Judge and Judge
[2014] FamCA 528
•18 July 2014
FAMILY COURT OF AUSTRALIA
| JUDGE & JUDGE | [2014] FamCA 528 |
| FAMILY LAW – PROPERTY – Final Orders – Application by wife for the matter to proceed on an undefended basis – husband does not intend to participate in proceedings – husband defending ongoing litigation in another jurisdiction – whether final orders can be made while civil proceedings still pending in the Supreme Court of South Australia and include a “freezing order” – where Statement of Claim produced during hearing - potential for claim asserting further equitable interest – proceedings adjourned – a copy of these reasons to be provided to the other interested parties. |
| Family Law Act 1975 (Cth) s 79 |
| Bevan & Bevan [2013] FamCAFC 116 |
| APPLICANT: | Ms Judge |
| RESPONDENT: | Mr Judge |
| FILE NUMBER: | ADC | 2814 | of | 2013 |
| DATE DELIVERED: | 18 July 2014 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Berman J |
| HEARING DATE: | 15 July 2014 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Pyke QC |
| SOLICITOR FOR THE APPLICANT: | Barnes Brinsley Shaw Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Starke |
| SOLICITOR FOR THE RESPONDENT: | Starke Lawyers |
Orders
UPON NOTING orders made on 15 July 2014
That on or before 4pm on 30 July 2014 a copy of the order made 15 July 2014 and these reasons for judgment be served upon B Pty Ltd being the plaintiff in Supreme Court of South Australia proceedings number 772 of 2013 by their solicitors Iles Selley Lawyers.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Judge & Judge has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT ADELAIDE |
FILE NUMBER: ADC 2814 of 2013
| Ms Judge |
Applicant
And
| Mr Judge |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
By Amended Initiating application filed in the Federal Circuit Court of Australia on 21 February 2014 Ms Judge (“the wife”) seeks orders by way of property settlement that Mr Judge (“the husband”) transfer his title and interest in the jointly owned property situate at C Street, Suburb D in the State of South Australia (“the Suburb D property”) to her.
Contemporaneously with the transfer of the husband’s interest in the former matrimonial home, the wife will discharge the mortgage secured over the said property and refinance same to the complete exoneration of the husband.
The wife also seeks to retain those items of property that are currently in her possession together with her superannuation entitlement with Hesta and Super SA.
The balance of the property held by the parties is to be retained by the husband free of any claim by the wife.
The husband filed a Response on 16 September 2013 and seeks orders that the “matrimonial property available for distribution, including superannuation, be divided 60 per cent to the wife and 40 per cent to the husband and/or as this Honourable Court deems just and expedient”.
By Application in a Case filed by the wife on 14 May 2014, the wife seeks the following orders:-
(1)That the matter identified by Action Number ADC … of 2013 proceed on an undefended basis.
(2)That the matter be listed before a Judge of the Family Court of Australia at the earliest convenience of the Court noting that the wife estimates the hearing length will be approximately half a day.
The application was supported by an affidavit of the wife’s solicitor filed on the same date.
The Application in a Case was initially considered by a Registrar of this Court and orders were made that further consideration of an undefended hearing be listed before me on 15 July 2014 at 2.15pm.
It was further ordered that any trial affidavit material be filed and served within 14 days.
In compliance with the trial directions, the wife relies upon the following documents:-
(1)Amended Initiating Application filed 21 February 2014.
(2)Trial Affidavit of wife filed 17 June 2014.
(3)Affidavit of Ms E filed 17 June 2014.
(4)Financial Statement of wife filed 17 June 2014.
(5)Affidavit of Mr F (valuer) filed 17 June 2014.
By letter dated 29 April 2014 from the husband’s solicitors Starke Lawyers addressed to the Registries of the Federal Circuit Court and Family Court of Australia (Annexure G to the affidavit of Ms E filed 17 June 2014), the husband’s solicitors advised that:-
[Mr Judge’s] position is that the matrimonial residence has been owned by him and his wife just prior to marriage should be transferred to the wife as part of the property settlement and that the parties should retain whatever possession they have.
[Mr Judge] will abide the event.
The correspondence also advised that the husband “will no longer participate (in the proceedings) and we are instructed not to attend”.
It was that advice and other clear indications of the husband’s intention not to participate in the proceedings that was the catalyst for the wife’s Application in a Case seeking that the matter proceed on an undefended basis.
