Shea-Frost and Frost
[2013] FamCA 363
FAMILY COURT OF AUSTRALIA
| SHEA-FROST & FROST | [2013] FamCA 363 |
| FAMILY LAW – PROPERTY SETTLEMENT – held not just and equitable to make any order to alter the property interests |
| Family Law Act 1975 (Cth) |
| Stanford v Stanford [2012] HCA 52 |
| APPLICANT: | Ms Shea-Frost |
| RESPONDENT: | Mr Frost |
| FILE NUMBER: | MLC | 8386 | of | 2009 |
| DATE DELIVERED: | 24 May 2013 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | 16 May 2013 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Hutchings |
| SOLICITOR FOR THE APPLICANT: | Perisic & Thomas Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Davis |
| SOLICITOR FOR THE RESPONDENT: | Lennon Mazzeo Lawyers |
Orders
Subject to any application (as referred to hereafter) for costs, the application filed by the wife on 7 May 2013 and the response thereto by the husband filed 10 May 2013 are both dismissed.
That should any party seek costs arising out of these orders, such application be made by written submission and filed and served by no later than 7 June 2013 with such submission being endorsed with the fact that it has been so served on the other party and any recipient of such submission have until 21 June 2013 to file and serve any response and such response be endorsed with the fact that it has been so served on the other party and upon receipt of any such application for costs, it or they be determined in chambers.
IT IS CERTIFIED:
That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Shea-Frost & Frost 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 MELBOURNE |
FILE NUMBER: MLC 8386 of 2009
| Ms Shea-Frost |
Applicant
And
| Mr Frost |
Respondent
REASONS FOR JUDGMENT
Ms Shea-Frost (“the wife”) and Mr Frost (“the husband”) separated in March 2008 after a marriage of 17 years yet, despite five years having passed, they had not resolved their property dispute.
The wife, as the applicant, consistently argued that the husband had failed to disclose documents and had not been frank about his financial position. She alleged on a number of occasions, including in her affidavit of evidence in chief, that the husband had hidden assets.
The husband, as the respondent, albeit not entirely cooperative in disgorging documents and indeed not complying with an order to complete his 2012 tax return, argued not only that there were negligible assets to divide but that he had provided the wife after they separated with a significant amount of money.
I am satisfied on the evidence according to the required standard of proof that the husband’s position is correct. It would not be just and equitable in the circumstances to make any order in this case to alter their respective property interests and the wife’s application must therefore be dismissed.
This final hearing was extremely short with each party represented by counsel and each party being cross-examined.
In his final submission, counsel for the husband submitted that there was no basis to make any order. Counsel for the wife submitted that he could not submit to the Court that the evidence justified the orders pursued by the wife.
The wife proposed orders as articulated in her amended application filed 7 May 2013. She sought the following:
· The husband pay to the wife the sum of $300,000;
· The husband return to the wife her specified gold ring;
· That the parties otherwise retain all items in their possession;
· Costs.
The husband proposed orders as articulated in his amended response filed 10 May 2013, the following:
· That the applicant wife’s application for adjustment of the property settlement be dismissed;
· That each retain to the exclusion of the other all property and financial resources in their respective possession as at the date of these orders; and
· Costs.
The 2013 pathway to trial
This case was originally listed in the docket of Young J and a number of procedural hearings were conducted in 2012. Those are also referred to below. With his Honour’s retirement, the matter was handed to me and I listed the matter for the purposes of setting it down for trial. Unfortunately, the wife indicated that she had not been aware of the hearing. Needless to say, discussions took place as to what was in dispute and I fixed the hearing date and required each party to file an amended application and response along with their affidavit of evidence in chief for the trial. At that procedural hearing, neither party was represented by a legal practitioner and it would seem that that had also been the case before Young J.
As a result of the orders I made, each party attended upon a legal practitioner who, it would seem, prepared the affidavit material.
