RENNIE & RENNIE

[2016] FamCA 52

FAMILY COURT OF AUSTRALIA

RENNIE & RENNIE [2016] FamCA 52

FAMILY LAW – PROPERTY – Interim – Injunctions – Where husband seeks to discharge previous consent orders – Where husband seeks sole responsibility for running the family business to the exclusion of the wife – Where both parties seek sole ownership of the business in property adjustment proceedings – Where husband seeks to prevent payment of parties’ legal fees from the business accounts – Where wife seeks orders compelling payment of funds and sale of personal property by the husband – Where wife seeks to restrain the sale of certain personal property by the husband – Applications dismissed.

FAMILY LAW – PRACTICE AND PROCEDURE – Duty of disclosure – Where wife seeks an order for ongoing disclosure from husband in relation to sale of livestock – Whether disclosure required pursuant to Rule 13.04(1)(g) of the Family Law Rules – Application dismissed.

Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)

Black & Kellner (1992) FLC 92-287
Oriolo & Oriolo (1985) FLC 91-653
Weir & Weir (1993) FLC 92-338

APPLICANT: Mr Rennie

RESPONDENT: Ms Rennie

FILE NUMBER: BRC 1329 of 2014

DATE DELIVERED: 10 February 2016

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Forrest J

HEARING DATE: 14 December 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Carew QC

SOLICITOR FOR THE APPLICANT: South & Geldard

COUNSEL FOR THE RESPONDENT: Mr Linklater-Steele

SOLICITOR FOR THE RESPONDENT: Hopgood Ganim Lawyers

Orders

1. That all applications for orders contained within the husband’s Amended Application in a Case filed on 11 December 2015 and the wife’s Response to an Application in a Case filed on 7 December 2015 are dismissed.

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

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 1329 of 2014

Mr Rennie

Applicant

And

Ms Rennie

Respondent

REASONS FOR JUDGMENT

1. The parties to this application in pending property adjustment proceedings consented to orders on 12 May 2015 which comprehensively regulated their operation of their family business and the distribution of the business’s earnings until final property adjustment is achieved. They did so compromising competing applications each had at that time for exclusive control of the business. 

2. The orders they agreed to provided (in paragraph 2) that

   “[e]ach … do all acts and things and sign all documents necessary to operate [the business] to the best of their mutual ability; to minimise the impact of their separation on the business and its clients, and to ensure that both of them are kept properly informed as to the affairs of the business, and with a division of responsibilities as follows:

   (a)The Husband will have control over the operational side of the business including invoicing to clients to the exclusion of the Wife but with information being shared with the Wife including providing copies of all invoices rendered to the wife…

   (b)The Wife will have control of the administration of the business, to the exclusion of the Husband but with information being shared with the husband;

   (c)The tasks that are allocated between the parties are contained in Annexure A.

3. Annexure A was a four page schedule of detailed tasks associated with running the operational and administrative aspects of the business showing how the parties agreed to divide those responsibilities as between them.

4. Over a year later, and before the matter has been listed for trial, the husband seeks, by order, to change that consensual division of responsibilities so that he is solely responsible for the running of the business to the exclusion of the wife. In order to do so, he necessarily seeks to invoke the injunctive powers of this Court contained in s 114(3) of the Family Law Act 1975, pursuant to which orders that the Court considers “appropriate” may be made in cases “in which it appears to the court to be just or convenient to do so”.

5. The wife seeks to have the husband’s application dismissed and also seeks other injunctive relief in the form of orders that the husband pays certain amounts of money, that he causes certain items of personal property, including livestock, to be sold and that he be restrained from selling certain other items of personal property.

Some Background

1. The parties married in 1993 after four years of cohabitation. At around the time of their marriage, they bought a rural property in central Queensland. They operated two businesses (one a hire business) from this property and other rural properties subsequently purchased.

2. The parties have two young adult children who live independently of their parents, but, to a degree, are both still financially dependent on their parents.

