Merrill and Burt (No 4)

[2017] FamCA 582

FAMILY COURT OF AUSTRALIA

MERRILL & BURT (NO 4) [2017] FamCA 582

FAMILY LAW – PROPERTY – Interim orders – Where wife seeks to crystalize any outstanding liability with the ATO – Where husband disputes there is a taxation liability – Where wife ordered to obtain a deed of settlement from the ATO in the amount previously determined – Application dismissed.

FAMILY LAW – PROPERTY – Interim orders – Where the husband seeks to adduce further evidence arising from defamation proceedings – Where there are no submissions in respect of the relevance of the evidence – Where the evidence would not assist the court in relation to the possible ATO liability – Application dismissed.

FAMILY LAW – PRACTICE AND PROCEDURE – Extension of time – Where husband seeks an extension of time to file written submissions – Where written submissions require minor amendments – Consideration of any prejudice to wife – Where wife also seeks leave to file written submissions in reply – Application allowed.

Family Law Rules 2004 (Cth) rr 11.02, 11.03

Akbar & Mali and Anor [2015] FamCAFC 244

APPLICANT: Ms Merrill

RESPONDENT: Mr Burt

FILE NUMBER: MLC 9912 of 2013

DATE DELIVERED: 10 August 2017

PLACE DELIVERED: Adelaide

PLACE HEARD: Adelaide

JUDGMENT OF: Berman J

HEARING DATE: 31 July 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT:	Mr Bartfeld QC
SOLICITOR FOR THE APPLICANT:	Farrar Gesini Dunn

COUNSEL FOR THE RESPONDENT:	Mr Isles
SOLICITOR FOR THE RESPONDENT:	Effron & Associates

Orders

1. The matter is adjourned to 9 am on 16 October 2017 (2 hours allowed) for counsel to speak to the written submissions.

2. That time is extended for the husband to file and serve his final written submissions by 4 pm on 4 August 2017.

3. That leave is given for the wife to file and serve written submissions in reply to the submissions of the husband by 4 pm on 1 September 2017.

4. That paragraph 1 of orders made 13 April 2017 be varied to enable the wife by herself, her servants or agents to request from the Australian Taxation Office (“ATO”) a draft settlement agreement which indicates the extent to which the ATO are prepared to determine the tax, penalties or other amounts outstanding to the ATO of:-

   (a)C Pty Ltd (ACN …);

   (b)S Pty Ltd (ACN …);

   (c)O Pty Ltd (ACN …);

   (d)T Pty Ltd (ACN …); and

   (e)U Pty Ltd (ACN …).

5. That upon the wife receiving a draft settlement agreement from the ATO that she cause a copy of same to be forwarded to the husband forthwith.

6. That the wife be at liberty to file a further affidavit annexing the following:-

   (a)A copy of the draft settlement agreement/deed with the ATO; and

   (b)A copy of the judgment or order of the Supreme Court of Victoria by which defamation proceedings in matter number SC… are concluded.

7. That the Applications in a Case filed 7 and 27 July 2017 and the Response filed 28 July 2017 are 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 Merrill & Burt (No 4) 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 ADELAIDE

FILE NUMBER: MLC 9912  of 2013

Ms Merrill

Applicant

And

Mr Burt

Respondent

REASONS FOR JUDGMENT

INTRODUCTION  

1. The final hearing in this matter commenced in the Melbourne Registry of the Family Court of Australia on 22 August 2016.  The evidence was concluded on 13 April 2017. 

2. Orders were made that the husband was to file written submissions by 4 pm on 19 May 2017, the wife to file written submissions by 23 June 2017 and the proceedings adjourned to 31 July 2017 to enable counsel to speak to the written submissions.  It was anticipated that thereafter judgment would be reserved.

3. Submissions were not filed on behalf of the husband as ordered.  A final submissions document was tendered to the Court on 31 July 2017, but for reasons that will be explained it is possible that the document may require minor amendment.

4. The wife filed her final submissions on 23 June 2017.

5. It is reasonable to find that subject to further application the wife had an expectation that final submissions would be made on the adjourned date.

6. On 7 July 2017, the husband filed an Application in a Case seeking orders summarised as follows:-

   (1)That the wife provide to the husband any proposed Deed of Settlement to be entered into between the wife and the Australian Taxation Office (“ATO”) in relation to the following entities:-

   (a)C Pty Ltd;

   (b)O Pty Ltd;

   (c)S Pty Ltd;

   (d)T Pty Ltd; and

   (e)U Pty Ltd.

   (2)The husband be appointed as director of the entities in order that he be given standing to consult with and be informed by and negotiate with the ATO in terms of the outstanding taxation amount.

