Akbar & Gandega
[2023] FedCFamC1A 174
•12 October 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Akbar & Gandega [2023] FedCFamC1A 174
Appeal from: Gandega & Fulmali [2023] FedCFamC1F 308 Appeal number: NAA 135 of 2023 File number: PAC 4811 of 2016 Judgment of: MCCLELLAND DCJ, AUSTIN & WILSON JJ Date of judgment: 12 October 2023 Catchwords: FAMILY LAW – APPEAL – PROPERTY – JURISDICTION – Where the first respondent wife joined the appellant as a party to the original proceedings – Where the second respondent husband and the appellant were former business associates – Where at trial both spouses contended for the husband’s right to financial remedies against the appellant – Where the spouses relied upon multiple causes of action pleaded both at common law and in equity – Where the primary judge made orders compelling the appellant to pay the husband a fixed sum – Where there was no common substratum of facts between the spouses’ matrimonial cause and the husband’s civil suits against the appellant at common law and in equity –
Where the authority to decide the non-federal aspects of the justiciable dispute only arises when such non-federal aspects are an integral part of the same controversy – Where the primary judge mistakenly assumed jurisdiction – Where the orders of the primary judge are ultra vires – Appeal allowed – Where the causes of action at common law and in equity pleaded by the spouses against the appellant in the original proceedings are dismissed for the want of jurisdiction to entertain them – No order as to costs.Legislation: Family Law Act 1975 (Cth) Pt VIII, ss 75, 78, 117
Federal Proceedings (Costs) Act 1981 (Cth)
Cases cited: Amaca Pty Ltd v Latz (2018) 264 CLR 505; [2018] HCA 22
AZC20 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2023] HCA 26
Bergman & Bergman (2009) FLC 93-395; [2009] FamCAFC 27
Berowra Holdings Pty Ltd v Gordon (2006) 225 CLR 364; [2006] HCA 32
DMW & Anor v CGW (1982) 151 CLR 491; [1982] HCA 73
Dougherty v Dougherty & Anor (1987) 163 CLR 278; [1987] HCA 33
Eberstaller v Poulos (2014) 87 NSWLR 394; [2014] NSWCA 211
Fencott v Muller (1983) 152 CLR 570; [1983] HCA 12
Fox v Percy (2003) 214 CLR 118; [2003] HCA 22
Harris v Caladine (1991) 172 CLR 84; [1991] HCA 9
Hsiao v Fazarri (2020) 270 CLR 588; [2020] HCA 35
Johnson v Perez (1988) 166 CLR 351; [1988] HCA 64
Kennon v Spry (2008) 238 CLR 366; [2008] HCA 56
Loxton v Moir (1914) 18 CLR 360; [1914] HCA 89
Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541; [2018] HCA 30
Minister for Immigration and Multicultural and Indigenous Affairs v B (2004) 219 CLR 365; [2004] HCA 20
National Trustees Executors and Agency Co of Australasia Ltd v FCT (1954) 91 CLR 540; [1954] HCA 71
QYFM v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2023) 97 ALJR 419; [2023] HCA 15
R v Ross Jones; Ex parte Beaumont (1979) 141 CLR 504; [1979] HCA 5
Re Ross-Jones; Ex parte Green (1984) 156 CLR 185; [1984] HCA 82
Re Wakim; Ex parte McNally; Re Wakim; Ex parte Darvall; Re Brown; Ex parte Amann (1999) 198 CLR 511; [1999] HCA 27
Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 52
Valceski v Valceski (2007) FLC 93-312; [2007] NSWSC 440
Warby and Warby (2002) FLC 93-091; [2001] FamCA 1469
Warren v Coombes (1979) 142 CLR 531; [1979] HCA 9
Number of paragraphs: 48 Date of hearing: 31 August 2023; 12 October 2023 Place: Sydney Counsel for the Appellant: Mr Cox SC, Mr Ford & Mr Reynolds Solicitor for the Appellant: David Leamey Solicitor & Barrister Solicitor advocate for the First Respondent: Mr Reeve Solicitor for the First Respondent: Marsdens Law Group Counsel for the Second Respondent: Mr Dura SC Solicitor for the Second Respondent: Crumpton Lawyers Pty Ltd ORDERS
NAA 135 of 2023
PAC 4811 of 2016FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR AKBAR
Appellant
AND: MS GANDEGA
First Respondent
MR FULMALI
Second Respondent
ORDER MADE BY:
MCCLELLAND DCJ, AUSTIN & WILSON JJ
DATE OF ORDER:
12 OCTOBER 2023
THE COURT ORDERS THAT:
1.The Application in an Appeal filed on 14 August 2023 is dismissed.