The wife relied upon an affidavit filed 3 May 2013 but not a financial statement and although cross-examined about its absence, nothing seems to turn on the point having regard to the modesty of the financial circumstances of each of the parties. The wife then relied upon a financial statement she filed on 26 November 2012. At that time, she was unemployed but has now returned to the workforce.
The husband complied with my orders and filed an affidavit of his evidence in chief on 10 May 2013. He did not file an updated financial statement but it became clear during cross-examination by the wife’s counsel that his compliance with orders made by Young J for the completion and filing of his income tax returns was contentious. It was asserted by counsel for the wife that he had not filed what he had been ordered by Young J but he had filed an affidavit on a date in January 2013 annexed to which were the financial statements and income tax returns for both the husband and a corporate entity called P Trust for 30 June 2010. Further, in an affidavit filed 29 January 2013, the same documents but for the following year were attached.
I shall return to the affidavit material of each party below but having regard to the fact that each had a legal practitioner acting for them, it is hard to see how each had not had an opportunity to adequately prepare and present a case seeking orders under s 79 of the Family Law Act 1975 (Cth) (“the Act”). However, the procedural background of this case also must be contemplated.
Procedural history
The wife filed the initiating application on 18 September 2009 returnable on 17 November 2009. Orders were then made for the valuation of two companies P Pty Ltd and T Pty Ltd.
At the hearing on 17 November 2009, the parties were not able to resolve the matter and orders for the husband to make financial disclosure followed. Why that was necessary remains unclear having regard to the primary obligation on all parties to proceedings to be pro-active in respect of full and frank disclosure. Needless to say however, the orders were made after negotiations had failed to sort out the dispute.
The matter came back for hearing before the Court on 10 February 2010 and it would seem from the record that the wife was not content with the husband’s disclosure because further disclosure orders were made.
I have not examined the entire court file nor should I do so but even on the wife’s evidence, the matter came back 11 months later and a further order was made for the exchange of financial documents between the parties. In addition, a conciliation conference was ordered.
A conciliation conference occurred on 6 April 2011 and no agreement was reached. That culminated in the matter coming on before Bennett J on 8 April 2011.
One of the advantages that I had (which it would appear, the parties did not have) was a transcript of the hearing before Bennett J. It was quite clear that her Honour was frustrated about the fact that the case was not ready for trial despite an assertion to the contrary. Her Honour adjourned the proceedings. It is abundantly clear from the court record that the issue of discovery was alive and unresolved.
On 23 June 2011, the matter was before a registrar who made further orders for the filing of documents.
On 10 August 2011, a registrar conducted a telephone mention and the case was again set down for final hearing. The trial judge was to be Bennett J again.
In the period between August 2011 and December 2011, the wife issued subpoenae to a variety of people and no doubt inspected various documents.
On 21 December 2011, the matter came before Bennett J and again, it was quite clear that her Honour was not satisfied that the matter was ready to proceed. It was adjourned and further orders for discovery were made. At that stage, it appeared that the case was transferred back into a pool of cases to await a further hearing.
In February 2012, the Registrar issued subpoenae at the request of the wife to the National Australia Bank and Westpac Bank because, as she said, the husband had not made financial disclosure.
On 29 June 2012, orders were made by me for the matter to be set down for trial and for the filing of the relevant trial documents. Unfortunately, the case could not proceed on the date allocated to it which was entirely a matter caused by the Court. The case was transferred on that particular day to Young J.
On 26 September 2012, Young J conducted a hearing and again made orders for disclosure and the filing of documents. He adjourned the matter to 26 November 2012.
On 26 November 2012, Young J made orders for the husband to file financial statements and tax returns for the financial years ending 2010, 2011 and 2012.
In addition to those matters, at one of the hearings before Young J, his Honour required the self-represented husband to go into the witness box whereupon his Honour cross-examined him about a variety of financial matters.
It was not disputed by the husband that he had not filed his 2012 taxation returns including the return for the company. While Young J ordered that the 2012 return be filed and served, the necessary taxation process was never started by the husband but having regard to what I heard arising out of his cross-examination, I am satisfied that it would make very little difference in this case.
