Keene and Scofield (No.2)
[2012] FMCAfam 1357
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| KEENE & SCOFIELD (NO.2) | [2012] FMCAfam 1357 |
| FAMILY LAW – De facto property proceedings – case fixed for hearing shortly as to whether declaration as to de facto relationship may be made – non suit injunction pending hearing – possibility of party losing right in proceedings under Family Law Act – matters to be considered. |
| Family Law Act 1975, ss.4A(1); 34; 90SM |
| Keene & Scofield [2012] FMCAfam 28 Esmore & Esmore (1979) FLC 90-711 |
| Applicant: | MR KEENE |
| Respondent: | MS SCOFIELD |
| File Number: | ADC 983 of 2011 |
| Judgment of: | Brown FM |
| Hearing date: | 4 December 2012 |
| Date of Last Submission: | 4 December 2012 |
| Delivered at: | Adelaide |
| Delivered on: | 11 December 2012 |
REPRESENTATION
| Counsel for the Applicant: | Mr Berman SC |
| Solicitors for the Applicant: | Angela Ferdinandy |
| Counsel for the Respondent: | Mr McGinn |
| Solicitors for the Respondent: | Howe Martin & Associates |
ORDERS
UNTIL FURTHER OR OTHER ORDER
The respondent Ms Scofield is restrained from commencing proceedings in the District Court of Australia or any other jurisdiction against Mr Keene in respect of the debt of $114,892.77 alleged to be owed by him to the aforesaid Ms Scofield.
This hearing before Federal Magistrate Brown on 31 January and 1 February 2013 at 10.00am is confirmed.
The wife file her trial affidavit material no later than 17 January 2013.
Costs of these proceedings reserved.
IT IS NOTED that publication of this judgment under the pseudonym Keene & Scofield (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
ADC 983 of 2011
| MR KEENE |
Applicant
And
| MS SCOFIELD |
Respondent
REASONS FOR JUDGMENT
Introduction
The substantive issue before the court, in this matter, is whether a de facto relationship existed between the applicant Mr Keene and the respondent Ms Scofield, at times which bring it within the jurisdiction of this court, pursuant to the provisions contained in Part VIIIAB of the Family Law Act 1975.
The application has been on foot since March of 2011, a period now approaching two years. At an early stage, by mutual agreement of the parties and with the acquiescence of the court, it was decided that it was convenient to excise the hearing of the case into two discrete segments.
Firstly, there would be a hearing as to whether there was a de facto relationship between the parties, as defined by section 4A(1) of the Act and therefore whether a declaration could be made to this effect pursuant to the provisions of section 90RD.
The second segment, if such a declaration was made, would relate to what should follow from the declaration, particularly whether there should be any alteration of the property interests of the parties concerned.
The proceedings have been rigorously contested. However, for reasons, to which I will turn shortly, the first segment of the envisioned hearing has not yet occurred, although an earlier date was allocated for the hearing and a further such date has been fixed for February of 2013.
At this stage it is helpful to set out the background, which brings the parties to the current point. In brief, Mr Keene asserts that the parties were involved in a de facto relationship between late June 2004 and November of 2010. For much of this time, the parties lived in adjoining properties in suburban Adelaide.
Ms Scofield denies that any de facto relationship has ever existed between her and Mr Keene. She asserts that, at best, there was a casual friendship between the parties, which existed between 2004 and 2006. She says that the parties operated separated households and maintained distinct finances during this period.
Mr Keene apparently purchased the property next door to
Ms Scofield’s at some time in 2006. Ms Scofield has asserted that she lent Mr Keene the sum of $114,892.77 to purchase the property, which was secured by a second mortgage, in her favour, over the property. The mortgage was apparently registered.
Mr Keene asserts that the property in question was purchased by the parties as a joint enterprise arising from their de facto relationship. It is his further position that, as a result of the intimate relationship between the parties, he has made extensive financial contributions, in relevant periods, which have benefited Ms Scofield and her children.
