B Pty Ltd and Ors & K and Anor
[2008] FamCAFC 113
•31 July 2008
FAMILY COURT OF AUSTRALIA
| B PTY LTD AND ORS & K AND ANOR | [2008] FamCAFC 113 |
| FAMILY LAW - APPEAL – Application for permission to appeal – From decision of Family Court Judge – PROPERTY SETTLEMENT –The wife sought leave to amend her application to join six new respondents and to claim further relief against some third parties already respondents – Some of the third parties were trustee corporations and some were (with the husband in some instances) among appointors of discretionary trusts, of which the husband was a member of the class of beneficiaries – The wife sought that each of the directors jointly and severally cause the trustees of the trusts to make a capital distribution in favour of the husband in such sum as the court deemed appropriate – The wife further sought that the husband hold such sums distributed to him upon trust for the wife and forthwith upon receipt of the said sum pay it to the wife or at her direction – The third parties and the husband opposed the amendment on the basis that such powers as were contained in s 90AE could not found the orders that the wife sought – The parties and the court treated the stance taken by the third parties and the husband as analogous to an application for summary dismissal of the wife’s proposed claim – The trial Judge allowed the amendment – Against that order the third parties and the husband seek permission to appeal FAMILY LAW - APPEAL – Application for permission to appeal – From decision of Family Court Judge – Question of constitutional validity of s 90AE – Appeal adjourned to enable notices to be given to Attorneys-General – Appeal resumed with Attorneys-General not seeking to be heard FAMILY LAW - APPEAL – Application for permission to appeal – From decision of Family Court Judge – The scope of the powers deriving from s 90AE – Wording and meaning of s 90AE and Part VIIIAA – Whether, on the approach agreed by the parties, Part VIIIAA could arguably have supported the orders sought by the wife on the wife’s material then before the court and any non-contentious facts material to the claim – Permission to appeal granted – Appeal allowed – Application of wife to amend dismissed |
| Family Law Act 1975 (Cth), Part VIIIAA, s 4(ca)(i), s 79, s 90AA , s 90AC, s 90AC(1), s 90AD, s 90AE, s 90AE(1), s 90AE(2), s 90AE(2)(a), s 90AE(2)(b), s 90AE(3), s 90AE(3)(a), s 90 AK Family Law Rules 2004, r 10.12 Judiciary Act 1903 (Cth) s 78B The Constitution paragraph 51(xxxi) |
| Dougherty and Dougherty v Dougherty (1987) FLC 91-823 General Steel v Commissioner for Railways (1964) 112 CLR 125 Gould v Gould; Swire Investments Ltd (1993) FLC 92-434 Hunt v Hunt and Others (2006) (2007) 36 FamLR 64 Law-Smith and Seinor (1989) FLC 92-050 Lindon v Commonwealth of Australia (No 2) (1996) 136 ALR 251 Spellson (1989) FLC 92-044 |
| APPLICANTS: | B PTY LTD AND ORS |
| RESPONDENT WIFE: | MRS K |
| RESPONDENT HUSBAND: | MR K |
| APPEAL NUMBER: | SA | 62 | L | of | 2005 |
| FILE NUMBER: | MLF | 1913 | of | 2001 |
| DATE DELIVERED: | 31 July 2008 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Faulks DCJ, Coleman and Warnick JJ |
| HEARING DATE: | 11 February 2008 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 21 September 2005 |
| LOWER COURT MNC: | [2005] FamCA 997 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Judd QC and Dr Ingleby |
| SOLICITOR FOR THE APPLICANT: | Michael J Williams Solicitor |
| COUNSEL FOR THE RESPONDENT WIFE: | Mr North QC and Mr Sweeney |
| SOLICITOR FOR THE RESPONDENT WIFE: | Lander & Rogers |
| COUNSEL FOR THE RESPONDENT HUSBAND: | Mr Spicer |
| SOLICITOR FOR THE RESPONDENT HUSBAND: | Kenna Teasdale Solicitors |
Orders
That the applicants have permission to appeal the orders of Morgan J.
That the appeal be allowed.
That the application by the wife to amend her application for property settlement in terms of the Minute dated 31 March 2005 be dismissed.
