Salter and Salter and Ors (No 2)

[2018] FamCA 772

FAMILY COURT OF AUSTRALIA

SALTER & SALTER & ORS (NO. 2) [2018] FamCA 772

FAMILY LAW – PROPERTY – Interim hearing – Whether to dissolve a partnership where two partners seek the dissolution and one partner opposes – Where the matter is listed for final hearing – Where there is no dispute between the partners – Where one partner seeks to attend an inspection and valuation of property.

FAMILY LAW – PROPERTY – Interim orders – Orders by consent.

Bishop & Bishop (2003) FLC 93-144
In the Marriage of Ireland (1986) FLC 91-731
Phillip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457

APPLICANT: Ms Salter

1st RESPONDENT: Mr Salter

2nd RESPONDENT: B Pty Ltd

3rd RESPONDENT: C Pty Ltd

FILE NUMBER: DNC 591 of 2017

DATE DELIVERED: 27 September 2018

PLACE DELIVERED: Adelaide

PLACE HEARD: Adelaide

JUDGMENT OF: Berman J

HEARING DATE: 13 September 2018

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Farmer

SOLICITOR FOR THE APPLICANT: Withnalls Lawyers

COUNSEL FOR THE 1ST RESPONDENT: Mr Williams

SOLICITOR FOR THE 1ST RESPONDENT: Povey Stirk Lawyers & Notaries

COUNSEL FOR THE 2ND RESPONDENT: Ms Farmer

SOLICITOR FOR THE 2ND RESPONDENT: Withnalls Lawyers

COUNSEL FOR THE 3RD RESPONDENT: Ms Davies

SOLICITOR FOR THE 3RD RESPONDENT: Preston Law

Orders

1. That within twenty eight (28) days the wife provide the following documents:-

   (a)       A copy of each application for refinance in respect of B Property;

   (b)A copy of all documents provided to all and any financial institution by the wife in relation to any finance application;

   (c)A copy of all written communication or file notes of any oral communication to or from all financial institutions in relation to the wife’s capacity to refinance;

   (d)Bank statements for all accounts held in the wife’s sole name or jointly with another individual (save and except the husband) for the last two (2) years;

   (e)Statements for all credit cards held in the wife’s sole name or jointly with another individual (save and except the husband) for the last two (2) years;

   (f)Statements for the wife’s bank term deposit or deposits for the last two (2) years and a copy of the current terms and conditions and all documents to identify where funds were secured upon the commencement of the term deposit;

   (g)The wife’s individual tax returns and notices of assessment for the financial years ending 2017 and 2018;

   (h)Copies of any documents evidencing any share portfolio held by the wife;

   (i)Copies of any current superannuation statements for member entitlements in any fund held by the wife;

   (j)All documents evidencing the purchase of plant and equipment for or located on B Property from 1 January 2016 to date.

2. That pursuant to Rule 15.45(1) of the Family Law Rules 2004 (Cth) a single expert be appointed as a joint single expert to value at equal expense the light aeroplane (“the aeroplane”) with the husband’s solicitors to nominate three valuers to Mr G Salter’s solicitors and they to elect one of the husband’s nominated valuers.

3. That Mr G Salter disclose all documents (including tax invoices) pertaining to the use of the aeroplane as and from 1 January 2018 to the present date.

4. That within twenty eight (28) days the husband provide in writing to Mr G Salter’s solicitors the following:-

   (a)Daily muster summaries for each muster undertaken at D Property in 2017 and 2018; and

   (b)       Monthly livestock returns for each month from 2017 to date.

5. That within twenty eight (28) days Mr F Salter provide in writing to Mr G Salter’s solicitors the following:-

   (a)Daily muster summaries for each day of muster undertaken at B Property in 2017 and 2018;

   (b)Daily muster summaries for each day of muster undertaken at J Property in 2017 and 2018; and

   (c)Daily muster summaries for each day of muster undertaken at K Property in 2017 and 2018.

6. That the directors of the second respondent provide such information as requested to Ms N not later than twenty eight (28) days from the date of request.

7. That the directors of the second respondent provide answers to any questions as may be requested by L Accountants Queensland within fourteen (14) days of such request, to enable L Accountants Queensland to lodge all tax returns (including BAS) as may be required to enable the lodgement of all necessary taxation returns and financial statements as are outstanding or as may be required.

