L and S

[2011] FCWA 64

JURISDICTION : FAMILY COURT OF WESTERN AUSTRALIA

ACT : FAMILY LAW ACT 1975

LOCATION : PERTH

CITATION : L and S [2011] FCWA 64

CORAM : CRISFORD J

HEARD : WRITTEN SUBMISSIONS

DELIVERED : 6 SEPTEMBER 2011

FILE NO/S : PTW 1328 of 2008

BETWEEN : L Applicant

AND S

Respondent

Catchwords:

APPLICATION TO REOPEN - long and protracted hearing - failure to adequately disclose - principles applicable

Legislation:

Family Law Act 1975 (Cth)

Category: Not Reportable

Representation:

Counsel:

Applicant : Mr T Kirk SC Respondent : Mr R Hooper

Solicitors:

Applicant : O'Sullivan Davies
Respondent : Clairs Keeley

Case(s) referred to in judgment(s):

R v B [2008] FCWA 55
Reid v Brett [2005] VSC 18
Watson v Metropolitan (Perth) Passenger Transport Trust [1965] WAR 88

WORDS IN SQUARE BRACKETS REPLACE WORDS USED IN THE ORIGINAL JUDGMENT – PARTIES’ NAMES AND IDENTIFYING DETAILS HAVE BEEN CHANGED

1[The respondent wife] seeks leave to reopen these proceedings which concern an application for property settlement under the Family Law Act 1975 (Cth) (“the Act”). This dispute has been protracted. The trial process commenced in February 2009. It was heard over 21 days. Thereafter there was an appeal to the Full Court of the Family Court of Australia. The matter resumed in early 2011. After a further 5 days of hearing it finished on 25 February 2011.

2On 3 May 2011 the wife sought leave to reopen her case. The basis for her application results from some evidence given by the husband in the February 2011 proceedings.

3That evidence revolved around him guaranteeing money borrowed by his sister to purchase a shop and which the wife now says is an asset owned by the husband. She says this should be taken into account in these proceedings.

4 The husband seeks the application be dismissed and that the wife pay his costs.

5Final submissions in relation to the application to reopen were received by the Court on 29 July 2011. It was made clear to the parties at the initial hearing of the application to reopen that the substantive judgment was almost complete but could not proceed to finalisation given the present application.

Husband’s evidence

6On 15 February 2011 the husband filed an affidavit for the trial which commenced on 21 February 2011. He raised the issue of his interest in a small retail business, unrelated to [his own Industry].

7 He deposed:

• he had acquired a silent interest in a business with his sister and a friend, [J];

•he had provided security against his interest in a property at [Sorrento] which is in his sole name and which is to remain in his possession post judgment; and

•his sister who lives in [the outer metropolitan area] will relocate to Perth. When she does she will sell her property and his security for the business will be reduced or paid out.

8He was cross-examined at length by Mr Hooper at trial about this issue. He said:

•in assisting his sister and J to purchase a business he allowed the Sorrento property to be used as security;

•the total loan amount to purchase the business was $580,000. In total the business cost $640,000. J provided a deposit of $70,000 - $75,000. The security was his sister’s house and the Sorrento property over which a mortgage was registered on 13 January 2011;

•given the present level of security he has provided he has a 50% interest in the business. This has given him 2 shares of 4 in a company, [L] Nominees Pty Ltd. His sister who has the other 2 shares will sell her property and thus reduce his security and interest in the business;

•the existing mortgage over the Sorrento property has been discharged. It has been refinanced at a more attractive rate. The existing mortgage was approximately $430,000 and the new mortgage is $580,000. [Sunset Nominees] services the original mortgage of $430,000 but due to the refinancing arrangements the payments on that mortgage are reduced;

•the shop debt of $580,000 is serviced by the business itself. Any short fall is paid by his sister or J. He accepts he had made the odd payments on his sister’s behalf of around $500 per month. This had happened on approximately

4 occasions. Apart from this neither he nor Sunset Nominees has put any money in;

• there is no documentation between his sister and J who is a close family friend.

There is bank documentation in the form of the mortgages; and

•the arrangement was not disclosed in his financial statement as the detail arose after the execution of that document.

Wife’s position

9The wife says the husband has acquired an interest in a business using the equity in a property of the parties to support that acquisition. The wife says the husband is using Sunset Nominees income to meet the loan repayments. She says he is actively involved in the management and operation of the business.

