Weller and Weller
[2008] FamCA 313
•2 May 2008
FAMILY COURT OF AUSTRALIA
| WELLER & WELLER | [2008] FamCA 313 |
| FAMILY LAW – ORDERS – Property – Review of a decision of a Judicial Registrar – Duty to make full and frank disclosure |
| Family Law Act 1975 (Cth) |
| Black and Kellner 1992 FLC 92-287 |
| APPLICANT: | Mrs Weller |
| RESPONDENT: | Mr Weller |
| FILE NUMBER: | SYF | 3708 | of | 2005 |
| DATE DELIVERED: | 2 May 2008 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Justice Le Poer Trench |
| HEARING DATE: | 1 April 2008 15 April 2008 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Johnston |
| SOLICITOR FOR THE APPLICANT: | Gells Lawyers |
| COUNSEL FOR THE RESPONDENT: | In Person |
| SOLICITOR FOR THE RESPONDENT: | In Person |
Orders
By consent as between the parties and unopposed on behalf of Sagacious Legal, pursuant to s.106B of the Act the Deed of charge between the husband and Sagacious Legal dated 3 May 2007 be set aside, insofar as it affects the interests of the husband and wife.
Subject to orders 3 and 4 hereof the husband is to forthwith transfer and assign to the wife the whole of his right title and interest in the net proceeds of sale and all interest accrued thereon of the former matrimonial home at W (“the monies”) held by the Registrar of the Supreme Court of New South Wales in proceedings number … of 2004 (“the Supreme Court proceedings).
The husband is to have 28 days from the date hereof in which to reach a settlement with the liquidator of C Company, on behalf of both himself and the wife, of the Supreme Court proceedings. Settlement to be evidenced by a written document signed by the liquidator illustrating acceptance of an offer to compromise made by the husband on behalf of the parties. The settlement is to release each of the parties from the debt owed to C Company. The husband is to forthwith serve a copy of any document evidencing acceptance of the husbands offer to compromise upon the wife.
The husband is to be able to commit up to $350,000 of the fund in the Supreme Court for the purpose of compromising the Supreme Court action.
Upon a settlement being reached of the Supreme Court proceedings in accordance with these orders, the husband is appointed as trustee for both he and the wife to sign any terms of settlement necessary to conclude the Supreme Court proceedings.
The husband is to be given a reasonable period to arrange for the matter to be listed in the Supreme Court and have terms of settlement filed in court thus concluding those proceedings. The wife has liberty to apply to this Court for further orders implementing these orders if the husband has not been able to have the proceedings in the Supreme Court concluded within six weeks of his having received the written agreement to settle referred to in order 3 hereof.
The Court declares the husband is solely entitled to the exclusion of the wife to the remainder of his legacy from his said late mother’s Estate.
The Court declares that otherwise each party is the sole and beneficial owner of all other items of property in their respective possession custody or control including but not limited to superannuation entitlements.
In the event that either party shall fail, neglect or refuse to execute any deed, instrument or document to give validity and effect to these orders then upon the other party filing an affidavit setting out such failure, neglect or refusal then a Registrar or a Deputy Registrar of the Sydney Registry of the Court is hereby appointed pursuant to section 106A of the Family Law Act to execute any such deed, instrument or document in the name of the party who defaults and to do all things necessary to give validity to the operation of the deed, instrument or document.
IT IS NOTED that publication of this judgment under the pseudonym Weller & Weller is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYF 3708 of 2005
| Mrs Weller |
Applicant
And
| Mr Weller |
Respondent
REASONS FOR JUDGMENT
Introduction
This is a review of the decision of Judicial Registrar Loughnan delivered 6th December 2007. The review is sought by the husband. The husband seeks what is a relatively minor change to the orders of the Judicial Registrar. The orders sought by the husband are contained in exhibit H1.
At the commencement of the hearing before me I was invited to read the judgement of the Judicial Registrar delivered on the 6th December 2007. The case then proceeded by way of submission about the form of the orders made by the Judicial Registrar. I was invited to read the transcript of the proceedings before the Judicial Registrar. No criticism is made by the husband of the findings of fact made by the Judicial Registrar. The husband says the division of assets which saw the wife receive all of the available assets is wrong. He seeks half of the funds remaining from the sale of the former matrimonial home which funds are currently lodged with the Supreme Court of New South Wales awaiting the outcome of proceedings between C Company and the parties to this case. The Husband further complains that the wife has done nothing to compromise the action between them and C Company and that will result in the husband becoming bankrupt. The husband argues that the wife has no incentive to settle the proceedings in the Supreme Court of NSW and thus the husband says renders impossible the husband’s plan to avoid bankruptcy. If he is able to avoid bankruptcy then he asserts that he has the possibility to recover financially before he reaches an age where he is too old to work.
The orders made by the Judicial Registrar on the 6th December 2007 are as follows:
Orders
1.By consent as between the parties and unopposed on behalf of Sagacious Legal, pursuant to s.106B of the Act the Deed of charge between the husband and Sagacious Legal dated 3 May 2007 be set aside, insofar as it affects the interests of the husband and wife.
2.The husband shall forthwith transfer and assign to the wife the whole of his right title and interest in the net proceeds of sale and all interest accrued thereon of the former matrimonial home at [W] (“the monies”) held by the Registrar of the Supreme Court of New South Wales in proceedings number […] of 2004.
