HARRISON & FOSTER

[2016] FCCA 649

FEDERAL CIRCUIT COURT OF AUSTRALIA

HARRISON & FOSTER [2016] FCCA 649

Catchwords:
FAMILY LAW – Property – application by wife for summary dismissal of husband’s s.79A application.

Legislation:
Family Law Act (Cth), s.79A
Federal Magistrates Act (Cth), s.17A
Federal Magistrates Court Rules (Cth), r.13

Cases:
Anderson & Anderson (2000) FLC 87-301
Barker & Barker (2007) FamCA 13
Biggs & Suzi (1998) FamLR 700
Lindon v Commonwealth (1996) 20 ALJR 541
Lowe & Harrington (1997) 21 FamLR 583

Applicant: MS HARRISON

Respondent: MR FOSTER

File Number: NCC 2751 of 2012

Judgment of: Judge Terry

Hearing date: 22 September 2015

Date of Last Submission: 22 September 2015

Delivered at: Newcastle

Delivered on: 6 April 2016

REPRESENTATION

Counsel for the Applicant: Mr Rugendyke

Solicitors for the Applicant: Cunningham & Adam

Counsel for the Respondent: Mr Boyd

Solicitors for the Respondent: Equilaw Solicitors

ORDERS

1. The respondent’s application as contained in Order 1 and 2 of his response filed on 26 September 2014 is dismissed.

2. All outstanding applications are adjourned to 9.30am on 12 May 2016 for further consideration.

IT IS NOTED that publication of this judgment under the pseudonym Harrison & Foster is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT
COURT OF AUSTRALIA
AT NEWCASTLE

NCC 2751 of 2012

MS HARRISON

Applicant

And

MR FOSTER

Respondent

REASONS FOR JUDGMENT

Introduction

1. These proceedings arise out of consent orders for property settlement made in the Local Court at Raymond Terrace on 26 June 2012.

2. The husband has not fully complied with his obligations under the orders and the wife has several applications on foot. These include an application for enforcement, an application pursuant to s. 106B of the Family Law Act to have some transactions between the husband and his brother set aside and an application to have the husband dealt with for contempt of court. However the application I need to deal with first is the wife’s application for summary dismissal of the husband’s application to have the orders set aside.

The evidence

1. The wife relied on her application in a case filed on 16 June 2015.

2. Counsel agreed that in determining whether the s.79A application had any reasonable prospects of success I should consider the husband’s case at its highest and the wife’s counsel did not ask me to read any of the affidavits the wife had filed. I therefore have not done so save for reading the Form 12A Application for Consent Orders which is annexure B to the wife’s affidavit filed on 25 July 2014.

3. The husband did not file a response to the application in case but I accept that he opposes the wife’s application.

4. The husband relied on his affidavits filed 2 June 2015 and 3 July 2015 (which contain a good deal of similar material) and on a document called Decision Regarding Change of Assessment prepared by the Child Support Agency.[1]

   [1] Exhibit A

5. The wife’s counsel asked me to also read paragraphs 16 to 31 and paragraph 38 of the husband’s affidavit filed on 31 January 2014 and paragraphs 31 to 36 and 49 and 50 of his affidavit filed on 27 October 2014.

6. The husband’s counsel opposed this. He submitted that I needed to consider the husband’s case at its highest and not his case under challenge. However in my view it would be artificial in the extreme to allow the husband to choose to rely on parts of his own evidence and ask me to disregard other parts, and in particular to disregard the affidavit he originally filed in support of his S.79A application. I consider that I am entitled to have regard to the totality of the evidence the husband has given about the consent orders in order to determine whether his application has any reasonable prospects of success.

Background

1. The parties had a short relationship and even shorter marriage. They commenced a relationship in (omitted) 2008, commenced cohabitation in (omitted) 2009, married on (omitted) 2010 and separated on 20 October 2011. They have one child, X, who was (omitted) 2009 and who has lived with the wife since the separation.

2. The husband is a businessman who has extensive business interests in the (omitted); he operates the (omitted) group of companies.

3. It was the husband’s evidence that prior to the parties’ marriage he was contemplating setting up a (omitted) business based on (omitted) he had developed at the (omitted) and that shortly after the parties’ marriage in (omitted) 2010 he established (omitted) Pty Ltd.

