Tassinari and Pesalaccio (No 2)

[2018] FamCA 506

FAMILY COURT OF AUSTRALIA

TASSINARI & PESALACCIO (NO 2) [2018] FamCA 506

FAMILY LAW – PRACTICE AND PROCEDURE – Application for summary dismissal – Where the husband’s mother, brother and various business entities in which they are involved are respondents to the proceedings – Where the wife alleges that the husband is involved in these business entities and that they are his puppets or alter egos – Where the respondents seek that the case against them be summarily dismissed – Consideration of the available evidence and principles of summary dismissal from legislation and case law – Where the wife’s evidence is limited – Where the respondent companies form part of a somewhat complex structure of family companies and the husband appears to occupy a prominent position – Where the Court is of the view that there is a real question to be tried  – Where the application for summary dismissal is dismissed.

Family Law Act 1975 (Cth) ss 4(1), 118(1)
Family Law Rules 2004 (Cth) rr 10.12, 10.14

Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337
Bigg v Suzi (1998) FLC 92‑799
Bretton & Bondai [2013] FamCAFC 168
Ebner & Pappas [2014] FamCAFC 229
Friar & Friar [2011] FamCAFC 71
General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125
Gitane & Velacruz (2007) FLC 93‑309
Lindon v Commonwealth (No 2) (1996) 136 ALR 251
Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158
Sarai & Talwar (2018) FamCAFC 22
Spencer v Commonwealth of Australia (2010) 241 CLR 118

APPLICANT: Ms Tassinari

FIRST RESPONDENT: Mr Pesalaccio

SECOND RESPONDENT: Ms Pesalaccio

THIRD RESPONDENT: B Pty Ltd CAN…

FOURTH RESPONDENT: C Pty Ltd ACN …

FIFTH RESPONDENT: D Pty Ltd ACN …

SIXTH RESPONDENT:	E Pty Ltd ACN …
SEVENTH RESPONDENT:	Mr F Pesalaccio

FILE NUMBER: SYC 3880 of 2012

DATE DELIVERED: 18 June 2018

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Johnston J

HEARING DATE: 19 January 2018

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Lethbridge SC

SOLICITOR FOR THE APPLICANT: Slatt Family Lawyers

COUNSEL FOR THE FIRST RESPONDENT: Dr Watson

SOLICITOR FOR THE FIRST RESPONDENT: Pearson Emerson Meyer Family Lawyers

COUNSEL FOR THE SECOND TO SEVENTH RESPONDENTS: Mr McInerney SC

SOLICITOR FOR THE SECOND TO SEVENTH RESPONDENTS: McGrath Dicembre & Company

Orders

1. That the applications at paragraphs 3 and 4 of the Amended Response to an Application in a Case filed by the second to seventh respondents on 5 December 2016 be dismissed.

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 Tassinari & Pesalaccio 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 SYDNEY

FILE NUMBER: SYC 3880 of 2012

Ms Tassinari

Applicant

And

Mr Pesalaccio

First Respondent

And

Ms Pesalaccio

Second Respondent

And

B Pty Ltd ACN …

Third Respondent

And

C Pty Ltd ACN …

Fourth Respondent

And

D Pty Ltd ACN …

Fifth Respondent

And

E Pty Ltd ACN …

Sixth Respondent

And

Mr F Pesalaccio 

Seventh Respondent

REASONS FOR JUDGMENT

1.This is an interlocutory application in substantive property proceedings between Ms Tassinari (“the wife”) and Mr Pesalaccio (“the husband”). This interlocutory application involves a number of respondents in addition to the husband including the husband’s mother, brother and various business entities in which they are involved. 

2.On 2 December 2016, the husband filed an Amended Response to an Application in a Case and on 5 December 2016 the second to seventh respondents (“the respondents”) filed an Amended Response to an Application in a Case. Some of the orders sought therein being similar to orders sought by the husband.

3.There are two orders sought immediately by the respondents and I note that the husband joins the other respondents in their application for these orders. 

4.The first is an order in the nature of a permanent injunction that the wife be restrained from making use of information obtained in breach of confidence to institute proceedings against the respondents including an order that:

(a)The wife be restrained from joining those respondents to the proceedings;

(b)The wife be restrained from prosecuting proceedings against those respondents;

(c)The wife be restrained from making any use of the information obtained in breach of confidence to prosecute the proceedings against the husband (including the issuing of subpoenas for production issued by the wife to the husband, the respondents and various third parties on various specified dates); and

(d)The wife’s former and current solicitors Ms NN and Ms Rachel Slatt and the wife’s former and current counsel Mr OO and Mr Lethbridge SC be restrained from acting on behalf of the wife in these proceedings. 

5.The second is an order that the claim for substantive relief made by the wife against the respondents be struck out or, alternatively, be summarily dismissed, and that those respondents be removed as parties in these proceedings. 

6.The application for the injunction to restrain the named lawyers from acting for the wife had not been listed for hearing on 19 January 2018. Specifically, on 2 November 2017 an order was made allocating 19 January 2018 for the hearing of the summary dismissal application, objection to subpoena and any residual breach of confidence issue. Mr Lethbridge indicated that he and Ms Slatt at least would wish to file affidavits. The wife, therefore, sought an adjournment of the proceedings. 

