Lennon & Lennon & Ors

[2017] FamCA 825

FAMILY COURT OF AUSTRALIA

LENNON & LENNON AND ORS [2017] FamCA 825

FAMILY LAW – PROPERTY – where trustee in bankruptcy of the husband agrees that orders should be made and there is no dispute about the justice and equity issues.  As between the husband and wife relating to superannuation interests, the husband did not attend or participate in any way and there is ample evidence to suggest that the husband should have no interest in the wife’s superannuation entitlements for the future.  Orders made.

Family Law Act 1975 (Cth)

Ashton and Ashton (1986) FLC 91-777
Stanford v Stanford [2012] HCA 52

APPLICANT: Ms Lennon

RESPONDENT: Mr Lennon

2^ND RESPONDENT: O Pty Ltd

3^RD RESPONDENT: Mr Markakis (as Trustee in Bankruptcy for Mr Lennon)

FILE NUMBER: MLC 10143 of 2012

DATE DELIVERED: 16 October 2017

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 28 September 2017; 13 October 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms O’Connell

SOLICITOR FOR THE APPLICANT:	Cahill & Rowe Family Law
THE RESPONDENT:	No Appearance

COUNSEL FOR THE 2ND RESPONDENT:	No Appearance
COUNSEL FOR THE 3RD RESPONDENT:	Dr Ingleby

Orders

1. That the orders of 15 November 2013 are set aside under s 79A of the Family Law Act 1975 (Cth).

2. That forthwith, the wife direct her solicitors, Cahill and Rowe (who hold the proceeds of sale of the real property pursuant to paragraph 3 of the orders made on 5 April 2017) to pay them out as follows:

   (a)      70 per cent to the applicant wife; and

   (b)30 per cent to the third respondent Mr Markakis as trustee of the bankrupt estate of Mr Lennon.

3. That the wife retain and the husband relinquish any interest in, any other asset in which the wife has a legal or equitable interest.

4. All extant applications are otherwise dismissed.

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

IT IS NOTED that publication of this judgment by this Court under the pseudonym Lennon & Lennon and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 10143  of 2012

Ms Lennon

Applicant

And

Mr Lennon

Respondent

And

O Pty Ltd

2^nd Respondent

And

Mr Markakis (As Trustee in Bankruptcy for Mr Lennon)

3^rd Respondent

REASONS FOR JUDGMENT

1. This property application by Ms Lennon (“the wife”) was listed before the court on 13 October 2017.

2. The respondents to the proceedings are Mr Lennon (“the husband”) who is an undischarged bankrupt, O Pty Ltd as the second respondent and, Mr Markakis as Trustee of the Bankrupt Estate of the Husband.  As between the Trustee in Bankruptcy and the wife, there was no dispute and each promoted a set of orders that I accept as between them, were just and equitable.  As counsel for the trustee promoted and also agreed, they were matters of a commercial nature and sensible having regard to what the wife had experienced and the costs involved in litigation.  In the circumstances, the court is satisfied that the orders were just and equitable.

3. Those orders however could not have been made until the court was empowered to exercise the s 79 power under the Family Law Act 1975 (Cth) (“the Act”) because in November 2013, final orders were made between the husband and the wife.

4. Before dealing with the evidence, it is important to observe that the husband had never participated in the proceedings initiating the present application other than he had appeared once by a solicitor who filed a Notice of Address for Service.  Despite a number of hearings in this court, the husband had filed no responding material.  Technically therefore, he has no right of audience in any event but it also means that, having received the wife’s evidence, he does not challenge its accuracy.

5. O Pty Ltd was joined as a party to the proceedings because it had been the registered proprietor of a property which was sold and the proceeds held in the trust account of the solicitors for the wife.  That arrangement was made pursuant to an order of the court on 5 April 2017.  The order does not indicate that the solicitors were holding the funds as trustee for the husband, the second respondent or indeed for the husband and wife.  Absent some clear understanding of their role, I have taken the view that they are holding the funds pursuant to any order of the court in their capacity as trustee for the parties.  They cannot be a trustee for the husband because in reality, as a bankrupt, any interest he had in those funds would vest in the trustee in bankruptcy.  The trustee in bankruptcy had no difficulty in accepting that any order directed to the wife for the payment out those funds would satisfy the trustee.

6. As for O Pty Ltd, there appears never to have been an appearance by or on behalf of the company.  It was said that the husband no longer controlled that company through shareholding or directorship which makes sense because he is now a bankrupt.  O Pty Ltd is the trustee of a trust which appears at least on the evidence of the wife, to be a discretionary family trust.  Various beneficiaries were said to be the children of the parties.  As a precaution, notice was served on those beneficiaries of the potential alteration of property interests and specifically that, as the money that had come from the sale of the property, owned by O Pty Ltd it might be trust property.   There was no appearance by or on behalf of any of those beneficiaries even if they might have had a right of appearance beyond the right to the due administration of the trust.

7. The approach of the trustee in bankruptcy in relation to the company and the trust was that advocated by the Full Court in Ashton and Ashton (1986) FLC 91-777. In Ashton, the husband was the trustee of a trust which purchased property and on an property dispute, the husband argued that the property was not his because it was property of the trust. He had argued that the trust deed precluded him from appointing himself as trustee and therefore it was not property that could be altered pursuant to s 79 of the Act. The Full Court had little difficulty with the argument referring to the fact that the husband had power under the trustee to appoint himself as trustee and his control had all of the attributes of a de facto ownership of the property of the trust. The Full Court held that in a family situation such as that, the court is not bound by formalities designed to obtain advantages and protections for someone who stands in reality, in the position of the owner.

8. In this case, the husband did not challenge any of the evidence of the wife that he had held the ownership of the property even though registered to the company and that its source had been the parties themselves. I am satisfied in the circumstances that the property arising from the sale of the property at D Street, E Town was, at all times, property of the husband and thereby, s 79 of the Act is attracted.

9. On 15 November 2013 after more than a year of litigation, where both husband and wife were represented by lawyers, they compromised their property proceedings and the court was asked to exercise its powers under s 79 of the Act. Those orders were made by Macmillan J.

10. It soon became apparent to the wife thereafter, that significant sums of money had been taken by the husband and he had not disclosed his activities.  The allegations of the wife are set out in her affidavit and have been the basis for her application since it was filed in 2015.

11. The initial application that was filed also sought an order that a financial agreement as between the husband and the wife be set aside.  The reference to the financial agreement can be seen in the orders of 15 November 2013 but only by way of notation.  It was common ground before me and therefore not disputed by the husband because of his absence, that the intended financial agreement was never executed.  In an amended application initiating the proceedings, reference to such a financial agreement was removed.

12. Therefore the immediate application before the court relies on s 79A of the Act.

13. Section 79A(1) provides that where the court is satisfied that there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstances, the court may, in its discretion, vary the order or set the order aside and, if it considers it appropriate, make another order under the enlivened s 79 power.

14. It is common ground between the trustee in bankruptcy and the wife here that there is very little money left.  Indeed, it is asserted that millions of dollars have gone missing and the parties are down to the thousands in the bank account arising from the sale of the last property earlier mentioned.

15. There being no challenge to the wife’s evidence, no response filed by the husband nor by O Pty Ltd and no appearance on behalf of or by, the husband and O Pty Ltd this day, I am satisfied that the wife has established that the husband had failed to disclose significant documents that would have otherwise entitled the wife to a much greater interest in property.  A miscarriage of justice undoubtedly occurred here.  That position is also adopted by the trustee in bankruptcy.  It follows therefore that the orders of 15 November 2013 must be set aside.

16. Insofar as the husband has any interest in property, by virtue of his bankruptcy on 25 January 2017, that property vests in the trustee.  That property excludes any interest that the parties may have in superannuation and for example, chattels of a limited value.  Counsel for the wife indicated that her only interest was in protecting the wife’s superannuation entitlements and having regard to what the husband had controlled and from which he had excluded the wife, any remaining interest in superannuation was relatively modest.  I accept that. 

17. The wife at present has about $100,000 in superannuation.  The trustee in bankruptcy has shown no interest in that property.  In my view having regard to the extraordinary sums of money described in the affidavit of the wife about which the husband has given no adequate explanation to this court, I am satisfied that it is just and equitable to make orders as between the husband and the wife in respect of property which is not vested in the bankruptcy trustee.

18. As was described by the High Court in Stanford v Stanford [2012] HCA 52 the first step if a court is satisfied that it is just and equitable to make an order, is to determine the legal and equitable interests of the parties in property. In this case, I am satisfied that the only property that the wife has a legal interest in is the cash proceeds of the sale of the property to which I have earlier referred. Those proceeds are modest. Counsel for the trustee in bankruptcy acknowledged that there was little dispute about the contributions of the parties nor could there be having regard to the amounts of money that the husband has had at his fingertips. The wife has limited future financial prospects and when one considers all of the matters set out in s 75(2) of the Act which I have taken into account, there was clearly not only a justification for an adjustment in her favour but one which counsel for the trustee quite properly and sensibly conceded. Counsel for the trustee argued that the appropriate division of the cash proceeds of the sale of the home was 70 per cent to the wife and 30 per cent to the trustee in bankruptcy and in my view, that is a just and equitable outcome as between those parties.

19. In relation to the non-bankruptcy vested property, I am satisfied that the evidence of the wife shows that she made significant contributions to that property and as the husband has made no claim at all, one must assume that he has no objections to a finding that it is just and equitable to leave the property as it is.  However, having regard to some of the concerns I have about the husband’s activities as outlined in the affidavit of the wife and conceded by the trustee in bankruptcy to have been extraordinary, it is important in this case that an order be made leaving the wife with property that she has in her possession or control or in which she has a legal or equitable interest to the exclusion of the husband.  I cannot think of any justifiable basis upon which the husband could make a claim against property in which the wife has such interests and indeed, as I have mentioned, the husband did not bother to attend to argue to the contrary.  In those circumstances, I am satisfied it is just and equitable to make an order that the wife retain to the exclusion of the husband any asset in which she has a legal or equitable interest.

20. In my view, the orders made are just and equitable.

21. There being no basis for the proceedings to otherwise remain alive, the applications are otherwise dismissed.

I certify that the preceding Twenty-One (21) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 16 October 2017.

Associate: 

Date:  16 October 2017