Kaufman and Kaufman and Ors (No 2)

[2010] FamCA 474

FAMILY COURT OF AUSTRALIA

KAUFMAN & KAUFMAN AND ORS (NO. 2) [2010] FamCA 474

FAMILY LAW – PRACTICE AND PROCEDURE – Amendment of statement of claim

Aon Risks Services Australia Limited & Australian National University (2009) 239 CLR 175; (2009) 258 ALR 14; (2009) ALJR 951; [2009] HCA 27

APPLICANT: Ms Kaufman

RESPONDENT: Mr Kaufman

SECOND RESPONDENT: C Pty Ltd

THIRD RESPONDENT: N Pty Ltd

FOURTH RESPONDENT: Mr S

FIFTH RESPONDENT: D Pty Ltd

FILE NUMBER: MLC 7188 of 2008

DATE DELIVERED: 30 April 2010

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Bennett J

HEARING DATE: 30 April 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Wood

SOLICITOR FOR THE APPLICANT: Saxbys Lawyers

COUNSEL FOR THE FIRST, THIRD AND FIFTH RESPONDENTS: Mr Hines

SOLICITOR FOR THE FIRST, THIRD AND FIFTH RESPONDENTS: Evans Ellis Law

COUNSEL FOR THE SECOND AND FOURTH RESPONDENT Mr Geddes QC with Mr Best

SOLICITOR FOR THE SECOND AND FOURTH RESPONDENT Dov Silberman

Orders

1. That there be leave to the husband and to N Pty Ltd to amend the statement of claim upon which they rely in terms of Exhibit “H1” and that exhibit stand as the amended statement of claim, notwithstanding any provision in the Family Law Rules to the contrary.

2. That by 30 June 2010 the wife file and serve a defence to the amended statement of claim.

3. That within 7 days Mr S and C Pty Ltd file and serve any request of N Pty Ltd for further and better particulars and, within 21 days of receipt by Mr S and C Pty Ltd of further and better particulars or notification that further and better particulars are refused or will not be provided, each party file and serve a defence to the amended statement of claim.

4. That I reserve the question of the wife’s costs as against the husband and any entities associated with him of and consequential to the amendment of the statement of claim referred to herein.

5. That I reserve the issue of the costs of C Pty Ltd and Mr S in relation to the costs of and incidental to the amendment as well as the costs referred to in paragraph 32 and 33 of the affidavit of Dov Silberman affirmed on 29 April 2010.

6. That N Pty Ltd file and serve any reply to the defences by not later than 12 July 2010.

7. That this matter be mentioned before me on 15 July 2010 at 9.00 am for the purpose of directions for the filing of case outlines.

8. That by way of compliance with Rule 19.04 of the Family Law Rules 2004 by not later than 12.00 noon on 12 July 2010, the practitioner for each party provide notice in writing to his/her client of:-

   a)the actual costs which will be incurred by the client up to and including the mention on 15 July 2010;

   b)any expenses paid or payable to an expert witness or, if those expenses cannot be ascertained, after the making of all reasonable enquiries, an estimate of any expenses;

   d)the costs payable for each day of the trial;

   e)the estimated length of the trial;

   f)the date of payments made and the source of the funds for the costs paid or to be paid so that:-

   i.if costs have been paid by cheque, details must be provided of the account on which the cheque was drawn;

   ii.if costs have been paid by credit card, the details must identify the finance provider and number and name of the credit card facility; and

   iiiif costs have been paid in cash, the details must identify the payer.

9. That contemporaneously with compliance by the practitioner concerned with paragraph 8 of this Order, the practitioner provide to my Associate, by facsimile or email a copy of the notification given to his/her client pursuant to paragraph 8 of this Order.

10. That pursuant to Rule 19.50 of the Family Law Rules this matter reasonably required the attendance of Senior Counsel and Counsel.

11. That the reasons for judgment this day be transcribed and that copies be made available to the parties.

AND THE COURT NOTES that the husband does not propose to enter any defence or take any steps on behalf of D Pty Ltd in relation to the proceedings.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER:  MLC 7188 of 2008

MS KAUFMAN

Applicant

And

MR KAUFMAN

Respondent

REASONS FOR JUDGMENT

ex tempore

1. These proceedings come before me on the husband’s application to amend his statement of claim by adding to it two further “defendants” which, if he is successful, would be respondents.

