Wickens and Brewer and Ors

[2014] FCCA 373

FEDERAL CIRCUIT COURT OF AUSTRALIA

WICKENS & BREWER & ORS [2014] FCCA 373

Catchwords:
FAMILY LAW – De facto property claim – respondent dies day after filing – dispute between applicant and deceased’s legal personal representatives about use and occupation of property and management of a business conducted in partnership with deceased – letters of administration contemplated but not granted yet – application under s.90SM(8) contemplated but not yet made – jurisdiction of court to make interim orders in these circumstances – whether s.90AE(2) is source of power – rights and states and property interests of all parties considered – impact of death on partnership – relevance of Partnership Act 1958 (Vic).

Legislation:
Family Law Act 1975 (Cth) – ss 90SM, 79, 114, 90AE, 90TA and Part VIIIAB

Partnership Act 1958 (Vic) – ss 37, 42

Cullen & Cullen [2011] FMCAfam 375
Warby & Warby (2002) FLC 93-091
B Pty Limited & K and Anor [2008] FamCAFC 113

Applicant: MS WICKENS

First Respondent: MR H BREWER

Second Respondent: MR L BREWER

Third Respondent: MR A BREWER

File Number: MLC 10906 of 2013

Judgment of: Judge Altobelli

Hearing date: 12 February 2014

Date of Last Submission: 12 February 2014

Delivered at: Melbourne

Delivered on: 14 February 2014

REPRESENTATION

Counsel for the Applicant: Mr Wraith

Solicitors for the Applicant: HBH Legal

Counsel for the Respondents: Mr Dunlop

Solicitors for the Respondents: Just Whyte & Moore

ORDERS

1. Until further order, the applicant MS WICKENS be entitled to sole use and occupation of the residence and surrounding farming property situated at and known as Property M, in the State of Victoria.

2. Until further order, the applicant MS WICKENS be solely responsible for the management of the farming enterprise conducted upon the said property including but not limited to management of the assets of the partnership previously operated under the style [Mr D Brewer & Ms Wickens].

3. Until further order:

   (a)The applicant maintain clear records of account of all transactions involving the acquisition and sale of partnership assets, the payment of partnership expenses and liabilities, and the receipt and distribution of partnership income; and

   (b)The applicant provide to Mr A Brewer (or subsequent to a grant of probate or letters of administration being made in respect of the estate of the respondent husband, such person or persons as may be appointed executor or administrator thereof) copies of such records of account on at least a quarterly basis.

4. Until further order, the applicant be permitted to have recourse to the assets of the partnership, and any funds deposited in accounts held in the name of the First Respondent for her reasonable day to day support and expenditure.

5. Mr H Brewer, Mr L Brewer and Mr A Brewer do all things and sign all documents necessary to facilitate compliance with orders 1, 2 and 3 hereof.

AND THE COURT NOTES THAT:

A.The matter remains listed in the Warrnambool Circuit commencing 17 March 2014 at 10.00 am in the Duty list.

IT IS NOTED that publication of this judgment under the pseudonym Wickens & Brewer & Ors is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT OF AUSTRALIA

AT MELBOURNE

MLC 10906 of 2013

MS WICKENS

Applicant

And

MR H BREWER

First Respondent

MR L BREWER

Second Respondent

MR A BREWER

Third Respondent

REASONS FOR JUDGMENT

EX TEMPORE

1. The substantive proceedings were initially as between the applicant

   
   

   Ms Wickens and the respondent, Mr D Brewer who is now deceased.  The application was filed on 13 December and supported by a financial statement bearing that date as well as an affidavit of that date.  The matter that actually came before the Court earlier this week is an application in a case by Ms Wickens.  The application was filed on 31 January and is supported by her affidavit sworn 30 January 2014. 

2. The application in a case names as respondents, Mr D Brewer who is deceased, Mr H Brewer, Mr L Brewer and Mr A Brewer.  The orders that are sought in the application in a case:

   1)That until further Order the Applicant, Ms Wickens, be entitled to sole use and occupation of the residence and surrounding farming property situate at and known as Property M, in the State of Victoria.

   2)That until further Order the Applicant, Ms Wickens, be solely responsible for the management of the farming enterprise conducted upon the said property including but not limited to management of the assets of the partnership previously operated under the style [Mr Brewer & Ms Wickens].