7.The respondents also sought an order that professional privilege does not attach to any of the documents the subject of subpoenas for production served upon various named persons and a law firm returnable in this Court on 22 December 2017 including an order that the respondents have access to the documents produced. Mr Lethbridge submitted that these persons might wish to have an opportunity to be heard in response to this part of the application. 

8.The respondents also sought an order that the wife pay the costs of the respondents on an indemnity basis. Mr Lethbridge sought time for the wife to file material in response to this application. 

9.In all these circumstances, I determined that it was appropriate to adjourn part‑heard the applications for the various injunctions and orders in relation to legal professional privilege, and costs. What remained was the summary dismissal application. In circumstances where the wife was well aware that this application was before the Court for hearing on this occasion, in my view, it was not appropriate for this to be further adjourned. I heard submissions from all parties in relation to this and reserved judgment. 

The parties

10.The wife was born in 1975 and is 42 years of age.  The husband was born in 1976 and is 42 years of age.  The husband’s mother, Ms Pesalaccio, the second respondent, was born in 1957. The husband’s brother, Mr F Pesalaccio, the seventh respondent, was born in 1981.

11.A number of corporate entities are connected to the Pesalaccio family. D Pty Limited, the fifth respondent, was registered on 5 November 1998 with Ms Pesalaccio being the director and secretary. E Pty Ltd, the sixth respondent, was registered on 28 May 2008 with the husband and Mr F Pesalaccio as the original directors and shareholders.  On 26 June 2012, B Pty Ltd, the third respondent, was registered with Ms Pesalaccio being the director, secretary and shareholder. On 25 March 2014, C Pty Ltd, the fourth respondent, was registered with Mr F Pesalaccio as the director and secretary. 

Background

12.The husband’s parents, Ms and Mr Pesalaccio Snr, were married in 1975.  Both were born in Europe.  At the time they were married the husband’s father was working as a tradesman on various building sites and the husband’s mother was working in administration.

13.They have three children, namely the husband born, as I have said, in 1976, Mr F Pesalaccio born in 1981 and Ms QQ Pesalaccio who was born in 1991. 

14.The husband and wife were married in 2000. There are three children of their marriage, namely H born in 2003, J born in 2006 and K born in 2010.  The husband and wife separated on 24 January 2012 and were divorced on 21 December 2014. 

Chronology

15.In 1980, the husband’s parents purchased a property at RR Street, Suburb SS (“the Suburb SS property”) for $42,000. They borrowed the sum of $30,000 from the bank and the balance came from joint savings. In around 1986 they sold the Suburb SS property. They then purchased a property at TT Street, Suburb UU (“the Suburb UU property”) for $140,000. The sum of $70,000 was borrowed from the bank and the balance of the purchase monies came from the proceeds of sale of the Suburb SS property, joint savings and money gifted from parents. 

16.In July 1990 the husband’s father, along with some subcontractors, formed the company VV Pty Ltd which provided services. 

17.In early 1992, the husband’s father resigned as a director of VV Pty Ltd. At around the same time, the husband’s parents along with Mr WW created the business XX Pty Ltd (“XXPL”). Mr WW held two shares and the husband’s parents owned a share each.

18.In 1993, the husband and the wife met and they commenced their relationship.

19.In 1994, the husband’s parents set up YY Pty Ltd (“YYPL”). YYPL was set up to own equipment which YYPL then hired out to XXPL. 

20.In about 1995, the husband’s parents purchased an investment property at ZZ Street, Suburb UU (“the ZZ Street property”). This property was purchased for about $189,000. The majority of the money was borrowed from the National Australia Bank and the balance came from their joint savings.

21.In January 1996, the husband’s parents registered AB Pty Ltd (“ABPL”). This was so that the contracting work could be split between ABPL and XXPL. The directors of ABPL were the husband’s parents and Mr WW and his wife.  Each were equal shareholders.

22.In 1997, the husband’s parents incorporated BC Pty Ltd (“BCPL”). The directors at BCPL were the husband’s father and Mr WW. Thereafter, YYPL and Mr WW’s company, ABPL, would equipment to BCPL.

23.In about 1998, the husband’s father and Mr WW were negotiating a split up of the ABPL business. 

24.On 6 April 1998, CC Pty Ltd was registered as a new contracting company. The directors of CC Pty Ltd were the husband’s father and the husband.  At this time, the husband was an architecture student. 

25.In June 1998, Mr and Mrs WW purchased the interest that the husband’s parents had in a property at CD Street, Suburb DE. Mr and Mrs WW and the husband’s parents had owned this property together as an investment property.

26.In June 1998, the husband and the wife purchased the property at N Street, Suburb O (“the Suburb O property”) as tenants-in-common in equal shares. 

27.On 5 November 1998, D Pty Ltd was registered with the husband’s mother being its director. This was to keep the business separate from the contracting business. The husband’s mother completed the administrative work for D Pty Ltd and CC Pty Ltd from her home.

28.In about March 1999, the husband’s parents purchased a property at EF Street, Suburb (“the EF Street property”) for $400,000. This property was purchased using joint savings. In about August 1999, the husband’s parents mortgaged the EF Street property and borrowed from the National Australia Bank the sum of $50,000 in order to develop the site to use it as a storage yard for D Pty Ltd. 

29.In 1999, the husband graduated with a degree.

30.As I have said, the husband and the wife married in 2000. 

31.On 10 February 2000, the husband’s company DD Pty Ltd was registered, the husband being its director.