4. In his affidavit filed on 2 June 2015 the husband said that he discussed setting up the business with the wife and that she agreed to be managing director.

5. I was not provided with information about shareholders and directors of the company at any particular time. The wife’s surname is part of the company’s name and the business (omitted) is listed as her asset alone in the Form 12A Application for Consent Orders filed in June 2012. However the paragraphs in the husband’s January 2014 and October 2014 affidavits to which the wife’s counsel referred me tend to suggest that the business was the husband’s prior to separation and the actual order about the business in the consent orders is equivocal. It provides that the husband transfer his interest in the business, if any, to the wife.

6. Erring on the side of caution and adopting the interpretation most likely to be favourable to the husband I will assume for the purposes of these reasons that prior to separation the business was the wife’s.

7. After the parties separated they both sought legal advice. They discussed a property settlement and reached agreement and in June 2012 a Form 12A Application for Consent Orders was lodged in the Local Court at Raymond Terrace.

8. On 26 June 2012 the orders sought by the parties were made. They provided for the wife to retain (business omitted) and for the husband pay the wife $700,000.00 by way of eight quarterly instalments of $87,500.00 commencing on 1 September 2012. The wife was also to retain some other minor items in her possession and the husband was to retain all other assets in his possession or under his control.

9. According to the financial disclosure in the Form 12A this represented a division of assets as to 43% to the wife and 57% to the husband.

10. The husband paid three instalments of $87,500.00 but he did not pay the fourth instalment due on 1 June 2013. As a result the balance of $437,500.00 became immediately due and payable with interest.

11. On 8 August 2013 the wife filed an Initiating Application in which she stated that she was seeking enforcement of the orders. However she did not specify what orders she wanted by way of enforcement and she also sought an order pursuant to s.79A of the Family Law Act. She alleged that the husband had failed to make proper disclosure of his business interests and proposed that the existing orders be set aside and the husband pay her $10m.

12. Subsequently the wife changed tack and on 22 November 2013 filed an amended application seeking enforcement only. Counsel at the hearing on 22 September 2015 agreed that this meant that by implication she had abandoned her s.79A application.

13. On 31 January 2014 the husband filed a Response in which he sought an extension of time to pay. However on 26 September 2014 he filed a second Response in which he sought the following orders:

    That the original orders made at Raymond Terrace Local Court on 12 June 2012 are set aside.

    That there be no further adjustment of property as between the parties.

    That the Applicant pay the Respondent’s costs.

14. In his affidavit filed on 27 October 2014 the husband stated that he was seeking to have the orders set aside on the basis that there had been a miscarriage of justice and this was the case argued by his Counsel on 22 September 2015.

15. The parties attended mediation in an effort to resolve their dispute but this was unsuccessful and eventually in June 2015 wife filed an application in a case seeking summary dismissal of husband’s s.79A application.

The law pertaining to summary dismissal

1. The power of this Court to summarily dismiss an application is contained in s.17A of the Federal Circuit Court Act and R.13.10 of the Federal Circuit Court Rules.

2. S.17A(2) (3) and (4) of the Federal Circuit Court Act provide as follows:

   (2)The Federal Circuit Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:

   (a)the first party is defending the proceeding or that part of the proceeding; and

   (b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.

   (3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:

   (a)     hopeless; or

   (b)     bound to fail;

   for it to have no reasonable prospect of success.

   (4)This section does not limit any powers that the Federal Circuit Court has apart from this section.

3. R.13.10 of the Federal Circuit Court Rules provides as follows:

   The Court may order that a proceeding be stayed, or dismissed generally or in relation to any claim for relief in the proceeding, if the Court is satisfied that:

   a) the party prosecuting the proceeding or claim for relief has no reasonable prospect of successfully prosecuting the proceeding or claim; or

   b)   the proceeding or claim for relief is frivolous or vexatious; or

   c) the proceeding or claim for relief is an abuse of the process of the Court.

4. Many cases have expounded at length on the meaning of s.17A and R.13.10 or provisions like them. The theme running through all the cases is that the summary dismissal power should be used sparingly because there is a real risk of injustice if a case is dismissed before proper exploration of the available arguments and before a party is afforded a chance to obtain further evidence which might assist their case.

