Yavuz and Yavuz & Anor
[2017] FamCAFC 74
•26 April 2017
FAMILY COURT OF AUSTRALIA
| YAVUZ & YAVUZ AND ANOR | [2017] FamCAFC 74 |
| FAMILY LAW – APPEAL – PROPERTY – third party debt claim where the trial judge rejected the cross-appellant’s claim for the repayment of a debt – whether the trial judge erred in addressing this issue – where the debt was said to arise from four different transactions – where error demonstrated only in respect of one. |
| Family Law Act 1975 (Cth) Federal Proceedings (Costs) Act 1981 (Cth) |
Family Law Rules 2004 (Cth)
| CDJ v VAJ (1998) 197 CLR 172 De Winter and De Winter (1979) FLC 90-605 Dougherty v Dougherty (1987) 163 CLR 278 Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 133 ALR 206 Gabel & Yardley (2008) FLC 93-386 Gregory R Ball Pty Ltd v Stead CA (1993) 9 NSWCCR 148 Kittel v Police [2012] SASC 95 Kuru v State of New South Wales (2008) 236 CLR 1 Oates and Crest (2008) FLC 93-365 R v Arundel Justices; Ex parte Jackson [1959] 2 QB 89 Re Minister for Immigration and Multicultural Affairs; Ex parte Durairajasinghan (2000) 168 ALR 407 Rand & Ors & Rand (2008) FLC 93-370 Ravasini and Ravasini (1983) FLC 91-312 Russell v Russell (1999) FLC 92-877 Slapp and Slapp (1989) FLC 92-022 Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In Liq) (1999) 160 ALR 588 Weir and Weir (1993) FLC 92-338 |
| APPELLANT: | Mr Yavuz |
| FIRST RESPONDENT: | Ms Yavuz |
CROSS-APPELLANT/SECOND RESPONDENT: | Dr Yavuz | ||||
| FILE NUMBER: | SYC | 1202 | of | 2009 | |
| APPEAL NUMBER: | EA | 17 | of | 2014 |
| DATE DELIVERED: | 26 April 2017 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | May, Strickland & Kent JJ |
| HEARING DATE: | 26 and 27 April 2016 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 23 December 2013 |
| LOWER COURT MNC: | [2013] FamCA 1038 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Kearney SC |
| SOLICITOR FOR THE APPELLANT: | Broun Abrahams Burreket |
| COUNSEL FOR THE FIRST RESPONDENT: | Mr Bartfeld QC with Mr Puckey |
SOLICITOR FOR THE FIRST RESPONDENT: | Pearsons Lawyers Pty Ltd |
| COUNSEL FOR THE CROSS- APPELLANT/SECOND RESPONDENT: | Mr Richardson SC and Mr Williams |
| SOLICITOR FOR THE CROSS- APPELLANT/SECOND RESPONDENT: | York Law |
Orders
The application in an appeal to adduce further evidence on appeal of the
cross-appellant, Dr Yavuz, filed on 4 February 2016 be dismissed.
Each of the appeal of Mr Yavuz and the cross-appeal of Dr Yavuz from the orders made by Johnston J on 23 December 2013 be allowed.
The orders made by Johnston J on 23 December 2013 be set aside.
The proceedings between Mr Yavuz and Ms Yavuz pursuant to s 79 of the Family Law Act 1975 (Cth) be remitted for rehearing by a judge other than Johnston J.
The claim or entitlement advanced by Dr Yavuz, limited to the extent that such claim or entitlement is founded upon the draw-down in two payments from the personal loan facilities of Dr Yavuz on 23 and 28 June 2010, be remitted for rehearing as part of the determination of the s 79 proceedings.
The Court grants to Mr Yavuz a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to Mr Yavuz in respect of the costs incurred by Mr Yavuz in relation to the appeal and the cross-appeal.
The Court grants to Dr Yavuz a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to Dr Yavuz in respect of the costs incurred by Dr Yavuz in relation to the appeal and the cross-appeal.
The Court grants to Ms Yavuz a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to Ms Yavuz in respect of the costs incurred by Ms Yavuz in relation to the appeal and the cross-appeal.
The Court grants to each of the parties a costs certificate pursuant to s 8 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to each of the parties in respect of the costs incurred by them in relation to the rehearing ordered.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Yavuz & Yavuz and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EA 17 of 2014
File Number: SYC 1202 of 2009
| Mr Yavuz |
Appellant
And
| Ms Yavuz |
First Respondent
And
| Dr Yavuz |
Cross-Appellant/Second Respondent
REASONS FOR JUDGMENT
On 23 December 2013 Johnston J determined property settlement proceedings between Ms Yavuz (“the wife”) and Mr Yavuz (“the husband”) pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”). Their cohabitation and marriage subsisted for about 13 years between 1995 and February 2009. It produced three children who at the time of orders were aged 17 years, almost 15 years and about 12 years respectively.
A central issue in the proceedings concerned claims advanced by the husband and by the husband’s brother, Dr Yavuz (“Dr Yavuz”) who participated as a party in the trial, in relation to a claim or entitlement of Dr Yavuz. As will be further discussed, Dr Yavuz’s claims, supported by the husband, had permutations in the manner of their formulation in the course of the proceedings. In summary and paraphrased form, Dr Yavuz claimed at trial an entitlement to be paid “approximately” $2 million over and above his otherwise equal (with the husband) share of their partnership capital in an unincorporated partnership the husband and Dr Yavuz conducted; and/or in property held by them via their jointly owned and controlled companies TT Pty Ltd (“TT”) and HH Pty Ltd (“HH”) by reason of capital contributed or, alternatively, in loans advanced by Dr Yavuz to the partnership and/or TT in excess of any like contribution by the husband.
It was not in issue at trial that for many years prior to trial the husband had engaged in a business partnership with Dr Yavuz. The trial judge expressed a qualified finding (at [104]) that their partnership had commenced in 1996. It was also not in issue that from the outset of their partnership the husband and Dr Yavuz shared partnership profits equally from a number of businesses conducted by the partnership as well as from investment properties. By the time of trial in April 2013 the partnership had accumulated significant property. That property included some 10 parcels of real estate (itemised at [180]) which, on the trial judge’s findings, had a combined gross value of $10,105,000 subject to secured bank liabilities of $6,285,407 and thus net equity of $3,819,593.
In addition to their partnership property, the husband and Dr Yavuz are equal (50 per cent each) shareholders in TT. The trial judge found (at [180]) that, as at trial, TT owned a real estate agency business worth $600,000 (that business being primarily conducted by the husband); the real property upon which that agency was conducted worth $700,000 and an investment property worth $860,000. The trial judge found that the combined gross value of these assets was $2,160,000 subject to secured bank liabilities of $1,350,000 yielding a net value of $810,000.
The husband and Dr Yavuz are also equal (50 per cent each) shareholders in the company HH. HH is the trustee of the Yavuz Family Trust. At [180] the trial judge records the holding by HH of the one remaining unsold unit in a multi-unit development undertaken by the husband and Dr Yavuz via HH, having a value of $350,000.
It bears emphasis that in determining this case, the trial judge had to determine the appropriate and just and equitable property settlement orders on the available evidence which did not include expert accounting valuation evidence. This is so despite orders being made, originally in the then Federal Magistrates Court as long ago as 6 April 2010 and 31 August 2010 for the appointment of a single expert to undertake a valuation of the husband’s respective interests in each of the partnership and the companies referred to. Order (1) of the order made by Federal Magistrate Walker on 31 August 2010 appointed Ms W of CH Accountants to value the husband’s interest in each of the relevant entities referred to, and Order (2) of that order required the husband to provide “forthwith upon request” all financial records and other information sought by the valuer appointed. Despite those orders, and despite the fact that this trial took place in April 2013 some three years after their making, no single expert accounting valuation of the husband’s partnership interest, his shareholding in the companies or any interest in a trust was available by the time of trial. This is so despite the trial judge’s own order of 30 August 2012 requiring (by paragraph (4)) the parties to “forthwith comply” with the requests of Ms W to allow her valuation to be completed “not later than 24 January 2013”.
By his own acknowledgement the husband controlled, at all material times, from the perspective of the parties to the marriage, their finances. In circumstances where the parties separated on a final basis in February 2009 the husband had, as between the parties to the marriage, effectively sole control of relevant financial information in the years preceding trial. As will be further discussed, it is abundantly clear that the husband’s numerous and protracted defaults in providing information ultimately had the consequence, as referred to above, that no single expert accounting valuation evidence of the husband’s interests in each of the partnership and the companies/trust, was available for the trial.
Importantly, it was in that context that as the reasons for judgment reflect (at [180] and [181]) the trial judge approached the question of the value of the husband’s relevant interests (as had the husband throughout the proceedings) by reference to the net value of the underlying assets held by each entity, in order to determine the value of the husband’s interests in property.
Dr Yavuz sought orders at trial to the following effect, as summarised by the trial judge at [6]:
·That pursuant to s 78 and s 90AD(1) of the Family Law Act 1975 (Cth) (“the Act”) the Court declare that the husband and wife owe Dr [Yavuz] by way of a debt the amount of approximately $2 000 000 or such amount as is found by the Court or otherwise agreed upon;
·That pursuant to s 90AE(1) of the Act the husband and the wife be held equally liable for a debt owed to Dr [Yavuz] in the amount of approximately $2 000 000 or such amount as is found by the Court or otherwise agreed;
·That the parties do all things necessary to ensure that Dr [Yavuz] is provided with, from the net matrimonial pool of assets, the amount of $2 000 000 or such amount as is found by the Court or otherwise agreed; and
·That as an alternative the Court invoke its accrued jurisdiction and make similar orders pursuant to such jurisdiction.
At [87] the trial judge recorded his acceptance of the submissions on behalf of each party “that the Court has jurisdiction to determine Dr [Yavuz’s] claim on the basis that it is necessary to do so in order for the Court to identify the legal and equitable interests of the husband and the wife in property”. There is no challenge on appeal to that conclusion.
Whilst at trial the husband supported Dr Yavuz’s claimed entitlement (in its various formulations), the property settlement order the husband ultimately sought was for a cash payment by him to the wife of $663,853, and the husband’s submissions in support of that order to the effect that such payment would result in the wife receiving or retaining 30 per cent of the parties’ combined property interests, were inconsistent with Dr Yavuz’s claim for $2 million (or any amount approximating $2 million) being deducted from the value of the husband’s 50 per cent interest in partnership property and his 50 per cent shareholding in the companies together with his solely owned property.