3.Upon the undertaking of the wife given through her counsel to properly consider all legal advice and to indemnify the husband against any future costs orders, the wife shall take over and conduct on behalf of the parties, proceedings No […] of 2005 and proceedings No […] of 2004 in the Supreme Court of New South Wales between [C Company] Pty Limited (A.C.N. […]) (“[C Company]”) as Plaintiff and the parties as Defendants.
3 a)In the event that the dispute with [C Company] is capable of resolution without trial the wife shall in any such settlement obtain a release from [C Company] in favour of the husband and his corporate entities in respect of the whole of his indebtedness to [C Company].
3 b)In the event that the dispute with [C Company] is incapable of resolution or compromise without trial the wife shall do all acts and things necessary in the said Supreme Court proceedings to bring the proceedings to conclusion at the earliest possible time.
4.The husband shall do all acts and things and execute all documents as are necessary from time to time at the request of the wife in respect of the future conduct of the proceedings referred to in order 3.
5.The Court declared that the husband is solely entitled to the exclusion of the wife to the remainder of his legacy from his said late mother’s Estate.
6.The Court declared that otherwise each party is the sole and beneficial owner of all other items of property in their respective possession custody or control including but not limited to superannuation entitlements.
7.In the event that either party shall fail, neglect or refuse to execute any deed, instrument or document to give validity and effect to these orders then upon the other party filing an affidavit setting out such failure, neglect or refusal then a Registrar or a Deputy Registrar of the Sydney Registry of the Court is hereby appointed pursuant to section 106A of the Family Law Act to execute any such deed, instrument or document in the name of the party who defaults and to do all things necessary to give validity to the operation of the deed, instrument or document.
8.That the operation of these orders be stayed for a period of 28 days from the date of the orders.
9.That within 7 days of the date of these orders the wife send a copy of these orders by ordinary prepaid post to each of the following persons or entities:
Diners Club
ANZ Bank
Citibank
St George Bank
American Express
G.E. Automotive
Sanderson Motors
Alliance Factoring
Reed Group
Credit Corp Services
David Ballard
Carlisle Attorneys
Clayton Utz Solicitors
[C Holdings] Pty Limited (In liquidation)
[B Company] Pty Limited (In liquidation)
Andrew Wily, Armstrong Wily, Chartered Accountants.
The parties and any other person affected by these orders are at liberty to apply on 7 days notice in respect of the orders.
The orders now sought by the husband are as follows:-
Alternate orders sought by the husband:
1.That [the husband] be able to conduct his own defence with [C Company]
2.That any surplus after settlement with [C Company] be divided equally between [the wife] and [the husband].
3.Alternatively, the fund be divided 50/50 between [the husband] and [the wife] or any other percentage the Court sees fit.
Alternative Orders Sought:
1.That there is no nett property to divide and the wife’s application be dismissed.
I am assured by Counsel for the wife, and I accept that order 9 made by the Judicial Registrar was complies with by the wife and notwithstanding each of the creditors named in the order being notified as required by the order no response has been received. That being the case I find it unnecessary to repeat the order in any orders made by me.
In the hearing before me the wife sought to maintain the orders made by the learned Judicial Registrar in the place of the orders sought by her in the minute of order sought in the hearing before the Judicial Registrar.
It is really order 3 of the 6th December 2007 which the husband seeks to change. He seeks a change which gives him the ability to negotiate with the plaintiff in those proceedings. The husband submits that he has been able to negotiate what he believes is a good settlement; however, the wife has refused to embrace that resolution and it seems is proposing to continue the proceedings. The husband says that neither the wife nor himself have the funds to be able to properly conduct those proceedings and he says they are too complex for either of them to conduct as personal litigants.
I turn to consider the findings of fact by the Judicial Registrar.
The first matter to be noted is that the husband had notified the Judicial Registrar prior to the hearing that he consented to order 3 as made on the 6th December. I understand that consent is no longer provided in the hearing before me.
In his reasons the Judicial Registrar was critical of the husband for failing to make a complete disclosure of his financial affairs. In order to address that complaint the husband, with leave, filed in court on the day of the hearing before me an update Financial Statement and two affidavits which he said redressed any earlier failure to disclose.
In his Financial Statement the husband sets out that he has an income of $1,000 per week. He has liabilities of $12,089,394. He has credit card liabilities of $132,152. He has an interest with the wife in $800,000 presently deposited in the Supreme Court pending resolution of the action with C Company. This amount appears to have grown since 2004 when the sum of $668,000 had been paid by Banksia Mortgages into the Supreme Court. The husband received $250,000 from his mother’s estate. He paid $50,000 to the wife and $30,000 to his solicitors. He has spent the balance on rent, creditors and living expenses.
The first of the husband’s two affidavits sets out what information he could recollect about the financial transactions he and the wife were involved in since 2001. Where he had documents available he has attached those to the affidavit.
It seems that his principal trading company was D Pty Ltd. He said in paragraph 13 of his affidavit that he observed the wife preparing and maintaining the general ledger for that company. This assertion was followed up in the hearing before me when the wife admitted she was employed as the “accounts manager” for D Pty Ltd. The husband says in his affidavit that he has only been able to provide details of the application of funds for that company because he has had regard to annotations on the company records which appear in the handwriting of the wife.
