Gissing and Sheffield

[2015] FamCA 15

FAMILY COURT OF AUSTRALIA

GISSING & SHEFFIELD [2015] FamCA 15

FAMILY LAW – PROPERTY – Interim property division – discovery – sale of assets.

Family Law Act 1975 (Cth)

Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578
Stanford v Stanford (2012) FLC 93-518
Strahan and Strahan (interim property orders) (2011) FLC 93-466

APPLICANT: Mr Gissing

RESPONDENT: Ms Sheffield

FILE NUMBER: MLC 2548 of 2012

DATE DELIVERED: 23 January 2015

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 13 January 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Dr Ingleby

SOLICITOR FOR THE APPLICANT: Mathews Family Law

COUNSEL FOR THE RESPONDENT: Mr Salamanca

SOLICITOR FOR THE RESPONDENT: Carew Counsel Solicitors

Orders

1. That forthwith, the applicant and the respondent do all things necessary to release to the applicant and his solicitors, the sum of $600,000 (being $500,000 towards the acquisition of a property and $100,000 to be provided to the solicitors for the applicant by way of costs for the legal proceedings) and that such sum be deemed to be an alteration of property interests pursuant to Part VIIIAB of the Family Law Act 1975 (Cth) (“the Act”).

2. That forthwith the applicant and the respondent do all things required to release to the respondent $200,000 to be applied for her legal expenses associated with the forthcoming trial and that such sum be deemed to be an alteration of property interests pursuant to Part VIIIAB of the Act.

3. That by arrangement, the Applicant and the case guardian arrange delivery of all items in storage for sale to:

   (a)       Shannons – all car related items;

   (b)       A specialist bike retailer – all bike parts and bicycles; and

   (c)       Leonard Joel – the balance

4. That the sales be conducted as soon as practicable by auction and each party be at liberty to bid upon any item at auction.

5. That any items deemed unsaleable by the auctioneer be divided between the parties by agreement or disposed of.

6. That within 30 days of the date of these orders, the Applicant provide to the Respondent’s Solicitors copies of the following documents:

   (a)The Applicant’s personal taxation returns and assessments for years ending 30 June 2005 to current date.

   (b)Copy of all bank account statements (including credit card statements and mortgage statements) for period 1 January 2006 to current date, for all accounts held in the Applicant’s name either solely, or jointly with another person or entity, and/or held on trust for the Applicant.

   (c)Current superannuation statements for all superannuation entitlements held by the Applicant.

   (d)       For the Applicant’s business BB Business:

   (i)Financial statements (including balance sheets, profit and loss accounts, depreciation schedules and taxation returns) for the period 1 January 2009 to current date.

   (ii)Any business activity statements for the period 1 January 2009 to current date.

   (iii)Details of all stock, plant and equipment held as at current date and as at 1 January 2010

   (iv)Documents outlining all earnings, including income that is paid or assigned to another party, person or legal entity, by or on behalf of the Applicant.

   (e)In relation to the business “S Business” all bank statements, cheque butts, pay-in books and all records and purchases of sale from the commencement to current date.

   (f)Documents outlining any vested or contingent interest in any property held by the Applicant, on his behalf or by a legal entity fully or partially owned or controlled by or on behalf of the Applicant.

   (g)Statements for all PayPal accounts held in the Applicant’s name either solely, or jointly with another person or entity, and/or held on trust for the Applicant, for the period 1 January 2006 to date.

   (h)Complete stock sheets for all stock, plant and equipment in the applicant’s possession and/or control relating to the business “S Business”, including but not limited to:

   (i)The radio collection and watch collection

   (ii)Stock held at CC Street, Suburb R

   (iii)Stock arrangements and consignments brokered by the applicant

   (iv)Stock stored at the applicant’s mothers home or on behalf of the applicant by any third party or entity.

   (v)Stock held by the applicant at  all National Storage Units

   (vi)Parts of the Chevrolet motor vehicle that the applicant dismantled and stored at the Suburb R Warehouse and three additional locations, as deposed by the applicant

   (i)A complete list and supporting documents of all property disposed of by the applicant or an entity controlled by the applicant (whether by sale, auction, transfer, assignment or gift):

   (i)In the 12 months immediately before the deemed date of separation of the parties; and/or

   (ii)Since the deemed date of final separation of the parties; and/or

   (iii)To meet the costs of the applicant’s legal costs as deposed at paragraph 59 of his Financial Statement filed 22 March 2012 and 24 January 2014.