Importantly, in her affidavit of evidence in chief, the wife said:
To date, I am yet to receive (the husband’s) updated financial disclosure despite the orders of the court for him to do so.
The procedural history above would indicate that notwithstanding all of the wife’s complaints about the husband’s financial disclosure, action was never taken to enforce discovery or even to seek to proceed on an undefended basis. That was apparent from the time put into the matter by Young J and more importantly, the transcript of the hearing before Bennett J which indicated a lack of concentration by the wife on what was required.
The lack of enforcement of discovery of documents must be seen to have been ameliorated by the fact that the husband went into the witness box and was cross-examined by counsel for the wife who diligently pursued a trail of money to which I shall turn.
Thus, the Court can only take its resources so far if parties do not seek appropriate relief to enforce necessary orders. Clearly, this was a case in which the wife was endeavouring to argue that the Court should take a robust approach to the husband’s financial position and simply make orders in the terms sought by the wife on the basis that the husband had been less than frank. The difficulty with that approach is that the Court must still have at its fingertips, the necessary evidence to satisfy itself that an order of the magnitude sought could be made.
For the reasons that I shall set out below, I am quite satisfied that no such assets exist that could justify making an order of the quantum sought by the wife nor could any order be enforced bearing in mind the findings that I shall make. Accordingly, the wife must take responsibility for her own complaint.
To make matters more complicated, and compounding the wife’s difficulty, she attached to her affidavit of evidence in chief, a report of a forensic accountant prepared in 2011 for her solicitors. No objection was taken to the admissibility of that document but it was an inappropriate way for the evidence to be introduced. More importantly, it did not establish anything to assist the Court. The report is littered with statements about a lack of information and the fact that the accountant was unable to express an opinion on the earning capacity of the husband nor to place a value on the business. Interestingly, the accountant said:
I do believe however, the value of (the husband’s) interest held in this business at this time would be negligible.
Counsel for the husband did not take objection to that material presumably on the basis that no other evidence took the issue of value or disclosure any further.
Background
The wife is 43 years of age and enjoys good health. She is an office worker by occupation. She had been employed for much of 2012 and then obtained work over the summer period and has since obtained the position she now holds. She earns a very modest income.
The husband is 49 years of age and described his occupation as a company director. He sells goods as a retailer. He conducts his own business as a director and shareholder of his company.
The parties commenced their relationship in 1988, cohabited in 1990 and were married in 1991.
There are three children of this marriage two of whom are over 18 years of age and M who is 14 years of age.
M is shared between the parties on a week about basis and attends a private college, the fees for which, the husband is responsible. The wife conceded that there is approximately $25,000 outstanding in respect of those fees but she believed that the husband had made an arrangement to pay them $3000 per annum added to which, the current fees are $10,000 per annum. She therefore reluctantly acknowledged that the husband was paying $13,000 per year.
The parties separated on a final basis in March 2008 and were divorced in April 2010.
The wife’s evidence
Two important concessions were made by the wife. The first was that when separation occurred in 2008, there were no assets except a caravan and as she otherwise described:
What else, I’m not sure.
When asked what the “pool” of assets that presumably either party had, she said she was not sure. She was then asked why she had not produced evidence to prove the existence of a pool of assets and her response was that she had not been able to provide that because no documents had been produced. Having regard to what I have set out above, I reject that evidence.
Thus it will be seen that despite all her protestations, the wife was not able to point to any assets of significance.
Another important concession was made by both parties. In each case, experienced counsel made the decision not to challenge the evidence about the history of the marriage and having regard to what I have just said about the wife’s concession about the financial position at the time of separation, that could hardly be surprising.
Neither party made any formal concession that the contributions that each made were much the same. For that reason, I shall point out the unchallenged evidence.
When the parties began living together, the husband had a unit into which they ultimately moved together as a couple. It was a modest property with little equity. The husband also owned another piece of real estate and the wife asserted that there was little equity in that property.
