Moore & Moore
[2014] FamCAFC 113
•27 June 2014
FAMILY COURT OF AUSTRALIA
| MOORE & MOORE | [2014] FamCAFC 113 |
FAMILY LAW – APPEAL – Where the wife appealed against a dismissal of her application to revoke the approval of a Deed pursuant to s 87(8) of the Family Law Act 1975 (Cth) – Where the wife asserts the husband misrepresented the true ownership of the very valuable asset of a trust – The findings made by the trial Judge were open to him on the evidence – Where the wife asserts the husband provided misleading information concerning disbursement of the proceeds of sale of two properties – The document provided was not misleading and in any event, the wife did not rely on any representation – Where the wife asserts the husband failed to disclose an arrangement between the husband and his mother relating to a mortgage – The trial Judge’s findings were open to him – Where the wife asserts the husband exerted undue pressure on her in circumstances where a mortgage was called up – The trial Judge’s findings were open to him – No merit in any grounds of appeal – Appeal dismissed.
| Family Law Act 1975 (Cth) s 87 |
| Family Law Amendment Act 2000 (Cth) |
AMP Services Ltd v Manning [2006] FCA 256
Barro and Barro (1983) FLC 91-300
Green & Kwiatek (1982) FLC 91-259
Giannarelli v Wraith (No. 2) (1991) 171 CLR 592
Grefeld & Grefeld (2012) FLC 93-508
Jones v Dunkel (1959) 101 CLR 298
Players Pty Ltd (in liquidation) v Clone Pty Ltd (2013) 115 SASR 547
R v Burdett (1820) 106 ER 873
Wentworth v Lloyd (1864) 10 HLC 589
| APPELLANT: | Ms Moore |
| RESPONDENT: | Mr Moore |
| FILE NUMBER: | ADF | 4732 | of | 1998 |
| APPEAL NUMBER: | SOA | 41 | of | 2012 |
| DATE DELIVERED: | 27 June 2014 |
| PLACE DELIVERED: | Perth |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Bryant CJ, Finn and Thackray JJ |
| HEARING DATE: | 9 & 10 October 2013 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 18 April 2012 |
| LOWER COURT MNC: | [2012] FamCA 387 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Whitington QC with Mr Jordan |
| SOLICITOR FOR THE APPELLANT: | Jordan & Fowler Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Richardson SC with Mr Bleby SC and Mr Stenhouse |
| SOLICITOR FOR THE RESPONDENT: | Karras Partners Lawyers |
Orders
The appeal be dismissed.
The wife pay the husband’s costs of and incidental to the appeal as agreed and in default of agreement, as assessed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Moore & Moore has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT ADELAIDE |
Appeal Number: SOA 41 of 2012
File Number: ADF 4732 of 1998
| Ms Moore |
Appellant
And
| Mr Moore |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an appeal against an order made by Strickland J on 18 April 2012 dismissing an application for revocation of approval of a deed entered into pursuant to s 87 of the Family Law Act 1975 (Cth) (“the Act”).
The appellant wife contends that the trial Judge erred by rejecting her claim that the respondent husband secured her agreement to the deed, and its subsequent approval by Murray J on 24 November 2000, by:
·misrepresenting the true ownership of the very valuable assets of a trust known as the E trust (Grounds 1 to 7);
·providing misleading information concerning disbursement of the sale proceeds of two properties in Suburb H and Suburb N (Grounds 8 to 14);
·failing to disclose an arrangement between the husband and his mother relating to a mortgage over the matrimonial home; (Ground 15) and
·exerting undue pressure (Grounds 16 to 20).
Relevant legislation
Section 87(1) of the Act provides that:
… a maintenance agreement may make provision to the effect that the agreement shall operate, in relation to the financial matters dealt with in the agreement, in substitution for any rights of the parties to the agreement under [Part VIII of the Act].
Section 87(3) requires a court to approve a “maintenance agreement” if satisfied its provisions dealing with financial matters are “proper”. However, by virtue of the Family Law Amendment Act 2000 (Cth), which came into effect on 27 December 2000, such agreements can no longer be approved. The deed with which we are concerned was approved shortly before the date of commencement of the amendments.
Section 87 remains in the Act because some of its provisions remain operative. Relevantly for this appeal, ss 87(8)(a) and 87(8)(c) continue to provide that the approval of a deed may be revoked if the court is satisfied that the approval was obtained by fraud, or if the agreement is void, voidable or unenforceable.
Importantly, s 87(11) provides that:
… the validity, enforceability and effect of an approved maintenance agreement shall be determined by the court according to the principles of law and equity that are applicable in determining the validity, enforceability, and effect of contracts and purported contracts …
Terminology
In these reasons, where convenient, we will refer to:
·the appellant, Ms Moore, as “the wife”;
·the respondent, Mr Moore as “the husband”;
·Mrs Moore Snr as “the husband’s mother”;
·Property TE, Adelaide as “the matrimonial home”;
·the deed approved on 24 November 2000 as “the Deed”; and
·the litigation between the husband and the wife prior to the approval of the Deed as “the original proceedings”.
Key events prior to the approval of the Deed
The following facts are drawn from the reasons of the trial Judge and are not controversial.
The husband and wife were married in 1973 and separated in 1998. They have two adult children.
The husband and his parents migrated to Australia from Europe when the husband was very young. By the time he married the wife, the husband had his own professional practice.
The husband’s parents conducted some of their business affairs through O Nominees Pty Ltd. After the husband’s father died in 1980, the husband was appointed as a director of the company because of the requirement for there to be two directors, and to assist his mother. The husband also held a share in the company because of the requirement for there to be two shareholders, but his share was held on trust for his mother. The husband was paid a regular management fee for the advice and assistance he provided.
The husband’s mother later altered her corporate structure on the advice of her accountants. This entailed the formation of the D Trust, with Y Pty Ltd as trustee. The husband’s mother was the appointor, with the beneficiaries being the husband’s mother and members of her family, including the husband. The husband and his mother were the directors of Y Pty Ltd. They each held one share, but again the husband’s share was held on trust for his mother.
In 1980, with a view to investing in commercial properties, the husband and his business partner Mr S, established C Investments Pty Ltd, as trustee for C Investments Unit Trust. The various entities they thereafter formed became known collectively as “C”. In 1988, entities associated with Mr R joined C.
In 1992, the husband and wife purchased the matrimonial home for $890,000. They executed a mortgage to O Nominees Pty Ltd over the home, securing the sum of $930,000 borrowed to acquire the property.
In 1993, the husband and his business associates became involved in a major property development in ER Street, Adelaide. In 1995, they took on another development at Suburb L, a suburb of Adelaide. Further details about these projects will be provided when we come to discuss Grounds 1 to 7.
In January 1998, the husband left the matrimonial home. A year later, he acquired a home in Suburb N, with the assistance of a bank loan.
In November 1998, the wife commenced proceedings for property settlement and spousal maintenance. During the course of these proceedings, which were finally resolved by the approval of the Deed, the wife had advice from:
·Ms Chapman, an “experienced family law practitioner” (Reasons at [75]);
·Mr W, an “expert accountant and valuer” (Reasons at [103]); and
·Mr Mansueto, a commercial solicitor. (Mr Mansueto also drafted the Deed, with assistance from Ms Pyke QC.)
The husband also had expert advice during the proceedings, in the course of which he or his legal advisors obtained two valuations of his business interests which are of considerable importance in this appeal.
The first was prepared by Mr J, who was a partner in X Accountants, the firm of accountants which also acted for the husband and C. Mr J presented his report in January 1999, and a copy was given to the wife.
The second, dated 31 March 2000, was prepared by Mr K, who the trial Judge described as “an expert forensic accountant who is well known and respected in this jurisdiction” (Reasons [80]).
The wife did not accept Mr K’s report and she commissioned a report from Mr W, which was dated 24 October 2000. The trial Judge noted, at [114], that “intriguingly … this report did not provide a valuation of the husband’s business interests”. Instead, it focussed on the income of the entities in which the wife claimed that the husband owned or had an interest.
In late September/early October 2000, the husband and wife had a series of private meetings in an effort to resolve the dispute, which by then had been listed for trial. Having made progress, they then engaged Mr Mansueto to assist them finalise an agreement, which ultimately was reflected in the Deed.
On 23 November 2000, the husband and wife signed the Deed, which was approved by Murray J on the following day.
The terms of the Deed
The Deed, to which O Nominees Pty Ltd was also a party, relevantly provided as follows:
·the wife to sell the matrimonial home at a price to be determined by her;
·the wife to pay the husband $650,000 on settlement of the sale of the matrimonial home (with the wife to receive the balance);
·O Nominees Pty Ltd to limit its entitlement to security under the terms of its mortgage over the matrimonial home to $650,000;
·upon payment of the $650,000 to the husband, O Nominees Pty Ltd to release the wife from all liability, on the basis the husband would thereafter assume responsibility for the debt secured by the mortgage;
·payment by the husband to the wife of $2.25 million as follows:
o$150,000 on 1 December 2000;
o$600,000 by quarterly instalments of $30,000, ending 1 October 2005; and
o$1.5 million on 31 December 2005;
·the wife to assign to the husband any interest she had in entities which were described in the Deed as “the [Moore] Group of Companies” and others described as “the Other [Moore] Companies”, with the husband to indemnify her in relation to any liability concerning those companies;
·each party to otherwise retain the property they held, which, in the husband’s case, included any interest and entitlement in “the [Moore] Group of Companies” and “the Other [Moore] Companies”.
The joint schedule provided to Murray J
Murray J was provided with a schedule of assets, liabilities and resources dated 23 November 2000. Although the schedule was prepared by the husband’s solicitor, the content had been agreed with the wife’s solicitor.
The schedule reveals that the only significant point of contention concerned an almost $8 million disparity in the value of the business interests. This was dealt with in the schedule in the following terms under a heading “The [C] Group of Companies” (an expression not used in the Deed):
The husband has obtained a valuation from [Mr K], Chartered Accountant (dated 31/3/2000) which indicates that the net position of the husband and the wife is a net liability of $997,901.00.