The trial judge’s rejection of the claim by the husband and by Dr Yavuz of any entitlement of Dr Yavuz to more than 50 per cent of the partnership capital and to 50 per cent of the shareholding in TT and HH; whether via capital contributions or loans, is a central focus of the challenges in the husband’s appeal and Dr Yavuz’s cross-appeal from the orders made by the trial judge. It is also a central focus of an application by Dr Yavuz pursuant to s 93A of the Act to adduce further evidence on appeal.
Having dismissed Dr Yavuz’s application for the orders he sought, the trial judge proceeded on the basis that, aside from property owned solely by the husband or the wife, the value of the husband’s interests in each of the partnership, TT and HH was to be determined by reference to the net value of the underlying property assets of each. That approach is also the subject of challenges in Dr Yavuz’s cross-appeal with it being contended, inter alia, that the trial judge was wrong to treat the husband as, in effect, a 50 per cent owner of property owned by TT rather than focusing upon the value of his shareholding; and that in respect of HH this approach also ignored the interests of beneficiaries in the Yavuz Family Trust. It is thus contended on appeal that the trial judge’s determination of the value of the husband’s property interests was wrong for these and, as will be discussed, other reasons.
The trial judge determined that the combined net property and superannuation interests of the husband and the wife had a value of $3,032,046. His Honour determined the contribution-based entitlements to be 52 per cent/48 per cent in favour of the husband but made an adjustment of 2 per cent in favour of the wife for “s 75(2) matters” to result in an overall 50 per cent/50 per cent division of the combined “pool” so determined. Each of the trial judge’s determinations in these respects is also the subject of challenges on these appeals.
Orders of the trial judge
By Order (1) the trial judge dismissed Dr Yavuz’s application for the orders he sought.
The substantive orders for property adjustment made by the trial judge were Orders (2) and (8). By Order (2) the husband was ordered to pay to the wife, or cause her to be paid, the sum of $1,506,723. That amount represented 50 per cent of the combined property interests of the husband and the wife as determined by the trial judge, taking into account the property already held or to be retained by the wife. By Order (8), save in respect of enforcement, each of the husband and the wife are otherwise to retain their respective property items and liabilities.
The trial judge made further orders by way of machinery or enforcement of Order (2) in a form ultimately sought at trial by both the wife and by the husband (Orders (3) to (7)). Those enforcement orders included an injunction directed to the husband and Dr Yavuz, in their personal capacities and as directors of the companies, restraining dealings with the partnership property or property owned by each of the companies pending the husband’s payment to the wife being made (Order (3)). In the event the husband failed to comply with the payment order, Order (4) compelled the husband and Dr Yavuz to sell such of “the properties” (as defined to include partnership property and property owned by each of the companies) as required to raise sufficient funds for the payment to be made to the wife with any accrued interest; and if such payment were not made by 30 June 2014, Order (5) compelled the husband and Dr Yavuz personally and as directors of the companies to transfer the subject properties to the wife as trustee for sale. Order (6) governed the order and priority of distribution of sales proceeds of the properties.
As Orders (3) to (7) (inclusive) are a significant focus of Dr Yavuz’s
cross-appeal, it is convenient to set them out in full as follows:
3.That pending receipt by the wife of the payment together with any interest and/or costs due to her pursuant to these orders:-
(a)The husband and [Dr Yavuz], in their personal capacities and as directors of [TT] Pty Limited ACN … and [HH] Pty Limited ACN … (“the companies”):
(i)be and are hereby restrained from dealing with, encumbering, disposing of, gifting and/or alienating any of the real properties detailed in the Schedule attached hereto (“the properties”), save and except to comply with the terms of these orders or in the ordinary course of business; and
(ii)continue to pay, as and when they fall due, all loan instalment repayments of principal and/or interest to the ANZ Bank and all other outgoings of the properties of whatsoever nature and kind.
4.That if the husband fails to comply with order 2 above he and [Dr Yavuz] personally, and in their capacities as directors of the said companies, forthwith do all things and sign all documents necessary to sell such of the properties as are required to raise sufficient funds to make the payment to the wife together with any interest accrued thereon.
5.That in the event that the payment together with accrued interest is not made to the wife in full by 30 June 2014, then the husband and/or [Dr Yavuz] personally and as directors of the said companies forthwith do all things and sign all documents necessary to transfer the properties to the wife to be held by her on trust for sale.
6.That in the event that the properties are sold, including pursuant to the default provisions of these orders, the proceeds of sale shall be applied in the following order and priority:-
(a)Firstly to pay costs of sale which shall include real estate agent’s fees and commissions, and conveyancing costs and disbursements;
(b)Secondly to discharge registered mortgages and securities but excluding any caveats lodged over the properties;
(c)Thirdly to pay to the wife so much of the payment as is outstanding together with interest at the rate prescribed by the Family Law Rules;
(d)Finally, the balance remaining to be paid to the husband and/or [Dr Yavuz] or as directed by them less any costs ordered to be paid in favour of the wife.
7.That in the event that the husband and/or [Dr Yavuz] refuse and/or neglect to execute any deed or instrument necessary to give effect to all or any of the orders made herein the registrars of this Court be appointed, pursuant to s 106A of the Family Law Act 1975 to execute such deed or instrument in the name of the said party and to do all things necessary to give validity and operation to the said deed or instrument.
It is contended by Dr Yavuz in his cross-appeal that a number of errors of principle infected the making of these orders. These will be set out in discussing Dr Yavuz’s challenges on appeal, but suffice to note that it is contended that the trial judge did not have jurisdiction to make Orders (4) to (7) (inclusive).
Overview of the husband’s appeal
By his further amended notice of appeal filed on 18 July 2014 the husband appeals Orders (1) to (6) of the orders made on 23 December 2013.
Grounds 1 to 4 of the husband’s appeal contain various challenges to the trial judge’s adverse findings concerning the husband’s credit; his lack of cooperation in the proceedings; his conduct in relation to the single expert property valuer (a Mr C); his failure to meet his obligations of disclosure including to the single expert accountants appointed to value his financial interests; and to his Honour’s consequential findings to the effect that there is some doubt that the husband’s income and property interests are as he asserted. The adequacy of the trial judge’s reasons for such findings are also challenged.
Ground 5 is a challenge to an asserted inference drawn by the trial judge consequent upon the husband’s previous, and current, accountants respectively not being called to give evidence. Adequacy of reasons is again part of this challenge.
Grounds 6 and 7 as argued contain challenges associated with the trial judge’s disposition of Dr Yavuz’s claimed entitlement and will be dealt with in that context.
Ground 8 is a challenge to the trial judge’s finding as to the value of the real estate agency business owned by TT; and Ground 9 contains several challenges as to the trial judge’s findings including as to certain assets of the husband which the trial judge included as part of his property interests, and as to liabilities the husband claimed which were excluded by the trial judge.
Ground 10 challenges the trial judge’s conclusion that the parties’ respective contribution-based entitlements were appropriately assessed at 52 per cent/48 per cent in favour of the husband. The husband contends that the trial judge failed to give sufficient weight to each of his initial (capital) contributions; his post-separation contributions; and the contributions taken to be made on his behalf by members of his family. It is further contended that the trial judge erred in finding that the wife made an “overwhelming contribution” as homemaker and parent and in finding that the totality of the parties’ contributions were “close to equal overall”.
Ground 11 contends that the trial judge erred in finding that an adjustment for s 75(2) factors in favour of the wife was warranted and erred in failing to make such an adjustment in favour of the husband.
Finally, Ground 12 asserts that the trial judge erred in failing to have regard to whether the orders were just and equitable. The husband contends by this ground that the trial judge proceeded on the footing that Dr Yavuz would arrange to pay any ordered cash payment to the wife to effect property settlement and that the trial judge thus proceeded on the footing that no sales of property would be required. It is contended that sales of property were an inevitable consequence of the amount of the cash payment ordered, and in consequence the trial judge failed to take into account realisation costs and likely capital gains taxation that would be incurred on necessary sales; or the effect of such sales upon the husband’s income earning capacity.
Overview of Dr Yavuz’s cross-appeal
By his further amended cross-appeal filed on 23 July 2014, Dr Yavuz appeals from all of the orders made on 23 December 2013.
Ground 1 comprises eight sub-grounds asserting errors of principle made by the trial judge. These primarily contain challenges, including by reference to s 90AE of the Act, directed to the jurisdiction of the Court to make the enforcement orders (Orders (3) to (7)) against, or affecting, the interests of Dr Yavuz, TT and HH including in circumstances where TT and HH were not parties to the proceedings and HH is the trustee of a trust. On the hearing of the appeal leave was given to Dr Yavuz, there being no objection, to amend one of the sub-grounds, Ground 1.8, to read:
1.8he made orders against or affecting [TT] Pty Limited and [HH] Pty Limited without them being joined as parties to the proceedings and without regard to the interests of their creditors.
(Amendments underlined)
Ground 1.3 contains a discrete challenge asserting a failure by the trial judge to make a formulaic order to take into account capital gains taxation and realisation costs of property sales and “top up tax” on any distribution to the husband from TT, and tax on any distribution to the husband from the trust for the husband to be able to pay the ordered lump sum payment to the wife, and to take any such costs into account in determining the wife’s entitlement.
Ground 1.6 challenges the legitimacy of the trial judge treating the husband’s shareholding in TT as in the nature of a partnership interest in the company’s underlying assets; and Ground 1.7 asserts failures on the part of the trial judge to have regard to the terms of the deed constituting the Yavuz Family Trust and the interests of all beneficiaries.
Ground 2 asserts that the trial judge erred in finding that Dr Yavuz did not have “an entitlement of $2,000,000.00 to be taken into account in determining the property of the parties”. We interpolate that it is perhaps somewhat ironic given the fluidity attending Dr Yavuz’s claim throughout these proceedings, and the husband’s support of each iteration of the claim, that it was only on the hearing of the appeal that counsel for Dr Yavuz modified the quantum of that claim on his behalf to a maximum amount of $1,693,419.75.
Grounds 3 and 4 also address challenges to the trial judge’s determination of the claims advanced by Dr Yavuz with the challenge in Ground 4 including a challenge as to the adequacy of reasons provided by the trial judge for rejecting Dr Yavuz’s claimed entitlement.