Notwithstanding the clear indication given, on the hearing of the matter the husband was in attendance and represented by Starke Lawyers. Counsel for the husband made it clear that it was not the husband’s intention to become involved in the proceedings and referred to an affidavit filed by the husband on 11 July 2014 which confirmed that the husband did not intend to participate in these proceedings and does not propose to contest them. In short, the husband will abide the outcome.
For reasons that will become apparent, the affidavit also provides a helpful update on the current circumstances of the husband both in respect of criminal proceedings currently underway in the District Court of South Australia and civil proceedings issued in the Supreme Court of South Australia.
At the conclusion of the hearing, I declined to make orders in terms of the Initiating Application of the wife but made the following orders:-
(1)Judgment be reserved.
(2)Leave is granted to the wife to rely upon the affidavit of the husband filed 11 July 2014.
(3)The Summons and Statement of Claim arising in the Supreme Court of South Australia in Suite Number 772 of 2013 be marked as “Exhibit 1” in the proceedings.
(4)The proceedings are adjourned for further consideration to 10am on 1 September 2014.
BACKGROUND
The husband was born in 1961. The wife was born in 1966. The parties married in 1988 and separated on 3 June 2013 after a period of cohabitation of about 24 years. The parties are not as yet divorced.
There are three children of the marriage, one of whom is still under the age of 18 years. The three children continued to reside with the wife following separation.
There is a complex financial history, but for the present purpose it is sufficient to refer to the assets and liabilities of the parties as set out at paragraph 7 of the wife’s trial affidavit. The short summary is that the parties jointly and separately have interest in property to the sum of $1,443,239 subject to liabilities that total $1,031,071. The wife has a superannuation entitlement totalling $125,910.
Accordingly, the net pool is $412,168. Of this sum the net value in respect of the property situate at C Street, Suburb D is $187,233.
Accordingly, it could be said that the pool of assets available for distribution between the parties is modest. Subject to further consideration, the effect of the orders sought by the wife would result in an outcome comfortably within the ambit of my discretion.
The affidavit of the wife’s solicitor discloses that the husband and a related corporate entity G Pty Ltd are first and second defendants respectively in proceedings issued by B Pty Ltd (“the plaintiff”) in the Supreme Court of South Australia in Suite Number … of 2013.
On 17 June 2013 an ex-parte “freezing order” was made by Vanstone J in the following terms:-
(6) (a) You must remove from Australia or in any way dispose of, deal with or diminish the value of any of your assets in Australia (Australian assets).
(7) For the purpose of this order:-
(i) Your assets include:-
(a)All your assets whether or not they are in your name and whether they are solely or co-owned;
(b)Any assets which you have the power, directly or indirectly, to dispose of or deal with as if it were your own (you are to be regarded as such power as a third party holds or controls the asset in accordance with your direct or indirect instructions); and
(c)The following assets in particular:-
(ii)Any money in account BSB065124 Account Number 10065025 in the name of the second defendant held with the Commonwealth Bank of Australia;
(iii)Any money in account BSB… Account Number … in the name of the first defendant held with the National Australia Bank;
(i)The value of your assets is the value of the interest you have individually in your assets.
Accordingly, the freezing order would include the husband’s interest in the Suburb D property.
The parties had clearly discussed property settlement and following what appears to have been a concluded agreement, the husband instructed his solicitors Starke Lawyers to file an interlocutory application seeking the following relevant order:-
(2)That the freezing order made on 17 June 2013 be varied, in particular orders 6 (a), 7 (i) (a), 7 (i) (b) so that the matrimonial residence at [C Street, Suburb D] in the State of South Australia…be removed from the freezing order, so that the property settlement orders in the Federal Circuit Court of Australia before her Honour Federal Judge Mead can be considered and sealed.
The application was supported by an affidavit of the husband’s solicitor and confirms that agreement has been reached with the necessary implication that the essential term of the agreement is a transfer of the husband’s interest in the Suburb D property to the wife. The agreement is not dissimilar to the orders sought by the wife in her Amended Initiating Application.
The interlocutory application resulted in a judgment by Nicolson J delivered 30 January 2014 (Annexure “C” to the affidavit of the wife’s solicitor). Ultimately, the interlocutory application was unsuccessful.