2. The respondents sought to be added are C Pty Ltd, as trustee of the R Trust, and D Corporation Pty Ltd, as the former trustee of the K Investment Trust, and the former trustee of the Kaufman Family Trust. 

3. These proceedings are under Pt.VIII of the Family Law Act 1975 (Cth) (“Act”), and part of the proceedings was transferred from the Supreme Court of Victoria. The case listed before me as the first case to commence on 2 August 2010 for final hearing.

4. The wife is Ms Kaufman.  The husband is Mr Kaufman.  These reasons will, however, deal in more particularity with the various entities.  I have not been given a map or diagram of entities. It would have been helpful if I had been. However, I will go through what I know.

5. The Kaufman Family Trust was established in March 1988.  The husband is the appointor of that trust.  Between its establishment and July 2008, the trustee of the trust was D Pty Ltd (“D Pty Ltd”), an entity of which the husband and wife are directors and of which the wife may be the majority shareholder.  K Investment Trust was established in March 1989.  The husband is the appointor of that trust.  Between its establishment and July 2008, D Pty Ltd was the trustee of the trust and, as previously mentioned, the husband and wife are directors of D Pty Ltd, and the wife may be the majority shareholder of that entity. 

6. On 1 July 2008, shortly after the husband and wife separated, the husband exercised his power of appointment in relation to the Kaufman Family Trust and the K Investment Trust and replaced D Pty Ltd with his own company, N Pty Ltd.  N Pty Ltd is a company of which he is the sole director and shareholder.  Shortly thereafter, N Pty Ltd, in its capacity as trustee of both trusts, instituted proceedings in the Supreme Court of Victoria seeking repayment of approximately $1.8 million from the R Trust pursuant to a series of transactions which it alleges were commercial.  The R Trust was established in 1996.  The appointor of the trust was the wife’s mother, Mrs S. 

7. From the time of its establishment until 2006, the wife and her brother, Mr S, were trustees of the R Trust (“R Trust”).  In June 2006, C Pty Ltd was appointed as trustee of the trust, presumably at the behest of the appointor, who is the wife's mother.  The beneficiaries of R Trust are the wife, her brother, their spouses, and their children.  I am informed that it is currently agreed that the assets of the R Trust amount to some $3.5 million, of which $500,000 relates to a property in O.  The O property is owned, according to the wife, as to 50 per cent by her and her brother, as trustee for the R Trust, which was the case when the property was acquired.  They are registered on title as tenants in common.  The other 50 per cent of the property is registered in the name of A Pty Ltd, which is an entity controlled by the husband.  The wife alleges that, whilst that entity is registered as a proprietor of the O property, the husband has previously acknowledged that there is no beneficial interest held by A Pty Ltd, or himself, in it. 

8. The former matrimonial home of the husband and the wife was a property at M.  There has been a series of mentions before me - and I have gleaned some of this from my earlier notes - it is a property which is now sold.  However, the holding of that property sets the context for much of these proceedings.  

9. The former matrimonial home was acquired early in the marriage and prior to the birth of either of the parties’ children.  In the early 2000s, the property was demolished and, over some years, reconstructed for the husband and wife by the wife’s brother, Mr S.  It is alleged by the wife that certain distributions were made from the R Trust to the husband’s trusts, which are the Kaufman Family Trust and the K Investment Trust, and recorded as loans either to the trusts or to its then trustee, D Pty Ltd.  Counsel for the husband and for the current trustee of the husband’s trusts says that they have been referred to as unpaid distributions or unpaid loans. 

10. None of that is particularly clear to me, but I accept that, that transactions were documented by entities controlled by the wife, or wife and her brother, in favour of the husband’s trusts. It is on those entries and transactions that the husband, through his entities, seeks to recover $1.8m.  The wife, on the other hand, says that the transactions were done for “tax effective” reasons, and that there was a consensus amongst all concerned, including the husband, that no moneys would, in fact, be payable from the R Trust to any entity associated with the husband.  Those transactions are the basis for the husband’s claim for something in the vicinity of $1.8 million.  The husband denies that the moneys were not recoverable hence he sought to recover the monies in the Supreme Court and, now, since the transfer, in this Court.

