SCVG and Estate of KLD (deceased) (No 4)

[2020] FamCA 666

FAMILY COURT OF AUSTRALIA

SCVG & ESTATE OF KLD (DECEASED) (NO. 4) [2020] FamCA 666

FAMILY LAW – PLEADINGS – Striking out pleadings

APPLICANT: Mr SCVG

RESPONDENT: Estate of KLD (Deceased)

FILE NUMBER:	SYC	4380	of	2008
SYC	5956	of	2016

DATE DELIVERED: 13 August 2020

PLACE DELIVERED: Canberra

PLACE HEARD: Canberra

JUDGMENT OF: Gill J

HEARING DATE: 29 May 2020

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Self-representing

COUNSEL FOR THE RESPONDENT: Mr Stenhouse

SOLICITOR FOR THE RESPONDENT: Macphillamy's

Orders

1. The re-pleaded paragraph 12(b) of the Applicant’s statement of claim in relation to the Judge Scarlett matter is struck out;

2. The re-pleaded paragraph 34, including 34(a) – (r) of the Applicant’s statement of claim in relation to the Justice Cronin matter is struck out;

3. The Applications in a case filed by the Applicant on 15 June 2020 and 18 June 2020 are dismissed;

4. The proceedings are listed for further procedural directions on 18 August 2020 at 2pm and the parties are required to appear via Microsoft Teams.

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 SCVG & KLD 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

FILE NUMBER: SYC 4380 of 2008
       SYC 5956 of 2016

Mr SCVG

Applicant

And

Estate of KLD (Deceased)

Respondent

REASONS FOR JUDGMENT

1. The background to these proceedings is set out in previous judgments.  The current issue concerns pleadings in relation to what have become known as the Cronin J matter and the Scarlett matter.  In each case the Applicant seeks to set aside determinations made by those judicial officers on the basis that their judgments were procured by a fraud perpetrated by the late Ms KLD.  Given the accusation made by the Applicant is one of fraud, orders were made on the application of the Respondent to have the Applicant plead his cases.  In consequence of those directions the Applicant did so, following which orders were made striking out a number of the pleadings in each matter.  Following the striking out the Applicant sought and received permission to amend his pleadings.  The immediate issue then concerns an application by the Respondent to strike out the amendments made by the Applicant.

2. Procedural directions were given on 7 May 2020 for the filing of written submissions to resolve the striking out claims.  Those directions required the Respondent to file submissions by 20 May 2020 and the Applicant to respond by 29 May 2020.

3. The Respondent’s submissions in relation to the Cronin J and Scarlett matters were filed separately and in accordance with the directions.

4. The Applicant filed responding submissions in relation to each on 29 May 2020, then filed applications in a case on 15 and 18 June seeking to supplement those submissions.

5. Although those submissions were not filed in accordance with the directions, the Applicant sought to rely upon them by means of filing Applications in a Case.

6. Although the Applications in a Case were not the subject of a listing, or hearing from the Respondent as to whether they ought to be taken into account, I have considered and taken those submissions into account.  If they had the effect of potentially altering the result then the applications would have required listing.  As they did not alter the determination of the matter, there is no requirement to take the step in the proceedings of listing the applications.  As the submissions have been taken into account the applications will be otherwise dismissed.

The Scarlett amendments

1. The Scarlett matter relates to orders made by Judge Scarlett of the Federal Circuit Court of Australia on 30 April 2015 dismissing the Applicant’s appeal from the SSAT and awarding costs against him.

2. In the initial round of objections to the pleadings, objection was not taken to [12], but rather to what was described as a particular at [12(b)].  By orders of 20 March 2020, paragraph 12(b) of the pleadings filed by the Applicant in relation to the Scarlett matter was struck out.  Paragraph 12(b) then read:

   12.  Ms KLD commenced to grossly misrepresent her financial circumstances in proceedings before various tribunals and courts (from 2012 to 2017) with her 2012 Financial Statement filed in the SSAT and her oral evidence, with the intent of causing the CSR and the SSAT to assess me with unfair excessive child support obligations and of causing the courts to dismiss my appeals of the SSAT decision, and the SSAT, CSR and courts do so act relying on Ms KLD’s misrepresentations, and the CSR undertook unjust enforcement actions against me including issuing a departure prohibition order.