As earlier noted, in support of his challenges to the trial judge’s dismissal of any entitlement in his favour, Dr Yavuz applies to adduce further evidence on appeal from himself and the accountant for the partnership as to, inter alia, rectification to the partnership accounts carried out post-trial and
post-judgment. A separate and discrete topic of the further evidence sought to be adduced on appeal relates to Dr Yavuz having instructed his lawyers at the time to seek an adjournment of the trial and that, apparently contrary to those instructions, no adjournment was sought. We received argument on the application for further evidence in conjunction with the argument on the substantive complaints on appeal, and the wife’s opposition to each of those complaints, so we will likewise deal with the application for further evidence in the course of dealing with the substantive complaints.
Whilst not the topic of any ground of appeal as particularised, Dr Yavuz’s summary of argument and, in particular, the content of his counsel’s oral argument on the hearing of the appeal, agitated complaints concerning Dr Yavuz’s late inclusion as a party to the proceedings and late notice to him of the orders ultimately sought by the wife against, or affecting, his interests. We will deal with these complaints in the course of addressing the substantive matters.
Did the trial judge make orders exceeding jurisdiction?
It is convenient to first deal with this topic given the potential need for a
re-exercise of discretion or remitter for rehearing of the proceedings to make substantive property adjustment orders if it be established that orders made by the trial judge were in excess of jurisdiction, irrespective of the merits or otherwise of other grounds.
We have earlier set out the full terms of Orders (3) to (7) of the orders made by the trial judge.
There was no contention at trial, nor was any finding made by the trial judge, to the effect that Dr Yavuz did not have a legitimate interest as the legal and beneficial owner of 50 per cent of the partnership and of his 50 per cent shareholding in TT. That is, whilst dispute obviously surrounded Dr Yavuz’s claimed entitlement over and above his 50 per cent interest in each, there was no dispute about his 50 per cent legal and beneficial ownership of each.
However, it can be seen that the operative effect of Orders (4), (5) and (6) (given the definition of “the properties” in Order (3)(a)(i)) is to attach property interests other than those of the husband and/or of the wife in order to satisfy the wife’s s 79 entitlement to be paid the cash amount. For example, the operative effect of Order (5) is to require each of the husband, Dr Yavuz, TT and HH to transfer “the properties” to the wife as trustee for sale; and the operative effect of Order (6) is to prioritise payment to the wife of her s 79 entitlement out of sales proceeds, in advance of payment of the existing entitlements of the respective legal and beneficial owners.
We find merit in the contentions of counsel for Dr Yavuz that the only juridical source of power for each of Orders (4) to (6) (inclusive) is s 90AE(2) of the Act and that the mandatory requirements of s 90AE(3) and (4) must be fulfilled as a precondition to the exercise of that power. We accept the submission that the trial judge’s errors of principle in this respect are analogous to the errors addressed in Rand & Ors & Rand (2008) FLC 93-370, including as to the adequacy of reasons if it is that juridical source of power which is to be relied upon.
However, counsel for the wife did not seek to defend the legitimacy of these orders by reference to s 90AE of the Act, nor did counsel contend on behalf of the wife that the orders were legitimate as an exercise of accrued jurisdiction. Rather, counsel for the wife sought to argue that s 79 in conjunction with s 80(1)(c) provided jurisdiction for the making of these orders.
Section 31 confers original jurisdiction on the Court with respect to, inter alia, “matrimonial causes” as defined in s 4(1) of the Act. Section 4(1) thus prescribes the categories of proceedings (here under (ca)) which the Court is empowered to entertain and thus defines the Court’s jurisdiction.
Section 79 is the source of power for the Court to make orders in a proceeding within the Court’s jurisdiction altering the interests of the parties to a marriage in the property of the parties to the marriage or either of them. It is well settled that s 80 is not a source of jurisdiction independent of s 79 (see, for example, Gabel & Yardley (2008) FLC 93-386). Section 80(1)(c) provides that the Court, in exercising its powers under Part VIII of the Act, may:
(c)order that payment of any sum ordered to be paid be wholly or partly secured in such manner as the court directs.
With respect to the argument of counsel for the wife, the orders referred to go well beyond the provision of security for a payment. The operative effect of these orders once activated is as already referred to, namely, to attach and alter property rights of third parties.
In our judgment, counsel’s submission that s 79 in conjunction with s 80 provides jurisdiction for these orders is confounded by High Court authority as to the scope of s 79 (see, Dougherty v Dougherty (1987) 163 CLR 278 and the cases therein cited).
There is no basis for reading into s 80(1)(c) the interpretation contended for by counsel for the wife given that Part VIIIAA of the Act, introduced by legislative amendments in 2003, makes specific provision for orders and injunctions binding third parties, and s 90AE is the relevant specific provision with respect to orders under s 79 binding a third party. As already noted, the subsections of that section are prescriptive as to thresholds to be met for such power to be exercised. There is no suggestion that those thresholds were met here.
We therefore reject the contention of counsel for the wife that s 79 read in conjunction with s 80(1)(c) founds jurisdiction for these orders. Counsel for the wife further contended that the defects in the orders, specifically Order (6)(c) which prioritises payment to the wife of her s 79 entitlement to a cash payment over the interests of Dr Yavuz and the corporate entities in the subject properties, could be corrected under the slip rule (r 17.02 of the Family Law Rules 2004 (Cth) (“the Rules”)). On the hearing of the appeal, counsel for the wife tendered a minute of proposed order amending the orders which he sought to characterise as a slip rule amendment.
We are not persuaded that the principles relevant to the operation of the slip rule are engaged with respect to the subject orders. Those principles are set out by Lockhart J in the decision of the Full Court of the Federal Court in Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 133 ALR 206 at 209-211, which was adopted with approval by the Full Court of this Court in Russell v Russell (1999) FLC 92-877 at [67] and [68]. Specifically, we are not persuaded that the proposed amendment is one upon which no real difference of opinion can exist or is not a matter of controversy; nor that it can be concluded that the mistake is not the consequence of a deliberate decision. Moreover, we accept the submission of counsel for Dr Yavuz that amendment under the slip rule provides no answer to orders made in excess of jurisdiction.
However, counsel for the wife further contended, in the alternative, that as Order (3)(a) in its inclusion of Dr Yavuz and Orders (4) to (7) of the orders made by the trial judge are purely machinery or enforcement or consequential orders made to give effect to the substantive payment order in Order (2), those offending orders could be excised from the orders leaving the other orders intact. That would involve, on counsel’s submission, the appeal being allowed in part to vary Order (3)(a) to excise the reference to Dr Yavuz in that order, and otherwise to set aside Orders (4) to (7), leaving to the wife the enforcement of Order (2) in default of the husband’s compliance.
Counsel for Dr Yavuz contended that an inevitable consequence of Orders (3)(a) and (4) to (7) being flawed for want of jurisdiction, was the setting aside of those orders and a rehearing of the proceedings or re-exercise of the discretion to make substantive property orders. No authority was cited for the proposition that it automatically followed that the setting aside of those orders must result in a rehearing/re-exercise of discretion. However, there is no discretion to be exercised in the determination, as a matter of law, whether orders made exceed jurisdiction, and we do not accept that proposition.
In our judgment, if Orders (4) to (7) are properly characterised not as substantive s 79 orders, but as consequential or machinery orders, or as enforcement, it would not follow that a rehearing of the proceedings or a
re-exercise of the discretion to make substantive property orders is the necessary consequence of setting aside of those orders made for want of jurisdiction, if those orders are severable.
The distinction between substantive orders effecting an alteration of property interests, on the one hand, and machinery or consequential provisions in orders on the other, is well established as is the power to vary the latter, as distinct from the former (see, for example, Ravasini and Ravasini (1983) FLC 91-312 and Slapp and Slapp (1989) FLC 92-022).
In our judgment, consistent with our acceptance of Dr Yavuz’s contention that Orders (4) to (7) were not substantive property adjustment orders made pursuant to the jurisdiction conferred by s 79, (in conjunction with the powers in s 80), the setting aside of Orders (4) to (7), and the variation of Order (3) would not involve the making, variation or setting aside of substantive s 79 orders.
There is authority for the setting aside, on appeal, of severable orders made in excess of jurisdiction, leaving other orders intact (see, for example, R v Arundel Justices; Ex parte Jackson [1959] 2 QB 89; Kittel v Police [2012] SASC 95 per Doyle CJ; and Oates and Crest (2008) FLC 93-365).
It follows that Dr Yavuz’s appeal should be allowed, at least in part, to vary Order (3) and to set aside Orders (4) to (7) as orders made in excess of jurisdiction, but as severable orders, this would not automatically result in the need for a re-exercise of discretion to make substantive s 79 orders, either by this Court or via a remitter of the proceedings for a rehearing for that purpose.
To the extent that Dr Yavuz’s application to adduce further evidence on appeal is founded upon the contention that he gave instructions to seek an adjournment of the trial, in the context of his contention of having been given insufficient notice of the orders sought by the wife adversely affecting his interests, that foundation is removed by the variation of Order (3)(a) and the setting aside of Orders (4) to (7) (inclusive).
Did the trial judge err in his treatment of the claimed entitlement of Dr Yavuz?
For the purpose of the trial (in April 2013) the husband and Dr Yavuz joined in advancing a Shareholders Agreement entered into by them and TT as parties more than three years earlier, on 19 January 2010, as the foundation of the respective legal rights of the parties to that agreement and, centrally, Dr Yavuz’s claim or entitlement.
There would appear to have been no issue that the husband and Dr Yavuz had the benefit of such legal and accounting advice as they sought to obtain in entering into the Shareholders Agreement. It is a document prepared by lawyers.
Whilst it is unnecessary to set out the full terms, meaning or effect of the Shareholders Agreement, some references to its terms are relevant.
Recital C records:
The parties have agreed to enter into this agreement for the purpose of regulating their rights between one another, to ensure repayment of monies paid by [DR YAVUZ] to the company in additional [sic] to those paid by [MR YAVUZ] and to ensure orderly succession to the control of the company.
(Emphasis added)
Clause 3 of the agreement provides that the husband must be the managing director of the company (TT) for any period when his assets secure the debts of the company; and it reposed in the husband “exclusive power to make all decisions of the directors after consultation with the other directors”. It is relevant to Dr Yavuz’s complaints as to his late involvement in the proceedings and late notice as to his rights being affected, that the agreement vested the husband, a party to the proceedings from the outset, with “exclusive power” to make directors’ decisions for TT.