   3)That until further order:

   i)The Applicant maintain clear records of account of all transactions involving the acquisition and sale of partnership assets, the payment of partnership expenses and liabilities, and the receipt and distribution of partnership income, and

   ii)The Applicant provide to Mr A Brewer, (or subsequent to a grant of probate or letters of administration being made in respect of the estate of the respondent husband, such person or persons as may be appointed executor or administrator thereof) copies of such records of account on at least a quarterly basis.

   4)That until further Order the Applicant be permitted to have a recourse to the assets of the partnership, and any funds deposited in accounts held in the name of the First Respondent for her reasonable day to day support and expenditure.

   5)That Mr H Brewer, Mr L Brewer, and Mr A Brewer do all things and sign all documents necessary to facilitate compliance with Orders 1, 2 and 3 hereof.

   6)Such further and other Orders as the Court deems appropriate.

Relevant Facts

1. The applicant is 43 years old, describes herself as a [occupation omitted] and lives in [omitted]. She was in a de facto relationship with Mr D Brewer between 1996 and 2013. The applicant appears to have made contributions for the purposes of section 90SM(4) of the Family Law Act such that would entitle her to an order under that section and otherwise pursuant to the provisions of Part VIIIAB of the Act. 

2. Section 90SM(4) states:

   (4) In considering what order (if any) should be made under this section in property settlement proceedings, the court must take into account:

   (a) the financial contribution made directly or indirectly by or on behalf of a party to the de facto relationship, or a child of the de facto relationship:

   (i) to the acquisition, conservation or improvement of any of the property of the parties to the de facto relationship or either of them; or

   (ii) otherwise in relation to any of that last-mentioned property;

   whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the de facto relationship or either of them; and

   (b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the de facto relationship, or a child of the de facto relationship:

   (i) to the acquisition, conservation or improvement of any of the property of the parties to the de facto relationship or either of them; or

   (ii) otherwise in relation to any of that last-mentioned property;

   whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the de facto relationship or either of them; and

   (c) the contribution made by a party to the de facto relationship to the welfare of the family constituted by the parties to the de facto relationship and any children of the de facto relationship, including any contribution made in the capacity of homemaker or parent; and

   (d) the effect of any proposed order upon the earning capacity of either party to the de facto relationship; and

   (e) the matters referred to in subsection 90SF(3) so far as they are relevant; and

   (f) any other order made under this Act affecting a party to the de facto relationship or a child of the de facto relationship; and

   (g) any child support under the Child Support (Assessment) Act 1989 that a party to the de facto relationship has provided, is to provide, or might be liable to provide in the future, for a child of the de facto relationship.

3. The asserted contributions include contributions of a financial and non-financial nature, directly and indirectly to the acquisition, conservation and improvement of property including a farming property at [M] and a partnership that appears to have been carried out on that property. 

4. On 13 December 2013 the applicant filed an application for orders against Mr D Brewer presumably pursuant to Part VIIIAB of the Act which is listed before this Court at Warrnambool on 17 March 2014.  Mr D Brewer died on [date omitted] 2013. 

5. On 24 January 2014 Messrs Whyte, Just and Moore Lawyers of Geelong wrote to the applicant’s lawyers making for present purposes three relevant points.  Firstly, that they:

   act for the estate of Mr D Brewer deceased.

   Nextly, that their client:

   absolutely rejects that there was a partnership in relation to the farming property.

   And, thirdly, that they will be:

   filing an application pursuant to section 79 subsection (8) of the Act.

   And then filing:

   an appropriate response.

   to the application listed 17 March 2014. 

6. On 12 February 2014 Mr John Butler of Messrs Whyte, Just and Moore signed an acknowledgement of service that does the following.  Firstly, it refers to as the person served, Mr D Brewer, deceased, Mr H Brewer, Mr L Brewer and Mr A Brewer.  Secondly, it states:

   I am the lawyer for the person served.  On behalf of my client I acknowledge service of the documents as listed on 12 February 2014 being the return date of the application in a case.

7. On 31 January 2014 the applicant filed an application in a case seeking the various orders above against the named respondents.  Lastly, in terms of relevant facts on 12 February 2014 the matter came before the Court in Melbourne.  Mr Wraith of counsel appeared for the applicant.  Mr Dunlop of counsel appeared for the respondents. 

8. I briefly discuss the relevant facts.  A number of tentative conclusions may be reached acknowledging, however, that these are interim proceedings. 