2.The appeal is allowed.
3.The causes of action at common law and in equity pleaded by the respondents against the appellant in the original proceedings are dismissed for the want of jurisdiction to entertain them.
4.The appellant’s application for costs is dismissed.
5.The parties’ respective applications for costs certificates pursuant to the Federal Proceedings (Costs) Act 1981 (Cth) are dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Akbar & Gandega has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE
REASONS FOR JUDGMENTAUSTIN J:
The first duty of every court is to ensure it has jurisdiction to entertain the proceedings before it (QYFM v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2023) 97 ALJR 419 at [27] and [92]; Eberstaller v Poulos (2014) 87 NSWLR 394 at [1]).
For that purpose, every court has jurisdiction to decide whether it is seized of jurisdiction (AZC20 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2023] HCA 26 at [3]; Minister for Immigration and Multicultural and Indigenous Affairs v B (2004) 219 CLR 365 at 393; Re Ross-Jones; Ex parte Green (1984) 156 CLR 185 at 193–194, 213, 215–216 and 223; DMW & Anor v CGW (1982) 151 CLR 491 at 507).
Here, there was no enquiry about the existence of jurisdiction to entertain the causes of action at common law and in equity asserted by and on behalf of the husband against the appellant, appurtenant to the determination of the matrimonial cause for financial relief contested between the spouses under Pt VIII of the Family Law Act 1975 (Cth) (“the Act”).
There was none. Jurisdiction was mistakenly assumed, induced by the manner in which the causes of action were instituted and prosecuted by the spouses without any objection by the appellant. But the parties could not consensually invest the Court with jurisdiction or power it did not possess (Harris v Caladine (1991) 172 CLR 84 at 133).
As a consequence, the orders made by the primary judge on 21 April 2023 to remedy the husband’s grievance against the appellant were ultra vires and must be set aside. The appeal must be allowed on that basis.
The grounds of appeal did not seek to impugn the appealed judgment for the absence of jurisdiction, yet, when the issue was raised at the commencement of the appeal hearing, the appellant eagerly embraced the proposition. Such a fundamental defect could not be ignored because the appeal must be a real review, not an illusion (Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541 at [30]–[32]; Fox v Percy (2003) 214 CLR 118 at [25]; Warren v Coombes (1979) 142 CLR 531 at 552–553). To afford the parties procedural fairness, the appeal hearing was consensually adjourned and the parties were directed to file and serve revised written submissions addressing the point before the hearing resumed.
The following reasons explain why the appealed judgment suffers from the want of jurisdiction, despite the respondents’ contention to the contrary.
Background
The wife asserted marital separation in 2012, but no finding was made to resolve that issue. The matrimonial proceedings were not commenced between them until some years later.
The husband and the appellant were former business associates, running a successful business operation through corporate structures. In 2016, the husband struck an agreement with the appellant about the terms on which he would withdraw from the business and its controlling corporations. The agreement entailed the appellant’s payment of an unspecified sum of money to the husband, the quantum of which would depend on the calculation of future net profits by accountants. The husband alleged the appellant breached the agreement, but had not brought any civil suit for remedies against the appellant before the matrimonial proceedings were commenced.
The wife commenced the proceedings in October 2016, unexceptionally seeking discretionary financial relief against the husband under Pt VIII of the Act. However, apparently without any forethought as to her lack of standing to do so, she joined the appellant as a party, purporting to sue him on behalf of the husband for damages to compensate him for the appellant’s alleged breach of the contract. Evidently, the wife’s objective was to recover damages for the husband, which money would then form part of his property and hence be amenable to financial adjustment orders between the spouses in the matrimonial dispute.
By the time the proceedings reached trial in August 2022, both spouses contended for the husband’s right to financial remedies against the appellant by reliance upon multiple causes of action, pleaded both at common law and in equity. The array of their claims included breach of contract, an account for profits, equitable compensation, restitution, unjust enrichment, and constructive trust. The appellant denied liability on any basis.
As it transpired, the trial ran for eight days and focused almost entirely upon the appellant’s alleged liability to the husband and the quantification of the liability. The matrimonial dispute between the spouses was but a small part of the contest. The spouses’ cross-examination of one another on factual issues was easily confined to a single day. Indeed, they agreed their contributions were equal (at [150]) and pursued only a narrow dispute about the quantum of the percentage adjustment the wife should have by reference to considerations under s 75(2) of the Act (at [151]). The primary judge made no orders at all to conclude the financial cause between the spouses, instead directing them to bring in orders reflecting the reasons (at [162]). For reasons it is presently unnecessary to discuss, that has not yet happened.