   (j)Copy loan application with Company DD and/or any other broker or financial institution, and supporting financial documents in relation to the refinance of the mortgages encumbering the Property H properties or the purchase of any other property by or on behalf of the Applicant.

   (k)Copy Centrelink notices and correspondence in relation to the applicant’s benefits and entitlements form 1 January 2009 to current date.

   (l)Evidence of all monies advanced by the applicant’s mother to the applicant and all loan documentation between the applicant and his mother, from the commencement of the deemed relationship until current date.

   (m)Evidence of all monies and or benefits advanced to the applicant’s mother from the business S Business, from the deemed commencement of the business until closure.

   (n)All financial and other records that support the matters deposed to by the applicant in his Financial Statements and affidavit filed in these proceedings.

7. That the respondent be granted leave to issue Subpoenas to the applicant’s broker, accountant, Solicitors and financial institutions in the event of the applicant’s non-compliance with order 6 above.

8. That save as to issues of costs, the application in a case and the response thereto be otherwise dismissed.

9. That should any party seek costs arising out of these orders, such application be made by written submission and filed and served by no later than 23 February 2015 with such submission being endorsed with the fact that it has been so served on the other party and any recipient of such submission have until 9 March 2015 to file and serve any response and such response be endorsed with the fact that it has been so served on the other party and upon receipt of any such application for costs, it or they be determined in chambers.

10. ALL APPLICATIONS ARE ADJOURNED AND FIXED FOR FINAL HEARING before the Honourable Justice Cronin as the 7th case in the monthly list commencing on 29 June 2015 not to be called before 10 am on 23 July 2015 as a three day matter.

11. The evidence in chief of all witnesses shall be given by affidavit.

    TIMETABLE:

12. By 4 pm on 27 March 2015 the applicant file and serve upon all other parties:

    (a)       an amended application setting out with precision the orders to be sought;

    (b)       all affidavits of evidence to be relied upon; and

    (c)       a financial statement.

13. The applicant pay all required court fees by 4 pm on 27 March 2015.

14. By 4 pm on 24 April 2015 the respondent file and serve upon all other parties:

    (a)       an amended response setting out with precision the orders to be sought;

    (b)       all affidavits of evidence to be relied upon; and

    (c)       a financial statement.

15. By 4 pm on 8 May 2015 the applicant file and serve any affidavit in reply.

16. Without leave of the Court, any affidavit filed beyond the timetable set out in these orders may not be relied upon.

    SUBPOENAE

17. All parties have leave to issue subpoenae for the production of documents. If a party is represented by a legal practitioner, the registrar shall, upon the certification of the legal practitioner, be satisfied as to relevance.

    CASE MANAGEMENT

18. The registrar may vary the filing timetable under these orders and in the absence of Justice Cronin, any application for interlocutory orders otherwise or for the making of final orders by consent, be on application to the case management judge.

19. If a party fails to comply with these orders, a party who has complied may file an application in a case supported by an affidavit seeking to proceed on an undefended basis.

20. Any rulings required on objections to evidence shall be set out in the case outline.

21. By 4 pm on 20 July 2015 all parties file electronically to … a case outline in one document setting out:

    (a)       a concise set of orders to be sought;

    (b)       the list of the affidavits to be read;

    (c)       the list of objections to evidence requiring a ruling;

    (d)       the outline of the issues in dispute; and

    (e)       a list of assets and liabilities.

    COSTS

22. At the commencement of the hearing, each party shall provide the court with a statement setting out their costs incurred to that date, the source of any payments made and what costs are expected until the completion of the hearing.

    AND THE PARTIES SHOULD NOTE:

    A.Upon non-compliance with the timetable under these orders or any amendments made by the registrar, the Court may relist the case for case management purposes requiring the parties to justify why it should not be removed from the trial list.