Clause 7 of the agreement records the agreement of the parties, relevantly, that:
·Dr Yavuz has provided “finance” to the company “interest free” in excess of the “finance” provided by the husband (clause 7(a));
·The amount of such finance is $1,350,000 (clause 7(c));
·That amount was “partly obtained” from the sale of properties owned by Dr Yavuz in W and Sydney with the proceeds of such sales being used to purchase properties in the name of the company and in partnership with the husband (clause 7(d));
·The company and the husband covenanted to repay the sum to Dr Yavuz on demand (clause 7(g)).
Clause 8 contains a personal guarantee by the husband to Dr Yavuz to repay the amount of $1,350,000.
The trial judge’s discussion and findings about Dr Yavuz’s claim appears at [86] to [115]. Commencing at [97] is discussion and findings concerning the Shareholders Agreement. At [98] the trial judge records a finding that Dr Yavuz was aware of the wife having commenced property settlement proceedings prior to his attendance upon lawyers to prepare the Shareholders Agreement. At [108] the trial judge records:
108.I must say that the view I have about this matter is that it is more probable than not that the 19 January 2010 document was brought into existence because the husband and Dr [Yavuz] were concerned that the wife had commenced proceedings. In my view it is more probable than not that the 19 January 2010 document was brought into existence in an endeavour by Dr [Yavuz] and the husband to have some evidence to support their assertions.
There is no challenge on appeal to the findings at [108] nor indeed did either the husband or Dr Yavuz maintain on appeal any reliance upon the Shareholders Agreement as governing their rights or the claim asserted in favour of Dr Yavuz.
Indeed it can be seen that at trial their joint case initially advanced that the Shareholders Agreement, recording as it does that the entitlement of Dr Yavuz derives from “finance” provided to TT, morphed into a different contention. At [109] the trial judge recorded:
109.In any event, the 19 January 2010 [agreement] is inaccurate in the sense that it purports to contain an acknowledgement that Dr [Yavuz] had advanced the $1 350 000 to the company [TT] whereas both Dr [Yavuz] and the husband asserted that the money had been used for the purchase of partnership property. Neither Dr [Yavuz] nor the husband were able to explain in any detail how the amount of $1 350 000 had been arrived at.
110.The husband conceded that he had been unable to locate any agreement or other document about the alleged debts owing between him and his brother one way or the other.
At [99] the trial judge recorded that during cross-examination the husband “was asked how he and his brother had arrived at the sum of $1 350 000. The husband said that the accountant worked it out”.
At [100] the trial judge referred to the 7 June 2010 letter from the accountant for the husband and Dr Yavuz appearing as Annexure “I” to the husband’s affidavit filed on 20 February 2013 for the trial as follows:
100.By a letter dated 7 June 2010, the accountant for the husband and Dr [Yavuz], a Mr [L] of [TT Accounting Services Pty Ltd] indicated that Dr [Yavuz] had personally contributed approximately $1 350 000 “extra” money to the partnership. He also said that Dr [Yavuz] and the husband had “always” made it known to him that this money would be repaid in the future to Dr [Yavuz] if and when the partnership was to be dissolved “as these were extra funds from Dr [Yavuz].”
Notably, in setting out the basis of the calculation of “extra moneys” contributed by Dr Yavuz, the 7 June 2010 letter of the accountant refers to the 2002 sale by Dr Yavuz of two properties owned by him at 21 and 23 X Street, WG and the 2007 sale of the BW property. Like the Shareholders Agreement which refers to “the sale of properties owned by him [Dr Yavuz] in [W] and Sydney” (which can only be interpreted as a reference to real properties) there is no reference in the letter to the sale proceeds of a taxi licence in the 1998 financial year which ultimately at trial and on appeal was included in the claim advanced by Dr Yavuz. The evidence reveals that the total of net sale proceeds of the transactions referred to in the accountant’s letter is $1,171,218.60.
In relation to the inclusion of the sale proceeds of $180,500 of a taxi licence sold by Dr Yavuz in the 1998 financial year, it is notable that the husband’s evidence under cross-examination at trial about the calculation of the total amount of $1,350,000 included this exchange:
…Let’s talk about the debt. Now, what do you owe your brother?‑‑‑I believe it was in my initial affidavit about the one point – it was 1.35, and then there was extra borrowings of 340‑odd thousand dollars, 341, and then I believe now that he has put a claim in for the tax [sic] that he also had as well.
(Emphasis added)
It is passing strange not only that the husband apparently only belatedly became aware of a “claim” deriving from events in 1998 but that the accountant who apparently “worked out” the amount of $1,350,000, seemingly for the purpose of the Shareholders Agreement dated 19 January 2010, makes no reference to the proceeds of the 1998 sale of a taxi licence, in detailing in the letter written some five months later the transactions said to give rise to the total of $1,350,000.
Thus, on the evidence, the chronology is that the husband and Dr Yavuz joined in contending (via the Shareholders Agreement) as at 19 January 2010 that $1,350,000 in “finance” to the company TT had been provided by Dr Yavuz, with the obligation to repay being that of TT, guaranteed by the husband. On the trial judge’s unchallenged findings at [98] and [108] the Shareholders Agreement was brought into existence after the wife had, to the knowledge of the parties, instituted the subject proceedings and “was brought into existence in an endeavour by Dr [Yavuz] and the husband to have some evidence to support their assertions”. Some five months later, on 7 June 2010 the accountant, whom the husband says calculated the amount of $1,350,000, authors a letter addressed to “whom it may concern” characterising the $1,350,000 not as loans by Dr Yavuz to TT, repayable on demand, but as capital contributions by Dr Yavuz to the partnership repayable “in the future … if and when the partnership was to be dissolved”.
Both the Shareholders Agreement and the (inconsistent) accountant’s letter were advanced at trial by the husband and Dr Yavuz. Neither document explains how the sum of $1,350,000 is arrived at. Moreover, neither the financial records of TT nor of the partnership reflected a disparity of capital owing to Dr Yavuz or loans owing to him. Commencing at [111] the trial judge recorded:
111.The husband and Dr [Yavuz] have not conducted their business affairs on the basis of any such liability. The partnership accounts do not support their assertions about this liability. The detailed balance sheet for the partnership of the husband and Dr [Yavuz] as at 30 June 2009 prepared by their accountants [AA Accounting Services Pty Ltd], shows Proprietors’ Funds as being $805 060 for Dr [Yavuz] and $657 860 for the husband. This is a differential of $147 200. The differential as at 30 June the previous year was exactly the same. And the differential for the same time the previous year was the same. This is a vastly different amount from the $1 350 000 differential now asserted by the husband and Dr [Yavuz].
112.And the financial statements make no reference to any loan account which might support the assertions of the husband and Dr [Yavuz]. The husband also conceded that the Income Tax Returns for the company [TT] Pty Limited did not include any reference to any loan account showing money owed by him to Dr [Yavuz].
113.In addition, I note that when the husband and Dr [Yavuz] applied to the ANZ Bank in July 2009 for 2 loans to a total of approximately $3 500 000 there was no mention of any such liability by the husband to Dr [Yavuz].
The above discussion serves to emphasise that in the context of the husband and Dr Yavuz bearing the onus of proving the disputed allegation made, namely as to Dr Yavuz being owed “approximately $2,000,000”, notably asserted to be a liability to him owing not only by the husband but also by the wife, there were fundamental difficulties and internal inconsistencies in the evidence in support of the claim which the trial judge had to consider.
The further evidence Dr Yavuz seeks to adduce on appeal, via his own affidavit and that of the accountant, Mr L, adds in some respects to the evident inconsistencies in the claim advanced.
In his affidavit filed on 4 February 2016, Mr L does not address at all, or even refer to, his letter of 7 June 2010. Nor does he refer to a calculation of the amount of $1,350,000 attributed to him by the husband in his evidence at trial, the amount used for the Shareholders Agreement, and stated in his letter.
It will be recalled that in his letter of 7 June 2010 Mr L detailed the real property transactions (sales) in 2002 and 2007 respectively, and recorded in relation to the asserted amount of $1,350,000:
[Dr Yavuz] and [Mr Yavuz] have always made it known to me that this money would be repaid in the future to [Dr Yavuz] if and when the partnership was to be dissolved as these were extra funds from [Dr Yavuz].
(Emphasis added)
That assertion appears to be irreconcilable with his affidavit sought to be relied upon as further evidence. In his affidavit in addressing each of the respective property sales and deposit of sale proceeds to or for the benefit of the partnership, Mr L deposes:
I was instructed to record the receipt by the Partnership … as capital introduction by [Dr Yavuz] and [Mr Yavuz] to the Partnership not as a loan by [Dr Yavuz].
(Paragraphs 10 and 13 - emphasis added)
The further apparent inconsistency is that the 7 June 2010 letter refers to the amount of $1,350,000 yet, as already noted, makes no reference in detailing relevant transactions to Dr Yavuz’s sale of the taxi licence/plate in the 1998 financial year and the sale proceeds of $180,500. However, it is only by inclusion of that amount with the real property net sale proceeds earlier referred to, that an amount approximating $1,350,000 is arrived at. Yet reference to Mr L’s affidavit at paragraphs 5 to 7 yields at least the ready inference that it is only in hindsight that there is a reference to Dr Yavuz’s 1998 income tax return; Mr L deposes, “[f]rom my review of [Dr Yavuz’s] income tax return I am now aware that during the financial year ending 30 June 1998, [Dr Yavuz] sold a taxi plate for the sum of $180,500” (emphasis added). At paragraph 7 Mr L records that the proceeds were recorded “as an introduction of capital by both partners”. At paragraph 18 Mr L deposes that in respect of all relevant transactions for each financial year he was instructed, in each year, by both the husband and Dr Yavuz “to record the monies introduced as capital introduction by the Partners.”
This trial having taken place in April 2013, with judgment being delivered on 23 December 2013, Mr L deposes at paragraph 19 of his affidavit that it was only in “late 2014” that he was instructed by Dr Yavuz to rectify the recording of the transactions not only to adjust their character from capital contributions to the partnership by both parties, but to characterise them not as capital but as loans made by Dr Yavuz to the partnership.