In these circumstances, he seeks orders which would confirm his ownership of the property in question, free from any liability to
Ms Scofield. In support of his position, he asserts that he paid regular mortgage payments due on the property arising from a first mortgage secured over the property and made other financial contributions, which have benefited Ms Scofield.
On 9 May 2011, solicitors instructed by Ms Scofield wrote to
Mr Keene demanding payment in the sum of $149,368.39, which was alleged to be the sum due pursuant to the second mortgage secured on the property, being the principal sum and interest accrued. The letter foreshadowed proceedings being commenced in the District Court of South Australia to recover the sum in question.
From the applicant’s perspective, it was potentially prejudicial to him to have the issue of his potential liability under the mortgage adjudicated in a different court to that which would determine whether a de facto relationship existed between the parties, particularly given that he sought consequential orders, which were intended to negate the application of the mortgage to his circumstances.
Ms Scofield has consistently voiced concerns, through her legal representatives, that Mr Keene lacks sufficient financial backing to reimburse her the sum due under the mortgage and, if he is unsuccessful in his application for a declaration as to the existence of a de facto relationship, to pay her costs, which have the potential to be significant.
This was the background to an application made, on her behalf, for security for costs. This application was made on 1 November 2011 and was opposed by Mr Keene. I delivered judgment in respect of the parties’ competing applications on 13 January 2012.[1]
[1] See Keene & Scofield [2012] FMCAfam 28
I declined Ms Scofield’s application for such security but made an injunction restraining Mr Keene from dealing or further encumbering the property in question and four other units, which he owned in another Adelaide suburb.
Mr Keene has been a self-employed [omitted]. He has previously operated his business through a company known as [T] Pty Ltd. As I understand matters, the four units, which were the subject of the injunction, were being developed by Mr Keene and were estimated to be worth $1.2 million but were heavily encumbered.
In the introductory remarks to the security for costs judgment, I wrote as follows:
“It has subsequently been agreed between the parties that Ms Scofield will forebear from bringing such proceedings until such time as the issues arising between the parties, pursuant to the provisions of the Family Law Act, have been resolved in this court. To this end, the parties competing applications have been fixed for trial before me on 1 & 2 March 2012.”
The proceedings in question being the threatened litigation, in the District Court, regarding the mortgage.
Regrettably the hearing scheduled for 1 & 2 March 2012 did not proceed. The issue of whether a de facto relationship did or did not exist between the parties thus remains at large. It is also the position that Ms Scofield is no longer prepared to forebear from proceeding against Mr Keene, in respect of the mortgage in question, in the District Court.
It is also Ms Scofield’s position that Mr Keene’s financial position has markedly deteriorated, since the date of the security for costs judgment. In particular, she asserts that [T] Pty Ltd has been placed into liquidation and a call will be made on its shareholder (Mr Keene) to pay outstanding creditors. The sum in question being just under $200,000.00.
In addition, she asserts that Mr Keene personally is being pursued in the Adelaide Magistrates Court for a civil debt and is personally liable to the South Australian Treasury for outstanding land tax. The sums in question being in the vicinity of $63,000.00. One part of the rationale for the earlier decision declining to grant security for costs was that I accepted that Mr Keene controlled assets to the value of approximately $250,000.00. From Ms Scofield’s perspective, this is no longer the case.
Following the security for costs decision, which incorporated the confirmation of the March 2012 trial date, I ordered the parties to file affidavit material for the hearing. Mr Keene was to file his affidavit evidence by 2 February 2012, with Ms Scofield to file her material by 16 February 2012.
On 3 February 2012, in anticipation of the trial, Mr Keene filed an affidavit of approximately thirty pages, not including annexures. This affidavit contained his assertions of fact regarding the nature of his relationship with Ms Scofield and her children from 2006 onwards. In terms of the property, which is central to the dispute between the parties, he deposed as follows:
“We had been looking at houses that were for sale when Property C came up. We talked about where we wanted to live, still close to [X] and [Y]’s school, [Ms Scofield]’s work and mine. [Ms Scofield] was not working at this point so we decided that she would put up the deposit and fees and I would pay the mortgage, and we would acquire an equal share in the property. The house was intended to be registered in joint names, but at [Ms Scofield]’s request it was registered in my name. It was a joint venture.