    B.Affidavits relied upon for previous hearings cannot be relied upon as evidence in chief without leave of the Court.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Gissing & Sheffield 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 MELBOURNE

FILE NUMBER: MLC 2548 of 2012

Mr Gissing

Applicant

And

Ms Sheffield

Respondent

REASONS FOR JUDGMENT

1. Mr Gissing (“the husband”) seeks an alteration of the interests of Ms Sheffield (“the respondent”) in property registered in her name.  He does so under Part VIIIAB of the Family Law Act 1975 (Cth) (“the Act”) and specifically s 90SM.

2. In this interim application, opposed by the respondent, the applicant seeks an interim payment from a trust fund in the name of the respondent as part of a settlement.  He seeks $600,000 together with a further payment of $100,000 to be allocated specifically to his anticipated legal expenses for the forthcoming dispute.

3. The respondent’s opposition relates only to the $600,000.  She says there should be no payment because, at this time, with a number of issues still controversially unclear, no order should be made.  However, she agrees that the applicant should have the $100,000 payment because at the same time, she seeks a payment of $200,000 herself for the same purpose.

4. In addition to this financial dispute, the parties also did not agree on discovery and inspection orders and also have a dispute about the return of chattels.

5. In my view, orders should be made but not to the extent sought by the applicant.

6. One thing which is no longer controversial is the fact that the jurisdiction of the Court is enlivened.  It would seem that there was (in the Federal Circuit Court) a dispute about whether there was a de facto relationship.  It was the respondent’s position that she and the applicant were in a business relationship.  That issue was put to rest and is now a matter of public record because Judge O’Sullivan in that court, published reasons.  My attention was drawn to the following paragraphs which contextually, have relevance here.  His Honour said:

   When all of the considerations discussed above are taken into account I am persuaded that the parties were in a relationship that could be described as a de facto relationship for the purposes of the Act.

   The “considerations” to which his Honour referred may be encapsulated in some but not all of his Honour’s findings.  He said:

   197.However I am satisfied that there is evidence that supports the existence of a de facto relationship including:

   •the mutual involvement in the business/es and the length of their association; and

   •that they carried on a mutual enterprise of sharing income from the shops, markets and shared payment of expenses for their mutual support and in relation to their homes; and

   •that the parties were conducting a joint bank accounts and inter-mingling of their finances; and

   •the interdependence between the parties and the almost complete reliance by the respondent on the applicant for financial and other advice and administration; and

   •         the perception of other persons; and

   •the common residence/s of the parties for significant periods of time; and

   •that on balance the evidence indicates that the parties had so merged their lives that they were for all practical purposes living together as a couple on a genuine domestic basis.

7. His Honour also said at para 165:

   …The majority of the parties money was transacted through the parties joint account and the parties treated those monies as their joint monies. The overwhelming bulk of what the parties worked together for, saved and spent, came from their joint account/s.

   and at para 167 and 168:

   …It is true that the properties purchased during the relationship were registered in the respondent’s name but the applicant gave a viable explanation for this occurring and funds to purchase many of these were secured over or gained on the basis of jointly owned property which the respondent albeit grudgingly acknowledged.

   168.The parties business continued throughout the period of the relationship and despite changes during that time to living arrangements the evidence revealed the parties’ financial dependence and interdependence was largely unaffected. In relation to this consideration the evidence does point in favour of the existence of a de facto relationship given the overwhelming manifestation of the incidents of “coupledom” on the evidence before the Court.

8. Before me, the respondent’s position was that she was critical of the applicant’s financial management but that issue seems to have been at least contemplated by Judge O’Sullivan.  His Honour said:

   83.In the context of the applicant’s claims, the respondent reluctantly acknowledged she couldn’t dispute the applicant’s claim that the proceeds from the sale of [Property E] went into the joint account or that proceeds from the business were used to purchase [Property M] and in turn, the property at [Property H]. 

9. The findings of Judge O’Sullivan assist me on the disputed issue of the applicant’s contribution and the respondent’s vague position to which I shall refer below.  Subsequent to the Federal Circuit Court determination, the proceedings were transferred to this Court.

10. In February 2014, the applicant brought an application for financial relief which was listed before Johns J.  On 6 February 2014, where both parties had the benefit of counsel, her Honour was asked to make orders with their consent.  Despite an inference I thought the respondent’s counsel wished me to draw that the applicant had sought orders and failed in his bid for that relief, the orders drawn by the parties dealt only with discovery, inspection and similar matters.  No orders were made for property division.  Even if the application had been made and failed, I am dealing with the matter on the basis of the evidence before me.  Whatever was in the parties’ applications in February 2014, the Court otherwise dismissed them at the parties’ request.