   (3)That time be expended to the husband to file his written submissions within 30 days after the tax, penalties and other amounts outstanding to the ATO have been crystalized;

   (4)That the time for the wife to file her written submissions be extended by 30 days after the husband files his written submissions.

7. By her Response filed 28 July 2017, the wife opposes the orders sought by the husband and seeks a discharge of paragraph 1 of orders made 13 April 2017.

8. That order provides that the wife be restrained and an injunction granted restraining herself, her servants or agents until further order from taking any action with the ATO to accept, commit or have crystalized the proposal of the ATO as set out in the letter of 14 March 2017 determining the tax, penalties or other amounts outstanding to the ATO in respect of the named entities.

9. If that order is discharged then the wife seeks the ability to take all necessary steps as may be required to finalise, settle and resolve the tax penalties and other amounts outstanding to the ATO in respect of the entities.

10. Notwithstanding that the wife had filed her final submissions document, she seeks leave to file supplementary submissions in relation to any ATO agreement and as to the outcome of defamation proceedings.

11. The Court was advised that the husband has pursued the wife and her accountants for defamation in the Supreme Court of Victoria, matter number SC….

12. The proceedings in respect of EE Accountants and Mr DD reached a confidential settlement on 27 June 2017.  Part of the settlement is a letter of retraction to the ATO dated 27 June 2017 retracting the defamatory statements and a letter of apology to the husband retracting the defamatory statements.

13. Both the letter of retraction and letter of apology are annexed to the husband’s affidavit sworn 25 July 2017 filed in support of his application in a case seeking leave to file an affidavit being evidence as part of the husband’s case exhibiting the letters of retraction and apology.  The husband also seeks leave to reopen the proceedings and lead evidence in respect of the letter of retraction and apology.

14. The proceedings between the husband and the wife have not resolved and are listed for trial at the Supreme Court of Victoria on 21 August 2017.

15. In preparation for the hearing on 31 July 2017, a summary of argument document was tendered on behalf of the husband.

16. At the hearing, Mr Hall of counsel advised that Mr Jones of Queens Counsel was no longer able to appear for the husband and as a result Mr Hall had attended the Court as a matter of courtesy but sought leave to withdraw. 

17. At the invitation of the Court the husband’s solicitor did not oppose counsel’s application and advised that in anticipation of the withdrawal of counsel, albeit at short notice, alternative counsel had been briefed.  Mr Isles of counsel was given leave to appear and submitted that subject to the resolution of the interim proceedings and a short adjournment to enable the husband’s submissions to be checked and possibly be the subject of minor amendment, the matter could be listed for final submissions.  Counsel apparently had an opportunity to consider the written submissions and his initial view was that any amendments that may be required were likely to be few in number and narrow in scope.

18. Given the circumstances as presented to the Court, in particular the late and apparently unexpected withdrawal of counsel, it was not possible for the interim applications to be heard and final submissions received.

19. The issues for determination are as follows:-

    (1)Whether leave should be given to the husband to rely upon a written submissions document given that there has not been compliance with my order.

    (2)The orders sought in the husband’s Application filed 7 July 2017.

    (3)The orders sought in the husband’s Application filed 27 July 2017.

    (4)The orders sought by the wife in the Response filed 28 July 2017.

SHOULD TIME BE EXTENDED FOR THE HUSBAND TO FILE WRITTEN SUBMISSIONS?

1. Whilst I have not yet given careful consideration to the detail of the summary of argument document tendered to the Court on behalf of the husband, it appears to be a comprehensive and responsive document.  I also accept the husband’s counsel’s submissions that if leave is given, both the Court and the wife can have some comfort that any changes will be minor and a final document can be completed within 48 hours of the hearing.

2. The husband’s application is opposed by the wife. The wife’s counsel refers to rules 11.02 and 11.03 of the Family Law Rules 2004 (Cth) (“the Rules”) which are in the following terms:-

   11.02 Failure to comply with the legislative provision or order

   (1)If a step is taken after the time specified for taking the step by these Rules, the Regulations or a procedural order, the step is of no effect.

   (2)If a party does not comply with these Rules, the Regulations or a procedural order, the court may:

   (a)dismiss all or part of the case;

   (b)set aside a step taken or an order made;

   (c)determine the case as if it were undefended;

   (d)make any of the orders mentioned in rule 11.01;

   (e)      order costs;

   (f)prohibit the party from taking a further step in the case until the occurrence of a specified event; or

   (g)make any other order the court considers necessary, having regard to the main purpose of these Rules (see rule 1.04).