[Ms Scofield] did become worried several years later, while I was in a Court case, that Property C would be sold and the money she put in would be lot to creditors. We decided she should get something drawn up for asset protection purposes. When she brought the document home I was not really sure what it was as it seemed much more technical than what we discussed. When I mentioned taking it to a lawyer to find out what it was she became upset and agitated so I signed it. Sometime later, when refinancing, I found out that it was a second mortgage.
We never discussed interest and never treated the advance as a “loan” but a contribution to our joint venture, as a couple.
I was in court over a claim against me by investors. Each time we went to Court I was successful. In the end I sat down with [Ms Scofield] and worked out what I could afford to pay the investors out. I wanted to hold the plaintiff to the terms originally agreed to but [Ms Scofield] just wanted it “finished with” as it was causing some stress at home. While attempting to refinance with the bank I became aware of the second mortgage. I had no idea it had been registered as this was never our intention. This caused me severe embarrassment because there was a date by which I had to have the judgment sum settled and [Ms Scofield] had not told me she had registered the mortgage. She properly agreed to discharge it in the circumstances.”
Ms Scofield has not as yet formally responded to this affidavit. This has not been necessary because the trial listed for 1 & 2 March 2012 did not proceed.
The State of South Australia referred its authority to make laws relating to the breakdown of de facto relationships, within that State, to the Commonwealth by means of the Commonwealth Powers (Defacto Relationship) Act 2009, which commenced on 1 July 2010.
This legislation followed the Commonwealth enabling legislation contained in the Family Law Amendment (Defacto Financial Matters and Other Measures) Act 2008.
In the early part of 2012, prior to the scheduled trial date, it became well known that irregularities had occurred in the proclamation process relating to the Commonwealth legislation. The Commonwealth Attorney General indicated publically that steps would be taken to rectify any such irregularities.
As a result, the Commonwealth legislature enacted The Family Law Amendment (Validation of Certain Orders and Other Measures) Act 2012, which came into effect on 22 March 2012.
In these circumstances, those advising both Mr Keene and Ms Scofield adjudged it imprudent for the court to embark upon the hearing of the parties’ competing applications, until the jurisdictional basis of the applicable legislation had been resolved. This was the background to the vacation of the 1 & 2 March hearing and the adjournment of the matter, for further directions, to 30 April 2012.
Once the issue of the enabling legislation had been resolved by the Commonwealth legislature, there was a further delay in the proceedings as a consequence of issues to do with Ms Scofield’s health. On 26 April 2012, an application was filed on Ms Scofield’s behalf seeking to extend the time for her to file her trial material. It was supported by an affidavit sworn by her solicitor, Mr Howe.
It is common ground between the parties that, in the past, Ms Scofield has suffered from an aortic aneurism, which required corrective surgery in 2006. Her cardiologist provided Mr Howe with a medical report, dated 15 February 2012, indicating that Ms Scofield had suffered dizziness and vertigo.
Concerns were raised, in the report, regarding the implications of stress for her blood pressure, given the earlier aortic repair. Counsel for
Mr Keene, Mr Berman was critical that the report in question does not provide extensive details regarding Ms Scofield’s medical situation.
Against this background, Mr Keene demurred to a discharge of the order dealing with the filing of material. As such, the proceedings were further adjourned to 1 August 2012, when it was hoped that a fresh trial date could be appointed.
In the mean time, the parties each directed subpoenas to various banks and Telstra seeking the production of records. Ms Scofield objected to the subpoena directed to her personal bank records. I dealt with this objection on 18 June 2012 and dismissed it largely for technical reasons.
