Harford & Spalding
[2021] FamCA 636
•27 August 2021
FAMILY COURT OF AUSTRALIA
Harford & Spalding [2021] FamCA 636
File number(s): SYC 3026 of 2020 Judgment of: HENDERSON J Date of judgment: 27 August 2021 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – Application for summary dismissal of the husband’s application seeking to set aside consent orders pursuant to section 79A(1) and a Binding Financial Agreement pursuant to section 90K of the Family Law Act 1975 (Cth) – Discussion of principles applying to applications for summary dismissal – Where the husband has an arguable case to set the consent orders aside pursuant to section 79A(1) of the Act and to set aside the BFA under section 90K of the Act on the basis of the wife’s failure to disclose the value of some assets in her possession or misleading the Court – Application for summary dismissal dismissed. Legislation: Family Law Act 1975 (Cth) ss 45A, 79A(1)(a), 79A(1)(b), 90K
Family Law Rules2004 r 10.12
Cases cited: Beck & Beck (2004) FLC 93-181
Bigg v Suzi (1998) FLC 92-799
Ebner & Pappas (2014) FLC 93-619
Gong & Zao [2021] FamCAFC 110
Lindon v The Commonwealth (No. 2) (1996) 136 ALR 251
Lysaght Building Solutions Pty Ltd (t/as Highline Commercial Construction) v Blanalko Pty Ltd (2013) 42 VR 27
Pelerman v Pelerman (2000) FLC 93-037
Ritter & Ritter (2020) FLC 93-957
Spencer v Commonwealth of Australia (2010) 241 CLR 118
Number of paragraphs: 143 Date of hearing: 23 June 2021 Place: Sydney Counsel for the Applicant: Ms Christie SC Solicitor for the Applicant: Newnhams Solicitors Counsel for the Respondent: Mr Friedlander Solicitor for the Respondent: Licardy & Co Solicitors ORDERS
SYC 3026 of 2020 BETWEEN: MS HARFORD
Applicant
AND: MR SPALDING
Respondent
ORDER MADE BY:
HENDERSON J
DATE OF ORDER:
27 AUGUST 2021
THE COURT ORDERS THAT:
1.The wife’s Application in a Case filed 21 January 2021 for summary dismissal of the husband’s Initiating Application filed 27 November 2020 and Amended Initiating Application filed 11 March 2021 is dismissed.
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 Harford & Spalding has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
This is an application by Ms Harford (“the wife”) seeking to summarily dismiss an Initiating Application filed on 27 November 2020 and amended on 11 March 2021 by Mr Spalding (“the husband”) seeking the following orders:
1.That the property Orders made on 29 May 2020…be set aside and/or varied pursuant to section 79A(1)(a) and section 79A(1)(b) and a different order be made/substituted as follows;
2That Order 2 made 29 May 2020 be set aside and in its place an order be substituted [t]hat; “that within 14 days of the making of this order pursuant to section 79A of the Family Law Act 1975, the wife pay to the trust account of the lawyers for the husband the sum of $2,150,000”.
2.That pursuant to section [90K(1)(a)] of the Family Law Act 1975, the Financial Agreement pursuant to section 90C of the Family Law Act 1975 entered into between the parties and dated 28 May 2020 be set aside.
3.That the wife pay to the husband the sum of $1,740 per week by way of spousal maintenance commencing from 1 June 2020 by way of a lump sum payment calculated to the date of this order and weekly thereafter until 31 May 2022.
The material read for the applicant wife is as follows:
(1)Case outline of the wife filed 17 June 2021;
(2)Application in a Case of the wife filed 21 January 2021;
(3)Affidavits of the wife filed 21 January 2021 and 18 May 2021;
(4)Financial Statement of the wife filed 23 December 2020;
(5)Response to Initiating Application of the wife filed 23 December 2020. This is the original Initiating Application and it is an amended application the husband now relies upon;
(6)Consent Orders made by Loughnan J on 29 May 2020, together with the transcript of proceedings before his Honour; and
(7)A copy of the Binding Financial Agreement dated 28 May 2020 and various documents, being letters and annexures and the like.
Although I read the wife’s material, consistent with authority I have not relied on her evidence in my decision save that which the husband relied upon and have only taken into account the evidence he submitted to the Court.
For the respondent husband:
(1)Initiating Application of the husband filed 27 November 2020;
(2)Amended Initiating Application of the husband filed 11 March 2021;
(3)Response to an Application in a Case filed by the husband on 24 February 2021;
(4)Affidavits of the husband filed 24 February 2021 and 22 April 2021 together with annexures;
(5)Financial Statement of the husband filed 16 November 2021;
(6)Written submissions;
(7)The balance sheet tendered to Loughnan J when the orders were made, which appears at page 65 of the wife’s tender bundle, and the conditions of employment letter (“COE letter”) from J Company, undated, concerning the prohibition on on-selling J Company brand products whilst employed by them also in the wife’s tender bundle;
(8)Paragraph 8.4 of the wife’s affidavit of 18 May 2021.
Ms Christie SC represented the applicant wife, and Mr Friedlander of counsel represented the respondent husband.
The husband relied upon his assertions of the wife’s fraud, suppression of evidence and/or failure to give relevant evidence and failure to disclose and submitted that such failures and/or suppression led to a miscarriage of justice within the meaning of section 79A(1)(a) of the Family Law Act 1975 (Cth) (“the Act”).
The husband relied upon similar arguments to those raised in his 79A application in his submission that the Binding Financial Agreement (“BFA”) be set aside for fraud and non- disclosure pursuant to 90K of the Act.
The BFA must be set aside before Order 3 of the husband’s Amended Initiating Application, which seeks a spouse maintenance order, can be made by the Court. The BFA dealt with the parties’ right to seek maintenance from each other. Until that agreement is set aside there is no jurisdiction in the Court to make an order for maintenance.