5. Kirby J put it this way in Lindon v The Commonwealth, a case to which the husband’s counsel referred me:

   An opinion of the court that a case appears weak and such that it is unlikely to succeed is not, alone, sufficient to warrant summary termination.  Even a weak case is entitled to the time of a court. Experience teaches that the concentration of attention, elaborated evidence and argument and extended time for reflection will sometimes turn an apparently unpromising cause into a successful judgment.[2]

   [2] Lindon v Commonwealth (1996) 20ALJR 541

6. Nevertheless litigation is expensive and stressful, court resources are limited and ever under strain and applications to the court can sometimes be used as instruments of oppression or as a delaying tactic and the court should not be afraid in an appropriate case to use the power to summarily dismiss an application.

The husband’s case

1. The husband relied on s. 79A(1)(a) of the Family Law Act which provides as follows:

   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;

   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.

2. The husband asserted that as a result of information which had now come to light he had very good reason to believe that the value of (business omitted) was considerably understated in the Form 12A. As a result there had been an unjust division of property between the parties and therefore a miscarriage of justice by reason of any other circumstance.

3. The first piece of evidence the husband relied on derived from Child Support proceedings between the parties.

4. On 3 June 2014 the wife made an application to the Child Support Registrar for a change of assessment. In the course of that application she conceded that her income from the business was $434,000.00 in the 2012/2013 financial year. The husband submitted that this was inconsistent with the business having been worth $150,000.00 in June 2012.

5. The husband also relied on the fact that in her financial statement filed on 8 August 2013 the wife said that the business was worth $350,000.00.

6. The husband’s counsel submitted that although the husband could not establish at the moment that the business was worth more than $150,000.00 when the orders were made he should not be denied the opportunity to investigate the matter and try to obtain further evidence when he was able to show as a result of the child support documents and the wife’s estimate in her financial statement that he had a reasonable basis for his belief that the company was worth significantly more than $150,000.00 in June 2012.

7. The husband said that since the current proceedings began he had wanted to appoint a forensic accountant value (business omitted) but he had been thwarted by the wife when he tried to obtain information necessary for this valuation to be carried out. The wife had resisted his attempts to subpoena the financial records of the company.

8. As an explanation for not having challenged the value at the time the orders were made the husband said that he had been anxious to get the consent orders made so that the wife would be reasonable about allowing him time with his son. He said that he was reluctant to give the wife the business but that she said words to the effect that if she did not have (business omitted) he would have a hard time seeing his son.

The wife’s case

1. It was the wife’s case that the husband had failed to put forward any evidence which would establish a miscarriage of justice and that his application should be summarily dismissed.

2. The wife said that to make out a case pursuant to s.79A(1)(a) the husband would need to establish that the value assigned to the business was significantly wrong at the time the orders were made and there was absolutely no evidence to suggest that this was the case. The child support document the husband relied on showed that the wife’s income from the business fluctuated. She had a very good year in 2012/2013 and declared income of $464,463.00 but her income in 2013/2014 as disclosed in that document was $39,822.00.

3. The evidence about her fluctuating income did not give a solid foundation for a claim that the business was likely to have been worth more than $150,000.00 in June 2012 and the estimate of value of the business in her financial statement filed on 8 August 2013 was only an estimate and in any event was not evidence of any kind that the business was worth more than $150,000.00 in June 2012.

4. The wife’s counsel submitted that in any event even if the value used in the consent orders was proved to be wrong this was not sufficient in itself to establish a miscarriage of justice; to do that the husband would need to establish some misconduct by the wife.

5. The wife’s counsel referred me to Anderson & Anderson where Chisholm J said as follows:

   It has been held in a number of authorities that the expression “miscarriage of justice” relates to the integrity of the judicial process. It was said by the Full Court in Biggs & Suzi[3] that it is difficult to imagine circumstances in which there would be a miscarriage of justice within the meaning of Section 79 for a party to “establish only that he or she entered into the orders under a mistaken belief, even about a relevant matter, which was neither induced by or known to the other party.” The Full Court went on to quote from the decision of the Full Court in Lowe & Harrington[4] where the Full court held, in effect, that a miscarriage of justice within the meaning of the section might in some circumstances be established where there is a unilateral mistake by one party known to the other.[5]

   [3] Biggs & Suzi (1998) FamLR 700

   [4] Lowe & Harrington (1997) 21 Fam LR 583

   [5] Anderson & Anderson

6. The wife’s counsel said that nowhere in his material did the husband suggest that the wife had misled him or misinformed him about the business or that she knew something about the profitability of the business which she failed to disclose to him, indeed the evidence in the husband’s 2014 affidavits suggested that the husband had a very sound knowledge of the business prior to the consent orders being made.