On 1 August 2012, when the matter returned to court, I fixed the matter for trial on 31 January and 1 February 2013 “in respect of the determination as to whether a de facto relationship did or did not exist between the parties pursuant to the relevant provisions of the Family Law Act. At the time, I accepted that two days would be sufficient for the determination of the preliminary issue. The matter was then adjourned to 8 November 2012 for trial directions to be made.
The current applications
On 25 October 2012 Ms Scofield’s solicitors filed an application in a case. The application sought particulars of Mr Keene’s legal costs, both to date and anticipated; particulars of any proceedings in which
Mr Keene was a party; and discovery of Mr Keene’s credit card statements and personal diary from 1 July 2010 to 30 November 2010.
Mr Keene responded to this application on 6 November 2012. He deposed an affidavit in support of his application. To this affidavit was attached a letter, which his solicitors had received from Ms Scofield’s solicitors on 24 October 2012. This letter indicated that Ms Scofield intended “to issue the summons with respect to the outstanding debt owed by your client to our client in relation to Property C on or after 9 November 2012.”[3]
[3] See annexure C to the affidavit of Mr Keene filed 2 November 2012
In his response Mr Keene seeks an injunction restraining Ms Scofield “from taking any step, proceeding or action to recover any sum or pursue any cause of action against the respondent in the district Court or any other jurisdiction for the recovery of amounts allegedly due to her.” In addition, Mr Keene also sought discovery of various specified documents, as well as disclosure of Ms Scofield’s situation regarding costs.
The current proceedings are primarily concerned with the issue of this injunction, which can be conveniently referred to as a non-suit injunction. Ms Scofield vehemently opposes such an injunction on the basis that it would be prejudicial to her legal entitlement to pursue
Mr Keene for the moneys due under the mortgage due in question, particularly given her concerns regarding the apparent deterioration of his financial position and the absence of an order for security for costs in her favour.
The time set aside for the hearing of the preliminary issue, as to the existence or otherwise of a de facto relationship between the parties, remains available. I have been advised by Mr Keene’s counsel that he will be ready to present his case on the dates in question, which are now approximately seven weeks away. He will rely on the affidavit earlier filed by him on 3 February 2012.
At an earlier stage of the proceedings, controversy arose between the parties regarding the issue of two subpoenae by Mr Keene’s solicitors, regarding the production of financial records from Ms Scofield’s bank and from her psychologist.
It was asserted by Mr Keene that the financial records were relevant as to the issue of whether he had provided financial support to
Ms Scofield in the period alleged by him to comprise the de facto relationship between them.
The issue of the subpoenae has apparently been resolved. Accordingly, from Mr Keene’s perspective, there is no impediment to the trial going ahead on the dates scheduled. His advisors believe two days is sufficient time for the hearing of the matter.
As previously indicated, Ms Scofield has not as yet filed her trial affidavit. She has however filed a statement of her financial circumstances. In addition, she has not formally indicated to the court the number of other witnesses, whom she proposes to call, or their identities.
Although in 2011, her counsel Mr McGinn agreed that two days was an appropriate estimate for the hearing of the matter, Mr McGinn has now expressed some concern that such a timeframe will be inadequate for the disposal of the preliminary issue.
The proceedings in respect of the anti-suit injunction were originally listed before the court on 8 November 2012. Shortly prior to this date, Mr Keene filed an affidavit in which he indicated, amongst other matters, that he had been arrested and charged with four counts of rape of Ms Scofield, which allegedly occurred between 2005 and 2008. I was told by his counsel that the matter was scheduled to come before the Adelaide Magistrates Court, for possible committal hearing, in a few days time.
In these circumstances, I was concerned that the hearing scheduled for 31 January and 1 February 2013 might not be able to proceed because of difficulties arising if Mr Keene wished to remain silent in respect of the nature of certain aspects of his relationship with Ms Scofield in the light of the criminal proceedings.
However, on 4 December 2012, I was advised that the criminal proceedings have been resolved. Accordingly, there was no longer this impediment in respect of the scheduled hearing in the New Year. In addition, the parties were also in a position to argue the issue of the non-suit injunction in respect of the potential proceedings in the District Court.