Not long after the cohabitation commenced, the unit was sold with little proceeds over after discharging the mortgage. The husband’s other property was also sold and the funds were used for a honeymoon.
The wife had been employed but when she became pregnant with their first child, she resigned.
The parties then rented accommodation and the wife obtained part-time work caring for children in the parties’ home.
In 1995 a home was purchased and sold two years later at a small loss.
During the early part of this relationship, the husband was working and ultimately became a partner in a retail organisation and the wife remained at home caring for the home and the children.
In 1995 they sold the home and leased a service business which had to be fitted out and they then rented a house in the nearby country town.
Initially, both parties worked full-time in the service business and then eventually purchased 40 acres of land with a home on it in the country. Although the wife’s father contributed towards that property, there was little equity and it was almost entirely encumbered by mortgage.
The country property was used for the breeding and agistment of stock and they invested in them as well as in a plantation.
When the wife gave birth to their third child, the service business was run by a manager and then both parties obtained paid employment and no doubt contributed their income although neither set out any details.
In 2003, there was a period of time when the husband was unemployed and then in 2004, he purchased a franchise relating to retail goods.
In her affidavit, the wife set out her understanding of what occurred but having regard to the cross-examination of the husband, his picture was more accurate.
Separation occurred in 2008 at a time when the husband was working in the franchise and the wife said that there were no debts in the business and significant sales were being generated. The wife obtained casual employment and a shared care arrangement occurred for the children.
In November 2007, the husband gave the wife $50,000 but she asserted that he took her car back which she said was worth approximately $50,000. The difficulty with her evidence was that she conceded that in November 2008, she had signed an acknowledgement of receiving $50,000 in cash plus $12,000 in what was described as “barter card trade money”. She said in the acknowledgement that she was receiving the money that was to be taken into account in any future settlement or part of divorce proceedings. In her affidavit, she said that whilst the husband gave her the $50,000, he took back a 2002 Mitsubishi … motor vehicle which she said was worth $50,000. However, in the document which she acknowledged having signed, the car was described as a Holden Commodore. In his affidavit, the husband too described the car as a 2002 Mitsubishi … motor vehicle.
Having regard to the concession by the wife which is consistent with her affidavit that at the time of separation there were no assets, I am able to find that at least during the period of time that the parties were together, they made equal contributions to the financial roles and non-financial roles that each fulfilled.
The retail business
The country property mentioned above was sold and the parties moved back to the Geelong area and purchased another property using borrowed money secured against it. That property too was sold a little later at a loss.
In 2004, the franchise had been purchased for $65,000 all of which had been borrowed pending the sale of the country property. The sale presumably paid out the franchise debt.
A corporate entity was then commenced and the husband was the sole shareholder. Initially, he drew a gross annual income of approximately $30,000.
After separation, the parties had discussions and the $50,000 mentioned above was paid. To raise the $50,000 funds, the husband said that he had to sell a 75 per cent interest in the franchise. He said that it was valued at $120,000 although acknowledged that that amount was questionable. Thus, despite the wife’s concession that there were no assets, the husband at least conceded that at the time of separation there was a value in the franchise of about $120,000. Having said that however, the equity was minimal.
As part of the sale of the franchise, the husband remained as the general manager and a separate company was incorporated by the purchasers of the 75 per cent. That company had a separate business in which the husband had a 25 per cent shareholding. All was going well until the global financial crisis hit and the husband then borrowed money from solicitors at an interest rate of 20 per cent to make a payment of $216,000.
The inter-company partnership was short-lived and unsuccessful and the husband received back the 75 per cent that he had sold but he retained an existing debt of $160,000.
The husband was cross-examined closely and carefully about a series of events around the time of the 2008 purchase of the franchise. It would seem that the retail sales turnover in the business was consistent and reasonable.
Some two years into these proceedings, the wife engaged the forensic accountant I have mentioned above to examine some of these transactions and although that material was not in evidence before me, it was used by counsel for the wife in cross-examination. The forensic accountant apparently raised a number of issues including the fact that by August 2011, the husband was still indicating on the ASIC public records that he was a director of the relevant company and his explanation for that was that he had resigned his directorship and transferred the shares but that the purchaser had been responsible for the transfers and had not undertaken the task.
