VAIL & SARGENT
[2013] FMCAfam 78
•4 February 2013
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| VAIL & SARGENT | [2013] FMCAfam 78 |
| FAMILY LAW – Property – Husband’s application for summary dismissal of Wife’s application – Wife’s application for property settlement has no reasonable prospects of success and is summarily dismissed. |
| Family Law Act 1975, s.75(2) Federal Magistrates Court Rules 2001, r.13.10 |
| Lindon v Commonwealth (No 2) (1996) 136 ALR 251 at 256 McDonald & Sandler [2012] FamCAFC 191 |
| Applicant: | MR VAIL |
| Respondent: | MS SARGENT |
| File Number: | BRC 9301 of 2010 |
| Judgment of: | Baumann FM |
| Hearing date: | 23 November 2012 |
| Date of Last Submission: | 23 November 2012 |
| Delivered at: | Brisbane |
| Delivered on: | 4 February 2013 |
REPRESENTATION
| Counsel for the Applicant: | Ms Ogge |
| Solicitors for the Applicant: | Chan Legal |
| Solicitor for the Respondent: | Mr McCarthy |
| Solicitors for the Respondent: | K L Legal |
ORDERS
The Husband’s application filed 22 October 2012 for summary dismissal of the Wife’s application for property filed 6 January 2012 is granted.
The Wife’s application filed 6 January 2012 is dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Vail & Sargent is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRC 9301 of 2010
| MR VAIL |
Applicant
And
| MS SARGENT |
Respondent
REASONS FOR JUDGMENT
In January 2012, the Wife, Ms Sargent commenced proceedings for property settlement in this Court, seeking an order that she receive “65% of the net assets” of the parties. As early as 20 April 2012, the Husband, Mr Vail, by the Response then filed, claims the Wife should receive nothing.
The evidence is that the relationship was of short duration between these two mature aged parties – the Wife currently being 50 years of age and of Russian ethnicity, whilst the Husband is 55 years of age and born in Australia. It is accepted that the parties met on the internet whilst the Wife was living in Kazakhstan with the Wife arriving in Australia in June 2006 (with her 9 year old son [Y]), on a Prospective Wife Visa. The parties married on [date omitted] 2006.
In March 2009, the Wife’s eldest child [X], a former medical student, arrived in Australia and the Wife, [X] and [Y] were successful in obtaining Australian Residency, sponsored by the Husband. Within weeks thereafter, the relationship ended and the Wife and her children left the home then occupied with the Husband in August 2009. Both parties agree separation actually occurred on 26 June 2009, however the parties remained separated under the one roof until 14 August 2009.
The Wife asserted the Husband had been domestically violent towards her, and on 13 October 2009, the Wife obtained a Protection Order against the Husband. The Husband denies he committed family violence and says the order was made “without admissions”.
On 22 October 2012, the Husband filed an application seeking an order that the Wife’s application for property settlement be summarily dismissed. The Wife opposes the application, effectively seeking the right to continue to pursue her application to finality. Before considering the principles to be applied in an application of this nature, it is helpful to provide in this case, a history of the proceedings.
Procedural history
This matter has remained in my docket since the first Court date on 20 March 2012. The events and orders of relevance are:-
a)20 March 2012 – As the Husband had not filed a Response with supporting affidavit and Financial Statement, he was ordered to do so. The Wife was represented by her solicitor Ms O’Leary. Orders for mutual discovery were made, with the Husband specifically directed to produce financial statements for the business known as “[S]” for the period since 30 June 2009. The Husband filed his material on 20 April 2012.
b)30 April 2012 – On this adjourned date, the Court heard that the Wife asserted a lack of discovery by the Husband. The Husband, at this early stage of the proceedings, asserted there was no matrimonial pool of assets. Clearly, the Wife did not agree and very specific discovery was ordered. The order identified the Court’s concern as to the costs that could be incurred in valuing the Husband’s interest in the business, if, as he asserted, it had minimal value.
c)20 June 2012 – On this occasion, the Court was informed that full discovery had been completed. The Husband’s interest (with his former wife) in a home at [omitted], had been independently valued by [omitted] and their assessment was accepted. Importantly, the Court was informed by the parties’ legal representatives, and the order duly noted, that “the parties accept that the business ‘[S]’ has no current intrinsic value”. The Court was informed that the business had no net maintainable earnings which could be capitalised. It was accepted by the Husband he was receiving an income from the business, which his Financial Statement filed 20 April 2012 estimated to be $885 (gross) per week. The parties were ordered to attend a conciliation conference with a Registrar, which occurred on 13 July 2012. No agreement was reached at that conference.