It was not controversial that the husband and wife held their legal title to the property since 1988. At paragraph 10 of the judgment the submissions made on behalf of the first defendant (the husband) are recorded. Essentially, an arithmetical exercise was undertaken in order to demonstrate that the proposed property settlement would see the wife retaining property (excluding superannuation) of $195,000, whereas the husband would retain property to a net value of $234,000. It was further put that the proposed settlement was therefore “legitimate or genuine arms-length settlement and not one merely designed to circumvent the terms of the freezing order”. The further submission is recorded as follows:-
(11)Counsel next submitted that the purpose of the interlocutory application was to respond appropriately to the Federal Circuit Court property proceedings which had been brought by the wife against the first defendant. Counsel then put a number of submissions directed to an attack on the plaintiff’s claim against the first defendant as set out in the Statement of Claim and affidavit evidence filed on behalf of the plaintiff. Counsel challenged the notion that even if the plaintiff ultimately were to succeed with its claim against the first defendant it did not necessarily follow that the plaintiff would be able to trace its entitlements against the first defendant into the wife’s legal and equitable interest in the matrimonial home.
(12)The difficulty with this submission is twofold. First, the plaintiff’s case, as it was accepted at the time the freezing order was made, is that the first defendant’s equitable interest in the matrimonial home may exceed his notional half interest as reflected by the legal title shown in the register. The Court exercising jurisdiction under the Family Law Act 1975 to effect a property settlement can only do so on the basis of property identified as owned by the respective parties. Often this will not require investigation, particularly where the parties are in agreement as to where the legal and equitable interests lie. However, in this case, the plaintiff is still to be heard on its claims that the first defendant has a greater interest in the matrimonial property than the legal title would otherwise suggest. It is for this reason that the freezing order as granted captured the whole of the matrimonial home property.
(13)The second difficulty with the first defendant’s submission here is that any attack on the plaintiff’s claims to the effect that they are not sufficient to permit the freezing order is to capture the whole of the matrimonial home property has been foreclosed by the making of the freezing order in circumstance where they were not challenged either at the time when the ex-parte orders were confirmed or on appeal. In the absence of new evidence counsel was right to advise the Court that there was to be no challenge to the making of the freezing orders.
A number of issues arise from his Honour’s judgment. The affidavit material filed by or on behalf of the wife does not disclose the potential of a third party equitable interest. The judgment refers to a Statement of Claim but until it was tendered at the hearing before me (now “Exhibit 1”), that document was not before the Court. I accept that it only became available following a discussion between counsel for each of the parties.
The obvious concern is that I am obliged to determine the legal and equitable interests of the parties. If I am not able to do that it is a potential impediment to a clear determination of the interests of the parties and a final division of property.
A further consideration arises from the suggestion that any equitable interest of the plaintiff may extend beyond the husband’s half interest in the Suburb D property. If substantiated, a successful outcome for the plaintiff might see the matrimonial pool significantly diminished by a diminution of the net value of the Suburb D property.
STATEMENT OF CLAIM
The Statement of Claim in the Supreme Court proceedings is before the Court as “Exhibit 1”. There are significant complexities in terms of the nature of the dispute between the plaintiff and the first and second defendants (the husband and his corporate entity) but essentially the document asserts that the husband was engaged by the plaintiff as a sub-contractor between 1998 and 29 May 2013. He undertook the duties of a finance broker and it is alleged that whilst not in writing, the terms implied by law of the sub-contract engagement required the husband to act honestly and in good faith in the carrying out of his duties and to never use his position for his own financial gain or the financial gain of others.
It is alleged that the husband breached his fiduciary duty to the plaintiff in that:-
From at least 2008 the first defendant misused his position for his own financial gain, or for the gain of the second defendant or others not yet known, and engaged in conduct detrimental to the interests of the plaintiff, the borrower clients and the lender clients by improperly directing to himself and the second defendant and other monies the property of lender clients.
The particulars of the claim whilst not alleging that any monies inappropriately obtained by the husband in breach of the implied terms and his fiduciary duties have found their way directly into the Suburb D property, has alleged that the husband directed funds held in a trust account on behalf of the lender client to be paid to an account held jointly in the name of the husband and his wife being a NAB account, BSB … and Account Number ….
It is not immediately apparent from the Statement of Claim what is the nexus between the alleged misappropriation of money by the husband and the Suburb D property.
In terms of remedies sought, the plaintiff seeks damages and costs against the defendants but in particular “equitable compensation”.
As matters presently stand, there is insufficient information to more clearly understand the extent of the claim if any by the plaintiff against the Suburb D property and the basis for the freezing order in so far as it includes the husband’s interest in the Suburb D property. Furthermore, the order does seek to restrain the interest of the wife notwithstanding a suggestion in the judgment of Nicolson J that the equitable claim of the plaintiffs may extend beyond the interest of the husband in the said property.