The wife has obtained a valuation from [Mr W], Chartered Accountant which provides an estimate of the value of the interest of the husband and the wife of approximately $7,000,000.00.
The schedule did not identify which entities comprised “[t]he [C] Group of Companies”, but it is common ground that the wife’s estimate of $7 million included the value of the assets of an entity (the E Trust) which had been treated by Mr K as the property of the husband’s mother. (We will discuss the E Trust in greater detail when we come to Grounds 1 to 7.)
The schedule recorded that the husband had obtained two appraisals of the matrimonial home at a figure of $1.5 million, but also recorded that the home had been formally valued, for security purposes, at $1.3 million. The schedule noted that the home was subject to a $930,000 mortgage to O Nominees Pty Ltd, plus interest totalling $97,941.40 (as at 5 September 2000).
The schedule disclosed assets/liabilities to be retained by the wife as follows:
·furniture and contents $59,140
·1998 car $109,000 (cost price)
·jewellery $3,000
·unpaid legal/accounting fees ($55,000)
The schedule recorded that the car was subject to a lease, but did not reveal any information concerning the liability under the lease. (An aide-memoire provided to Strickland J suggested that the liability was $90,000.)
The schedule also disclosed assets/liabilities to be retained by the husband:
·Suburb N equity $130,000
·1990 car $80,000
·life insurance $2,193
·superannuation $6,846
·overdraft ($50,000)
·Visa card ($10,000)
·unpaid legal/accounting fees ($102,143)
It will be seen that, apart from the business interests, the husband and wife had assets of only nominal value after allowing for liabilities, including more than $150,000 in unpaid fees associated with the proceedings.
Notwithstanding Mr K’s view that the business assets had a value of negative $1 million, the terms of the settlement involved the wife receiving about $3 million, albeit payable over a period of five years, without interest.
Grounds 1 to 7 – Control and ownership of the E Trust
These grounds contain the wife’s complaints about the rejection of her contention relating to the true ownership of the assets of the E Trust.
Before setting out the grounds, we will provide important details about the Trust; its investments; and the way its assets were treated in the negotiations. These are drawn from the reasons of the trial Judge and are not controversial.
The establishment of E and its investments
In 1992, the South Australian Government called for expressions of interest to develop land in ER Street, Adelaide. C registered its interest, but because of financial difficulties C had experienced, the Government insisted that an entity independent from C undertake the project.
The husband and his associates established the RE Trust to take a lease, containing an obligation to develop the land. The RE Company Pty Ltd was incorporated to be the trustee. The directors were the husband, Mr S and Mr R (although the latter did not have a financial interest).
The beneficiaries of the RE Trust were E Pty Ltd as trustee for the E Trust (representing the Moore family interests) and Z Pty Ltd as trustee for the Z Trust (representing the S family interests).
E Pty Ltd was incorporated in 1993. The directors were the husband’s mother, the husband and Mr S. The husband’s mother held eight shares, and the husband and Mr S held one each. The E Trust was settled in September 1993. The husband’s mother was the appointor of the Trust.
The husband was a director of Z Pty Ltd, along with Mr S, but the husband had only a nominal shareholding, in the same way that Mr S had only a nominal shareholding in E Pty Ltd.
The State Government required an initial capitalisation of $250,000 for the ER Street project. It also required the developers to demonstrate a funding source for the development costs of $8 million.
The husband’s mother agreed to provide the initial funding through Y Pty Ltd as trustee for the D Trust. This was recorded as a loan of $125,000 to the E Trust and $125,000 to the Z Trust.
The husband explained to his mother that funding was required for the construction work for the project and that Y Pty Ltd would need to provide this if finance could not be secured from another source. This proved to be the case, and Y Pty Ltd provided a facility, pursuant to which $1,085,585 had been drawn by 1996 when bank finance was finally obtained on the security of the lease. This was used to repay Y Pty Ltd for the money it had advanced for the construction funding.
The trial Judge recorded the husband’s evidence about the ER Street development in the following terms:
136.The husband’s evidence was that his mother was quite prepared to invest in the project and she had confidence in him and Mr [S] in organising and running the project. However, she did not want to expose herself to financial risk unnecessarily and thus she required a power of “veto”. As to the return on her investment the evidence of the husband was that his mother did not require regular income but she sought a share in any capital profit received from the project.
The E Trust also had an interest in another major project. This involved the purchase and development of a property at L, at an initial cost of $4 million, funded with a $6 million bank loan.
This project was undertaken via the P Trust. P Pty Ltd was incorporated in 1995 to act as trustee. The three directors were the husband, Mr S and Mr R. The shareholders were E Pty Ltd, Z Pty Ltd and B Pty Ltd (representing the R family interests).
The husband, both prior to and after approval of the Deed, accepted that he had the day-to-day control of the E Trust. He also acknowledged that the entire income derived from the Trust was effectively distributed to him.
Some seven years after the Deed was approved, E liquidated its interest in ER Street. This followed a falling out between the husband and Mr S, which was resolved by mediation in August 2007. Under the terms of the agreement, E sold its stake in ER Street to the Z Trust. E received $8,825,790 from the sale, of which the husband’s mother received $1 million and the husband received the balance.
By the time of this division of the proceeds of ER Street, the wife had already applied for revocation of the approval of the Deed, her application having been filed in December 2006.
The valuation of E prior to the execution of the Deed
The husband originally instructed his accountant, Mr J, to prepare a valuation of his interests for the purpose of the Family Court proceedings. The report valued E at $1.797 million but Mr J said in the report that consideration would “need to be given to attributing a percentage of the value of this (and other) Trusts to [the husband’s mother]” (Reasons [100] and [101]).
Having been advised that Mr J could not be considered independent, the husband commissioned a second report from Mr K who valued the E assets at $2,501,403. This included its interest in the two development projects.
Although Mr K valued all the E assets, his report did not treat them as belonging to the husband. He reasoned that the husband:
·was unable to control E Pty Ltd, as the husband’s mother was the beneficial owner of more than 75 per cent of the shares “which gives the holder the ability to appoint and remove directors in accordance with the Corporations Law” (paragraph 2.193);
·did not have control of “the E Group” and was “only one of the class of persons who may be included as a beneficiary” (paragraph 10.3); and
·was unable to control the E Trust as the husband’s mother had the power of appointment and, consequently, the husband “has no interest in the E Group apart from being one of the class of persons who may be a beneficiary” (paragraph 2.194).
Although the schedule provided to Murray J did not disclose any doubt on the husband’s part about the K report, in his evidence before Strickland J the husband claimed he had entertained doubt about Mr K’s reasoning.
The relevant part of the husband’s cross-examination (pages 563 to 566 of the transcript) is lengthy, and we do not propose to recite it. It is nevertheless of importance since senior counsel for the husband relied upon it when explaining to us the complexity of the issues arising from the report. For present purposes, it is sufficient to say that the husband stressed in his evidence that Mr K was the expert. While he therefore took the view that Mr K’s conclusions were matters within “his domain”, he nevertheless personally felt that “when it came to determining the matrimonial pool … there would be other factors that needed to be taken into account and that the issue was far more complex”, including the fact he was receiving all the income from E.
The wife never accepted Mr K’s opinion that the E assets should be excluded from “the matrimonial pool”. As earlier recorded, she represented to Murray J that she had “obtained a valuation” estimating the business assets were worth $7 million, which must have included E. It is now known this was not a formal valuation, but rather a verbal estimate that found its way into the schedule at the request of the wife’s advisers.
The grounds of appeal relating to E
The seven grounds dealing with the E Trust were expressed as follows:
1.The learned trial judge erred in finding that the husband did not control the [E] Trust.
2.The learned trial judge:
(a)erred in affording no significance to the husband’s loan application … in determining the issue of control;
(b)erred in affording no significance to the letter from Mr [ST] to Australian Taxation Office dated 24/5/99 and in particular erred in failing to attribute the conduct and knowledge of the husband’s agent and solicitor to the husband;
(c)erred in finding that it was as much open to the wife as to the husband to call the husband’s solicitor and not drawing a Jones v Dunkel inference against the husband as to the correct interpretation of the letter to the Australian Taxation Office in circumstances where the solicitor was bound by the husband’s or a third party’s legal professional privilege;
(d)erred in not holding that the husband was required by his high obligation pursuant to the Family Law Act to make full and frank disclosure on the critical question of control including by divulging to the wife in clear and explicit terms the basis for the assertion in the letter to Australian Taxation Office of the husband’s control of the [E] Trust;
(e)erred in failing to give any or sufficient weight to the accumulation of events subsequent to the property settlement in connection with the conduct and control of the [E] Trust;
(f)erred in failing to give any or sufficient weight to the steps taken by the husband (and referred to at paragraph 149 of his Reasons) which assumed a capacity in the husband to exert control of the [E] Trust to the exclusion of the husband’s mother;
(g)misstated the effect and significance of the question of control of the [E] Trust of the power of attorney (Ex189);
(h)erred in failing to find that the evidence referred to in paragraphs 95, 146 and 149 of his Reasons did give rise to an inference that the husband controlled the [E] Trust and that he was required to apply the principal [sic] in Jones v Dunkel against the husband’s unexplained failure to call his mother at the trial.
3.The learned trial judge erred in finding that the wife did not rely on the husband’s representation of lack of control advanced through the [K] Report.
4.The learned trial judge failed to appreciate and confused the distinction drawn in the wife’s case on the question of control of the [E] Trust between belief in the truth of the matter on the one hand and belief that the husband was asserting and would maintain the contrary against her in the proceedings with the risk that he would prevail.
5.That the learned trial judge erred in attaching no weight or relevance to the amendments to the settlement deed regarding the “other [Moore] companies”.
6.The learned trial judge erred in finding that there was a valuation available to the wife in the amount of $7,000,000.
7.The learned trial judge erred in failing to find that the approval of the Court of the Section 87 deed was procured through the husband’s non-disclosure of the fact of his control of the [E] Trust.