The appealed judgment pronounced by the primary judge in April 2023 comprised only three orders, designed to quell only the controversy as between the husband and the appellant. In effect, the orders compel the appellant to pay to the husband the sum of $2,456,002, which sum was included within the table of the spouses’ assets and liabilities for the purpose of the ultimate determination of their matrimonial cause (at [147]).
The legal or equitable premise for the relief granted to the husband against the appellant remains quite unclear from the reasons for judgment (at [120]–[121], [130]–[131] and [135]), but that is a different problem from the anterior question of jurisdiction.
The jurisdiction of the Federal Circuit and Family Court of Australia (Division 1) to entertain the common law and equity causes of action against the appellant could only have possibly existed in one of two ways: first, by the invocation of s 78 of the Act; or secondly, by finding the causes of action were an inherent part of the federal “matter” litigated between the spouses.
Rather than enquiring into those alternatives, the primary judge said only this on the subject of jurisdiction:
3.There is no claim by the wife that the [appellant] has any obligation directly to her. Instead, the wife’s claim is for a property settlement pursuant to s 79 of the Act and, as an incident of that claim, she pursues a case against the [appellant] to establish that the husband is entitled to a significant sum as a result of the business dealings between them.
…
19.There is no dispute that the issues between the husband and the [appellant] must first be determined in order to determine the husband’s assets for the purpose of the property settlement proceedings between the husband and wife, nor is there any dispute that it is just and equitable to make property settlement orders as between the husband and the wife in the circumstances of this case.
Section 78
Section 78 of the Act is located within Pt VIII, dealing with financial relief between spouses, and provides as follows:
78 Declaration of interests in property
(1)In proceedings between the parties to a marriage with respect to existing title or rights in respect of property, the court may declare the title or rights, if any, that a party has in respect of the property.
(2)Where a court makes a declaration under subsection (1), it may make consequential orders to give effect to the declaration, including orders as to sale or partition and interim or permanent orders as to possession.
By its specific terms, s 78 of the Act empowers the Court to declare “existing title or rights” in respect of “property”.
The concept of “property” is used in different ways in different statutory contexts but, where the term appears in the Act, it has been given a wide meaning conformably with the remedial purpose of the Act (Kennon v Spry (2008) 238 CLR 366 at 387, 390 and 396–397). It certainly extends beyond property in which the spouses have legal interests (Kennon v Spry at 442).
The causes of action alleged by the husband against the appellant were “choses in action” and hence “property” in his hands (National Trustees Executors and Agency Co of Australasia Ltd v FCT (1954) 91 CLR 540 at 584; Loxton v Moir (1914) 18 CLR 360 at 379).
Yet s 78 of the Act only empowered the primary judge to declare the husband’s existing title or right in the chose in action, which title or right the wife certainly did not separately enjoy. The provision did not empower the primary judge to hear and adjudicate the causes of action by granting a compensatory remedy, thereby converting the husband’s “chose in action” into a “chose in possession”.
If the power afforded by s 78 of the Act was to extend so far there would be no limit to the extent of the jurisdiction to hear and decide common law, equitable and statutory causes of action against third parties concerning spouses’ entitlements to money and property merely because it is convenient to establish the ambit of the property interests which may then be divided between them in the exercise of discretionary power under Pt VIII of the Act.
The power under s 78 of the Act is confined to the use of legal and equitable principles to establish the spouses’ existing, not prospective, legal and equitable property interests, which is the first step in exercising discretionary power to make adjustment orders pursuant to s 79 of the Act (Stanford v Stanford (2012) 247 CLR 108 at [37] and [50]; Hsiao v Fazarri (2020) 270 CLR 588 at [50] and [66]; R v Ross Jones; Ex parte Beaumont (1979) 141 CLR 504 at 511 and 517).
Such statutory power is commonly used in that way to declare spouses’ existing equitable interests in real or personal property (Warby and Warby (2002) FLC 93-091 at 88,792), with expert evidence often then led about the value of such property interests, though the court cannot stray far into that contentious territory unless the jurisdiction to do so is properly accrued (Valceski v Valceski (2007) FLC 93-312 at [29]–[36]).