11. To add to the complexity, in November 2013, presumably based on mental health issues, a case guardian was appointed for the respondent.  The case guardian swore an affidavit to which I turn below.

12. Thus, having regard to the concession by counsel that the applicant could have $100,000 towards legal fees, the issue here is really about quantum.  The jurisdiction has been enlivened and it is then a matter for the Court as to what is the appropriate exercise of the power.  If there is a justification for a payment of $100,000, even if it is simply for the purposes of funding legal costs, it is hard to see how the respondent can claim that no other order should be made.

13. The authorities that guide the determination are Stanford v Stanford (2012) FLC 93-518 and Strahan and Strahan (interim property orders) (2011) FLC 93-466. Both counsel agreed they were the relevant authorities.

14. In Strahan, Boland and O’Ryan JJ recognised (as did counsel for the respondent in this case), that the need for a party to seek funds to enable the payment of legal costs to enable participation in proceedings had been recognised for many years.  That was particularly so in situations where one party controlled almost exclusively, the bulk of the assets and funds and an order enabled the party to present a case.  There is clearly a distinction between the Court making an order for the participation in the proceedings and one which provides them with money which is effectively theirs.  However, it would be anathema if someone could pursue an unjustifiable claim for relief in the sense of it having no basis in law using funds provided from the same pot of assets.  That is not the case here having regard to the matters to which I shall turn. 

15. Boland and O’Ryan JJ went on to say that another source of jurisdiction was s 117(2) of the Act where the Court could make such order as it considered just, provided there were justifying circumstances. That too has to be seen in the context of the remarks that I have just made about justifiable relief. Their Honours then said that in respect of an interim property order, the requirements of the Act (in that case s 79(2) and (4)) had to be observed, if it appeared that the applicant would likely receive by way of property settlement, a sum sufficient to cover the advance. That was a view expressed by Brereton J in Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578. That reinforces the point that whether it is an application founded on s 117 or s 80, the Court has to be satisfied that it is likely that there will be relief provided in the long run.

16. Boland and O’Ryan JJ then referred to s 79(2) with reference to the fact that the Court should not make an order unless it is satisfied that in all the circumstances, it is just and equitable to make it. That was the position reinforced by the High Court in Stanford.

17. The Full Court in Strahan made clear that there was only one exercise of power under s 79 of the Act and that it was preferable that there be one final hearing of s 79 proceedings. The Court then went on to say:

    115.It was submitted by senior counsel for the Wife that it is important to recognise that in relation to an application under s 79 and s 80(1)(h) of the Act there are two distinct aspects of an application. The first consideration is the adjectival or procedural step and the second consideration is the substantive step. The first step requires consideration as to whether the jurisdiction will be entertained. The second step arises if the jurisdiction is entertained and requires consideration of the factors which are relevant to the exercise of power under s 79 to make an order.

18. The submission of senior counsel in Strahan was accepted by the Full Court.  Thackray J delivered a separate judgment and did not disagree with the other members of the Court.  His Honour said:

    225.These sorts of considerations provide a strong basis upon which the Court should maintain its traditional stance that there should ordinarily be only one hearing of disputes concerning alteration of property issues.  I accept the submission of senior counsel for the wife that something out of the usual course would need to be established before the Court could be expected to devote its resources to resolution of disputes about interim alteration of property interests.  However, once the Court has determined that it is appropriate to embark upon the hearing of an interim dispute, it has no alternative other than to exercise (or decline to exercise) the power to make an interim order by application of the relevant provisions of the legislation. 

    226.In my view, the two step approach advocated by senior counsel for the Wife aptly encapsulates the way the Court should approach an application for interim property settlement. The Court must first identify circumstances that make it appropriate to give consideration to exercising its power to make an interim order. It is at this stage that the Court has regard to the policy consideration that it is generally in the interest of the parties and the Court for there to be only one exercise of the s 79 power. However, once the Court has determined that the interests of justice require it to exercise the power, the conditions on which the power is to be exercised are governed only by the obligation to make an order that is “appropriate” and to ensure that the proposed order is “just and equitable” by reference to the matters set out in s 79(4).