8. The interim proceedings stand dismissed.

9. The matter be listed for trial directions at 12.15pm (Adelaide time) on 24 October 2018.

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

IT IS NOTED that publication of this judgment by this Court under the pseudonym Salter & Salter and Ors (No. 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

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

FAMILY COURT OF AUSTRALIA AT ADELAIDE

FILE NUMBER: DNC 591 of 2017

Ms Salter

Applicant

And

Mr Salter

Respondent

And

B Pty Ltd
Second Respondent

And

C Pty Ltd
Third Respondent

REASONS FOR JUDGMENT

INTRODUCTION 

1. The parties remain in dispute as to their separate entitlement consequent upon a determination of the property interests of Ms Salter (“the wife”) and Mr Salter (“the husband”).

2. As discussed in the Judgment delivered 16 August 2018 the business activities of the parties involve the management and operation of farming properties namely, B Property which the wife seeks to retain for herself, Mr G Salter and his wife Ms H and the D Property that the husband seeks to retain.

3. As between the husband and wife, reflective of a relationship of 50 years, they seek a distribution of the net assets of the B Trust as to 65 per cent to the husband and the wife and 35 per cent to Mr G Salter and Ms H.  Thereafter, the property of the parties is to be divided equally between them.

4. The focus therefore is not a consideration of the adjustment or apportionment between the parties but rather, to ascertain the value of their legal and equitable interests and then undertake an arithmetical exercise to ascertain the settlement sum that either party may be required to pay to reflect their agreement that B Property shall remain primarily with the wife and D Property with the husband.

5. Since the delivery of Judgment on 31 August 2018, orders were made on 12 September 2018 that transferred the matter of Snell & Salter (Action No. …) to the Family Court of Australia at Darwin with the parties consenting to the proceedings either being consolidated with the current proceedings, or to “run alongside the proceedings”.

6. There was no appearance on behalf of Ms H. The solicitor for Mr G Salter is common to both matters and advised the Court that the preliminary view of counsel was such that the Salter & Snell matter would likely require six to seven days of Court time given the perceived complexity of the dispute.

7. No final decision has been made, but if the assessment of counsel is accurate, it is unlikely that there will be any merit in the consolidation of the proceedings, particularly when only four days are available as and from 29 January 2019.

8. A determination of the interests of Mr G Salter may well assist in crystalizing the matters for determination in Salter & Snell. Given the involvement of Mr G Salter as a party to both proceedings, the attitude of Ms H is as yet unknown.

9. Both matters have been listed for mention on 24 October 2018.

MATTERS FOR DETERMINATION

1. The parties are agreed that [2] of orders made 31 August 2018 to the extent that they are relevant, will apply equally to the wife.

2. Paragraphs 2 and 4 of the Application filed 12 July 2018 are still to be determined. However, [2] is now agreed as is [9] of the Response filed 6 September 2018.

3. Paragraph 4 of the said application seeks the early dissolution of the partnership between the husband, Mr F Salter, Mr M Salter (now retired) and Mr G Salter pursuant to a Partnership Agreement made 25 May 2009 which will be dissolved on 28 February 2019.

4. On 6 September 2018, Mr G Salter in his capacity as a director of B Pty Ltd and a partner of C Pty Ltd filed a Response seeking the following orders:-

   ·That he be granted access to attend the inspection and valuation of D Property.

   ·That he be granted sole use of the light aeroplane (“the aeroplane”) and that it be the subject of valuation.

   ·That the partners of C Pty Ltd and the parties to the proceedings generally do attend private mediation.

   ·That the husband provide daily muster summaries and monthly livestock returns for each muster undertaken at D Property in 2016, 2017 and 2018.

   ·That Mr F Salter provide daily muster summaries for each day of muster undertaken at B Property, J Property and K Property in 2017 and 2018.

   ·That the directors of B Pty Ltd provide information as requested to the company bookkeeper Ms N.

5. The parties are agreed that the aeroplane is to be valued by the joint appointment of a single expert. Mr G Salter seeks the sole use of the aeroplane on the basis that he is the only person that holds the appropriate pilot’s license. The only concern of the husband is that he alleges Mr G Salter may be using the aeroplane to generate income other than for the business operated by the second and third respondents. In the absence of argument, I do not propose to make the orders sought in [2] of the Response filed by Mr G Salter, but will require him to provide all documents, including tax invoices, pertaining to the use of the aeroplane.

6. I do not propose to make any order in relation to the parties attending private mediation. It is a matter for the parties to attempt to resolve their differences and the Court does not consider that any order that compels them to attend mediation will likely assist a resolution of the dispute if the parties are not minded to do so.