10 The wife says that the husband has failed to make appropriate disclosure in relation to this business. She says that his evidence at trial is inconsistent with documents that have emerged.

Husband’s position

11 The husband says the wife’s application is wholly without merit and will create unnecessary delays if it is allowed. He says it does not fall within any of the principles applicable to a reopening in these circumstances.

12 The husband argues that the shop was purchased with borrowed funds on the open market a few months ago. Any equity that there may be could only have been generated in the months since the trial. The husband says he purchased the interest for his sister.

Discussion

13 The reported authorities give very clear guidance on the way to exercise judicial discretion and where appropriate permit a reopening of a case and adducing further evidence.

14 Ultimately, the purpose of allowing a trial to be reopened is to ensure justice is done. Courts should be cautious in allowing reopening and will generally do so only if it is likely that the further evidence to be adduced would probably affect the result and could not, by reasonable diligence, have been given previously.

15 Each counsel has addressed the four widely accepted guidelines a Court refers to when considering an application such as this (Watson v Metropolitan (Perth) Passenger Transport Trust [1965] WAR 88; Reid v Brett (2005) VSC 18).

16 This has been a long and protracted trial. The parties’ lives have been in limbo.

Third parties have also been affected. There is ongoing uncertainty about their own financial affairs. I refer specifically to employees, brokers and clients of Sunset Nominees.

17 This application to reopen signals what can only be a significant further delay until an outcome is arrived at. It could very easily involve valuation evidence, not only of this business but of an updating nature for Sunset Nominees.

18 The husband disclosed his interest in the business, albeit just prior to the resumed trial. The manner he addressed it in his affidavit is inadequate. It does not descend to the detail required in this case. It is vague and, in the climate of suspicion which permeates this case, almost calculated to inflame. However, he was cross- examined on it at length whilst he was under oath at trial.

19 I pause here to consider the nature and extent of the obligation to disclose in these circumstances. I have had occasion to remark on it previously and it is of use to repeat what I said in full here. (R v B [2008] FCWA 55)

30There is a clear obligation under the Family Law Rules 2004 to make a full, frank and complete disclosure of financial circumstances in a timely fashion. This need for parties to make such disclosure in financial matters is not in doubt. (See Oriolo and Oriolo (1985) FLC 91-653; Black and Kellner (1992) FLC 92-287; Weir and Weir (1993) FLC 92-338 ; Tate v Tate (2000) FLC 93-047) and Kannis and Kannis (2003) FLC 93-135. Smithers J in a seminal passage in Briese and Briese (1986) FLC 91-713 at 75,180 said:

“I believe that a person in the position of the husband in this case has a positive obligation to set out at an early stage his financial position in a clear and comprehensive manner. The Regulations, and now the Rules, are not intended as a vehicle to mask the true position, or as an aid to confusion, complexity or uncertainty. They are not intended as the outer limits of the obligation of financial disclosure, but as providing avenues towards disclosure. The need for each party to understand the financial position of the other party is at the very heart of cases concerning property and maintenance. Unless each party adopts a positive approach in this regard delays will ensue with the consequent escalation of legal, accounting and other expenses, always assuming that a party has the strength to continue the struggle for information and understanding.

…

In my view it is fundamental to the whole operation of the Family Law Act in financial cases that there is an obligation of the nature to which I have referred. Livesey v Jenkins makes it clear that mere compliance with rules of court or practice directions does not alter the basic principle of the need for full and frank disclosure by the parties.”

31Does this obligation to disclose continue after trial but before a judgment has been given?

32Pursuant to r 13.01(1) and (2) of the Family Law Rules 2004 the parties to a case have a general duty of disclosure of all information relevant to their case, continuing from the pre-action procedures until the end of the case. This position is reiterated at Part B, point 4 in the non-prescribed Court form titled “undertaking as to disclosure” which states “I undertake to continue to comply with my duty of disclosure until the conclusion of the case.”

33 When has a case “concluded” or “ended”?

34 The Full Court in Morrison and Morrison (1995) FLC 92-573 at

81,670 observed:

“The constant emphasis of the cases is that in order for there to be a just and equitable and appropriate order altering the interest of parties in their property there must be full and frank disclosure between them of all circumstances which may be relevant to the determination of their true financial position both presently and in the foreseeable future”.