The thrust of the husband’s affidavit includes an assertion that as the wife was the accounts manager for the company D Pty Ltd. Her knowledge of the financial transactions of that company was significant and as such the husband should not be penalised for failing to make disclosures about the financial undertakings of that company.
In paragraph 17 of his affidavit the husband says
“Similarly, in the conduct of various businesses undertaken by corporations associated by me subsequent to my leaving [M Company], the respondent assembled the documentation concerning the payment of expenses and outgoings and printed and wrote up the cheques for payment.”
The second affidavit of the husband filed in Court appears to be a replica of the first, however there are more documents attached. The last annexure is a letter dated the 27th March 2008 from the husband’s then solicitors to Gells Solicitors, the wife’s solicitors in this matter. The letter encloses a list of documents and invites inspection of the documents. During the oral examination of the wife in the hearing before me she was asked to confirm that no arrangement had been made by her to inspect the documents. She said she did not know if they were inspected or not.
As there is no contest in relation to these matters I here adopt the following findings of the Judicial Registrar.
“Short History
1.The wife and husband are 57 and 60 years of age respectively. They commenced cohabitation in late 1971, were married on […] April 1972 and separated under one roof in August 2004.
Children
2. The parties have three adult children:
[E]who was 25 years of age as at the date of the hearing; and
[M] and
[L]who were 22 years of age as at the date of the hearing.
3.Sadly, the parties lost [S] who was born on the same day as [M] and [L], soon after her birth.
Background facts
4.The parties started to live together in late 1971. They purchased [R property] for $14,000. The wife paid $1,000 and the husband paid $400 for the 10% deposit. The balance was borrowed.
5. They were married on […] April 1972.
6. In 1977 the parties bought land at [A] for $20,000.
7.In early 1979 the parties purchased [P property] for $214,000.
8.In 1980 the parties purchased two blocks of land at [C] for $90,000.
9.In 1982 the parties sold the [R] home for $216,000 and the [C] land for $130,000.
10. In 1982 the parties sold the [A] land for about $45,000.
11.In mid 1982 the parties bought [T property] for $215,000.
12. [E] was born on […] August 1982.
13.In 1984 the [P] property was sold for about $1.1M. and the [T property] for $950,000.
14.[M], [L] and [S] were born on […] March 1985. [S] died on […] March 1985.
15.In late 1987 [W property] was purchased for $750,000.
16.In April 2000 the husband purchased a unit at [F] for $850,000. In 2001 the unit was sold for $1,800,000.
17.In 2001 the husband’s company, [A Pty Ltd] bought a unit at [H]. In late 2001 the husband purchased a unit at [H2]. At some point that property was transferred to the husband’s brother, […]. In November 2001 the husband bought an office floor being […], Sydney for $1,9M. It has since been sold by the mortgagee.
18.For a short period in about 2001 or 2002 the [W] property was unencumbered. In June 2002 $1,600,000 was borrowed on the security of the property, from Banksia Mortgages, for the purposes of operating expenses for the husband’s companies. On 12 August 2003, the husband’s company, [G] Pty Limited borrowed $1,267,500 from [C Company] Pty Limited. The loan was guaranteed by [B Company] Pty Limited, [L] Pty Limited, [T] Pty Limited and the husband. Again those funds were used for the purposes of the husband’s companies. Interest was payable at the rate of 5% per month. There were two monthly payments of $63,375 and a total of $420,468.56 paid off the principal but by August 2005 the debt stood at $2,330,532.32. The debt finally resulted in a claim for over $11M. At some point the debt may have been assigned by [C Company] Pty Limited to [C Holdings] Pty Limited.
19. The parties separated under one roof in August 2004.
20.In 2004 the property at [W] was sold for $2,450,000. The parties exchanged contracts with the purchaser but Banksia Mortgages entered under a power of sale and settled the conveyance. On or about 17 September 2004 Banksia Mortgages paid $668,000, being the balance of the net proceeds of sale of the [W] property into the Supreme Court of NSW.
21.In April 2005 [C Company] Pty Limited issued a summons out of the NSW Supreme Court against the parties seeking that the entirety of the funds be paid out of Court and to it and as a result, the moneys held in the Supreme Court together with interest accrued, have remained there to abide the outcome of the [C Company] litigation.
22.The physical separation of the parties occurred in late 2004 or January 2005.
23. These proceedings were commenced by the wife on 11 August 2005.
24. On 8 May 2007 an order was made for interim costs.”
Before the Judicial Registrar was an application under section 106B of the Act. There is no challenge to the orders made by the Judicial Registrar in relation to that matter and I therefore incorporate into these orders the findings and determinations of the learned Judicial Registrar on that matter.
“Applications under Section 106B
25. Relevantly the section provides:
Section 106B
(1)In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
…
(2)The court may order that any money or real or personal property dealt with by any instrument or disposition referred to in subsection (1), (1A) or (1B) may be taken in execution or charged with the payment of such sums for costs or maintenance as the court directs, or that the proceeds of a sale must be paid into court to abide its order.
(3)The court must have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested.