d)19 July 2012 – The solicitor for the Wife informed the Court that she needed further time to obtain her client’s instructions as her client did not accept, as the Husband had continued to assert, there was no divisible pool of assets. An adjournment was granted to 16 August 2012.
e)16 August 2012 – The Wife’s solicitor, Ms O’Leary, informed the Court that she was still not able to detail her client’s claim. The Court expressed concern that listing the matter for a hearing in these circumstances, was likely to incur the parties in more costs. The uncertainty of the Wife’s position on that occasion caused the Court to order, inter alia:-
“2.The Wife file and serve by 19 September 2012 an exact minute of the final order, articulating with certainty, the relief she is seeking.
3.The Respondent Husband’s costs of today be reserved.”
The matter was adjourned to 26 September 2012.
f)26 September 2012 – The solicitor on the record for the Wife, sought leave to withdraw. A number of orders were made as follows:-
“1.This matter be adjourned to 9.30am on 5 November 2012 in the Federal Magistrates Court of Australia at Brisbane.
2.The solicitor on the record for the Applicant be given leave to withdraw from these proceedings.
3.Any application by the Respondent Husband seeking an order that the Wife’s property application be dismissed summarily be filed and served within fourteen (14) days.
4.The Wife file and serve any response to such application supported by affidavit within fourteen (14) days after service thereof.
5.The costs of the Husband of today be reserved.
NOTATION:
The solicitor on the record for the Applicant Wife informed the Court today that she was unable to obtain instructions from the Applicant so as to enable her to comply with the order made 16 August 2012 to articulate an exact final minute of order in these proceedings.”
As the Wife was, at that stage unrepresented, a Russian interpreter was booked, at the cost of the Court for the adjourned hearing on 5 November 2012. The Husband filed an application for summary dismissal on 22 October 2012 – which was outside the time limit imposed by the order (of 14 days).
g)5 November 2012 – The Wife appeared on her own behalf, with an interpreter, having filed a self-prepared Response on 30 October 2012 supported by affidavit. On the same day, the Wife was given leave to file a further affidavit, prepared by a new solicitor recently retained. The Court indicated that as the Wife was ill-prepared on that date to argue against the application for summary dismissal, one further (and last) adjournment would be granted. The Wife intimated she would have a solicitor representing her on the adjourned date of 23 November 2012. On 7 November 2012, the firm of Chan Lawyers filed a Notice of Address for Service. The Court also notes that between 30 October 2012 and 7 November 2012, nine subpoena were filed by the Wife. On 23 November 2012 she did not tender or seek to rely upon any subpoenaed documents.
h)23 November 2012 – The parties appeared and the application for summary dismissal was argued by Mr McCarthy, solicitor for the Husband and Ms Ogge, solicitor for the Respondent Wife. No written submissions were offered to the Court. It is important, on the basis of the authorities which reveal that the Court should take the Respondent’s evidence at its highest in an application like this, to note that the parties relied upon:-
i)The Wife relied upon Affidavits filed 30 October 2012; 5 November 2012; 23 November 2012. The affidavit filed (by leave) on 23 November 2012 attached a purported valuation by an accountant Mr C dated 20 November 2012. The valuation of Mr C was not confirmed by any affidavit sworn by the expert.
ii)The Husband relied upon two affidavits filed on 22 November 2012 and 23 November 2012 and a further affidavit by the solicitor for the Husband Mr Nigel Blundell which attached numerous items of correspondence passing between the Husband’s solicitors and the Wife’s new solicitors.
Principles
Rule 13.10 of the Federal Magistrates Court Rules 2001 provides:
“The Court may order that a proceeding be stayed, or dismissed generally or in relation to any claim for relief in the proceeding, if the Court is satisfied that:
(a)the party prosecuting the proceeding or claim for relief has no reasonable prospect of successfully prosecuting the proceeding or claim; or
(b)the proceeding or claim for relief is frivolous or vexatious; or
(c) the proceeding or claim for relief is an abuse of the process of the Court.
Note For additional powers of the Court in relation to family law proceedings that are frivolous or vexatious, see section 118 of the Family Law Act.”