The existence of the husband’s chose in action was not contentious as between the spouses. They agreed he enjoyed that property interest. Only its value was liable to be controversial between them. But placing a value on that property interest for the purpose of resolving the spouses’ matrimonial dispute did not demand the determination of the causes of action brought against the appellant. Rather, the spouses bore an evidentiary burden to adduce evidence from which the primary judge could have at least impressionistically attributed a value to the husband’s chose in action when determining their matrimonial cause, since the assessment of any damages prospectively owed to him by the appellant was a matter of judgment, not mathematical calculation (Amaca Pty Ltd v Latz (2018) 264 CLR 505 at [92]; Johnson v Perez (1988) 166 CLR 351 at 367).
If the available evidence lacked the necessary probative weight to reliably find the value of the husband’s chose in action, there was always the option of an order compelling the division of any damages eventually recovered by him from the appellant between the spouses in the same proportions as their other valued net assets were divided. Alternatively, the matrimonial cause could be adjourned until the non-matrimonial causes were litigated to finality in a forum seized of jurisdiction to hear them.
Here, the primary judge did not purport to resort to the use of power under s 78 of the Act to determine the causes of action against the appellant, but it would have been an error if his Honour had done so. Such power only authorised the primary judge to identify and declare the husband’s existing property interest, not to adjudicate the contested common law and equity claims.
The federal “matter”
Claims grounded solely in contract, tort, equity, or some other form of non-matrimonial relationship (such as partnership or corporation shareholdings) are not likely to attract jurisdiction as a matrimonial cause when the spouses’ marriage is purely coincidental to the dispute (Dougherty v Dougherty & Anor (1987) 163 CLR 278 at 286–287, 295 and 299–300). The connection of such common law, equity or statutory causes of action to matrimonial causes is even more tenuous when vested in and asserted by one spouse against third party strangers to the marriage or family unit.
However, when federal law, like the Act, confers original jurisdiction on a federal court in respect of a “matter” – such as the matrimonial cause concerning the adjustment of spouses’ property interests – the jurisdiction extends to authorise the determination of the whole “matter”, the entire resolution of which controversy may entail the consideration and application of both federal and State law (Valceski v Valceski at [38]).
Nevertheless, the authority to decide the non-federal aspects of the justiciable dispute only arises when such non-federal aspects are an integral part of the same controversy. Perhaps the best known statement collating the principles about the need for coincidence between the federal and non-federal aspects of the matter was expressed this way in Re Wakim; Ex parte McNally; Re Wakim; Ex parte Darvall; Re Brown; Ex parte Amann (1999) 198 CLR 511:
140.In Fencott it was said that ‘‘in the end, it is a matter of impression and of practical judgment whether a non-federal claim and a federal claim joined in a proceeding are within the scope of one controversy and thus within the ambit of a matter.’’ The references to ‘‘impression’’ and ‘‘practical judgment’’ cannot be understood, however, as stating a test that is to be applied. Considerations of impression and practical judgment are relevant because the question of jurisdiction usually arises before evidence is adduced and often before the pleadings are complete. Necessarily, then, the question will have to be decided on limited information. But the question is not at large. What is a single controversy ‘‘depends on what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct and relationships’’. There is but a single matter if different claims arise out of ‘‘common transactions and facts’’ or ‘‘a common substratum of facts’’, notwithstanding that the facts upon which the claims depend ‘‘do not wholly coincide’’. So, too, there is but one matter where different claims are so related that the determination of one is essential to the determination of the other, as, for example, in the case of third party proceedings or where there are alternative claims for the same damage and the determination of one will either render the other otiose or necessitate its determination. Conversely, claims which are ‘‘completely disparate’’, ‘‘completely separate and distinct’’ or ‘‘distinct and unrelated’’ are not part of the same matter.
(Emphasis added) (Footnotes omitted)
The High Court there referred approvingly to Fencott v Muller (1983) 152 CLR 570, in which it was earlier recognised that federal judicial power is attracted to the whole of the controversy only if the federal claim constitutes the substantial aspect of the controversy (at 609–610). As already mentioned, in this instance, the reverse was true. The federal dispute between the spouses was merely an adjunct to the non-federal claims against the appellant.
More recently, the High Court has emphasised the need to determine the ambit of the federal “matter” by advertence to the conduct of the parties, the relationships between them, and the laws which attach rights or liabilities to such conduct and relationships (AZC20 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs at [52]).