26.The husband and companies associated with him ([G Pty Ltd], [A Pty Ltd], [L] Pty Limited and [S] Pty Limited) entered into a deed on 3 May 2007 with Sagacious Legal (former solicitors for the husband and the companies) to secure legal fees and to address a lien that would otherwise have prevented access by the husband to documents held by the solicitors.
27.The wife seeks that the deed be set aside. The husband consents to the order.
28.There remains an issue of natural justice. Has Sagacious Legal had proper notice of the application and an opportunity to be heard? It had not but at the commencement of the hearing, the husband’s solicitor, Mary-Clare Kennedy, gave evidence that she had telephoned Mr Paul O’Shanassy of Sagacious Legal some minutes earlier and had told him that her client was moving the Court for an order to set aside the deed. Mr O’Shanassy told Ms Kennedy that Sagacious Legal did not want to be heard in relation to the application.
29.By its terms the deed evidences a claim for costs of $61,819.56 and an acknowledgement by the husband and the companies, subject to their right to formally challenge the quantum, that the costs are owed to the solicitors. It purports to secure the costs against funds of the husband that pass through the hands of his subsequent solicitor – Carlisle Attorneys Pty Limited.
30.There is no suggestion that the deed was entered into by any of the parties with the intention of defeating the wife’s claim but there is no doubt that it could have that effect. The wife’s claim is for all of the parties’ entitlement to the fund representing the net proceeds of sale of the [W] property and for $100,000 from the husband’s undistributed interest in his mother’s estate. Depending on the net value of the main asset of the estate, a property at [V], there may not be $61,819.56 left to the husband’s credit, if orders were made as sought by the wife. On that basis and given that the order is agreed between the parties and not opposed by Sagacious Legal, I will make it.”
The Property of the Parties
The Judicial Registrar found the assets of the parties to be as follows:-
Assets Value Proceeds of sale of [W property] (Joint) $750,000 [D] Pty Limited Not known [T] Pty Limited Not known [L] Pty Limited Not known [A] Pty Limited (in liquidation) Not known [G] Pty Limited Not known [Z] Pty Limited Not known [N] Pty Limited Not known [J] Pty Limited Not known The husband’s interest in [H2 property] Nil [M Company] litigation relating to [M Company], [Mr MS] and husband Nil Husband’s interest in Telstra panels at [H2 property] Nil Husband’s interest in the estate of [his mother] (deceased) – estimated $124,000 Wife’s AMP superannuation $3,800 Legal fees paid by the wife $51,000 Legal fees paid by the husband $15,000 Total $943,800.00
At the urging of counsel for the wife the Judicial Registrar included in the one pool the small amount of superannuation held by the wife. I agree with that approach.
In relation to the husband’s interest in his mother’s estate the Judicial Registrar said as follows:-
“Husband’s interest in his mother’s estate
31.The husband’s mother died on […] September 2006. The husband’s brother, […], is the executor and has obtained probate of the estate. The will provides that the husband, his brother, […], and his sister each take one third of the remaining assets of the estate, being a property at [V] valued at about $800,000 and nearly $7,000 in savings.
32.The husband would have it that he and his brother are estranged but that they share a belief that the husband has no further interest in the estate. The husband says that he brother came to that view on 17 December 2006. There is no probative evidence of that fact. Even if there was evidence of the executor holding that view, that is not a relevant fact. Nor is it consistent with the way in which the executor and the husband have behaved. Funds have been paid out to the husband from the estate. The husband deposes to his brother having agreed to advance him $250,000 for the costs of litigation and that approximately $50,000 was advanced under that agreement. On 8 May 2007 interim costs orders were made in the following terms:
2.Leave to the parties to notify the Registrar that that date is not required not later than 24 hours prior to the adjourned date in the event that they have agreed on directions for trial and presented those to a Registrar in Chambers.
3..Until further order unless the parties agree to the contrary in writing the husband forthwith authorise and direct [his brother] to pay from the fund representing the husband’s interest in the estate of [his late mother]:
a.to the solicitor for the wife the sum of $51,000 to be applied for the purposes of the wife’s costs of and incidental to these proceedings;
b.to the solicitor for the husband the sum of $25,000 to be applied:
(i)to the debt of $6,053.67 of [G] Pty Ltd associated with proceedings in the Supreme Court;
(ii)as to $15,000 to the costs and disbursements of the husband of and incidental to these proceedings; and
(iii)as to balance of that sum of $25,000 to be evenly divided and applied to the costs of and incidental to the proceedings involving [G] Pty Ltd and the proceedings involving [A] Pty Ltd.
4.Leave is granted to restore the matter to the list on 7 days’ notice to the Court and to the other party in relation to any further distribution of the funds.
5.The husband is restrained from authorising or directing [his brother] other than in accordance with these orders.
33.I understand that those orders were complied with insofar as [the husband’s brother] advanced the required funds. Thus approximately $126,000 has already been advanced from the husband’s interest in the estate. How could that be if he has no such interest?
34.There is no evidence of any challenge to the will. There is no evidence that the administration of the estate has been finalised. In a letter from his solicitors of 22 January 2007[1] [the husband’s brother] was advised, among other things, that the only outstanding matter, in order to finalise the estate, was the sale of the [V] house and the final distribution of proceeds. Thus the husband has an undivided one third interest in the assets represented by the [V] property and some modest savings, subject to the costs of the administration, including the costs of realising the assets.
