Heron and Heron

[2018] FCCA 1369

FEDERAL CIRCUIT COURT OF AUSTRALIA

HERON & HERON [2018] FCCA 1369

Catchwords:
FAMILY LAW – Property proceedings – proceedings transferred to the Family Court of Australia – order made.

Legislation:

Federal Circuit Court of Australia Act 1999 (Cth), s.39
Federal Circuit Court Rules 2001 (Cth), r.8.02

Cases cited:

Morris & Rosetti [2017] FamCA 249

Applicant: MS HERON

Respondent: MR HERON

File Number: PAC 3615 of 2015

Judgment of: Judge Newbrun

Hearing date: 25 May 2018

Date of Last Submission: 25 May 2018

Delivered at: Parramatta

Delivered on: 28 May 2018

REPRESENTATION

Solicitors for the Applicant: Mr Lofitis of West Legal

Solicitors for the Respondent: Ms Khalil of Saba El-Hanania Lawyers

ORDERS

1. These property proceedings are forthwith transferred to the Family Court of Australia at Parramatta.

NOTATION

The Court refers to its written judgment in relation to the above transfer Order.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT PARRAMATTA

PAC 3615 of 2015

MS HERON

Applicant

And

MR HERON

Respondent

REASONS FOR JUDGMENT

1. The within Reasons for Judgment relate to this Court’s order of 25 May 2018 that these property proceedings be transferred to the Family Court of Australia.

2. The parties are aged in their early fifties, their relationship spanned some 24 years, and they have three adult children.

Issues in dispute

1. The issues in dispute are as follows:

   a)Valuation of the parties’ business (operated through a corporation);

   b)Whether proper financial disclosure by the husband in relation to the business has been afforded to the wife;

   c)Whether the business has improperly expended moneys for non-business expenses;

   d)Whether the husband wilfully caused a diminution in value of the business’ value through neglect and other actions, following separation;

   e)The extent to which the wife contributed to the business through her alleged work in the business during the relationship (a marriage from 1992 to separation in November 2014, with three adult children);

   f)The manner in which the purchase of the businesses factory premises was financed;

   g)Whether, and the extent to which, the husband sought to exercise dominion over the business company and sought to exclude the wife from the business (including denying her access to business banking records and other records of the business) since February 2015;

   h)Whether the wife accessed the business’ business account in January 2015 and paid herself certain moneys without the husband’s permission;

   i)Whether $145,000 received by the wife under the will of her late sister should be held on trust by the wife for the children of the relationship;

   j)The extent to which the wife made contributions as a homemaker and parent, and the extent to which the husband made such contributions;

   k)Whether, and the extent to which, the husband has wasted matrimonial assets through gambling on racehorses;

   l)Whether there should be any significant adjustments pursuant to section 75(2) of the Family Law Act 1975 (Cth) in favour of the wife by reason of her adverse mental health; she contends that she is not employable because of, inter alia, her anxiety condition, which is disputed by the husband;

   m)Whether, and the extent to which, the wife’s alleged renovations to the parties’ jointly owned Suburb B Property post-separation has increased the value of that property;

   n)The extent to which inheritances received by the wife from her late father and sister should be taken into account by the Court;

   o)The extent to which the wife received employment income during the early part of the relationship;

   p)Whether the wife made a payment of $17,000, representing some of her superannuation, towards reducing the loan on the Suburb B property.

Relevant statutory provisions and principles

1. The Court refers to the decision of Tree J in Morris & Rosetti [2017] FamCA 249. His Honour sets out in that decision, in relation to transfers of proceedings between this Court and the Family Court of Australia, the relevant statutory provisions and principles, and refers to a Protocol, agreed to between the heads of jurisdiction of this Court and the Family Court of Australia, in relation to such transfers, as follows:

   14. The heads of jurisdiction of both Family Court and the Federal Circuit Court have agreed upon, and published, a protocol for the guidance as the appropriate court in which parties should commence proceedings. It provides as follows:

   If any one of the following criteria applies, then the application for final orders ordinarily should be filed and/or heard in the Family Court of Australia (“FCoA”), if judicial resources permit, otherwise the matter should be filed and/or heard in the Federal Magistrate Court (“FMC”).

   1. International child abduction.

   2. International relocation.

   3. Disputes as to whether a case should be heard in Australia.

   4. Special medical procedures (of the type such as gender reassignment and sterilisation).

   5. Contravention and related applications in parenting cases relating to orders which have been made in FCoA proceedings; which have reached a final stage of hearing or a judicial determination and which have been made within 12 months prior to filing.

   6. Serious allegations of sexual abuse of a child warranting transfer to the Magellan list or similar list where applicable, and serious allegations of physical abuse of a child or serious controlling family violence warranting the attention of a superior court.

   7. Complex questions of jurisdiction or law.

   8. If the matter proceeds to a final hearing, it is likely it would take in excess of four days of hearing time.

   Note: The FCoA has exclusive jurisdiction in relation to adoption and the validity of marriages and divorces.