Although no mention is made in these grounds of the receipt by the husband of nearly $8 million on disposal of the E interest in the ER Street project, it is one of the “events” referred to in Ground 2(e). The disposal of that interest is also one of the “steps” mentioned in Ground 2(f) – and it forms part of the factual matrix relevant to other grounds. As there is so much overlapping, we propose to address first those grounds that deal with discrete issues, before discussing the totality of the complaints.
The trial Judge’s findings will be explained, to the extent necessary, in the course of our discussion of each of the grounds.
Ground 2(a) – The loan application
In December 1998, the husband made an application for a loan to purchase his unit in Suburb N. The application contained the following entry under a heading, “Investment and Beneficiary Interests”:
[C] Investments Unit Trust – 50 per cent
current market value
[RE] Trust - 50 per cent (via [E] Trust)
current market value
[P] Trust – 331/3 per cent (via [E] Trust)
current market value
[D] Trust – discretionary trust (trustee [Y]).
The wife relied on this part of the loan application to advance her contention that the husband controlled the E Trust; however, the trial Judge did not accept her proposition, saying, at [149.1]:
… I agree with the submission of the husband that on any view this is uncontroversial. It does not say anything about control, and it is consistent with the report of Mr [K], in that the husband as a beneficiary receives income from the [E] Trust.
On appeal, senior counsel for the wife submitted that the trial Judge “appears to have approached the loan application … through a conclusion rather than with a view to a conclusion”. It was further submitted that, contrary to the finding made by the trial Judge at [149.1]:
the document was a statement of position advanced in support of a loan application claiming an economic interest not only in the [C] Investments Unit Trust (incontrovertibly controlled by the husband) but also the interests held within the [E] Trust, and not simply a statement of an expectation of discretionary distributions of income.
Senior counsel for the wife properly conceded that, on its own, the application was not “decisive”, but submitted that “when you put it in the balance as well with the tax letter [which we will discuss when we come to Ground 2(b)] it’s all tending in the same direction”.
In response, the husband submitted that all that the loan application identified was “Investment and Beneficiary interests” via the [E] Trust, and the trial Judge was right to find this consistent with the K report. In his oral submissions, senior counsel for the husband also pointed out that the husband would be wanting to have the bank understand that he had an income stream available to him to support the borrowings that he wanted to undertake from them. (Appeal transcript, 10 October 2013, p 125)
We accept the submissions of senior counsel for the husband. At the time he made the loan application, the husband was receiving the entire income of the E Trust. We therefore consider it was open to the trial Judge to consider it was “uncontroversial” for the husband, when applying for a loan, to refer to two entities in which the E Trust had an interest as being “Investment and Beneficiary Interests”. There is therefore no merit in this complaint.
Grounds 2(b) and (d) – The letter to the Australian Taxation Office
These grounds relate to a letter from a solicitor, Mr ST, to the Australian Taxation Office (“ATO”), dated 24 May 1999 seeking private rulings on behalf of entities comprising the C Group and also on behalf of E Pty Ltd “in its own right”, for the three years ending 30 June 1996, 1998 and 1999. (Mr ST’s name was spelled incorrectly in the trial Judge’s reasons and in the transcripts. The errors have not been corrected in the quotations below.)
Senior counsel for the wife summarised the purport of the letter as being:
a taxpayer … seeking to pass income from a profit-making entity such as the [P] Trust and [RE] through [E] up to [C] Investments and [C] Holdings, which had accumulated tax losses, and to set one off against the other. (Appeal transcript, 9 October 2013, p 36)
The part of the letter on which the wife principally relied was that unequivocally stating that the [E] Trust is “controlled by the husband”.
In opening the wife’s case at trial, senior counsel had claimed that the letter had not been discovered in the original proceedings. However, it transpired that this was incorrect. The letter had been discovered, but had not been seen by the wife or her solicitors because they failed to inspect the documents. In his oral submissions to us, senior counsel for the wife explained that the letter had been included in a very long list of documents and that it apparently only came to light when his junior had read the discovered documents. He surmised that the “discovery was never read by the wife or her solicitor … because it was such an enormous task, and it would have cost a huge amount of money”.
The trial Judge noted that after it became known the letter had been discovered:
111.… the wife’s senior counsel changed tack and instead criticised the husband for not bringing this correspondence to the attention of the wife’s solicitors and suggesting to include it in a lengthy list of documents was insufficient. Full disclosure required more than that, it is submitted.
The trial Judge was unimpressed by this proposition:
112.This is an extraordinary submission, and I reject it. The husband did all that was required of him given that in my view there was no reason at the time for this letter to be highlighted or the subject of specific discovery. It was only the failure by the wife’s legal advisers to inspect the documents that kept the wife in the dark about this letter …
On returning to the topic later in his reasons, his Honour said:
149.2… However, the difficulty for the wife in relying on this letter is that it was not a letter written by the husband, and the language used was that of Mr [ST], the author. There is no context in the letter to the use of the word “controlled”, and it could have a meaning other than the one the wife seeks to promote. Indeed, Mr [ST] was not called as a witness to provide that necessary context, and it was as much open to the wife to call him as a witness in her case, as it was to the husband to call him.
Thus, this letter does not provide the necessary inconsistency with the report of Mr [K] that the wife requires to succeed in her claim.
…
Finally, it was suggested to the husband in cross-examination that he should have shown this letter to Mr [K] for the purposes of his report, and that if he had, Mr [K] would not have written his report as he did. However, I do not find that persuasive. Although it is plain that the letter was not provided to Mr [K] by the husband or his solicitors, Mr [K] had access to any information that he thought was necessary, and he was in fact in contact with Mr [ST] in the course of writing his report. Indeed, Mr [K] had a two hour meeting with Mr [ST] and provided drafts of parts of his report to him.
Thus, to repeat, I do not consider that any forensic use can be made of the contents of this letter, and it certainly does not support the wife’s contention as to the control of the [E] Trust.
The wife’s submissions relating to Grounds 2(b) and (d)
Senior counsel for the wife strongly criticised the trial Judge’s treatment of the ST letter, describing it as being perhaps “the most significant item of objective evidence”. In doing so, senior counsel emphasised that “Mr [ST] had worked with the Group for some years”, and that the husband had accepted the letter was sent on his instructions.
Senior counsel for the wife submitted that the trial Judge had dismissed the probative value of the letter on two, equally misconceived, grounds.
The first, namely that the letter had been written by Mr ST, not the husband, was said by senior counsel to have overlooked the fact that solicitors only make admissions on the instructions of their client, especially in correspondence as important as this.
The second was that his Honour considered “the admission might be qualified and it was for the wife to call the solicitor to confirm the admission, not the husband to have him qualify it”. In advancing this proposition, it was submitted by senior counsel for the wife that Mr ST was plainly in the husband’s “camp” and was bound by the husband’s legal professional privilege, which made it impracticable for the wife to call him.
In his oral argument, without taking us to the applicable taxation legislation, senior counsel for the wife submitted that “as night follows day”, the outcome sought to be achieved in the private ruling could only succeed “if there is a form of common equity ownership”, and the fact the various entities were under common management would not be sufficient to allow income derived from one entity to be offset against losses made in another.
Senior counsel for the wife further submitted that the obligation to make a full and frank disclosure in proceedings such as these has been fashioned
… in much the way of the trustee’s obligation or the fiduciary’s obligation to a fiduciary beneficiary. And, in those circumstances, to get somebody’s consent, it must be fully informed consent, and, in those circumstances, you cannot go through a charade of discovery; you must actually get their informed consent. (Appeal transcript, 9 October 2013, p 45)
Although senior counsel for the wife, when challenged, appeared to back away a little from the last mentioned proposition, he nevertheless submitted:
But when you have filed a form 17 on oath which contains an assertion through the [K] report, “I had no control”, and you have in your possession a letter to the Commissioner saying, “I do have control”, then we do say … it is incumbent upon that party to bring it to the attention of their opponent/spouse, either through correspondence or through the affidavit.
In support of this argument we were referred in passing to Players Pty Ltd (in liquidation) v Clone Pty Ltd (2013) 115 SASR 547; however, with respect to senior counsel for the wife, the case is not on point, and does not advance the argument that the husband had an obligation to draw the letter to the wife’s attention.
Senior counsel for the wife also criticised the trial Judge for accepting the husband’s explanation for considering that the issue of “control” of the E Trust was irrelevant to the private ruling. The husband’s understanding, as he explained in cross-examination, was based on what Mr ST had said in a letter concerning the retirement of Mr S’s father as appointor of the Z Trust. The husband’s contention was that the position of Mr S’s father in the Z Trust mirrored that of the husband’s mother in the E Trust, and that Mr ST had advised that the retirement of Mr S’s father was irrelevant to the private ruling.
Senior counsel for the wife submitted that this explanation was itself
a complete irrelevancy because Mr [ST], we say, no doubt would have said the retirement of [Mr S’s father] as appointor has no bearing upon the tax ruling because the tax ruling was premised upon his son having the control [as had also been said in the [ST] letter]. And so the fact that somebody who didn’t have control should retire as appointor is neither here nor there. (Appeal transcript, 9 October 2013, p 49)
Senior counsel for the wife also sought to advance his argument by referring to another part of the letter in which an explanation was given to the ATO for keeping E and Z outside the C Group. He submitted that the letter revealed that rationale “was a purely pragmatic one to do with bank funding and protection of the interests of the asset management corporation”.
The husband’s submissions relating to Grounds 2(b) and (d)
Senior counsel for the husband submitted that the reliance by the wife
on the law as to admissions of an agent is relevant enough to the question of admissibility of the document, but ultimately the [husband] was himself available for cross-examination. If the [wife] chose to cross-examine the principal, then the “admission” would always have to be assessed in light of that evidence.
Senior counsel for the husband observed that the husband had been cross-examined at length on the ST letter, in the course of which he had pointed out that the letter was not his, and the language was that of the solicitor. Furthermore, the husband accepted the accuracy of the assertion made in the letter about “control” insofar as this might refer to “executive control”; but denied it might have referred to “ultimate control”.