The legal principles applicable
There is no dispute between the parties that the court has jurisdiction to grant the non-suit injunction sought by Mr Keene. The source of the jurisdiction derives from either section 34 of the Family Law Act or the inherent jurisdiction of the court to make orders appropriate to avoid injustice to one or other of the parties in proceedings before it. Section 34 reads as follows:
“The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, and to issue, or direct the issue of, writs of such kinds, as the Court considers appropriate.”
In McCarney & McCarney[4] 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.
[4] See McCarney & McCarney (1977) FLC 90-200 at 76,058
However, more recently, Nygh J has determined that the court should issue anti-suit injunctions in appropriate circumstances. In Esmore & Esmore[5] 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.”
[5] See Esmore & Esmore (1979) FLC 90-711
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?”[6]
[6] See Australian Family Law & Practice Broun; Dickey; Fowler; and Wade editors at page 36,723
Ms Scofield’s position
Ms Scofield’s submission that it would be unfair to restrain her from bringing proceedings in the District Court, in respect of the mortgage, rests on her concern that there is a very real risk that Mr Keene will become insolvent and accordingly, if she does not bring the proceedings, it is likely that she will lose priority in respect of Mr Keene’s other creditors.
I accept that, on a prima facie basis, evidence provided by Ms Scofield does indicate a worsening of Mr Keene’s financial position, since the security for costs application was dismissed.
Mr Keene’s position
It is Mr Keene’s position that he has been prepared for the hearing scheduled for early next year since the filing of his affidavit on 3 February 2012. It is further his position that the delay in the proceedings thus far has largely emanated from Ms Scofield. In particular, he is critical that she has not provided extensive details of her health issues, either to him or the court.
Mr Keene further submits that it was Ms Scofield who agitated for the bifurcation of the proceedings into two discrete segments, ostensibly to save costs. It was in this context that she also agreed that it was financially pragmatic to have the issue of whether or not a de facto relationship existed between the parties determined prior to the hearing of any possible proceedings in the District Court regarding the mortgage in question.
In these circumstances, he asserts that it would be unfair to him to force him to deal with two sets of litigation dealing with the same factual situation and issues.
Given the protracted history of the matter to date, he asserts that it is open for him (and the court) to infer that the change of tack on
Ms Scofield’s part is due to her desire to delay the hearing of his application further or possibly to derail it entirely.
Counsel for Mr Keene, Mr Berman points to the fact that neither his client nor the court have been provided with a copy of any statement of claim proposed to be filed in the District Court on Ms Scofield’s behalf. In these circumstances, he argues that it is impossible for the court to determine any potential prejudice to Ms Scofield, if the injunction sought on behalf of his client is made.
In addition, Mr Berman stands by his earlier estimate that two days will be sufficient for the hearing of the first aspect of the proceedings. In these circumstances, he submits it would be unfair to his client for the court to once again defer the hearing on the basis of Ms Scofield’s recent change of estimate, particularly given she has not as yet filed any affidavit material in support of her position that no de facto relationship existed between the parties at relevant times.
Conclusions
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.
Whether Mr Keene will elect to defend any proceedings brought by Ms Scofield in the District Court, in respect of the mortgage, is a question which I cannot definitively determine. I have not seen any proposed statement of claim. It remains an issue for Mr Keene as to what he does in respect of any possible proceedings.
However, given the history of the proceedings to date in this court, it seems unlikely that he will take no action in respect of any mooted proceedings in the District Court. Accordingly, the financial reality of any such proceedings is that they will lead to a duplication of costs on the part of both parties.
For these reasons, I propose to grant the non-suit injunction sought. I will also make the necessary procedural orders confirming the two day hearing of the matter on 31 January and 1 February 2013 and make directions that Ms Scofield file her trial affidavit material no later than 17 January 2013.
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 sixty-six (66) paragraphs are a true copy of the reasons for judgment of Brown FM
Associate:
Date: 11 December 2012
[2] See Mr Keene’s affidavit filed 3 February 2012 at paragraphs 26-29
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