Keene and Scofield and Anor
[2013] FCCA 540
•14 June 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| KEENE & SCOFIELD & ANOR | [2013] FCCA 540 |
| Catchwords: FAMILY LAW – Principal proceedings concerned with existence or otherwise of a de facto relationship between the parties – applicant seeks to join third party creditor as a party to the proceedings – or in the alternative for grant of non suit injunction restraining third party from pursing proceedings in the District Court to recoup debts – whether injunction reasonably necessary to effect any division of property between the principal parties concerned – no declaration as yet made regarding existence of de facto relationship – matters to be considered – costs – what is just – application wholly unsuccessful – order for costs made. |
| Legislation: Family Law Act1975 ss.4A; 4AA; 90AF; 90RD; 90SB; 90SM; 90SK; 90SS; 90TA; 114(2)(a); 117(1); 117(2) |
| Keene & Scofield [2012] FMCAfam 28 Keene & Scofield (No.2) [2012] FMCAfam 1357 Jonah v White (2012) 45 Fam LR 460 Ascot Investments Pty Ltd v Harper & Harper (1981) FLC 91-000 McCarney & McCarney (1977) FLC 90-200 Esmore & Esmore (1979) FLC 90-711 |
| Applicant: | MR KEENE |
| First Respondent: | MS SCOFIELD |
| Second Respondent: | MR S AS LIQUIDATOR OF [T] PTY LTD (IN LIQUIDATION) |
| File Number: | ADC 983 of 2011 |
| Judgment of: | Judge Brown |
| Hearing date: | 24 May 2013 |
| Date of Last Submission: | 24 May 2013 |
| Delivered at: | Adelaide |
| Delivered on: | 14 June 2013 |
REPRESENTATION
| Counsel for the Applicant: | In person |
| Counsel for the First Respondent: | No appearance |
| Counsel for the Second Respondent: | Mr Vlahos |
| Solicitors for the Second Respondent: | Sheahan Lock Partners |
ORDERS
The application filed by Mr Keene on 22 April 2013 is dismissed.
The applicant pay the second respondent’s costs fixed in the sum of two thousand dollars ($2,000.00).
IT IS NOTED that publication of this judgment under the pseudonym Keene & Scofield & Anor is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADC 983 of 2011
| MR KEENE |
Applicant
And
| MS SCOFIELD |
First Respondent
And
| MR S AS LIQUIDATOR OF [T] PTY LTD (IN LIQUIDATION) |
Second Respondent
REASONS FOR JUDGMENT
(As Corrected)
Introduction
These proceedings arise by way of an application in a case filed on 22 April 2013. The effective respondent to the application is Mr S, who is the liquidator of [T] Pty Ltd. Mr Keene is the sole shareholder and director of [T] and is, to all intents and purposes, its alter ego.
Mr Keene has been involved in protracted litigation, in this court, with Ms Scofield, which arises pursuant to the provisions of Part VIIIAB of the Family Law Act, which deals with financial matter relating to de facto relationships.
Mr Keene wishes to join Mr S as a party to the proceedings between him and Ms Scofield and, as a consequence of that, Mr S be restrained from taking any steps to recover debts alleged to be owed by Mr Keene to [T].
Ms Scofield, through her counsel, has indicated that she is disinterested in the outcome of the application. Mr S opposes it. These reasons for judgment are directed to resolving these issues.
In order to understand the context of the application, it is useful to refer to two previous judgments delivered in this matter, which set out some of the history of the litigation between Mr Keene and Ms Scofield to date, particularly some of Mr Keene’s financial dealings with [T].[1]
[1] See Keene & Scofield [2012] FMCAfam 28 and Keene & Scofield (No.2) [2012] FMCAfam 1357
It is common ground that, from September 2006 onwards, Mr Keene and Ms Scofield have been neighbours, living respectively at number [2] and number [1] Property D. Ms Scofield holds a second mortgage over [1] Property D, which is the property owned by Mr Keene. The amount secured by the mortgage is approximately $115,000.00. The mortgage was registered in April 2008 but was subsequently discharged. Ms Scofield owns [2] Property D.
Mr Keene and Ms Scofield have known one another since 2004. It is Mr Keene’s assertion that a de facto relationship, as defined by section 4A(1) of the Family Law Act1975, existed between him and
Ms Scofield from late June 2004 until November of 2010. It was during this period he purchased [1] Property D. Ms Scofield has owned number [2] for many years.
By way of his amended application, filed 20 May 2011, Mr Keene seeks that the court make a declaration, pursuant to section 90RD(1) of the Act, that a de facto relationship existed between him and
Ms Scofield, which terminated in November of 2010.
Ms Scofield denies that any such de facto relationship has ever existed between her and Mr Keene. In the alternative, she asserts that, if the court finds that a de facto relationship did exist between the parties, it came to an end in early June of 2010.
The latter date is significant, as it would fall prior to the commencement of the Commonwealth Powers (De facto Relationship) Act (2009) South Australia, which was the necessary legislation, pursuant to which the state of South Australia referred its power to make laws relating to the breakdown of de facto relationships to the Commonwealth. It commenced on 1 July 2010.
At the most, Ms Scofield asserts that the parties had a romantic or “casual boyfriend/girlfriend type relationship” which fell far short of the relevant indicia, of a de facto relationship, as set out in section 4AA(2) of the Family LawAct.
It is her case that she leant money to Mr Keene to allow him to purchase number [1] Property D, against her better judgment and not because of any de facto relationship between them but rather because he pressured her.
On the other hand, it is Mr Keene’s position that the purchase of the property was a joint venture between him and Ms Scofield, arising from the de facto relationship between them. He asserts that he and Ms Scofield intended to demolish the dwellings on both number [1] and number [2] and build a family home, which would straddle both properties. Subsequently, it seems, the fence between the two properties was removed.