32.In 2000, D Pty Ltd purchased GH Street, Suburb HI (“GH Street”) for $603,500. D Pty Ltd borrowed most of the funds from the Commonwealth Bank of Australia. 

33.In 2000, the husband’s mother was unable to continue to manage the administration of CC Pty Ltd and D Pty Ltd from her home. She moved to an office at IJ Street, Suburb JK. An office junior was employed to help her with administrative duties and an estimator was hired to help the husband’s father tender for the contracts. The EF Street property was used as a storage facility for D Pty Ltd. 

34.In 2001, the husband’s parents sold the ZZ Street property to Mr F Pesalaccio for $275,000. The sale of proceeds were applied towards paying out the mortgage to the National Australia Bank and the balance was used to construct an office building on the EF Street property so that all the equipment and administration could be conducted from one premises. 

35.In approximately 2004, the husband’s parents purchased 40 acres of land at KL Street, LM Town (“KL Street”) for $250,000. This property was purchased in the names of each of the husband’s parents and their three children in equal shares. The husband, Mr F Pesalaccio and Ms QQ Pesalaccio did not contribute any monies towards the acquisition of this property and have not contributed any funds towards the maintenance of this property.

36.In 2004, the husband’s parents sold the Suburb UU property for approximately $693,000 and purchased the property at MN Street, Suburb NO (“the MN Street property”) for $1,210,000. The MN Street property was purchased with monies from joint savings and the proceeds of sale of the Suburb UU property.

37.In about August 2004, D Pty Ltd and the husband’s parents purchased a property at OP Street, Suburb PQ (“the Suburb PQ property”) for the sum of $1,212,000. This was financed primarily from a loan from the National Australia Bank. The balance of the purchase monies was derived from joint savings and monies from D Pty Ltd.

38.In November 2004, D Pty Ltd purchased FF Street, Suburb GG (“the Suburb GG property”) for $2,850,000. 

39.On 14 February 2006, the husband’s father registered QR Pty Ltd.

40.On 6 September 2006, RS Pty Ltd was registered with the husband’s father as director. RS Pty Ltd is the corporate trustee of the RS Family Trust. 

41.In September 2006, RS Pty Ltd purchased a property at 2 MN Street, Suburb NO (“2 MN Street”) for the sum of $790,000.  RS Pty Ltd borrowed the majority of the funds from the St George Bank. 

42.In about 2007, the husband’s parents purchased 2 KL Street, LM Town (“2 KL Street”) for $110,000. 2 KL Street is an adjoining lot to KL Street and consists of 40 acres. The property was again purchased in the names of each of the husband’s parents and their three children as tenants-in-common in equal shares. The husband, Mr F Pesalaccio and Ms QQ Pesalaccio, again, did not contribute any monies towards the purchase or the maintenance of the property. 

43.On 28 May 2008, E Pty Ltd (“E”) was registered, the husband and Mr F Pesalaccio being its directors and shareholders.

44.On 11 June 2008, CC Group was registered with the husband and E Pty Ltd as the registered owners. 

45.From mid-2008, E Pty Ltd began conducting its business from the EF Street property. 

46.On 23 July 2008, Mr F Pesalaccio purchased the husband’s shares in E Pty Ltd and the husband ceased to be a director of E Pty Ltd. 

47.In July 2008, the husband’s company, DD Pty Ltd, began providing consultancy services to E Pty Ltd.

48.In about August 2008, the husband’s mother purchased the husband’s father’s interest in the EF Street property for $222,500. At around the same time, the husband’s mother also purchased the husband’s father’s interest in the MN Street property for the sum of $550,000. 

49.On 14 October 2008, D Pty Ltd entered into a supply agreement with E trading as CC Group. E Pty Ltd’s obligations to D Pty Ltd under a Supply Agreement were secured by registered charge on 1 May 2009. 

50.In 2008, the Pesalaccio Family Trust (“the Pesalaccio Family Trust”) was established by deed between Mr TU as settlor and Pesalaccio Pty Ltd as trustee. The original appointors of the Pesalaccio Family Trust were the husband, the wife and their daughter H. On 1 October 2008, at a directors meeting of Pesalaccio Pty Ltd, it was resolved that:

(a)Pesalaccio Pty Ltd agrees to act as trustee of the Pesalaccio Family Trust; 

(b)Pesalaccio Pty Ltd holds as trustee on behalf of the Pesalaccio Family Trust a one-half interest in the property known as L Street, Suburb M; and

(c)Pesalaccio Pty Ltd is authorised to sign all documents and enter into all contracts in order to acquire a 50 per cent interest in the property at L Street, Suburb M as trustee for and on behalf of the Pesalaccio Family Trust.

51.On 15 October 2008, the husband and the wife transferred the husband’s interest in the Suburb O property to Pesalaccio Pty Ltd.  On the same day, the husband and the wife transferred L Street, Suburb M as joint tenants to Pesalaccio Pty Ltd and the wife as tenants-in-common in equal shares.

52.In approximately November 2008, the husband transferred his interest in 1 and 2 KL Street to Pesalaccio Pty Ltd as trustee for the Pesalaccio Family Trust. At around the same time, the husband’s father transferred his interest in the same KL Street Lots to RS Pty Ltd as trustee for the RS Family Trust (“RS”). 

53.On 8 November 2008, Pesalaccio Pty Ltd, as trustee for the Pesalaccio Family Trust, purchased a property at UV Street, Suburb PQ. 