   Particulars

   …

   (b) In the Binding Financial Agreement executed by the parties prior to our marriage on 11 December 2001 (BFA), Ms KLD’s excluded property included, inter alia, 100 shares in J Pty Ltd and 100 shares in N Pty Ltd.  In the BFA each party acknowledged that they made no contribution to the other party’s excluded property nor had any entitlement to it or any accretion to it, or property acquired in substitution for it, or any income from it.

3. This pleading was struck out as it failed to do what the Applicant asserted that it did, namely that it established that the Respondent was aware at some point that particular property was worth in excess of one million dollars.  The pleading was unable to sustain such a factual contention.

4. The Applicant amended the pleading as follows:

   12(b).  On 11 December 2001 when Ms KLD signed the Binding Financial Agreement (BFA) after receiving the Certificate of Independent Legal Advice signed by her solicitor Mr Macphillamy, both she and Mr Macphillamy knew that her 100 shares in PP Pty Ltd and N Pty Ltd listed in Schedule 2 of the BFA had a substantial value to her.  The listing in the BFA of 100 shares in PP Pty Ltd was a technical error in that the correct company name at the time was QQ Pty Ltd.

5. Objection is taken to this paragraph in its re-pleaded form.

6. As best as I can understand the pleading relates to the assertion that the Respondent miss-stated her financial position in her financial statement and oral evidence before the courts, the CSR and SSAT commencing in 2012.

7. The Respondent complains that the pleading is of matters unconnected to the cause of action (being that the orders obtained before Judge Scarlett were the product of fraud), that the pleading asserts a state of knowledge without facts to enable such to be established, pleads an uncertainty in the state of knowledge alleged (“substantial value”) pleads an irrelevant matter (the state of mind of Mr MacPhillamy) and is otherwise irrelevant insofar as it might be used to establish exceptionality in the case to justify setting aside of the judgment.

8. The Applicant’s submissions assert that the Respondent recruited her solicitor to knowingly assist in the perpetration of fraud upon the Court.  It is further asserted that what can be drawn from the facts pleaded is that they each knew that the holdings were of “material value.”  Presumably this was “material value” as at 2001.  The Applicant then identified a suite of other allegations relating to events in 2017 to 2018 to establish value in the assets the subject of this pleading.  The assertion is then made that these later documents also establish material value in the assets.

9. Further it is alleged that this factual matter (i.e. the state of knowledge of the solicitor) relates to the issue of exceptionality, a matter that was also the subject of the supplementary submissions the subject of the Applicant’s two Applications in a Case.

10. It may be observed that much of the amended pleading reflects the struck out pleading, the key difference being the assertion of knowledge on the part of both Ms KLD and her solicitor that the shares had a material value to Ms KLD in 2001.

11. The pleading refers to the state of mind of Ms KLD’s solicitor in relation to the value of a particular asset at the time of the execution of a document in 2001. 

12. It may be observed that any state of knowledge in relation to the value of an asset by the solicitor in 2001 is not material to the cause of action, materiality being related to the state of mind in 2012 and following.

13. It may be also observed that what is pleaded is a state of mind without identification of what the state of mind is, by virtue of the ambiguous “material value”.

14. Further, facts are not identified to sufficiently to demonstrate a state of mind of “material value.”

15. These matters mean that whether or not the state of mind of the solicitor is relevant to exceptionality, and whether exceptionality is material, the pleading will be struck out. Potential exceptionality does not overcome the above identified faults in the pleading and the amended pleading will be struck out.

The Cronin J matter

1. The Applicant seeks to set aside the costs order made by Cronin J on 20 August 2015 on the basis that it was procured by fraud.