If the court makes a declaration, pursuant to section 90RD(1), that there was a de facto relationship between the parties, at a time when the applicable legislation was operative, Mr Keene would thereafter seek orders, pursuant to section 90SM, which would result in the alteration of property interests between him and Ms Scofield.
Specifically, Mr Keene seeks an order that the debt owed by him to Ms Scofield, which is secured by way of the mortgage over number [1], be either set aside or that he be adjudged entitled to the sum in question, as his part of an appropriate settlement of the de facto property proceedings arising between the parties.
The court is a long way from dealing with any application arising pursuant to section 90RD(1). No determination has yet been made as to whether a de facto relationship did or did not exist between the parties. The court has however heard evidence over the course of approximately six days spread over January, February, April and May of this judgment. Judgment was reserved in respect of the threshold issue of whether a de facto relationship did or did not exist between the parties on 10 May 2013.
These proceedings were vigorously contested between the parties and much time and energy was spent by each of them examining the various aspects of their relationship with one another by reference to the various indicia delineated in section 4AA(2) of the Act.
Pursuant to section 4AA(1), the court is required to have regard to all the circumstances of the parties concerned to determine whether they have a relationship as a couple living together on a genuine domestic basis. In Jonah v White [2] Murphy J considered that the key to this definition is to be summarised by a concept, which he denoted as coupledom. Coupledom arose, in his Honour’s view, when the parties concerned had so merged their lives together that they were, for all practical purposes, living together as a couple on a genuine domestic basis.
[2] Jonah v White (2012) 45 Fam LR 460 at 471
Circumstances which may be relevant to possible coupledom, to utilise his Honour’s terminology, are delineated in section 4AA(2). The list provided is not exhaustive and the factors on it are not specifically noted to be directive. They are as follows:
(a) the duration of the relationship;
(b)the nature and extent of their common residence;
(c)whether a sexual relationship exists;
(d)the degree of financial dependence or interdependence, and any arrangements for financial support, between them;
(e)the ownership, use and acquisition of their property;
(f)the degree of mutual commitment to a shared life;
(g)whether the relationship is or was registered under a prescribed law of a State or Territory as a prescribed kind of relationship;
(h)the care and support of children;
(i)the reputation and public aspects of the relationship.
Regrettably the hearing of Mr Keene’s application has been delayed. This delay has not arisen from any default on his part. The proceedings were initially listed for hearing, regarding the issue of the alleged de facto relationship between the parties, on 1 & 2 March 2012. The hearing did not proceed.
The case was delayed because, in early 2012, doubts arose relating to the validity of the applicable legislation as a consequence of irregularities in its proclamation process. Later Ms Scofield fell ill and, in these circumstances, Mr Keene agreed to a deferral of the case. Later again, he was charged with a number of serious criminal charges relating to Ms Scofield, which were later discontinued by the police.
Notwithstanding these delays, Mr Keene filed his affidavit material for the trial, at an early stage, in February of 2012. On the other hand, it is only recently that Ms Scofield has filed her evidence in support of her position that there has never been a de facto relationship between the parties.
However, prior to the aborted March 2012 trial, Ms Scofield brought an application for security for costs. This provided a forum for the examination of the parties’ respective financial positions at the time. The outcome of the application is contained in the first decision handed down.
Ms Scofield is a [occupation omitted], who works on a part-time basis, because, in the past, she has suffered serious health problems. As a consequence, she is a modest wage earner. She has two children, unrelated to Mr Keene, who are significantly dependant upon her.
It is not controversial, so far as Mr Keene and Ms Scofield are concerned, that Ms Scofield’s most significant asset is the property at number [2], which she values at $550,000.00. It is however subject to an unregistered mortgage, in favour of her mother, in the sum of $460,000.00.
Ms Scofield has been represented throughout the proceedings to date. She has had some assistance, from relatives, in respect of the payment of her legal fees. She has put Mr Keene, on notice, if he is unsuccessful in his application for a declaration that a de facto relationship existed between the parties, she will seek costs from him.
Mr Keene is a self-employed [omitted]. Until recently, this business was operated through [T] Pty Ltd. This company is now in liquidation.
Mr Keene is the registered proprietor of number [1] Property D, which he estimates is worth approximately $550,000.00. It is subject to a first mortgage, in favour of the Westpac Bank, in the sum of $480,000.00.
In addition, Mr Keene owns four units at [M]. In 2011, he valued these units at $1.2million. However, the units are subject to a mortgage, again in favour of the Westpac Bank, in a sum of $950,000.00.
For reasons previously provided, I dismissed the application for security of costs. At the time, I accepted that Mr Keene had access to equity, particularly in the [M] units, which was likely to be significantly greater than any award of costs made in Ms Scofield’s favour. I did however injunct Mr Keene from further mortgaging or encumbering either number [1] Property D or the units at [M]. I should also point out that this order was made in anticipation of the trial proceeding within a few weeks time.
In November of 2012, in response to an application brought by
Ms Scofield essentially relating to discovery issues, Mr Keene sought an order from the court restraining Ms Scofield from bringing proceedings against him, in the District Court of South Australia, relating to the debt said to be owed by Mr Keene to Ms Scofield arising from the money advanced when number [1] was purchased.
It was Mr Keene’s position that Ms Scofield had agreed to forebear from such litigation pending the outcome of the proceedings, between the parties, in this court. On that basis, it was his position that it would be fundamentally unfair, to him, if such a non-suit injunction was not made in his favour.
On the other hand, Ms Scofield was concerned that, if she was so injuncted, there was a real risk that she would not be able to recover moneys properly due to her. These concerns arose, in part at least, from actions brought against [T] by its various creditors.