It was further submitted that the wife’s complaint ignores the finding that there was no context to the use of the word “controlled”, and that it could have a meaning other than that which she sought to promote. It was pointed out that the letter was just one letter in the course of a five-year application for a private ruling, in circumstances where the ATO had been provided with all relevant materials, which would have shown the husband’s mother held the power of appointment and the majority shareholding in E Pty Ltd. In these circumstances, it was submitted that to assert that the sentence relied on in the letter “was an admission that needed no qualification” is unsustainable.
Senior counsel also disputed that the husband had allowed Mr K to proceed in ignorance of the letter, noting that “for all the [husband] knew, anything could have been discussed” between Mr K and Mr ST, given that Mr K had open access to Mr ST, had a two hour meeting with him, and provided him with drafts of part of his report.
Senior counsel for the husband agreed with an observation from the bench that senior counsel for the wife had made no endeavour to take us to the relevant legislation in order to establish that success in seeking the private ruling was dependent upon demonstration of common ownership or equity in the various entities. He argued that it “might equally be inferred that the inquiry is one that springs from the existence of a common beneficiary of the income”, pointing out that there had been a commonality here between those receiving the benefit of the income and those who incurred the losses.
Senior counsel for the husband also drew our attention to paragraph 6.7 of the K report, which recorded that Mr K had “been advised that a Private Ruling Request [had] been made in respect of the trust loss provisions and the income injection test”. The letter to the ATO also suggests that the ruling would turn on an “income injection test”, prompting senior counsel for the husband to submit that:
the language certainly suggests that it’s a test relevant to the availability of using these losses that has something to do with where the income is going. … So at the outset, we contend the argument … that it is to be inferred that this letter is all about an understanding of equity ownership of these trusts, is something that can’t be made out as being the probable inference or even an available inference. (Appeal transcript, 9 October 2013, p 107)
Senior counsel also disputed that the husband had accepted that the ST letter was written in accordance with his instructions. He took us to the following passage which was relied on by senior counsel for the wife, and submitted that the full answer to the question was “somewhat … qualified”.
[SENIOR COUNSEL FOR THE WIFE] And … this letter was prepared by Mr [ST] and sent to the Commissioner with your instructions?‑‑‑ [THE HUSBAND] Yes, I had – well, I was instructing Mr [ST], generally and over some period of time prior to this letter about this issue. (Transcript, 15 December 2010, p 585)
Senior counsel for the husband submitted that the qualification to the answer became more explicit in the following passage:
And where does Mr [ST] in his letter refer to the other considerations?‑‑‑I don’t know; that’s Mr [ST’s] letter and I can’t answer for where – why it is in or why it is out. I assume he’s saying what ever is pertinent or relevant to the point he’s trying to make to the ATO.
Based on your instructions?‑‑‑I didn’t specifically instruct him to write this particular letter. This is the work of Mr [ST], not my work. (Transcript, 15 December 2010, p 596)
Senior counsel submitted that not only did these answers make clear that the husband did not accept responsibility for the language used in the letter, but they also constituted a waiver of legal professional privilege (which is a point of potential relevance to the Jones v Dunkel argument discussed later).
Senior counsel, in concluding his argument, submitted that:
… it’s drawing an extraordinarily long bow to say that this letter … was, in fact, the smoking gun … that must have meant a concession as to ultimate control in a way that was different to the trust instrument and different to the creature that had been presented to the court.
…
And whilst our friends wish to construct it as being an enormously significant piece of evidence in this case, it wasn’t for [the husband] to necessarily see it as significant at all … (Appeal transcript 9 October 2013, p 111, 113)
Discussion of Grounds 2(b) and 2(d)
We will defer until later discussion of the inference, if any, to be drawn from the husband’s failure to call Mr ST to explain his letter. Dealing now only with the other propositions contained in Grounds 2(b) and 2(d), we have not been persuaded that the approach adopted by the trial Judge to the letter was unavailable to him. In particular, we consider that:
·the letter having been discovered, the husband and his advisors were not obliged to draw the attention of the wife or her advisors to its content, let alone in “clear and explicit terms” as asserted by Ground 2(d);
·the obligation to make full and frank disclosure does not place parties in proceedings in the Family Court in the position of a trustee or fiduciary, even where one is a lawyer – noting that here the wife had the benefit of advice/assistance from three legal practitioners and an accountant;
·the one statement contained in a single letter to the ATO must be seen in the context of what we were informed by senior counsel for the husband (without contradiction) were other documents and information provided in the course of the chain of correspondence of which it formed but part;
·the letter was consistent with the husband’s case that he did, in fact, have the day-to-day control of the Trust;
·there was no reason for the husband to consider the letter would be seen as of significance in determining who had “ultimate control” of E in the sense of determining how the corpus might be distributed (in circumstances where he had always acknowledged he had “executive control” and anticipated continuing to receive all the income);
·without being taken to the legislation applicable in 1999, there was no reason for the trial Judge – or us – to conclude that the only basis upon which the desired ruling could legitimately be sought was commonality of ownership, when the reference to the “income injection test” suggests it was at least as likely that what was required was a commonality between those receiving the income and those who incurred the losses.
Senior counsel for the wife, in his reply, correctly noted that senior counsel for the husband had not addressed his argument that the trial Judge had erred by failing to place any significance on the explanation given in the letter for why E had been kept outside the C Group. However, the letter itself reveals that this was related to the “precarious financial position” of C at the time the ER Street opportunity arose. We were not taken to any evidence to suggest that the husband had the means of providing the $250,000 upfront payment required, nor that he had any funding source other than the husband’s mother to meet the development costs. In our view, the fact the husband’s mother was in a position to provide funding is, in itself, sufficient to explain why she was placed in a position of control.
We might add that we were also not taken to any part of the record to show that the trial Judge was asked to place significance on any part of Mr ST’s very long letter save for the reference to the husband having control of E. Nor were we ourselves able to locate any request for him to do so.
For these reasons, we consider the findings in relation to the letter were open to the trial Judge and we therefore find no merit in Grounds 2(b) and (d).
Ground 2(g) – The Power of Attorney
Senior counsel for the wife submitted that the trial Judge erred in failing to place appropriate weight on four pieces of “retrospective evidence”, which he argued should have cast a “backward light” on the dispute.
One of the four pieces of “retrospective evidence” was the husband’s conduct of the dispute with Mr S and the subsequent distribution of the funds received on disposal of the ER Street project. The other “retrospective evidence” comprised three documents signed by the husband’s mother, namely:
·blank transfer forms relating to her shares in E Pty Ltd;
·a document relinquishing her power of appointment of the E Trust; and
·a general and enduring power of attorney in favour of the husband.
Ground 2(g) concerns the last of these documents, and seeks to attack the following finding of the trial Judge:
149.4The wife tendered a General and Enduring Power of Attorney (Exhibit W189) whereby the husband’s mother purports to appoint the husband as her Attorney. However, the document tendered is not dated, and [the husband’s mother’s] signature is not witnessed, and there is no acceptance by the husband. Thus, as the husband says, this is not a document “that could be relied on by the husband to conduct [the husband’s mother’s] affairs” (Power of Attorney and Agency Act 1984 (SA) s 6(2)).
In any event, even if it was properly executed, again, as the husband submits, it would not be open to the husband under this Power to manage the affairs of his mother to benefit himself. Thus he still could not be said to control the [E] Trust such that its assets can be treated as his.
Senior counsel for the wife relied on the Power of Attorney, along with the other documents, as demonstrating
a capacity in the husband in his discretion to install himself as the controller of the [E] Trust as a matter of legal form that bespeaks a real and effective practical control. The suggestion that the power of attorney was of no account because the mother’s signature had not been witnessed nor the husband’s acceptance endorsed is spurious when it was at all times within the husband’s capacity to make the document complete.
Senior counsel for the husband submitted in response that the Power of Attorney did not demonstrate any capacity on the part of the husband to install himself as the controller of the E Trust in the manner asserted. It was argued that the trial Judge’s findings were unassailable, as not only was the document signed by the husband, but he could also never have used the power to benefit himself.
In support of the latter proposition, senior counsel relied upon the law as recently restated in Grefeld & Grefeld (2012) FLC 93-508 (citations omitted):
67. … applying the law of Australia, the relationship created by the power of attorney was one of agency, and that is ordinarily a fiduciary one … in which the agent is not permitted to put his interest in conflict with the principal’s, nor to act for different principals with conflicting interests, nor to profit from the agency, at least without full disclosure to the principal …
68. No matter how broadly the terms of the power of attorney were drawn, its terms did not authorise the husband to act contrary to those legal principles …
We accept it was open to the wife to attempt to rely on the Power of Attorney and the other documents with a view to casting a “backward light” on the position at the time the Deed was approved. But the trial Judge, also accepted that fact, and we can find no error in him placing weight on the evidence that:
·the Power of Attorney was undated;
·the mother’s signature had not been witnessed;
·the power had not been accepted by the husband.
More importantly, however, we consider his Honour was entitled to place the considerable weight he did on the fact that even if these formal requirements had been satisfied, the husband would not have been at liberty to make use of the power to benefit himself.
We therefore find no merit in Ground 2(g).
Ground 2(h) – Inference available from “retrospective evidence”
This ground relies upon the evidence referred to at [95], [146] and [149] of the trial Judge’s reasons, which dealt, inter alia, with the “retrospective evidence” mentioned above. (The ground also deals with the Jones v Dunkel issue, but we have reserved that for discussion later.)
The evidence relied upon, which the wife asserts should have led to the trial Judge drawing an inference that the husband controlled the E Trust, was:
·the loan application, the ST letter and the Power of Attorney – all of which we have already discussed;
·the execution by the husband’s mother of a document relinquishing her position as the appointor of the E Trust and nominating in her place the husband and his associate, Mr S, “acting jointly and in the event of the death of one of them, the survivor of them acting alone”;
·the execution by the husband’s mother of share transfer forms in E Pty Ltd;
·the husband’s day-to-day management and operation of the E Trust, his position as a director of the trustee company, and the effective distribution to him of 100 per cent of the net income of the Trust each year;
·the conduct of the husband’s dispute with Mr S between 2005 and 2007, in the course of which:
oMr S resigned in 2005 as a director of E Pty Ltd and transferred his share to the husband, while the husband did the same in relation to Z Pty Ltd;
oa mediation was conducted, at which the husband’s mother was apparently not present, but which resulted in a “prima facie settlement of all issues”;
oMr S instituted proceedings against the husband and various entities, including E Pty Ltd, essentially seeking to enforce the mediation agreement, leading to the husband instructing solicitors to defend the claim, including on behalf of E;
othe husband’s mother retired in June 2006 as a director of E Pty Ltd and transferred her eight shares to the husband;
oa further mediation was conducted, at which the husband’s mother was not present, resulting in an agreement for E to dispose of its interest in the ER Street project;
oa further arrangement was made pursuant to which the husband’s mother received $1 million from the E stake in the project, while the husband received the balance of nearly $8 million.