Reference to Dr Yavuz’s affidavit filed on 4 February 2016, also sought to be adduced as further evidence on appeal, yields further apparent inconsistency. Nowhere within that affidavit does Dr Yavuz offer any explanation as to why he positively instructed Mr L, at the time of each transaction in each of the relevant years, that the subject contributions were to be recorded as capital contributed by both partners. Moreover, paragraphs 8 and 13 of this affidavit record:
8.During the course of the family law proceedings, I became aware that all of the monies that I advanced to the Partnership including the taxi plates [sic] proceeds were recorded as capital introduced by both partners. This was incorrect and resulted in significant injustice to me as I have applied my own monies from my own personal exertions to the Partnership and this should have been reflected in the accounts as a loan by me.
…
13.Again, the accountant recorded the monies that I withdrew from my own personal mortgage account and I advanced by way of a loan to the partnership, he recorded it as a capital introduction by the Partners. This was wrong and should never have been recorded that way. I am not an accountant and did not understand these matters until the family law proceedings where I raised the issue about the amounts that I advanced to the Partnership and which I wanted to be repaid back to me only to discover that the amounts I advanced had been recorded in the Financials as capital introduced by [the husband] and me. This was wrong as it was my own money that I advanced to the partnership and should have been recorded against my name as a loan that the Partnership owes me.
Further, at paragraph 26 of that affidavit Dr Yavuz deposes:
26.…I did not understand or appreciate what the accountant had done over the years. I kept my own record of what the Partnership owed me and I proceeded at all times that the Partnership will pay me my entitlement first before any partnership funds are split between [the husband] and me.
Those depositions appear to be inconsistent with the following contents of Dr Yavuz’s affidavit sworn on 3 April 2013 and relied upon by him for the trial:
21.Both homes [21 and 23 X Street, WG] were sold in May 2002 for the sum of $840,000 to a developer. With these monies the proceeds again went into reducing debt and purchasing a commercial property bought in my and my business partners [sic] names. Our accountant was aware and we had signed an agreement which I cannot find.
…
28.I then sold [the BW property] in 2007 for the sum of $689K and these monies went to pay off debts and to help purchase another commercial property with my business partner. It was always known to our accountant [Mr L] and our previous accountant [Mr K] that we had an agreement that these extra funds contributed by me would be paid. At this stage I cannot find the original agreement done by [Mr K] but when my current accountant [Mr L] took over I was under the impression he may have the first copy that was signed. He has always been fully aware of the monies contributed by myself and was always fully aware that these monies would be reimbursed to me in addition to my 50% stake of the partnership.
…
32.It was always agreed that if and when the partnership would break up that I would be entitled to the extra monies that I contributed as per signed document by [Mr K] which I am unable to locate. However my current accountant has always been aware of this agreement as per his letter. This information was always known to our accountant. I knew we had an agreement as well as proof of sale of assets and bank documents. I was not concerned that if the partnership would cease that I would be entitled to the extra monies. I thought this would have been common knowledge. It was a known fact between the business partners, the bank, the accountant and a signed agreement. What more could have I done?
(Errors as in original)
There is no explanation or reconciliation of these competing versions as to why it would be that there was no reflection of disparity in the annually prepared partnership accounts as to capital contributions by the respective partners, or the recording of loans, yet it is asserted that it was always known by the respective accountants that which is attributed to them by Dr Yavuz.
Perhaps there exists some explanation which presently eludes us for the apparent inconsistencies we have identified, but it is obviously highly relevant to the discretion to admit further evidence on appeal that these apparent inconsistencies exist. That is in addition to the feature that the further evidence, in terms of the legitimacy of the rectification of the accounts that has been carried out long after the trial judgment is disputed by the wife. We do not consider that the remedial purpose of s 93A of the Act referred to and discussed by the High Court in CDJ v VAJ (1998) 197 CLR 172 (“CDJ”), extends to allowing litigants advancing a positive case at trial on the basis of evidence assembled more than three years in advance of the trial and proffered by them in the trial, to fundamentally reconstruct the evidence post-trial and judgment for the purpose of seeking to adduce further (disputed) evidence on appeal. In this context it is to be remembered that Dr Yavuz was not merely a passive participant in the trial. He advanced at trial a positive case via his application for the orders earlier referred to that the husband and the wife pay him “approximately $2,000,000” or such lesser sum as determined by the Court.
We have already addressed Dr Yavuz’s application to adduce further evidence concerning his instructions to seek an adjournment which in our judgment is rendered otiose by our determination that the orders made in excess of jurisdiction should be set aside. The balance of Dr Yavuz’s application to adduce further evidence on appeal ought be refused. It does not demonstrate error on the part of the trial judge in his Honour’s treatment of the subject issue, nor does his application engage any of the criteria identified in CDJ where the discretion to admit further evidence on appeal is appropriately exercised in favour of its receipt.
In argument of the appeal, counsel for Dr Yavuz formulated his claimed entitlement as loans owing by the partnership to Dr Yavuz based upon the following transactions, the proceeds of which were applied to or for the benefit of the partnership:
A
Sale proceeds of taxi plate/licence in 1998 financial year
$180,500.00
B
Net sale proceeds of 21 and 23 X Street, WG properties in the 2003 financial year
$520,246.60
C
Net sale proceeds of the BW property in the 2008 financial year
$650,972.09
D
Draw down in two payments from Dr Yavuz’s personal loan facilities in the 2010 financial year (on 23 and 28 June 2010)
$341,701.06
TOTAL
$1,693,419.75
It is clear that the trial judge was aware of and recognised the relevant factual matters as to each of the above transactions. At [9], [13] and [86] the trial judge records the facts in relation to A above. At [10] and [20] the facts in relation to the transaction in B above are recorded and at [12] and [25] the facts in relation to C are recorded. Finally, at [34] is the reference and recording of the transactions in D above.
Whilst in argument of the appeal each of counsel for the husband and Dr Yavuz addressed challenges to the trial judge’s approach to the total outlined above and the transactions in combination, there was also argument directed specifically to item D above, Dr Yavuz’s draw down in two payments from his personal loan facilities in the 2010 financial year. In summary, it was contended that the trial judge erred in not giving discrete consideration to item D before rejecting the claimed entitlement in toto. That approach was also agitated in submissions before the trial judge at trial. We will return to this topic shortly.
The reasons reflect that the trial judge was cognisant of, and accepted, each of the factual premises that were relied upon by Dr Yavuz and by the husband as to the foundation for the (reframed) claim by Dr Yavuz. It will be seen that what the trial judge did not accept was that the husband and Dr Yavuz had established these contributions to be in excess of those of the husband.
The trial judge recorded findings, in the recounting of the chronology of relevant events, as to the relevant history of business dealings between the husband and Dr Yavuz including via their partnership and via the companies. Relevantly, aside from the transactions already referred to:
a)Between about 1987 and mid-1996 the husband drove the taxi purchased by Dr Yavuz in 1987 on a full-time basis (at [9] and [11]). We interpolate that whilst Dr Yavuz also drove the taxi whilst a student, Dr Yavuz commenced his professional practice in 1995 and thereafter engaged as a professional (at [8]);
b)In mid-1996 the husband commenced operating the T business, which had been purchased by Dr Yavuz, on a full-time basis. As earlier noted, the trial judge expressed a qualified finding at [104] that the partnership between the husband and Dr Yavuz commenced in 1996. We interpolate that the need for the finding to be qualified is plainly attributable to the paucity of the evidence of the husband and Dr Yavuz generally in providing any real detail of their arrangements from time to time including any agreed terms from time to time pursuant to which their business arrangements were conducted, including via the partnership;
c)The T business was so conducted until it was sold in 2001 and the proceeds were used to purchase the N business, likewise conducted thereafter by the husband (at [11] and [18]);
d)In 2002 a second business was established within the N business premises and was conducted until its sale in 2005. The proceeds of sale of the N business premises in 2004 were applied to purchase the real estate business and premises (by TT) primarily operated by the husband from commencement in December 2004 and continuing as at the trial (at [20] and [21]);
e)In 2009 the husband and Dr Yavuz, via HH, purchased the MW Property and thereafter developed and sold residential units, with only one unit remaining unsold at trial. The husband and Dr Yavuz initially borrowed $2,530,000 (in 2009) to fund this project; the first sale of the 22 units constructed occurred in January 2012; and when the second last of the units was sold in January 2013 the total of (gross) proceeds of sale received to that point was $5,800,000 (at [30], [45] and [49]).
Having made significantly adverse credit findings concerning the wife (at [53] to [63]), the trial judge addressed reservations about the reliability of the husband’s evidence from [64] to [68]. Within those findings the trial judge recorded at [67]:
…Yet there was still a dearth of relevant documents and the husband’s affidavit, while replete with criticisms of the wife was almost empty of any details about the acquisition of assets…
As the trial judge’s findings adverse to the husband’s reliability as a witness can be seen to form at least part of the basis for the trial judge rejecting Dr Yavuz’s claimed entitlement, and at least some of those central findings are the subject of the husband’s challenges on appeal in Grounds 1 to 4, it is convenient to now deal with those challenges.
Ground 4 contends that the trial judge erred in failing to provide sufficient reasons for making a finding adverse to the credit of the husband. There is ample authority for the proposition that there are limits to the extent to which it is necessary for a judge to articulate reasons concerning credit findings.
For example, in Re Minister for Immigration and Multicultural Affairs; Ex parte Durairajasinghan (2000) 168 ALR 407 McHugh J said at [67]:
In addition, the prosecutor alleges that the tribunal breached s 430(1) by failing to set out reasons for its finding that the prosecutor’s claim that members of PLOTE tried to recruit him were “utterly implausible”. However, this was essentially a finding as to whether the prosecutor should be believed in his claim – a finding on credibility which is the function of the primary decision-maker par excellence. If the primary decision-maker has stated that he or she does not believe a particular witness, no detailed reasons need to be given as to why that particular witness was not believed. The tribunal must give the reasons for its decision, not the sub-set of reasons why it accepted or rejected individual pieces of evidence…
See also, Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 280 per McHugh JA.
In our judgment the trial judge adequately explained his conclusion for finding the husband to be an unreliable witness and there is no merit in this ground.
In argument of Ground 1 and its six separate sub-grounds, counsel for the husband sought to engage us in a fine-grained analysis of selections of evidence in respect of a number of disparate matters each said to constitute errors in findings of the trial judge or error in the form of failing to provide adequate or sufficient reasons for findings.