That the respondent wife pay the husband’s and the 2nd to 24th respondents’ costs of and incidental to the application for permission to appeal and of the appeal as agreed and in default of agreement, as assessed.
IT IS NOTED that publication of this judgment under the pseudonym B Pty Ltd and Ors & K and Anor is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT MELBOURNE |
Appeal Number: SA 62L of 2005
File Number: MLF 1913 of 2001
| B PTY LTD AND ORS |
Applicants
And
| MRS K |
Respondent Wife
And
| MR K |
Respondent Husband
REASONS FOR JUDGMENT
1.In property settlement proceedings between Mr and Mrs K, the wife sought leave to amend her application to join six new respondents and to claim further relief against some third parties already respondents (all together called “the third parties”). Some of the third parties were trustee corporations and some were, with the husband in some instances, among appointors of discretionary trusts, of which the husband was a member of the class of beneficiaries. The wife, by the proposed amendments, sought:
…
6.That pursuant to s 90AE(2)(a) and/or s 90AE(2)(b) of the Family Law Amendment Act 2003, each of… [the directors]…jointly and severally do all such acts and things and execute all such documents to cause the trustees of the trusts referred to in paragraph 5 hereof to make a capital distribution within 60 days of the date of this order in favour of the husband in such sum as the court may deem appropriate.
7.That the husband hold such sums distributed to him pursuant to paragraph 6 hereof upon trust for the wife and forthwith upon receipt of the said sum, pay such sum to the wife or at her direction.
2.When the wife’s application to amend came before Morgan J on 21 September 2005, the third parties and the husband opposed the amendment, on the basis that such powers as were contained in s 90AE of the Family Law Act 1975 (Cth), as amended (“the Act”) could not found the orders that the wife sought. The parties and the court treated the stance taken by the third parties and the husband as analogous to an application for summary dismissal of the wife’s proposed claim. Morgan J allowed the amendment and against her order the third parties and the husband seek from this Court permission to appeal.
3.The application for permission to appeal first came before us in May 2006. Submissions and discussion between the bench and bar established that, though the question of constitutional validity of s 90AE did not arise if the section had the meaning for which the third parties and the husband contended, the third parties and the husband alternatively argued that, if s 90AE was broad enough to support the claim of the wife in relation to the trusts, it was constitutionally invalid. The appeal was adjourned to enable notices to be given to the Attorneys-General pursuant to s 78B of the Judiciary Act 1903 (Cth). Notices given, the matter resumed before us on 11 February 2008 with no Attorneys-General seeking to be heard.
4.It is common ground that, the trusts concerned being discretionary trusts, though the husband is a beneficiary of each of them, he cannot under the general civil law in Victoria require a distribution to himself. However, Mr North SC, who appears before us for the wife, submits that an order to that effect can be made pursuant to s 90AE of the Act.
5.While much of the argument properly focuses on the wording of s 90AE and other sections in Part VIIIAA of the Act and the scope of the powers thereby granted, we think it important to keep in mind that the ultimate question is whether, on the approach agreed by the parties, Part VIIIAA could arguably have supported the orders sought by the wife, on the wife’s material then before the court and any non-contentious facts material to the claim.
The scope of the powers deriving from s 90AE
6.We accept the submission on behalf of the third parties that:
17.…that the meaning of sections 90AE and 90AF is to be determined within the context of the entirety of Part VIIIAA is supported by the “modern approach to statutory interpretation” outlined by Brennan CJ, Dawson, Toohey and Gummow JJ in CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 141 ALR 618 at 634:
“Moreover, the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses “context” in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy. Instances of general words in a statute being so constrained by their context are numerous. In particular, as McHugh JA pointed out in Isherwood v Butler Pollnow Pty Ltd, if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent.”
This statement was approved by the majority of the Full Court in Coghlan at paragraph [98] and has been applied by the High Court subsequently in Stevens v Kabushiki Kaisha Sony Computer Entertainment and Others (2005) 221 ALR 448 per McHugh J at paragraph [124]; see also Project Blue Sky Inc & Ord [sic] v Australian Broadcasting Authority (1998) 194 CLR 355.
7.In ultimately approaching s 90AE, Mr North firstly points to the object of Part VIIIAA of the Act, as expressed in s 90AA, namely:
The object of this Part is to allow the court, in relation to the property of a party to a marriage, to:
(a) make an order under section 79 or 114; or
(b) grant an injunction under section 114;
that is directed to, or alters the rights, liabilities or property interests of a third party.
8.Next, Mr North points to the terms of s 90AC headed “This Part overrides other laws, trust deeds etc”, the terms of that section being:
(1)This Part has effect despite anything to the contrary in any of the following (whether made before or after the commencement of this Part):
(a)any other law (whether written or unwritten) of the Commonwealth, a State or Territory;
(b)anything in a trust deed or other instrument.
(2)Without limiting subsection (1), nothing done in compliance with this Part by a third party in relation to a marriage is to be treated as resulting in a contravention of a law or instrument referred to in subsection (1).
9.Then Mr North comes to s 90AE(2), which provides:
(2)In proceedings under section 79, the court may make any other order that:
(a)directs a third party to do a thing in relation to the property of a party to the marriage; or
(b)alters the rights, liabilities or property interests of a third party in relation to the marriage.
10.In particular, Mr North relies upon the words empowering the court to make an order that alters the property interests of a third party in relation to the marriage. To show a connection between the marriage and (in broad terms) the property interests of the third parties, Mr North points to two circumstances:
· that in respect of at least many of the trusts the wife was a beneficiary, either specified or by reason of marriage to the husband, and that the children of the marriage were in many cases also specified beneficiaries; and
· that the husband’s rights as a beneficiary of the trusts constituted a chose-in-action and were thus property.
11.In relation to the second circumstance, there is no nexus between the husband’s chose-in-action and the trust assets which gives the husband any proprietorial interest in those assets. An order in respect of those assets would not seem to be “in relation to the property of a party to a marriage” (s 90AA).
12.On 9 July 2008, while our decision stood reserved, the solicitors for the wife forwarded a letter to the Appeals Registrar which said:
We have been asked by our client’s Senior Counsel, Mr North SC, to bring to the attention of the Court further decisions that may be of relevance, namely:-
1. Law-Smith and Seinor (1982) FLC 92-050; and
2. Spellson (1989) FLC 92-044
Both of these authorities deal with the interests of objects under discretionary trusts.
13.The letter was so marked as to demonstrate that copies were sent to the lawyers for other parties. We have not received anything further from the other parties.
14.We have considered the cases referred to (the correct year reference for Law-Smith and Seinor is (1989)).
15.While each deals with matters related to issues before us, neither case is directly comparable and nothing said in either lends strength to Mr North’s contentions.
16.As to the first circumstance:
· (that in respect of at least many of the trusts the wife was a beneficiary, either specified or by reason of marriage to the husband, and that the children of the marriage were in many cases also specified beneficiaries),
taken in isolation, the term in s 90AE(2)(b), in relation to the marriage, is puzzling. Even so, we are inclined to think that they are words of limitation rather than expansion.
17.In any event, we do not think much, if anything, turns on those words in the instant case. There are other terms that, in our view, are clear in their effect.
18.Section 90AE(3)(a) provides:
(3)The court may only make an order under subsection (1) or (2) if:
(a)the making of the order is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage; and
19.While acknowledging the terms of subsection 3(a), Mr North does not concede that they impede the claim that the wife seeks to make.
20.In our view, the terms clearly circumscribe the use of the power.
21.Moreover, insofar as the words in s 90AE(2)(b) “property interests of a third party in relation to the marriage” may be unclear, we note again the object of the Part in s 90AA, namely to allow the court to make orders under s 79 that is directed to the property interests of a third party in relation to the property of a party to a marriage.
22.The “connections” to which Mr North points do not go to engage either the phrase in the object of the Part, or that emphasised in the above quote of s 90AE(3)(a) “to effect a division of property between the parties to the marriage”.
23.The orders sought by the wife against the trustees seek, not to divide, but to increase the present property of the parties. If Mr North is correct, Part VIIIAA has introduced a new cause of action to the law; but, what be the elements of this cause of action is largely unknown.
24.True it is that the power bestowed by s 90AE(2) is circumscribed by matters set out in s 90AE(3) which include, other than those already discussed, paragraphs (c), (d) and (e) (paragraph (3)(b)) is not relevant for present purposes). Relevant paragraphs are as follows:
3.The Court may only make an order under subsection (1) or (2) if:
…
(c) the third party has been accorded procedural fairness in relation to the making of the order; and
(d) the court is satisfied that, in all the circumstances, it is just and equitable to make the order; and
(e) the court is satisfied that the order takes into account the matters mentioned in subsection (4).
25.Matters set out in subsection (4) are as follows:
(a)the taxation effect (if any) of the order on the parties to the marriage;
(b)the taxation effect (if any) of the order on the third party;
(c)the social security effect (if any) of the order on the parties to the marriage;
(d)the third party's administrative costs in relation to the order;
(e)[not relevant for present purposes]
(f)the economic legal or other capacity of the third party to comply with the order;
(g)if, as a result of the third party being accorded procedural fairness in relation to the making of the order, the third party raises any other matters--those matters;
(h)any other matter that the court considers relevant.
26.The power of the court is further limited by the terms of s 90AK, preventing orders that would result in the acquisition of property otherwise than on just terms, or that would be invalid because of paragraph 51(xxxi) of The Constitution.
27.But these circumscriptions upon the exercise of power do not help to identify all the requisite elements of any new cause of action. For example, in the instant case, is the size of the trust estate relevant to the quantum or value of property that a court might order a trustee to convey to the party to the marriage? Does the court have regard to the history of acquisition of trust assets? Is it necessary for the claiming party to show that he or she has contributed to the accumulation of trust assets? Is it necessary that the court make findings of the comparative contributions to trust assets of all potential beneficiaries?
28.That the elements of the “action” which the wife seeks to initiate cannot be identified is a powerful argument against the position for which Mr North contends. In our view, all that s 90AE(2)(b) does, of relevance to the wife’s claim here, is to enable the court to adjust the property interests of a third party for the purpose of effecting a division of the present property of the parties to the marriage, between those parties. Only in the sense that altering interests may leave a bundle of rights or interests that are consequent upon the alteration, may the exercise of power create interests, but these “new” interests will be the residue of what already existed at law. Except in this sense, the subsection does not create a new cause of action derived from rights not previously known to the law. In this sense, the subsection resembles a machinery provision, though in our opinion it is more than that.
29.An argument emphasised for the third parties is that the proposed claim by the wife did not fit within paragraph (ca)(i) of the definition of “matrimonial cause” in s 4 of the Act. That paragraph is:
(ca)proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them, being proceedings:
(i)arising out of the marital relationship;
30.The argument proceeds that, in contrast with the provisions of Part VIIIAA (s 90AE(1)) that relate to a court’s power with regard to a debt owed by one or both parties to the marriage, to a third party creditor, no provision has been made by the legislation to ensure that a claim based on the power expressed in s 90AE(2) constitutes a matrimonial cause.
31.By s 90AE(1), in proceedings under s 79, the court may make:
(a)an order directed to a creditor of the parties to the marriage to substitute one party for both parties in relation to debt owed to the creditor;
(b)an order directed to a creditor of one party to a marriage to substitute the other party, or both parties, to the marriage for that party in relation to the debt owed to the creditor;
(c)an order directed to a creditor of the parties to the marriage that the parties be liable for a different proportion of the debt owed to the creditor than the proportion the parties are liable to before the order is made.
32.In respect of these novel powers, Parliament enacted s 90AD:
Extended meaning of matrimonial cause and property
(1)For the purposes of this Part, a debt owed by a party to a marriage is to be treated as property for the purposes of paragraph (ca) of the definition of matrimonial cause in section 4.
(2)For the purposes of paragraph 114(1)(e), property includes a debt owed by a party to a marriage.
33.In contrast, the power in s 90AE(2)(b) to alter the property interests of third parties in relation to a marriage, is not underpinned by any extension of the definition of property for the purposes of paragraph (ca) of the definition of matrimonial cause, or by any requirement that the “claim” reliant upon the exercise of power in s 90AE(2)(b) be treated as property for the purposes of the paragraph. However, we are not convinced that the comparison of the provisions granting a power relating to a party’s indebtedness to a third party creditor to the provisions granting a power relating to an alteration of property interests is valid for the purposes of the argument of the third parties.
34.In any event, we agree with Mr North that, for the Family Court to entertain the wife’s claim in issue, that claim does not have to fit within paragraph (ca) of the definition of matrimonial cause. But the claim must either be a matrimonial cause, one within the associated or accrued jurisdiction of the Court, or one which, in a matrimonial cause or other claim being heard together with such a cause, invokes a power conferred upon the court.
35.We think Mr North likely to be correct when he submits that a claim under s 90AE fits within paragraph (f) of the definition of “matrimonial cause”. Paragraph (f) is:
(f)any other proceedings (including proceedings with respect to the enforcement of a decree or the service of process) in relation to concurrent, pending or completed proceedings of a kind referred to in any of paragraphs (a) to (eb), including proceedings of such a kind pending at, or completed before, the commencement of this Act.
36.But the circumstance that a proceeding may be “in relation to concurrent…” proceedings of a kind referred to in any of paragraphs (ca) to (eb) does not assist the wife in establishing that her proposed claim to “create” property engages the powers in Part VIIIAA.
37.Gaudron J said of paragraph (f) in Dougherty and Dougherty v Dougherty (1987) FLC 91-823 (at 76,203):
…A proceeding falling within para. (ca) of the definition of “matrimonial cause” must satisfy the limitation that it arises either out of the marital relationship, or one of the other two limitations therein specified. So, too, a proceeding with respect to such proceeding falling within para. (f) of the definition is relevantly confined by the limitations in para. (ca). These aside, the only other proceedings which may constitute a matrimonial cause as defined in the Act (which may also constitute proceedings between the parties to a marriage with respect to the property of the parties to a marriage or either of them) are those falling within para. (e) of the definition being “proceedings between the parties to a marriage for an order or injunction in circumstances arising out of the marital relationship …”.
38.Mr North submits that the satisfaction of the requirements of s 90AE(3)(a) “would necessarily demonstrate that the matter considered under (f) satisfied the limitation on that invocation of power, that it arises out of the marital relationship”. We repeat, whether that is so or not, there is nothing in the wife’s case here which goes to meet the requirement in s 90AE(3)(a), namely that:
(a)the making of the order is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage; and
39.In view of the approach we have taken, no issue of the constitutional validity of Part VIIIAA arises. However, we refer to the discussion by O’Ryan J in Hunt v Hunt and Others (2006) (2007) 36 FamLR 64, which, though directed primarily to questions of constitutional validity, contains examination of the powers conferred by s 90AE. His Honour said:
64.… When consideration is given to s 90AE(2)(b) and s 90AF(2)(b) the Parliament, in clear and unambiguous words, has expressed an intention to give power to deal with the rights and interests of third parties and not simply procedural rights and interests.
…
113.When s 90AE(2) is read in conjunction with s 90AE(3), s 79, and Part VIIIAA generally, it is clear that what is contemplated is not some arbitrary invasion of the rights of a third party but an alteration of those rights where they are sufficiently connected to the division of the property between parties to a marriage.
114.Any doubt about the sufficiency of the connection between s 90AE(2) and the marriage or divorce and matrimonial cause power is removed by the presence of s 90AE(3) which relevantly provides that the Court may only make an order under s 90A(2) if the making of the order is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage.
…
118.Submissions were made on behalf of the Respondents in relation to the construction of s 90AE(2) and s 90AF(2) and also s 90AE(3) and s 90AF(3). The submissions focussed on s 90AE(2) and s 90AE(3). It was submitted that as a matter of construction the Court’s powers under these sections are “unlimited” as to parties, “unrestricted” as to the nature of alterations, and that there is no necessity for there to be any connection between the rights, liabilities or property interests of the third party on the one hand with the marriage or the parties to the marriage on the other. It was submitted that notwithstanding the terms of s 90AE(3) and (and 90AF(3)), the order may bring about a result which only has some indirect relation to the division of property “and there is no limit on the degree of indirectness”.
119.The power and discretion of the Court is carefully controlled and confined. The requirement in s 90A(3)(a) (and see the identical requirement in s 90AF(3)(a)) that the making of the order be “reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage” in and of itself ensures that far from the discretion being “unlimited” or “unrestricted”, it is carefully linked, and certainly sufficiently connected, to the subject matter of marriage and matrimonial causes. In particular, it is bound up in, or at least sufficiently connected to, the central area of the marriage power, namely, the effecting of a division of property between the parties to the marriage.
40.We respectfully agree with his Honour’s remarks. We conclude that the wife’s claim did not engage the powers conferred by s 90AE of the Act.
41.In support of his contentions, Mr North profers an affidavit by his instructing solicitor, essentially annexing the trust deeds and related documents, but there are no issues joined in argument about the content of those documents or anything Mr North says about them, so in our view whether they are received or not, makes no difference.
The wife’s application before Morgan J
42.The Family Law Rules 2004 provide for summary orders. Rule 10.12 states:
10.12 A party may apply for summary orders after a response has been filed if the party claims, in relation to the application or response, that:
(a) the court has no jurisdiction;
(b) the other party has no legal capacity to apply for the orders sought;
(c) it is frivolous, vexatious or an abuse of process; or
(d) there is no reasonable likelihood of success.
43.In the usual run of applications for alteration of property interests or parenting orders, the fact of marriage or parenthood, accompanied, in respect of the former, by a history of contribution to and acquisition of, property and, in respect of the latter, evidence that relates to any aspect of a child’s interests, is sufficient to make the existence of a “cause of action” apparent. No pleading in the traditional sense is required to identify further facts material to the cause.
44.However, the narrative or descriptive nature of evidence is often unsuited to formulate or particularise a cause of action against a third party. Something resembling a statement of claim will generally be necessary.
45.In Gould v Gould; Swire Investments Ltd (1993) FLC 92-434 Fogarty J (with Nicholson CJ and Finn J agreeing) said (at 80,451):
I conclude, consistently with Buckeridge and Barro, that the correct procedure, where an applicant in proceedings under the Family Law Act seeks relief against a person who is a stranger to the marriage or relationship, is to name that person as an additional respondent in the proceeding and set out the nature of the claim and the basis of it in the ordinary way in the application. (emphasis added)
46.Of relevance to the procedure adopted in the instant case, Fogarty J had also earlier said (at 80,448):
…good case management and fairness to the parties, in particular to a third party, suggest that in appropriate circumstances the claim against a third party, or more particularly the jurisdictional base of that claim, be determined as a preliminary issue where it is appropriate and practical to do so. …
47.Morgan J had before her no statement of claim or equivalent; only the orders which the wife wished to add and an affidavit of the wife, in which the wife said:
Personal financial circumstances of the parties
5.The personal financial circumstances of the husband and I are relatively modest. …
…
7.That otherwise, the husband and I, throughout our marriage, always considered his hard work and dedication as a pivotal member of the [K] Group would pay off and, provide us with a stake in the Group that would, in effect, represent our superannuation. In fact, on different occasions during the course of our marriage, the husband advised me that he would be retiring at age 45 with “a nest egg” which grew during the marriage from $1M to $2M. The husband left me in no doubt that he and I would share in the financial rewards of the [K] Group which became extremely successful in the latter part of the 1990’s.
8.The [K] Group is a global organisation involved in the [mining industry], supplying highly technical equipment and plant as well as construction of the various processing plants. …
Type of lifestyle
9.As a family we enjoyed a high standard of living which, from time to time, was subsidised by lump sums of money which I believed to have been sourced from overseas and from companies within the Group.
48.In our opinion, that evidence was insufficient to found the proposed claim under s 90AE against the third parties.
49.In her reasons for the orders permitting amendment, Morgan J did not address the nature of the wife’s deposition, nor attempt to identify the material facts in support of the claim which the wife sought to add. It is at least unusual in respect of an application said to be of the nature of one for summary dismissal that attention is not given to the identification of facts material to the cause of action.
50.In his submissions to Morgan J, Mr North said:
36.In the context of an application to amend a claim for relief in a procedural context of there being no formal requirement to plead particular facts and when that application has been heard prior to disclosure having been had or concluded or the filing of affidavit evidence in chief, it would be erroneous in principle for this Court to embark upon an exercise of pre-judgment with respect to the likelihood or otherwise of a party producing sufficient evidence necessary to satisfy a trial Judge of the matters referred to that subsection. …
51.Further in his final written submission to us, he said:
20.The very provision s.90AE(3)(a) is one that can only be sensibly considered in light of all the facts presented after a trial. Unless your Honours can be satisfied by the Applicant on appeal that there are simply no factual circumstances conceivable under which it may be reasonably necessary or reasonably appropriate and adapted to make the Order sought in order to effect a division of property between the parties to the marriage then the application for leave in the appeal must fail. The application for leave comes after an interlocutory determination. No issues of fact have been determined. …
52.We do not accept that it is proper to allow joinder of third parties merely upon the formulation of a paragraph in, or to be added to, an application, on the basis that at trial facts to support the application may be asserted and proved. Sufficient facts must be asserted to demonstrate that, if proved, the law arguably provides the relief sought.
53.As we have said, Morgan J did not discuss the factual sufficiency of the basis for the wife’s claim. Rather, Morgan J’s approach was, as appears from the following extracts from her reasons, to examine the limits of the power conveyed by s 90AE:
5.Senior Counsel for the wife conceded that an amendment which is futile because it is obviously bad in law could not succeed. However, there is a clear difference between a claim which is so obviously futile that it would be struck out if it had appeared in an original pleading and one which does not have much chance of success. …
…
9.The question I must determine is whether the wife's application is "doomed to fail" or “obviously futile” as was contended by the respondents. These are the terms with which the authorities resonate. If the wife can satisfy me that she has an arguable case then she should be allowed to amend. I am not required to determine the merits of her claim. The question of whether her claim should succeed is a matter for the trial judge. …
10.There was no dispute that under well established principles of equity the husband, as the object of discretionary trust, has no proprietary interest in the assets of the trust. In so far as the assets are concerned there is a mere expectancy that the trustee will, in the exercise of its discretion, make a distribution in his favour. He has an equitable chose-in-action which is the right to insist upon due administration of the trust.
11.In oral submissions Senior Counsel for the respondents submitted that:
“There is no doubt that our friend can draw a connection between the marriage and the interest of a discretionary beneficiary, but not to the assets of the trust. The degree of connection between the husband’s interest in the trust and the marriage is being employed by the applicant and perhaps even as a device … which conceals an important leap of logic.”
12.Absent the provisions of Part VIIIAA of the Act that submission is clearly correct and an application for an order to compel a trustee to exercise its discretion in [sic] particular way would be “doomed to failure”. In written submissions it was put for the wife that:
“What this order proposes is the trustee at the direction of the Court vesting capital in one object. The trustee has the power to do so. All the Court is doing is constraining its discretion and compelling [sic] to exercise that power in a particular way at particular time.”
13.To say that is “all the Court is doing” is quite an understatement. As the wife's submissions went on to acknowledge it is quite contrary to general equitable principles to fetter the exercise of a trustee's discretion in this way.
54.Morgan J then turned to Part VIIIAA of the Act. She set out the terms of s 90AE(2)(a) and (b) and s 90AC(1) and said:
16.It was contended for the wife that an order such as that sought by the proposed amendments having the effect of directing a trustee of a discretionary trust to vest capital of the trust in a particular beneficiary who is a party to a marriage could be characterised as both an order to third-party to do a thing in relation to the property of a party to the marriage and also as an order altering the rights, liabilities or property interests of that third-party in relation to the marriage.
17.It was conceded that the wife's proposed order overrides existing principles of the law of trusts. However, it was put that section 90AC(I) invested the Court with power to make the order sought.
55.Morgan J then summarised the submissions for the third parties that the wife wished to join and posed the question of whether the wife had an arguable case or whether her proposed application was futile or doomed to failure. She continued:
20.This is the decision I must make. In determining this issue I do not have the responsibility of the trial judge who may ultimately decide whether the provisions upon which the wife relies have the effect contended for her. (emphasis added)
56.Her Honour then discussed Part VIIIAA. She said:
22.A useful example of the conundrum posed by the above provisions is provided by Anthony Dickey QC (2005 79ALJ 483). He asked whether a wife might properly seek an order for the transfer of the whole interest in a former matrimonial home of which the husband and his brother are joint owners. Section 90AE2(b) provides that in proceedings under section 79 the Court may make an order which alters the rights, liabilities or property interests of third parties. However, the provision concludes with the words "in relation to a marriage". If this means that the alteration of third parties’ rights must pertain to the marriage then the Court could make such an order. Dickey suggests that this is because this would be an alteration of third-party property interests in relation to the marriage. Section 90AE(2)(b) suggests such a wide power.
23.On the other hand, section 90AE(3)(a) provides that the Court may only make an order under section 90AE(2)(b) if it is "reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage". That provision supports the proposition for the respondents that the object of Part VIIIA is to provide machinery to give effect to a decision already made. On that construction [sic] Court could sever the joint tenancy between husband and his brother but not divest the brother of his interest.
57.Morgan J said that consideration of the object of the Part and of both the original and revised Explanatory Memorandum did not assist. However, she saw some support for arguments for the wife as to the width of power in ss 90AE and 90AK in respect of which she said:
27.Further support for the proposition that, despite the statements in the Explanatory Memoranda, the relevant provisions allow the Court to divest a third-party of property is to be found in section 90AK which provides that the Court must not make an order or grant an injunction in accordance with Part VIIIA which would result in the acquisition of property other than on just terms and which would be invalid because of paragraph 51 (xxxi) of the Constitution.
58.We do not think that s 90AK offers any more support for those arguments for the wife than it does for those put forward for the husband because, as we have said, “restructuring” of a third parties’ rights is within power, subject to the various limitations on the exercise of that power.
59.Morgan J concluded:
30.I am not required to determine the complex issues raised by this proposed amendment. As I have said, if the wife’s application is allowed, that will be a matter for the trial judge. However, the very complexity of issues and the “conundrum” to which I have referred, demonstrate that the wife has an arguable case. Conversely that complexity and the preceding analysis demonstrate that her application is not "obviously futile" or "doomed to failure".
31.I propose to allow the amendment sought by the wife.
Conclusion
60.In relation to her Honour’s conclusion, we are mindful of what Kirby J said in Lindon v Commonwealth of Australia (No 2) (1996) 136 ALR 251, namely (at 256):
4. …If there is a serious legal question to be determined, it should ordinarily be determined at a trial for the proof of facts may sometimes assist the judicial mind to understand and apply the law that is invoked and to do so in circumstances more conducive to deciding a real case involving actual litigants rather than one determined on imagined or assumed facts.
61.However, we have in mind also what was said by Barwick CJ in General Steel v Commissioner for Railways (1964) 112 CLR 125 at 130:
…I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff’s claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed.
62.For present purposes, we do not differ from much of what Morgan J has said of the complexity involved in determining the limits of the powers conferred by Part VIIIAA. But it was not necessary for her Honour to address any possibilities outside those raised by the application before her.
63.In our view, the correct conclusion was that, as the wife set out her proposed claim, she did not show that the power conferred by s 90AE could arguably be engaged. Any order made pursuant to s 90AE(2)(b) must be for the purpose of effecting a division of property between the parties. The order that the wife proposed was for the purpose of increasing the property of the parties, by an unknown amount and on unknown principles.
64.It would be impossible, based upon the wife’s deposition, to identify what the wife said were the facts material to a cause of action which would lead to an order that the trustees of a discretionary trust distribute to one of a group of beneficiaries. The amendment would have joined the third parties to an unformulated claim to which they would have had great difficulty responding. That Morgan J did not address this issue is, in our view, an appealable error.
65.In suggesting that Morgan J’s order did not cause the third parties substantial injustice, Mr North submits that because claims, other than those with which we have been here concerned, had been already made against some of the third parties, for example, to register transfers of shares from husband to wife, a successful appeal would not release all third parties from the litigation. However, though some or all of the third parties may remain in the action because of those other claims, they are of a comparatively very limited nature and may not call for any substantial participation in proceedings by the third parties.
66.We consider that permission to appeal should be granted, the appeal allowed, the orders of Morgan J set aside and the application of the wife to amend, dismissed.
Costs
67.Mr North opposes a costs order on the basis of a significant disparity in assets between husband and wife. This, of course, does not go to the position of the third parties. Having regard to the outcome of the proceedings, we consider that the wife should pay the costs of the husband and the third parties.
I certify that the preceding sixty-seven (67) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court.
Associate:
Date: 31 July 2008
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