The decision, in respect of the application for a non-suit injunction was heard on 4 December 2012 and delivered on 11 December 2012. I granted the injunction sought. In the applicable reasons for judgment, I said as follows:
“In my view, the two most significant factors as to whether the injunction in question should be granted are as follows. Firstly, Ms Scofield agreed to forebear with possible proceedings in the District Court until the preliminary issue of the existence or otherwise of the de facto relationship had been determined. Secondly, the hearing of this issue can commence within a comparatively short period of time.
At this juncture, it seems improbable that Ms Scofield will be able to much advance any proceedings she wishes to bring in the District Court prior to 31 January 2013. The only prospect of this occurring being if Mr Keene does not defend the proceedings when instituted and judgment is either entered in default of an appearance or summarily against him.
In the unlikely event that judgment is so entered against Mr Keene, I am satisfied that this would be unfair to him as it would potentially rob him of his rights under Part VIIIAB of the Family Law Act for an alteration of property interests under section 90SM of the Act, if a declaration is ultimately made that a de facto relationship existed between the parties.”[3]
[3] See Keene & Scofield (No.2) [2012] FMCAfam 1357
Essentially, Mr Keene seeks a further such non-suit injunction. However, on this occasion, the rights and interests of parties extraneous to his litigation with Ms Scofield are potentially affected. Those third parties essentially being the creditors of [T] Pty Ltd.
The current applications
Until recently, Mr Keene has been represented by solicitors, who have retained senior counsel to appear on his behalf. However, for the last few days of the recent trial issues between him and Ms Scofield,
Mr Keene has been appearing on his own behalf. He prepared the current application regarding the liquidator of [T] Pty Ltd.
In his application, filed on 22 April 2013, Mr Keene seeks the following orders.
“That the liquidator of [T] Pty Ltd Mr S be joined to these proceedings.
That the liquidator be restrained and injunctions be granted restraining him from taking any step to further recover or enforce the debt allegedly due and owing by the de facto husband to the liquidator pending the making of final orders.
That the amount due and owing by the de facto husband to the liquidator be deemed to be a debt of the relationship.
That the de facto wife do pay and discharge the said debt within fourteen (14) days and that the ultimate appointment thereof be reserved for the trial Magistrate.
That the de facto wife pay the costs of the incidental to this application.
The matter be heard urgently.”
Mr Keene has prepared a brief affidavit in support of his application. He states that, on 24 October 2011, a payment arrangement was made between [T] Pty Ltd and the Australian Taxation Office in respect of a debt owed by the company to [T]. The amount of the debt was approximately $92,200.00. It was agreed that the company would pay this debt in April 2012 and the Australian Taxation Office would forebear from proceeding to recover the moneys owed to it. From Mr Keene’s perspective, he anticipated that this debt would be after the conclusion of the current round of proceedings, with Ms Scofield. No doubt, he expected to be vindicated in respect of his assertion that a de facto relationship existed between him and her.
When Mr Keene’s application first came before the court, counsel for Ms Scofield indicated that his client would not be filing any material in response to Mr Keene’s application and did not wish to be heard in respect of it.
Mr S, the liquidator of [T] Pty Ltd, responded to Mr Keene’s application on 20 May 2013. He opposes each of the orders sought by Mr Keene.
In support of his position, Mr S filed an affidavit on 20 May 2013. He was appointed liquidator of [T], by order of the Federal Court at Adelaide, on 10 October 2012. Concurrently, an order for the winding up of [T] was made, on the basis that it was insolvent.
Mr S further deposed that [T] had been incorporated and registered with ASIC on 5 September 1994. On 30 November 2001, Mr Keene had been appointed its sole director and company secretary. This situation had remained unchanged until the winding up order had been made.
Following his appointment as [T]’s sole director, Mr Keene acquired 100 percent of its issued shares, which comprised twelve ordinary shares at $1.00 per share, which were recorded by ASIC as being fully paid.
Mr S further deposed that, on 22 May 2007, Mr Keene caused [T] to issue a further 199,988 ordinary shares to him at $1.00 per share. These shares were only partially paid at a rate of $0.01 per share.
Accordingly, as at the date of winding up, [T] had issued 200,000 ordinary shares to Mr Keene, creating a share capital of $200,000.00. However, in respect of this share capital, Mr Keene had paid $2,011.88.
As a consequence of the winding up order, on 14 November 2012,
Mr S wrote to Mr Keene requesting payment of the sum of $197,988.12 being the unpaid capital of [T]. Mr Keene responded to this demand on 21 November 2012, indicating that he was not in a position to provide any funds to [T].
In his capacity as liquidator of [T], Mr S has received two formal proofs of debt, pursuant to the Corporations Act. These relate to a debt of $97,081.28 owed by [T] to the Australian Taxation Office and a further debt of $2,002.00 owed in respect of professional fees to a firm of solicitors. Mr S also deposes that he has received claims from ASIC in respect of unpaid company fees and anticipates receiving further proofs of debt from other creditors of the company.
On 22 February 2013, Mr S commenced proceedings in the District Court of South Australia seeking to recover the amount owed by
Mr Keene to [T] in respect of its share capital. As at 24 May 2013,
Mr Keene had not filed a defence in respect of the summons in question. The matter returns to the District Court on 5 June 2013.
In support of his application that Mr Keene’s application be dismissed, Mr S deposes as follows:
“Pursuant to my appointment on 10 October 2012 by the Federal Court of Australia as liquidator of [T], and pursuant to my statutory duties under the Corporations Act 2001, and pursuant to my fiduciary duties to act in the best interest of [T], I am required to make a call on Keene as a contributory of [T] for the unpaid share capital he owes to [T]. The purpose of the call is to recover assets belonging to [T] for the benefit of [T]’s creditors.
If Keene’s injunction application were granted, it would further prejudice [T]’s creditors by delaying recovery of [T]’s assets. Furthermore, [T] is currently assetless and by joining [T] to these proceedings it increases [T]’s liabilities, which again is to the detriment of [T]’s creditors.