7. In his affidavit filed on 27 October 2014 the husband said as follows about the creation of the company:

   At the time my group of companies engaged (omitted) Accountants for their work. On my instructions (omitted) went ahead and registered the company (omitted) Pty Ltd. I was incorporating (omitted) Pty Ltd and (omitted) Pty Ltd at the same time and it was convenient for the companies and my accountants to do the three incorporations together.

   Ms Harrison did not make any direct financial contribution to the registration or establishment of (omitted) Pty Ltd and was employed as a casual.

   (omitted) operated out of offices and used workers supplied by the (omitted). Mr S reported to me as did other employees on a daily basis as to the conduct of (omitted), which had taken over control of the (omitted) from the (business omitted) without charge.

   In January 2011 (omitted) obtained its first employee Ms E, however the (business omitted) paid her wages, and she reported to me.

   In the Consent Orders which were made in June 2012 Ms Harrison sought, and I agreed, to a transfer to her all of my interest in (business omitted). That interest included loan arrangements, foregone debts and ownership of the (omitted). I estimate that the value given to Ms Harrison at that time was about $250,000.00, including a $46,000.00 loan from (omitted) to (omitted), costs to establish the company with ASIC, ATO and OSR, including legal and accounting fees, furniture and IT expenses. Within a year the company’s accounts showed an equity of $313,202.00.[6]

   [6] Affidavit of the Husband, paragraphs 32-36.

8. The husband also said as follows in his affidavit filed on 31 January 2014 (grammar as in original):

   In October 2011, the Applicant sent a letter stating “Terms of Separation” at F-1, Vol 5, Index 3, she will now run (omitted) and draw a salary as such. I am reluctant as (omitted) hold (omitted) Intellectual property and shows an annual profit of approximately $250,000.00. This will personally result in a $250,000.00 loss of income to myself. I consult my advisor who advises against it, but the Applicant constantly threatened my visitation rights to my son, X and I rejected his advice.[7]

   [7] Husband’s affidavit filed 31 January 2014 paragraph 27

9. Later in his affidavit he went on to say:

   In April 2012, I negotiated with the Applicant to pay the sum of $700,000.00 over a two year period as per the consent orders. In addition to this, the Applicant was entitled to keep (business omitted) Pty Ltd which at that time was generating a profit of around $250,000.00 per annum, plus I volunteered to pay $500.00 per week for my son X, to the Applicant.[8]

   [8] Husband’s affidavit filed 31 January 2014 paragraph 31

10. During discussion on 22 September 2014 I indicated that based on this material I felt that there was evidence that (business omitted) was in fact the husband’s business. As mentioned earlier I cannot be sure on reflection that this was the case and I intend to proceed on the assumption that it was not. Having said that the evidence in the husband’s 2014 affidavits does suggest that he had a very good knowledge of the business before the orders were made and had information about its trading figures.

11. In summary the wife’s case was that not only was there no basis for a claim that (business omitted) was worth more than $150,000.00 in June 2012, even if there had been there was no evidence that the wife had failed to make full and frank disclosure or misled the husband or done anything which impugned the integrity of the judicial process leading to the making of the orders and that therefore the husband had no reasonable prospects of succeeding with his s.79A application.

Discussion

1. The case which most closely aligns factually with the case the husband wishes to run is Barker & Barker[9] although neither counsel referred me to it.

   [9] Barker & Barker (2007) FamCA 13

2. In Barker & Barker consent orders were made on 26 November 2003 on the premise that a property “AW” which the husband was to receive was worth between $1.1 and $1.2 million.

3. On 3 December 2003 the husband received an offer of $2.65 million for the property and a few weeks later he exchanged contracts to sell it for that price.