11. It is asserted by the wife, or has previously been asserted by the wife, that the construction of the former matrimonial home by her brother represented a significant financial advantage to them - that is, they paid much less through him than they would have paid otherwise and that there were various times at which the financial support of the husband and the wife and their children were propped up, or significantly augmented, by the R Trust.  There are no proceedings, however, for a recovery of those moneys. 

12. All of the protagonists in all of the entities and all of the protagonists in the transactions are before the Court - that is, the husband and the wife and the wife’s brother.  Of those, the wife’s brother has least interest in being here. He is represented by Mr Geddes QC and Mr Best of junior counsel.  The wife is represented by Mr Wood of counsel. The husband is represented by Mr Hines of counsel who is instructed by Evans Ellis Law.  There was previously some issue of conflict taken in respect of counsel for the husband or those who then instructed him but that issue seems to have fallen away and I can discount it as anything that will cause delay at the trial or in the orderly preparation of the matter for trial.

13. The amendment which is sought to be made today will add C Pty Ltd as a respondent in its capacity as trustee of the R Trust.  It will also add D Pty Ltd as a respondent, and that is in its capacity as a trustee of the K Investment Trust and the Kaufman Family Trust from the time of the establishment of those trusts until 1 July 2008.  It is the former trustee of those trusts. 

14. The amendment is opposed.

15. I have regard to the sworn material, first by that of the husband sworn on

    
    

    24 March 2010, and then that by Mr Silberman, solicitor, for C Pty Ltd and Mr S sworn on 29 April 2010. 

16. The picture that emerges from reading both documents is that from at least

    
    

    26 August 2008, when the proceedings from the Supreme Court were transferred into this Court, the practitioners for the wife and for her brother and their associated entities have been telling the husband and the entities associated with them that their proceedings were in part misconceived, incomplete, or incompetent.  Some two years later, it seems that the husband deposes to seeking to add the parties, which were previously identified by the wife's practitioners, and doing so “for the sake of completeness”.  I expect that is fairly much an understatement. It appears that what the husband is doing now is rectifying defects which were apparent to others over the last two years. 

17. The trial is set for 2 August 2010.  It is the first matter listed at the moment; others will be listed behind it, but it will proceed in priority to them unless some postponing feature emerges in this case. 

18. Mr Geddes of counsel has taken me through a history of the matter.  I have had the helpful affidavit of Mr Silberman.

19. Mr Geddes concedes that the amendment, whilst it may involve some future expense, will not endanger the matter proceeding on 2 August. I am satisfied that the amendment brings into the arena of this litigation further entities which are either relevant, or may be relevant, to a determination of the proceedings under Pt.VIII of the Act between the husband and the wife and the other proceedings transferred from the Supreme Court.

20. The statement of claim, as pointed out by Mr Silberman, even in its amended form may be deficient, and if it is, then the respondents can either seek further and better particulars or sit back and see what happens without things being cured.  It does not appear to me that the amendments sought bring any further assets into the pool other than those which were originally referred to in both sets of proceedings, or, if there are any further assets sought to be brought into the pool, there was none that were not contemplated within the original proceedings. The husband concedes that if he or his entities recover any money from the entities of the wife’s brother or the wife, those monies will go into the pool of assets divisible between the husband and the wife.

21. Counsel for the husband has referred me to the judgment of Dodds‑Stretton J in the Federal Court of Australia, which in turn contains references by her Honour to the recent High Court case of Aon Risks Services Australia Limited & Australian National University (2009) 239 CLR 175; (2009) 258 ALR 14; (2009) ALJR 951; [2009] HCA 27. I have regard to those cases and to the principles of case management and fairness. Mostly, I am concerned that we should progress the proceeding to a trial, which will ultimately operate to quell the disputes between the husband and the wife and the various companies with which they are aligned, or over which they have control.

22. My concern about getting the matter to a final hearing is to avoid the matter being bogged down in detail.  I intend no disrespect to the practitioners, who have obviously put much work into the matter and analysed the husband’s case - and they are not exclusively on the husband’s side - but the principal things about which this Court is concerned is that there be a fair trial.  That is, a trial which is underpinned by procedural fairness, with the opportunity of everyone to adduce relevant evidence, and, very significantly, by the ability of this Court to make orders which are binding on all relevant persons and activities at the end of the proceedings. 

23. I will allow the amendment.

I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Bennett

Associate: 

Date:  11 June 2010