As we have observed, we have already discussed some of the matters on which the wife relies in Ground 2(h). We turn now to those we have not discussed.
The relinquishment document and the share transfer forms
The trial Judge dealt with the purported relinquishment by the husband’s mother of her position as appointor of the E Trust and the execution by her of transfer forms relating to her shares in these terms:
149.5The wife sought to rely on a document dated 20 August 2001 whereby the husband’s mother purported to resign as appointor of the [E] Trust and to nominate Mr [S] and the husband as appointors (Exhibit W167).
The husband in his affidavit of evidence-in-chief deposed that his mother was, and at all times remained the appointor of the [E] Trust. Thus, immediately there was an inconsistency, and the wife suggests that not only does this impact on the husband’s credit, but this indicates that within a year of the approval of the Deed these changes were made with the implication that they were done to implement what had been the defacto position at the time of that approval, namely, the husband in fact controlling the [E] Trust in the relevant sense.
The husband’s explanation of this document given in evidence-in-chief was that it, along with a number of share transfer forms were prepared but were not implemented.
I will address the issue of the transfer forms in a moment, but the husband’s evidence is that the preparation of all of these documents was precipitated by the retirement of [Mr S’s father]. In 2001 [Mr S’s father] sought to retire from his involvement in [Z] Pty Ltd and the [Z] Trust which were the mirror company and trust to [E] Pty Ltd and the [E] Trust. This entailed him retiring as appointor of the [Z] Trust, appointing the husband and Mr [S] in his place, transferring four of his eight shares in [Z] Pty Ltd to the husband and the other four to Mr [S], and retiring as a director of that company. This was all implemented by the husband and his in-house accountant …
At the same time the husband and his mother contemplated whether it was appropriate for her to retire as well. Indeed, documents were prepared and signed in anticipation of that decision being made. However, it was not proceeded with and the husband’s mother remained the appointor of the [E] Trust and a director and the majority shareholder of [E] Pty Ltd.
Referring to the Relinquishment of Appointor document prepared for his mother, the husband’s evidence is supported by the terms of the document being the same as the Deed by which [Mr S’s father] relinquished his position as appointor of [Z] Pty Ltd and nominated the husband and Mr [S] as the appointors. Accordingly, I accept the husband’s evidence as to this.
It is also not clear to me how it is that a document prepared in 2001, and not put into effect, and in any event purporting to substitute not just the husband but also Mr [S] as the appointor of the [E] Trust can raise an implication that the husband controlled the [E] Trust at the time of the approval of the Deed and at all relevant times beforehand.
Turning to the transfer forms (Exhibits W184–187), apart from one (Exhibit W187), they were standard printed forms. The odd one out was a typed form which replicated the relevant parts of the standard printed form. They were all signed by Mrs [Moore] as Transferor and two of them were signed by the husband as Transferee. They were all undated. They each had a “Date of Purchase” panel for completion, and the printed part of the panel was as follows “… / … 19…”.
The wife’s senior counsel submitted that these forms had been prepared in the 1990s, and importantly before the date of
Mr [K’s] report. This, it was said, indicates that the husband was in control of the [E] Trust, that he was just waiting for the finalisation of the property settlement dispute to implement these transfer forms, and most significantly they were not disclosed not only to the wife, but also to Mr [K].I reject these submissions as completely untenable on the evidence before me. The uncompleted panel does not indicate that the forms were prepared in the 1990s, and the husband’s evidence that these forms were prepared and signed in 2001 in the context of the possible retirement of Mrs [Moore] from the [E] Trust following the retirement of [Mr S’s father] from [Z] is entirely plausible …
In attacking these findings, senior counsel for the wife submitted in his oral argument before us “that if the husband was able to procure his mother’s relinquishment of the appointment just a few months after the settlement, then that is capable of an inference that he could have done it at any time”.
Senior counsel for the wife also noted that the relevant documents had been “discovered late” and that the husband’s explanation of them had been given in his oral evidence-in-chief. His explanation was that Mr S’s father, having been told he was going to lose his pension with effect from January 2002 because of his involvement in Z, insisted he would retire from all entities in which he was involved so as to keep the pension, even though he was a wealthy man. As a result, documents to secure his extrication were prepared.
Senior counsel submitted that the trouble with this explanation was that the husband had conceded his mother did not need a pension and therefore did not need to give up her power of appointment. Senior counsel also submitted that the husband had given evidence, in effect, that the relinquishment document had been “stuck somewhere in the top drawer and never used or relied on”, causing senior counsel to ask, “well … why have it?”
In considering this submission, it will be instructive to set out precisely what the husband said when dealing with this issue:
[SENIOR COUNSEL FOR THE HUSBAND] Yes, but what was the circumstances in which they came to that position?‑‑‑ [THE HUSBAND] This process with [Mr S’s father] extended over a period of time in 2001. At a point of time in that process I considered whether it might also be appropriate at that time that, like [Mr S’s father] was doing, that perhaps my mother … should also retire. I spoke to her about it and I said that – explained what was happening with [Mr S’s father] and said to her that I was considering whether to recommend to her that she do the same thing. I also said to her that I would arrange, which I did, for [the in-house accountant] to have her execute similar documents to those executed by [Mr S’s father] in readiness if we made a decision, that is, I went back to her and said, “Yes, I do recommend this move. What do you think? What shall we do?” but in readiness for that, and [the in-house accountant] did that … (Transcript, 15 December 2010, p 550)
The trial Judge was uniquely well-placed to assess this explanation. And, as senior counsel for the wife properly conceded, the husband’s evidence was accepted. Once that concession was made, senior counsel could only fall back on his other argument that his Honour’s credibility finding was made “without weighing the Jones & Dunkel requirement of the absence of the mother”. That is a different issue, which will be discussed later. At this point, it is sufficient to say that nothing else put in argument persuaded us that it was not open to the trial Judge to accept the husband’s explanation.
The conduct of the dispute with Mr S and division of the proceeds
The wife’s case at trial, and re-agitated on appeal, was that the manner in which the husband had conducted the dispute with Mr S, and the way the proceeds of ER Street had been distributed, were further evidence of the husband having the ultimate control of the E Trust.
Having set out the background, the trial Judge disposed of the issue as follows:
149.3… The argument of the wife is that this series of events indicates that the husband made all of the relevant decisions in relation to the [E] Trust without any reference to his mother, and thus he controlled that Trust in the sense promoted by the wife. Although these events took place some time after the Deed was approved, the wife says that if the husband controlled the Trust at this time then he must have also controlled it at all relevant times previously because there was no evidence of any change.
However, again I am not persuaded by this argument. First, it has never been in dispute that the husband maintained the day to day control of the [E] Trust, and that is all that this evidence demonstrates. Secondly, it is the husband’s evidence that he exercised the day to day control, and conducted and concluded the dispute, the proceedings and the mediation with the consent of his mother. His evidence is that he consulted regularly with her and discussed all of the issues with her at the times when he needed to. Thirdly, on 30 June 2006 the husband’s mother retired as a director of [E] Pty Ltd and transferred her eight shares to the husband. This was done because of her age and the need to avoid her being embroiled in the dispute. Thus, the proceedings in the Supreme Court were in fact conducted by the husband as the sole director and shareholder of [E] Pty Ltd, as was the mediation with Mr Walsh QC, and the finalisation of the dispute. The husband did not need to defer to his mother or involve her at all after 30 June 2006 in relation to the operation of the trustee company.
Having next dealt with the husband’s failure to call his mother to give evidence, his Honour then discussed other issues concerning the extent to which the husband had control of the affairs of the E Trust:
149.6The wife told the Court of her beliefs and opinions as to the abilities of the husband’s mother, and to what extent the husband managed her affairs. For example, in paragraph 27 of her affidavit of evidence-in-chief filed on 18 August 2010 she deposed that following his father’s death in April 1980 “the husband took over complete control of all of his mother’s financial affairs (which he undertook for the remainder of (the) marriage)”. Further, the wife claimed that [the husband’s mother] could not read or write English and she had to be taught to sign her name.
In paragraph 13 of her affidavit in reply filed on 10 November 2010 the wife said that she did not believe that [the husband’s mother] “was capable of playing or did play any part in the management of (her) companies”, in paragraph 19 of that affidavit she claimed that “(s)he was not capable of managing her affairs”, and that it was “absurd … to suggest that she had any input to financial or business matters,” and in paragraph 29 she said that she did not “believe that the husband’s mother had any knowledge of transactions and bank accounts.”
All of this of course was meant to convey to the Court that the husband’s mother could not be the controller of the [E] Trust in the relevant sense, and that the husband must have been. The wife’s belief was that the husband did not give his mother any “advice”, that he did not “follow her directions”, and that he “treated the assets of entities said to belong to or be controlled by his mother as he pleased”.
However, I agree with the husband’s submissions that these beliefs and opinions have no value as to the truth of those beliefs or opinions, and as such they do not provide any basis for finding that the husband controlled the [E] Trust.
This of course was another area where it might have been appropriate for the husband to call his mother as a witness, but for the same reasons as identified above, I do not consider there can be any adverse inference drawn from that omission.