35.The husband has not called any more detailed evidence about the value of his interest. There is mention of a figure of $250,000 in the wife’s case and that would seem to be a reasonable estimate. It may be no coincidence that the sum that [the husband’s brother] agreed in March 2007 to advance the husband was also $250,000. From that sum $126,000 has already been drawn down. In addition, it is the husband’s evidence that his brother is totting up a bill for the husband’s rent at the rate of $600 per week. There is no evidence as to how long the rent has been calculated. The husband sold the property at [H2] to his brother […] on 21 December 2006 for $650,000. The sale was necessary in order to satisfy the mortgagee, Westpac Bank. The husband and [M] live there now and they may well have been there since the sale.
36.Doing the best I can, the effective balance of the husband’s interest in the estate may be in the range $100,000 to $124,000.”
In the hearing before me the husband showed in his Financial Statement that the value of his interest in his mother’s estate was $250,000 all of which has now been expended. He was not cross-examined in relation to that statement. There is no argument for the $250,000 or part thereof to be added back to the pool. Even if there be such an argument there would be little justification for doing so. The inheritance was received by the husband post separation. Neither party can claim a contribution to the inheritance. I would not exercise my discretion in the circumstances of this case to add the inheritance or part thereof to the pool of assets.
It seems that the husband has adopted the wife’s estimate of the value of the estate received by the husband and which the Judicial Registrar had determined was a reasonable figure. I likewise think that $250,000 on the evidence provided to the Judicial Registrar is a reasonable figure. However, unlike the Judicial Registrar, I determine on the evidence which is before me (the latest Financial Statement which was not before the Judicial Registrar) that the husband has none of that money left. I therefore would exclude it from the pool of assets.
I therefore determine the assets of the parties to be those as determined by the Judicial Registrar and set out earlier in these reasons with the exception of the value attributed to the husband’s estate which I will determine as Nil.
The total assets of the parties will therefore be $819,800.
I will also refer at this point to the inclusion in the husband’s Financial Statement of “Additional Information” which is contained in Part O of the document. There the husband discloses that he and some of his related corporations have the benefit of a cost order against LR. The order is unquantified. The husband says any amount received by him personally will be applied to outstanding legal costs. He also says in his Financial Statement he has a liability for legal costs of $42,583.
The Liabilities
The Judicial Registrar dealt with the parties’ debts as follows:-
“Liabilities:
37. As to the liabilities:
Debt to [C Company]
38.I have referred earlier in these reasons to litigation in the NSW Supreme Court instituted by [C Company] Pty Limited against the parties for the balance of the proceeds of [W property]. That company or its assignee is said to have a claim of in excess of $11M against the husband and some of his companies. That claim resulting from the compounding effect of interest payable under the deed, on the debt that stood at $2,330,532.32 in August 2005. There have been settlement discussions with [C Company] Pty Limited. The husband says that in March 2007 a director of that company agreed to accept a payment of $300,000 in 12 months (March 2008) to settle the proceedings brought against the parties. It is not clear whether that agreement would have resulted in the husband and his companies being released in relation to all claims arising under the deed. I gather that there were subsequent negotiations and therefore assume that the compromise settled in March 2007 is no longer available. Nevertheless the best evidence I have is that the parties’ debt is $300,000.
Debt to Clayton Utz
39.The husband owes Clayton Utz solicitors something of the order of $21,000. The debt has been recorded in a judgment and a Bankruptcy Notice[2] issued on a date that does not appear in the evidence. The husband says he compromised the debt by agreeing to pay instalments of $1,500 on a monthly basis. He paid two instalments. He missed the instalment due on 7 November 2007 and understands that at a result, the entire debt again falls due. Thus the husband owes Clayton Utz about $21,000.
i)[2] Exhibit 8
40. The liabilities are:
Liabilities Amount [C Company] debt $300,000 Clayton Utz debt $21,000 Husband’s other liabilities Not known $321,000
I do not agree with the determination by the Judicial Registrar of the parties liabilities. In the hearing before me it was clear that the liability of the parties to C Company is $11,800,000. The evidence comes from the husband’s Financial Statement filed in Court in the hearing before me. The husband told me in submission, which was not the subject of complaint by the wife, that the parties had signed mortgage documents with C Company however, contrary to the requirements of the mortgage the wife had not had the contents of the mortgage explained to her by an independent legally qualified person. The husband told me that in the Supreme Court proceedings the wife was running what has become known as “the wife’s defence” and thus seeking to be relieved of any liability under the mortgage. That defence was not available to the husband.
I was referred to the evidence of the husband that he had been able to negotiate a settlement of $300,000 which seems, on the face of the matters disclosed, to me a reasonable if not attractive settlement. It is easy for me to see why he wants to pursue that settlement.
On balance I would reach the conclusion that the amount of the debt is $11,800,000 as asserted by the husband.
In addition the Judicial Registrar referred to “Husband’s other liabilities.” His conclusion was “Not Known”. In the hearing before me there is evidence of other liabilities of the husband which are referred to in his further evidence filed in court on the 1st April 2008. These debts are set out in particular in his Financial Statement”.
