Knox & Knox

Case [2024] FedCFamC1F 708

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Knox & Knox [2024] FedCFamC1F 708

File number: SYC 3239 of 2024
Judgment of: CAMPTON J
Date of judgment: 21 October 2024
Catchwords: FAMILY LAW – APPLICATION FOR REVIEW – Where the wife seeks to review orders of a senior judicial registrar as to disclosure and the appointment of single valuation experts – Where the wife has access to documents in her capacity as a director of a corporation and does not have the right to possession or control of the documents sought to be disclosed in her personal capacity – Where the wife has an obligation pursuant to the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) to provide disclosure of information achieved in her personal capacity relevant to the proceedings – Where orders are made in accordance with the purpose of litigation as contained in s 67 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) and to progress the litigation including as to the filing of an affidavit pursuant to r 6. 06(6) of the Rules and the issue of subpoena for the production of documents directed to the trustee of a trust – Application for Review otherwise dismissed.
Legislation:

Corporations Act2001 (Cth) ss 198F and 290

Family Law Act 1975 (Cth) s 79

Federal Circuit and Family Court of Australia Act 2021 (Cth) s 67

Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) chapter 6 and chapter 7, rr 6.01, 6.06 and 14.01
Cases cited:

Barro & Barro (No. 2) (1983) FLC 91-317; [1983] FamCA 14

Hickey and Hickey and the A-G for the Commonwealth of Australia (Intervener) (2003) FLC 93-143; [2003] FamCA 395

Kennon & Spry (2008) 238 CLR 366; [2008] HCA 56

Masoud & Masoud (2016) FLC 93-689; [2016] FamCAFC 24

Schweitzer& Schweitzer (2012) FamCA 445

Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 52

Zunino& Zunino [2019] FamCA 845
Division: Division 1 First Instance
Number of paragraphs: 43
Date of hearing: 21 October 2024
Counsel for the Applicant: Mr Sansom SC
Solicitor for the Applicant: Hopgood Ganim Lawyers
Counsel for the Respondent: Ms McMahon
Solicitor for the Respondent: Nolan Lawyers

ORDERS

SYC 3239 of 2024

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN:

MS KNOX

Applicant
AND:

MR KNOX

Respondent

ORDER MADE BY:

CAMPTON J

DATE OF ORDER:

21 OCTOBER 2024

THE COURT ORDERS THAT:

1.The proceeding is placed in the Major Complex Financial Proceedings list and placed in my docket.

2.The listing before a senior judicial registrar on 28 October 2024 at 9.30 am be vacated.

3.The matter be listed before me by Microsoft Teams at 9.30 am on 13 December 2024.

4.On or before 25 October 2024 the wife file and serve an affidavit in compliance with r 6.06(6) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) identifying all information personal to her…

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AGLC
Knox & Knox [2024] FedCFamC1F 708
Case
[2024] FedCFamC1F 708
Decision Date

CaseChat Overview and Summary

In Knox & Knox, the wife sought to review orders made by a senior judicial registrar regarding disclosure and the appointment of single valuation experts. The husband filed an application for specified disclosure and the appointment of single valuation experts, which the wife opposed. The senior judicial registrar made orders on 23 August 2024 that are now under review. The court had to decide whether the orders were appropriate and if the wife's obligations under the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) were correctly applied.

The court found that some of the orders required clarification, particularly those concerning the valuation of the wife's interests in various trusts. It was noted that the wife's interests in different trusts might differ, and the terms of the orders needed refinement. Additionally, orders pertaining to single experts were deemed premature, as they should follow the sequential approach to financial proceedings as outlined in the Federal Circuit and Family Court of Australia Act 2021 (Cth). The court also emphasised the importance of full disclosure by both parties, which is critical to achieving justice and equity.

The court made several orders to address the issues identified. The proceeding was placed on the Major Complex Financial Proceedings list and scheduled for a hearing before the judge. The wife was required to file an affidavit detailing her understanding of the B Investment Trust and serve a joint draft balance sheet to the husband. The husband was granted leave to issue a subpoena to the trustee of the B Investment Trust. Certain orders made by the senior judicial registrar were discharged, and others were suspended until further notice. The wife's application for review was dismissed. The court warned that failure to comply with disclosure obligations could result in the striking out of the party in default's substantive relief.