Senior counsel for the wife, in his argument before us, relied heavily on the fact that the husband had received so much of the “profit” from the ER Street project; a fact which he submitted “was capable of casting a backward light on the issue of who really owned these assets”. He paraphrased the husband’s explanation for the division of the proceeds as being that:
... in effect, his mother was still in control. He consulted her during the mediation and settlement negotiations. When it came to realising a pot of money … she simply said, “Well, I would like a million dollars share of the profit for what I did at the outset”. (Appeal transcript, 9 October 2013, p 56)
Senior counsel for the wife then went on to refer to the $250,000 contribution the husband’s mother had made “at the outset” of the project (and the other money she had advanced for the development, which he noted had been previously repaid). We gather that the point being made was that the husband’s mother had not done enough to warrant her recovering more than $1 million “profit” from the project. If this was indeed the point, it raises commercial issues which we are not aware the trial Judge was asked to consider. In any event, if the husband’s mother had ultimate control of the entity that undertook the development, she was entitled to determine the manner in which the profit was distributed, no matter how spectacular that profit may have been.
Senior counsel for the husband responded to the submissions about the extent of the husband’s control of [E] by saying there was “nothing surprising”:
that an elderly mother who had a son who was a businessman and a professional who she trusted would rely upon him, particularly, against her background of becoming a widow in her early 50s at a time where she had no commercial experience herself that she would rely upon him significantly to have day to day management of this trust. (Appeal transcript, 10 October 2013, p 124)
Senior counsel for the husband also drew our attention to the following exchange in the husband’s evidence-in-chief concerning the discussions between him and his mother during the three day mediation that led to the agreement about the disposal of the interest in the ER Street project:
[SENIOR COUNSEL FOR THE HUSBAND] Was there any discussion, with your mother, about the sale of that interest before it was actually sold?‑‑‑[THE HUSBAND] Yes.
Can you tell us what was said?‑‑‑At about the time of the mediation with Mr Steve Walsh QC, I was staying with her … and discussed with her the progress of that mediation. In that context the proposition that [RE], or [E’s] interest in [RE] be sold was raised.
Can you tell us what was said, or the effect of it?‑‑‑She was against it. She didn’t like the idea of selling property.
Just tell us – well, I know that’s what the effect. What were the words, or the effect of the words that were said? So once she said she was against it what was the next thing that happened?‑‑‑We discussed it and then she accepted that it was a good idea. And I explained to her that this would give rise to about $9 million in capital profit. She said, “I’m very pleased, and now is the time for me to get something back on my investment.” And she said, “I would like a million dollars of that; that will do me at my age and for my – rest of my life, and … you can have the rest. Good luck.” (Transcript, 15 December 2010, p 538)
Senior counsel for the husband submitted there was also “nothing surprising” about the agreement concerning the division of the money, given the husband’s mother was “a woman in her 80s” and given her relationship with her son. Senior counsel stressed it was important to recognise that the husband’s mother had “required her interest [in the project] to be recognised albeit ultimately in a way that may not have been substantial as compared to his”. He observed that “even her taking $1 million at the end, that’s inconsistent with this being his, in a proprietary sense or totally, as a matter of control”.
Likewise, senior counsel for the husband submitted that it made “perfect sense” for the husband’s elderly mother, while remaining the appointor of the trust, to transfer her shares in E Pty Ltd to her son and to cease being a director in circumstances where “litigation was looming” with Mr S.
Again putting to one side the issue of the mother not having been called as a witness, nothing put to us persuaded us that the trial Judge’s approach to the evidence concerning the conduct of the dispute with Mr S was not open to him. Similarly, we are not persuaded his Honour erred in failing to draw the inference urged by the wife concerning the way the husband received all but $1 million from the investment – some seven years after approval of the Deed.
Grounds 3 and 4 – The wife’s reliance on the husband’s representations
Grounds 3 and 4 were said to be directed to [121], [123] and [124] of the trial Judge’s reasons. We will recite these below, but we intend also to recite [107], [122] and [271]:
107. It is also significant that at no time did the wife accept that the husband did not control the [E] Trust. She considered that although the mother appeared to have “legal” control, it was the husband who was in fact controlling the Trust, and not just in the sense that the husband concedes, namely the day to day management and operation of the Trust. The wife believed that it was the husband who made all of the business and investment decisions, and relevantly without reference or deference to his mother, such that the assets of the Trust could be treated as his property.
…
121.… the effect of how this issue was presented to [Murray J at the time of approval of the Deed] was that the wife did not accept the [K] valuation and she was proceeding on the basis that the business interests were valued at approximately $7,000,000.
122.Disingenuously in her evidence before me, the wife sought to “diminish the significance of the indication of the valuation of the business interests at $7,000,000”. She said she knew about it but she did not rely on it ...
123.I find that the wife at no time accepted the correctness of the [K] valuation in excluding the value of the [E] Trust, that in her view the husband’s interests included the [E] Trust, that in consultation with her solicitor Ms Chapman, her commercial solicitor Mr Mansueto, and her forensic accountant Mr [W], a valuation of $7,000,000 was struck for the value of the husband’s (and the wife’s) business interests including the [E] Trust, and that was presented to Murray J as the wife’s position in joining in seeking the approval of the Deed.
124.I find that at no time did the wife rely on any representation by or on behalf of the husband that the [E] Trust should be excluded from the asset pool for whatever reason, including in particular that the husband did not control that Trust. Or, put another way, I do not accept that the wife was induced to enter into the agreement that was eventually reached by any such representation.
…
271.It is also instructive to consider what was put to Murray J on 24 November 2000 in relation to the application for approval of the Deed, and I highlight the following:
(a)Mr Berman who appeared as counsel for the husband said of the schedule of assets, liabilities and resources:
… It will be of some assistance to Your Honour. It does the best that the husband can to set out the asset parameters in respect of both of the parties and, indeed, raises some of the matters that Your Honour has been discussing with Ms Chapman.
(Transcript, 24 November 2000, page 5, lines 6-9)
(b) Then Mr Berman said this:
I can tell Your Honour that schedule is a document that has passed between the solicitors for both parties and whilst obviously each party does not necessarily agree with the position adopted by the other, it at least provides Your Honour with some indication of the respective positions.
(Transcript, 24 November 2000, page 5, lines 14-18)
(c)Ms Chapman did not demur from this position, and the wife was also present in Court. Thus, by impliedly agreeing with those statements, and on the basis of what was contained in paragraph 1 of the schedule, the wife was indicating that she did not accept the valuation from the [K] Report, and was presenting a valuation from Mr [W].
Pausing there, I also agree with the submission of the husband that it could never be said that there was a “fraud” on the Court; the Court was being told, correctly, that a compromise had been reached notwithstanding the different positions taken by the parties. It is also noteworthy in this regard that at this hearing Ms Chapman insisted that the affidavit of Mr [W] annexing his Report be filed.
Senior counsel for the wife submitted that nowhere in his Honour’s reasons was there a “clearly articulated basis” for the finding that the wife did not rely on the assertion of the husband’s lack of control of the E Trust advanced through the K Report. He nevertheless conceded that the finding could have been premised, in part, on the fact that at the hearing before Murray J, the report from Mr W, dealing with the income stream, was handed up for consideration alongside the schedule which referred to Mr W’s estimated value of $7 million of the business interests.
Although senior counsel for the wife endeavoured in his submissions before us to reject the suggestion that the wife had a valuation at $7 million (for example, see Appeal transcript, 9 October 2013, p 79), the fact is the wife did represent to Murray J and the husband that she had such a valuation. We therefore do not consider it necessary to consider this part of senior counsel’s submissions, especially as he ultimately effectively abandoned Ground 6, which asserted that the trial Judge erred in finding the wife had a valuation of $7 million.
We accept the submission of senior counsel for the husband that the trial Judge’s rejection of the wife’s case relating to reliance on the husband’s representation concerning control of the E assets had been
based on a series of findings, in particular that [the wife] would be pursuing a valuation based on future maintainable earnings, that [the wife] engaged a cohort of commercial advisors, that [the wife] never accepted that the [husband] did not control the [E] Trust … the receipt of the report from Mr [W] identifying net profit of the Group (including the [E] Trust) and the finding that [the wife] was proceeding on the basis that the business interests were valued at approximately $7,000,000.
Senior counsel for the husband also pointed out that:
·the wife gave no evidence that she had relied upon, or was affected by, the fact that the K valuation was being put against her;
·from as early as 18 February 2000, the wife had engaged her own accountant to deal with the valuation of the business interests;
·the wife’s solicitors wrote to the husband’s solicitors on 3 May 2000, confirming they would “not be recommending to our client the valuation methods invoked by Mr [K] …”;
·on the same date, the wife’s solicitor wrote to the wife advising that “[h]aving conferred with Mr [W] and Mr Mansueto it is clear that we must proceed with re-assessment of the business interests of your former husband on a capitalisation of earnings basis”; and
·Mr Mansueto wrote to the wife on 5 May 2000, advising that he had recently spent “a considerable period of time discussing the [K] report” with Ms Chapman and Mr W and they had “identified a number of areas in which the report may be challenged, along the lines previously discussed with you …”
We also accept the submission of senior counsel for the husband that the “adoption or propounding by the husband of the report of Mr [K] … did not constitute by him a rejection of an acceptance that he had an interest in the [E] trust and an interest that was relevant for the purposes of the proceedings”. Senior counsel noted, as his Honour found, at [102], that the husband had conceded that the provision of the J’s report to the wife:
was an express representation of the fact of an interest of the husband in the [E] Trust and indeed the husband had deposed to as much in an affidavit filed on 3 March 1999.
In his affidavit of 3 March 1999, the husband had expressly referred, at [30], to Mr J’s inclusion of the E Trust as part of the “[Moore] Family Interest” at a value of $1.8 million, albeit the husband went on to note that Mr J had said “that consideration will also have to be given to attributing a percentage of the value of the relevant trusts to my mother …”
Senior counsel for the husband therefore submitted, in our view correctly, that
… it was not the position at any point … that the husband was contending that he did not have an interest, nor was he contending that the [E] Trust was irrelevant to the proceedings. What he was contending was that it was not appropriate in the proceedings to see him as the owner of the assets of the trust, or to see the assets of that trust as available to satisfy a section 79 order as if it was an alter ego case. (Appeal transcript, 10 October 2013, p 117)
Although senior counsel for the wife submitted in reply that “the [J] report was overtaken by the [K] report … and the husband’s unmitigated reliance on it”, we do not consider this reflects the husband’s position. The husband, although a professional and property developer, was not an expert. He had properly engaged experts to provide their opinion as to value. When Mr J provided his report, which contended that the E assets should be treated as part of his “Family Interest”, the husband, in the words of senior counsel for the wife, “propounded” that report. When the K report was obtained, as the first report was not independent, the husband “propounded” that report, which although treating the E assets as owned by his mother, nevertheless provided a valuation at a figure much higher than given by Mr J.