If Keene has a valid defence to the claim by [T], he is not prevented from raising it in his defence in the District Court proceedings (and indeed I have invited him to do so). The District Court has ordered Keene to file his defence by 29 May 2013.”[4]
[4] See affidavit of Mr S filed 20 May 2013 at paragraphs 21-23
Other matters
I have heard all relevant evidence, which the parties wish to lead, regarding whether or not a de facto relationship existed between the parties. The evidence in question covers a lengthy period of time and is complicated. There are factors which militate in favour of there being such a relationship, and matters which militate against.
That there was some form of relationship between the parties is clear. They obviously have had many dealings with one another, both intimate and financial, over many years. However, as a consequence of the complexity of their relationship and the moment of any decision relating to it, for each of the parties, I was not in a position to deliver judgment immediately following the case. For those reasons, judgment was reserved.
However, at this stage, it is possible for me to summarise the positions of each of the parties, without making concluded findings of fact in respect of those positions and the intricate evidentiary details which support them. Such a summary is relevant to the rights and entitlements of any third parties, who may potentially be affected by the decision in this case.
It is Ms Scofield’s position that there was no steady or well defined relationship between the parties, as defined by section 4AA(1) of the Act. Essentially, to paraphrase her counsel, Mr McGinn, there was no essential “coupledom” between the parties, who at best had an unsatisfactory boyfriend/girlfriend relationship with one another, which did not progress further, notwithstanding Mr Keene’s fervent desire that it should, particularly to marriage.
It is Ms Scofield’s case that the parties never had a common residence, certainly not at number [2]. In this regard, particular reliance is placed on the fact that Mr Keene provided number [1] as his billing address for a number of his financiers. In addition, Ms Scofield places significant weight, on the fact that Mr Keene indicated to the Westpac Bank, in an application for finance, that he was a single person.
Significantly, it is also Ms Scofield’s position that there was no significant financial dependence or inter-dependence between her and Mr Keene. It is common ground that the parties never held any joint bank accounts and Ms Scofield declined Mr Keene’s offer to make her a supplementary cardholder, in respect of his credit card provider.
Ms Scofield also points to the lack of mutual wills between the parties and the absence of joint insurance arrangements. In addition, it is the case that Mr Keene has not provided any documentary proof that the parties have ever incurred joint responsibility for the supply of any goods and services, for the two properties concerned, such as electricity, water, gas or rates.
Of particular relevance, in the present case, is that fact that neither party has asserted that Ms Scofield was ever involved in the operations of [T] and its financial affairs in any manner whatsoever. [T]’s business premises were at number [1]. It was not asserted by Mr Keene that Ms Scofield even had a casual or informal relationship with the business, such as taking messages for it. She did however utilise a mobile phone, the use of which was charged to [T].
It is however Mr Keene’s position that income generated through his efforts with [T] provided income, which benefited Ms Scofield and her children. Essentially, he asserts that he paid a significant portion of
Ms Scofield’s daily living expenses, particularly purchasing her groceries, as well as paying for her mobile phone.
In addition, Mr Keene asserts that the parties frequently socialised together and he paid for many dinners, outings and holidays. In this regard, he places significant weight on some items of major expenditure, incurred by him, which relate to the celebration of special occasions in Ms Scofield’s family, such as the sixteenth birthday of her daughter and the purchase of her school formal dress.
That the parties did socialise together, with some regularity, and did take common holidays, which would fit the attribution of “family holidays”, cannot be doubted. It is also acknowledged that the parties' relationship was, from time to time, a sexual one. One major factual dispute between the parties concerns their sleeping arrangements.
Mr Keene’s position is that he only slept in Ms Scofield’s bedroom at number [2], as the premises at number [1] were essentially uninhabitable. He asserts that he lent Ms Scofield his bed, sheets and other bedding, which the parties utilised for themselves. Ms Scofield only returning these items to him in early 2011.
Although Ms Scofield accepts she had the bed and Mr Keene occupied it, with her, from time to time, she refutes his assertion that she and he were a “conventional family”. By necessary implication, she denies that Mr Keene slept over at her home as often as he alleges. In this regard, it is common ground that Mr Keene never, at any time, had a key to number [2]. This fact is a significant plank of Ms Scofield’s case.
From Ms Scofield’s perspective, Mr Keene’s assertions arising from the provision of groceries for a common household are grossly exaggerated. It is her case that the evidence indicates that she purchased her own groceries, from time to time and, as such, she cannot be said to be financially dependant upon Mr Keene to even a limited degree. Essentially, it is her case that the parties had separate financial lives.
In this context, she would categorise Mr Keene as an experienced business person. It is her case that she had no involvement whatsoever in his various financial affairs, other than that she leant him a significant sum of money to enable him to purchase the property at number [1] Property D.
In this context, it seems uncontroversial that Ms Scofield had no personal involvement in the purchase and management of Mr Keene’s units at [M]. The units in question are apparently tenanted. It is also common ground that Ms Scofield is not a formal guarantor in respect of any of Mr Keene’s business arrangements.
It is Ms Scofield’s case that she sought the injunction restraining Mr Keene from dealing with the [M] units because she was fearful that any potential application, which she may bring in respect of costs, might be rendered nugatory by what she perceived to be Mr Keene’s parlous financial circumstances. Given the liquidation of [T], her position has proven to be prescient.
It is further Ms Scofield’s position that, with Mr Keene’s full knowledge, she arranged for her loan to Mr Keene to be protected by way of the lodgement of a mortgage, in her favour, on number [1] Property D. On the other hand, it is Mr Keene’s position that he did not understand the legal import of the document, which he acknowledges he did in fact sign. This second mortgage was registered in April of 2008.