In this instance, there was no relationship at all between the wife and the appellant. The relationship between the husband and appellant arose exclusively out of their mutual business activities and their commercial conduct affected only their individual rights and interests. The husband’s legal grievance with the appellant could easily have been litigated independently from his legal dispute with the wife. There was no common substratum of facts between the spouses’ matrimonial cause and the husband’s civil suits against the appellant at common law and in equity. No fact or issue determinable between the husband and the appellant in the common law and equity causes of action is able to be identified as a “common transaction or fact” within the matrimonial cause between the spouses. The federal and non-federal suits are not “so related that the determination of one is essential to the determination of the other”. In the end, as the High Court observed, it is a matter of impression and of practical judgment. However, the common law and equity causes of action brought against the appellant in this case seem “distinct [from] and unrelated [to]” the matrimonial cause between the spouses.
Merely because the anterior determination of the non-federal causes of action between the husband and the appellant would influence the identity and value of the property owned by the husband, then amenable to adjustment orders within the matrimonial cause, does not bring the non-federal causes within the purview of the federal matter. The convenience of first determining whether or not the husband should have judgment for a certain sum of money entered in his favour against the appellant on any of the common law or equity causes of action is not the same as the essentiality of determining those causes for the purpose of then determining the matrimonial cause. So much has been recognised by the Full Court in another similar situation (Bergman & Bergman (2009) FLC 93-395 at [57]–[61]).
The respondents’ contrary argument is rejected. An example, starker than the present situation, will ably demonstrate why. Suppose the husband was instead a member of a civil class action brought by many against a large corporation or polity in another superior court of record. Jurisdiction to hear and determine the class action litigation would not accrue to the matrimonial cause litigated between the spouses merely because it might be helpful to know the quantum of damages the husband could eventually receive as his share of the class action remedy. For the non-federal dispute to form part of the federal “matter”, the nexus must be clear and close. The corollary of acceptance of the respondent’s submissions would be that any cause of action at common law, in equity, or under statute asserted by a spouse against a third party could be heard and determined as part of the matrimonial dispute.
In the present circumstances the primary judge did not accrue jurisdiction to determine the common law and equity causes of action as an integral part of the determination of the matrimonial cause under Pt VIII of the Act.
Disposition
The appeal should be allowed and the orders made by the primary judge set aside.
Given the absence of jurisdiction, there is no dispute capable of remitter or re-determination. The appellant sought an order dismissing the spouses’ claims for relief against him, which dispositive order follows naturally from the absence of jurisdiction to entertain them. Courts are empowered to make dismissal orders even when lacking substantive jurisdiction to entertain the cause (Berowra Holdings Pty Ltd v Gordon (2006) 225 CLR 364 at [15]–[16]). The dismissal of the claims on that foundational basis, rather than because they lack substantive merit, should preclude the appellant from later contending in a State jurisdiction that the claims made against him are estopped by operation of the doctrine of res judicata.
As the appeal should be allowed for a patent legal error, there is no need to receive further evidence in the appeal to demonstrate error and the appellant’s application to do so should be dismissed.
Leaving the question of costs aside for the moment, the following orders should be made:
(1)The Application in an Appeal filed on 14 August 2023 is dismissed.
(2)The appeal is allowed.
(3)The causes of action at common law and in equity pleaded by the respondents against the appellant in the original proceedings are dismissed for the want of jurisdiction to entertain them.
WILSON J:
I agree with the orders proposed by the Honourable Justice Austin for the reasons ascribed by his Honour and have nothing I wish to add.
MCCLELLAND DCJ:
I also agree with the reasons of Justice Austin.
Costs
I deliver this costs judgment unanimously on behalf of all members of the Full Court.
The appellant in this matter has succeeded in the appeal as a result of our finding of want of jurisdiction on the part of the primary judge to make the orders which are the subject of the appeal.
Until alerted to our concern, that was not, however, a ground of appeal pursued by the appellant.
In those circumstances, while the appellant has been wholly successful or, conversely, in terms of the provisions of s 117(2A)(e) of the Act, the respondents have been wholly unsuccessful in terms of that sub-section, we are not satisfied that this is an appropriate case to depart from the general principle set out in s 117(1) of the Act, that each party bear their own costs.
Further, having regard to the fact that the error on the part of the primary judge occurred in circumstances where the primary judge had not been addressed on the issue of jurisdiction, we are not satisfied that it is appropriate to grant costs certificates as sought by the parties pursuant to the Federal Proceedings (Costs) Act 1981 (Cth).
Accordingly, the additional orders of the Court, being Orders 4 and 5 are that the appellant’s application for costs is dismissed and Order 5, that the parties respective applications for costs certificates pursuant to the Federal Proceedings (Costs) Act 1981 (Cth) are also dismissed.
I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Ex Tempore Reasons for Judgment of the Honourable Deputy Chief Justice McClelland and Justices Austin & Wilson. Associate:
Dated: 19 October 2023
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