The husband asserted, in his affidavits, that he had relied upon the following information provided by the wife when entering into the consent orders and signing the BFA:
(1)He accepted the value attributed by the wife to the clothing and accessories in her possession, including international designer clothing and J Company clothing;
(2)That the wife’s values of the international designer clothing and J Company items in her possession as disclosed by her were false and misleading;
(3)He accepted her statement that as an employee of J Company she was unable to on-sell items she had bought at a significant discount from her employer whilst still employed and had accepted the truth of the COE letter she had provided to him on this issue and that this prohibition on selling affected the value of those items in the wife’s possession;
(4)That the wife has set about on a course of conduct post the making of the consent orders and signing of the BFA to sell some of her J Company items which is inconsistent with her evidence of a prohibition on her of selling those items whilst employed by J Company;
(5)That the wife had no other assets or interest in any asset such as bank accounts and the like other than as disclosed in her material and on the balance sheet and he has subsequently discovered she did have other assets;
(6)That the wife refused to provide him with a schedule of her J Company brand and other designer clothing in her possession and that at paragraph 4 of his affidavit filed 24 February 2021:
It is now known after the making of the Final Property Orders [on] 29 May 2020 that the clothing is of significant value as some have been sold and she has taken steps to list some other items of her clothing including J Company items for auction with a significant prospective value.
(7)That the wife failed to disclose the value of her tax losses, an B Bank account, an NAB account and a bank account with D Bank as at the date of making of the consent orders and signing the BFA.
The husband asserts this conduct by the wife grounds his claim that she has suppressed evidence, has misled the Court and/or perpetrated a fraud upon the Court. That the wife’s conduct has led to a miscarriage of justice in that the Court was misled as to the value of assets in her possession as at the date of making the consent orders as she failed to disclose relevant information and gave false evidence within the meaning of section 79A(1)(a) of the Act.
The husband also asserts he cannot comply with the order that he is to establish his own self-managed superannuation fund (“SMSF”) as part of the super splitting order provided for in the consent orders and thus within the meaning of section 79A(1)(b) of the Act the orders entered into between the parties cannot be carried out in part.
SHORT, RELEVANT CHRONOLOGY
The parties commenced cohabitation in 1988 and married in 1990.
They have two children, Mr K, born in 1994, and Mr H, born in 2000.
The wife commenced employment at J Company in 2001.
The husband was in the building industry and was declared bankrupt in 2011.
The parties separated on a final basis on 7 February 2017.
The parties remained separated under the same roof and physical separation did not occur until 16 December 2019.
The parties attended a mediation with Mr L on 23 March 2020. A balance sheet was prepared for that mediation and that balance sheet was tendered at the hearing before Justice Loughnan when consent orders were made on 29 May 2020.
The parties engaged in negotiations. Consent orders were signed by the parties on 28 May 2020.
On 28 May 2020, the husband and wife signed a BFA pursuant to section 90C of the Act and a release was signed pursuant to section 95 of the Succession Act 2006 (NSW) by the husband on the same date.
On 29 May 2020, Loughnan J made orders in accordance with the consent orders signed by the parties on 28 May 2020 after hearing submissions and receiving as a joint tender the balance sheet. Ms Christie SC represented the wife and Ms Warda represented the husband at that time.
There has been a partial carrying out of the consent orders.
The husband commenced proceedings to set the consent orders and BFA aside in November 2020.
The husband says he cannot presently earn an income.
The wife earns an income of $800,000 per annum.
THE LAW
The law in this area is well-settled and difficult to apply.
Section 45A of the Act governs matters for summary dismissal as their Honours note in the decision of Gong & Zao [2021] FamCAFC 110 (“Gong & Zao”).
The law is clear at least in one aspect of such applications, namely that the Court has regard to the evidence of the party whose case it is sought be summarily dismissed, and only that evidence, and takes that evidence at its highest. As explained in the decision of Beck & Beck (2004) FLC 93-181 (“Beck & Beck”) at [20]:
…an application for summary dismissal must be determined on the basis only of the material put forward by the respondent (to that application)…
The principle comes from Lindon v The Commonwealth (No 2) (1996) 136 ALR 251 (“Lindon”) where Kirby J said at 256:
To secure such relief, the party seeking it must show that it is clear, on the face of the opponent’s documents, that the opponent lacks a reasonable cause of action…or is advancing a claim that is clearly frivolous or vexatious.
(Citations omitted)
That material may include material filed by the applicant and in this matter I note the husband has relied upon paragraph 8.4 of the wife’s affidavit of 18 May 2021, the balance sheet tendered to his Honour and annexed to the wife’s material and the COE letter from J Company concerning a prohibition on the wife on-selling merchandise she has purchased from the company whilst she is employed by them and that such conduct may lead to a dismissal from employment. It is the totality of the respondent’s evidence before the Court and only that evidence which I am to have regard to in coming to a decision.
Section 45A(2) of the Act is as follows:
(2) The court may make a decree for one party against another in relation to the whole or any part of a proceedings if:
(a)the first party is defending the proceedings or that part of the proceedings; and
(b)the court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceedings or that part of the proceedings.
In so doing I must consider subsection (3) of section 45A of the Act which is as follows:
(3) For the purposes of this section a defence, or proceedings or part of proceedings need not be;
(a) hopeless; or
(b) bound to fail;
to have no reasonable prospect of success.
In addition to the summary dismissal power, section 45A(4) of the Act gives the Court power to dismiss proceedings that are frivolous, vexatious or an abuse of process and that section is as follows:
The court may dismiss all or part of proceedings at any stage if it is satisfied that the proceedings or part is frivolous, vexatious or an abuse of process.
Further, subsection (7) of section 45A of the Act permits the Court to take action under this section on its own initiative.
Rule 10.12 of the Family Law Rules 2004 provides the following:
A party may apply for summary orders after a response has been filed if the party claims, in relation to the application or response, that:
(a) the court has no jurisdiction;
(b) the other party has no legal capacity to apply for the orders sought;
(c) it is frivolous, vexatious or an abuse of process; or
(d) there is no reasonable likelihood of success.
In Gong & Zao their Honours confirmed that section 45A of the Act applies to applications for summary disposal of proceedings.
At paragraph 13 that:
…a court may make a decree for one party, as to the whole or any part of the proceedings, where the Court “…is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceedings or that part…” (s 45A(2) of the Act). The proceedings need not be “hopeless” or “bound to fail” for the section to apply (s 45A(3) of the Act).
Their Honours also found at paragraph 16:
…the cautions against the too ready inclination to summarily dispose of proceedings expressed by Kirby J in Lindon v The Commonwealth (No. 2) (1996) 136 ALR 251 at 255–256 remain relevant.