The record reveals that this second mortgage was formally discharged in mid-2009. The reason Ms Scofield has provided for allowing the mortgage in question to be discharged was that Mr Keene was renegotiating his financial arrangements with his financier, the Westpac Bank, as he was under some pressure from creditors. Ms Scofield’s asserts that she did so, with extreme reluctance and subject to some duress from Mr Keene. Mr Keene does not agree.
Mr Keene asserts that number [1] was always in a poor state of repairs. As such, it is his position that it was purchased as a joint enterprise between him and Ms Scofield. The intention being to demolish it, so that a larger family home could be constructed.
In this context, he places particular reliance, on a set of architectural plans, which were prepared in anticipation of the project. These plans bear both his and Ms Scofield’s name. It is also the case that
Ms Scofield paid half of the architect’s fee incurred in respect of drawing up the plans. Ms Scofield asserts that she paid the sum in question under pressure from Mr Keene.
It is common ground between the parties that, in October of 2007 or thereabouts, Mr Keene purchased a diamond ring, which he gave to
Ms Scofield. The ring has not been returned. Mr Keene asserts that he gave the ring to Ms Scofield after proposing marriage to her and in circumstances where he believed his proposal was accepted. Mr Keene has provided evidence which indicates that the ring is worth $15,500.00.
Ms Scofield acknowledges acceptance of the ring, which she describes as “a pretty thing”. She denies however either Mr Keene proposed to her or that she accepted. In addition, she points to the fact that the parties did not take any concrete steps to marry.
In the overall context of this case, a significant matter occurred on 1 June 2010. This was the date on which Ms Scofield asserts that, whatever form of relationship existed between the parties, it undoubtedly severed completely thereafter. On this date, Ms Scofield asserts that Mr Keene attempted to run her and her children over in the driveway of number [1], whilst he was subject to a fit of temper.
Mr Keene’s evidence is that he, whilst backing his truck down the driveway of number [1], in the dark, an accident occurred as he did not realise that Ms Scofield and her children were standing behind the gate. As such, he had no intention to hurt anyone and was not angry at the time.
However, Mr Keene acknowledges that the incident did mark what he would characterise as a temporary breach in the relationship between the parties. It is Mr Keene’s evidence that is refuted by Ms Scofield, that the parties resumed their “normal” relationship by late July 2010.
Until 4 June 2010, there was no dividing fence between number [1] and number [2]. On this date, Ms Scofield instructed a builder to construct a fence along the dividing line between the two properties concerned. It is the submission of her counsel that it is hard to consider a more concrete way for her to have signalled to Mr Keene that whatever relationship existed between the two was thus brought to at an end.
Mr Keene had an accident, at his work, in late August of 2010. He was admitted to hospital as a result. Ms Scofield acknowledges visiting him in hospital and providing some care for him in the period after his discharge. Ms Scofield was noted to be Mr Keene’s next of kin in the relevant hospital records.
Ms Scofield does not dispute that she provided some limited nursing care to Mr Keene. It is however her position that she did so as a matter of ordinary human decency and because Mr Keene had no other sources of support, not because of any emotional or romantic bond between the two.
Mr Keene asserts that from July to November 2010, he and
Ms Scofield and her children engaged in numerous social activities together and he, to all intents and purposes, lived at number [2], as he had done prior to 1 June 2010. In this context, he relies on telephone records, which show that he and Ms Scofield frequently telephoned one another.
What was said specifically, during these calls, is not clear but the duration of the majority of the calls is comparatively brief. Mr Keene asserts that this supports his claim that the contents of the conversations in question were normal domestic trivialities, such as when people would be home for dinner; who was doing the shopping; and the like. This is said to support his contention that the ordinary domestic arrangements between him and Ms Scofield were resumed following the 1 June incident.
As I have already indicated, I am not, as yet, in a position to make concluded findings of fact about the myriad of evidentiary disputes arising in this case and what are the legal implications of those matters, so far as section 4AA of the Family Law Act is concerned. It will be necessary for me, in due course, to provide a more nuanced and thorough account of these matters, when I come to publish the necessary reasons for judgment, arising from the now concluded final hearing, arising from the parties’ competing claims.
However, it is clear to me that Ms Scofield has never had any involvement with Mr Keene’s business and nothing to do with the operations of [T] Pty Ltd. As such, in the circumstances of this case, I find that, on the basis of the evidence thus far led before me, it is would be difficult, in the extreme to find, that she has any legal or equitable obligation to satisfy the company’s debts.
I note, however, that the current task before the court is not to assess potential contributions arising under section 90SM(4) of the Act. Rather it is to determine whether a de facto relationship existed between the parties at a time which renders it amenable to the court’s jurisdiction. However, for reasons upon which I will expand in due course, the remoteness of the court from the task potentially arising under section 90SM(4) must have implications as to whether it reasonably necessary for the court to make a non suit injunction of the sort sought by Mr Keene.
In addition, up to this stage, Mr Keene has never previously asserted that Ms Scofield should be liable for debts arising from the operation of his business. To the contrary, his case has centred on the assertion that his legal obligations, arising under the mortgage ostensibly executed by him, in respect of his title over number [1], should be off-set against what he asserts have been his indirect financial and other contributions made towards Ms Scofield and her household, which in particular have assisted her in the acquisition, conservation and improvement of number [2].
Submissions of the parties
Mr Keene is not legally trained. As previously indicated, the material prepared by him, in respect of his application, was brief. His further submissions to the court were not extensive. Essentially, he drew my attention to what I had earlier written in delivering judgment on his application for an injunction to prevent Ms Scofield instituting proceedings against him, in the District Court.
In my view, the current circumstances are very different to those which arose at that stage. Most fundamentally, Mr Keene’s current application concerns the rights of third parties, who are disinterested in the issue of whether a de facto relationship does or does not exist between
Mr Keene and Ms Scofield. Accordingly, Mr Keene’s submissions were not helpful to me.