For the reasons just discussed as to the need for reasons in relation to credit findings, and for those which follow, it is in our judgment unnecessary and potentially unsafe to engage in the kind of analysis counsel suggested for the purpose of dealing with these grounds. By potentially unsafe we refer to, for example, the cautions expressed by Kirby J in State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In Liq) (1999) 160 ALR 588 at 154 as to the advantages in fact-finding which a trial judge enjoys and the dangers inherent in an appellate court being taken to selective passages of evidence to advance arguments. Moreover, as observed by Handley JA in Gregory R Ball Pty Ltd v Stead CA (1993) 9 NSWCCR 148:
Appellate courts exist to remedy errors of law and miscarriages of justice not to dot “Is” and cross “Ts” in the reasons for judgment of trial judges.
The central and ultimate findings of this experienced trial judge, who became seized of the proceedings from the “first day of trial” within the meaning of the Rules on 10 January 2012, and then and thereafter made directions and orders in advance of the trial proper in April 2013 were, in summary, as regards the husband:
a)That he was an unreliable witness – a finding open and adequately explained and which need not be further discussed;
b)That he had failed in his duty to make full and true disclosure;
c)That he had failed in material respects to comply with orders/directions concerning single expert evidence.
In relation to Grounds 2 and 3 it is trite, by reference to r 13.01 of the Rules that a party’s duty of disclosure:
·Is a duty owed to both the Court and to each party;
·Is to give full and frank disclosure, not only of documents, but of “all information relevant to the case”;
·Must be met in a timely way.
Division 13.1.2 of the Rules specifies what is required for full and frank disclosure as to a party’s financial circumstances in a financial case and Division 13.2.1 specifies the requirements for disclosure of documents.
In our judgment it is amply demonstrated that it was open to the trial judge to conclude that the husband abjectly failed in his duty to make full and frank disclosure when regard is had to:
a)The striking lack of information in the husband’s affidavit evidence for trial as to the financial arrangements/agreements pertaining between the husband and Dr Yavuz spanning, or for any relevant times during, their business partnership commencing in 1996, in the context of Dr Yavuz’s claim for payment of $2,000,000;
b)The similarly striking lack of information as to the husband’s own contributions to the business partnership or business endeavours and how it was resolved, or agreed from time to time, that these were to be reflected in entitlements;
c)The reasons for judgment read as a whole but, particularly, for example, the findings at [65], [66] and [67], [72], [109], [119] to [127], [147] and [148], [159], [164] and [165], [171] and [172], and [176], each of which largely iterate instances of the husband failing to provide any, let alone all, information relevant to the case.
It is likewise amply demonstrated, in our judgment, that the husband failed to meet his obligations with respect to the obtaining of expert evidence. We have already referred to the orders made commencing with those of 2010, some three years before the trial in April 2013, for the appointment of a single expert to value, inter alia, the husband’s partnership interest and shareholdings. The juxtaposition between the nature and timing of those orders and the fact that it was the husband at all times in control of relevant information, leading to the conclusion that responsibility lies with the husband for the failure of such evidence being available at trial, is fortified when regard is had to the contents of Exhibit 8. That exhibit demonstrates the husband’s protracted and enduring failure to provide requested information to the single expert, plainly in breach of orders and directions that he so do.
Having regard to the substance of the centrally important conclusions of the trial judge concerning the husband and his evidence, to which we have referred, and the breadth of evidence to support those conclusions, we are not persuaded that any of the sub-grounds of Ground 1 we have not specifically traversed identifies subject matter or error which could be material to those conclusions (De Winter and De Winter (1979) FLC 90-605). We are not persuaded of any merit in Grounds 1 to 4 of the husband’s appeal. It follows that in our judgment the trial judge was justified in taking into account his findings concerning the husband and his evidence, in determining Dr Yavuz’s claimed entitlement.
As already noted, having set out in the chronology in [7] to [52] relevant business dealings; and findings as to the unreliability of the husband as a witness in [64] to [68] as discussed, the trial judge addressed Dr Yavuz’s claim “for $2 000 000” at [86] to [115]. The trial judge had also expressed (at [75] to [77]) his reservations about the reliability of Dr Yavuz’s evidence by reference to the cross-examination of Dr Yavuz.
Taken from [86] to [115], it can be seen that in the context of the trial judge having determined that the evidence of each of the husband and Dr Yavuz was not reliable, the following were the prime factors or considerations leading to the trial judge rejecting the claimed entitlement of Dr Yavuz:
a)The fact that the husband and Dr Yavuz bore the onus of proving the disputed allegation they joined in advancing ([106]);
b)Assertions unsupported by documentary evidence ([96], [103], [104], [105], [110] and [114]) or by calling evidence from the accountant, Mr L (which could be tested on cross-examination) ([99] to [101]);
c)The inability of the husband and Dr Yavuz to explain in any detail how the amount of $1,350,000 adopted in the Shareholders Agreement was calculated ([109]);
d)The fact that the Shareholders Agreement was brought into existence in the context of these proceedings ([108]); and the fact that both Dr Yavuz and the husband departed from asserting that the Shareholders Agreement accurately reflected the true position ([109]);
e)The fact that the financial accounts of the partnership in evidence did not support the existence of any such liability ([111]); nor did the financial statements of TT ([112]); nor did the contents of the joint application by the husband and Dr Yavuz to the ANZ Bank in July 2009 for two loans totalling $3,500,000;
f)The absence of documents to explain why the relevant partnership accounts (for each of several years) did not reflect the claimed entitlement ([114]).
At [105] and [106] the trial judge recorded:
105.In my view, there are a number of difficulties with this claim that the husband owes money to Dr [Yavuz]. Firstly, it is based merely on the bare assertions by the husband and Dr [Yavuz] that Dr [Yavuz] has made contributions to their business partnership in excess of whatever contributions the husband has made thereto by approximately $2 000 000 and that Dr [Yavuz] requires repayment in this amount. In my view, for Dr [Yavuz] to be able to sustain this claim, it would be necessary for him and the husband to have put before this Court, sufficient of the relevant details about their business dealings supported by evidence in proper form from which the Court could have been in a position to make appropriate findings. It is the husband and Dr [Yavuz] who have had the intimate knowledge of the relevant transactions and the financial details and it is they who have had access to the relevant documentation.
106.The onus lies on Dr [Yavuz] and the husband to establish that monies are owed by the husband to Dr [Yavuz] as his business partner. Neither the 19 January 2010 agreement about the alleged debt nor the 7 June 2010 letter from the accountant Mr [L] take the matter any further than the assertions by the husband and Dr [Yavuz] because they are both really further manifestations of the same assertions.
(Emphasis added)
Counsel for Dr Yavuz contended on appeal that there was no evidence or exploration at the trial of any contention that the husband had made “any equal or otherwise offsetting contribution” to those made by Dr Yavuz. One answer to that contention is that absent any articulation or particulars in the evidence of the husband and Dr Yavuz in the face of annual partnership accounts for several years not reflecting the disparity contended for, the absence of evidence particularising all relevant financial arrangements/agreements between the husband and Dr Yavuz over the period when the husband worked full-time in the successive joint business endeavours, assumes significance. It is unknown, for example, whether the husband’s taxi driving; operation of the T business; operation of the N business; establishment and operation and sale of the second business, and thereafter the real estate agency (of TT) throughout the subject period of about 20 years, was commercially remunerated by his share of partnership profits. As another example, the husband’s trial affidavit at paragraph 112 treats the rental/investment income from the husband’s personally owned WN property, owned by the husband throughout the relevant period, as being applied to the partnership. As at the time of that affidavit the rental income deposed to was approximately $28,000 per annum. For how long this was the case, or in what total amount this apparent “offsetting contribution” became, and thus its relative significance, is an unknown purely because of the lack of information referred to. What is known is that throughout the relevant period the husband provided his WN property as security for business loans.
To the extent that counsel’s contention that this aspect was not explored at trial is to be interpreted as meaning that the proposition of “offsetting” contributions was not put to Dr Yavuz, the trial transcript reveals otherwise (see transcript, 11 April 2013, p. 256 l. 45 - p. 257 l. 20).
We do not accept that in a case where:
a)All of the financial accounts of the partnership for several years available in evidence did not reflect the disparity contended for;
b)The financial accounts of TT did not reflect the disparity contended for;
c)The content of the 2009 loan application (representations) to the ANZ Bank referred to was inconsistent with the existence of the claimed disparity;
d)Each of the Shareholders Agreement dated 19 January 2010 and the accountant’s letter dated 7 June 2010 were brought into existence after and in the context of these proceedings;
e)The husband had failed in his duty to make full and frank disclosure;
f)The husband had failed to provide to the single expert accountant requested information to facilitate an independent valuation of his interests in the relevant entities;
an evidentiary or persuasive onus of proof fell to the wife to establish “offsetting” contributions by the husband to those identified on behalf of Dr Yavuz with respect to the transactions in A, B and C referred to above.
We are satisfied that in relation to the transactions in A, B and C, that on the evidence before the trial judge and for the reasons identified by his Honour as referred to, it was well open to the trial judge to reject Dr Yavuz’s claimed entitlement based upon those transactions.
However, turning to the transactions in D, there are readily identifiable distinguishing features about the transactions in D as compared with those in each of A, B and C.
First, each of the transactions in A, B and C involved the sale by Dr Yavuz of assets held by him and the further investment by him of net proceeds from those sources in acquiring further assets or in the reduction of debt in the partnership. There is no suggestion that any of these transactions were other than voluntary in the sense of considered decisions. In contrast, the transactions in D did not involve the deployment of net proceeds yielded from asset sales, but rather the assumption by Dr Yavuz of further debt to meet the exigencies or requirements of business lenders to the partnership. The effect of Dr Yavuz’s affidavit evidence for trial, unchallenged in this respect, was that the rental income of the partnership was insufficient to meet interest on loans from the ANZ Bank and money had to be found to avoid foreclosure by the bank (Dr Yavuz’s affidavit sworn 3 April 2013 at paragraphs 35 and 37). Exhibit 15 in the proceedings are the bank statements confirming the withdrawals by Dr Yavuz from his personal home loan facility to pay partnership debt. There was no challenge in the cross-examination of Dr Yavuz at trial as to his evidence about the circumstances in which these payments were rendered necessary to meet accumulating bank interest and debt.