1. As Thackray J said, ordinarily there should only be one hearing and that something out of the usual course needed to be established before the Court could be expected to devote its resources to that sort of application.  Two obvious reasons why the power should be exercised are that there is a vast gulf between the financial positions of the two parties of the type earlier mentioned under which one party has the control of all of the resources but secondly, it is clear that those assets will ultimately be divided.  The money (or some of it) held by one party therefore clearly belongs to the other.  The second reason is where the Court has the resources and that in many ways, depends upon the hearing being truncated, determined on the papers and considering submissions.  There must be evidence which is specifically directed to the issues raised by the Full Court in Strahan.  Having regard to the evidence that I have heard and the submissions put, this is one of those cases. 

2. It is further obvious that I am satisfied that although both Strahan and Stanford related to a marriage, the differences between the relevant legislative provisions concerning marriages and de facto relationships are indistinguishable.  In my view, the principles are the same for both.

3. For the reasons that follow, I am satisfied that it is appropriate to exercise the jurisdiction.  That is because the respondent agreed that there was a justification for a payment from the trust funds and I am entitled to conclude that that would not have been a concession unless the respondent accepted that the applicant was ultimately going to receive some form of relief.  Why else would costs be expended on a fruitless exercise?  In respect of the second of the two steps, further I am satisfied that it is just and equitable to make an order for a sum because of the financial imbalance but also because it is clear that the respondent has control of the applicant’s property.  The respondent was not heard to say that the applicant was not entitled to anything in the substantive proceedings but rather that there should not be an order made now. 

4. That the applicant should succeed now must be the case having regard to the evidence which in my view, provides a prima facie case and satisfies the various aspects of s 90SM(4) for the purposes of relief.

5. The respondent could not deny an entitlement by the applicant.  The initiating proceedings of both parties sometimes called the pleadings, were vague.  Notwithstanding these proceedings had commenced in 2012, neither party had set the parameters of the financial dispute.  Each had been vague as to what they were seeking and what the other party was entitled to.  The rules of the Court require parties to plead with particularity.  An exception to the rule is where there is uncertainty as to the nature of the financial position of the parties.  That could not be the case here even if there was a dispute over values because the property is known. 

6. In respect of each party, I required counsel to tell me what position would be adopted at the final hearing.  Dr Ingleby of counsel for the applicant indicated that if he was counsel for the applicant, he would be seeking a division of 50 per cent of the known assets.  Mr Salamanca of counsel for the respondent indicated that possibly the applicant would receive 25 per cent.  It is clear that this is not a precise science and many minds will see the position differently.  However the starting point is that both parties have acknowledged that it would be just and equitable for the Court to make an order.  The question therefore is what is the proper quantum of the order based upon the relevant provisions of Part VIIIAB.  To a very large degree therefore, if the Court can rely upon the subjective judgments of the counsel who had no doubt brought a fresh mind to the proceedings, the parameter of the dispute was the entitlement of the applicant to somewhere between 25 per cent and 50 per cent of the equity in the assets.

7. There is clearly an argument in this case about just what is to be divided.  Two major concerns raised by the respondent need consideration.  The first is that of the significant amount of cash held in trust there will undoubtedly be an obligation to pay capital gains tax.  There was no evidence about that save for the imprecise guess of counsel who said that based upon certain known facts, it could be said that it would be likely to be somewhere in the vicinity of $300,000.  The second fact concerned an assertion by the respondent (albeit vague) that a claim by the applicant that his mother had lent him $350,000 for the purposes of the legal proceedings and presumably living expenses, was money provided to her during the relationship from the parties’ business.  That assertion is undoubtedly without any factual foundation at least at this stage.  The case guardian’s affidavit contained a clause in which he asserted that belief but he did not indicate any foundation for it.  Even if the respondent told him of those facts, she in turn, would have had to have established the basis of her belief.  In final submission, counsel for the respondent said that the respondent alleged that the applicant “pilfered” funds over time and that explained how the applicant’s mother could provide him with funds.  There was no foundation for that submission because it did not match the assertion in the case guardian’s affidavit and as I have indicated, there was no factual foundation for it. 

8. Accordingly, when I determine what there is to be divided, I propose to ignore the second of the two problems and work on the best evidence basis in respect of the first.