7. If there is agreement that the parties will undertake mediation (and it is unlikely to occur prior to the preparation of a concluded balance sheet), I am prepared to make orders as to the costs of the mediator or other disbursement costs as may be incurred.

8. On the understanding that daily muster summaries and monthly livestock returns exist, I propose to make an order in terms of [7] and [8], but only in so far as they would require the production of documents for 2017 and 2018.

DISSOLUTION OF THE PARTNERSHIP

1. By agreement, a copy of the Partnership Agreement has been tendered and will be marked as Exhibit “1” in the proceedings. It provides for the husband, Mr F Salter, Mr M Salter and Mr G Salter to enter into a partnership to carry on a farming business on land owned, or to be owned by the landowners specified in the agreement.

2. Clause 2.1 provides that the partnership is to commence on 1 March 2009 and to continue for an initial term of five years “or until dissolution or termination under this agreement” and can be extended for a further term of five years with the unanimous agreement of the parties.

3. The partners are entitled to the profits of the business as set out in cl 5 noting that Mr M Salter has retired and it is assumed that his 25 percent interest in the partnership has been subsumed by the remaining three partners.

4. The winding up of the partnership is set out in cl 36:-

   36.1A full and general account in writing of the Partnership must be taken on the dissolution or termination of the Partnership for any reason.

   36.2This account must include:-

   (1)all the assets and liabilities of the Partnership; and

   (2)a valuation of all assets and liabilities.

   36.3Immediately after the account is taken, all the assets of the Partnership must be sold to the best advantage and the sale proceeds and all other money of the Partnership must be paid in the following order:

   (1)The costs of winding up of the Partnership;

   (2)The debts and liabilities of the Partnership to persons who are not Partners;

   (3)The amount due to each Partner for excess contributions (as distinguished from capital contributions) and any interest due on them;

   (4)Each Partner’s share of the capital in the Partnership Shares and any interest due on it; and

   (5)Any surplus to the Partners in the Partnership Shares.     

5. The husband is joined by Mr F Salter in his application that:-

   The [C Pty Ltd] be wound up and a Receiver is appointed to do all things necessary to sell all assets of the partnership and after payment of all secured and unsecured liabilities, be distributed in specie to the partners such that each holds cash or stock of equal value.

6. The early dissolution of the partnership is opposed by Mr G Salter.

7. The husband argues that the partnership is due to expire on 28 February 2019 and the order for early dissolution would enable the dissolution of the partnership to be managed in an orderly fashion and allow consideration to be given as to “in specie distribution to minimise taxation liabilities that would accrue on the sale of all partnership assets”.

8. It is also submitted that it is difficult to see what prejudice is caused in circumstances where both the Darwin and Brisbane proceedings will require a determination of the value of the interest of the husband and Mr G Salter in terms of the separate proceedings.

9. If the partnership was dissolved prior to the trial date of 29 January 2019, the interests of the parties would by crystalized.

10. In opposition it is argued that the early dissolution of the partnership is not required for the proceedings. A single expert can be appointed to value the interests of the husband and Mr G Salter for the purposes of the proceedings. It is only the relative proximity of the date of dissolution to the trial that provides any support for early dissolution.

11. It is not argued that any issue of jurisdiction exists.

12. In Phillip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457, 475 at [34] Barwick CJ considered accrued jurisdiction in the following terms:-

    It is settled doctrine in Australia that when a court which can exercise federal jurisdiction has its jurisdiction attracted in relation to a matter, that jurisdiction extends to the resolution of the whole matter. This accrued federal jurisdiction is not limited to matters incidental to that aspect of the matter which has in the first place attracted federal jurisdiction. It extends, in my opinion, to the resolution of the whole matter between the parties. This accrued jurisdiction carries with it the authority to make such remedial orders as are necessary or convenient for or in consequence of that resolution. For this purpose, the court exercising federal jurisdiction may enforce rights which derive from a non-federal source. …

13. Barwick CJ considered that the exercise of accrued jurisdiction is “…discretionary and not mandatory, though it will be obligatory to exercise the federal jurisdiction which has been attracted in relation to the matter”.

14. Lindenmayer J said at 75,315 of in the Marriage of Ireland (1986) FLC 91-731:-

    The fact that a federal court has jurisdiction to entertain a non-federal claim as a non-severable aspect of a “matter” of which a federal claim within its jurisdiction is an integral part does not mean that court must exercise that “accrued” jurisdiction. It remains a matter for the discretion of the court whether, in all of the circumstances of the particular case, that jurisdiction should or should not be exercised.

