others that are pending. Those are matters to which I have regard.
However, as submitted by the counsel for the husband, the evidence is that attempts to raise capital to date have failed and there is no evidence before me of a likelihood or timeframe for the capital that is sought to be secured.
I cannot be satisfied on the balance of probabilities, on the evidence to which I was taken, that there is likely to be a significant change. Significantly, there was no evidence at all as to the time that any change is likely to take place. The only evidence as to time frame is that referred to in the deed, that is that in March 2025 the liability may be called upon or by agreement renegotiated. This, in my view, does not go so far as to establish a likely timeframe that the assets of the parties are likely to change as required by s 79(5).
I concluded it is likely, if the applicant was given leave to amend her orders sought to include orders under ss 79(5) and 79(6), that the time allocated for the trial would be inadequate and the matter would proceed part-heard to address the late application, and it would require further time next year as well as time in 2025 to determine the matter.
Whilst it might be suggested that the husband could be compensated by way of an order for costs, the husband is also eager to have the matter resolved as it’s being going on for some years now, and there are health considerations and the other matters to which I have referred which must be considered that, on balance, in my view, do not favour leave being granted.
In addition, I note the stretched judicial resources, and I am mindful that providing a further hearing date for these applications would likely displace and delay other litigants who seek to have their cases heard. This is also an important and relevant factor.
For these reasons, the application for leave to file the Amended Application so far as it seeks orders pursuant to s 79(5) and s 79(6) is dismissed.
I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Ex Tempore Reasons for Judgment of the Honourable Justice Curran. Associate:
Dated: 20 December 2023
3
1
2