Mr Vlahos appeared on behalf of Mr S. He prepared a helpful written submission. As such, it is clear to me that Mr S is entitled to institute proceedings, against Mr Keene, in the District Court, in his capacity as liquidator for [T] as a consequence of Mr Keene being the sole contributory to the share capital of the company. The power arises pursuant to sections 9, 515 and 527 of the Corporations Act2001.
Mr Vlahos concedes that a debt owed by a party to a de facto relationship can be a de facto financial cause for the purposes of section 90SS of the Act. Accordingly, he accepts that the court has the authority to make the order sought by Mr Keene.
However, Mr Vlahos submits that Mr Keene has provided no evidence to explain why it is “reasonably necessary or reasonably appropriate” for the court to grant the non-suit injunction sought by him.
In particular, Mr Vlahos submitted that Mr Keene has failed to provide any evidence that the money’s owed by him to [T], as a result of shares issued to him, is to be considered a debt of his as yet unestablished de facto relationship with Ms Scofield. Mr Vlahos submits that Mr Keene has only provided his own assertion that this is the case.
In addition, Mr Vlahos argues that Mr Keene has not sought to argue that the monies sought from him, on behalf of the liquidator, are anything other than a genuine debt incurred by him. In any event, the appropriate forum for any claim that the debt is invalid is in the District Court, where Mr Keene is entitled to file a defence and otherwise argue the merits of the case against him. As yet, Mr Keene has not filed such a defence.
In all these circumstances, Mr Vlahos relies on the High court authority of Ascot Investments Pty Ltd v Harper & Harper,[5] which he summarises as follows:
·An order cannot be made where its effect will be to deprive the third party of an existing right;
·An order cannot be made to impose on such a party, a duty which the party would not otherwise be liable to perform;
·The parliament did not intend that the legitimate interests of third part should be subordinated to the interests of a party to a marriage; and
·The parliament did not intend that the Family Court should be able to make an order that would operate to the detriment of third parties.
[5] See Ascot Investments Pty Ltd v Harper & Harper (1981) FLC 91-000
The applicable legal principles
The legal provisions applicable to this matter cannot be described as readily apparent. This is a consequence of major legislative reforms, which have occurred at different times and which have resulted in significant new divisions being added to the Family Law Act.
Part VIIIAA deals with orders and injunctions binding third parties. This part was added prior to the conferral of the power to make orders in respect of de facto property on this court and the Family Court. Part VIIIAB deals with financial matters relating to de facto relationships.
Pursuant to Division 3 of Part VIIIAB the court is conferred with the same jurisdiction, to make orders binding third parties in respect of proceedings between de facto partners, as it has in respect of proceedings concerning the parties to a marriage.
The operative provision is section 90TA(2) which substitutes the terms de facto relationship for marriage and de facto financial cause for matrimonial cause, as well as making other similar substitutions, so that the specific division applying to orders and injunctions binding third parties also applies in the cases relating to persons in a de facto relationships, as it does to persons in a marriage.
Section 114(2)(a) of the Act empowers the court to grant such injunction as it considers proper in respect of a de facto financial cause. However, the section also provides that sections 90SB and 90SK apply in relation to an injunctive order in the same way in which those sections apply to an order altering property interests made pursuant to section 90SM.
Essentially, sections 90SB and 90SK impose statutory preconditions, which the parties must satisfy, before any order may be made which alters the property interests of parties to a de facto relationship.
Firstly [section 90SB] the court must be satisfied that the period of the de facto relationship, in question, is at least two years in duration; has produced a child; or the applicant in the proceedings in question has made substantial contributions, which if denied would result in a serious injustice being occasioned; and finally, the relationship in question was registered under a relevant state based law.
Secondly [section 90SK] there is a geographical condition. One or both of the parties, to the de facto relationship in question, must be resident in a participating jurisdiction, when the application is made. South Australia is a participating jurisdiction and there is no controversy that both parties were resident in the state, when Mr Keene made his application.
However, the situation is far from clear, in my view, in respect of the matters raised under section 90SB. The import of Ms Scofield’s position, in the case, is that there is no and there has never been a de facto relationship between the parties. She has not sought to agitate this particular issue, in the context of the current proceedings.
On the other hand, Mr Keene argues that the relationship between the parties was a de facto relationship and was one of significantly more than two years. It is also implicit in his position that it would occasion him a significant miscarriage of justice, if the court was not to make the declaration ultimately sought by him.
However, the fact remains that, in a formal sense, Mr Keene has not as yet satisfied the provisions of section 90SB and no concession has been made in this regard by Ms Scofield. This condition may or may not be satisfied when judgment is delivered in the substantive proceedings between Mr Keene and Ms Scofield.
The specific power to make an injunction binding a third party, pursuant to section 114, arises pursuant to section 90AF. This power includes the authority to make a non suit injunction in respect of third parties. With the substitutions, authorised by section 90TA(2), the relevant section reads as follows:
“90AF Court may make an order or injunction under section 114 binding a third party
(1) In proceedings under section 114, the court may:
(a)make an order restraining a person from repossessing property of a party to a de facto relationship; or
(b)grant an injunction restraining a person from commencing legal proceedings against a party to a de facto relationship.
…
(3)The court may only make an order or grant an injunction under subsection (1) or (2) if:
(a)the making of the order, or the granting of the injunction, is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the de facto relationship; and
(b)if the order or injunction concerns a debt of a party to the de facto relationship —it is not foreseeable at the time that the order is made, or the injunction granted, that to make the order or grant the injunction would result in the debt not being paid in full; and
(c)the third party has been accorded procedural fairness in relation to the making of the order or injunction; and
(d)for an injunction or order under subsection 114(1)—the court is satisfied that, in all the circumstances, it is proper to make the order or grant the injunction; and
(e)for an injunction under subsection 114(3)—the court is satisfied that, in all the circumstances, it is just or convenient to grant the injunction; and
(f)the court is satisfied that the order or injunction takes into account the matters mentioned in subsection (4).