35Although it has not been widely dealt with, there are some cases that have interpreted the duty of disclosure to extend beyond the conclusion of the trial.

36Stuart-Smith LJ in Vernon v Bosley (No 2) [1997] 1 All ER 614 in case relating to a damages claim for post-traumatic stress disorder considered the duty to disclose relevant information to be an ongoing one:

“If there is a continuing obligation to disclose after-acquired documents, up until what point of time does the obligation extend? Clearly in my view it must extend up to the close of the evidence; in most cases where judgment follows shortly afterwards, this in practice will no doubt suffice. But I can see no logical reason to take that as a cut-off point rather than the conclusion of the proceedings, as expressly provided in Lord Woolf’s draft rules. If the party to whom discovery of the after-acquired document is disclosed has closed his case, or the evidence as a whole is concluded, he will have

to obtain the leave of the judge to recall relevant witnesses or to reopen the case. Recalling witnesses does not usually present a serious problem. An application to reopen the case in the light of the disclosure is unlikely to be entertained unless the document is of real significance and there is otherwise a risk of injustice. An unwarranted application is likely to be visited with an order for costs.

It seems to me immaterial how the further discovery is made, whether by a further formal list or simply by letter. This will probably depend on the amount of documents involved. Moreover, I do not think the existence of documents that are clearly privileged need to be disclosed.”

37 His Honour went on to say at p. 629:

“It is the duty of every litigant not to mislead the court or his opponent. He will obviously mislead the court if he gives evidence which he knows to be untrue. But he will also do so if, having led the court to believe a fact to be true, he fails to correct it when he discovers it to be false. This duty continues in my opinion until the judge has given judgment.”

38 In dismissing the husband’s application for costs Moore J in Browne

& Green [2002] FamCA 94 took into account the husband’s failure to disclose certain information before the judgment was delivered:

“Mr Browne’s failure to disclose his activity prior to the delivery of judgment at first instance left the wife and the court with the understanding that he had an undisputed obligation to repay

$300,000 ATG and the liability to that extent was taken into account in determining the value of his net assets. That he was ‘seriously considering’ pursuing a claim to be relieved of that obligation to repay his creditor, along with substantial damages for their actions/representations, was a material fact at that point. No one could have predicted the outcome at the time, as Mr Lloyd accurately pointed out at one stage. But the claim he was working up was a substantial one and, as later events revealed, he ended up pledging a lot of money to the pursuit of it. That he actually did pursue it prior to the time his appeal was argued in the Full Court and that he pursued it actively during the time judgment there was reserved, was also a material fact.”

39The husband successfully appealed the decision. On appeal the Full Court in Browne v Green (2002) FLC 93-115 held that Moore J placed too much weight on the husband’s failure to disclose certain information before the judgment was delivered in dismissing the costs application. However, the Full Court did not necessary deal with whether it was correct to impose an ongoing obligation of disclosure:

“So, why then should a post hearing but pre-judgment failure to make disclosure of a prospect of litigation coupled with a financial disparity between the parties in circumstances where the applicant was herself worth in excess of $1 million be of such weight that it can be equal to the total failure of the proceedings on behalf of the wife seen in light of an open offer to settle the matter made in writing? Notwithstanding the arguments of the respondent that it was within the range of discretion, we think that such an outcome is untenable.

Had the failure of the husband to make discovery meant that the parties had wasted money in the proceedings on issues which did not have to be fought, or had the failure to make discovery had the real potential of avoiding the proceedings or somehow minimising the costs involved in the proceedings, then it would have been appropriate to give it significant weight. But in these circumstances, where the failure to make the disclosure happened after the trial and ultimately had little or no consequence for the outcome of the proceedings, it is difficult to say that it merits the removal of what might have otherwise be seen to be an appropriate costs order in favour of the husband.

We conclude in the circumstances that far too much weight and attention was given to this issue and too little attention was given to the issue that a wife of not insubstantial means brought a wholly unsuccessful application against a husband of greater means and persisted with that application in face of what turned out to be a more than reasonable offer to settle the matter.”

40In Geremin & Morton [2002] FamCA 788 Boland J considered the first instance decision in Browne & Green (supra):

“I must consider whether the failure of the wife to disclose, either before the trial or during the period between the judgment of O’Ryan J and the judgment of the Full Court, her changed superannuation position as a result of the legislative amendments constituted a miscarriage of justice.