Earlier I mentioned the various and consistent orders for disclosure. Counsel for the wife put to the husband that he had failed to provide documents and he denied that. He then proffered that he had provided what was under his control at the time. It was put to him that as a director of the company, he could have obtained the documents by virtue of his entitlements under the Corporations Act. He said that he made a demand for the documents but there was a dispute with the other directors and he was unable to get them. There was clear criticism of the husband by counsel for the wife but I again point out that there was no action taken by the wife that I could see to enforce her rights to disclosure under those circumstances.
Counsel for the wife cross-examined the husband about his credit card statements in 2008 and 2009 which indicated some electronic banking deposits about which he was vague in explanation. When asked why he could not explain where these monies came from, he said that it was four years ago. His explanation had a ring of reality about it. Importantly, the sums of money were modest and his best explanation was that they were a refund of expenses he incurred when he was involved in a professional association. There is no reason for me to be concerned about these payments despite the wife’s assertion that there were hidden assets because as I understood her counsel’s concession, they were modest.
Counsel for the wife carefully cross-examined the husband about the various corporate transactions which I have generally referred to but it was clear that it could not be suggested that any of these transactions led to the husband hiding money, holding money or sending money offshore such that the Court could find that he had assets that he was not disclosing.
Counsel questioned the husband as to why, when he took back the 75 per cent shareholding in the company that he had previously sold, he took over the significant debt. He said he was involved in an acrimonious business separation and that he had little choice. He accepted that he had taken on the burden of the loans of which $60,000 was described by him as his percentage. He was unable to explain the transactions in any greater details but it was clear that counsel for the wife did not know the answer either and therefore the issue could also not entitle the Court to make any finding that there was hidden money.
I find that little if any money from the joint efforts of the parties went into the franchise business and to the extent that there was some connection, the wife was unable to point to it in any value sense. Indeed, as I have pointed out, her view was that there was no asset of substance at the time of separation. Thus, to the extent that the husband after separation was involved in a variety of commercial transactions, they were all of his own doing.
The January 2013 affidavits
Despite the fact that the husband was accused of not having filed the tax returns in accordance with the orders of Young J, it was clear that most of the relevant ones had been. Significantly, the balance sheet of the corporate entity showed that in the year ended 30 June 2009, the total company assets amounted to $39,019 with liabilities of $63,265 leaving an obvious negative equity.
A careful examination of the 2009 balance sheet shows that there was a very small amount of money in the company’s bank account, some motor vehicles, office furniture and that was it. The liabilities were essentially internal and personal to the parties including the wife. There were hire purchase liabilities and chattel mortgage liabilities all of which left the company with a negative equity of $24,245.
In the following year, 2010, the situation deteriorated with the same sort of entries and a negative equity of $35,079.
In 2011, the re-purchase of the 75% interest occurred and although the wife was suspicious about why the husband would seem to take on a heavy debt load in a company with minimal (if any) value, nothing supported her conclusion that there was a significant stash of money somewhere. Equally importantly, nothing in the wife’s evidence pointed to the possibility that there might be a change in the opinion of her own forensic accountant even if more current financial documents were provided.
The future
Each party addressed their respective future needs. Both parties appear to have a modest income and each lives in rental accommodation. There is no reason for me to reject the husband’s evidence that he is effectively eking out a living from the franchise. He is supporting the parties’ only child under 18 years of age. Neither party is therefore in affluent financial circumstances and there is no evidence to indicate a likely change in the foreseeable future.
The law
In Stanford v Stanford [2012] HCA 52, the High Court of Australia (French CJ, Hayne, Kiefel and Bell JJ) noted the operation of s 79 of the Act. Their Honours said:
35.It will be recalled that s 79(2) provides that "[t]he court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order". Section 79(4) prescribes matters that must be taken into account in considering what order (if any) should be made under the section. The requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.