(4) The matters are as follows:
(a)the taxation effect (if any) of the order or injunction on the parties to the de facto relationship;
(b)the taxation effect (if any) of the order or injunction on the third party;
(c)the social security effect (if any) of the order or injunction on the parties to the de facto relationship;
(d)the third party’s administrative costs in relation to the order or injunction;
(e)if the order or injunction concerns a debt of a party to the de facto relationship—the capacity of a party to the de facto relationship to repay the debt after the order is made or the injunction is granted;
Example: The capacity of a party to the de facto relationship to repay the debt would be affected by that party’s ability to repay the debt without undue hardship.
(f)the economic, legal or other capacity of the third party to comply with the order or injunction;
Example: The legal capacity of the third party to comply with the order or injunction could be affected by the terms of a trust deed. However, after taking the third party’s legal capacity into account, the court may make the order or grant the injunction despite the terms of the trust deed. If the court does so, the order or injunction will have effect despite those terms (see section 90AC).
(g)if, as a result of the third party being accorded procedural fairness in relation to the making of the order or the granting of the injunction, the third party raises any other matters—those matters;
(h)any other matter that the court considers relevant.”
Accordingly, the powers available to the court under Part VIIIAA, so far as they affect the rights of third parties, are subject to a number of strict preconditions for their use, which can be summarised as follows.
Firstly, the use of the power must be objectively necessary to give effect to the division of property between the relevant parties to the de facto relationship in question.
Secondly it cannot be foreseen that the making of the order will result in any debt arising to the third party in question not being paid in full.
Thirdly the third party debtor whose rights will be affected by any injunction must be accorded procedural fairness. Essentially the third party must be given the right to be heard about the consequences of the order sought.
Finally regard must be had to financial consequences for others, including government instrumentalities, of the making of the order.
Essentially, the powers available to the court under Part VIIIAA are closely circumscribed and their use should not result in the loss of any substantive rights by a third party, who is extraneous to the matrimonial relationship before the court.
The principle mechanism by which a statute is to be interpreted is of course the wording of the statute itself. However in order to confirm the meaning of any particular piece of legislation or to resolve obscurities or ambiguities in respect of it, it is permissible for the court to have regard to certain specified pieces of extrinsic material.[6]
[6] See Acts Interpretation Act 1901 (Cth) at section 15AB
Two such extrinsic sources are any explanatory memorandum, which related to the legislation when it was in bill form; and the second reading speech made by the relevant minister to the legislature. The examination of such extrinsic material is often a useful exercise for the court to follow, particularly in respect of novel pieces of legislation.
In the case of the Family Law Amendment Bill 2003 the then Attorney-General, Mr Williams said as follows in the bill’s second reading speech:
“Of major significance are the provisions in schedule 6 of the bill that will allow the court to make orders binding third parties to give effect to property settlement proceedings under the act. These provisions will apply to all creditors of the parties to the marriage, whether they are family, friends or financial institutions. In limited circumstances, where it is considered necessary, the court will be able to alter the terms of a contract between the parties to a marriage and a creditor. For example, the court could adjust the proportion of debt that each party of a marriage owes a creditor or order that the liability for a debts belongs to just one of the parties. The changes do not affect the underlying substantive rights of creditors and provide creditors with procedural rights.
The relevant passage of the explanatory memorandum reads as follows:
“Schedule 6 of the Bill provides for the Family Court to be given power to bind third parties in order to give effect to property settlements. This will apply for any creditor of a party to a marriage irrespective of whether the creditor is a friend, relative or financial institution. Procedural rights will be given to third parties to ensure that the changes do not affect the underlaying substantive property rights of the creditor.”
These sources confirm that the court is not to utilise the provisions of Part VIIIAA of the Act in such a way that affects the “underlying substantive property rights” of any creditor.
Conclusions
Mr Vlahos rightly submits that Mr Keene has provided no evidence whatsoever regarding whether it is reasonably necessary or otherwise to make the non suit injunction to restrain Mr S bringing proceedings against him personally in the District Court. This is so.
In addition, Mr Keene has not asserted that he has any defence in respect of the claim against him. Finally, no evidence has been provided by Mr Keene to indicate that the debt owed by him to [T], in respect of its issued share capital, is actually a debt arising directly from the de facto relationship alleged to exist between him and
Ms Scofield.
At its highest, the evidence indicates that it is a debt of one of the parties to a potential de facto relationship. It being clear to me, from the evidence advanced at trial, that Ms Scofield has never had any involvement in the operations of [T], either directly or indirectly.
In any event, on the basis of the evidence available to me, it would appear to be clearly the position that Mr S is entitled to bring the proceedings in question and that the monies owing to [T] will have to be paid to the company’s liquidator at some stage. The debts in question are not going away and it cannot be said that Mr S’s claim is either spurious or otherwise improper.
If Mr S is restrained from bringing his suit in the District Court, it will mean that the various creditors of [T] will be delayed in receiving their entitlements. In addition, the amounts owed will inevitably increase in quantum.
The focus in the case between Mr Keene and Ms Scofield has been on the adjoining properties at [1] & [2] Property D and the currently unregistered mortgage, in Ms Scofield’s favour, executed in respect of number [1]. Mr Keene has asserted that Ms Scofield has any form of interest in the [M] units or in [T] itself.
Given, there is no indication provided by Mr Keene that he has a defence to the claims against him made by Mr S, in his capacity as liquidator of [T], and given that Mr Keene effectively asserts that the mortgage held by Ms Scofield should be off set against other contributions said to be made to him in favour of Ms Scofield, I can find no rationale, on which it can be said, that restraining Mr S from bringing proceedings in the District Court is necessary to achieve a proper adjustment of property between Mr Keene and Ms Scofield, if and when any declaration is made that there was a de facto relationship between them.