54.In July 2009, D Pty Ltd purchased VW Street, Suburb WX (“the Suburb WX property”) for $1,320,000.  D Pty Ltd borrowed money from the bank for the purchase with the balance coming from funds held by D Pty Ltd. 

55.On 28 August 2009, the husband’s mother became the sole director of RS Pty Ltd. In about 2009, she purchased the interest held by the husband’s father and D Pty Ltd in the Suburb PQ property. 

56.In early 2010, RS Pty Ltd purchased the property at XY Street, Suburb YZ (“the XY Street property”) for $700,000. 

57.In 2010, the house on the Suburb PQ property was demolished and a new family home was constructed for the husband’s parents. 

58.On 15 November 2010, a Deed of Variation to the trust deed for the Pesalaccio Family Trust was signed.  This deed provides for the husband’s appointment as trustee of the Pesalaccio Family Trust, the resignation of Pesalaccio Pty Ltd as trustee and the resignation of the wife and H as appointors of the Pesalaccio Family Trust. Pesalaccio Pty Ltd transferred its interest in L Street, Suburb M to the husband at around this time on the basis that the beneficial interest in L Street, Suburb M remained with the Pesalaccio Family Trust. 

59.On 29 June 2011, ZA Pty Ltd was registered, the husband’s mother being its director. This was to be an entity that D Pty Ltd could use to lease and sell its equipment to third parties including to the CC Group. 

60.In mid-2011, D Pty Ltd purchased AC Street, Suburb BD (“the Suburb BD property”) for $4,805,000.  The majority of the purchase monies were borrowed from FI Bank. 

61.As indicated above, the husband and the wife separated on 24 January 2012. 

62.In about 2012, CC Group moved offices from the EF Street property to its current premises at the Suburb GG property. 

63.On 18 June 2012, the husband’s father filed for voluntary bankruptcy due to an investment in CE Pty Ltd. 

64.On 26 June 2012, B Pty Ltd was registered, the husband’s mother being its sole director and shareholder. 

65.On 1 July 2012, E Pty Ltd trading as CC Group entered into a commercial lease to lease part of the Suburb GG property from D Pty Ltd.

66.In 2012, B Pty Ltd entered into a joint venture with DG Europe (“DG Europe”) to conduct an importing business to be known as DG Australia Pty Ltd (“DG Australia”). On 5 July 2012, DG Australia Pty Ltd was registered, the directors being Ms DG and the husband.  The husband’s mother had appointed the husband as E Pty Ltd’s representative on the board of DG Australia. The husband retained this role for six months then his mother undertook this directorship. 

67.In 2012, Mr AA, Ms QQ Pesalaccio’s fiancé, commenced working as a consultant at E Pty Ltd, D Pty Ltd and DG Australia. 

68.On 6 May 2013, the husband received a Director’s Penalty Notice from the Australian Taxation Office demanding payment for liabilities for CC Pty Ltd of which he was a director at the relevant time. On 17 May 2013, D Pty Ltd entered into a loan agreement with the husband to lend him the sum of $1,500,000 in order for him to pay the amount due.  I note that there is an issue about whether any part of the loan is outstanding. 

69.In August or September 2013, DG Australia leased a unit at Suburb Y. The husband’s mother said that this was for the purpose of having it available for staff, contractors or guests from DG Europe to stay whenever they visited Australia. The husband has lived in this property.  Again, I note that there is some issue about the circumstances of this. 

70.In late 2013, the husband’s mother purchased a property at 3 MN Street, Suburb NO (“the 3 MN Street property”). This property is the adjoining property to the MN Street property. This purchase was financed through a mortgage with the ANZ Bank. 

71.In early 2014, B Pty Ltd purchased an investment property at EH Street, Suburb DE (“the EH Street property”) for the sum of $5 million. The majority of funds were borrowed from FI Bank. 

72.On 25 March 2014, C Pty Ltd was registered with Mr F Pesalaccio being its director.  

73.On 24 June 2014, the wife appointed a liquidator in respect of Pesalaccio Pty Ltd in her capacity as its sole member. 

74.In about June 2014, the wife engaged a real estate agent to sell the Suburb O property. 

75.In late 2014, D Pty Ltd won a raffle and received a 14-foot aluminium dinghy.  A short time later, in January 2015, a boat was purchased in the name of the husband’s mother for $365,000. 

76.As I have said, on 21 December 2014, the parties were divorced. 

77.On 19 June 2015, the husband’s father was discharged from bankruptcy. 

78.In early 2016, B Pty Ltd purchased GJ Street, Suburb HK (“the GJ Street property”) for $3,350,000. B Pty Ltd borrowed the majority of the funds from the FI Bank and the remainder was derived from the resources of B Pty Ltd.

79.In early 2016, the property at S Street, Suburb T (“the Suburb T property”) was purchased by B Pty Ltd for $6,510,000.  Subsequently, the contract entered into at the auction was rescinded and a new contract was entered into whereby the husband’s mother held 75 per cent of the Suburb T property in her name and 25 per cent was held in the name of B Pty Ltd. B Pty Ltd and the husband’s mother borrowed $4,800,000 from the National Australia Bank with the balance obtained from the husband’s mother’s savings and resources of B Pty Ltd.  Prior to the purchase, the husband contacted the bank to ascertain how much could be borrowed to purchase the property.  Prior to the auction, the husband spoke to the architect who was working on the GJ Street property to ascertain what could be done in relation to subdividing the Suburb T property. The husband’s parents, together with Mr F Pesalaccio and the husband, all attended the auction. The husband made subsequent enquiries with an architect in relation to development proposals for the Suburb T property. 