The husband has Credit Card debts of $132,152. The evidence does not disclose when or for what purpose the liabilities were incurred. They have not been the subject of challenge in any way. Given that the parties have been separated since August 2004 and given the history set out in relation to the husband post separation it is reasonable to infer that at least some of this debt has been generated post separation.
The husband has a liability of $2,853 to Sanderson Motors and $75,002 to GE Automotive Financial Services. Alliance Factoring Pty Ltd is owed $35,803. The first two mentioned debts have letters of demand (see attachments to the husbands Financial Statement) going back to late 2004 and early 2005. It seems reasonable to conclude that they were debts incurred during the marriage. I propose to include those debts.
In the hearing before me the wife relied upon her Financial Statement filed on the 29th March 2007. That showed some assets of minor value which have not been included in the balance sheet. In the circumstances of this case that is a justified omission. The document discloses substantial liability. The liability of the wife is $48,446. The liability is largely for legal fees and credit cards. I propose to include the liabilities in my balance sheet.
I therefore determine that the liabilities of the parties are as follows:-
C Company $11,800,000
Husband’s credit cards $132,152
Husband’s debt to Sanderson Motors $2,853
Husband’s debt to GE Automotive Financial Services $75,002
Husband’s debt to Alliance Factoring $35,803
Husband’s debt to Clayton Utz $21,000.
Wife’s liabilities as set out in her Financial Statement $48,446.
It can readily be seen that the debts vastly swamp the available assets. However, if the husband is correct and the debt to C Company can be settled for $300,000 then a different picture emerges.
Neither party discloses any financial resources which needs to be taken into account in the case.
Contributions of the Parties
The Judicial Registrar made the following findings based on contribution.
“Contributions
Section 79(4)(a) Contributions
41.Financial contributions, both direct and indirect were made by each of the parties.
42.The parties had modest savings at the commencement of the marriage.
43.The wife was in paid employment in various positions from the start of the marriage until 1982. She was an Office Manager, Shop Manager Personal Assistant and Bookkeeper. Apart from sub-contracting work in 1984 and one month as a sales person in 1999, the wife next returned to the paid workforce as a Data Entry Operator from 2002 to 2004 in various part-time positions. She supplemented that income in 2004 with work 5 hours a week as a Shop Assistant and ironing and baby sitting. In 2005 the wife took a position as Financial Manager. In 2006 she worked as Office Manager and Accounts Assistant but apart from 2 weeks of temporary work in October, she was out of paid work from 1 September 2006 until 12 November 2006. Since 13 November 2006 the wife has been employed as Personal Assistant to the Managing Director and the General Manager and as Office Manager of […] in […].
44.The husband generally worked as an Accountant from the start of the marriage. From 1981 to 2000 the husband worked for [M Company] in Sydney, rising from Accountant to Financial Controller. The wife thinks that over this period the husband salary rose from about $35,000 per annum to about $375,000 per annum. From 2000 to 2004 the husband was self-employed as a property developer.
Section 79(4)(b) contributions
45.Over the years the parties bought, improved and sold properties and in the later years, engaged in property development. The husband played the key financial role. Although the parties apparently worked hard at various ventures over the years, sadly the net effect has been a massive loss.
46.Albeit unchallenged, there is a bald assertion contained in the wife’s affidavit to the effect that the husband engaged in gambling. There is no probative evidence of the duration or extent of his gambling nor, more importantly, is there any indication of a loss, let alone the extent of any loss, incurred as a result. Therefore the evidence has no weight.
Section 79(4)(c) contributions
47.The only evidence about contributions comes from the wife. The husband occasionally mowed the lawns and did a little landscaping. From May 1984 the husband spent a little more time with [the child E] and on the weekends did jobs around the house, including gardening. With assistance from friends, his mother, his sister and the wife’s parents the husband cared for [E] during the wife’s confinement from January to March 1985. The husband played no part in feeding or changing the twins. By June 1986 although he did not help with a family move from [T] to [R], the husband spent a little more time with the children, mainly playing with them. From 1972 to 1982 the husband did the cooking. From 2003 to 2005 the husband cooked and shopped about twice a week. Otherwise as between the husband and the wife, the wife undertook the remaining parent and homemaker roles.
48.In relation to the parenting and homemaker task, that largely fell to the wife. For much of the marriage she had one or more minor child to care for. She cannot have had an easy time of it when she was hospitalised on weekdays in the months leading up to the birth of triplets in March 1985. There was the tragic loss of [S] and then twins to care for. In 1988 [M] suffered a major head injury and was hospitalised for 2 months. He needed full time physiotherapy and occupational therapy for the next year; by 1989 he still needed constant monitoring in relation to a leg brace and exercises; he repeated Year 5 at […] as a result of his head injuries; and in 2002 he had an orthopaedic operation on his left foot and physiotherapy thereafter.
Conclusion
49.This was a long marriage during which very significant assets were developed, three children were supported and the parties enjoyed a good standard of living. There were no contributions made to the husband’s mother’s estate. The only evidence about contribution was given by the wife. Her contributions generally exceeded those made by the husband. In the circumstances of this case it is not possible or necessary to identify the imbalance in contributions by reference to percentage figures. However, the husband’s mother died after separation. The husband’s interest in the estate should be seen as a contribution made wholly on his behalf.