9. The respondents’ rejection of the partnership that the applicant asserts existed with her late de facto partner is untenable in the face of the documents annexed to the applicant’s affidavit sworn 30 January 2014 which include the partnership balance sheet, profit and loss and livestock trading statement for the year ended 30 June 2012.  Moreover, an accountant’s letter of 28 January 2014 is inconsistent with the dissolution of the partnership after 30 June 2012.  On the evidence before the Court, therefore, it is more likely than not that the applicant’s assertion of the existence of the partnership, at least until the date of death of Mr D Brewer, is correct. 

10. What is also apparent from the relevant facts to which I have made reference is that the respondents intend to participate in the substantive alteration of property proceedings pursuant to section 90SM(8) of the Act and I note the incorrect reference to section 79(8) in the letter. Whilst there appears to have been some uncertainty about this after hearing submissions from counsel the Court’s impression is that the respondents will be seeking Letters of Administration of the deceased’s estate in circumstances where he left no will. The applicant has no direct entitlement to any share of the estate on intestacy.

11. Finally, there can be no doubt from the terms of the respondent’s solicitor’s letter of 24 January 2014 that they directly challenge the applicant’s right to continue the business operated by the partnership or enter and occupy the farm property for that purpose. 

12. What was the impact on the partnership of the death of Mr D Brewer? In the absence of any provision in a partnership agreement that might expressly provide to the contrary the partnership between the applicant and her deceased de facto partner was dissolved on his death. Section 37 of the Partnership Act Victoria 1958 so provides. The applicant’s obligations and rights as surviving partner did not cease, however. Indeed, section 42 of the said Act expressly provides:

    After the dissolution of a partnership the authority of each partner to bind the firm and the other rights and obligations of the partners continue notwithstanding the dissolution so far as may be necessary to wind up the affairs of the partnership and to complete transactions begun but unfinished at the time of the dissolution but not otherwise:
    Provided that the firm is in no case bound by the acts of a partner who has become bankrupt but this proviso does not affect the liability of any person who has after the bankruptcy represented himself or knowingly suffered himself to be represented as a partner of the bankrupt.

1. It is important to note that the applicant’s case is framed on the basis of:

   “the need to have the farm properly managed in the interim.”

   And this comes from paragraph 7 of her affidavit 30 January 2014. 

2. One of the complexities that arise in this case, of course, is the relationship and rights between the surviving partner and the legal personal representatives of the deceased’s partner.  The learned author of Lindley & Banks on Partnership, 19^th Ed. 2010 is quite clear on this issue at paragraph 26-02 at page 873:

   It has already been seen that subject to any contrary agreement the death of a partner dissolves the partnership as regards all the partners.  Although the doctrine of survivorship will not in general apply to any part of the deceased partner’s beneficial share the conduct of the winding up is vested exclusively in the surviving partners.  It follows that the rights of the personal representatives are limited as Lord Lindley explained:

   Unless all the partners had agreed to the contrary when one of them dies his executors have no right to become partners with the surviving partners nor to interfere with the partnership business but the executors of the deceased represent him for all purposes of account and unless restrained by special agreement they have the power by bringing an action to have the affairs of the partnership wound up in the matter in a manner which is generally ruinous to other partners.

3. Prima facie, therefore, the applicant’s right to wind up the partnership without interference from the legal representatives of the deceased is clear although there are equally clear obligations to account. 

4. A further complexity arises from the fact that the farming property on which the partnership was conducted was not owned by the partners but by the deceased only.  The claim, therefore, against the respondents was in their personal capacity.  Before considering the substantive legal issues raised in submissions it is useful to discuss the rights and capacities of the parties to the present application.  On behalf of the applicant it was conceded that she was not and indeed could not seek to bind the estate of the deceased in circumstances where letters of administration had not yet been granted. 

5. The Court finds that they were not only the most appropriate persons to seek orders against but probably the only persons against whom orders could be sought in the period between death and grant of letters of administration. For all practical purposes the respondents have conceded this through their solicitor’s correspondence whether intentionally or not. The respondents have foreshadowed joining the Part VIIIAB proceedings via section 90SM(8) but they must be for the purposes of that section be:

   “Legal personal representatives.”