Most tellingly, however, senior counsel for the husband submitted that the wife’s case “was put to death by her own evidence”, namely this statement in her affidavit sworn 18 August 2010:
The advice I received from Ms Chapman was that the assets of the [E] Trust were beyond the reach of the Family Court as they were controlled by the husband’s mother and that accordingly the pool of matrimonial assets was diminished.
Senior counsel for the husband acknowledged that this paragraph of the wife’s affidavit was qualified by saying, “I accepted that advice, especially having regard to the [K] Report”, but correctly observed that the rider was self-serving. Senior counsel therefore submitted that the wife acted on the basis of her advice, not on what the husband or his expert had contended. As senior counsel for the husband noted, given that advice, the wife’s case then logically proceeded on the basis of valuing the income stream that the husband had always conceded was available to him from the Trust.
Senior counsel for the wife also submitted that if the finding at [124] was based on the wife’s avowed belief that the husband had real and effective control of the E Trust, then his Honour had misconceived her case. He argued that, in reasons given at an interlocutory hearing, the trial Judge had correctly recognised that the “critical fact was that the husband was asserting against the wife a proposition that the wife believed was false (want of control), not that the wife accepted and relied on the truth of the husband’s assertion”.
It was therefore asserted that the wife
was at risk throughout the negotiations of an ultimate finding that the husband did not have the relevant control of the [E] Trust when, in truth, the fact was otherwise. She was materially disadvantaged if it turned out that the husband had not made a full and frank disclosure because, as the learned trial judge put it in his interlocutory judgment, this “set the parameters of the negotiated settlement”.
In this context, however, we note that when giving reasons for the orders now under appeal, after hearing all of the evidence – which he had obviously not done when delivering his reasons in the interlocutory matter – his Honour said:
248.Significantly, it needs to be emphasised that during these negotiations there was no reference to whether the [E] Trust was in or out, or whether the husband controlled it or not, although given the “[Moore] family assets” were on the table it was clear that this Trust was in the mix.
Although, in response to a question from the bench (Appeal transcript, 9 October 2013, p 84), senior counsel for the wife appeared to take issue with the factual underpinning of his Honour’s statement at [248], we are not persuaded that the finding about what occurred during the negotiations was not available on the evidence.
Furthermore, as was submitted on behalf of the husband, the proposition that the K report had “set the parameters” for the negotiation was “flimsy in the extreme”, since prior to the report the wife had sought a settlement in the order of $3 million and after the report continued to seek that amount in negotiations. It was correctly submitted that there was no evidence that the wife apprehended any “parameters” in the negotiations. The upshot, as his Honour found, at [258], was that the settlement was “both negotiated and finalised on the basis of what the wife wanted to achieve”.
Senior counsel for the husband also submitted that it was wrong for the wife to assert that the trial Judge had misapprehended her case in that she had not claimed reliance upon the husband’s representation about control of the Trust. Reference to the wife’s Further Substituted Particulars of Claim bears out senior counsel’s submission since , at [12], it was expressly said that the wife had “relied on the [K] valuation and the husband’s representations … in agreeing to the terms of the settlement …”
The trial Judge accepted the husband’s evidence that it had been left to Mr U as to how best to assert O Nominees’ rights. His Honour also found that the husband’s mother had been adamant that the wife was not to be evicted from the home and noted that “all subsequent actions including correspondence emanating from Mr [U] were entirely consistent with this stance”.
His Honour’s reasons recorded what transpired after Mr U issued the written demand. A shortened version of his findings is set out below:
189.1On 7 May 1999 the husband withdrew his interim application for the sale of the [TE] property.
189.2On 10 May 1999 Mr [U] advised the wife’s solicitors … that for the time being [O] Nominees … would not seek to enforce the security by way of sale, and would not require the husband or the wife to pay interest due under the mortgage on an interim basis. Indeed, this apparently became the subject of an undertaking by [O] Nominees Pty Ltd not to pursue any recovery action for six months.
189.3Also on 10 May 1999 the husband’s solicitors advised the wife’s solicitors that as a director of [O] Nominees … the husband was unable to cause the demand for $930,000 to be withdrawn (the wife’s solicitors had requested this), however, because of his conflict of interest he would be resigning as a director of [O] Nominees Pty Ltd, [Y] Pty Ltd and [C Moore] Investments Pty Ltd.
…
189.5On 24 December 1999 … Mr [U] again wrote to the solicitors for the husband and the solicitors for the wife seeking their proposals as to repayment of the principal amount and accumulated interest.
189.6On 5 January 2000 the husband’s solicitors wrote to Mr [U] advising of the state of the Family Court proceedings and indicating that it was inevitable that the [TE] property would need to be sold, and repayment of the mortgage could then be made.
189.7On 6 January 2000 the wife’s solicitors wrote to the husband’s solicitors indicating that the wife did not have the funds to meet the demand and enquiring as to the husband’s intentions in relation to payment. Further, in the letter, the wife’s solicitors confirmed that the wife was still challenging “the validity and enforceability of the mortgage”…
189.8On 2 February 2000 Mr [U] wrote to each solicitor advising that in view of the trial in the Family Court being listed in May or June that year [O] Nominees … would not take any recovery action for the moment, but would monitor the situation …
189.9The trial was not in fact listed in May/June 2000 and accordingly on 20 June 2000 the husband filed an application seeking, inter alia, an order for the sale of the [TE] property. On the return hearing date of that application Murray J listed the trial to commence on 3 October 2000, and accordingly, given the fate of the [TE] property was very much in dispute, her Honour also dismissed the husband’s application for sale.
189.10No further action was taken in relation to the mortgage apart from Mr [U] providing the solicitors for the parties on two occasions, namely 15 June 2000 and 5 September 2000, with updates as to the amount outstanding on the mortgage … [O]n 11 September 2000 the trial date in October was vacated because of the inability of both parties to be ready for trial at that time, and the hearing was to then be listed in late January 2001 or as soon thereafter as possible. On 8 November 2000 the hearing was listed to commence on 5 February 2001.
In discussing these events, the trial Judge first drew attention to the fact that the initial demand for payment of the principal arose out of the wife’s own actions in denying the validity of the mortgage, notwithstanding having previously in the proceedings acknowledged the liability. The trial Judge went on to reject the submission that the issuing of the demand “was all part of a planned strategy on [the husband’s] part to use the mortgage against the wife” since, as his Honour said:
193.… the husband was doing nothing more than reacting to the allegations made by the wife and her solicitor. As far as I can see, the husband acted appropriately, and in particular in arranging for his mother (and [O] Nominees Pty Ltd) to be independently represented. It was also appropriate for him as a director of [O] Nominees Pty Ltd to inform his mother, the other director, of what was being alleged, and it was even more appropriate for him to recognise that there was a conflict of interest and resign his directorships on the advice of Ms Powell QC.
194.There is also nothing in the events subsequent to the making of the demand as set out in paragraph 189 above to suggest that they too were part of a scheme to use the mortgage against the wife and ultimately to pressure her to settle. I consider that the husband’s actions were entirely appropriate and necessary on behalf of his mother in light of the challenge to the mortgage maintained by the wife through her solicitors.
195.Crucially, there is also no evidence whatsoever to support the submission made by the wife’s senior counsel that the demand or the threat were “held over the head of the wife in the property settlement negotiations” or that “the wife was forced to negotiate property settlement under the pressure of the threat applied by the mortgagee.”
196.I set out later in these reasons the sequence of events and the circumstances surrounding the negotiations which led to the resolution of the issues of property settlement and maintenance, and nowhere does this issue feature.
197.It also must not be forgotten that in the settlement that was ultimately reached, the husband agreed to take responsibility for the mortgage, something that the wife had insisted on throughout the negotiations.
198.It is noteworthy too that at no time after 2 February 2000 did [O] Nominees Pty Ltd make any further demand or threat, and the negotiations that resulted in the settlement were yet to occur. This of course does not sit well with paragraph 22 of the substituted particulars of claim which related “the demand and the accompanying threat” to the time of the negotiations.
199.I also observe that to continue to refer to a “threat” in relation to the mortgage is not entirely accurate. The wife in her evidence repeatedly characterised it as a threat to peremptorily sell the property and evict her therefrom, but as from 10 May 1999 Mr [U] had reserved to his client its right to bring whatever action it may be advised to bring. That is not a threat, but a reservation of rights.
200.The final nail in the coffin containing these submissions can be found in the advice that was given by Mr Mansueto to the wife. He was asked about the enforceability of the mortgage and in his initial letter of advice dated 18 February 2000 … he said this:
I will need to meet with you at some stage in any event to go over that material and take a detailed statement from you about the mortgage as it may be a good tactical manoeuvre to bring a claim against [the husband’s] mother to have the Mortgage set aside or in some other way to challenge it.
201.I accept the submission of the husband’s senior counsel that what this indicates is that far “from being placed under some sort of undue pressure about the [O] mortgage, the wife was receiving advice in the matter by February 2000 not only from Ms Chapman, but also from Mr Mansueto.” Further, “this was not limited to advice on whether or not the [O] mortgage was unenforceable, but how best to exploit the mortgage to the wife’s advantage, through the possible use of a tactical manoeuvre in the form of proceedings against [the husband’s mother].”