The applicable law has changed consequent upon section 45A of the Act commencing in 2018.
A more recent decision of the important principles a court must have regard to in a summary dismissal application is the decision of Ritter & Ritter (2020) FLC 93-957 (“Ritter”).
At paragraph 26 of Ritter their Honours said that section 45A of the Act requires the Court to “consider whether the husband had no reasonable prospects of success in prosecuting his application pursuant to s 79A”.
At paragraph 27, “[t]here is in our view considerable benefit in revisiting those principles by reference to the decisions of the High Court of Australia and intermediate Courts of Appeal…” That the “full force and effect of the applicable principles is [found] by considering the cases from which the principles are derived”, such as Lindon where Kirby J said at 256:
To secure such relief, the party seeking it must show that it is clear, on the face of the opponent’s documents, that the opponent lacks a reasonable cause of action or is advancing a claim that is clearly frivolous or vexatious.
Similarly, as referred to at paragraph 27 of Ritter, cases such as Ebner & Pappas (2014) FLC 93-619 (“Ebner & Pappas”), Lysaght Building Solutions Pty Ltd (t/as Highline Commercial Construction) v Blanalko Pty Ltd (2013) 42 VR 27, Spencer v Commonwealth of Australia (2010) 241 CLR 118 are also cases from which the principles are derived.
In Ebner & Pappas the Full Court held that an order for summary dismissal on the basis that the application discloses no reasonable cause of action was interlocutory.
Their Honours say, at paragraph 66 in Ritter, that in a summary dismissal application:
The determination of the issue must only take into account the material on which the respondent seeks to make out the case, or as often expressed takes the respondent’s case “at its highest” unless the respondent’s version is inherently incredible or unreliable.
In Ritter their Honours noted that the primary judge had found that the husband had an arguable case and in that circumstance the judge ought not to have summarily dismissed his application.
The older principles in decisions such as Beck & Beck, Bigg v Suzi (1998) FLC 92-799 (“Bigg v Suzi”) and Pelerman v Pelerman (2000) FLC 93-037 (“Pelerman”) that can be re-visited are set out in Beck & Beck at [17]:
“(a) The power for summary dismissal is a discretionary one.
(b) Relief “is rarely and sparingly provided”.
…
(d) A weak case or one that is unlikely to succeed is not “sufficient to warrant termination”.
(e) “If there is a serious legal question to be determined, it should ordinarily be determined at a trial”.
(f)“If notwithstanding the defects of pleadings, it appears that a party may have a reasonable cause of action which it has failed to put in proper form, a Court will ordinarily allow that party to reframe its pleadings”.’
In determining an application of this nature … the rule … is that if a version of the facts put forward by the respondent is not inherently incredible, then in the absence of any opportunity for cross-examination it is incumbent upon the court to proceed on the basis that the respondent's version will ultimately be accepted at the trial of the action (see Webster v Lampard (1993) 177 CLR 598 at 608).”
INTERPLAY BETWEEN THE CONSENT ORDERS AND THE BFA
The Binding Financial Agreement deals with the parties’ rights and obligations in relation to spouse maintenance and each gave away that right pursuant to the terms of the BFA. The consent orders deal with the division of their property, including a division of their superannuation, which is a self-managed superannuation fund of which the wife was the trustee.
HUSBAND’S EVIDENCE
The evidence to support the husband’s case in relation to the s 79A application and to set aside the BFA is contained in the following documents:
(1)Initiating Application of the husband filed 27 November 2020;
(2)Amended Initiating Application of the husband filed 11 March 2021;
(3)Response to an Application in a Case filed by the husband on 24 February 2021;
(4)Affidavits of the husband filed 24 February 2021 and 22 April 2021;
(5)Financial Statement of the husband filed 16 November 2021;
(6)Written and oral submissions;
(7)The balance sheet tendered before Justice Loughnan at the time of making the consent orders which document appears at page 65 of the wife’s tender bundle;
(8)Paragraph 8.4 of the wife’s affidavit of 18 May 2021; and
(9)The COE letter from J Company.
I do not have the transcript of the proceedings before his Honour before me as the husband did not rely upon this transcript.
INABILITY TO CARRY OUT THE ORDERS
The husband asserts he cannot set up a new self-managed superannuation fund as was contemplated by the consent orders and that this is a ground for setting those orders aside. That argument went nowhere as the evidence he provided to support that assertion, being a report from M Accountants dated 18 August 2020 and annexed to his affidavit at annexure “S”, did not support an inability to do this, rather that it was not financially advantageous for him so to do, and that is a very different thing.
At page five of the report the summary of advice to the husband is “Do not establish a SMSF”.
At page 6 of the advice, “[a]fter careful consideration we do not believe a SMSF is in your best interest due to the following reasons…”
The advice sets out 11 reasons why not to establish such a fund and that in not establishing a fund the husband will avoid additional administrative requirements, legal obligations and save costs. However the advice does not state the husband is unable to set up such a fund. That ground was effectively abandoned at the hearing by Mr Friedlander.
CLAIM PURSUANT TO SECTION 79A(1)(A) OF THE ACT
Following the pathway set out in Ritter, what is the husband’s arguable case to support his claim that the consent orders ought to be set aside under section 79A of the Act?
His case is based on the following:
(1)The husband accepted the value attributed by the wife to the clothing and accessories in her possession, including international designer clothing and J Company clothing, and that the wife’s values of the international designer clothing and J Company items in her possession and disclosed by her were false and misleading and that the wife’s Financial Statement of 15 May 2020 made no reference to those items;
(2)That the wife refused to provide him with a schedule of her J Company and other designer clothing in her possession and that at paragraph 4 of his affidavit of 24 February 2021:
It is now known after making the Final property Orders [on] 29 May 2020 that the clothing is of significant value as some have been sold and she has taken steps to list some other items of her clothing including J Company items for auction with a significant prospective value
(3)He accepted that as an employee of J Company she was unable to on-sell items she had bought at a significant discount from her employer whilst still employed and had accepted the truth of the COE letter she had provided to him on this issue which affected the value of those items in the wife’s possession and that this was false and misleading;
(4)That the wife has set about on a course of conduct post the making of the consent orders and signing of the BFA to sell some of her J Company items which is inconsistent with the prohibition on her of selling those items and is evidence of misleading the Court;
(5)The Court has approved the consent orders on a misapprehension of the parties’ financial positions and due to the wife’s failure to disclose, the giving of false and misleading evidence and her suppression of relevant evidence this has resulted in a miscarriage of justice; and
(6)That the wife perpetrated a fraud on the Court by her false assertion of the value of some of her fashion items, including J Company items, in the balance sheet as nil and that this is grounds for setting aside the BFA.