3. The real properties still owned by the parties (two properties) are registered in the husband’s sole name.

4. The hire business is operated by the parties through a private company. The parties are both directors of the company.  The equipment utilised in the business is owned or leased by a unit trust of which the wife is the sole trustee. The business is operated from the first of the real properties the parties owned. The husband has continued to live in the house situated on that property since separation in early 2014 and the wife has rented accommodation, now living in a house owned by her parents and paying them commercial rent for doing so.

5. The other business is registered in the sole name of the husband and he has continued to operate it since separation.

6. The husband is, and always has been, the senior operator of the hire business, a role which carries certain obligations pursuant to civil regulatory provisions. Prior to separation, the wife always performed the book keeping role in the business. Around separation, conflict between the parties arose. Unsurprisingly, dispute about management of the business attended that conflict. As already noted, each then sought exclusive control of the business until the proceedings could be finalised, but compromised with an agreement to maintain co-responsibility for its management and operation that was given effect to by Orders made by this Court in May 2014. 

7. Between May 2014 and the filing of the husband’s application being considered, pursuant to those May 2014 orders, the husband continued to manage the operational side of the business and the wife continued to be responsible for its bookkeeping/administrative side. Those orders provided for the wife to cause the business to pay the parties a gross salary of $80,000 each with the net amount after tax and superannuation deductions to be deposited into their personal bank accounts. In addition, those orders provided for the wife to pay additional amounts to cover school fees, private health insurance and their daughters’ “expenses”, loan repayments for the loans secured over real properties, the lease payments on a truck, the lease payments on the equipment and $5,000 per month to each party on account of their ongoing legal costs (with the treatment of those payments to be determined ultimately by the trial judge).

8. Apparently, at around the time of having learned from a Registrar of this Court (around the middle of last year) that the matter could take many months to come to trial, the husband brought the application now being considered. The wife cross-applied for the orders she seeks.

9. Significantly, each party tells the Court they want to acquire sole ownership of the hire business in the property adjustment proceedings before the Court. Each of the parties tells the Court that they seek the interim orders that they do so as to appropriately preserve the value of the hire business pending the final determination of the proceedings.  The husband asserts that only with the wife out of the management of the business, can its value be maintained. The wife asserts that only with her continuing to be part of its management can she be assured that its value will be maintained.

10. Over the past two years, the parties have obtained valuations of assets, including the business. They have participated in three separate mediations set up to achieve resolution of their disputes as an alternative to this litigation. Plainly, those have been unsuccessful, at least in assisting them to reach final resolution.

The Husband’s Case

1. Simply put, as submitted by Queen’s Counsel who appeared for the husband, the husband contends that since the May 2014 orders:

   … the wife has continued to act in a way that has put the continued operation of the business in jeopardy.

2. He deposes to several particular incidents and some particular conduct attributed to the wife since mid-2014 in support of his principal submission. A number of those particular factual incidents can be simply described as the wife drawing money from the business bank account contrary to the May 2014 orders and not for business purposes. He also complains of the wife not paying invoices and accounts on time, thus damaging the business’ reputation, having continued disputes with the business’s employees, and not taking seriously enough forecast cashflow and budgetary issues.

3. Over three months in mid-2014, the wife transferred funds from the business’s bank account to the Australian Taxation Office totalling $35,103, ostensibly in payment of the business’ tax obligations. By mistake when entering the B-Pay details, the wife asserts, the money was paid to her own personal tax account. Later, when discovered, the ATO sent her a cheque refunding the amounts. That cheque came into the husband’s possession. It was eventually deposited back into the business’s bank account. The exact circumstances surrounding this factual issue are, apparently, controversial. That controversy cannot be resolved on this interim hearing. What is uncontroversial is that the money from the business’s account went back into the business’s account, although after many months, and was not lost to the business or the parties.

4. The husband also asserts that in March 2015 the wife drew a cheque in the sum of $1,031.20 from one of the business’s accounts payable to a solicitor in Emerald (not her solicitors in these proceedings) and that this was not a business expense. The wife does not appear, on my reading of her affidavit of evidence responding to the husband’s, to offer a response to this assertion. Whilst, prima facie, without explanation, that might appear to contravene the May 2014 orders, such a relatively small amount drawn from the account, albeit for an unknown purpose, does not, of itself, in my view, justify removing the wife from the co-management administrative role in the business that the parties previously agreed she maintain.  