80.On 30 August 2016, B Pty Ltd sold its 60 per cent interest in DG Australia to DG Europe. DG Europe now has total control of DG Australia. 

History of the proceedings

81.On 3 July 2012 the wife commenced these proceedings in the Federal Circuit Court of Australia seeking orders in relation to property division and maintenance. 

82.On 27 August 2012 the proceedings were transferred to this Court. 

83.On 3 March 2014, it was noted by the Court that “the wife has foreshadowed joining the husband’s parents as parties to these proceedings”.

84.On 29 April 2014 the wife was ordered to file and serve a Further Amended Initiating Application naming the husband’s parents and relevant entities as parties to the proceedings within seven days. 

85.On 6 September 2016, the wife filed an Application in the Case seeking that an order be made ex-parte permitting a search party to enter the premises of the respondents to seize computer files and hardware of the respondents. 

86.On 7 September 2016, Anton Piller orders were made ex-parte in favour of the wife for the seizure of any computer files or hardware from the premises of Ms Pesalaccio or B Pty Ltd or C Pty Ltd or D Pty Ltd or DG Pty Ltd or E Pty Ltd at FF Street, Suburb GG.

87.On 2 December 2016, as I have said, the husband filed his Amended Response to an Application in a Case seeking that the Anton Piller orders be discharged nunc pro tunc and that any material obtained by the wife as a result of the Anton Piller orders be returned and any copies deleted.

88.On 5 December 2016, an Amended Response to an Application in the Case was filed by the respondents, as I have also referred to above. 

89.On 2 and 3 February 2017, the matter came before the Court for an interim hearing in relation to the Anton Piller orders previously made. The wife was cross-examined and judgment in relation to the Anton Piller orders was reserved. 

90.On 15 March 2017, the respondents filed an Application in a Case seeking leave to re-open their case in relation to both evidence and submissions in support of the Amended Response filed by the respondents on 5 December 2016.

91.On 20 March 2017, the wife filed an Application in a Case seeking that she be permitted to re-open her case in the interlocutory proceedings. 

92.On 2 November 2017, orders were made vacating and discharging the Anton Piller orders nunc pro tunc. 

93.As indicated above, on 19 January 2018, judgment was reserved in relation to the summary dismissal application and the respondents’ application for orders concerning confidentiality, legal professional privilege and costs of the Anton Piller proceedings was adjourned part-heard to 18 June 2018. It was ordered that the wife file and serve further affidavits on which she relies together with written submissions no later than 30 April 2018. In fact, the wife’s written submissions were received on 17 May 2018. They were not confined to the application for restraints of the wife for breach of confidence, but, rather, they seek to make further submissions in relation to the strikeout/summary dismissal application. This is not within the directions made and the hearing of the summary dismissal application concluded on 19 January 2018 on the material filed and submissions made at that time. Notwithstanding the application and submissions by senior counsel for the wife to re‑open that matter, I indicated that I propose not to do so.

Substantive orders sought by wife against the respondents

94.The orders which the respondents are seeking to have summarily dismissed are as included in the wife’s Further Amended Initiating Application filed on 7 September 2016 at paragraphs 4, 5 and 6 as follows:

4.        That the Husband be declared the owner of the following companies:

a)        B Pty Ltd ACN …

b)        C Pty Ltd ACN …

c)        D Pty Ltd ACN …

d)        E Pty Ltd ACN …

5.That within 42 days of final orders being made, the Second Respondent and the Seventh Respondent transfer their shares in the entities identified at order 4 above to the Husband.

6.That within 42 days, the Second Respondent and the Seventh Respondent do all acts and things including sign all documents necessary to resign as Secretary and/or Director of the entities identified at order 4 above in favour of the Husband and that the Husband sign all documents necessary to become appointed as Director and/or Secretary in substitution for the Second Respondent and the Seventh Respondent.

Submissions

95.The respondents made the following submissions:

(a)The wife has had ample opportunity to put forward whatever evidence necessary to try and make an arguable case against the respondents.  She has been on notice of the strikeout and summary dismissal applications since 5 December 2016.

(b)The wife’s senior counsel conceded in cross‑examination that the husband had made no financial contribution to any of the respondent corporations or to the acquisition of any of the properties owned by any of the respondents. 

(c)The evidence demonstrates that the husband’s mother, D Pty Ltd or B Pty Ltd provided the money for the purchase of each of the relevant properties. The husband has never made any contributions to his parents’ property including contributions to any of the mortgages over those properties.

(d)There is no substance in law or in fact of the relief sought by the wife in which she seeks a declaration that the husband is the owner of B Pty Ltd, C Pty Ltd and D Pty Ltd and E Pty Ltd. The husband is not the owner of those companies and does not and cannot control his mother and father and brother’s decisions about what to do with their assets.

(e)The wife does not make any allegation in the proceedings to the effect that the husband has any legal or equitable interest in respect of any of the relevant properties.

(f)The assets of the family companies do not fall within the definition of “property” in subsection 4(1) of the Family Law Act 1975 (Cth) (“The Act”).

(g)The wife put her application for the Anton Piller order on the basis that the husband had engaged in sham transactions.  The wife subsequently abandoned that claim.