Orders

Orders of the court

SYC 3239 of 2024

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MS KNOX

Applicant

AND:

MR KNOX

Respondent

ORDER MADE BY:

CAMPTON J

DATE OF ORDER:

21 OCTOBER 2024

THE COURT ORDERS THAT:

1. The proceeding is placed in the Major Complex Financial Proceedings list and placed in my docket.

2. The listing before a senior judicial registrar on 28 October 2024 at 9.30 am be vacated.

3. The matter be listed before me by Microsoft Teams at 9.30 am on 13 December 2024.

4. On or before 25 October 2024 the wife file and serve an affidavit in compliance with r 6.06(6) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) identifying all information personal to her as to her understanding as to:

(a) The nature and character of the B Investment Trust;

(b) The document establishing that the B Investment Trust, including its date and the parties to it,

(c) The published financial statements of the B Investment Trust for the year ended 30 June 2020;

(d) Any income or capital distribution statement of the B Investment Trust as directed to the wife or the D Trust for the year ended 30 June 2018 to date; and

(e) The assets and liabilities of the B Investment Trust, including but not limited to any debit or credit loan account payable by or to that trust by the wife, the D Trust, or the E Trust.

5. On or before 31 October 2024 each of the husband and the wife shall file and serve a financial questionnaire.

6. On or before 8 November 2024 the wife shall serve upon the husband a joint draft balance sheet to include all assets, liabilities, superannuation interest and financial resources as she understands to be suggested to be relevant and to include values as she understands are alleged by each party.

7. On or before 15 November 2024 the husband shall make any additions to the joint collaborative draft balance sheet as required to reflect his contra allegations and any values that are agreed (if applicable).

8. Wheresoever controversy exists as to the inclusion of an item or the value of an item a footnote shall be appended to explain the controversy.

9. On or before 22 November 2024 the wife shall cause a copy of the draft working collaborative joint balance sheet to be filed and served.

10. On or before 5 November 2024 the wife shall do all such things as are necessary to provide to the husband by way of disclosure as to the E Trust:

(a) Copies of minutes of meetings of the trustee from the time the trust was established to date;

(b) Any document amending the terms of the trust from that contained in the last will of the wife’s late father as recorded in the grant of probate;

(c) Any capital or income distribution statement issued by the trust from the date the trust was established to the current time; and

(d) Any balance sheet or profit and loss statement of the trust from the date the trust was established to the current time.

11. In the event the wife is unable to comply with the prior order, in circumstances where she contends the relevant document is not in her possession or control, leave is granted for the wife to issue a subpoena directed to herself and the other co-trustee of that trust to require the production of the documents identified in Order 10, such subpoena to be made returnable on or before 29 November 2024.

12. The husband be granted leave to issue such subpoena for the production of documents as he considers relevant directed to the trustee of the B Investment Trust, such leave not to be exercised prior to 8 November 2024 and in the event the subpoena is issued, it is to be returnable no later than 29 November 2024.

13. Save and except as provided for by these orders, Orders 2(a), 2(d), 2(e), 2(f), 7(e), 7(f), 7(g), 7(h), and 7(i) as made by the senior judicial registrar on 23 August 2024 are discharged.

14. Orders 10 and 11 as made by the senior judicial registrar on 23 August 2024 are suspended until 5 December 2024.

15. The Application for Review of the wife filed 13 September 2024 be otherwise dismissed.

THE COURT NOTES THAT:

A. Each of the parties are on notice that in the event of a failure to comply with the obligations of disclosure as codified in ch 6 of the Rules, active consideration will be given to the striking out of the substantive relief of the party in default and leave being granted for the other party to proceed on an undefended basis.

Note: The form of the order is subject to the entry in the Court’s records.