2. By orders of 20 March 2020, paragraph 34 of the pleadings filed by the Applicant in relation to the Cronin J matter was struck out.  Paragraph 34 then read:

Ms KLD's Financial Statement and Affidavit filed on 16 March 2015 were prepared by, and affirmed before, Mr Macphillamy who through his decades long work as solicitor for the business and personal affairs of the KLD family knew that her statements made on 16 March 2015 were materially false, and he instructed Ms KLD's counsel to rely on those false statements in submissions to Justice Cronin.

1. This paragraph was struck out as it was embarrassing in the sense that the Respondent was left to piece together what was referred to in order to form a necessary connection between the solicitor and the alleged fraud.

2. The Applicant amended the pleading as follows:

   Mr Macphillamy, the solicitor for Ms KLD, knowingly perpetrated a fraud upon the Court, in helping her complete and placing before the Court Ms KLD’s false financial statements.

   Particulars

   a)When he facilitated Ms KLD swearing her Financial Statement and Affidavit before him on 16 March 2014, Mr Macphillamy knew that s117 (2A)(a) of the FLA imposed a statutory duty on Justice Cronin to take into account the financial circumstances of the parties when considering making a cost order and that there were the documents conveying the statutory information which Justice Cronin would rely on to discharge his statutory duty.

   b)Mr Macphillamy gave formal independent legal advice to Ms KLD for, and prepared her section of the Binding Financial Agreement executed prior to our marriage in December 2001 at Ms KLD’s insistence to protect her assets. Mr Macphillamy listed in the schedule of Ms KLD’s Excluded Property 100 shares in N Pty Ltd and 100 shares in J Pty Ltd. Under the BFA the parties each remain entitled to their respective excluded property to the exclusion of the other party.

   c)Mr Macphillamy knew from December 2001 until 16 March 2014 that her shares in N Pty Ltd and J Pty Ltd were of substantial value to Ms KLD and that she regarded them as having substantial value.

   d)Mr Macphillamy acted as the KLD family’s commercial solicitor for their purchase of the land at Suburb AA to expand K Pty Ltd including his review of the necessary property sale or lease documents.

   e)Mr Macphillamy prepared the Deed of Settlement for the M Settlement and facilitated its execution on 28 June 2002.

   f)Mr Macphillamy prepared the Deed of Settlement for the T Trust and witnessed its signature by Ms KLD as the trustee on its execution dated 24 September 2002. Both Ms KLD and I were included as income and capital beneficiaries in that Deed.

   g)Mr Macphillamy prepared the Deed Amending the T Trust and signed each page as the witness on its execution date 31 March 2017, the primary effect of this amending deed was to remove me both as income and capital beneficiary.

   h)Mr Macphillamy knew from September 2002 that the T Trust was created for the primary purpose of benefiting Ms KLD and her children and that Ms KLD’s controlling shareholding in L Pty Ltd as a consequence of being the trustee of T Trust was of very substantial value to her.

   i)Ms KLD’s Financial Statements dated 16 March 2015 were sworn before Mr Macphillamy and contained an item that claimed she owed her mother a liability of $650,000 for legal fees paid by her mother and represented that she had a negative net worth (liabilities exceeding assets) of $53,697.

   j)Mr Macphillamy knew shortly after the SSAT issued its child support decision in March 2013 that Ms KLD had given the SSAT sworn evidence that her mother’s payment of her legal fees was a gift. At no time did Mr Macphillamy as the KLD’s family solicitor prepare any document in regards to any liability Ms KLD purportedly had to her mother for legal fees paid by her mother on Ms KLD’s behalf and did not receive any instructions to do so.

   k)When Mr Macphillamy witnessed Ms KLD’s signature of her financial statements on 16 March 2014 and when he instructed Council to make submissions to Justice Cronin in support of Ms KLD’s application for indemnity cost order relying on those filed financial statements, he knew that Ms KLD had no legally enforceable liability of $650,000 nor any other amount to her mother for legal fees paid.