202.I observe that the fact of there being a mortgage to [O] Nominees Pty Ltd over the former matrimonial home in the principal sum of approximately $930,000, was always going to be a significant issue in the proceedings for property settlement, as well as what was to happen to that property. Accordingly, it is apparent that at every opportunity the wife attempted to avoid the consequences of there being this mortgage. She challenged its validity and its enforceability, although on an ever-shifting basis, she alleged that her signature was a forgery, but then drew back from that once the witness to her signature filed an affidavit confirming that the wife did sign the document. Consistent though with this disingenuous approach she was still evasive when cross-examined before me about her recollection of signing the mortgage. Frankly, I am less than impressed with how the wife addressed this issue.
203.More importantly, to put all this into context, the wife has failed to persuade me that the agreement reached was “procured by the exercise of pressure” by the husband on her “which is unconscionable, that is, beyond what the law is prepared to countenance as legitimate”. It is also said that “(t)he (illegitimate)” pressure need only be one reason why a party acted as they did and not the sole, predominant or clinching reason”. In other words, “it is no answer that the aggrieved party would have entered into the contract even without the exertion of the unlawful pressure: Barton v Armstrong [1976] AC 104.” However, I find that not only was there no unlawful pressure brought to bear, but the demand and the threat insofar as it can be described as such, had no bearing on the wife’s decision to settle as she did.
204.As to the issue of undue influence I need say no more than that none of the requirements to make a finding of undue influence have been satisfied here.
Then at [209] the trial Judge recorded that:
It emerged during the wife’s oral evidence that the wife was also pursuing a more general claim under the topic of unlawful pressure/undue influence, namely that the husband pursued a strategy of denying the wife funds to prosecute her claim forcing her into a disadvantageous settlement.
His Honour then proceeded, commencing at [210], to conduct a detailed examination of this topic, which concluded with the following:
236.Given this background, I do not accept that the wife was subjected to a strategy by the husband of denying her funds, and that that either necessitated her entering into settlement negotiations or resulted in an unfavourable settlement. Whatever the husband said about his financial position it was always open to the wife to bring an application seeking funds for the purposes of the trial, and as can be seen she not only did just that but she was always prepared to take that step again. Moreover, and to repeat, at all relevant times the wife had the benefit of expert advice about what she could do in this regard from her family law solicitor, her commercial solicitor, and her forensic accountant.
The wife’s submissions relating to Grounds 16 to 19
It was submitted on behalf of the wife that in what purported to be a detailed and complete account of the evidence, the trial Judge had omitted to mention one critical fact. This was said to be that the husband had conceded under cross-examination that it was he who he gave the instructions to the solicitor to assert O’s rights under the mortgage, including calling up the principal and demanding interest in circumstances where his mother merely desired that the validity of the mortgage be asserted and did not want to demand repayment of the principal or set interest running.
It was submitted that the trial Judge’s reasons “gloss and glide over this critical evidence”. It was further submitted that while his Honour’s reasons drew attention to the advice from O Nominees that it would suspend recovery action, the reasons failed to acknowledge the significance of the fact that interest was continuing to run, thereby eroding the parties’ equity in the property. The alleged significance of the interest accruing was sought to be demonstrated by senior counsel for the wife referring to the fact that in 2000 the husband had claimed that the accrual of interest had been decisive in his failure to secure a loan on second mortgage to satisfy an order designed to require the husband to provide funds to cover costs of the litigation. (Such an order is commonly described as a Barro order. See Barro and Barro (1983) FLC 91-300.)
It was further submitted for the wife that the distinction drawn by the trial Judge between a threat and a reservation of rights was “spurious”, and in any event the advice from O’s solicitor operative from 2 February 2000 was simply that it would not pursue recovery action for the time being but would monitor the situation and in the meantime require interest to accrue.
Senior counsel for the wife submitted that the trial Judge appeared to rely on the fact that the husband claimed that as a director of O Nominees he was unable to cause the demand under the mortgage to be withdrawn, despite the fact that he had given instructions for the demand to be issued in the first place, and that because of a conflict of interest he had resigned as a director of O. However, senior counsel for the wife submitted that the evidence demonstrated that the husband participated in all instructions thereafter purportedly given by his mother to the solicitor.
Senior counsel for the wife further submitted that the trial Judge failed to have regard to the relevant evidence which should have made the finding inevitable that the husband procured the demand under the mortgage and caused the demand to be maintained and held over the head of the wife throughout the negotiations for property settlement.
It was also submitted that the conclusion at [195] of the reasons “simply flies in the face of the objective evidence”, and the conclusion at [194] that the husband’s actions were entirely appropriate and necessary on behalf of his mother was contrary to the evidence as to the mother’s expressed wish, the evidence as to the husband’s unilateral instruction to make demand, and to the self-evident fact that to dispute a claim that a mortgage is invalid does not require the mortgagee to go further and call up the mortgage. In this regard it was submitted that, plainly, a demand under an impugned mortgage does nothing to demonstrate that the mortgage is valid.
Senior counsel for the wife submitted that the trial Judge apparently considered it significant that the wife’s solicitor maintained that if the negotiations failed, a fresh application for a Barro order would be pursued. Senior counsel submitted that reliance on that circumstance was plainly misplaced in that the fate of a subsequent application would doubtless have been the same as the first (which had proved unsuccessful because the husband was unable to obtain a further loan on security of a second mortgage over the home).
The husband’s submissions relating to Grounds 16 to 19
Senior counsel for the husband submitted that the characterisation of the evidence and findings advanced by the wife in support of these grounds was “loose and selective”. It was submitted that the husband’s evidence in relation to the instructions to Mr U spoke for itself. It was submitted that his evidence was, as the trial Judge found, that he left it to Mr U as to how O Nominees could best assert its rights under the mortgage. It was further said that it was a loose characterisation of the evidence to say that the husband had “participated” in all instructions given by his mother to the solicitor and that he had not given instructions to the solicitor after his resignation as a director. It was argued that the husband’s evidence to that effect was accepted.
It was further submitted for the husband that it was specious to suggest that the husband procured the demand under the mortgage and held it over the wife’s head through the negotiations. It was submitted that this ignored the findings of the trial Judge at [189] to [192], all of which were supported, and it was further submitted that the wife’s proposition ignored the findings about the settlement negotiations made at [237] and following.
It was also submitted that the criticisms by the wife of the trial Judge’s rejection of her case about lack of funds and the assertion that an application for a further Barro order would fail did not begin to deal with the evidence. Senior counsel for the husband drew attention to the chronology relating to the negotiations, noting that the wife continued to have her solicitor progress the application for funds and therefore clearly did not think that a further application for funds would fail.
Furthermore, senior counsel for the wife observed that the wife had contemplated the possibility of the sale of the home which was ultimately agreed upon, and which would have provided funds to continue the litigation. This is evidenced by the following statement in a letter from the wife’s solicitors to the husband’s solicitors dated 26 October 2000:
Clearly, our client requires in excess of $100,000 to prepare for the trial and to pay for the cost of counsel and professional witnesses and reports. There are also significant outstanding fees that we have previously advised.
We accept your client will also require funds for trial, assuming the parties are unable to reach an agreement in the next ten days.
We note you will obtain instructions in respect of your client’s previous proposal that the matrimonial home be sold and that such funds be held on account of both parties’ costs. Particularly if [O] Nominees Pty Ltd agrees that not less than $400,000 from the net proceeds be paid to the solicitor’s trust account or an interest bearing account pending settlement this could be achieved.
Finally, senior counsel for the husband submitted that there was no evidence that any of the wife’s advisers were unwilling to take the matter to trial in the event she was unable to meet their costs until she received her settlement.
Discussion of Grounds 16 to 19
We consider these grounds can be dealt with in fairly short compass.
Senior counsel for the wife conceded before us that the wife had “plainly … provoked the issue [about the mortgage] by alleging sham and forgery”. In these circumstances, we consider it was well open to the trial Judge to proceed on the basis that the wife was the author of her own misfortune if she felt under some pressure to settle as a result of [O] Nominees calling up the mortgage.
The trial Judge was entitled to accept the husband’s evidence that, on his mother’s instructions, he had left it to Mr U to determine how to assert his mother’s rights under the mortgage. We consider the actions Mr U took in doing so were pragmatic and appropriate, even given the fact that the husband’s mother had made clear that she did not want the wife to be “put out of her house”, and had not expressly said she wanted interest to accrue (noting the husband’s evidence that she accepted Mr U’s advice that this is what should happen).
We accept there may have been other ways of asserting rights under the mortgage, as senior counsel for the wife submitted to us, but that is not the point. There was nothing inappropriate in the way Mr U went about it and we do not accept the submission that the trial Judge’s reasons “gloss and glide over the critical point”, namely that the husband’s mother merely wanted it to be said on her behalf that the mortgage was valid.
Although senior counsel for the wife acknowledged that his Honour correctly found that on 2 February 2000 the husband’s mother suspended recovery action under the mortgage, he argued that his Honour erred in failing to recognise that the wife was still under pressure because interest under the mortgage was continuing to accrue. That may have been a cause of concern to the wife, but the fact is the parties had borrowed a very large sum from the husband’s mother, and the terms of the instrument permitted her to recover interest on the loan in the event she issued demand for repayment.
The mere fact that the proceedings had been costly, and that it would be costly to proceed to trial, could not provide a basis for saying the wife was under undue pressure to settle, since most litigants face similar pressure, as senior counsel for the wife accepted. It is also noteworthy that the schedule provided to Murray J indicated that the husband’s unpaid costs significantly exceeded those of the wife.
Nothing put to us persuaded us that there was any error in any of the findings made by the trial Judge in dealing with this issue. These grounds therefore fail.
Ground 20 – The settlement negotiations
The final ground of appeal asserted:
20.That the learned trial judge erred in finding that the settlement negotiations demonstrated that there was no fraud misrepresentation or undue influence engaged in by the husband against the wife.
This ground does not require separate discussion given what we have said in dealing with the other grounds.
The outcome and costs
There being no merit in any of the grounds, the appeal will be dismissed.
Senior counsel for the wife properly conceded that if the appeal was dismissed he could not oppose an order for costs being made. The appeal having been wholly unsuccessful, the wife should pay the husband’s costs.
I certify that the preceding two hundred and sixty (260) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court delivered on 27 June 2014.
Associate:
Date: 27 June 2014
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