THE LAW
Following the decision of the High Court in Stanford v Stanford (2012) FLC 93-518 the following is relevant to the matters under consideration:-
[37]First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. So much follows from the text of Section 79 (1) (a) itself, which refers to “altering the interests of the parties to the marriage in the property”. The question posted by Section 79 (2) is thus whether, having regard to those existing interests, the Court is satisfied that it is just and equitable to make a property settlement order.
In Bevan & Bevan [2013] FamCAFC 116 the Full Court at paragraph 73 said:-
The High Court in Stanford has laid down three “fundamental propositions” which will provide useful guidance to trial judges in approaching the task under Section 79. These were recited above, and could be summarised thus:-
(i)Determination of a just and equitable outcome of an application for property settlement begins with the identification of existing property interests (as determined by common law and equity);
(ii)The discretion conferred by the statute must be exercised in accordance with legal principles and must not proceed on any assumption that the parties interests in the property are or should be different from those determined by common law and equity;
(iii)A determination that a party has a right to a division of property fixed by reference only to the matters in Section 79 (4) and without separate consideration of Section 79 (2), would erroneously conflate what are distinct statutory requirements.
In Mullane v Mullane (1983) 158 CLR 436 at 445, Mason A.C.J., Wilson, Brennan, Deane and Dawson JJ said:-
In our opinion, therefore, Section 79 on its proper construction refers only to orders which work an alteration of the legal or equitable interest in the property of the parties or either of them. An interest in property is a right of a proprietary nature, not a mere personal right…it does not exclude every interest which is not assignable or transferable…
As matters are currently presented, the potential for a claim asserting an equitable interest or entitlement in respect of the Suburb D property or the suggestion of same is sufficient to justify further exploration.
OTHER INTERESTED PARTIES
Clearly, the plaintiff in the aforementioned Supreme Court proceedings is potentially an interested party. I note the correspondence forming Annexures D, E and F to the affidavit of the wife’s solicitor filed 17 June 2014. That correspondence formally advises the solicitors representing the plaintiff company that:-
·There are proceedings in the Federal Circuit Court seeking orders by the wife for property settlement
·That the effect of those orders includes an alteration of interest in the Suburb D property
·That the orders sought by the wife are as set out in the Amended Initiating Application
·An advice of the future Court date.
That letter was followed up by further correspondence dated 4 April 2014.
By letter of response dated 29 April 2014, solicitors representing the plaintiff forwarded email communication in the following terms:-
Dear [Ms E],
I refer to the above matter, and to your letter of 4 April 2014.
By way of courtesy, and so as to avoid any confusion, I confirm that we do not have instructions to attend this afternoon’s direction hearing before Registrar Paxton, nor do we have instructions to intervene in the Family Court proceedings.
Kind regards
It is a reasonable inference from the correspondence passing between the solicitors for the wife and the plaintiff’s solicitors that the plaintiff company does not intend to intervene in these proceedings.
Noting that I have adjourned further consideration of the proceedings to 10am on 1 September 2014, it would seem proper to afford a further opportunity to the plaintiff to be heard as to the extent if any of the equitable interest that the plaintiff may have in the Suburb D property.
CONCLUSION
The only further order that I propose to make in addition to those orders made on 15 July 2014 is to require a copy of that order together with these reasons to be served on the solicitors for the plaintiff in the Supreme Court proceedings.
The outstanding submission made on behalf of the wife is that a consideration of the Statement of Claim does not reveal the basis if any for asserting that the plaintiff may have an equitable interest either in respect of the husband’s interest in the Suburb D property or in some way affecting the wife’s interest in the said property.
The reliance by the wife on the husband’s affidavit filed 11 July 2014 enables the Court to better understand the current circumstances of the husband. The affidavit reveals that the husband intends to enter a plea of guilty to certain criminal charges currently being heard in the District Court of South Australia and that he is likely to be sentenced on 20 August 2014. There is also a reference to the Supreme Court proceedings and a suggestion by the husband that on the adjourned date being 26 September 2014, the proceedings will either be dismissed or discontinued. There appears to be some inter-relationship between the anticipated resolution of the Supreme Court proceedings and the orders that will be made upon a resolution of the criminal proceedings.
I make orders as appear at the commencement of these reasons.
I certify that the preceding fifty(50) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 18 July 2014.
Associate:
Date: 18 July 2014
Key Legal Topics
Areas of Law
-
Civil Procedure
Legal Concepts
-
Jurisdiction
3
1