9. The application was filed on 5 December 2014.  I have already set out what orders it sought and I shall return to the ancillary issues below.

10. Supporting that application, the applicant said that both he and the respondent worked full-time during the relationship which was extant for 15 years.  That is now not a controversial period because of the finding of Judge O’Sullivan.  The applicant said he was currently unemployed but did not receive Centrelink payments.  He said he resided with his mother who supported him.

11. The applicant pointed to the fact that the respondent continued to operate a business and was receiving income to the extent of $69,000 or thereabouts from the commercial premises in South Australia.  Those premises are a subject of the proceedings.

12. Each of the parties set out what they said each had at the commencement of the relationship.  Each worked on approximate values of assets.  For the purposes of this exercise, albeit an interim hearing, it is not appropriate for the Court to simply accept estimates from people who are unqualified.  Neither the applicant nor the respondent has any experience in values and neither was in a position to say how their estimates were derived.  In those circumstances, I propose to simply work on the basis that there is an argument about the initial contribution and its extent can be sorted out at trial.  On the evidence I have, it is not a significant dispute because of the length of the relationship.

13. The applicant went on to say that he was instrumental in managing the acquisition of real estate and motor vehicles on behalf of both he and the respondent and he supervised the running of various businesses.  That is disputed by the respondent but I am cautious about accepting what the case guardian says because he undoubtedly relies upon information provided to him by the respondent.  After reading the reasons for judgment of Judge O’Sullivan, it is clear that his Honour took a fairly dim view of some of the respondent’s evidence.

14. What is clear in this case is that the property is all owned (legally) by the respondent.  Arising out of that, she has retained all of the income not only from the rented premises but also from the business that she is conducting.

15. In respect of the current business of the respondent, the applicant pointed to the fact that it was conducted from rented premises and according to her tax returns, no profits were being made.  No doubt that is all a matter that can be subject to discovery. 

16. What was controversial in the proceedings was the apparently large collection of stock which is in various places for storage purposes.  These are the items that are apparently still to be sold or have been sold in the past by the parties.  Dr Ingleby of counsel for the applicant described it as “junk”.  Mr Salamanca of counsel for the respondent described it as “object d’art”.  The orders made in 2014 required the sale of these items that were not wanted.  That now seems to be the agreed position again subject to a dispute about each of the applicant and the respondent keeping that which they want at the value ascribed to the items.  The difference between the parties seems to be how to work out that value.  Rather than go through the exercise of having a valuer undertake an inventory and try and work out a market price, I think the applicant’s suggestion of everything going to sale and the parties being able to bid to determine the value is a much more just and equitable way of sorting out the divisions.  Mr Salamanca thought that the value of the objects d’art could be as much as $300,000.  The vagueness of the whole concept and the fact that almost a year has gone by without the implementation of the orders is a good reason to sell it all now.

17. The parties disagreed on whether or not the items should go to one valuer or specialists in the areas of the particular items.  In my view the respondent’s position is a more sensible one and I propose to make an order along those lines.

18. Because of the controversy about the value of the objects d’art/junk, it is difficult for me to ascertain just exactly what I should include in the assets of the parties in relation to that.  I propose to ignore it for the purposes of this interim division.

19. On the subject of objects d’art, it is also important to observe that the respondent has an argument that at the commencement of the relationship, she had significant items and that ultimately these culminated in the assets that the parties are now dividing.  This is the “seed capital” argument.  I bear in mind however that it was 15 years ago.  I also bear in mind in the determination I am about to make that Mr Salamanca of counsel, in estimating what he thought the respondent would open her case on, had taken into account that seed capital argument.

20. The respondent’s position as set out in the affidavit of the case guardian, indicates that much of what he relied upon had been provided to him by the respondent.  I found it somewhat disconcerting that Judge O’Sullivan made reference to the case guardian in his reasons as having had a relationship with the respondent in earlier years.  I have not taken that into account bearing in mind the applicant has not raised any question about the objectivity of the case guardian.

21. The respondent observed that there is a vast difference between the two positions of the parties.  The respondent is 67 years of age and not in good health.  That good health was described as a diagnosis of adjustment disorder and major depressive disorder.  He said that the respondent was dependent upon the business that she now conducts and the rental she receives from the premises.  I note that she has been receiving that rental for a number of years now.  No doubt that can be taken into account in the just and equitable division.