   l)Mr Macphillamy knew that Ms KLD’s shares in L Pty Ltd had substantial underpinning assets of HH properties at S Town and Delegate, her shares in K Pty Ltd had substantial underpinning assets of the farm business and real property and her shares in N Pty Ltd had the underpinning successful business and central S Town real property assets, that each had a substantial current value to Ms KLD and a current market value which was materially in excess of the nominal values she asserted them in her financial statement.

   m)Mr Macphillamy knew that the operating company of the successful L Pty Ltd business is J Pty Ltd, which is owned by the M Settlement, whose trustee is K Pty Ltd, which is in turn, owned jointly by Ms KLD and her 2 siblings and that this structure which he assisted in creating made Ms KLD’s shares in K Pty Ltd of substantial value to her.

   n)Consequently, Mr Macphillamy knew that Ms KLD had a net worth of millions of dollars which was materially in excess of and fundamentally contrary to her insolent position of negative $53,697 net worth conveyed to Justice Cronin in the table on page 1 of her financial statement.

   o)As a consequence of his involvements described in matters (a) to (n) about, Mr Macphillamy knew on 16 March 2014 that Ms KLD’s financial statements and affidavit placed before the Court by him would convey grossly false statements of Ms KLD’s financial circumstances on which Justice Cronin had to rely.

   p)Mr Macphillamy’s solicitors in swearing Ms KLD’s financial statements and preparing the Affidavits, having it affirmed before him, filing it and instructing Counsel to make submissions relying upon it facilitated the procuring of fraud by Ms KLD.

   q)When discharging his statutory duty to take into account the parties’ financial circumstances when considering making a cost order, Justice Cronin relied upon the Financial Statements and Affidavit prepared by Mr Macphillamy and sworn by Ms KLD before Mr Macphillamy and also on the submission relating to the Financial Statements and Affidavit made by Counsel upon Mr Macphillamy’s instructions.

   r)But for Mr Macphillamy’s actions described in (a) to (n) above to facilitate Ms KLD’s fraud, Justice Cronin would have made a less onerous cost order against me or no cost order at all.

3. The Respondent complains that these matters are not material in the sense that they are an attempt to plead the case against the solicitor, who is not a party to the proceedings.  The justification advanced in answer to this complaint by the Applicant is that “in essence Mr MacPhillamy’s knowing assistance made Ms KLD’s fraud more effective and impactful on the decision made by Justice Cronin.”

4. However, the state of mind of the solicitor is not material to the fraud, if in fact fraud was perpetrated by Ms KLD.  Such fraud is reliant upon Ms KLD’s state of mind, not the solicitor’s state of mind.  It is no less a fraud by her if the solicitor was an innocent agent and, correspondingly, no greater a fraud if he was not.

5. The Applicant seeks to make the state of mind of the solicitor material as going to the question of exceptionality of the fraud upon the Court.  It is unclear whether, if exceptionality is required (the Applicant contending that it is not), such matter goes to exceptionality.

6. However, even if the above matter, being the allegations that the solicitor knew that Ms KLD was placing knowingly false information before the Court, is material, then it is, on the proposed pleadings and particulars only so material based upon the state of knowledge of the solicitor.

7. The previous iteration of this pleading was struck out, as identified above, as it left the Respondent to piece together matters to understand how the solicitor was alleged to be involved in the fraud alleged against Ms KLD.  The re-pleading identifies a state of mind or knowledge on the part of the solicitor.  It was incumbent upon the Applicant, in re-pleading the matter, to provide particulars setting out the facts that are said to establish such a state of mind on the part of the solicitor.  To do so the Applicant has relied on a secondary set of assertions of state of mind.  Those underlying states of mind likewise require particularisation, in the form of the identification of the facts that indicate their existence. 

8. The assertions of knowledge do not rise above being mere assertions of knowledge as a conclusory fact.  That is, the facts alleged to sustain such a state of mind are unidentified, lacking, or lacking in sufficient connection to the asserted state of mind.

9. The pleading is to be struck out on the basis of this deficiency.

I certify that the preceding thirty-two (32) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Gill delivered on 13 August 2020.

Associate: 

Date:  13 August 2020