6. On one view that will not occur until letters of administration are granted.  On another view and indeed the view preferred by this Court based on the decision of Kemp FM as he then was in Cullen & Cullen [2011] FMCAfam 375, 27 April 2011 as applicants for letters of administration the respondents could be joined as a party to the litigation in order to progress the matter by way of procedural orders and pending the grant without the proceedings being suspended. This Court appreciates that the present situation is slightly different to the facts in Cullen where there was a will with a named executor. Here, of course, there is no will but the applicants for the letters of administration are clearly defined and have signalled their intention to apply under section 90SM (8)

7. It is this Court’s view that the principles applied in Cullen nonetheless apply to the facts of this case. The preceding discussion may well be academic, given that section 90SM(10)(f) specifically entitles:

   …any other person whose interests would be affected by the making of the order to become a party to the proceedings. 

8. The rights asserted by the applicant also need to be identified and understood. She asserts a right under section 90SM to have an order made that the Court considers appropriate – section 90SM(1) – and which is just and equitable – section 90SM(3). Whilst her right is not formally recognised until an order is made, there can be no doubt that she is entitled in the course of proceedings to ask the Court to make orders which preserve property pending the determination of her right. Section 90SS(1)(k) or section 114(2A) and, arguably, section 114(3). The property in question must be property of the parties to the de facto relationship.

9. There can be no doubt on the facts of this case so far that the property in question includes the applicant’s share as surviving partner in the partnership assets. It is possible that an alternative basis for her claim is in fact in section 90SL, which entitles her to seek a declaration as to her existing rights in the property, particularly the partnership property. The death of her former party is not an obstacle to her continuing her claim in this case, otherwise there would simply be no purpose in having subsection (8) of section 90SM.

10. The other right the applicant has relates to the partnership assets only and that is a statutory right pursuant to the Partnership Act 1958 of Victoria.  Her rights include, for example, the right to approach a Court having competent jurisdiction to make orders to facilitate the winding up of the partnership.  State Courts exercise jurisdiction under the various Partnership Acts including, of course, in Victoria.  An interesting issue but one which is unnecessary to decide is whether this Court would have accrued jurisdiction to determine any issue between the parties to the litigation insofar as they arise from the now dissolved partnership (Warby & Warby (2002) FLC 93-091) Arguably, there is a single justiciable controversy arising out of the one substratum of facts. Putting aside those interesting and probably academic issues, the irrefutable fact is that the applicant has property, in the form of a chose in action against the respondents, arising out of the partnership.

11. Having set out what the Court considers to be necessary background, it now deals with the first of the substantive issues raised by the respondents who contend that this Court has no jurisdiction to make the orders sought against them. The applicant relied on section 90AE of the Act, which applies to de facto relationships because of section 90TA of the Act. The applicant contended that subsection (2) of section 90AE applies, which states:

    (2) In proceedings under section 79, the court may make any other order that:

    (a) directs a third party to do a thing in relation to the property of a party to the marriage; or

    (b) alters the rights, liabilities or property interests of a third party in relation to the marriage.

12. It is noted that the applicant had to rely on section 90AE because the respondents had not yet applied under section 90SM(8).

1. Given that the respondents have clearly signalled their intention to do so, the issue of jurisdiction is a time limited one.  Of course, if there is no jurisdiction to make the orders, the period in which an order is meant to subsist is irrelevant.  Section 90AE(2) is quite clear in its terms.  Paragraph (a) would, on its face, empower the Court to make orders in relation to the partnership assets currently controlled by the respondents but, prima facie, property of the applicant, at least in part.  Paragraph (b) would, on its face, empower the Court to make orders that alter the rights, liabilities or property interests of the respondents which, in this case, arguably includes the farm from which the partnership was conducted.

2. There is a certain irony in this case that has probably not been lost on the parties in that the respondents appear to be asserting rights in relation to property that is not vested in them, other than by possession, in circumstances where their legal interest is entirely dependent on a grant of Letters of Administration from the Victorian Supreme Court which has not yet occurred. Even if it could not be said that they have property for the purposes of section 90AE(2)(b), they certainly have rights, that is, the right to make an application for letters of administration in respect of an estate whose main asset appears to be the farm property. The necessary connection to the de facto relationship is present; a fact that must be deemed to be conceded by the respondents when they themselves foreshadowed an application under section 90SM(8).

3. The real issue raised in support of the contention that this Court lacks power under section 90AE is based on the Full Court’s decision in B Pty Limited & K and Anor [2008] FamCAFC 113, particularly paragraph 63 of the reasons for judgment, which states:

   In our view, the correct conclusion was that as the wife set out her proposed claim, she did not show that the power conferred by section 90AE could arguably be engaged.  Any order made pursuant to section 90AE(2)(b) must be for the purpose of effecting a division of property between the parties.  The order that the wife proposed was for the purpose of increasing the property of the parties by an unknown amount and on unknown principles.