5. In April 2015, the wife made a payment of $21,033 to the solicitors acting for her in these proceedings. The husband asserts it was identified in the online bank statements as “hire of equipment”, thereby apparently being deliberately disguised by the wife. A later account statement viewed by the husband revealed that it was paid to the wife’s solicitors.

6. The wife conceded the payment to her solicitors. She asserted that circumstances led her to do that without seeking the husband’s consent. She said that the husband had received, after the May 2014 orders, a personal tax refund for the 2014 tax year that was $21,033 greater than the amount she had received for her refund. She said that was due to the fact that the family livestock business, run in the husband’s sole name, had incurred significant deductible expenses. She said she had asked him to pay that amount into their joint bank account to be used to pay for the valuations that were required to be obtained in these proceedings, as she asserted that she could not afford to meet her share of the cost of those otherwise. She asserted that the husband had himself transferred $18,000 out of the business’s bank account into the livestock account that he alone controlled. She asserted that she considered her actions reasonable, given that the cost of applying to the Court would have exceeded the amount she required.

7. In reply, the husband said that the wife had previously (he said “as a result of the 2014 tax return” but he must have meant the 2013 tax return) received a tax refund of $10,000 whilst he had been required to pay an additional $4,000.  He asserted that he also refused to agree to the wife’s request to use the difference in their 2014 tax refunds towards the cost of the valuations as they were each receiving $5,000 per month from business funds, in addition to their salaries, from which each should have been paying for their costs and outlays, including the valuations. He asserted that he had not used any of the $18,000 transferred to the business account for personal expenses.

8. At the same time, the husband was still holding the ATO refund cheque that was sent to the wife for the amount of approximately $35,000 that had not yet been deposited back to the business’ bank account and the evidence is that as at August 2015 there was around $310,000 in the business’s bank accounts.

9. Whilst indeed, the wife’s actions again appear to be prima facie in contravention of the May 2014 orders that she consented to, the funds that she transferred to her solicitors were not, in my view, sought to be put beyond the field of the Court’s scrutiny or hidden from the husband’s view permanently. The amount was determined by the wife by reference to an amount the husband had obtained by refund from the ATO through the use of the parties’ business assets that favoured him over the wife and that he retained sole control of. The expenditure of that amount by the wife on her legal costs and outlays is to be characterised by the trial judge and consideration of that amount notionally as property already received by the wife in determining just and equitable property adjustment orders is quite likely, in my view. Whilst the wife might prudently desist from unilaterally taking steps like this in future before the matter is finalised, I would not characterise her action in this respect as action that seriously jeopardised the continued operation of the business thus justifying excluding her from an ongoing administrative role pending final determination of the property adjustment proceedings.

10. The husband also relies on uncontroversial evidence that the payments the wife was making to the parties up to the end of the 2015 financial year for their salaries were incorrect and not strictly in accord with the provisions of the May 2014 orders. However, the wife asserts that was simply another mistake; that it  was also not picked up the husband or his advisers for many months; and that it was not a serious error. In my view, there is merit in that assertion.

11. The husband also points to the unilateral determination by the wife, in late June 2015, to make additional contributions from the business’s account to the parties’ superannuation entitlements in their self-managed superannuation fund of $54,510 as further evidence of her acting in a way that jeopardizes the continued viability of the business.

12. The wife said that immediately prior to doing that the business’s bank account had a balance of $337,357 and she had no concerns that there were inadequate funds to cover the superannuation contributions. She said the contributions maximised the use of tax concessions obtained through superannuation contributions for the parties for that financial year, thus reducing expected tax liabilities of the parties. She said that she “checked this course of action” with their accountant who told her “it will be a good idea for tax”.