SETTING ASIDE ORDERS
Sections 79A(1)(a) and (b) of the Act, which the husband is relying upon to set aside the consent orders, is as follows.
79A(1), grounds on which an order can be set aside or varied:
(1)Where, on application by a person affected by an order made by a court under section 79 in property settlement proceedings, the court is satisfied that:
(a) there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance; or
(b)in the circumstances that have arisen since the order was made it is impracticable for the order to be carried out or impracticable for a part of the order to be carried out…
[…]
the court may, in its discretion, vary the order or set the order aside and, if it considers appropriate, make another order under section 79 in substitution for the order so set aside.
The husband effectively abandoned his case that the orders could in part no longer be carried out under the provisions of section 79A(1)(b) of the Act.
EVIDENCE
The balance sheet
The balance sheet appearing at page 65 of the wife’s tender bundle, annexure “D” to the wife’s affidavit of 21 January 2021, and referred to at paragraph 4 of the husband’s affidavit filed 22 April 2021 disclosed the following.
The husband asserted the wife’s J Company handbags were worth $1 million, her international and J Company designer clothing, $1,162,000, her J Company and international designer coats including exotic furs, $625,000, J Company boots and international designer shoe collection, $162,000.
The wife asserted her handbags were worth $101,312, her J Company and international designer coats including exotic furs, $62,000, J Company boots and international designer shoe collection $5,000, and her J Company and international designer clothing, nil.
The balance sheet has notes in relation to the items disclosed by the parties and these notes form part of the balance sheet. At Note 1 the wife describes her reasons for the value she has placed on bags, for example, in that the items she is able to purchase are seconds.
At Note 2 the husband says:
For full list of items refer to ‘Harford Clothes & Other Items Schedule’ prepared by the Wife as at June 2014. Husband contends that the Wife’s clothing collection has grown substantially to date (as per images taken by the Husband).
(As per the original)
The husband then breaks down what he says is the value of clothes in use by the wife and those she has in storage which he values at a total of $1.162 million and the wife’s value is nil.
The wife’s Note states that “In any event, the wife is not permitted to re-sell her J Company clothing whilst an employee of J Company”.
Note 3 is the husband’s explanation of his value of the “predominantly long coats and exotic skinned items” referred to in the attached schedule prepared by him and that the balance of the coats are accounted for in Item 2. The wife responded to the husband’s value.
In Note 4 the husband refers to the full list of shoes schedule as prepared by him and the wife responds to that schedule.
In Note 5 the husband refers to the full list of jewellery schedules prepared by him and the wife responds to that schedule.
In Note 11 the husband complains the wife has not provided disclosure of a NAB account which at 30 June 2019 had a balance of $0.99.
Notes in relation to Items 18, 19 and 21. These items relate to stock options, a share portfolio and a NAB account in the wife’s name which account the husband asserts the wife has not disclosed. The wife responds at Item 18 that in the past she “received stock options as a result of her employment” and that “her current holding is Nil”. At Item 19, “the Wife does not have a share portfolio” and at Item 21 that she “no longer operates any NAB accounts”.
At the Note to Item 37 the wife responds to the husband’s assertion that she has failed to disclose taxation losses carried forward.
Allegations the wife has failed to disclose bank accounts in her name
The husband makes a bare assertion at paragraph 8 of his affidavit filed 24 February 2021 that the wife did not disclose assets held by her in an overseas bank being D Bank. There was no documentation or annexures to his affidavit to support this assertion or any explanation proffered why he believed this to now be the case.
The only reference to this ground is his affidavit filed 22 April 2021 at paragraph 14 where he says “[a]nnexure “S” to the applicant wife’s affidavit sworn 21 January 2021 is not a document from D Bank [sic]”. The husband is correct in his commentary about annexure “S” however he does not disclose any document or other evidence in his material to support his bald assertion that the wife has such a bank account. The best his evidence reaches is that the wife said to him on 16 December 2019 “All the money is in a European Bank…I have learnt how it is done (send money overseas)”.
Accepting this evidence at its highest, it is inconsistent with the balance sheet. The balance sheet disclosed over $2 million in bank accounts in the wife’s name in Australia being four B Bank accounts, two CBA accounts, six Westpac accounts including a Euro account and an ANZ account. Thus “all the money” was not in a European bank account at the time the orders were entered into. Accepting the husband’s evidence at its highest, all that has been pleaded is an assertion of a failure to disclose a bank account with D Bank based upon what the wife said to him in December 2019 which statement is inconsistent with the extent of money in banks in the wife’s name disclosed by her. The husband has no reasonable prosects of successfully prosecuting a case to set the orders aside for a failure to disclose pursuant to section 79A of the Act on this evidence and his evidence is inherently unreliable.
Further, annexure “S” to the wife’s affidavit of 21 January 2021 is headed “Your portfolio as of 19 March 2020” with the J Company logo on the letterhead:
Participant: Ms Harford
Your grants/your accounts
Statement of your cash accounts
…01 STOCKPLAN CASH ACCOUNT IN EUR: Balance 0.00 EUR
Statement of your securities accounts
Category – Vehicle – Quantity – Option gain/Acquisition gain – Current value: You currently hold no securities from your rights.
Page two of that document is a series of transactions on this portfolio.
This annexure is a document in relation to her employment and includes a stock cash account and a securities account or share portfolio as referred to at Items 18, “stock options” and 19, “share portfolio”, in the balance sheet. The husband asserted a total value of these items at $500,000 in the balance sheet and the wife asserted nil. The wife responded to these notes in the tendered balance sheet and said in respect of Item 18 “the Wife has in the past received stock options as a result of her employment. Her current holding is Nil”. At Item 19 the wife responds “the Wife does not have a share portfolio”. Annexure “S” to the wife’s affidavit of January 2021, which the husband referred to in his material, supports the wife’s position of disclosure and not the husband’s case of a failure to disclose.