   Transfers

   1. Either Court on its own motion or on application of a party can transfer a matter to the other Court.

   2. There is no right of appeal from a decision as to transfer.

   15. It is pertinent to make the following observations in relation to the protocol:

   ·    The protocol speaks about the appropriate court in which proceedings should be commenced. It does not speak, necessarily or directly, to the matters which might inform transfer by either court, although there may be an expectation that the matters enumerated in it would be relevant to the exercise of the discretion to transfer;

   ·    The language of the protocol admits of exception: for instance the direction that certain matters “ordinarily” should be filed in the Family Court, and the reference to “if judicial resources permit;”

   ·    Some of the criteria require a degree subjective interpretation, for instance, the reference to “serious” allegations of abuse, and “complex” questions of law. Necessarily, these are matters upon which reasonable minds may legitimately reach different conclusions;

   ·    Notwithstanding those observations, the intent of the protocol is to effect a relatively clear division of work between the two courts, with the Family Court undertaking work more suited to a superior court of record. Whilst terms such as “complex,” “difficult” or “complicated” might on occasion be used to try and describe that division, none are perfectly apt to describe the line of demarcation between the two courts work. That is because, particularly in children’s matters, there is almost always some degree of complexity, difficulty and complication involved in determining where the best interests of children lie.

   16. The other point which should be made about the protocol is that it is an agreement between the heads of both jurisdictions. As such, it cannot lawfully fetter the discretion of either court to transfer proceedings to the other: see for instance, Re W: Publication Application (1997) 137 FLR 205 at 240 per Finn J. In fairness to those who drafted the protocol, it does not, on a plain reading of its contents, seek to do so in any event. To cast that proposition slightly differently, a judicial officer who regarded the exercise of their discretion to transfer as being required to be in conformity with the protocol would be imposing an unlawful fetter. At most, the protocol is a potentially relevant consideration.

   RELEVANT STATUTORY PROVISIONS AND PRINCIPLES

   17. Section 39 of the Federal Circuit Court of Australia Act 1999 relevantly provides:

   (1) If a proceeding is pending in the Federal Circuit Court of Australia, the Federal Circuit Court of Australia may, by order, transfer the proceeding from the Federal Circuit Court of Australia to ... the Family Court.

   ...

   (4) In deciding whether to transfer a proceeding to the Family under subsection (1), the Federal Circuit of Australia must have regard to:

   (a)     any Rules of court made for the purposes of subsection 40(4);

   (b)     whether proceedings in respect of an associated matter are pending in the Family Court;

   (c) whether the resources of the Federal Circuit Court of Australia are sufficient to hear and determine the proceedings; and

   (d)     the interests of the administration of justice.

   ...

   18. Rule 8.02 of the Federal Circuit Court Rules provides as follows:

   (1) The Court may, at the request of a party or of its own motion, transfer a proceeding to the Federal Court or the Family Court.

   (2) Unless the Court otherwise orders, a request for transfer must be made on or before the first court date for the proceeding.

   (3) Unless the Court otherwise orders, the request must be included in a response or made by application supported by an affidavit.

   (4) In addition to the factors required to be considered by the Court under subsections 39(3) and (4) of the Act for transfer of proceedings to the Federal Court or the Family Court, the following factors are relevant:

   (a) whether the proceeding is likely to involve questions of general importance, such that it would be desirable for there to be a decision of the Federal Court or the Family Court on one or more of the points in issue;

   (b) whether, if the proceeding is transferred, it is likely to be heard and determined at less cost and more convenience to the parties than if the proceeding is not transferred;

   (c) whether the proceeding will be heard earlier in the Court;

   (d) the availability of particular procedures appropriate for the class of proceeding;

   (e) the wishes of the parties.

Discussion

1. Presently, the parties each seek competing Orders in relation to the transfer of ownership of the business; the wife seeks an Order that the husband transfer his interest in a business to her, and the husband seeks an Order that the wife transfer her interest in the business to him.  The parties seek competing Orders in relation to ownership of the business’ factory premises at Suburb A.

2. At the Conciliation Conference, the parties’ balance sheet stated that the wife asserted assets of $3,785,020, with liabilities of $155,192, with the husband contending jointly owned assets, and assets in his name, of $2,113,462, and liabilities of $3,694. The parties contended superannuation entitlements in each of their respective names of about $280,000 each.

3. There is likely to be significant evidence, including cross-examination, in relation to all the above issues (under the heading, at the beginning of these Reasons, “Issues in Dispute”).

4. There is a significant and protracted dispute in relation to the value of the parties’ business, with the husband asserting that its value is $75,000, and the wife $400,000. 

5. This business has operated for over twenty years, is run through a corporation, has its place of business in factory premises owned by the husband (which includes an office and warehouse), carries out the majority of its work for clients pursuant to contract, and employs numerous employees.

6. There was a joint valuation referred to as “Limited Scope Valuation” for the business and dated 25 July 2016, prepared by Mr S, which ascribed a value of $70,000 to the business.  The valuation report expressly stated that this value did not take into consideration cash at bank, trade receivables or payables, or financial liabilities.

7. The wife asserts that the above report is flawed, and does not accept the valuation.

8. By way of background, following the issuing of the above valuation report, the wife caused a lengthy subpoena to produce documents to be filed and served upon the above business.

9. The husband disputed the schedule to that subpoena; an interlocutory hearing was held accordingly.

10. On 28 October 2016, the Court made Orders in relation to the schedule to that subpoena, and directed that the above valuer prepare a full valuation of the business, taking into account certain matters.

11. On 15 March 2017, Consent Orders were made in respect of the above Orders of 28 October 2016.

12. On 21 December 2017, the Court made further Orders in relation to the above subpoena, and varied its Orders of 28 October 2016 in relation to the manner in which the above valuer should revise his valuation of 25 July 2016 (the Court refers to its Reasons for Judgment of 21 December 2017).

13. A Conciliation Conference was held on 14 May 2018 with no agreement being reached; at that conference the Registrar observed, inter alia, that the parties did not agree on the value of the business, which was a substantial issue.

14. At the mention of these proceedings on 25 May 2018, the solicitor for the wife informed the Court that, inter alia:

    a)The wife proposes, inter alia, to seek Court Orders that a fresh joint valuation report be ordered for the business, or alternatively obtain a further and independent valuation report for the business;

    b)An amended valuation report prepared by the above valuer did not comply with the Court’s Orders of 21 December 2017, in that the valuer, inter alia, did not take into account cash at bank; the valuer failed to treat a loan to the director of $143,458 as an asset of the company, and failed to take into account trade receivables or payables;

    c)The wife still maintains that the company has failed to comply with the above subpoena (reference is made to the wife’s Affidavit filed 1 December 2017), and furthermore, having inspected boxes of receipts produced by the company under the subpoena, and having compared those receipts against copies of bank statements produced by the company, she maintains that the company has made significant payments for non-business-related items.  There is likely to be a significant factual dispute at trial in relation to these discrete issues of financial disclosure and company expenditure;

    d)The wife maintains that the evidence of the business’ accountant, Mr R (see his Affidavit filed 8 March 2017) will be challenged at trial, in that she disputes his assertions that all the financial reports, taxation returns, PAYG, BAS statements, and accounts of the business corporation are correct, based on financial information and statements provided to that accountant by the parties.

15. There is likely to be extensive and significant cross-examination at the final hearing of:

    a)Expert valuation witness/witnesses in relation to the business; 

    b)The accountant of the business;

    c)The husband and wife, in relation to a multiplicity of issues, as referred to above.

16. There is likely to be tendered in evidence extensive documentary evidence, noting that the subpoenaed documents already produced to the Court and the wife by the business corporation are voluminous and contained in numerous boxes.

17. There is a significant prospect that complex accounting principles are likely to underpin expert evidence given by the valuer/valuers of the business.

18. It will be necessary for the Court, at the final hearing of these proceedings, to hear the competing oral submissions of the parties, based upon the likely extensive evidence before the Court.

19. In the above circumstances, these proceedings will likely take more than four days of final hearing, and, in the view of the court, having regard to the Protocol alone, the proceedings should be transferred.

20. Further, as to section 39(4)(c) of the Act, the resources of this Court are not sufficient to hear and determine the proceedings. There have been extensive and prolonged interlocutory hearings in this Court to date. Two interlocutory judgments have been made by this Court and there have been numerous directions hearings. There are likely to be continued interlocutory proceedings relating to valuation evidence of the business, and financial disclosure issues in respect to that business, including with respect to further subpoenae to be issued by the wife.

21. Further, as to section 39(4) of the Federal Circuit Court of Australia Act 1999 and Rule 8.02 of the Federal Circuit Court Rules 2001:

    ·The proceedings are likely to be heard and determined at less cost and more convenience to the parties than if the proceedings are not transferred; in this Court, there are likely to be significant waiting periods between the dates of directions hearings, and delays in appointing fixtures for interlocutory disputes, compared to the Family Court of Australia. Further, in property proceedings of this nature, in particular involving significant disputes as to business valuations, the Family Court of Australia has greater expertise;

    ·The final hearing of these proceedings is likely to be heard earlier in the Family Court of Australia than in this Court; property proceedings in this Court, once ready for final hearing (which this case is not), are likely to receive a final hearing date at least twelve months thereafter;

    ·The wife expressed a desire for the proceedings to be transferred to the Family Court of Australia, with the husband not opposing that course;

    ·These proceedings are complex by reason of the significant dispute involving the business valuation, and the Court refers to its discussion above in these Reasons;

    ·Again, having regard to the issues to be determined between the parties, these proceedings are likely to take in excess of four final hearing days;

    ·The administration of justice is best served by transferring these proceedings, and the Court has regard to its discussions above.

22. The Court, in the exercise of its discretion, transfers these proceedings to the Family Court of Australia of its own motion, but notes, again, that on 25 May 2018 the wife sought a transfer which was not opposed by the husband. Had it been necessary, noting the manner in which these proceedings have progressed to date, the Court would have granted the wife leave to make that request out of time, noting the provisions of Rule 8.02(2).

I certify that the preceding twenty six (26) paragraphs are a true copy of the reasons for judgment of Judge Newbrun

Date: 28 May 2018