4. The wife promptly brought an application pursuant to S.79A (1) alleging that there had been a miscarriage of justice as a result of “any other circumstance”. She was unsuccessful at first instance but successful on appeal.

5. The Full Court was satisfied that the close proximity of the sale to the date of the consent orders together with other evidence in the case should have led the trial judge to find that “AW” was undervalued by at least $1 million at the time the consent orders were made.

6. The outcome in Barker & Barker did not turn solely on the sale price of “AW.” There were other issues in this case including that the husband had received an offer of $2.3 million for the property not long before the orders were made which he said he did not consider genuine but which the Full Court considered he had an obligation to disclose. However in the course of the judgment the Full Court said as follows:

   There will thus be many cases in which an order will be made, by consent or otherwise, based upon an agreed valuation which has been prepared many months earlier. There may be factors in the intervening period which have affected the value so agreed. Unless there is some particular act which impugns the process by which the orders were obtained, the mere effluxion of time and the consequent changes in the market during that period, whether they be upward or downward, will not of themselves create an injustice, nor require either of the parties to make further investigations of value if they choose not to do so.[10]

   But s 79A is a remedial section designed to avoid a miscarriage of justice. Where there is some intervening factor known to one party, but not the other, this may lead to a result which is unfair and unjust and can be characterised as a flaw in the judicial process by which the orders were made. There may also be circumstances in which the judicial process could be impugned by a sale after orders were made and in the absence of bad faith by either party or suppression of some relevant fact, if it led to a significant miscarriage of justice.[11] [my emphasis]

   [10] Paragraph 122 of Barker & Barker (2007) FamCA 13

   [11] Paragraph 124 of Barker & Barker (2007) FamCA 13

7. The problem for the husband however is that (business omitted) has not been sold and there is no clear evidence that it was worth more than $150,000.00 in 2012.

8. In seeking to avoid summary dismissal and to be allowed time to obtain a valuation in order to develop his case the husband is in effect seeking to be allowed time make inquiries which he had every opportunity to make in 2012 but failed to make, in the hope that those inquiries will turn something up which will assist him, and he is seeking to do it in circumstances where there is absolutely no evidence that the wife failed to make full and frank disclosure or overbore his will or did anything wrong in the lead up to the consent orders being made.

9. To excuse his failure to investigate the value of (business omitted) in 2012 the husband made mention of discussions concerning X but nowhere in his 2 June 2015 or 3 July 2015 affidavits did he suggest that he failed to obtain a valuation of (business omitted) because of any threat the wife made about his time with X..

10. In his affidavit filed on 3 July 2015 the husband claimed that the wife said to him “if I do not have (business omitted) you are going to have a tough time seeing X”. He did not suggest however that this led to him failing to investigate the value of the business and he was at all times legally represented. His Counsel did not suggest nor could he have reasonably suggested that anything said or done in relation to X could establish that there had been a miscarriage of justice by reason of duress.

11. The evidence in the affidavits the husband filed in 2014 suggest that he had a very good knowledge of the business in 2012, which might explain why he did not worry about getting it valued, but even if I am wrong in having regard to this evidence, the 2015 affidavits on which the husband wished to rely contain no assertion that the wife misled him or misinformed him or refused to disclose documents in connection with the business.

12. The mere fact that a particular value for the business was inserted into the consent orders does not constitute misleading conduct by the wife and the fact that the husband omitted from his later affidavits the admissions he made earlier about his knowledge of the business does not strengthen his case.

13. A person seeking to rely on s.79A (1) bears the onus of making out the required ground on the balance of probabilities and I am satisfied that the husband has no reasonable prospects of doing that.

14. In summary, the evidence that the value assigned to the business in June 2012 was wrong is of the most equivocal kind. The husband had legal and accounting advice in 2012 and he negotiated with the wife over a period of many months before the orders were signed. He is not a vulnerable person who may have been susceptible to duress and there was no evidence remotely likely to establish duress. He had ample opportunity to investigate the value of the business in 2012 and he chose not to do so.

15. There is simply no basis on which the husband is likely to be able to establish that a miscarriage of justice occurred in 2012 and I intend to dismiss his application.  

I certify that the preceding sixty three (63) paragraphs are a true copy of the reasons for judgment of Judge Terry

Date: 6 April 2016