36.The expression "just and equitable" is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds. And while the power given by s 79 is not "to be exercised in accordance with fixed rules", nevertheless, three fundamental propositions must not be obscured.
37.First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. So much follows from the text of s 79(1)(a) itself, which refers to "altering the interests of the parties to the marriage in the property" (emphasis added). The question posed by s 79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.
38.Second, although s 79 confers a broad power on a court exercising jurisdiction under the Act to make a property settlement order, it is not a power that is to be exercised according to an unguided judicial discretion. In Wirth v Wirth, Dixon CJ observed that a power to make such order with respect to property and costs "as [the judge] thinks fit", in any question between husband and wife as to the title to or possession of property, is a power which "rests upon the law and not upon judicial discretion". And as four members of this Court observed about proceedings for maintenance and property settlement orders in R v Watson; Ex parte Armstrong:
"The judge called upon to decide proceedings of that kind is not entitled to do what has been described as 'palm tree justice'. No doubt he is given a wide discretion, but he must exercise it in accordance with legal principles, including the principles which the Act itself lays down".
39.Because the power to make a property settlement order is not to be exercised in an unprincipled fashion, whether it is "just and equitable" to make the order is not to be answered by assuming that the parties' rights to or interests in marital property are or should be different from those that then exist. All the more is that so when it is recognised that s 79 of the Act must be applied keeping in mind that "[c]ommunity of ownership arising from marriage has no place in the common law". Questions between husband and wife about the ownership of property that may be then, or may have been in the past, enjoyed in common are to be "decided according to the same scheme of legal titles and equitable principles as govern the rights of any two persons who are not spouses". The question presented by s 79 is whether those rights and interests should be altered.
40.Third, whether making a property settlement order is "just and equitable" is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s 79(4). The power to make a property settlement order must be exercised "in accordance with legal principles, including the principles which the Act itself lays down". To conclude that making an order is "just and equitable" only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.
The only existing legal and equitable interests of the husband and wife in any property lie in the chattels that either has and the shareholding of the husband in the franchise.
Having regard to the payment made by the husband to the wife in 2008 for which she signed the acknowledgment together with her concession that at the time of separation there were no assets of substance, I find it would not be just and equitable to make an adjustment or alteration of the interests of the husband in the company. The only evidence I have as to a valuation indicates that the shareholding is of no value or if it is, nothing was put before the Court that would suggest it is of significance. So much can be gathered from not only the cross-examination of the husband and the concession of the wife but also the evidence of the wife’s forensic accountant in 2011.
Even if it was just and equitable to make some alteration and I find it is not, the provisions of s 79 would not justify an assessment that would culminate in an order being made. To the extent that it is necessary for me to say so, I would find that the parties’ contributions up until the time of separation were equal but the contribution thereafter to the asset as well as to the family constellation significantly favours the husband. Section 79(4)(e) requires the Court to consider all of the matters set out in s 75(2) so long as they are relevant. On the evidence before me, sparse as it is, there is no basis for me to make a finding that one party deserves an adjustment because of those various factors all of which I have taken into account.
Having found that it is not just and equitable to make any alteration, the wife’s application for $300,000 must fail.
As will be seen above, the wife also sought the return of what appears to be personal chattels. There was no evidence that would enable me to make such an order and at no stage did counsel for the wife challenge the husband that he still had those items in his possession regardless of who had the legal or equitable interests in them. On that basis, that part of the wife’s application must also fail.
At the conclusion of the submissions, I indicated that I would adjourn the proceedings to enable a judgment to be prepared and to the extent that either party desired to make an application for costs, I would consider submissions and determine the matter in chambers. Accordingly, I propose to make an order along those lines.
I certify that the preceding Eighty Five (85) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 24 May 2013.
Associate:
Date: 24 May 2013
Key Legal Topics
Areas of Law
-
Family Law
Legal Concepts
-
Costs
-
Discovery
-
Procedural Fairness
-
Remedies
-
Standing
0