It has been noted in other authority, that this Rule reflects the common law principles which emerge from the authorities, and most recently in this jurisdiction, Coleman J in McDonald & Sandler [2012] FamCAFC 191 (sitting as the Full Court), set out the test which governs applications for summary dismissal, relying upon and recording the remarks of Kirby J in Lindon v Commonwealth (No 2) (1996) 136 ALR 251 at 256 that:-
“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 O 26, r 18 or in the inherent jurisdiction of the court, is rarely and sparingly provided.
2.To secure such relief, the party seeking it 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 O 26, r 18, 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 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 O 26, r 18 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 O 26, r 18(2), 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. (Footnotes omitted)”
Cleary, the bar is set high for the Applicant Husband.
The Respondent Wife’s case
It is clear form the Wife’s material that her case relies heavily upon the existence of some value in the Husband’s interest in the [S] business. I do not discount the possibility that when the parties first met on the internet in 2005 and after the Wife moved to Australia to begin a new life for herself and also her two children, that the Husband’s financial position might have been portrayed by him as financially stronger than he now says it is.
The Wife claims the pool of assets is $91,833, relying upon the valuation for the Husband’s business interest of $110,700. Ms Ogge now says (contrary to the Wife’s application filed 6 January 2012), that the Wife is entitled to at least 35% of the pool – which would be calculated to be approximately $30,000. The Wife relies heavily upon the “evidence” of Mr C. The Wife’s claim for a 35% share of the pool must be seen in the light of the facts, not in dispute that:-
a)The Husband contributed funds exceeding $40,000 towards the Wife’s costs of applying to reside in Australia and to come here – acknowledging that $27,916 was paid before the Wife arrived.
b)The Husband contributed funds to the travel of [X].
c)At the commencement of cohabitation, all assets of any significance were owned by the Husband – including his interest in the business and the interest in the former matrimonial home owned with his first wife. The valuation of the home, after allowance for the mortgage, reveals no current equity.
d)During the short relationship in Australia of approximately three years until separation, the Wife was not employed and the overwhelming direct financial contributions were made by the Husband from his business.
e)The Husband used his funds to support the Wife’s children [Y] and [X].
f)There is a dispute as to the extent of the Wife’s non-financial contributions as a homemaker and to some minor renovations on the Husband’s property. Considering the length of the relationship and the need for the Wife to assist, quite understandably, her sons, even at its highest, these contributions are significantly outweighed by the Husband’s initial contributions and the direct financial contributions he made.
g)The Wife now has permanent residency in Australia and her last Financial Statement revealed an income from employment in [omitted] of $400 per week and Centrelink benefits by way of family payments and rent assistance of $295 per week. She retains the unit in Kazakhstan which she owned at the time of the marriage. Her estimate of its value is AUD$9,000. In circumstances where the Wife has made no claim for spousal maintenance (and in circumstances where the time to do so has elapsed without leave, considering the divorce became absolute on 7 January 2011), a significant adjustment under s.75(2) does not appear to exist, nor is it claimed.
As a result, the Wife’s claim to materialise in any payment in reality relies upon the Court ultimately finding there is some pool of assets to divide and that the Wife’s likely share will result in a payment to her.
Whilst I evaluate this matter further below, as Ms Ogge properly and sensibly acknowledged, the Wife’s case hinges largely on being able to establish that the Husband’s business has a value.
Report by Mr C
The Court is not assisted in this case by the failure of the Wife to:-
a)Have the report of Mr C affirmed by affidavit. Mr McCarthy properly argued that this should diminish the weight that could be applied to the opinion; and
b)Provide details of Mr C’s expertise, other than he claims to be a “CPA” or Certified Practising Accountant. The Court has no information about the experience Mr C has in forensically assessing and valuing businesses.
c)There is no competing valuation offered to the Court – including, for example, the evidence which was available to the parties prior to 20 June 2012, when the Husband and Wife both agreed that the business interest of the Husband had no intrinsic value.
Leaving aside, for a moment these reservations, the report of Mr C states broadly that:-
a)The future maintainable earnings method is the appropriate method to use for a valuation of the Husband’s interest in the business.
b)The average yearly operating profit for the previous five years is $160,000.
c)He would add back owners’ fair wages of $100,000.
d)On this basis the “net maintainable earnings” are $60,000 per annum to which an industry valuation multiplier between 1.13 to 3.69 should be applied.
e)On this basis, the business (as a whole) would have a valuation of between $67,800 to $221,400.