22. The case guardian observed that the applicant’s financial position was unclear.  He had not produced his tax returns, personal bank account records or business records.  These business records relate to a business that he had conducted and about which little detail was known.  It is not appropriate for either party to approach a case relating to financial matters without making full and frank disclosure.  Not only do the rules make that clear but the authorities have said it for many years now.  In this case, I found it quite perplexing that having not only been to court over the de facto relationship issue, a further 12 or 18 months has gone by as the parties head for a final hearing and there are still disputes about discovery.  That is not appropriate.  I also expressed in the same vein, alarm at the fact that each of the parties has spent huge sums of money in a pool of assets that can only be described as somewhere around the $2 million mark.  Each of the parties is now expected to spend at least a further $100,000 to trial.  Therefore, in the case of the applicant, he will have spent something in the vicinity of $350,000 in legal fees by the time this trial ends and so too the respondent.  In circumstances where the case guardian complained that the respondent was 67 years of age and in poor health and struggling, it is hard to image why that amount of money is necessarily so spent.  It is more so in circumstances where the parameters of the dispute, if counsels’ estimates are correct, are now much clearer.

23. In the case guardian’s affidavit, he set out estimates and did not provide any basis for those values.  He does not have any qualifications as I understand it in respect of valuations nor does he have any expertise.  To the extent that he had any such ability, it was not so said. 

24. The case guardian went on to refer to values of property that the respondent had in 1994 and 1995 and then into 1996 but all of those matters are matters about which I cannot make any determination and are matters for trial.

25. At paragraph 15 of the case guardian’s affidavit, he confirmed that the applicant and the respondent entered into a “business partnership” and established two businesses.  The investment of those monies may very well have been different but they certainly entered into a partnership on the basis of equality.  If it was otherwise, presumably the case guardian would have said so.  The case guardian acknowledged that the applicant was responsible for the bookkeeping, banking and stock purchases.  It is hard therefore to see how the argument of disparity of contribution can arise in this particular case over the period of the 15 year relationship.

26. I have already mentioned the question of the accusation against the applicant of “pilfering”.  The applicant had said:

    The income received from the [EE Business] (which is the commercial premises for which rent is being paid), the [FF Business] and the [GG Business] were pooled and invested in property for our mutual benefit.

    The case guardian responded as follows:

    I deny the matters referred to therein.  I believe that the applicant’s mother received tens of thousands of dollars and stock from the business “S Business” without the respondent’s knowledge or consent.  The applicant removed all financial records in relation to the business “S Business” and has refused to provide copies of these documents by way of discovery.

27. In relation to the discovery issue, there were clearly orders made in February 2014 which have not been fulfilled.  Dr Ingleby said they can now be fulfilled but with the proviso that the documents are to be provided if they are in the applicant’s possession or he provides an explanation as to what has been provided.  Dr Ingleby said that the documents are not held by his client but rather by the respondent.

28. Clearly the two issues in relation to capital gains tax and the “pilfering” are the critical ones to establish what it is that the parties have to provide.  The discovery needs to concentrate on those two issues because the assets are otherwise clearly known.

29. In his affidavit, the applicant said that after separation, the respondent evicted him from one of the investment properties and as a consequence he moved to the home of his mother.  Accordingly, that property was sold.  The case guardian complained that the unit was “filthy and resembled a tip site”.  He pointed to photographs.  All of those matters are of no consequence unless the case guardian on behalf of the respondent produces evidence to show that either he had to spend significant sums of money to put the property into a saleable state or that the agent maintains that it sold for less than it might otherwise have sold but for its condition.  A similar argument was made in respect of the second unit but all of those matters are no doubt issues not only for the subjective judgment of the trial judge but also for evidence.  It is not appropriate that I make a determination particularly bearing in mind that much of the evidence relates to estimates rather than concrete facts. 

30. Thus, much of the evidence particularly of the case guardian was a distraction from the real issue. 

31. In this case it is common ground that the two units have been sold and that there is currently a net sum of $1.42 million in a trust account.  Those sales will be subject to capital gains tax.  Mr Salamanca said it was “possible” that it might be $300,000. 