Having considered all of the evidence to which I have been directed and the findings of the Judicial Registrar I would have to disagree with the learned Judicial Registrar in relation to “Her contributions generally exceeded those made by the husband”. On the facts of this case I reach the conclusion that the parties’ contributions should be seen as equal. I agree with the conclusion of the Judicial Registrar that the inheritance received by the husband would be a contribution made on his behalf, however, in the scheme of the whole of the contributions made by each of the parties over the lengthy marriage it is of little consequence.
Section 75(2) Matters
The Judicial Registrar set out all of the matters to be considered under section 75(2). He reached the following conclusion in relation to same.
“Conclusion
50.The relevant matters arising from the remaining elements of s 79, which include the s 75(2) factors referred to above are:
ØThe parties are at a similar time of life;
ØThe husband’s income earning capacity is likely to be greater than that of the wife;
ØThe husband did not fully disclose his financial circumstances and is likely to have wasted assets.
51.In my view there should be an adjustment to the wife by virtue of the other matters in section 79(4). In the circumstances of this case there is no utility in making the adjustment by reference to a percentage figure. Because I do not know the net financial circumstances of the parties, in my view it would be appropriate for the wife to receive the lion’s share of the visible assets.”
Section 75(2)(o)
In this case this section plays a very significant part. The wife has alleged that the husband has failed to make a full and frank and timely disclosure of relevant financial matters. Further she alleges that there is probably property which is available to the husband which property has not been disclosed to the wife or the court. That property on the face of it has a potential to be of significant value in the circumstances of this case. I will now consider the evidence in relation to the wife’s submission.
In the submissions before me Mr Johnston, counsel for the wife took me to various parts of the transcript which dealt with cross-examination of the husband about specific pieces of property or potential property. Each of those references illustrated an incident where in my view the husband should have provided full disclosure sufficient for the wife to satisfy herself that there was little likelihood of further property coming into the husband’s hands or control. The areas include the following:-
(a) The husband’s inheritance.
(b) The sale of the [H2] unit to the husband’s brother.
(c)Litigation either discontinued or dismissed in the Supreme Court of NSW.
(d)Any potential right the husband may have to recover considerable entitlements and/or damages from M Company.
(e)A proprietary company owned by the husband which in turn owns Proprietary Limited ownership of six car spaces in a city building.
It is unnecessary to refer specifically to each of these items and the evidence which I was taken to. It was very clear to me that the submissions of the wife had merit and it obviously was likewise evident to the husband who is an intelligent and articulate gentleman.
After hearing the submissions from the wife’s counsel and after further discussion between myself and the husband he acknowledged that he had not made a full and frank disclosure of relevant information about the topics covered in the submissions; however, he said, and I accept, that it was through ignorance of his obligations rather than some wilful act designed to defeat the wife.
Having seen that the areas of non disclosure cover assets or potential assets of some substance and significance in the circumstances of this case and having not been in a position to positively assess the property of the husband I reach the conclusion that the Judicial Registrar’s decision in relation to the outcome where the wife should receive the totality of the available assets is correct and I reach that same conclusion. The consequence is that whatever the parties have left from their action in the Supreme Court with the liquidator of C Company should be the property of the wife. There remains one further matter to determine however, and that is: “Should the husband have the opportunity to settle the Supreme Court proceedings on behalf of both parties and if so, how much of the fund in the court should he be able to commit to that settlement?”
Having reached that conclusion there is something further I wish to say about the obligation to make a full and frank disclosure. This case reeks of a complete financial collapse. The requirement to make a full and frank disclosure must be connected to financial reality. A mere glance at some of the solicitors’ bills which are presented to this court from time to time reveals the extensive cost of inspecting documents. In this case I would readily accept there would be many boxes of documents which could be potentially relevant if they could be marshalled. However, why would the wife, assuming she is a prudent financial manager, waste large amount of money having documents inspected by lawyers and accountants if it is unlikely to produce evidence of assets which could then be included in the parties’ pool of assets? This was conceded by the wife’s counsel to be correct. The wife would not wish to spend money having all the potentially relevant documents inspected. However, in this case, there were a potentially small group of documents which the wife would have liked to have seen and would have paid to have inspected. Those documents address the topics which I have referred to in this judgement. In such circumstances the wife should have required limited discovery. Alternatively the husband should have sought directions which relieved him from the broad obligation which he has to make a full disclosure of relevant documents and have that obligation restricted to the topics identified in these reasons.
There is evidence before the court that the husband has provided a list of documents to the wife (albeit late in the preparation for a hearing and therefore not in “a timely manner”) and her inspection of those documents was invited. The evidence suggests that the offer was not taken up. Does that then entitle the wife to continue to say the husband has not made a full and frank disclosure where she has not inspected potentially relevant documents? I think the answer is no. I think the wife took a very sensible and prudent decision not to waste time or money inspecting those documents. She must have concluded it was unlikely she would find anything of assistance to her for this case.
In my view the type of exercise which the court considered in Black and Kellner 1992 FLC 92-287 ought to be limited to cases where there is a real suspicion, based on acceptable evidence, that there has been a deliberate failure to disclose with sinister intention or alternatively a complete indifference to the obligation to disclose. It ought not to be applied to a case where there seems very little likelihood that a full discovery exercise is likely to be other than a waste of the parties’ time and assets. The case law makes it clear that Black and Kellner is to be used to enable the court to make an order which exceeds the value of the available identified assets where the court has been unable to determine the wealth of a party. This is such a case.