The question of whether a party has an ongoing obligation to make a full and frank disclosure to the Court if a material change occurs during a period a judgment is reserved or pending appeal to the Full Court was considered in respect of a costs application by Moore J in Browne v Green (supra).

…

Her Honour in considering the requirement to make a full and frank disclosure and whether such an obligation was an ongoing one referred to Vernon v Bosley (supra).

…

Moore J concluded at paragraph 70 of her Judgment that the husband had a duty to disclose an action brought by him against the third party to the wife, both prior to the delivery of Judgment at first instance and prior to the delivery of the Judgment on appeal.

The obligation of parties before the Court to make a full and frank disclosure of their financial circumstances goes to the core of the Court's ability to make an adjustment, if appropriate, of their property under s79 which is just and equitable. It appears to me to enable the Court to fulfil its function, a party's obligation cannot cease at the conclusion of a hearing, but must be an enduring obligation to disclose any material matter relevant to a party's financial position until the delivery of judgment, or in the case of an Appeal, until the judgment of the Full Court.”

41In Boege & Boege [2002] FamCA 276 Boland J again referred to the duty of disclosure as an ongoing one:

“Clearly property proceedings in the Court can only be properly conducted so that parties receive a just and equitable division of their property if each makes a full frank and proper disclosure of their financial affairs. That duty must be an ongoing duty where there has been a material change in one party’s circumstances including during any period from hearing until the delivery of a reserved judgment or pending the determination of an appeal.”

20 I have no hesitation in finding the husband had an obligation to disclose all relevant documents to the wife between the date of trial and the date of judgment.

21 However, as can be seen from the cases discussed (particularly paragraphs 36 and 39), a failure to disclose, by itself does not provide all the answers. I do not consider that this alone is a reason to reopen.

22 This issue was first identified just prior to the resumed trial. It was dealt with extensively at trial. The wife’s application to reopen comes some six weeks after the resumed trial.

23 The wife says she has received no financial information. In her affidavit filed on

3 May 2011 in support of her application she says the business is not simply a shop. In a further affidavit she filed on 24 June 2011 she relies on statements made by the parties’ young children about the nature and extent of the venture.

24 This was a venture entered into by the husband post-separation. He gave an explanation at trial about the purpose of the venture. He disclosed the circumstances of his involvement in the venture.

25 The husband has now disclosed a number of documents. I am not satisfied the documents he has disclosed lend support to the wife’s contention that Sunset Nominees has been paying for the security provided to the business.

26 If I am wrong in that then it is a matter to be rectified by an accounting at the conclusion of the matter. However the documents produced are not supportive of her contention. At best, for her, they are equivocal. On one reading they appear to show that the refinancing has reduced the amount previously paid to service the debt of

$430,000.

27 I am simply not satisfied the material I now have before me shows that this issue is of such moment it will affect the overall outcome of this case. I am critical of the husband in the manner in which he provided the detail but that is more a symptom of his attitude generally rather than what I perceive to be a deliberate effort to mislead on this business venture. What must be kept in context is the length of time over which these proceedings have been conducted and the size of the present asset pool of between $10,000,000 and $12,000,000.

28 The Sorrento property has always been earmarked as something the husband would retain no matter what other orders were made.

29 There is a distinct prejudice if I allow a reopening. It is a prejudice that goes well beyond these parties. It also has the likely effect of re-agitating matters that have well and truly been dealt with. In summary I do not consider that:

•the issue raised is so material that the interests of justice require it to be agitated by reopening the case;

•the position of the wife if believed, would probably affect the overall result;

• the wife acted in a timely manner; and

•the issue the wife wishes to agitate is overshadowed by the delay and prejudice to others, including the husband.

30 I consider that taken as a whole the justice of the case does not favour the grant of leave to reopen.

31 In making this decision I am critical of the husband in not providing greater detail earlier and continuing to provide information about the business. These criticisms do not outweigh what I see to include the public interest in having this matter finalised.

32 I consider each party should bear his or her own costs associated with this application.

Orders

1. The wife’s Application in a Case filed on 3 May 2011 be dismissed.

2. There be no order for costs.

I certify that the preceding [32] paragraphs are a true copy of the reasons for judgment delivered by this Honourable Court

Associate