13. Of course, all of those funds remain available to the parties as part of their superannuation entitlements that are to be considered in the property adjustment proceedings between them. Again, whilst prima facie in contravention of the May 2014 orders and not something the wife should have done unilaterally, she did not act to put funds beyond the reach of the Court or the husband or in a way that reduces the pool of property and superannuation to be adjusted between them. She apparently considered whether the business could afford the contributions and she sought accountant’s advice. She appears to have been motivated by a desire to obtain maximum taxation advantage to the benefit of both parties. I do not consider her actions as being so damaging of the business such that she should now be removed from its co-management.

14. The husband has particularised some errors and delays in the wife’s payment of accounts for the business. The May 2014 orders that the parties agreed to provide for the husband to check invoices for payment and forthwith email them to the wife for her payment. His evidence supports a view that the wife has taken some time to actually make payments that are required on invoices sent to her. The wife gives evidence in response that supports a view that sometimes the husband has not sent her all invoices in a timely fashion or provided her with relevant information in respect of payment that she says has led to some mistakes that he complains of.

15. The husband asserts that separating the business tasks has created “an avenue of dispute” between them that places at risk their credit rating. He has not given evidence, though, of any of their business suppliers having withdrawn credit from them as a consequence of late or non-payment of accounts. Encouraging more positive efforts being made by both parties to reduce disputes between them at this time rather than simply excluding the wife from co-management is, in my view, the preferred course for ensuring accounts are paid on time, in the circumstances presenting in this case.

16. The husband gives evidence of continued disputation between the wife and the employees who work for the business since the May 2014 orders. It is uncontroversial that poor relations existed between the employees and the wife at separation (although the wife asserts her relationships with them were good prior to the breakdown of the parties’ relationship) and up until the time of the May 2014 orders. The husband’s evidence is that those relations have not improved and that issues surrounding reimbursing employee expenses have continued to be problematic with the wife having administrative responsibility in the business. One employee resigned in September 2014 and cited his relationship with the wife as one of the principal reasons for his resignation.

17. The wife asserts that the particular employee and the husband have a close friendship, that employee being the son of an old friend of the husband’s. She asserts that he became “inappropriately involved” in the parties’ relationship breakdown and dispute and was not an impartial employee. The wife asserts that the husband’s actions around the employees’ expenses that they are to be reimbursed contribute to the difficulties that arise. These matters of controversy are impossible for me to determine soundly on an interim basis. The husband has not asserted that the loss of the employee in late 2014 has not been able to be overcome by the business in a way that jeopardises the ongoing performance of the business.  A substantial contract that the business had in NSW has not been renewed. The evidence does not suggest that is because of the loss of the employee or because of any problems caused by the administrative management of the wife.

18. Clearly, it is in the immediate interests of both the husband and the wife that the business continue to be successful, particularly given the fact that each of them asserts a desire to retain ownership of the company and the business into the future. Again, I do not consider that the evidence about the wife’s relationships with the employees supports an objective view that the wife must be excluded from the co-management position that the husband agreed she retain in May 2014 when some behavioural and expectation adjustments on the part of both parties, whilst this matter is waiting to go to trial, should ensure that the business continues to operate successfully with both parties remaining involved until then.

1. Finally, in respect of the husband’s application for injunctive relief, he asserts that the financial position of the business is such that its prospects in the immediate future are not as good as opined by the single expert, Mr B, who has provided the parties with a valuation based on the capitalisation of assessed future maintainable earnings using the financial statements of the business up until 30 June 2014, supplemented by information provided by the parties. The husband supports his own position by reference to a cash flow projection prepared at his instruction by the business’s accountants and by the provision of additional information about the business. The wife does not accept all of the factual premises upon which that cash flow projection is based and points to differences between the husband’s position and the opinion of the single expert as casting doubt on the accuracy of the husband’s position.

2. I understand the husband to point to this projection and the wife’s non-acceptance of its likely accuracy as being a further ground for her to be excluded from the co-management of the business pending finalisation of their dispute about their property adjustment. Again, I do not consider that I am in a position, at this interim point, to determine decisively who might be right or who might be wrong about the underlying factual premises upon which the cash flow projection is based or whether the wife’s position compared to the husband’s demonstrates such a fundamental misunderstanding of the business on her part that she must be excluded from the co-management in her own interests, as well as the interests of the husband.

3. As is now clear, none of the matters the husband complains about, either singularly or, indeed, collectively, persuade me to the judgment that it is appropriate to exclude the wife from the administrative role she performs in the management of their family business at this point in time and to hand over the management of the business exclusively to the husband pending determination of the question as to which of them should retain the business on a final basis. With respect, I do not consider the husband to have successfully made out a case that such an order is really necessary for interim asset preservation, particularly where he proposes to replace the wife with a bookkeeper who the business would pay whilst at the same time the business would continue to pay the wife at the same rate as she has been paid pursuant to the May 2014 orders.

The Remaining Issues – cessation of the payment of legal fees from the business account and the conduct of the livestock business

1. The husband also effectively asks the Court to discharge that part of the May 2014 orders that entitles the wife to cause the sum of $5,000 per month to be paid to each of the parties (or their solicitors’ trust account if they direct) on account of their ongoing legal costs. That has been occurring since 1 June 2014.

2. His case is that the business simply cannot afford this any longer, now having paid out (up to and including February 2016) $210,000, or $105,000 each, just in those monthly payments. He submits that each party should now simply be responsible for paying their own legal costs and outlays from the salary payments they are otherwise receiving (being the gross amount of $80,000 each). He points to the cash flow projection he adduced into evidence and the business’s accountants estimate of tax payable for the 2015 financial year of $323,000 and asserts that the business will not have sufficient funds in its accounts to cover the tax payable in or around May of this year, unless payments such as the monthly amount of $10,000 for legal fees are stopped.

3. On the other hand, the wife asserts that those monthly payments have not been enough to cover her legal costs and outlays and that she had to borrow a further $20,000 from her parents to pay for the costs of the hearing before the Court in December 2015 of the applications being considered herein. She opposes the husband’s application for discharge of the existing order and seeks further orders that the $20,000 be paid to her solicitors so that she can repay her parents, that the $18,000 the husband paid from the business’s account to the livestock business account be repaid, and that three motorbikes collected by the husband and owned through the family’s trust be sold with the proceeds used to pay legal expenses. The wife also seeks more specific orders in respect of disclosure by the husband in respect of the livestock business on an ongoing basis.

4. In response, as to the issue of ongoing payment of legal fees, the husband proposes the parties sell off one of the two remaining real properties by lots and distribute the proceeds by way of part-property adjustment or use those lots as security for further borrowings of $200,000 to be divided equally between them with each being equally responsible for repaying the interest and the principal on such a loan.

5. Mr B’s report is in evidence. He opined that the adjusted average annual earnings of the hire business based on the financial years from 30 June 2010 to 30 June 2014 are $415,754. He then allowed for a commercial remuneration to the wife of $60,225 (including superannuation at 9.5 per cent) and a commercial remuneration to the husband of $131,400 (including superannuation at 9.5 per cent). He indicated that the parties had instructed him that this was an appropriate level of commercial remuneration for the husband and that research revealed the $60,225 was an appropriate level for the wife. He then allowed for a commercial rent in respect of premises suitable for the location of the hire business of $60,000 in one scenario and $75,000 in another scenario (competing scenarios offered by the parties). However, the business does not currently pay rent as it is situated on the real property that the parties purchased at the commencement of their marriage that is still occupied by the husband. Accordingly, rent is not being paid.

6. On the opinions expressed by Mr B, the maintainable earnings of the business are $415,754 out of which a total of $191,600 might be appropriately paid to the parties for their work in the business, leaving $224,154 out of which financing costs and taxation would have to come, with any surplus being available for the payment of further dividends to the shareholders or to reinvest in the business.

7. Currently, from the business’s earnings after expenses, the parties are receiving a gross payment of $160,000 per year in total for their work, the wife pays rent of $450 per week (equal to $23,400 per year) and the cost of her utilities expenses (not known) and the parties are receiving the total sum of $120,000 per year for their legal fees. In addition, certain “expenses” of their two adult children are paid. The husband’s cash flow projection puts those at $8,980 per month ($107,760 annualised). It is not clear whether the wife agrees that the children’s “expenses” are that much. I shall, for the purposes of this issue, assume that she does. These outgoings all total $411,160, which is just within Mr. B’s estimated maintainable earnings. This leaves little surplus for the taxation and financing costs Mr B acknowledged also had to be met from the earnings after expenses. 

8. As I understand the figures on the cash flow projection adduced into evidence by the husband, earnings after “normal” expenses for the current financial year are forecast to be $150,000. Those expenses include an amount for wages which I assume includes the $160,000 paid to the husband and the wife. That would take the total to $310,000 if the $1600,000 is added back for the purposes of this exercise. If the husband is correct, the parties are likely to face a shortfall of $100,000. This is approximately equal to the financial support they are currently giving their adult daughters or the amount they are using to pay their legal fees. Clearly, if the husband is correct, and things continue as they are at present, the parties will face a $100,000 shortfall of income compared to their expenditure. If Mr B, upon whom the wife relies on this point, is correct, then whilst there is still likely to be a shortfall, it is not likely to be as great.

9. As I have already indicated, I am not in a position on this interim hearing to determine the correctness or otherwise of either argument. On one side, is an independent expert opinion as to the maintainable earnings of the business as at 30 June 2014. On the other side, is an opinion of what the expected earnings of the business will be for the current financial year. Of course, the 2015 financial year is well gone and the current financial year is now more than seven months gone. The parties and their advisers would be in a better position than the Court to determine which of the competing opinions is more accurate having regard to actual figures for the 2015 financial year and the current financial year to date.

10. Whilst it might be the case that the parties will need to adjust either the amounts they pay from business earnings to themselves for legal fees in this matter on a monthly basis or the amounts they pay for the expenses of their adult daughters, or both of those categories of outgoings, in the not too distant future, I am not satisfied that I should discharge the order that they both agreed to in May 2014 for the monthly payment of $5,000 to each of them for legal fees at this point in time.

11. There was uncontroversial evidence adduced that, as at 26 March last year, the parties’ livestock were valued at $315,950, their stored semen and embryos were valued at $52,000, the balance of the business account at 30 November 2015 was $106,632 and the truck was valued at $50,000 with a liability of $65,000 attached. Some livestock have been sold since they were valued. The husband does not agree that the semen and embryos, if sold, would realise $52,000 and he said that the funds in the livestock account were to be used to meet some $40,000 in GST owed on sales and approximately $10,000 in agistment fees, leaving about $56,000.

12. The husband said he would agree to sell the stored semen and embryos to raise needed cash. He said he wants to retain the core of the livestock for future purposes, though. I read nothing about him saying that the lease payments on the truck could be met in future from the livestock account, as they apparently could be, rather than the hire business’s account as they are currently, pursuant to the May 2014 orders.

13. The wife says that the three motor cycles could also be sold. In evidence is a document obtained from jointly instructed expert valuers asserting that the three bikes are worth $95,000 in total but would realise only $78,000 if sold at auction. The same experts value a boat and trailer of the parties at $40,000 to realise $32,000 if sold at auction.  The husband said he wishes to retain the motorcycles. He did not say anything about retaining the boat and trailer but the wife did not specifically seek an order that those be sold.

14. The wife did not tell the Court what she thought of the husband’s proposal to use the sale proceeds of real property or funds borrowed against the security of that real property to meet legal fees in the future. That is clearly another option open to the parties in the future if they cannot resolve their property dispute in the meantime. They may need to seriously consider selling that real property to meet their pending tax liability if there is the shortfall in cash at bank at that time that the husband currently predicts through the cash flow projection he relies upon.

15. In any event, currently it appears that the earnings of their apparently viable business and the capital of the parties held through various assets in the form of cash at bank, livestock, stored semen and embryos, collectible motorcycles, a boat and trailer, and some real property are well and truly sufficient to meet their current and ongoing expenditure requirements, including supporting themselves and their adult children, as well as paying for legal representation and their taxation obligations.

16. Accordingly, I do not consider it is necessary or appropriate, at this point in time, for the Court to have to make decisions for the parties about how those expenditure requirements are to be prioritised and met where they are demonstrably capable of making those decisions for themselves as the immediate need for such decisions arises and where they are competently advised by experienced family law practitioners as well as accountants to help them make those decisions. Of course, should they remain in dispute as they currently are, then it might be that ultimately the Court will have to make some decisions about these matters, but that is likely to come at considerably more legal expense to the parties resulting in further reduction of their asset base.  The time for such decisions is not yet, though, in my judgment, at least.

17. I will not now discharge the order requiring payment of $5,000 per month to each of the parties for their legal fees. To do so, I consider, would put at risk the ongoing legal representation of one or both of them, when both of them clearly desire ongoing representation by their current solicitors of choice.

18. I will not now make an order for any money to be paid from the livestock account to the wife’s lawyers or her parents or back into the business’s bank account. I will not now make any orders for the sale of the motorcycles.

19. As I have said, decisions about the prioritising of these matters are for the parties to make as and when the immediate need arises. I do not now consider the need for any such decisions to be immediate, so the Court will not make decisions that the parties are responsible for making themselves before the need for any such decision actually arises.

20. The wife seeks further particular orders in respect of ongoing disclosure by the husband in respect of matters pertaining to his conduct of the livestock business. She also seeks an order that the net proceeds of sale of livestock be paid into his solicitors’ trust account to be held for both parties and disbursed only by prior agreement. In support, she asserts failures to disclose on the husband’s part in the past in respect of his conduct of the livestock business. He denies those assertions and asserts himself that he has been conducting the livestock business prudently and in the best interests of both parties, at the same time disclosing to the wife as required. 

21. Again, I am simply not in a position to determine who is correct in their competing assertions. It is clear, as she now concedes herself, that the wife has internet viewing access to the livestock account in the husband’s name. I consider it sufficient in this case to remind the parties, particularly the husband in so far as disclosure is concerned in relation to the livestock business, of their disclosure obligations quite distinct from those they specifically agreed to when they joined in asking the Court to make the May 2014 orders that it did.

22. Case law requires parties to property adjustment proceedings to make a full and frank disclosure of their financial position. (Oriolo & Oriolo (1985) FLC 91-653; Black & Kellner (1992) FLC 92-287; Weir & Weir (1993) FLC 92 – 338).

23. That case law is reinforced by the Family Law Rules. Parts 13.1 and 13.2 of those Rules set out a party’s disclosure obligations. Rule 13.01(1) of the Family Law Rules provides:

    Each party to a case has a duty to the court and to each other party to give full and frank disclosure of all information relevant to the case, in a timely manner. (my emphasis)

24. Rule 13.04(1)(g) of the Family Law Rules provides:

    A party to a financial case must make full and frank disclosure of the party’s financial circumstances, including:-

    …

    (g) any disposal of property (whether by sale, transfer, assignment or gift) made by the party, a legal entity mentioned in paragraph (c), a corporation or a trust mentioned in paragraph (f) that may affect, defeat or deplete a claim;

    …

    (ii) since the final separation of the parties.  (my emphasis)

25. Rule 13.07 of the Family Law Rules provides the duty of disclosure applies to each document that:

    (a) is or has been in the possession, or under the control, of the party disclosing the document; and

    (b)      is relevant to an issue in the case.

26. The Explanatory Statement, issued in 2004 by the authority of the Judges of the Family Court of Australia, states, inter alia:

Rule 13.01:  General duty of disclosure

This rule sets out the general duty of disclosure and provides that it applies from pre-action procedures to the finalisation of the case.

This rule reinforces these principles:

(a)       the duty applies in all cases;

(b)the duty applies to the disclosure of information and documents; (my emphasis)

(c)it is a duty which the Court regards as very important and will scrutinise and enforce;

(d)       it is a continuing duty starting with the pre-action procedure.

The importance of the duty of disclosure is emphasised in the Rules by the introduction of the following:

1.the parties are required to read the duty of disclosure before swearing the affidavit in the Form 1 and Form 1A;

2.the parties are required to acknowledge the duty of disclosure and give an undertaking as to their compliance with it at a certain stage of a case. Breach of this undertaking may be punishable as a contravention of a parenting order under the Act (section s 112AA (c) and 70 NB (c)) and may amount to contempt of court; and

3.Rule 13.14 which is intended to send a clear message that the Court will take a serious view of non-compliance with the duty of disclosure and the Rules.

Rule 13.04:  Full and frank disclosure

This rule was formerly O17 r3 (FLR 1984) which has been extended to ensure it is contemporary, relevant and useful in relation to complicated financial structures as well as not so complicated arrangements.

Rule 13.07: Duty of disclosure - documents

This rule imposes a duty on a party to disclose documents in the party’s possession or control that are “directly relevant” to an issue. Gone are the days where the Court will allow “general discovery” ie “an order that a party produce all documents in the party’s possession or control relating to the issues in dispute.”

This follows the lead taken in the United Kingdom and Queensland in eliminating the extremely wide test established by The Compagnie Financiere du Pacifique v. The Peruvian Guano Company (1882) 11 QBD 55 which required discovery of documents which may (not must) either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary. “ The results of this test was to make virtually unlimited the range of potentially relevant (discoverable) documents which parties were obliged to review and list forcing the other party to read, against the knowledge that only a handful of such documents would affect the outcome of the case. It is a monumentally inefficient and costly process.” (Lord Woolf:  Access to Justice Final Report 1996)

The requirement to disclose “directly relevant” documents will introduce a higher standard of assessment in the sifting and examination of a client’s documents.  This will oblige parties and lawyers to focus attention at an early stage upon the real issues in dispute and the documentary evidence that goes directly to those issues.

1. Given that these proceedings are under way and that “information and documents” that are “directly relevant” to an issue are to be disclosed in a “timely manner” and “any disposal of property … that may affect, defeat or deplete a claim” (my emphasis) has clearly been listed as such a “directly relevant” matter that is required to be disclosed, there can be no doubt that the sale of livestock is an action attracting the duty to disclose in a timely manner. 

1. Only by being properly aware, in a timely fashion, of a transaction entered into by the other party that may “affect, defeat or deplete a claim”, can a party seek advice and, if necessary, take steps to protect their legitimate interests in obtaining just and equitable property adjustment orders. Ongoing disclosure of information and documents about livestock sales that allows the wife to understand exactly what is happening with their property in the form of livestock is an obligation of the husband, not something that has to be repeatedly requested by the wife.

2. I am not persuaded on the evidence that the husband has acted in a way that justifies an order that he deposit the net proceeds of livestock sales into his solicitors’ trust account, as the wife seeks. I will not make such an order.

3. Finally, obligations imposed on parties by orders that those parties themselves have asked the Court to make, and duties of disclosure imposed upon parties by the Rules, are to be taken seriously by parties. They are not to be selectively complied with by one party, whilst at the same time complaining about the other party’s non-compliance. In this particular case, that the Court has not enjoined the wife from continued involvement in the co-management of the business should not be construed as mute acceptance of prima facie contraventions of the existing orders, or viewed as a portend of likely tolerance of any future contraventions.  Similarly, that the Court has not ordered the husband to make specific disclosure in respect of livestock sales is not to be taken  to mean that the Court does not expect full, frank and timely disclosure or that it would not make more specific disclosure orders in future if persuaded they are necessary.

4. It is regrettable that the parties must wait such a long time for their dispute about property adjustment to come to trial. Unfortunately, that is a consequence of constraints imposed upon the Court by judicial resourcing shortfalls. The parties are nevertheless encouraged to fully utilise the resources at their disposal to attempt to minimise their differences and to jointly manage their business and their other assets in their mutual best interests pending the final resolution of their dispute, whether that be consensually achieved or ultimately by determination of this Court. It is to be hoped that frustration with the delay in the Court process alone will not lead the parties back to Court prior to the matter being listed for trial.

5. I will dismiss all interim applications on this occasion.

I certify that the preceding sixty-eight (68) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 10 February 2016.

Associate: 

Date:  10 February 2016