This court has for some time been concerned about the concept of “proportionality” in property cases. That is the connection between the costs incurred in the case and the amount of property available for distribution between parties or the benefit which is likely to accrue to parties in the proceedings. Proportionality has to be seriously considered in cases where there are likely to be a plethora of relevant documents with little or no likelihood of assisting a party in the case after extensive and expensive inspection of those documents.
I should add here that I do not agree with the conclusion of the Judicial Registrar that the husband “is likely to have wasted assets.” The only mention of this fact was made by the Judicial Registrar in relation to an unsupported allegation of the wife that the husband was a gambler. No other basis appears on the evidence for such as finding.
My decision in relation to 75(2)
Subject to the above criticism of the Judicial Registrar’s approach I otherwise agree he has identified the evidence which the court should take into consideration. I would like to add the following.
In submissions counsel for the wife described the husband’s opinion that he will be able to return to a high ranking position in a large company as effectively “a pipe dream”. He referred to the husband’s health and the fact that he had been out of that type of employment now for many years. With respect to the husband, I agree with that submission. The “days of glory” which the husband found himself in during past decades are unlikely to return for him. He has been offered employment which has inbuilt incentives. Those types of incentives are not offered if it is an easy job to achieve re-zonings of properties. The husband may have some skills in the area of property development; however, those skills are ageing as well. The husband told me in submissions that his attempt to gain re-zoning of properties had failed and the position he spoke of when before the Judicial Registrar has been terminated. I determine therefore that the future financial circumstances of the husband are probably not going to be as affluent as the husband may now think.
I should also take into account at this point that the husband has used part of his inheritance to make a payment of $50,000 to the wife. He has used the balance to meet legal fees of his own and to cover living expenses and pay creditors. There is some doubt I have that the inheritance money has been fully expended.
I also need to take into account that the only positively identifiable asset of the parties is the fund sitting in the Supreme Court. The wife may have a defence to the claim by C Company which would see her retain the whole of the proceeds of the former matrimonial home which are not expended in settlement of the claim. The husband does not appear to have such a defence. The husband seeks to extract himself from those proceedings by avoiding bankruptcy. He takes the view that if he can compromise the suit with C Company then he may be able to enter into an arrangement with the balance of his creditors which would see him able to continue in business. He was also hoping that he might receive some funds from the Supreme Court fund to pay his creditors, however that will not happen.
I conclude that there should not be any further adjustment between the parties having regard to the section 75(2) matters.
Weighing up all those matters then I conclude that the determination of the case should be that the wife receive the balance of the funds in the Supreme Court after the action by C Company has been determined.
Given that the principal asset is the fund sitting in the Supreme Court and that the only other assets in the balance sheet are the paid legal fees of the parties I propose only to make orders in relation to the Supreme Court fund. I appreciate that would leave the wife in a slightly advantageous position to that of the husband because of the imbalance in the paid legal fees; however, those monies are lost to the wife and do not represent a real asset to her.
What Orders Should be Made?
The husband seeks to achieve, as a bare minimum from these proceedings, the opportunity to be able to stay out of bankruptcy. In order for him to have any chance to do so he needs to have the proceedings with C Company concluded. The wife, if she has control of the proceedings, could negotiate a result which would see her released from the proceedings and the husband with a judgement entered against him for the full amount of the debt. The husband would have no recourse against the wife because any civil action by him against her in relation to the debt would be “a matrimonial cause” and thereby outside the jurisdiction of any court not exercising power under the Family Law Act 1975 (Cth). I therefore conclude that the order framed by the Judicial Registrar which gives the wife control of the Supreme Court proceedings has the potential to work an injustice against the husband. I am further concerned, having heard the wife in the witness box, and having heard the submissions of the husband, that the wife has no realistic appreciation of how the proceedings might be compromised.
I think it reasonable to allow the husband an opportunity on behalf of both the parties to be able to compromise the Supreme Court proceedings. The husband is confident he could settle the action for a payment of $300,000. He should be given a little leeway on that figure given that time has transpired since the husband last had settlement discussions with the liquidator. I propose to allow him to commit up to $350,000 of the fund to settle the case and release each party from any further liability to the liquidator. The husband would do the negotiation himself. He believes he would be able to reach a settlement at least to the point of obtaining a written agreement to compromise within fourteen (14) days. That may be a little optimistic given that he has to negotiate with the liquidator of the plaintiff company who would then need to obtain approval from other creditors.
I propose to allow the husband 28 days to negotiate the settlement and allow him to commit up to $350,000 of the fund in the Court to settle the case.
If the husband does receive a written acceptance of his offer to settle the proceedings in the Supreme Court there should then be given a reasonable period to prepare the necessary court documents and be able to appear before the Supreme Court to conclude the proceedings. I will allow a further six (6) weeks for that purpose. If it is not completed within that time the wife may re-list the matter before the Court to seek further orders only relating to the implementation of the orders made by me.
I certify that the preceding sixty-one (61) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Le Poer Trench
Associate:
Date: 2 May 2008
Key Legal Topics
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Family Law
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Equity & Trusts
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