96.The husband adopted the submissions of the respondents. In addition, his counsel submitted that the wife’s pursuit of a case against the respondents has been obsessive and that her case is not sustainable in law. It was submitted that it is not the case that the husband has a proprietary interest in the assets of the husband’s mother or brother and it was submitted puppetry or control does not give a proprietary interest.

97.The following submissions were made on behalf of the wife:

(a)The respondents’ summary dismissal application proceeds on a false basis. It assumes that the wife could never sustain any form of actionable case against the respondents. As commonly occurs in complex property disputes before this Court (such as this proceeding), one party seeks relief for property settlement from a deprived footing.  That party may be possessed of relatively limited or modest information in respect of the financial affairs of the other party (which may include modest information about others such as corporate entities and persons who may properly and sensibly be regarded as potential and necessary parties to the proceedings). In these circumstances, the Court is well familiar with the prospect that such a party will be required to build her or his case through interlocutory steps such as the provision of financial disclosure and discovery. That such a party may not be able to articulate perfectly or sufficiently precisely, his or her case prior to the provision of disclosure and/or discovery is unsurprising. Any such failure is not, the wife submits, a proper or sound basis upon which to strikeout his or her claim for property settlement. Any such party may, however, be directed to file a more precisely formulated claim after the provision of disclosure, discovery or other necessary interlocutory steps.

(b)The written submissions provided by the respondents were provided shortly before the trial. They are voluminous and it would be a denial of natural justice to not permit the wife time to digest the submissions of the respondents. It was further submitted that some of the matters put forward in the submissions were raised for the first time in these submissions.

(c)Following the outcome of the Anton Piller application, the normal course would be to permit the wife to re plead her case by providing additional points of claim when the usual discovery processes and subpoena processes have been effected.

(d)There is a claim that the property of the husband and wife is subject to debts due to the respondents which exceed $3 million. It would be entirely inappropriate to preclude the wife from joining these entities as parties to the proceedings in these circumstances. 

(e)Precluding the wife from joining the parties to the proceedings at this stage would almost certainly impact any process that the wife might seek to commence to obtain information from these individuals and entities.

(f)It was submitted that it is apparent that the use of strikeout is something that should be sparingly used. Until the wife has the opportunity to pursue in a proper, effective and speedy fashion the process of building her case, it would be inappropriate. Consideration should be given to General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 (“General Steel Industries”) where it was determined that access to a tribunal should not be denied unless there is a lack of cause of action. The lack of a cause of action is only something that can be determined when the applicant has been able to pursue the full gamut of discovery. It was submitted that even if the Court was to determine that the case in its present form should not stand, it would be appropriate to allow the wife to resubmit points of claim.

The wife’s case

98.The wife’s contention is that the companies in respect of which she seeks declarations, namely B Pty Ltd, D Pty Ltd, C Pty Ltd and E Pty Ltd are in reality the puppets or alter ego of the husband.

99.In the matter of Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337, the High Court of Australia discussed the power of the Court to make orders binding third parties. Within his judgment, Gibbs J stated at page 354 that:

It can safely be assumed that the Parliament intended that the powers of the Family Court should be wide enough to prevent either of the parties to a marriage from evading his or her obligations to the other party, but it does not follow that the Parliament intended that the legitimate interests of third parties should be subordinated to the interests of a party to a marriage, or that the Family Court should be able to make orders that would operate to the detriment of third parties.

100.And his Honour goes on to say at page 354:

The position is, I think, different if the alleged rights, powers or privileges of the third party are only a sham and have been brought into being, in appearance rather than reality, as a device to assist one party to evade his or her obligations under the Act. Sham transactions may always be disregarded. Similarly, if a company is completely controlled by one party to a marriage, so that in reality an order against the company is an order against the party, the fact that in form the order appears to affect the rights of the company may not necessarily invalidate it.

Except in the case of shams, and companies that are mere puppets of a party to the marriage, the Family Court must take the property of a party to the marriage as it finds it.

Summary dismissal

101.The process for making an application for summary dismissal is set out in rule 10.12 of the Family Law Rules 2004 (Cth) (“the Rules”). Rule 10.12 is as follows:

A party may apply for summary orders after a response has been filed if the party claims, in relation to the application or response, that:

(a)the court has no jurisdiction;

(b)the other party has no legal capacity to apply for the orders sought;

(c)it is frivolous, vexatious or an abuse of process; or

(d)there is no reasonable likelihood of success.

102.Rule 10.14 of the Rules provides that upon application, the Court may:

(a)dismiss any part of the case;

(b)decide an issue;

(c)make a final order on any issue;

(d)order a hearing about an issue or fact; or

(e)with the consent of the parties, order arbitration about the case or a part of the case.

Note:  This list does not limit the powers of the court. The court may make orders on an application, or on its own initiative (see rule 1.10).

103.In Lindon v Commonwealth (No 2) (1996) 136 ALR 251 (“Lindon”), the following was held in relation to summary dismissal applications at page 256 by Kirby J:

(1)It is a serious matter to deprive a person of access to the courts of law for it is there that the rule of law is upheld including against government and other powerful interests. This is why relief, whether under [a particular rule] or in the inherent jurisdiction of the court, is rarely and sparingly provided.

(2)To secure such relief, the party seeking is must show that it is clear, on the face of the opponent’s documents, that the opponent lacks a reasonable cause of action, or is advancing a claim that is clearly frivolous or vexatious.