   11.03 Relief from orders

   (1)A party may apply for relief from:

   (a)the effect of subrule 11.02(1); or

   (b)an order under subrule 11.02(2).

   (2)      In determining an application under subrule (1), the court may consider:

   (a)whether there is a good reason for the non-compliance;

   (b)        the extent to which the party has complied with orders, legislative provisions and the pre-action procedures;

   (c)whether the non-compliance was caused by the party or the party’s lawyer;

   (d)the impact of the non-compliance on the management of the case;

   (e)the effect of non-compliance on each other party;

   (f)costs;

   (g)        whether the applicant should be stayed from taking any further steps in the case until the costs are paid; and

   (h)        if the application is for relief from the effect of subrule 11.02(1) – whether all parties consent to the step being taken after the specified time.

3. In Akbar & Mali and Anor [2015] FamCAFC 244, the following appears:-

   [34]Inter alia, the factors set out in r 11.03(2) are designed to ensure that a party would not suffer unfair consequences of non-compliance with a procedural obligation if the non-compliance was caused by that party’s lawyer, where there is a good explanation for the breach, or the other parties agree the party should be excused. In other words, the scheme of this sub rule is to ensure that these rules do not operate as instruments of injustice and there is a just and proportionate response to any breach.

4. The focus in this case must be whether there is prejudice likely to be caused to the wife.  It appears that for various reasons each party considered that there may need to be an extension of time for the final submissions.  The husband’s position is that the case cannot be concluded until the interim proceedings have been determined and in particular the important issue of the amount payable to the ATO.  The wife is concerned that the resolution of the defamation proceedings may require further submissions to be made in any event.

5. The more significant mischief is that by the failure to comply with the orders for the filing of the written submissions, the wife in filing her submissions document did not have the advantage of being able to respond to the husband’s submissions.

6. There is substance to that submission.  The wife is entitled to respond to the husband’s submissions and if she chooses to do so, in writing.

7. Once final submissions were not able to be heard as anticipated, the inevitable delay in the matter being relisted provides substantial opportunity for the husband’s submissions to be filed and for the wife to have the opportunity of filing a considered response.

8. As matters have transpired counsel agreed that final submissions be listed for hearing on Monday 16 October 2017 in the Melbourne Registry.

9. Notwithstanding that the husband has not complied with the orders and the potential impact and application of r 11.02 of the Rules, given that the proceedings cannot be heard in any event and the husband has indicated that there can be substantial reliance on the summary of argument document that has been provided, I propose to extend time for the filing of a completed summary of argument to 4 pm on 4 August 2017.

OUTSTANDING TAXATION LIABILITY

1. By his Application filed 7 July 2017, the husband seeks that the wife provide to him any proposed deed or deeds of settlement to be entered into between the wife and the ATO on behalf of the corporate entities.

2. In addition, the husband seeks that he be appointed as a director of the corporate entitles so that he be given standing to consult and negotiate with the ATO.

3. The Response of the wife filed 28 July 2017 seeks relief from paragraph 1 of orders made 13 April 2017 which would enable her to “finalise, settle and resolve” the tax and other amounts outstanding to the ATO.

4. She also seeks to be able to enter into a deed of settlement and that the proceedings not be finalised until the wife has concluded an enforceable agreement with the ATO.

5. The wife’s solicitors caused a copy of a letter from the ATO to the wife’s accountant Mr DD dated 28 July 2017 in the following terms:-

   I refer to my letter of 14 March 2017 which sets out in some detail the ATO’s position in relation to a settlement of this matter.  As foreshadowed in that letter, we have commenced preparing a draft settlement agreement.

   I now seek your further advice as to Ms Merrill’s position in relation to the settlement proposed by the ATO.

6. An issue between the parties is the extent to which the entities and the wife have an outstanding taxation liability to the ATO.

7. The wife in conjunction with her accountants entered into lengthy negotiations with the ATO which she says has resulted in a proposed settlement of the outstanding taxation liability in the sum of $2,513,773.  Exhibit “10” in the proceedings sets out the ATO calculations.  The liability arises from the non-filing of taxation returns from as early as 2001.

8. Evidence in respect of the basis of the wife’s acceptance of the proposed settlement sum was given in the proceedings by the wife’s accountant.

9. The evidence was further supplemented by Mr DD, an accountant with the accounting firm EE Accountants.  The husband relied on the evidence of an expert accountant to comment on the issue of taxation.

10. There was no evidence presented on behalf of the husband which might be considered as a credible alternative calculation.