15. In Bishop & Bishop (2003) FLC 93-144 the Full Court stated at 78,407:-

    We think some caution and a very careful examination of the facts needs to be exercised before applying the general notion that if a court has jurisdiction it ought exercise it when dealing with claims involving third parties and family law cases. That caution having been said, if, as in this case, the facts support the exercise of accrued jurisdiction, the Court ought not to shy away from it. It is a very important and necessary part of the Court’s powers.

16. There is little doubt that the value of the partnership interests of the husband and Mr G Salter are relevant to the proceedings. The point of distinction is that there is no “controversy” between the partners in respect of their interests. The husband and Mr F Salter contend that it would be convenient and perhaps desirable to dissolve the partnership such that the interests of the parties would be clearly determined by the commencement of the proceedings. As discussed, it is submitted that the proximity to the dissolution date of 28 February 2019 would likely result in little or no prejudice to the partners generally and Mr G Salter in particular.

17. The Partnership Agreement does not provide the circumstances by which early termination of the agreement and dissolution of the partnership may occur except under clause 36 in the event of death, bankruptcy or retirement of a partner. Even in circumstances where a partner may die, the agreement provides for that share to be retained by the partner’s estate if the remaining partners do not exercise their right under cl 31.1(3) to purchase the interest of the deceased.

18. There is no basis for early dissolution in the agreement. The fact that two of the partners would seek a dissolution does not compel the opposing partner to concede the point. The argument for a dissolution of the partnership is summarised by the husband in his Affidavit of 21 February 2018 at [29]:-

    Since the signing of the document, [Mr M Salter] has ceased being a partner. [The wife] is not a party to that agreement, and I seek to join the [C Pty Ltd] to these proceedings so as to enable an equal property settlement to occur between [the wife] and I. I believe the [C Pty Ltd] needs to be wound up such that its bank debt is discharged and the share of [livestock] that I own is transferred to me either in specie or to [the wife] and I. The dissolution would also mean that [Mr F Salter] receives his one third of the [livestock] and [Mr G Salter] also receives his one third.

19. There is nothing to suggest that upon the dissolution of the partnership the in specie retention of livestock by the partners would not occur.

20. At present there is no dispute. It is not suggested that the partners will be in conflict and given that the principal issue of concern to the husband (and Mr F Salter) is the retention of livestock, the process involved in an early dissolution of the partnership would be the same process that would be required upon the anticipated dissolution date.

21. In the absence of a dispute that requires the Court’s intervention, I do not consider it would be appropriate for the Court at this stage to exercise its accrued jurisdiction and order the winding up of the partnership and to engage in a process of account and enquiry.

22. It is also argued that a Court managed dissolution may assist in minimising any taxation implications for the parties. I consider issues of tax minimisation are matters for the parties and not for the Court. If the issues are of significant advantage then that may well be a catalyst for agreement being reached as to the process by which the partnership will be dissolved. It is not a matter for the Court to assist the parties in their taxation affairs and I decline to do so.

23. In the absence of a dispute and where one of the partners opposes orders for an early dissolution, I decline to exercise my discretion to dissolve the partnership.

24. If it is considered by the parties that a concluded asset pool cannot be formulated until the formal dissolution of the partnership has occurred, then that may well be a relevant factor in terms of the retention of the trial date.

MR G SALTER TO ATTEND INSPECTION OF D PROPERTY

1. Mr G Salter seeks orders that he be permitted to attend inspection at D Property and asserts that the husband has previously refused permission for him to enter onto their property.

2. He seeks to be present when the valuation of the property, livestock and plant and equipment is undertaken by the single expert. His application is opposed. His affidavit does not make it clear the extent to which he intends to be present. There is no advice as to the duration required by the valuer to undertake the assessment and valuation process.

3. The principal proceedings are in respect of the competing applications for settlement of property as between the husband and wife. The valuation of D Property is relevant to that exercise. The wife does not seek to inspect the property. At this stage, I do not consider it necessary to grant Mr G Salter an order that he be permitted to attend the D Property at the same time as the scheduled inspection and valuation.

CONCLUSION

1. I propose to make orders the subject of agreement between the parties as discussed, but to dismiss the husband’s application for early dissolution of C Pty Ltd.

I certify that the preceding forty-five (45) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 27 September 2018.

Associate: 

Date:  27 September 2018