32. There is little dispute that the commercial premises in South Australia have a significant value.  Whatever the case guardian might have argued it was worth, the respondent herself indicated in July 2013 in a financial statement that it was worth $750,000 and a year later, the case guardian said it was $705,000.  Even on a conservative value, I can therefore presume that it is $705,000.  There is a small mortgage.  There are also two holiday units about which there is little dispute and the value there is $125,000. 

33. On any view of the facts therefore allowing $300,000 for capital gains tax and working on the lower of the two values for the South Australian premises, these parties have approximately $2 million to divide.  The dispute between the parties as I have earlier indicated sets out the parameters of somewhere between 25 per cent and 50 per cent and on that basis, the entitlement of the applicant would have to be somewhere in the vicinity of $500,000.   $100,000 of that sum is already conceded by the respondent.  At the moment, the evidence suggests that the applicant has no assets.

34. One of the issues raised in previous authorities about interim property division is the question of the clawback of property at a final settlement.  That is still part of the Court’s entitlement to consider on the justice and equity issue.  The applicant indicated that he proposed to buy a property.  He set out the property that he wanted and the price that he expected to pay.  As counsel for the applicant observed, that property would then become part of the pool of assets to be divided between the applicant and the respondent because the relevant provision in Part VIIIAB requires the Court to divide the assets of the parties at the particular time of the hearing.  Thus, any order for the use of the trust funds towards real property, has little impact on the assets to be divided and does not create a problem in respect of any “clawback”.

35. In my view, having determined to exercise the jurisdiction for the reasons earlier mentioned, it is just and equitable to make an order that the applicant have at least what is largely conceded by the respondent as his entitlement.  Having regard to the fact that the use of the funds not lost in legal fees, will go into real property, in my view, it is not necessary that I be too concerned about the cautious approach as to what assets the parties do have.  In other words, the capital gains tax issue can be addressed at a later date as can the value of the South Australian property and I take into account that the respondent has had the benefit of the rental of the property in South Australia to the exclusion of the applicant since the period of separation.  As I have indicated, I do not intend to take into account the assertion that money has been taken because there is no evidence of a credible nature.  To the extent that this has arisen some two years after separation, one would have expected much better evidence than that which was provided by the case guardian.

1. In the circumstances, not only should the applicant have the $100,000 anticipated towards his costs but he should also have $500,000 to enable him to establish what he wants to in terms of a property.  Accordingly, I propose to make an order that the sum of $600,000 (rather than $700,000) be paid to the applicant.

2. For the same reasons as set out above, the respondent has property tied up that she wants to use for legal fees.  There can be no doubt even on the applicant’s position that the respondent will receive 50 per cent.  On that basis she should have the $200,000 that she seeks.

3. I have already dealt briefly with the discovery issue.  I propose to make an order that the orders proposed by the respondent be made with the rider that the applicant provide to the respondent’s solicitors copies of the documents set out in the application unless he otherwise provides an affidavit indicating that he has already provided them and if so when, and if he does not have them where they were last in his possession, power or control.  He can have a month to prepare that affidavit.

4. In respect of the stock, it is clear that both parties should have the opportunity to sell.  I agree with the respondent’s position that it should be sold by the three experts referred to in paragraph 5 of the proposed orders of the respondent.  In relation to the question of the inspection, all of those items should not be simply overseen by the case guardian but simply immediately delivered.  Both the case guardian and the applicant need to get together and it would seem that notwithstanding the case guardian’s complaints about the lack of cooperation, the evidence does not necessarily enable me to make a conclusion that the applicant is being recalcitrant in relation to his obligation.  In those circumstances, I will make an order that combines the sale positions of both parties and any funds thereafter can be placed in the trust account of the solicitors for the respondent.

5. I will otherwise make provision for the parties to make submissions in relation to costs to avoid the costs issue looming at trial.

6. The applicant also sought orders for the return of items and the distribution of the income to which I have referred.  I do not propose to make orders in this case bearing in mind that those matters were not significantly argued and are matters that will ultimately be covered by the trial issues.

7. At the request of the parties, I have set the case down for hearing and provided a timetable.  

I certify that the preceding Sixty (60) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 23 January 2015.

Associate: 

Date:  23 January 2015