Second, the transactions in D occurred on 23 and 28 June 2010 respectively. Thus, in contrast to each of the other transactions in A, B, and C, the transactions in D post-date:
a)The most recent partnership taxation returns/financial accounts for the partnership in evidence at trial, being those for the financial year ended 30 June 2009;
b)The Shareholders Agreement dated 19 January 2010 and the accountant’s letter dated 7 June 2010;
c)The joint loan application of the husband and Dr Yavuz to the ANZ Bank made in July 2009 (Exhibit 9).
It follows that whilst it was in our judgment entirely legitimate for the trial judge to take those factors or considerations referred to occurring after the transactions in A, B and C into account in respect of those transactions, as his Honour clearly did in rejecting Dr Yavuz’s claimed entitlement to the extent it was founded on the transactions in A, B and C; that is not so with respect to the transactions in D.
We do not consider, given the reasoning of the trial judge for rejecting the claimed entitlement of Dr Yavuz in its totality, and the apparent absence of discrete consideration of the transactions in D which we consider was necessary by reason of the distinctions identified, that the decision is open that the above factors or considerations were not material to the trial judge’s conclusion to reject Dr Yavuz’s claimed entitlement to the extent that it was based upon the transactions in D. In our judgment in this respect the trial judge was in error.
We are therefore persuaded of merit in the contentions of the husband and Dr Yavuz on appeal to the extent that, as regards the transactions in D, discrete consideration of them was required; and that at least some of the bases for rejecting the claims based upon the transactions in A, B and C were not available as reasons for rejecting the claim founded upon the transactions in D.
In this respect we would also note that, in contrast to the transactions in A, B and C, the transactions in D occurred subsequent to the parties’ final separation and the wife’s institution of the proceedings and, on the trial judge’s findings, were transacted by Dr Yavuz with knowledge of those things.
It follows from this conclusion that we find merit in Grounds 3 and 4 of Dr Yavuz’s cross-appeal and those sub-grounds within the husband’s appeal, to be further discussed, directed to this issue.
The conclusion that the trial judge erred in his determination of the claim or entitlement of Dr Yavuz, a necessary step before the subject property interests of the husband were identifiable for the purpose of determining appropriate and just and equitable orders under s 79, has obvious consequences for these appeals and a need for remitter of the proceedings for rehearing.
It will be necessary for Dr Yavuz’s entitlement referrable to the transactions in D and as affected by any facts or subsequent events relevant to them, to be reconsidered. Given the effluxion of time since the trial and the need to afford the parties the opportunity to present further and current relevant evidence, a remitter of the proceedings for rehearing is necessary to that extent.
Whilst that might be thought to render otiose the need to further deal with either the grounds of the husband’s appeal or those of Dr Yavuz in the
cross-appeal not thus far addressed, we are conscious of the importance referred to by the High Court of an intermediate court of appeal considering whether to deal with all grounds of appeal (Kuru v State of New South Wales (2008) 236 CLR 1 and the authorities cited in that case).
We will therefore consider other grounds for that purpose.
Husband’s further grounds
Ground 5: That His Honour erred in finding that the evidence of each of Mr K and Mr L would not have assisted the second respondent (and by extension the appellant) and in failing to provide sufficient reasons for the drawing of such inference
Contrary to that which is asserted in this ground and in paragraph 31 of the husband’s written outline in support of it, the trial judge did not draw any inference with respect to the husband’s and Dr Yavuz’s former accountant, Mr K, not being called.
The context in which the trial judge made reference to the lack of direct evidence from the accountant, Mr L, is important. Having at [98] referred to the Shareholders Agreement (in which the loan amount of $1,350,000 to TT and not to the partnership appears) the trial judge continued:
99.During cross-examination the husband was asked how he and his brother had arrived at the sum of $1 350 000. The husband said that the accountant worked it out.
100.By a letter dated 7 June 2010, the accountant for the husband and Dr [Yavuz], a Mr [L] of [AA Accounting Services Pty Ltd] indicated that Dr [Yavuz] had personally contributed approximately $1 350 000 “extra” money to the partnership. He also said that Dr [Yavuz] and the husband had “always” made it known to him that this money would be repaid in the future to Dr [Yavuz] if and when the partnership was to be dissolved “as these were extra funds from Dr [Yavuz].”
101.Neither the husband nor Dr [Yavuz] called the original accountant. They said they do not know his current whereabouts. Nor did either of them put their current accountant on affidavit nor call him to give evidence. I infer that whatever evidence he might have given would not have assisted Dr [Yavuz’s] case in this regard.
102.In approximately June 2010 Dr [Yavuz] drew down $341 701 from two personal home loans and paid the partnership interest bill due to the ANZ Bank. He asserted that, with interest, the husband owes him approximately $400 000 in respect of this advance to the partnership.
103.Given the nature of Dr [Yavuz’s] claim, it was somewhat surprising that there was little by way of documentary evidence to support his assertions about business arrangements between himself and the husband.
Whilst it may have been open on such an holistic assessment of the entirety of the period under consideration for the trial judge to reach the conclusion expressed at [224], the validity of such a conclusion could only be open if it could be seen that the trial judge gave some consideration to the
post-separation period in reaching that overall conclusion.
The difficulty here is that his Honour’s reasons make no reference at all to this important aspect, and it thus cannot be gleaned from the reasons that his Honour took this material consideration into account in reaching the ultimate conclusion his Honour expressed at [224].
As can be seen from what the trial judge recorded at [224], his Honour noted that “[t]he husband’s mother also contributed to the care of the children” but there is no reference to, as a contribution by or on behalf of the husband, the provision of a home owned by his mother for the family throughout their cohabitation, additional to the husband’s initial contribution of the WN property, in his Honour’s discussion and assessment of the parties’ contribution-based entitlements.
Again, a legitimate exercise of discretion might see the overall conclusion being the same as that reached by the trial judge. The fundamental difficulty, though, is that it cannot be gleaned from the reasons expressed by the trial judge, that his Honour had regard to what appear to be material matters to be considered in assessing the parties’ contribution-based entitlements.
For these reasons we find substance in the husband’s challenge on appeal to the trial judge’s assessment of the parties’ contributions and, including, the apparent absence of consideration of post-separation contribution.
As the proceedings will necessarily have to be remitted for hearing for the reasons already expressed, it is unnecessary and potentially unhelpful for us to further discuss the husband’s other challenges directed to the manner in which the trial judge dealt with the husband’s initial contribution of the WN property as the assessment of contributions will fall to be considered in any rehearing of these proceedings and re-exercise of the discretion.
Ground 11 – Section 75(2) considerations
The trial judge made a 2 per cent adjustment in favour of the wife to the contribution assessment of the parties’ entitlements, that is, the same disparity in real money terms earlier referred to of $121,281.
Consideration of s 75(2) matters necessarily involves a degree of prediction, assumption and value judgments given the future and thus hypothetical nature of the determinations to be made. We find no error on the part of the trial judge in having regard to historical levels of income the husband had derived (his Honour referred to the husband’s 2009 loan application in Exhibit 9) in considering the husband’s future earning capacity over the remaining decades of his notional working life.
Given the modest (2 per cent) adjustment made, contrary to the husband’s complaint, his Honour plainly did have regard to the husband’s future
child-caring responsibilities as his Honour specifically made reference to that fact at [242] of the reasons. As at the time of judgment, and as his Honour recorded in the reasons, the children were then aged 17 years, 15 years and 12 years respectively. In terms relative to the husband’s future notional working life, that factor was proportionate given also that the wife was paying assessed child support and the husband was continuing to avail himself of his mother’s home to accommodate himself and the children.
For the reasons already discussed, the trial judge’s finding that the husband had failed in his duty of disclosure was well open to him, and to the extent that only a 2 per cent adjustment was made for that feature, it too was a conclusion well open to the trial judge.
We find no merit in this ground. Obviously, the s 75(2) considerations will fall for reconsideration on the rehearing of the proceedings and nothing we have said here ought be interpreted as placing any fetter whatsoever on the discretion to be exercised by the trial judge on the rehearing of the case as it then presents.
Ground 12 – Justice and equity
It is convenient to deal with this ground together with Ground 1.3 of Dr Yavuz’s cross-appeal, given that a contention within both is to the effect that the trial judge wrongly proceeded on the footing that Dr Yavuz would provide the husband with the cash payment the husband was ordered to pay. That contention includes that the trial judge failed to make any allowance for the prospect of realisation costs or capital gains taxation incurred if property had to be sold; nor any allowance for any top up tax on dividends or other tax on distributions to the husband to facilitate his capacity to make that cash payment.
The trial judge can be seen to have proceeded, both in the manner in which the orders were structured, and the discussion by the trial judge commencing at [254], that it was likely Dr Yavuz would be the source of funding for the husband’s payment to the wife to be made, and that it was unlikely any properties would have to be sold for that purpose.
Whilst our review of the evidence at trial and of the final submissions (including the minute of orders the husband was then contending for) supports that there was some basis for the trial judge to proceed on the footing he did, that was so in the context of the husband ultimately contending that the wife’s 30 per cent entitlement translated into a required cash payment in the order of $663,853. The cash sum the trial judge ultimately ordered was in the amount of $1,506,723. Moreover, on the proposition that Dr Yavuz would “buy-out” the husband from the partnership and his shareholding in TT, the buy-out price was, according to each of the husband and Dr Yavuz, to take account of Dr Yavuz’s claimed entitlement. Moreover, on a “buy-out” scenario, the husband would no longer hold an interest in the relevant business interests and stood to lose that potential source of income.
The wife seeks to emphasise what appears at paragraph 96 of the husband’s trial affidavit as follows:
I believe I have made every effort to settle with the applicant and now she may not get what was originally offered because of the downturn of the valuations and business losses suffered. I have tried to settle the matter in order to save further costs to all involved and more importantly to spend more quality time with my children. I note that since my business partner Dr [Yavuz] is in a better financial position than me, and has the capacity to buy out part or all of my share of the partnership, a settlement can be organised on this basis (as previously offered to the applicant’s solicitor on 3 occasions).
However, in that same affidavit (particularly at paragraphs 112 and following) the context is given to what the husband is referring to when he refers to “my share of the partnership” – specifically, a share of what is left after a substantial entitlement is paid to Dr Yavuz.
The husband’s cross-examination on this topic included the following:
Yes. All right. Throughout these proceedings, he has indicated, along with you, that if your wife receives a property settlement, that he will be the one coming up with the money, as it were, bailing you out; is that right?---That is correct due to the fact that he has put more into it and – and his debts, yes.
That’s a different question. What you say in your affidavit and [Dr Yavuz] says in his affidavit is that [Dr Yavuz] is in a strong financial position and he will be paying out the property settlement to your wife, if there is one?---I don’t think I’ve said that. What I’ve said is – I believe in my affidavit was that – was that if there was such a thing, that my business partner was happy to buy me out.
Yes. So, for example, in paragraph 29 of your affidavit, you say:
My business partner has offered to buy me out.
And you talk about that in a context of settlement negotiations. You talk about the settlement negotiations in your affidavit. At paragraph 29, you say that you had a discussion with me about settlement offers; right? You recall that?---Yes.
And you say that there was a question raised as to how the funds would be raised; correct? You’ve said that?---Correct.
And you said – you responded:
My business partner had offered to buy me out.
Right?--- Buy my share in, yes.
HIS HONOUR: I’m sorry. Which paragraph is it?
MR PUCKEY: 29, your Honour, of the husband’s affidavit.
Then in paragraph 96 of your affidavit, you say:
I’ve made every effort to settle. She may not get what was originally offered.
You go on to say that you’ve tried to settle, and you say this, that:
Since my business partner, Dr [Yavuz], is in a better financial position than me and has the capacity to buy out part or all of my share of the partnership, a settlement can be organised on this basis, as offered to the applicant’s solicitor on three occasions.
All right? That’s what you say?---Because the question was asked to me by the applicant’s solicitor how these funds, if they were to accept such funds – so that’s why I responded like that.
Okay. So your brother is going to be the source of any settlement payment to your wife; is that right?---Unless there’s - - -
If there is one. I understand you’re saying there shouldn’t be one, but if there is one?---No, no. If there’s equity there, if the valuer’s valuations are correct and – and if there is equity, well, then, maybe he won’t have to.
Paragraphs 37 and 41 of [Dr Yavuz’s] affidavit, he says the same thing: that he has made an offer to buy you out, he’s in a strong position and still able to buy you out and the like. All I’m suggesting to you is that you and your brother stand side-by-side in your intent to satisfy whatever claim your wife succeeds in achieving by your brother stumping up more money; correct?---The question was asked almost three years ago, my first solicitor, how these - - -
Well, now, just don’t worry about – can you just answer my questions. Have I got anything wrong about that: that you and your brother stand side-by-side in your intention, that whatever settlement is to be paid to your wife, if any – I’m not trying to hold you to having to make one. If there is one, it will be – the money will be coming from your brother?---if – unless there’s equity in the properties.
All right. So if you can’t raise the money yourself, you will raise what you need to from your brother?---Well, I’m – I’m hoping - - -
Is that the position?---I’m hoping he will stick to his word.
(Transcript, 10 April 2013, p. 144 l. 6 – p. 145 l. 31)
In his trial affidavit, Dr Yavuz, having devoted many of the preceding paragraphs to his entitlement or claim to be paid substantial additional monies over and above his 50 per cent partnership and his 50 per cent shareholding in TT, deposed:
37.Had I not redrawn these monies, then as stated, the bank would have either foreclosed or started a “fire sale”. I had made an offer to buy my business partner out but believed the applicant in this matter had rejected such an offer. I am in [sic] strong position and still am able to buy my partner out considering what he already owes me.
38.With the sale of my taxi cab for $185K as well as the sale of 3 homes and the redrawing on my personal ($321000) home loan I am owed approximately $2,000,000 taking into consideration the interest accrued.
39.I own 50% of [TT] Pty Limited which owns the Real Estate business along with two commercial properties which I set up. I also have my real estate licence. I feel that I should be entitled to purchase these assets first at an agreed price.
40.As a 50% stakeholder of the properties I reserve the right to buy my business partners [sic] stake in the business as confirmed. Also the extra monies of $2,000,000 must be taken into account.
41.I am still willing to buy my business partner out but the price would be less now as the market has and is continuing to drop. There is evidence of this all over the country and world and I would disagree with 5 of the valuations completed.
(Emphasis added)
Dr Yavuz was not challenged in cross-examination about the basis or context in which he gave his affidavit evidence about the prospect of buying out the husband’s interests. Moreover, it was not put to Dr Yavuz in
cross-examination that he would be able to, or willing to, fund a payment as much as $1.5 million.
In our judgment the evidence did not permit of the ready conclusion that the cash payment amount ordered could, or would, be funded via Dr Yavuz. In other words, there was no sufficient evidentiary foundation for a conclusion that the husband would be able to fund the cash payment to the wife without there being a need to resort to sales of property, and the incurring of realisation costs and potentially taxation costs of so doing.
It ought be emphasised with respect to the subject matter of these grounds, that the trial judge did not receive the level of assistance from the respective legal representatives of the husband and Dr Yavuz that his Honour was entitled to expect. No evidence, or even calculations of, prospective realisation costs or prospective taxation imposts was provided. The bare assertion that some realisation costs/capital gains tax might be incurred was woefully inadequate.
However, on the trial judge’s own findings, the available realisable property in the husband’s own name (items 1, 2 and 3 identified in [251]) was worth a gross total of $586,750 including the husband’s WN property worth $550,000. The husband’s personal liabilities as found totalled $93,000 – thus the husband’s net position in terms of his own solely held assets was $493,750. Obviously, the sale of the WN property would crystallise realisation costs, but in any event would be insufficient to meet the payment. Moreover, the evidence was that this property was subject to cross-securities with property held in the partnership and/or TT. Thus, without resort to his interests in TT and/or HH the husband could not fund a payment of the magnitude of the sum ordered from his solely owned property.
In our judgment there is merit in the complaints that the trial judge was bound to consider, but did not properly consider, the prospect of real properties having to be sold for the husband to secure funds and the relevant consequences. Those included potential realisation costs on property sales and capital gains taxation. In addition, taxation on distributions to the husband via his partnership might be incurred or via “top up tax” on dividends from TT or via distributions from HH, in order to place funds in the husband’s hands sufficient to make the ordered payment to the wife. Moreover, these potential costs needed to be addressed in either or both the form of orders made and/or allowance being made for them in determining the wife’s cash sum entitlement.
We therefore find merit in each of Ground 12 of the husband’s appeal and Ground 1.3 of Dr Yavuz’s cross-appeal.
Remaining grounds in Dr Yavuz’s cross-appeal
By Ground 1.6 of his cross-appeal, Dr Yavuz contends that the trial judge made an error in principle by treating the husband as a shareholder in TT as having an interest in the nature of a partnership in the underlying assets of the company.
The trial judge ultimately determined a cash sum payment payable by the husband to the wife. In reaching that determination, absent expert accounting valuation evidence, the trial judge had regard to the underlying assets of TT and the fact that the husband was a 50 per cent shareholder in that company. We have already explained that in the circumstances confronted by the trial judge, it was legitimate for his Honour to determine the husband’s interest on an asset-backing valuation basis which is in fact all that his Honour did when making a cash sum payment order in favour of the wife payable by the husband.
In other words, the trial judge assessed the worth of the husband’s shareholding in TT by reference to its underlying assets in the circumstances we have discussed. No error of principle is demonstrated in his Honour taking that approach and there is no merit in this sub-ground.
By Ground 1.7 of his cross-appeal Dr Yavuz contends that the trial judge erred in principle in failing to have regard to the terms of the deed of settlement in respect of the Yavuz Family Trust and the interests of all beneficiaries and the requirements of the deed.
The fundamental difficulty with this ground and counsel’s argument in support of it, is that we were not directed to any evidence to demonstrate that any “deed of settlement” in respect of the “Yavuz Family Trust” exists. There was no evidence at trial of which we are aware as to the creation of the trust or indeed the nature of the trust. Whilst counsel’s argument seems to assume that the Yavuz Family Trust is a discretionary family trust with beneficiaries other than the husband and Dr Yavuz, we were not directed to any evidence at all to demonstrate either of these things.
Notably, the evidence of each of the husband and Dr Yavuz seemed to proceed on the basis that the Yavuz Family Trust, whatever that entity may in fact be in terms of its nature, was solely owned and controlled by the husband and Dr Yavuz via their shareholding in its corporate trustee, HH.
We therefore find no substance in this contention.
Ground 2 of Dr Yavuz’s cross-appeal contends that the trial judge erred in finding that Dr Yavuz “did not have an entitlement of $2,000,000.00 to be taken into account in determining the property of the parties”.
As already noted, on appeal Dr Yavuz’s counsel abandoned the quantification of Dr Yavuz’s entitlement at $2 million. In any event, for the reasons already given, the trial judge was entitled to reject Dr Yavuz’s claim or entitlement to the extent that it was founded upon the transactions we have characterised as A, B and C above for the reasons that were given by the trial judge.
There is therefore no merit in Ground 2 of the cross-appeal.
Ground 3 of the cross-appeal expressed to be in the alternative to Ground 2 and in the event that Ground 2 is dismissed, contends that the trial judge erred in failing on the evidence before him to determine that Dr Yavuz had an entitlement to a lesser amount (than $2 million) to be taken into account. Ground 4 contains the complaint about the trial judge’s failure to give adequate reasons and to properly consider the evidence leading to the conclusion of the trial judge rejecting the claim in its entirety.
We have accepted that the trial judge erred in identifying each of the same matters which the trial judge identified for rejecting the transactions we have characterised as A, B, and C above, as founding any entitlement of Dr Yavuz (which his Honour was entitled to do) for rejecting the claim to the extent that it was based on the transactions we have characterised as D above.
Any entitlement of Dr Yavuz referenced to the transactions in D and in the context of any other subsequent relevant events needs to be reconsidered at a rehearing of the s 79 proceedings.
Conclusion and costs
The orders of the trial judge are to be set aside and the s 79 proceedings remitted for rehearing by a judge other than Johnston J.
Any entitlement or claim of Dr Yavuz referable to the transactions we have characterised as D above, and in the context of any other subsequent relevant events, needs to be reconsidered in the rehearing of the s 79 proceedings.
The bases upon which the husband’s appeal and Dr Yavuz’s cross-appeal are to be allowed do not give rise to justifying circumstances for costs orders under s 117 of the Act to be made. They do give rise to each party being granted costs certificates pursuant to the Federal Proceedings (Costs) Act 1981 (Cth) in respect of the appeal and in respect of the rehearing and we will so order.
I certify that the preceding one hundred and ninety-seven (197) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (May, Strickland & Kent JJ) delivered on 26 April 2017.
Associate:
Date: 26 April 2017
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