(3)An opinion of the court that a case appears weak and such that it is unlikely to succeed is not, alone, sufficient to warrant summary termination. Even a weak case is entitled to the time of a court.  Experience teaches that the concentration of attention, elaborated evidence and argument and extended time for reflection will sometimes turn an apparently unpromising cause into a successful judgment.

(4)Summary relief of the kind provided for by [the relevant rule] for absence of a reasonable cause of action, is not a substitute for proceeding by way of demurrer.  If there is a serious legal question to be determined, it should ordinarily be determined at a trial for the proof of facts may sometimes assist the judicial mind to understand and apply the law that is invoked and to do so in circumstances more conducive to deciding a real case involving actual litigants rather than one determined on imagined or assumed facts.

(5)If, notwithstanding the defects of [the] pleadings, it appears that a party may have a reasonable cause of action which it has failed to put in proper form, a court will ordinarily allow that party to reframe its pleading. A question has arisen as to whether [the relevant rule] applies to part only of a pleading. However, it is unnecessary in this case to consider that question because the Commonwealth’s attack was upon the entirety of Mr Lindon’s statement of claim.

(6)The guiding principle is, as stated in [the relevant rule], doing what is just. If it is clear that proceedings within the concept of the pleading under scrutiny are doomed to fail, the court should dismiss the action to protect the defendant from being further troubled, to save the plaintiff from further costs and disappointment and to relieve the court of the burden of further wasted time which could be devoted to the determination of claims which have legal merit.

104.The question of summary dismissal in a family law matter was further considered by the Full Court in the matter of Gitane & Velacruz (2007) FLC 93‑309. In this matter, Kay J referred at 81,314 to the decision of Bigg v Suzi (1998) FLC 92‑799, and provided a summary of Lindon as follows:

(1)that relief for summary dismissal is rarely and sparingly provided;

(2)that it is only available if it is clear on the face of the documents of the person asserting a cause of action that there is no reasonable cause of action or that it is a frivolous or vexatious one;

(3)that it is not enough to attain summary dismissal to show that it is a weak case;

(4)that there is a defect in the pleading and it appears that the party still has a reasonable cause of action, the Court will allow the party to reframe its pleading; and

(5)that one only summarily dismisses if it is clear that the case is doomed to fail.

105.In the case of Friar & Friar [2011] FamCAFC 71, it was held that rule 10.12 is to be read as supplementing the power of the Court to dismiss frivolous and vexatious proceedings pursuant to subsection 118(1) of the Act. In this case, Thackray and Watts JJ also refer to General Steel Industries stating at [53] that:

Regardless of the formulation, “exceptional caution” must be used in applications for summary dismissal and the power should be sparingly employed. [Reference is made to General Steel Industries]

106.In the case of Ebner & Pappas [2014] FamCAFC 229 (“Ebner”), at [59], the Full Court stated that the phrase “no reasonable likelihood of success” is of a relatively recent origin in relation to the test to be applied to summary dismissal. The Full Court referred to the decision in Bretton & Bondai [2013] FamCAFC 168 where Finn, Strickland and May JJ considered that this phrase is a conceptually different test to the “doomed to fail” test discussed in previous case law.

107.In Ebner, the Full Court referred to the matter of Spencer v Commonwealth of Australia (2010) 241 CLR 118 (“Spencer”) which referred to a Federal Court rule in similar terms to rule 10.12. It was stated at [56] in Spencer:

Because s 31A(3) provides that certainty of failure (“hopeless” or “bound to fail”) need not be demonstrated in order to show that a plaintiff has no reasonable prospect of prosecuting an action, it is evident that s 31A is to be understood as requiring a different enquiry from that which had to be made under earlier procedural regimes. It follows, of course, that it is dangerous to seek to elucidate the meaning of the statutory expression “no reasonable prospect of successfully prosecuting the proceeding” by reference to what is said in those earlier cases.

108.The matter of Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158 was also referred to in Ebner. The Full Court identified that at the time of this judgment by the Victorian Court of Appeal the relevant legislative test in Victoria was “no real prospect of success”. At [27] and [35], it was stated:

…whatever might be the practical effect of the new test, it is difficult to disagree…that it should be applied by reference to its own language, without paraphrase or comparison with the previous rule, always bearing in mind the principle that the power to award summary judgment is only to be exercised with caution and, therefore, not unless it is clear that there is no real question to be tried.

…

Upon the present state of authority:

(a)the test for summary judgment under [the relevant provision] of the Civil Procedure Act 2010 is whether the respondent to the application for summary judgment has a ‘real’ as opposed to a ‘fanciful’ chance of success;

(b)the test is to be applied by reference to its own language and without paraphrase or comparison with the ‘hopeless’ or ‘bound to fail test’ essayed in General Steel;

(c)it should be understood, however, that the test is to some degree a more liberal test than the ‘hopeless’ or ‘bound to fail’ test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent’s case is not hopeless or bound to fail, it does not have a real prospect of success;

(d)at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried;  and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.