At paragraph 15 of his affidavit filed 22 April 2021 affidavit the husband says:
Since the making of the final property orders I have discovered a screen shot taken of a print out of an email from Ms N at B Bank to the wife’s email account … on 17 July 2019 referring to a Premier Account which the wife was proposing to open…[t]he applicant wife has never disclosed any premier account in B Bank.
This screenshot is attached to the husband’s affidavit at annexure “F”. The screenshot says as follows:
Good Morning Ms Harford,
I hope you have been well. I was just sending you an email to see when you are ready to make the transfer and do the special account opening…
This is not evidence of an account having been opened. At best it is evidence that supports an intention so to do. This evidence does not support the husband’s case that the wife failed to disclose a Special B Bank account, only that some years ago she may have had an intention to open such an account. The husband has no reasonable prosects of successfully prosecuting a case to set the orders aside for a failure to disclose pursuant to section 79A of the Act on this evidence and it is inherently unreliable. I note the wife disclosed four separate B Bank accounts in the balance sheet.
The wife disclosed in the balance sheet she had had a NAB account some time ago as the husband said she had in 2019 and had closed it. The husband has no reasonable prospects of successfully prosecuting a case to set the orders aside for a failure to disclose pursuant to section 79A of the Act on this evidence.
Assertion of Relying on the wife’s value of items when entering into the consent orders leading to a miscarriage of justice
At paragraph 7 of his affidavit of 24 February 2021 the husband says:
The wife disclosed her J Company Boots and International Designer Shoe Collection at a significantly reduced value to its true market value in the Balance Sheet presented to His Honour Justice Loughnan. When the property orders were made by his honour on 29 May 2020 I relied on the wife’s assertion of Nil value. Her Financial Statement she swore on 15 May 2020 makes no reference to her J Company Boots and International Designer Shoe Collection as her asset of any value.
8. The wife did not disclose assets held by her in an overseas bank being the D Bank [sic]. I am now aware that the wife had transactions through D Bank [sic] in Country C…
9. The wife disclosed the value of her tax losses in her name as Nil in the Balance Sheet presented to His Honour Justice Loughnan when the property orders were made by his honour on 29 May 2020 whereas she has substantial tax losses which she can take advantage of.
(As per the original)
These paragraphs do not correctly state the wife’s assertion of value on the balance sheet as the wife did place a value of some of those items in the joint balance sheet such as boots, furs and handbags. His Honour and the husband and wife relied upon the balance sheet, it being a joint tender, and thus I do not see that a failure by the wife to disclose certain items in her Financial Statement can support the husband’s case of the wife failing to disclose relevant material for she did disclose this information in the balance sheet. Relevant information can be disclosed in multiple documents.
In his affidavit filed 22 April 2021 the husband said that the wife had unique expertise as to valuing new and old fashion given the positions she held the industry. The husband said the wife told him during the marriage, at paragraph 3:
“Part of my job is to monitor auction sales and other sales information of second hand and possible fake reproductions of J Company items”
Further, that she said “My clothes are worth nothing. No one is ever going to buy them”, that she had acquired or purchased more than 1,000 items of international designer clothing in Australia and on multiple overseas trips.
Annexed to his affidavit and marked “A” is a list prepared by the wife dated 17 August 2014 of her clothing and jewellery at that time. It is a document headed “Clothes Complete List (draft) Ms Harford” and is 11 pages with some 45 items on each page. This list was prepared for an insurance claim against F Company for water ingress.
The husband says at paragraph 4 of his affidavit of 22 April 2021:
…When final property orders were made on 29 May 2020 because of her actual and claimed experience and expertise of international designer clothing I believed and relied upon her repeated statements to me that “My international designer clothing had no commercial value”. My estimate of $1,162,000 million in Item 2 of the Balance Sheet…is based on the list of purchase prices of her international designer clothing which she gave to me for the water ingress insurance claim against F Company.
The husband annexed to his affidavit filed 22 April 2021 at paragraph 4, annexure “B”, a schedule of what he says was the value of clothing, fabrics and accessories stored at F Company on 16 March 2017 and the total is $434,540.
It is clear from these paragraphs of the husband’s affidavit that he had come to his own assessment of the value and quantity of the wife’s international and designer clothing, including J Company clothing, in her possession before entering into the consent orders given this is the basis of how he reached his value for those items in her possession. It is clear from the husband’s own material, the balance sheet and the husband’s notes to the balance sheet that he was aware of the extent of the wife’s clothing and had formed a view as to its value and quantity.
The husband now says to the Court that he accepted the wife’s value of the items in her possession at that time and entered into the consent orders on this basis.
However this case is inconsistent with the evidence which is that he did not accept her values when entering into the consent orders. The husband put forward his own values and then entered into the consent orders despite the significant difference in those values.
Accepting his case on this issue at its highest, the evidence is that:
(1)He accepted the wife’s values given her expertise in the industry;
(2)This was a decision he took in light of what he knew at the time which was that he disputed the value of her items and the quantity of items she had disclosed;
(3)That he tendered a document to the Court with the dispute as to values clearly shown; and
(4)He entered into the orders notwithstanding these disputes.
The husband had equal input with the wife into the creation of the balance sheet and each were legally represented before his Honour and at the mediation. There is no evidence of any valuations by independent sources of these contested items and the husband was at liberty to obtain his own independent valuations. His evidence that he accepted the wife’s values when entering into the consent orders given her expertise in the industry is inherently unbelievable and unreliable given the evidence he relied upon when the orders were made in Court.
The husband had an opportunity to question all the items the wife put on the balance sheet and the value she ascribed thereto and if he disagreed with the figures or quantity disclosed by the wife, as he clearly did from a reading of the joint balance sheet, he had his remedies including withdrawing his consent to the making of the orders. The husband has no reasonable prospects of successfully prosecuting a case pursuant to section 79A of the Act to set the orders aside on the basis that he relied upon the wife’s values when entering into the consent orders.