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

Background

Background to the litigation

The husband filed an Application in a Proceeding on 30 April 2024 seeking orders as to specified disclosure and the appointment of single valuation experts. The wife opposed that relief. That contest was determined by the orders made by the senior judicial registrar on 23 August 2024 currently the subject of review.BACKGROUND The wife was born in 1966 and is currently 57 years of age. She identifies that she has retired from employment. The husband was born in 1971 and is 53 years of age. He identifies he is employed as a consultant. The parties commenced cohabitation in 1996 and were married in 1997. They separated on a final basis on 12 February 2022. An order for divorce was made in mid-2023. There are two children of the marriage, both of whom are now adults. An order made by the senior judicial registrar on 23 August 2024, not being the subject of review, transferred the proceeding to the Federal Circuit and Family Court of Australia (Division 1) and referred it to the National Assessment Team for inclusion in the Major Complex Financial Proceedings list. The evidence of the parties implicitly records that they had engaged in extensive exchanges by way of pre-action procedures as prescribed by the Rules prior to the commencement of the proceedings in Division 2. Notwithstanding that apparent compliance, substantial issue exists in identifying their property interests and their financial resources. The parties have not prepared a collaborative draft working balance sheet, nor have they filed Financial Questionnaires. I am told that the wife filed an Undertaking as to Disclosure in compliance with ch 6 of the Rules on 9 August 2024, and the husband filed an Undertaking as to Disclosure in compliance with the Rules on 30 August 2024. The wife's affidavit evidence identifies contributions made on her behalf by way of her parents, and specifically her father, over the period of cohabitation. Should that evidence be accurate, the parties have achieved significant funds by way of the largesse of the wife's family. It is uncontroversial for the purposes of the s 79 litigation that the D Trust is the property of the wife amenable to adjustment. The wife has the power of appointment and removal of trustees. The wife is the sole shareholder and director of the current trustee, D Pty Ltd. The trustee has an absolute discretion as to the distribution of the capital and income of the trust. The D Trust by way of its trustee owns all of the issued shares in C Pty Ltd. The wife is the sole director of C Pty Ltd. During the period of cohabitation, the wife was the sole member of a self-managed superannuation fund, Superannuation Fund 1. The husband and the wife were directors of the corporate trustee of the self-managed superannuation fund. At one time, the wife's member entitlement in the fund had a value in the range of $345,723. Sometime after 30 June 2021, the wife's member entitlement in the self-managed superannuation fund was rolled into an industry fund.

Evidence

Evidence Before The Court

A number of the orders subject to challenge on review simply repeat that as prescribed by r 6.06. There is little purpose in repeating those obligations.The challenged orders as to single expert valuation evidence The challenge to Order 7 as made by the senior judicial registrar has some merit, in that it requires the Court to value “the wife's interest” in certain entities. The wife's “interest” in the E Trust and the D Trust, being entities she controls, may be very different to “her interest” in the B Investment Trust. There may be a requirement to refine the terms of Order 7 to identify evaluation of the trusts themselves and the wife’s interests in them, after disclosure has been completed. The completion of disclosure will ground the scope of dispute, if any, as to the nature of the wife's “interests” in the respective trusts. There is no utility in ascribing a value B Pty Ltd. It does not trade on its own account, acting as a corporate trustee. Order 10 as made by the learned senior judicial registrar was an attempt to prevent further litigation on the issue of the appointment of single experts to progress the litigation in compliance with the rules and objectives identified in s 67 of the Federal Circuit and Family Court of Australia Act 2021 (Cth). Order 11 falls into a similar category. The orders are premature at this time in the litigation. It is trite to observe that, as identified by the Full Court in Hickey and Hickey and the A-G for the Commonwealth of Australia (Intervener) (2003) FLC 93-143, the sequential approach to the determination of proceedings in s 79 of the Act involves interrelated steps, the first being to make findings as to the identity and value of the property, liabilities and financial resources of the parties. It is only after that occurs that consideration can be given to the satisfaction as to justice and equity being achieved (as identified by the High Court in Stanford v Stanford (2012) 247 CLR 108) in adjusting property. The obligation of disclosure and its implementation in the circumstances of this case at this time in the litigation pathway A party to financial proceedings is required to make a full and frank disclosure of all documents and information regarding their financial circumstances. That duty is absolute and continues throughout the litigation process. It is critical to the function of the jurisdiction and fundamental to achieving justice and equity. The obligation, and how it is codified in ch 6 of the Rules, is significant. It goes to all documents and information that is relevant and material to factual findings to be made in the case, and specifically the identity and value of the property of the parties. There has been some progression as to the valuation of real property interests held personally by the parties pursuant to the implementation of the senior judicial registrar's orders. As indicated during the hearing today, I propose to cause this matter to be placed in the Major Complex Financial Proceedings list and placed in my docket. Orders will be made vacating the listing before a judicial registrar on 28 October 2024 at 9.30 am.

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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