Accordingly, there is no evidence to indicate that the granting of the injunction is necessary so that ultimately the court will be able to effect a just and equitable division of property between Mr Keene and
Ms Scofield.
In addition, as I have already pointed out, notwithstanding these considerations, at this juncture, Mr Keene has not satisfied the precondition arising pursuant to section 90SB of the Act. It has not as yet been determined that there is a de facto relationship between him and Ms Scofield to which the provisions of Part VIIIA A can be applied.
In all these circumstances, I do not consider it appropriate to make the injunction sought. To the contrary, I consider it prejudicial and unfair, to the various creditors of [T], if such an injunction is made. The effect of any such injunction must be to delay their receipt of monies properly owed to them.
In Keene & Scofield (No. 2) the earlier case dealing with Mr Keene’s successful application for a non suit injunction against Ms Scofield in respect of her desire to commence proceedings against him in the District Court in respect of the unregistered mortgage, I said as follows:
“In McCarney & McCarney[7] the Full Court considered it “undesirable” to injunct a person seeking an order, in a court of appropriate jurisdiction, for relief to which he or she would otherwise be entitled.
However, more recently, Nygh J has determined that the court should issue anti-suit injunctions in appropriate circumstances. In Esmore & Esmore[8] Nygh J said as follows:
“Where, as here, the exercise of jurisdiction by a State court would defeat the rights of the party under the Family Law Act, I feel that this court should act.”
The learned authors of Australian Family Law & Practice express the test as to whether a court should issue an anti-suit injunction as follows:
“The test seems to be: is it necessary to interfere with the progress of the litigation in the other court to preserve a right under the Family Law Act which might otherwise be lost?”[9]
[7] See McCarney & McCarney (1977) FLC 90-200 at 76,058
[8] See Esmore & Esmore (1979) FLC 90-711
[9] See Australian Family Law & Practice Broun; Dickey; Fowler; and Wade editors at page 36,723
The situation arising in the earlier case was very different to the situation pertaining between Mr Keene and his creditors, as represented by Mr S. In the first case, Ms Scofield wished to litigate an issue in the District Court, which was obviously congruent with the litigation in this court commenced earlier by Mr Keene. In addition, at an earlier stage, she had submitted herself to the jurisdiction of this court as the appropriate forum to determine the various issues arising between her and Mr Keene, including the mortgage in question.
The same cannot be said of Mr S. He has brought appropriate litigation in a court of appropriate jurisdiction. As such, from his perspective, there is no over lap of jurisdiction. He is disinterested in the controversy regarding the existence or otherwise of a de facto relationship between Mr Keene and Ms Scofield. Mr S’s action, in attempting to recoup monies owed to the creditors of [T], will not deprive Mr Keene of a right to which he is otherwise entitled under the Family Law Act.
For these reasons, it must follow that Mr Keene’s application is misconceived and must be dismissed.
Costs
Mr Vlahos seeks costs on behalf of his client. Mr Keene opposes the making of any costs order against him. The general rule is that parties in proceedings under the Family Law Act should bear their own costs.[10] Usually such proceedings arise between parties who have formally been intimately involved with one another and have fallen into dispute about arrangements for the care of their children or the division of formally jointly held assets.
[10] See Family Law Act at section 117(1)
As such, there are public policy considerations arising in respect of cost issues given the ordinary subject matter of litigation under the Family Law Act. As is clear, Mr S is disinterested in the nature of the relationship between the parties and came into these proceedings unwillingly. His involvement has resulted in him incurring costs.
Notwithstanding the general rule, section 117(2) provides the court with a general discretion to make costs orders if it is of the opinion that there are circumstances that justify it in so doing. The court may make such order for costs as it “considers just”.
Section 117(2)(A) sets out the matters that the court shall have regard to in exercising this discretion. They include the following: the financial circumstances of the parties concerned; the receipt of legal aid by the parties; the conduct of the parties to the proceedings; whether the proceedings were necessitated by the failure of a party to comply with previous court orders; whether one of the parties to the proceedings have been wholly unsuccessful in them; any offers to settle the proceedings; and any other relevant matter.
The court has a wide discretion as to the calculation of costs. Pursuant to Rule 21.02(2) of the Federal Magistrates Court Rules:
“In making an order for costs in a proceeding the Court may:
(a) set the amount of costs; or
(b) set the method by which the costs be calculated; or
(c)refer the costs for taxation under Part 40 of the Federal Court Rules or under Chapter 19 of the Family Law Rules; or
(d)set a time for payment of costs which may be before the proceedings is concluded.”
However, pursuant to Rule 21.10:
“Unless the Court otherwise orders a party entitled to costs in a proceeding (other than a proceeding to which the Bankruptcy Act applies) is entitled to:
(a) costs in accordance with Parts 1 and 2 of Schedule 1 and
(b) disbursements properly incurred.”
Mr Keene has been wholly unsuccessful in his application. The proceedings are in no way attributable to any act of default or omission on the part of Mr S in his capacity as the court appointed liquidator of Keene. In these circumstances, I have come to the view that it would be proper to make an order for costs in his favour.
In my view, the appropriate mechanism to assess the quantum of costs applicable is pursuant to the relevant schedule. The fee allowable for initiating or defending a discrete hearing, which has the characteristics of a summary hearing, is $1,617.00. There were two short mentions of the matter for which a sum of $264.00 is allowable.
In all these circumstances, I propose to order that Mr Keene pay Mr S’s costs fixed in the sum of $2,000.00.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding one hundred and thirty-nine (139) paragraphs are a true copy of the reasons for judgment of Judge Brown
Associate:
Date: 14 June 2013
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