11. The position of the husband is the subject of submission at paragraphs 144 and 145 of the written submissions document tendered to the Court.  The initial position is that there is no tax debt that should be brought to account given that no tax returns have been submitted to the ATO.  There is no concluded agreement with the ATO and the following appears in the submissions:-

    No Deed of Settlement has been submitted to the ATO by the applicant nor submitted by the applicant to the respondent for consideration, nor has a Deed of Settlement been provided to the parties by the ATO of which the husband is aware.  No adjustment for tax should be made as a consequence.  Should the Court decide otherwise, from this, the tax liability should be deducted to $2.514 million (subject to it being confirmed by Deed that the ATO will accept this figure in full and final settlement) making the total for distribution $9.6 million (in round figures).

12. Arising from the orders sought, there is at least some common ground between the parties in that the wife seeks to be released from the injunction to receive a proposed deed of settlement from the ATO in circumstances where the husband asserts that there is no evidence of any tax liability having been proven or agreed.

13. The submissions of Queens Counsel for the wife is that she does not intend to make any further submissions to the ATO as to the proposed ATO debt and would wish to do no more than to invite a deed of settlement confirming the ATO’s position as foreshadowed in the letter of 28 July 2017.

14. In those circumstances and given the apparent acceptance by the wife of an assessment of the ATO debt at $2,513,773, a document indicating the commitment of the ATO to settle the debt in that figure is consistent with orders being sought by each of the parties.  The basis of the husband’s contention at this stage is that he seeks to be satisfied at least as a first stage that the ATO are prepared to resolve the matter in the sum as evidence by exhibit “10” in the proceedings.

15. The husband seeks that he be appointed as a director of the corporate entities to give him standing to consult and negotiate with the ATO.

16. The husband’s position is that there either should be no tax brought to account, but if that is not the finding of the Court then by his submissions document he appears to accept the figure of $2,513,773 subject to being satisfied that the ATO is prepared to settle matters on that basis.  Other than the assertion that there is no tax debt and that no tax liability has been proven, evidence was not presented on behalf of the husband as to an alternative amount.

17. Paragraph 3 of the orders sought seek that time be extended for the husband to file written submissions after the tax penalties and other amounts outstanding to the ATO have been crystalized.

18. To avoid any doubt the wife should be given an opportunity to confirm whether the ATO are prepared to confirm a settlement sum as discussed.

RESPONSE FILED 28 JULY 2017

1. As discussed, the wife should be permitted to seek that the ATO provide a draft settlement agreement and that a copy should be provided to the husband.

2. Subject to the obtaining of a draft settlement agreement, the wife will continue to be restrained from entering into a settlement agreement with the ATO pending the delivery of final judgment.

3. The defamation proceedings are to commence on 21 August 2017.  Given that the final submissions are listed for hearing on 16 October 2017, there is ample opportunity for the defamation litigation to be resolved and it would be a relevant consideration for the Court to be aware of any judgment or order arising therefrom.

LEAVE TO ADDUCE FURTHER EVIDENCE

1. The husband seeks leave to file an affidavit exhibiting a letter of retraction from EE Accountants and Mr DD to the ATO dated 27 June 2017 and a letter of apology to the husband.

1. The affidavit in support sets out the circumstances in which the husband brought defamation proceedings against EE Accountants and Mr DD in respect of defamatory statements contained in a voluntary disclosure letter dated 4 August 2016 from EE Accountants to the ATO being annexure “EC2” to the affidavit of Ms F.  The husband seeks to call evidence in respect of the letters of retraction and apology.

2. The application is opposed.   The orders sought by the husband seem to be unnecessary.  The wife’s submissions document by reference to the ATO liability, does not suggest that anything turns on the statements contained in paragraphs 13(a) to 13(d) of the letter namely:-

   (1)[The husband] was acting as a shadow director of the entities under the wife’s control and directorship;

   (2)[The husband] continued to be in effective control of all finances and assets referred to after becoming a bankrupt in or about 2009;

   (3)That at all material times the husband had actual and effective control of books, records, accounts, finances and assets held by the husband or the wife; and

   (4)That at all material times during the relationship the husband had been solely responsible for providing instructions to accountants.

3. The only purpose to the evidence of Ms F, Mr DD and Mr w was to consider the circumstances surrounding the purported quantum of the taxation liability of $2,513,773.  Neither the husband nor the wife make any submissions in respect of the relevance of the accepted misrepresentations made by EE Accountants and Mr DD.  The Court would gain no assistance from either receiving the letter of apology or from hearing further evidence from the husband on the topic.

I certify that the preceding fifty-four (54) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 10 August 2017

Associate:

Date:  10 August 2017