Duress
Despite Mr Friedlander submitting the husband was “influenced” by the wife regarding the value of items in her possession I could find no evidence to support that submission in the husband’s affidavit. The husband said he relied on her values due to her “expertise” not her “influence” over him and, accepting this evidence at its highest, it cannot support a case of duress within the meaning of the section or even “influence”. The husband has no reasonable prospects on this evidence of successfully prosecuting a case pursuant to section 79A of the Act to set the orders aside for duress.
The assertion that the wife has set about on a course of conduct to sell her J Company items whilst still an employee of J Company
At paragraph 5 of his affidavit filed 22 April 2021 the husband says he “retained some items of the wife’s international designer clothing”, including J Company clothing, “as part of the property settlement”. There is no specific mention of these items in the husband’s possession on the balance sheet nor of their value. There is an agreed value of the husband’s personal clothing at $35,350 at Item 25 and he says this value is based on the purchase price of the items, see paragraph 4 of the husband’s affidavit of 22 April 2021.
At paragraph 7:
I had no personal use for many of the non-clothing items retained by me from the property settlement and contacted a representative at P Auctioneers in Sydney. I intended to sell many items of handbags, furniture and jewellery…P Auctioneers arranged for a photographer to come to the Suburb Q storage facility and I met with a photographer who introduced himself as Mr G on about 31 July 2020.
At paragraph 13 of the husband’s affidavit filed 24 February 2021:
I shall be seeking to have subpoenas issued to P Auctioneers in Suburb R and T Photography to obtain evidence to corroborate the fact that the wife has commenced the process to list and sell items of her International Designer Clothing (including J Company clothing) after the orders were made on 29 May 2020.
There was no subpoenaed material produced at the hearing from P Auctioneers Suburb R or any evidence from T Photography.
The evidence is that on 6 August 2020 the husband attended the F Company facility at the request of the parties’ youngest son to assist him in moving heavy furniture which belonged to the wife. Paragraph 8.4 of the wife’s affidavit of 18 May 2021 upon which the husband relies is as follows:
I did not give [my] son permission to have Mr Spalding attend at the storage unit where my personal items were being stored and until reading Mr Spalding’s affidavit, I was not aware that Mr Spalding was present or that he had entered the storage unit where my personal items were being stored, or that he had received copies of the photographs. Had I known that this was the intention I would not have agreed to have my personal items photographed.
From this paragraph it is clear the wife was not present when her personal items were being photographed, has not received a copy of the photographs that were taken by Mr G and had no input into what was to be, or what should not be, photographed at the time.
The husband continues in his affidavit that whilst at that storage facility he observed a number of items of international designer clothing which were items held by the wife in her apartment that had not previously been held in her storage facility at Suburb Q. He says at paragraph 8 of his affidavit of 22 April 2021:
Included in the items were some I recognised from their label as being J Company products in our matrimonial residence prior to our separation.
At paragraph 9:
Whilst I was at the F Company Suburb Q storage unit I observed that the photographer Mr G who worked with P Auctioneers and whom I had met about one week earlier when he had photographed my items[,] arrived and took photographs of items including the wife’s items of international designer clothing and including items of J Company clothing.
That paragraph reads to me that a week earlier the husband and Mr G had photographed his international designer and J Company fashion items and that the following week the husband was at the wife’s storage unit without her knowledge and Mr G was photographing some of her international designer items which included J Company clothes.
The husband continues at paragraph 10:
The photographer…said to me words to the effect “I have been asked to take photographs for a catalogue for an auction sale by P Auctioneers of Ms Harford’s clothing”. I then asked the photographer “While you are here would you also take some photographs of some of my items that I want to include in my upcoming auction” and he said “Yes” and I took some of my items from my storage shed and watched him photograph them.
The husband has had two stints at having his items photographed, first on 31 July 2020 and again on 6 August 2020.
Paragraph 10 continues:
I subsequently received copies of the items photographed by Mr G on about 10 August 2020 which included the items of the wife’s clothing which I observed from their labels comprised about 20% of the wife’s J Company designer clothing and the balance was of other items of the wife’s international designer clothing. Annexed hereto and marked “D” is a copy of the photographs taken by Mr G on or about 6 August 2020 of the wife’s international designer clothing and some other items of hers and mine. Items numbered 176, 183, 185, 190 to 196 inclusive, 198, 200, 201, 476, 477, 482, 483, 494, 501, 504, 506, 508 to 510 inclusive[,] 513, 514, 518, 519 and 523 to 543 inclusive are my items. The rest of the items belonged to the wife and included J Company dresses where I had observed the J Company labels. Items 406 and 410 are photographs alongside boxes which I recognise as J Company boxes.
There are no discernible labels on any alleged J Company or other dresses in the annexed photos. There are labels on scarves which are the husband’s items at 196, 198, 200 and 201. They cannot be read. The boxes that the husband refers to are clearly there but I cannot see from the photographs what labels are on those boxes, however I must accept the husband’s evidence at its highest and I accept what he says as to the labels on the items being correct and that there are J Company items included in the photographs.
Paragraph 11:
My on line auction took place on 25 August 2020 of the items referred to in annexure “C”. I watched the on line auction on my computer. Annexed hereto and marked “E” is a schedule of the sale prices of the auctioned items of the wife’s international designer clothing retained by me pursuant to the court orders on 29 May 2020. About 13 items did not sell.
(As per the original)
Annexure “E” to the husband’s affidavit of 22 April 2021 indicates the husband received from auction about $28,000-odd for all the clothing sold in two lots, $40,645 for the jewellery, $114,600 for the J Company bags, $4,170 for “luxury bags-general”, and decorative arts, $19,600, a total of some $207,008.
Paragraph 12 of the husband’s affidavit filed 22 April 2021 says:
To the best of my knowledge and belief an auction of the applicant wife’s international designer clothing has not yet taken place as after my auction took place on 25 August 2020…I forwarded an email to the applicant wife on 3 September referring to her lying about not being able to sell J Company clothing. The items of international designer clothing photographed to be listed for auction on behalf of the wife appear to be items of a lesser value of the items retained by her in any event.
At paragraph 13 he says:
The wife asserted and I relied on her assertion and evidence that she was unable to sell any J Company items and this was false.
Going now to the husband’s case that he relied upon the COE letter that the wife was prohibited from selling her J Company designer wear, that to do so may mean dismissal from her position yet post the consent orders and BFA she has set about on a course of conduct to do that very thing.
The evidence of such a course of conduct or intention or both by the wife to sell is only found at paragraph 10 of the husband’s affidavit filed 22 April 2021 where the husband says Mr G told him, “I have been asked to take photographs for a catalogue for an auction sale by P Auctioneers of Ms Harford’s clothing”. The wife has never asserted she was unable to sell her international designer clothing. It is the sale of the J Company clothing that is prohibited.
The husband received photographs from Mr G of not only his own items but also the wife’s items of which some were J Company items. The evidence from paragraph 8.4 of the wife’s affidavit of 18 May 2021 that she was not present when these photographs of her personal items were taken, had no knowledge what photographs were being taken and has not received a copy of the photographs from Mr G is also relevant. The evidence is that the husband has not received a catalogue in which the wife’s J Company clothing was listed for sale and he says at paragraph 12 of his affidavit of 22 April 2021:
To the best of my knowledge and belief an auction of the applicant wife’s international designer clothing has not yet taken place
He further says he wrote to her on 3 September 2020 “referring to her lying about not being able to sell J Company clothing”, yet his affidavit at paragraph 12 talks about selling international designer clothing which she is entitled to do.
There is no evidence the wife planned to auction her J Company clothing. The only evidence on this issue put forward by the husband is the conversation between the husband and Mr G where Mr G said “I have been asked to take photographs for a catalogue for an auction sale by P Auctioneers of Ms Harford’s clothing” and the husband receiving photographs of the wife’s items including J Company items from Mr G in a format suitable for inclusion in an auction catalogue.
Taking the husband’s case at its highest I accept:
(1)The wife’s J Company clothing together with other international designer clothing was photographed by Mr G in a format suitable for inclusion in an auction catalogue;
(2)J Company clothing falls into the category of international designer clothing;
(3)That the wife led evidence she could not on-sell her J Company clothing and items whilst an employee of J Company and to do so would put her employment in jeopardy;
(4)That no auction of the wife’s photographed J Company items or any photographed international designer items has taken place at any time after the orders were made and the BFA entered into, including after the husband wrote to her on 3 September 2020 accusing her of lying on this issue. The husband further said at paragraph 12 of his affidavit of 22 April 2021:
The items of international designer clothing photographed to be listed for auction on behalf of the wife appear to be items of a lesser value of the items retained by her in any event.
(5)There is no prohibition on the wife selling her international designer clothing whilst an employee of J Company.
On this evidence, and taking it at its highest, Mr G photographing the wife’s international designer clothing including J Company clothing has raised a suspicion in the husband that the COE letter of prohibition of on-selling is incorrect and/or that the wife lied to the Court on this issue and that she intends to auction her J Company clothing and items whilst still employed by that company. Do those suspicions support an arguable case which a court should determine?
Going to the J Company policy document provided by the wife to the husband being annexure “B” to the wife’s affidavit filed 18 May 2021.
The document is headed “J Company Second Choice Policy” and consists of five categories: “objective”; “application”; “roles and responsibilities”; “definitions”; and “procedure”.
Page two of the document asserts the objective is to “provide employees the opportunity to purchase products at reduced price”.
At point “5” under the heading “PROCEDURE” the last point is as follows:
Resale of a second choice item is strictly prohibited
Point “5.1” is headed “Policy Breaches”:
Abuse or non-compliance of the Second Choice Policy and Procedure will mean exclusion for all future Second Choice or Staff Sale activities. Depending on the severity of the breach may also result in disciplinary action, which may include termination of employment or contract for breach of J Company Code of Conduct.
The on-sale of any items purchased during Second Choice may result in disciplinary action and/or instant dismissal for breach of J Company Code of Conduct.
There is no evidence or submission made by the husband that the J Company document provided by the wife is not legitimate, rather that she has in some way lied to him and the Court. The fact that some of her J Company items were, in the absence of the wife, photographed by Mr G does not support an arguable case that the wife either intended to sell the items or that she in some way lied to the Court about the import of the COE document. This is particularly so where no auction of any of the wife’s international designer clothing, or J Company clothing and items, has taken place and where there is no prohibition on her selling international designer clothing. On this evidence the husband’s arguable case, at its highest, is a suspicion of a possibility of the wife intending to sell her J Company items including clothing at some point in time.
I find this evidence is inherently incredible and unreliable for the following. As Ms Christie SC submitted, it “beggars belief” that the wife would put her lucrative employment with J Company in jeopardy for the sale of items worth some weeks of her salary given she earns a salary of $800,000 per annum. When I couple that inherently incredible evidence with the husband’s evidence that no auction of any of her international designer clothing or items, let alone J Company clothing or items, has taken place the evidence put forward by the husband to ground his arguable case is also unreliable. His evidence at its highest and as a matter of law establishes that the husband has no reasonable prospect of successfully prosecuting his claim to set the orders aside on this ground. The wife may not always be employed by J Company and there will then be no prohibition on her selling her J Company items in those circumstances.
Assertion of wife’s failure to disclose the value of her items when entering into the consent orders leading to a miscarriage of justice
The husband’s case is that the wife misled the Court as to the value of her designer clothing including J Company clothing in her possession as she asserted the value was “NIL” on the balance sheet and failed to include such items in her Financial Statement.
The husband alleges at paragraph 2.3 of his affidavit filed 24 February 2021 that the wife failed to provide a full schedule of her coats and clothing in her possession or control, including her international designer clothing and J Company clothing. This complaint is repeated at paragraph 4 of the husband’s affidavit filed 22 April 2021 where the husband asserts:
There were attempts to agree on an independent valuer of the wife’s international designer clothing but the wife never disclosed a complete list of such clothing in her possession or control and there was no agreement as to who could value the items as set forth in the annexures to the Tender Bundle to the wife’s affidavit sworn 21 January 2021 herein.
The husband further asserts in that paragraph that:
When the final property orders were made on 29 May 2020 because of her actual and claimed experience and expertise of international designer clothing I believed and relied upon her repeated statements to me that “My international designer clothing had no commercial value”.
At paragraph 2.7 of the husband’s affidavit of 24 February 2021, he says he relied upon the wife’s asserted valuation of her J Company and international designer clothing and that he seeks to adduce evidence, when the matter comes for trial, that the wife sold her international designer clothing for “valuable consideration after the Orders were made” and that she “has taken steps to resell her J Company clothing” whilst still an employee of J Company.
The husband says at paragraph 3 of his affidavit of 24 February 2021 there was a “miscarriage of justice by reason of the fact that the wife represented the value of her J Company and International Designer Clothing as nil in the Balance Sheet” and her Financial Statement of 15 May 2020 made no reference to those items at all.
Further, at paragraph 4:
It is now known after the making of the Final Property Orders [on] 29 May 2020 that the clothing is of significant value as some have been sold and she has taken steps to list some other items of her clothing including J Company items for auction with a significant prospective value.
…
6. The wife asserted and the husband relied on her assertion and evidence that she was unable to sell any J Company items and this was false.
The only evidence of J Company and other international designer items being sold is the sale of items in the husband’s possession which items were not included as an asset on the balance sheet and to which no value was ascribed.
Paragraph 11:
My on line auction took place on 25 August 2020 of the items referred to in annexure “C”. I watched the on line auction on my computer. Annexed hereto and marked “E” is a schedule of the sale prices of the auctioned items of the wife’s international designer clothing retained by me pursuant to the court orders on 29 May 2020. About 13 items did not sell.
(As per the original)
Annexure “C” shows both J Company and international designer clothing were sold by the husband.
Annexure “E” to the husband’s affidavit of 22 April 2021 indicates the husband received from auction about $28,000 in two lots for the clothing, $40,645 for the jewellery, $114,600 for the J Company bags, $4,170 for “luxury bags-general”, and decorative arts, $19,600, a total of some $207,008.
Accepting this evidence, it is clear that the international designer clothing in the husband’s possession had a value. Although the husband does not directly state in his material and nor were submissions made to this effect, on this evidence the Court can draw an inference that similar items in the wife’s possession have a value as well. On this evidence the husband has an arguable case that international clothing in the wife’s possession has a value and that for the wife to have ascribed “NIL” as a value on the balance sheet is potentially the wife misleading the Court or failing to disclose material evidence leading to a potential miscarriage of justice.
Going now to the husband’s application to set aside the BFA.
The test to set aside a BFA under section 90K of the Act is as follows:
Circumstances in which court may set aside a financial agreement or termination agreement
(1)A court may make an order setting aside a financial agreement or a termination agreement if, and only if, the court is satisfied that:
(a)the agreement was obtained by fraud (including non-disclosure of a material matter); or
(aa)a party to the agreement entered into the agreement:
(i)for the purpose, or for purposes that included the purpose, of defrauding or defeating a creditor or creditors of the party; or
(ii)with reckless disregard of the interests of a creditor or creditors of the party; or
(ab)a party (the agreement party ) to the agreement entered into the agreement:
(i)for the purpose, or for purposes that included the purpose, of defrauding another person who is a party to a de facto relationship with a spouse party; or
(ii)for the purpose, or for purposes that included the purpose, of defeating the interests of that other person in relation to any possible or pending application for an order under section 90SM, or a declaration under section 90SL, in relation to the de facto relationship; or
(iii)with reckless disregard of those interests of that other person; or
(b) the agreement is void, voidable or unenforceable; or
(c)in the circumstances that have arisen since the agreement was made it is impracticable for the agreement or a part of the agreement to be carried out; or
(d)since the making of the agreement, a material change in circumstances has occurred (being circumstances relating to the care, welfare and development of a child of the marriage) and, as a result of the change, the child or, if the applicant has caring responsibility for the child (as defined in subsection (2)), a party to the agreement will suffer hardship if the court does not set the agreement aside; or
(e)in respect of the making of a financial agreement--a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable; or
(f)a payment flag is operating under Part VIIIB on a superannuation interest covered by the agreement and there is no reasonable likelihood that the operation of the flag will be terminated by a flag lifting agreement under that Part; or
(g)the agreement covers at least one superannuation interest that is an unsplittable interest for the purposes of Part VIIIB.
(1A)For the purposes of paragraph (1)(aa), creditor , in relation to a party to the agreement, includes a person who could reasonably have been foreseen by the party as being reasonably likely to become a creditor of the party.
(2)For the purposes of paragraph (1)(d), a person has caring responsibility for a child if:
(a) the person is a parent of the child with whom the child lives; or
(b) a parenting order provides that:
(i)the child is to live with the person; or
(ii)the person has parental responsibility for the child.
(3)A court may, on an application by a person who was a party to the financial agreement that has been set aside, or by any other interested person, make such order or orders (including an order for the transfer of property) as it considers just and equitable for the purpose of preserving or adjusting the rights of persons who were parties to that financial agreement and any other interested persons.
(4)An order under subsection (1) or (3) may, after the death of a party to the proceedings in which the order was made, be enforced on behalf of, or against, as the case may be, the estate of the deceased party.
(5)If a party to proceedings under this section dies before the proceedings are completed:
(a)the proceedings may be continued by or against, as the case may be, the legal personal representative of the deceased party and the applicable Rules of Court may make provision in relation to the substitution of the legal personal representative as a party to the proceedings; and
(b) if the court is of the opinion:
(i)that it would have exercised its powers under this section if the deceased party had not died; and
(ii)that it is still appropriate to exercise those powers;
the court may make any order that it could have made under subsection (1) or (3); and
(c)an order under paragraph (b) may be enforced on behalf of, or against, as the case may be, the estate of the deceased party.
(6) The court must not make an order under this section if the order would:
(a)result in the acquisition of property from a person otherwise than on just terms; and
(b) be invalid because of paragraph 51(xxxi) of the Constitution.
I have found that the husband has an arguable case under section 79A of the Act that the wife misled the Court or failed to disclose the value of items in her possession being international designer clothing leading to a potential miscarriage of justice. This finding may also support an arguable case to set the BFA aside on the ground set out in section 90K(1)(a) which is as follows:
(1)A court may make an order setting aside a financial agreement or a termination agreement if, and only if, the court is satisfied that:
(a) the agreement was obtained by fraud (including non-disclosure of a material matter)
Thus the wife’s application for summary dismissal of the husband’s application under section 79A and section 90K of the Act must fail.
I certify that the preceding one hundred and forty-three (143) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Henderson. Associate:
Dated: 27 August 2021
2
7
2