4. The central contention advanced on behalf of the respondents was that the order sought by the applicant was for the purpose of increasing the property of the parties and not effecting a division of it.  The Court does not accept this submission for three reasons.  Firstly, it overly simplifies what the Full Court said.  A more useful statement of principle is found at paragraph 28 of the reasons, where the Full Court said:

   In our view, all that section 90AE(2)(b) does of relevance to the wife’s claim here is to enable the Court to adjust the property interests of a third party for the purpose of effecting a division of the present property of the parties to the marriage between those parties;  only in the sense that altering interest may leave a bundle or rights or interests that are consequent upon the alteration may the exercise of power create interests.  But these new interests will be the residue of what already existed at law except in this sense;  the subsection does not create a new cause of action derived from rights not previously known to the Court.  In this sense, the subsection resembles a machinery provision, though, in our opinion, it is more than that.

5. Secondly, the present case can be distinguished on its facts. Whereas the wife in the Full Court decision was, in effect but simplifying the facts, asking the Court to make orders against certain third party appointors of trusts where the husband was a discretionary beneficiary and which could result in the creation of property, here the situation is far simpler and far less intrusive on third parties. In effect, she is seeking to preserve an already existing interest in property for the relatively short period between now and when section 90SM(8) is invoked.

6. Thirdly, the submission ignores the reality in this case of the wife’s interest in the partnership assets and her right, which appears to be exclusive of the respondents, to manage the partnership for winding up purposes.

7. The property sought to be the object of orders in this case is tangible property whose title is in a state of flux.  Nonetheless, it can be identified.  It could be valued.  In theory, it could be assigned.  There is nothing to be created in the sense contended for by the respondents.  The property sought to be claimed in B Pty Limited & K could not be identified, valued or assigned and, hence, was not amenable to an order under section 90AE(2).  Indeed, the present case may well be what the Full Court contemplated at paragraph 28 of its reasons when it refers to:

   “…new interests that are the residue of what already existed at law.”

8. Thus, even when all the parties are joined to the section 90SM application pursuant to 90SM(8) and even when letters of administration are granted and fully recognising that each of these events potentially create new interests, they are merely the residue of what already existed at law for the applicants and the respondents.

9. It was not submitted on behalf of the respondents that section 90AE(3) presented an obstacle to the making of the orders proposed. Indeed, that submission could not be sustained on the evidence before the Court. Whilst it is unnecessary to do so, should the Court be wrong in relying on section 90AE(2) as the grant of power, alternative bases for making the orders sought include section 90SS(2), 90SS(5) and section 114(3).

10. Should the Court exercise the jurisdiction that it has?  The respondents’ alternate submission was that the applicant had not established that the jurisdiction should be exercised in her favour.  This argument was always going to be difficult in circumstances where the respondents filed no evidence at all about the potential impact on them of making the orders, or of what steps they are taking to either manage or wind up the farming partnership or preserve the farm property itself.  By contrast, the applicant’s evidence is compelling.  Who is looking after the cattle, who is maintaining the farm property, what steps are being taken to wind up the partnership?

11. Whereas the respondents are silent on these and other pertinent issues, the applicant is very clear in her evidence in terms of understanding the issues and demonstrating a willingness and capacity to address the issues.  Having regard to the evidence before the Court, it finds that the orders sought are appropriate, are modestly framed, are no more than reasonably necessary to preserve the property in question and cause no discernable hardship to the respondents.  In any event, these orders are clearly framed as interim orders. 

12. I turn now to consider the future conduct of the case. The substantive application under section 90SM is listed before this Court at Warrnambool on 17 March 2014. All parties are urged to have discussions, perhaps facilitated by their lawyers, about an orderly administration of both the partnership and the deceased estate, followed by settlement discussions. In this Court’s experience, grief is one of those emotions that greatly distorts clear thinking about issues such as those adverted to in these reasons. As the grief subsides, one can only hope that settlement will be possible and that life will go on. In terms of the orders that the Court makes, the Court makes the orders, being orders 1 to 5 contained in the application in a case filed 31 January 2014 and otherwise stands the matter over to the Warrnambool sittings of this Court on 17 March 2014.

I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of Judge Altobelli.

Associate: 

Date:  10 March 2014