In this report, Mr C says, by way of business background that:-
“Business background
According to information provided by the Husband Mr Vail (Ms Sargent’s former husband), Mr Vail has for many years conducted an insurance broking business in partnership with his partners Mr H and Ms H. Upon the death of Mr H in 2010, Mr Vail purchased the 67% share of the former partner Mr H and Ms H’s share in the business for the sum of $230,000.”
Mr C does not indicate, in his report, whether he took into consideration the sale price of the two-thirds interest in the business, between these related parties, in determining his valuation.
I find it troubling that Mr C has:-
a)Adopted a fair wages for owners of $100,000 without any apparent analysis. The Trust Income Tax Return reveals, and the evidence before the Court confirms, that three people work in his business – the Husband, his former wife Ms J and his daughter Ms R. In the 2012 tax year distributions of income were made by the Trustee as follows:-
· [H] Family Trust $50,000
· Husband 47,796
· Ms J 47,795
· Ms R 47,795
$193,386
In the circumstances, the “wages” for the three persons working in the business, as paid by the business in the 2011/2012 year represented their distributions and totalled $143,386.
The Court cannot determine whether the figure adopted of $100,000 or the figure paid of $143,386 is correct for a reasonable remuneration for the three persons working in the business.
b)No explanation is offered as to in what circumstances the range of industry multiplier will apply. Not surprisingly, the Wife seems to adopt the higher figure (of 3.69%) to the best nme of $60,000 and then accepts the Husband’s interest to be 50% - getting a valuation of the Husband’s interest at $110,700.
Clearly, however, even if the Court accepted that figure, the Husband would be entitled to deduct the sum he claims to owe to his former partner of $89,449 – leaving at the very best the Husband having a “net interest”, on the Wife’s own figures of approximately $20,000.
Anything worse than the Wife’s best case scenario, significantly reduces the value of the Husband’s interest in the business at this time, for example:-
a)If the net maintainable earnings were as low as $17,000; or
b)The multiplier was the lower end of the range rather than the adopted higher end of the range.
On the basis of the Wife’s produced report, it is hard for the Court to discern any value for the Husband’s interest in the business in the region of $110,700 as asserted by the Wife.
Evaluation
The Wife, with the benefit of a pro bono lawyer in Ms Ogge (who I must say could have said nothing more than she has in this application on behalf of the Wife), has shown that the business could have a value to the Husband – but that its value is much less than $110,000.
The Wife says the business should be independently valued, but does not have the funds to pay for or contribute to such exercise. The Husband says the Wife did not pay her share of the property valuation, however, the Wife has not answered that allegation.
In my view, the Wife’s application for property settlement has no reasonable prospects of achieving an award of moneys which is likely to result in any monetary award to her. Even if, and it is on the evidence a big “if” – the Husband’s interest in the business he has owned for many years (and to which the Wife made no direct financial contribution), is worth something, then the Wife’s claim is well less than 35% considering the shortness of the relationship; the other contributions from which the Wife and her sons have benefited and the justice and equity of the possible orders.
This Court’s decision to order that the Wife’s claim for property settlement be summarily dismissed, is not based on the fact that as at 20 June 2012, the Wife had agreed through her then solicitor that the business had no value. In these circumstances, the Court has not prevented the Wife from attempting to argue otherwise. Nor is this case decided on some basis that the Wife and her children, through the agency of the Husband, are lucky to have the future benefit of living in this country. I am sure the Wife, [Y] and [X] will make their contributions as residents in their chosen home.
Considering the high onus imposed upon the Husband to succeed in this application, I have very carefully considered whether the Wife has a claim which is doomed to fail – in a real sense – and not just a theoretical sense. In that scenario, the Court cannot ignore the likely costs of proceeding to a hearing, and also the costs to the Husband of continuing to respond to such a weak claim. There is no prospect, if the Husband at a trial was to succeed, that the Wife will be in a position to contribute to his costs. It is to be recalled that the Husband’s position now is exactly the same as it has been since the beginning.
I have also taken into consideration the words of Kirby J, that sometimes a weak case can turn into a successful judgment. In my view, this is not likely to be such a case.
For these reasons, I will order that as the application of the Wife filed 6 January 2012 has no reasonable prospects, it shall be summarily dismissed. I will take submissions as to costs.
I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Baumann FM.
Date: 4 February 2013
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