109.The discussion in Ebner suggests that the test for “reasonable likelihood of success” is less strict than the test for “bound to fail”.  This was discussed recently in Sarai & Talwar (2018) FamCAFC 22 where Aldridge J held at [9]:

The words “no reasonable prospect of success” are very similar to the words “no reasonable likelihood of success” which appear in r 10.12 of the Family Law Rules 2004 (Cth). That rule was the subject of a significant discussion in Ebner & Pappas (2014) FLC 93-619 (“Ebner”) at [56]-[63]. It is clear that this test is less stringent than the former “doomed to fail” test. However, as the Court did in Ebner, it is still important to note the comments of Kirby J in Lindon v Commonwealth (No. 2)[1996] HCA 14; (1996) 136 ALR 251 (“Lindon”) at 256 in relation to the caution that must be attached to cases involving summary dismissal.

The wife’s evidence

110.Now the wife in support of her application for the Anton Piller orders asserted that she had evidence which demonstrated that the husband had purchased a waterfront home for $6.51 million in the name of his mother and his mother’s company.  The wife also asserted that the husband had purchased a luxury boat for $365,000 in the name of his mother, the second respondent. The waterfront home is the property at S Street, Suburb T to which I have already referred which was purchased on 28 May 2016. As I have said, the registered proprietor is the husband’s mother and her company, B Pty Ltd.

111.The evidence which formed the basis of the wife’s assertions was contained in numerous emails.  The admissibility of the evidence supporting the wife’s case in these proceedings is very much in issue, but if ultimately admitted in the substantive proceedings, it would appear to demonstrate that:

(a)It was the husband who dealt with the agent selling the property and also with the solicitor who acted on the purchase, which included the solicitor requesting the husband to arrange settlement cheques and ultimately forwarding the settlement statement to the husband;

(b)That the husband contacted an architect, by email indicating that he was “searching for an architect to assist in designing my family home in Suburb T” and forwarding a sketch and photos;

(c)That the husband sent an email to another architect, which included: “As mentioned, my wife, would like the house to have hotel like features - our preferred style is elegant, glamorous whilst remaining clean and crisp”;

(d)That the husband sent an email to a further architect forwarding a survey and saying: “…it will be our intention to renovate the existing residence and keep it as a semi independent residence that we can rent out and then utilise as “in law accommodation” or separate accommodation for our children when they grow up…”. These architects reported to the husband, including a fees proposal and a draft “Client Architect Agreement” naming the husband as the client;

(e)That the husband approached a crane hire company which subsequently provided a quotation for crane installation and hire for the site at the Suburb T property;

(f)That the husband arranged a bank loan with the National Australia Bank of approximately $4.775 million to assist with funding the purchase and appears to have become the contact for the National Australia Bank with respect to securing the loan; and

(g)That the husband had arranged for the purchase of a $365,000 boat, the registered owner being his mother. The emails demonstrate that he negotiated the purchase price, the funding, arrangements to store the boat, instructions for its maintenance, application for its registration and that he used the boat. An email of complaint to the dealer who sold it appears to present the husband as the owner from the following:

…I have taken this boat out 5-6 times … I have encountered problems with it … I paid a premium … but it seems that this is not living up to what was sold to me…

112.The wife also said that the fact that the husband moved into the Suburb Y apartment was contrary to depositions in his affidavit filed on 17 November 2014 where he said that since separation in January 2012, he had resided at his parents’ home at Suburb PQ. The wife also said that the husband sought to disguise his residence at the property by arranging for the lease to be entered into by his mother’s company, DG Pty Ltd, and she attached a copy of an email in relation to that matter. In relation to the apartment, the wife deposed to the husband occupying that apartment leased by his mother’s company. She asserted that in reality the apartment was the husband’s home and leased for his occupation. The wife pointed to an email sent to the husband on 19 May 2014 from the husband’s brother‑in‑law, Mr AA, who undertakes accountancy work for D Pty Ltd which informed the husband that rental payments were in arrears and said: “[Mr Pesalaccio], Please pay your rent…”

113.And the wife also points to email messages which indicate that the husband negotiated with the firm of accountants, BB, to provide accounting services for the Pesalaccio group of companies and members of the Pesalaccio family.

114.In her points of claim filed on 31 January 2017, the wife asserts that the husband has applied, for his own benefit, substantial sums of money which are owed by CC Pty Ltd to D Pty Ltd.  The wife also asserts that at the husband’s direction a motor vehicle was provided to the wife at no cost to her by D Pty Ltd.  I am not aware of evidence in proper form being before the Court in respect of these assertions.

115.The respondents have filed affidavits which put these matters, which I have referred to, in issue.

116.It is submitted on behalf of the wife that it would be just for the Court to permit her the opportunity, through the normal processes of discovery and disclosure, to build her substantive case.

Conclusion

117.I accept that the wife has conceded that the husband has not made a payment for acquisition of properties owned by the companies or to mortgages thereon.  And the wife does not assert that the husband has a legal or equitable interest in relevant properties.  But the wife contends that the companies are the puppets or alter egos of the husband and points to some, admittedly limited, evidence in support of her contentions.

118.What is apparent is that the respondent companies form part of the somewhat complex structure of family companies. The husband appears to occupy a prominent position in operating this business. The wife contends that it is his business in reality. In my view, there is a real question to be tried, namely whether one or more of the respondent companies is the puppet or alter ego of the husband.

119.On the basis of the above authorities, in my view, the law requires that the wife be permitted to continue her proceedings against the respondents and that her application for orders against them not be summarily dismissed. Accordingly, I propose to dismiss the summary dismissal application.

I certify that the preceding one-hundred and nineteen (119) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Johnston delivered on 18 June 2018.

Associate

Date: