Badawi and Badawi
[2016] FamCA 804
•21 September 2016
FAMILY COURT OF AUSTRALIA
| BADAWI & BADAWI | [2016] FamCA 804 |
| FAMILY LAW – PROPERTY SETTLEMENT – Application by the husband under section 79A(1)(a) to set aside final consent orders – Whether the husband was under duress signing the consent orders – Whether there was a suppression of evidence – Whether the then Federal Magistrate Court Rules 2001 (Cth) were not complied with – Whether the parties’ solicitors failed in their duties – Whether the representation of the husband was perverse or amounted to no representation at all per In the marriage of Clifton and Stuart (1991) FLC 92-194 – Whether the husband was not competent to conduct litigation without a case guardian due to his mental health – Where the Court finds that no ground has been established under section 79A(1)(a) – Where the Court would not have found a miscarriage of justice had occurred – Where the Court would not have exercised its discretion to set aside the consent orders – Application dismissed. |
Evidence Act 1995 (Cth) s 140(2)(c)
| Family Law Act 1975 (Cth) ss 79A(1)(a), 79, 114(2)(b) Federal Magistrate Court Rules 2001 (Cth) rr 4.03, 11.08, 24.02 |
Birkbeck & Birkbeck (1970) 16 FLR 78
Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40
Gebert & Gebert (1990) FLC 92-137
Harris v Caladine (1991) 172 CLR 84
Holland & Holland (1982) FLC 91-243
Howard v Commissioner of Taxation [2014] HCA 21
In the marriage of Clifton and Stuart (1991) FLC 92-194
In the marriage of Florie (1988) FLC 91-913
In the marriage of Rohde (1984) FLC 91-592
In the marriage of Simpson and Hamlin (1984) FLC 91-576
Lane & Lane [2016] FamCAFC 53
Law Society of New South Wales v Harvey [1976] 2 NSWLR 154
Maguire v Makaronis (1997) 188 CLR 449
Redman & Redman [2013] FamCAFC 183
Saintclaire & Saintclaire (2015) FLC 93-684
Saleeby & Moon [2015] FamCA 43
SH and DH (2003) FLC 93-164
University of Wollongong v Metwally(No. 2) (1985) 60 ALR 68
| APPLICANT: | Mr Badawi |
| RESPONDENT: | Ms Badawi |
| FILE NUMBER: | SYC | 3146 | of | 2008 |
| DATE DELIVERED: | 21 September 2016 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | McClelland J |
| HEARING DATE: | 5 - 6 May 2016; 3 June 2016 and by way of written submissions |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Reid |
| SOLICITOR FOR THE APPLICANT: | M Duncan & Associates |
| COUNSEL FOR THE RESPONDENT: | Mr Paterson |
| SOLICITOR FOR THE RESPONDENT: | Jack Rigg Solicitors |
Orders
The husband’s Initiating Application filed 24 November 2014 is dismissed.
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 Badawi & Badawi 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).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 3146 of 2008
| Mr Badawi |
Applicant
And
| Ms Badawi |
Respondent
REASONS FOR JUDGMENT
Introduction
This matter concerns an application pursuant to s 79A of the Family Law Act 1975 (“the Act”) to set aside orders made by consent by Federal Magistrate Dunkley (as his Honour then was) on 4 November 2009 (hereafter referred to as “the Consent Orders”). The Consent Orders gave each of the parties a fifty per cent interest in the former matrimonial home and provided for the wife to have a life estate in the property. Significantly, the Consent Orders also in effect provided for exclusive occupation of the former matrimonial home by the wife.
The matter involves a complex set of circumstances where the applicant, Mr Badawi (“the husband”), has had a history of psychiatric illness and perpetrated serious acts of domestic violence against the respondent, Ms Badawi (“the wife”), and their three children.
I have found that the husband has a legitimate grievance that the solicitor with the carriage of his matter when the Consent Orders were made was in a position of conflict of interest as a result of seeking employment in the firm representing the wife. There are also issues as to whether the nature of the solicitor’s relationship with the principal of the firm representing the wife was such that it impacted upon the outcome for the husband under the Consent Orders.
I have found that insofar as the husband has a remedy as a result of failings by his legal representatives, that action should be taken against those legal representatives. The circumstances are not such, however, that I should make orders pursuant to s 79A setting aside the Consent Orders.
Applications
In a Case Outline document filed on 27 April 2016, the husband sought the following orders:
(1)That pursuant to s79A the orders of the Federal Magistrates Court made 4 November 2009 be set aside.
(2)That the Respondent pay the Applicant’s costs of these proceedings on an indemnity basis.
In a Case Outline document filed on 28 April 2016, the wife sought the following order:
(1)That the application be dismissed with costs.
The hearing
The hearing was originally listed for two days, being 5 and 6 May 2016. However, in order to complete cross examination of the parties’ witnesses, it was adjourned part-heard to 3 June 2016. The parties subsequently agreed to provide their closing submissions in written form. The submissions and submissions in reply on behalf of the husband were filed on 15 June 2016 and
1 July 2016 respectively. The submissions on behalf of the wife were filed on
23 June 2016.
Evidence
The husband relied upon the following material:
a)The husband’s affidavits filed on 24 November 2014 and 13 October 2015;
b)
The affidavit of Marieann Duncan (the husband’s solicitor) filed on
24 November 2014;
c)The affidavit of Dr N (the husband’s treating psychiatrist) filed on 18 August 2015;
d)The affidavit of Ms D (the husband’s solicitor at the time the Consent Orders were made) filed on 8 October 2015; and
e)The affidavit of Mr H (Ms D’s employer at the time the Consent Orders were made) filed on 7 March 2016.
Counsel for the wife objected to the affidavit of Dr N being admitted into evidence. As mentioned, Dr N is the husband’s treating psychiatrist. His affidavit annexed a report setting out his opinion as to the likely state of the husband’s mental health in 2009 when the Consent Orders were made. After hearing submissions from both counsel, I decided to admit the affidavit into evidence subject to argument as to the weight to be given to his evidence.
The wife relied upon the following material:
a)The wife’s affidavit filed 29 September 2015;
b)The wife’s Financial Statement filed 24 August 2009;
c)
The affidavit of Ms V (the parties’ eldest adult child) filed
29 September 2015;
d)
The affidavit of Ms B (the parties’ middle adult child) filed
29 September 2015;
e)The affidavit of Mr B (the parties’ youngest adult child) filed 29 September 2015; and
f)The affidavits of Mr R (the wife’s solicitor at the time the Consent Orders were made) filed 7 October 2015 and 16 December 2015.
All witnesses were required for cross examination.
Agreed facts
Helpfully, the parties were able to agree to a joint chronology.
The husband was born in Country C in 1951. He is currently aged 65.
The wife was born in Country C in 1963. She is currently aged 53.
In 1971 the husband arrived in Sydney with his mother and five brothers (Mr F, Mr G, Mr L, Mr K and Mr J).
In 1972 the husband, along with his mother and three of his brothers (Mr F, Mr G and Mr L), purchased W Street, Suburb U (“the W Street property”) in equal shares.
In September 1978 the husband purchased land at A Street, Suburb U (“the A Street property”) unencumbered. He subsequently built a house on the land.
In December 1984 the wife arrived in Australia as a visitor.
In February 1985 the parties met.
In April 1985 the parties were married. They subsequently resided with the husband’s mother at the W Street property.
In July 1985 the parties moved into the A Street property.
In 1986, the parties’ first child Ms V was born. She is currently aged 30.
In 1990 the parties’ second child Ms B was born. She is currently aged 26.
In 1996 the parties’ third child Mr B was born. He is currently aged 20.
In February 1997 the husband was hit by a bus. He suffered physical injuries and subsequently issues with his mental health.
On 27 March 200, the parties separated. On this date, the husband was also admitted to Z Psychiatric Hospital.
In August 2004 an Apprehended Domestic Violence Order was granted against the husband, restraining him from returning to the A Street property.
On 21 August 2008 the wife filed an Application for Divorce.
In late 2008 the husband was admitted once again to a psychiatric facility.
On 1 February 2009 the husband was assaulted. He was taken to Y Hospital initially by the police, but then was admitted two days later at X Hospital.
On 13 February 2009 the husband was served with the wife’s Application for Divorce whilst admitted at X Hospital.
In February 2009 Ms D was admitted into legal practice.
On 17 March 2009 the decree nisi was granted.
On 1 July 2009 the wife filed an Application for Final Orders seeking final property orders.
In July 2009 the husband became a client of H Legal.
On 2 August 2009 the wife’s Application for Final Orders was served on the husband.
On 10 August 2009 the proceedings came before Dunkley FM. Mr S of R & Associates appeared on behalf of the wife and Ms D appeared on behalf of the husband. His Honour made orders adjourning the proceedings and ordered the wife to file and serve a Financial Statement and affidavit by 24 August 2009. His Honour also ordered that the husband file his Response and Financial Statement by 11 September 2009.
On 24 August 2009 the wife filed and served her Financial Statement.
On 16 September 2009 the proceedings came again before Dunkley FM.
Mr R of R & Associates appeared on behalf of the wife and Ms D appeared on behalf of the husband. His Honour ordered that the husband file and serve his Response and Financial Statement by 16 October 2009 and listed the proceedings for further directions on 4 November 2009.
On 28 October 2009 a conference was held at the office of Mr R and was attended by Ms D, the husband and one of the husband’s brothers, Mr K. The wife was present in another room. An Offer of Compromise was signed by the parties.
On 30 October 2009 the husband met with Ms D and Mr H in regards to the Offer of Compromise and signed a statement acknowledging that he had received legal advice on the terms of the Offer of Compromise and their effect on his rights.
On 4 November 2009 Mr R and Ms D appeared before Dunkley FM and provided to the Court signed terms of settlement. The Consent Orders were made by his Honour in accordance with those terms.
On 23 September 2014 the husband’s mother passed away, leaving her share in the W Street property to the husband’s two younger brothers (Mr K and Mr J).
On 24 November 2014 the husband filed an Initiating Application seeking that the Consent Orders of 4 November 2009 be set aside.
In addition it should be noted that on 2 March 2015, Mr M was appointed Case Guardian for the husband. Mr M is an employee of the solicitors for the husband. He is employed part-time as the firm’s Office Manager and is not a solicitor.
The law
In seeking that the Consent Orders be set aside, the husband sought to rely upon s 79A(1)(a) of the Act. That section relevantly provides:
(1)Where, on application by a person affected by an order made by a court under section 79 in property settlement proceedings, the court is satisfied that:
(a) There has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance; or
…
the court may, in its discretion, vary the order or set the order aside and, if it considers appropriate, make another order under section 79 in substitution for the order so set aside.
General approach to s 79A applications
It is generally considered to be in the public interest, and in the interest of the parties, for litigation to be final.[1] There must therefore be some significant reason or reasons for setting aside a property order made pursuant to s 79A.[2]
[1] See for example Mullane v Mullane (1983) FLC 91-303; Taylor v Taylor (1979) FLC 90-674; Slapp & Slapp (1989) FLC 92-022 as referred to in Lenova & Lenova (2011) FLC 93-467 at 85,662.
[2]Mullane v Mullane (1983) FLC 91-303 at 78,070 and 78,068.
Applications under s 79A(1)(a)
In Barker & Barker (2007) 36 Fam LR 650, the Full Court stated:
120. A miscarriage of justice under s 79A(1)(a) will occur if circumstances exist which “for some significant reason, make the order contrary to law and justice according to law as it relates to the integrity of the judicial process [original emphasis]” (Bigg v Suzi (supra) at 84,982). See also Suiker (supra); Public Trustee (as executor of the estate of Gilbert) v Gilbert (supra)). Whilst cases such as Suiker (supra), Holland v Holland (1982) FLC 91-243 and Gebert v Gebert (1990) FLC 92-137 indicate that the words “miscarriage of justice” should not be construed narrowly and the phrase “integrity of the judicial process” should not be taken only to refer to the hearing in the court, the circumstances creating the miscarriage must nevertheless have been such as to have had an influence on the outcome of the litigation.
In considering an application under s 79A(1)(a), the Court must only consider circumstances “occurring before or at the time of the making of the order”.[3] As the Full Court in Molier & Van Wyk (1980) FLC 90-911 noted, “the term ‘miscarriage of justice’ does not seem apt to apply to matters which arise after the order has been made”.
[3] Public Trustee (as executor of the estate of Gilbert) & Gilbert (1991) FLC 92-211 at 78,427 referring to Molier & Van Wyk (1980) FLC 90-911 at 75,767-75,768.
In determining an application under s 79A(1)(a), the Court must consider the application in the following stages:
a)Has the applicant established a ground under s 79A(1)(a)?
b)If a ground is established, does that ground amount to a miscarriage of justice?
c)If there has been a miscarriage of justice, should the Court in its discretion vary or set aside the order(s)?
d)If so, should the Court make a different order under s 79?
Accordingly, while an applicant may establish a ground under s 79A(1)(a), the Court may nevertheless refuse to exercise its discretion to vary or set aside the relevant order(s).
Closing written submissions prepared on behalf of the husband did not clearly articulate which grounds under s 79A(1)(a) the husband continued to rely upon. However, in counsel’s Case Outline document it had been submitted that there had been a miscarriage of justice:
…by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), and circumstances where justice was not done, court rules were not followed satisfactorily and the legal representatives for both parties failed in their duties.
The Consent Orders
The Consent Orders that the husband seeks to set aside were made by Dunkley FM on 4 November 2009. In full, the Consent Orders read:
1.The orders, notations and declarations are made in accordance with the document titled “Terms of Settlement”, dated 4 November 2009, and marked with the letter “A” and initialled by the Federal Magistrate.
2.All applications and cross applications are otherwise dismissed and the case is removed from the list of cases awaiting finalisation.
[Exhibit A]
Orders by Consent
Final Orders
BY CONSENT IT IS ORDERED:
1.[The husband] to transfers [sic] to [the wife] fifty per cent (50%) of the property at [A] Street, [Suburb U] being Folio Identifier ... The respective interests in the said property shall be held as tenants in common.
2.[The husband] to give [the wife] a life estate in the property at [A] Street, [Suburb U].
3.[The husband] must not to sell, transfer, charge or otherwise deal with his fifty per cent 50% share of the property at [A] Street, [Suburb U] other than in accordance with these orders.
4.[The husband] acknowledges [the wife’s] right to lodge a caveat over his interest in the property at [A] Street, [Suburb U].
5.When [the husband] dies, his one half share of the property at
[A] Street, [Suburb U] be transferred to [the wife].6.If [the wife] sells her 50% share in the property at [A] Street, [Suburb U] during her lifetime, then [the husband] is at liberty to sell his 50% share and retain the proceeds of sale.
7.When [the wife] dies, her interest in the property at [A] Street, [Suburb U] be transferred to [the husband] to be held by him on trust for the children of the marriage as tenants in common in equal shares and to be transferred to the children of the marriage as tenants in common in equal shares upon the death of [the husband].
8.[The husband] not to enter or approach within 300m, the property at [A] Street, [Suburb U].
9.[The husband] be declared the absolute owner of his interest in the property at [W Street], [Suburb U].
IT IS DIRECTED:
1.That the Minutes of Consent Orders remain on the Court file.
THE COURT NOTES:
2.That the parties intend these orders shall as far as practicable finally determine the financial relationships between them and avoid further proceedings between them.
Issues
The issues to be determined by the Court are therefore as follows:
·Has the husband established a ground for setting aside the Consent Orders under s 79A by reason of:
a) Fraud?
b) Duress?
c) Suppression of evidence (including failure to disclosure relevant information)?
d) Giving false evidence?
e) Any other circumstance, including whether there was a miscarriage of justice because:
i) the then Federal Magistrates Court Rules 2001 (Cth) (“FMC Rules”) were not followed satisfactorily;
ii) the legal representatives for both parties failed in their duties; and/or
iii) of issues related to the husband’s mental health?
·If a ground has been established, does it amount to a miscarriage of justice?
·Should the Court exercise its discretion to set aside the Consent Orders?
Has the husband established a ground for setting aside the Consent Orders under s 79A?
Fraud
There was no suggestion that fraud was a relevant consideration. Accordingly, the first issue to consider is the issue of duress.
Duress
In SH and DH (2003) FLC 93-164, Federal Magistrate Ryan (as her Honour then was) reviewed the relevant authorities and concluded that the applicable test, for the purposes of s 79A, should be “by reference to equity’s formulation” of duress.
That test, as formulated by McHugh JA in Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 at 45-46, is:
A person who is the subject of duress usually knows only too well what he is doing. But he chooses to submit to the demand or pressure rather than take an alternative course of action. The proper approach […] is to ask whether that pressure went beyond what the law is prepared to countenance as legitimate? Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct.
The husband’s evidence as to alleged duress was provided on the first day of the hearing in respect to the circumstances in which he signed an Offer of Compromise in the office of Mr R, the solicitor for the wife, on 28 October 2009.
Under cross examination the husband responded to the following questions:
Q. Do you remember what happened at that meeting?
A. Not exactly, you know.
…
A. I remember I been under force to sign. I remember that.
Q. What do you mean---
A. I was sick and unfit to sign and I was under pressure, and forced to sign, and I was refusing.
Q. Do you – when you say forced, do you mean physical force? Did anyone---
A. No. No.
Q. ---hit you?
A. No.
Q. Tie you down?
A. No. The solicitor was looking and he was – has a devilish face, and I was scaring, and I was worried about my family – do something wrong to them. Then, you know, I have to sign, and I complain about, you know, the things and he ignored me. He gone to – back to his office and then came back. He said “sign, sign, sign” and … I was scaring.[4]
[4] Transcript 5 May 2016 page 41 lines 44-46 and page 42 lines 1-29.
Counsel for the husband drew attention to Holland & Holland (1982) FLC 91-243 where the Full Court stated at 77,341 that:
There may be cases where the order consented to is so far outside the ambit of what is just and equitable that the Court may infer that a party had acted under duress, in ignorance or as a result of incompetent advice.
The substance of the Offer of Compromise signed on 28 October 2009 was not, with respect to counsel for the husband, such that the Court could, on the face of the document, conclude that the husband was subject to duress when signing the document.
Further, the husband’s evidence is not supported by any other person who attended the meeting. Ms D gave the following evidence during the course of cross examination by counsel for the wife:
Q. Do you have any recollection of what happened at the conference?
A. There was just people signing. That’s what it was, signing the terms. All the parties signing.
Q. Did the parties express agreement with the terms?
A. No. My client was there, but he just signed.
Q. Did he express any disagreement with any of the terms?
A. He was – he didn’t have mental capacity to express any - - -
Q. No, no, no, excuse me, you’re doing it again. I’ve asked you a question. Did he express agreement with any of the terms?
A. No, he just signed.
Q. Did he express any disagreement with any of the terms?
A. Yes, after he signed he told me he wasn’t happy.
Q. When did he tell you that? After the conference?
A. After he signed it. After the conference.[5]
[5] Transcript 5 May 2016 page 111 lines 16-32.
Subsequently counsel for the wife asked:
Q. So what happened is that during the course of the conference your client signed without comment and afterwards he said he wasn’t happy?
A. Right, correct.[6]
[6] Transcript 5 May 2016 page 111 lines 37-38.
Ms D’s evidence that the husband signed the document without complaint during the course of the conference contradicts the evidence of the husband who said, during the conference, “I complain about, you know, the things and he ignored me”.
The husband carries the onus of establishing that he was subject to duress. In light of the inconsistency of evidence, I am unable to accept on the balance of probabilities that he was subject to duress at any time prior to his signing the Offer of Compromise.
Moreover, even if the husband’s evidence was accepted at its highest it does not, in the circumstances that I have outlined, amount to an illegitimate pressure constituting duress.
Suppression of evidence (including failure to disclose relevant information)
In respect to this ground, counsel for the husband submitted as follows:
The necessity for full and frank disclosure of financial matters to the Court and to the other party are basic to the process of the Court and the fundamental aims of the legislation contained in S79 of the Family Law Act (Harris and Caladine (1991) FLC 92-217).
We, as Counsel, have a duty to the Court and in the administration of justice to ensure that all relevant evidence should be before the Court.
The relevant matters that the husband complains were not provided to the Court but appear to be as follows:
a)The husband’s mental health condition;
b)That the husband had no fixed place of abode;
c)That the husband had brought the totality of the assets into the marriage; and
d)The effect of the orders upon the husband.
There was no suggestion that the wife withheld any relevant information from the husband in respect to those matters. In fact, to the contrary, the wife had less information than the husband about each of those matters. Insofar as there was a suppression of evidence or failure of disclosure, it was not by the wife to the husband but rather by the husband to the Court.
In Birkbeck & Birkbeck (1970) 16 FLR 78, Carmichael J stated at [92]:
For my part I deprecate the consequences of Mrs Matthew’s submission in the present case that a party having either by choice or inadvertence failed to give relevant evidence should then be able to seek a different decision because he was dissatisfied by what he now says was the result of his own mistake or neglect.
More recently, in Lane & Lane [2016] FamCAFC 53, the Full Court at [139] confirmed that the concept of suppression of evidence occasioned by non‑disclosure, for the purpose of s 79A of the Act, “is one party’s failure” to disclose matters:
…“which were peculiarly within [the] knowledge” of that party or omissions which knowingly engendered, or permitted, a mistaken understanding on the part of the other party.
Within that context, it has been said, for example, that suppression of evidence must “amount to wilful concealment of matters which it was [the party’s] duty to put to the Court” and that “the ground is not available to a party who simply fails to give relevant evidence either by choice or inadvertence…”
(References omitted)
In this matter it could not be said that any of the matters referred to above “were peculiarly within the knowledge” of the wife. Nor could it be said that the wife was under a duty to put information concerning those matters to the Court.
Insofar as the husband alleges that information concerning those matters should have been put to the Court, the appropriate party to do so was the husband. The husband cannot now seek to have the Consent Orders set aside because of the failure by the husband, or more specifically the husband’s solicitors, to put that information before the Court.
As was noted in In the marriage of Rohde (1984) FLC 91-592, insofar as the husband has a potential remedy in respect to the non-disclosure of that information to the Court, it is not against the wife but may potentially be against his legal representatives.
Has the husband established that the Consent Orders were affected by the giving of false evidence?
While the husband had alleged that the Consent Orders were affected as a result of the suppression of evidence (including a failure to disclose relevant information), there has been no suggestion that a party gave false evidence to the Court either prior to, or during, the course of the parties’ joint application for the Court to make the Consent Orders.
Did a miscarriage of justice occur within the contemplation of s 79A of the Act as a result of any other circumstance?
As previously noted, in respect to this ground, the husband alleges that there was a miscarriage of justice because:
a)The FMC Rules were not followed satisfactorily;
b)The legal representatives for both parties failed in their duties; and/or
c)The husband’s mental health was not properly considered.
Were the then FMC Rules followed satisfactorily?
Counsel for the husband’s written submissions in reply argued that:
…in this case Magistrate Dunkley (as he then was) failed in his duty to enquire about whether the orders were proper, especially in that the court rules had not been followed. As the court failed to exercise its role correctly that is a matter of jurisdictional error [refer Rowlings and Rowlings FamCAFC 87, and reference to NAIS v Minister for Immigration and Multicultural and Indigenous Affairs [2005] HCA 77].
Section 79(2) imposes a precondition to the Court making an order adjusting the property interests of parties. The pre-condition is that the Court must be satisfied that it is “just and equitable” to make such an order.
In Redman & Redman [2013] FamCAFC 183 the Full Court said at [36]:
The Court is not relieved from its obligation to consider whether the making of the Order is just and equitable under s 79(2) simply because the order is said to be by consent.
This is consistent with the observations of Brennan J in Harris v Caladine (1991) 172 CLR 84 where at 103 – 104, his Honour said:
It does not follow that, when a consent order is sought in a s. 79 application, it is necessary to conduct an inquiry into each of those factors. The Court may be satisfied that a provision is proper by reference not only to the material before the Court relating to the factors mentioned in s. 79(4) but by reference to the advice available to the respective parties and the consent which they respectively give to the making of the order. In the majority of cases, once it appears that the parties are conscious of the factors mentioned in pars (a) to (f) and have taken them into account before consenting, the provisions “with respect to financial matters” proposed for incorporation in the consent order will be seen to be “proper” … Nevertheless, when an application for a consent order in a section 79(1) matter is made there is a discretion to be exercised with reference to the propriety of the provisions with respect to financial matters. The making of a consent order in a s 79(1) matter is not automatic.
Clearly, the making of consent orders is not automatic; however, the fact that both parties had the benefit of legal representation is of significance. In that context in Saleeby & Moon [2015] FamCA 43 Aldridge J said:
60. Unlike Gebert, in this matter the husband had the benefit of legal representation. That makes the husband’s task in this case even more difficult. These authorities establish that the learned Federal Magistrate would have been entitled to rely upon consent of the parties who had the benefit of independent legal representation and little more to make the consent orders. The possibility, or even probability, of different orders being made after a contested hearing does not vitiate the consent orders. The husband agreed to the consent orders having had the benefit of legal advice. Presumably, he thought they were appropriate at the time. He gave no evidence to the contrary.
61. This consideration is, of itself, sufficient for the husband’s application [pursuant to section 79A] to fail.
(References omitted)
In this matter Dunkley FM was entitled to rely upon the fact that both parties were legally represented and that both solicitors represented to his Honour that the parties consented to the orders being made.
The transcript of the proceedings of 4 November 2009, when the Consent Orders were made, was attached to the written submissions of the husband. The transcript is relatively brief and does not indicate that his Honour provided reasons for the making of the Consent Orders. However, neither of the parties requested such reasons and it was not incumbent upon his Honour to provide those reasons. Further, there is no evidence as to what additional documents may have been included in the court file that may have been considered by his Honour.
The husband places significance on the absence of documents before Dunkley FM on 4 November 2009 despite his Honour making orders for the parties to file such documents as follows:
a)
On 10 August 2009 his Honour ordered the wife to file and serve an affidavit and Financial Statement within fourteen days and for the husband to file and serve his Response and Financial Statement by
11 September 2009; and
b)On 16 September 2009 his Honour extended the time for the husband to file and serve his Response and Financial Statement to 16 October 2009.
At the time it appears that the relevant FMC Rules were:
·r 24.02 which required an applicant to file either a Financial Statement or an affidavit of financial circumstances with the application; and
·r 4.03 which provided that a respondent may file a Response (which would need to be supported by a Financial Statement or affidavit of financial circumstances).[7]
[7] Emphasis added.
It is acknowledged that the wife filed a Financial Statement on
24 August 2009.
When the proceedings were listed before Dunkley FM on 16 September 2009, no further application was made for the wife to file an affidavit despite the fact that no such affidavit that been filed in accordance with the Orders made on 10 September 2009.
On that day his Honour did however make orders for the husband to file and serve his Response and Financial Statement by 16 October 2009. It is common ground that the husband did not file those documents.
Accordingly, in considering this issue, it is relevant that the absence of information before the Court concerning the husband’s circumstances resulted from a failure on the part of the husband’s legal representatives to file and serve documents in accordance with the orders of Dunkley FM.
In University of Wollongong v Metwally(No. 2) (1985) 60 ALR 68, the High Court said:
It is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so.[8]
[8] See also Coulton v Holcombe (1986) 162 CLR 1 at 7-8.
This principle is applicable in this case. The husband’s legal representatives failed to provide Dunkley FM with the documents that they were ordered to file on 16 September 2009. It would be contrary to principle to now permit the husband to set aside the Consent Orders made by his Honour on 4 November 2009 as result of the neglect on the part of the husband’s legal representatives to prepare and file those documents.
Did the legal representatives for the parties fail in their duties?
Appropriately both parties recognised that solicitors have a fiduciary duty to their clients. That is indeed the case. A fundamental requirement of that duty is that solicitors must avoid being in a position of actual or potential conflict of interest with those of their clients.
Once Ms D accepted instructions from the husband, she was in a fiduciary relationship with him.[9]
[9] Maguire v Makaronis (1997) 188 CLR 449.
In Law Society of New South Wales v Harvey [1976] 2 NSWLR 154, the NSW Court of Appeal said at 170-171:
Where there is any conflict between the interest of the client and that of the solicitor, the duty of the solicitor is to act in perfect good faith and to make full disclosure of his interest. It must be a conscientious disclosure of all material circumstances, and everything known to him relating to the proposed transaction which might influence the conduct of the client or anybody from whom he might seek advice. To disclose less than all that is material may positively mislead. Thus for a solicitor merely to disclose that he has an interest, without identifying the interest, may serve only to mislead the client into an enhanced confidence that the solicitor will be in a position better to protect the client's interest. The conflict of interest may, and usually will, be such that it is not proper, or even possible, for the solicitor to continue to act for and advise his client. A solicitor, who deals with his client while remaining his solicitor, undertakes a heavy burden. Where a solicitor discovers that continuing to act for his client will, or may, bring the interests of his client and his own interests into conflict, it will be a rare case where he should not, at least, advise his client to take independent legal advice. It may well happen that the conflict arises fortuitously, and has not been anticipated when the solicitor undertook to act for the client. This circumstance does not alter the duty of the solicitor already referred to.
In Howard v Commissioner of Taxation [2014] HCA 21 at [59], Hayne and Crennan JJ summarised a fiduciary obligation to avoid a conflict of interest in the following terms:
It is well established that “[i]t is an inflexible rule of a Court of Equity that a person in a fiduciary position … is not, unless otherwise expressly provided, entitled to make a profit; he is not allowed to put himself in a position where his interest and duty conflict”. The majority in Pilmar v Duke Group Ltd (in liq) said of this obligation that “the fiduciary is under an obligation, without informed consent, not to promote the personal interests of the fiduciary by making or pursuing a gain in circumstances in which there is ‘a conflict or a real or substantial possibility of a conflict’ between personal interests of the fiduciary and those to whom the duty of owed”.
(References omitted)
Similarly, in Bristol and West Building Society v Mothew [1998] Ch 1 Millett LJ held that:
The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or for the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of the fiduciary obligation. They are the defining characteristics of the fiduciary.
(Emphasis added)
At the time her client provided instructions to sign the Offer of Compromise and the Consent Orders were made on 4 November 2009, Ms D was in a clear position of conflict between her duty and her interest. She had a fiduciary obligation to her client, the husband. At the same time, she had a personal interest in negotiating, and ultimately obtaining, an offer of employment from Mr R who was representing the wife in the family law proceedings.
There was no suggestion that the conflict of interest had been disclosed to the husband.
It is not to the point that Ms D was not specifically asked whether the poor representation she provided to the husband was a result of her desire to secure employment with Mr R. The existence of the conflict of interest and duty were sufficient. Ms D should have either ceased to act on the behalf of the husband or, at the very least, sought his informed consent to continue to act for him in circumstances where:
·she was seeking employment as a solicitor in Mr R’s firm;
·in anticipation of that potential employment, she had commenced to undertake legal work at his office; and
·in the week prior to the Consent Orders, she had obtained an email address in her own name at Mr R’s firm.
The fact that Ms D was in a position of a conflict of interest is even more concerning in circumstances where she acted in an entirely unprofessional manner in respect to her dealings with the husband, including failing to obtain her client’s instructions in respect to proposals put to her by the solicitor for the wife, Mr R.[10]
[10] Transcript 5 May 2016 page 105 lines 1-6.
A further matter of concern is that in the period following 16 September 2009, it appears that Ms D was engaged in a flirtatious relationship with Mr R.
It must be stressed, however, that the fiduciary relationship was between
Ms D and the husband. Mr R, unquestionably, had a corresponding fiduciary relationship with the wife but he did not owe such a duty to
the husband.
The legal representation of the husband by Ms D is a matter of great concern. The husband may well have a remedy against her and her principal in respect to her conduct but that does not, in itself, warrant the Consent Orders being set aside pursuant to s 79A.
The law as to when incompetence of legal representation may be a ground for setting aside an order under s 79A
The Full Court in Gebert & Gebert (1990) FLC 92-137 said at 77,935 – 77,936:
It would, in our view, be straining the meaning of the words “miscarriage of justice” far beyond what Parliament intended to describe orders made in such circumstances as amounting to a miscarriage of justice. We consider that the words “any other circumstance” appearing in s 79A(1)(a) whilst not to be read ejusdem generis with fraud duress suppression of evidence or the giving of false evidence, are intended to cover other situations where, for one reason or another, a miscarriage of justice has occurred…
The important matter that must be established for an application under this part of the section to succeed is that there has been a miscarriage of justice. It is, we think, clear as counsel for the appellant argued that the words “miscarriage of justice” should not be giving a restrictive meaning, particularly when coupled with the words “any other circumstance” and that justice means justice according to law. See Kokl and Kokl (1981) FLC 91-078 at p 76,557.
The above was cited with approval by the Full Court in Clifton & Stuart (1991) FLC 92-194, where at 78,337 it was stressed that the words ‘any other circumstance’ are “not of unlimited scope but governed by the words ‘miscarriage of justice’”.
As will become relevant in the Court’s determination of this application, in Clifton & Stuart (supra), the Full Court agreed that generally the incompetence of legal representatives, though unjust for the party represented, does not affect the judicial process such that it would amount to a miscarriage of justice. However, the Full Court also agreed that such incompetence could amount to a miscarriage of justice if:
…the representation was so bad as to be the equivalent to no representation at all or if the representation was perverse for example if the representative was in league with the other side.[11]
[11] at 78,335.
(Emphasis added)
It is convenient to consider these issues in reverse order.
Were the parties’ legal representatives in league with each other?
A finding that a solicitor acted in concert with, or colluded with, another solicitor to deprive that other solicitor’s client of their legal rights or to cause an injustice to that other solicitor’s client is a serious matter. To make such a finding, s 140(2)(c) of the Evidence Act 1995 (Cth) requires the Court to be satisfied on the balance of probabilities that such collusion has occurred.
Counsel for the husband argued that the settlement reflected in the Consent Orders was so disadvantageous to the husband that the Court should infer that such conduct occurred between Ms D and Mr R.
As previously noted, the Consent Orders provided for the husband to have a fifty per cent interest in the A Street property. However, that interest was subject to the wife having a life estate and the husband being precluded from approaching the property.
The husband also retained his interest in the W Street property that he owned jointly with his brothers and his mother.
The question before the Court is whether the process of settlement negotiations between the parties’ legal representatives in the period leading up to the making of the Consent Orders leads to such an inference of collusion between the parties’ legal representatives with a view to disadvantaging the husband.
To determine this, the history of negotiations that led ultimately to the Consent Orders being made must be examined.
By letter dated 17 February 2009, R & Associates wrote directly to the husband proposing a property settlement whereby the A Street property would be sold, with the wife obtaining seventy per cent of the proceeds of sale and the husband the remaining thirty per cent.
On 17 March 2009 R & Associates wrote a further letter to the husband noting that no reply had been received and requesting that he respond as soon as possible.
On 1 July 2009 the wife commenced proceedings in the then Federal Magistrates Court seeking the following orders pursuant to s 79 of the Act:
1.That the property at [A] Street, [Suburb U] NSW … be sold;
2.The property at [W Street], [Suburb U] NSW … be valued;
3.Declaration that 20% of the value of [W Street], [Suburb U] NSW and the entire property at [A] Street, [Suburb U], be declared matrimonial property of the Husband and Wife in these proceedings;
4.That the proceeds of the sale of [A] Street, [Suburb U] NSW … to be distributed as follows:
a. An amount equivalent to 70% of matrimonial property be paid to [the wife];
b. The balance of proceeds of sale be paid to [the husband].
5.[The husband] to return [sic] his interest in the [W Street], [Suburb U] NSW ...
The effect of these proposed orders would have been for the husband to have retained his twenty per cent interest in the W Street property as well as receive thirty per cent of the proceeds of sale of the A Street property.
The matter was listed for a first return date on 10 August 2009. As previously noted, on that occasion, directions were made by Dunkley FM for the filing of documents by both parties with the husband to file his Response and Financial Statement by 11 September 2009.
Shortly prior to 8 September 2009, the wife received a document entitled “Deed of Agreement” in her mailbox at the A Street property. Relevantly that document proposed:
THIS AGREEMENT is made between [Mr Badawi] of [W Street Suburb U], NSW, … and [Ms Badawi] of [A] Street [Suburb U], NSW, ...
Additional clauses forming part of the contract
1.1The agreement is for the purpose of facilitating a shared agreement in relation to the property at [A] Street, [Suburb U] NSW ...
The proceeds of sale of [the matrimonial property] to be distributed as follows:
“Acknowledgement between two parties ([Mr Badawi]) and ([Ms Badawi]) that if the house located at [A] Street [Suburb U], NSW, … is to be sold and [Mr Badawi] is still alive, 60% shall go to [Ms Badawi] and 40% to [Mr Badawi].”
In the event that the said [Mr Badawi] dies the property shall be divided as follows:
[The document then proposed a 50 per cent distribution to the parties’ son and a 25 per cent distribution to each of the parties’ daughters]
In the event that the said [Ms Badawi] dies the property should be divided as follows:
[The document then proposed a 50 per cent distribution to the parties’ son and a 25 per cent distribution to each of the parties’ daughters]
That the children of the broken marriage namely [Mr B], [Ms V] & [Ms B] live with the mother at [A] Street [Suburb U] NSW ...
It is well-known that Mr [Badawi] must not enter the premises of [A] Street [Suburb U]. This remains in force for the period stated in the Apprehended Violence Order unless it is varied or revoked by a further court order.
Mr [Badawi] interest in the property [W Street], [Suburb U] NSW … is too [sic] remain as it is.
If either party is to re-marry the new partner will not be entitled to any percentage of the property unless otherwise stated.
Death
1.2 Should either party prior to the completion of the agreement die or become mentally ill then the other party may rescind the agreement by notice in writing, forwarded to the other’s [sic] party’s solicitor and upon receipt of this notice the agreement will be rescinded.
Dispute resolution
1.3 If there is a suspected breach by either party, the party must inform the other party as soon as practicable so that the issue can be resolved.
1.4 While a dispute is in progress between the parties, the agreement is suspended for both parties until the matter is resolved.[12]
[12] Annexure “A” to the affidavit of Mr R filed 16 December 2015.
(Emphasis added)
The “Deed of Agreement” is ambiguous to the extent that, on the one hand, reference is made to the prospect of the A Street property being sold but on the other hand, the document sets out arrangements based on the premise that the A Street property will continue to be occupied by the wife and children. The document also anticipates having application beyond a period of time that could reasonably be anticipated if it was intended to sell the property. For instance, the document provides for the possibility of a party remarrying or dying.
The document provides for the apportionment of the parties’ interests in the A Street property “if [the property] is to be sold”. However, in that respect, the use of the conditional word “if” suggests an acknowledgement of the possibility of sale of the A Street property rather than that being the purpose and intention of the “Deed of Agreement”.
Ms D conceded that the document was prepared by someone in
Mr H’s office other than herself and acknowledged that the reference to “MH:LS” in the letterhead could be a reference to Mr H and Ms SS (a receptionist/typist employed at the firm at the time).
Further, Mr H gave evidence that it is likely he drafted the document, although he stated that he was:
…using [Ms [D]] as the go-between, partly because she had a language in common with him and partly because she had more familiarity with those areas of family law at that time, given that she had not long passed and been admitted. So whilst I can’t say that he actually said exactly every word directly to me, I can certainly say that the intent is that those were his instructions.[13]
[13] Transcript 5 May 2016 pages 133 -134.
In other words, there can be no suggestion of any collusion between Ms D and Mr R in respect to the “Deed of Agreement” initially proposed by the husband. I accept that the Deed was in fact prepared by Mr H.
While it is not necessary to conclusively determine the purpose and intention of the document, in my view the preferable construction is that it does not propose the sale of the A Street property as part of the family law settlement. The intention appears to be that the wife and children would continue to reside in the former matrimonial home and the husband would be excluded from the property, at least for the duration of the apprehended domestic violence orders against him.
Thereafter, by letter dated 8 September 2009, R & Associates continued to press for the former matrimonial home to be sold with the wife receiving seventy per cent of the proceeds of the sale.
The next event of relevance was the preparation of a draft letter of response to the letter dated 8 September 2009 containing the wife’s counter offer. That draft letter was dated 14 September 2009 and prepared by Ms D on the letterhead of Q Lawyers. It appears it was on the letterhead of that firm because Ms D was performing part-time work there at the same time that she was undertaking work for H Legal. The letter was not sent and it could not be said that Ms D’s actions in preparing the draft letter on that firm’s letterhead resulted in Q Lawyers acting for the husband.
The draft letter was addressed to Mr S of R & Associates rather than Mr R. Ms D gave evidence that it was prepared on the instructions of the husband’s brother, Mr K.[14] Ms D did not suggest that it had been prepared as result of any input by Mr R. In any event, as noted, the letter was not sent.
[14] Transcript 5 May 2016 page 96.
According to the evidence of the wife, she departed from her original position that she receive seventy per cent of the net proceeds of sale of the A Street property, as a result of a direct approach she had received from the husband and his brother Mr K, during which they requested that the wife not seek orders for the sale of the former matrimonial home.
The wife’s evidence to that effect was as follows:
THE INTERPRETER: In 2009, after the first court decision, I wanted to sell the house and take my 70 per cent share for me and for my children, but [the husband] and [[Mr K]] came to me, and they were convincing me to stop doing this and – and what has happened is everything was, like, in regards to their condition. Their – they wanted me to do so – and I have a proof – we have a proof, here, about that.
MS REID: Right. So who were saying convinced you not to sell the house and take 70 per cent?
THE INTERPRETER: The one who was advising me about the 70 per cent was [Mr [R]] but [[Mr K]] and [the husband] are the ones who didn’t want me to sell the house.[15]
[15] Transcript 6 May 2016 page 74 lines 5 to 15.
The evidence of the wife in that respect is plausible and is consistent with the evidence of Mr R that he received the following instructions from the wife via an email dated 14 September 2009, sent by her friend Mr T which read:
Hi …
how are you?
This is regarding [Ms Badawi] case
…
the other party is husseling us to cancell the court thats coming up this week , so we can give them any conditions , so can you or some 1 call us regarding the matter ,
IF YOU THINK THIS IS FOR YOUR CLIENT’S BENEFITS,. & IF YOU LIKE TO CHANGE OR ADD ANYTHING TO THE CONDITIONS BELOW.
[MS BADAWI] CONDITIONS
1][Mr Badawi] not to go anywhere near the house or to live in it as long as he lives,
2][Mr Badawi] is not allowed to plan or rearrange everything in the house.
3][Mr Badawi] is not to sell, rent out or refinance the house .
4] [Ms Badawi’s] name to be added to the ownership of the house .
5] if at any time Mr [Badawi] breaks these conditions [Ms Badawi] is to get 70% of [A] Street [Suburb U] and 70% of his share of [W Street Suburb U] even if it is sold or if he surrenders the house to other family member.
6] in the event of [Mr Badawi] deth’s [sic] the property at [A] Street [Suburb U] to go to [Ms Badawi] and nothing to do with [W Street Suburb U]. [16]
[16] Annexure “L” to the affidavit of Mr R filed 7 October 2015.
The reference to “the court case… coming up this week” was a further mention before the then Federal Magistrates Court on 16 September 2009.
The wife’s assertion that she had been approached by the husband and his brother Mr K to agree to a settlement that did not include the sale of the A Street property is also consistent with what I regard as the preferred construction of the proposed “Deed of Agreement”, being that the wife and the children would continue to reside in that property.
Further, it is significant that Mr R was not cross examined on his evidence that he prepared the Offer of Compromise based on the email from Mr T and by letter dated 14 September 2009, requested his client to “present the document headed Offer of Compromise to your former husband and try to negotiate an agreement along the lines of that document”.[17]
[17] Ibid.
The Offer of Compromise attached to the letter from R & Associates dated 14 September 2009 is significant because it is the first time that it was proposed by the wife that she have a life estate in the former matrimonial home and that the husband not enter or approach within three hundred metres of the property.
The fact that Mr R suggested that the wife negotiate directly with the husband supports Mr R’s evidence that he was not acting in collusion with Ms D.
Further, I prefer the evidence of Mr R over that of Ms D that he did not meet Ms D until two days after that letter was sent.
In that respect, in oral evidence, Ms D initially agreed that she first met Mr R “in court at a directions hearing in this matter in 2009”.[18] When it was pointed out to Ms D that the first time Mr R attended court was on 16 September 2009, she changed her evidence to give a second version of events that on 10 August 2009 she had been taken by Mr R’s employee, Mr S, to meet Mr R at his office after the court mention on that date.[19]
[18] Transcript 5 May 2016 page 91 lines 14-15.
[19] Transcript 5 May 2016 page 92 lines 21-24.
Mr R’s evidence, that he did not meet Ms D until 16 September 2009, is consistent with Ms D’s first version of events. It is also consistent with email communications between Mr R and Ms D that occurred on
16 September 2009. At 2:39 pm Mr R sent an email to Ms D addressed “Dear Madam”. At 3:56 pm Ms D responded with an email address to Mr R by his first name and stated “thank you for today you were great in assisting me. please keep in touch”. At 6:19 pm Mr R responded with an email addressed to Ms D’s first name which stated “Not at all. Don’t forget to give me a bell or drop me an email if you need any assistance, or just to say hello….”.[20]
[20] Annexure “N” to the affidavit of Mr R filed 7 October 2015.
I accept the submission of counsel for the wife that it is inherently unlikely that Mr R would have addressed Ms D as “Dear Madam” in email correspondence if they had been in a personal relationship as at
16 September 2009. I accept also that the email exchanges are more consistent with the beginning of a relationship. I therefore find, on the balance of probabilities, that Mr R first met Ms D on 16 September 2009.
The focus of my consideration then becomes whether there was evidence of collusion between Mr R and Ms D in the period subsequent to
16 September 2009 that suggests they were acting in league or in concert to the detriment of the husband.
Ms D gave oral evidence that she “felt under duress by [Mr [R]] to settle these [family law proceedings]”.[21] However, at no stage did Ms D provide any evidence as to how or why she felt under duress. Specifically, Ms D did not provide evidence of a conversation or other communication between herself and Mr R that would satisfy the Court, on the balance of probabilities, that Mr R attempted to apply any pressure upon her or offer any inducement to her to achieve a settlement of the parties’ family law proceedings.
[21] Transcript 5 May 2016 page 109 lines 7.
At best, Ms D’s evidence in respect to the nature of the communications between herself and Mr R is unclear. In cross examination by counsel for the wife, Ms R said:
He [Mr [R]] was pretty much leading me to these offers of – he was pretty much putting these to me and I wasn’t even seeking my client’s instructions. He was the one that was telling me, “Just get your client to agree.” So I can’t even recall about these changes, what happened and what took place, because there was a lot of discussion that took place between me and [Mr [R]] - - -[22]
[22] Transcript 5 May 2016 page 105 lines 2-6.
(Emphasis added)
Mr R refuted any suggestion that there had been any collusion between himself and Ms D. He deposed in his affidavit that:
I never gave any advice to [Ms] [D] in relation to the [s 79 proceedings]. I did not say anything to [Ms] [D] that could be reasonably interpreted that I was inducing her or suggesting to her that she should deal with those [s 79 proceedings] in any manner contrary to her client’s interests.[23]
[23] Affidavit of Mr R filed 16 December 2015 at paragraph 30.
It is telling that Mr R was not cross examined on that statement. This is significant because while the parties discussed the possibility of agreeing not to take an issue pursuant to the principles of Browne v Dunn, the Court was advised that no such agreement had been reached between the parties.[24]
[24] Transcript 5 May 2016 page 56 lines 19-20.
Moreover, the evidence of Mr R is consistent with his action in recommending to Ms D that the husband be provided with advice from Ms D’s employer, Mr H. Mr R’s evidence to that effect is set out in his affidavit as follows:
After the conclusion of the meeting [on 28 October 2009] I had a conversation with [Ms] [D] as follows:
[Mr] [R]: “You know how you are going to be working here soon, you should have your boss explain the terms of settlement to the client. You don’t want somebody making allegations that you didn’t explain the terms of settlement properly to the client. It is best if your boss gives them advice on it.”
[Ms] [D]: “Okay. I’ll ask [Mr [H]] to see them.”[25]
[25] Affidavit of Mr R filed 16 December 2015 at paragraph 21.
Again, Mr R was not cross examined on that evidence. Further, it is agreed that the husband attended a meeting with Mr H for the purpose of Mr H discussing the proposed terms of settlement with him. The significance of that advice will be discussed below.
In conclusion, the husband has not satisfied the Court that, on the balance of probabilities, the legal representatives for the parties acted in league or in concert to secure the husband’s consent to the terms of settlement that were reflected in the Consent Orders made on 4 November 2009.
For completeness, I also find that, in the absence of evidence of collusion between Mr R and Ms D, the terms of the Consent Orders do not justify such an inference being made by the Court.
Incompetence of legal advice
Ms D was at pains to stress that she had only recently been admitted as a solicitor at the time she acted on behalf of the husband in 2009.
The only possible conclusion, if her evidence is to be accepted, is that the legal representation she provided to the husband was appalling. Her evidence was to the effect that she did not consult with the husband regarding settlement proposals; she did not comprehend the basics of property law and did not appreciate the property interests that the husband had in the matrimonial property.
Ms D’s evidence strains credulity in that respect. The initial offer of settlement made by the wife, as reflected in the letter from R & Associates to the husband dated 17 February 2009, stated under the heading “Matrimonial Property”:
8. The current matrimonial property is as follows:
9. Real estate property at [A] Street, [Suburb U] wholly owned by you and unencumbered. This property is worth about $1,200,000.
10. Real estate property at [W Street], [Suburb U] owned by you and your brothers. This property is worth $900,000 and is unencumbered.[26]
[26] Annexure “D” to the affidavit of Mr R filed 7 October 2015.
Ms D’s evidence that she failed to understand basic procedural concepts such as the need for a “transfer” to transfer an interest in property is difficult to believe. This is particularly so in circumstances where Mr H gave evidence that she had acted in several conveyancing matters during the course of her employment with his firm.
Even if, contrary to the doubts I have expressed, Ms D’s evidence is taken at its highest and she was indeed grossly incompetent, it is nonetheless relevant that the husband obtained independent advice from Mr H on 30 October 2009. This was confirmed in a document signed by the husband acknowledging that he had received that advice.[27]
[27] Annexure “E” to the affidavit of Ms D filed 8 October 2015.
In signing that document, the husband acknowledged that he had obtained independent legal advice about the effect of accepting the Offer of Compromise entered into on 28 October 2009 on his rights.
Mr H gave the following evidence in response to cross examination by counsel for the wife:
Q. You would not have signed it unless you had given that advice, would you?
A. That’s correct.
Q. And you wouldn’t – you couldn’t have given that advice without telling Mr [Badawi] that he was giving up his rights in the property, could you have?
A. What – I think we need to be just a little bit – little more precise.
Q. Yes?
Q. What I – the reason I said it the way I said it was because I wanted him to understand clearly, or at least as best as I could ensure, that he was effectively ensuring that the family would remain in the house but he wouldn’t have any access or benefit – sorry – benefit from it.[28]
[28] Transcript 5 May 2016 page 135 lines 42 to 47 and page 136 lines 1-4.
Further, in response to additional questioning, Mr H stated:
Q. And in – well the last point is that in going through and giving the advice – can you turn over to page 25 of the bundle [Exhibit 7]?
A. Yes.
Q. You’ve gone to the trouble on page 25 of writing down points 1 to 8. The likelihood is that you explained each of those points to
Mr [Badawi]?A. Yes.
Q. And satisfied yourself the best you could that he understood it?
A. As best I could, yes.
Q. And if there had been any disagreement with any of those points by Mr [Badawi] you would not have signed the certificate, would you?
A. I would have amended the document accordingly.
Q. You would not have allowed this to go to court a few days later with a consent to a term that had been – Mr [Badawi] had indicated he did not want or did not understand?
A. He indicated his understanding. That’s the best I could work with. What – what can any of us do, counsel?[29]
[29] Transcript 5 May 2016 page 139 lines 11-27.
Ms D’s evidence was also consistent with that of Mr H. In cross examination Ms D provided the following replies to questions from
counsel for the wife:
Q. Do you have any reason to doubt that correctness of the statement on page 26 [of Exhibit 7] ---?---
A. No.
Q. --- that you’ve put your signature to?
A. No
Q. If you had attended the meeting and Mr [H] hadn’t given such advice, I suggest you wouldn’t have signed it would you?
A. Correct.[30]
[30] Transcript 5 May 2016 page 114 lines 28-34.
As a result of the husband receiving advice from Mr H as to the nature of the terms of settlement and impact of the settlement on his rights, it cannot be said that the legal representation provided to the husband is “equivalent to no representation at all”.
The significance of the husband’s mental health
In the written submissions in reply filed on behalf of the husband, it was argued that:
[The husband] as a chronic schizophrenic has a diagnosed, long term mental health condition. Under the then applicable Federal Magistrates Court Rules he came within the definition of a person needing a ‘litigation guardian’. There is no uniform test for capacity but in Erdogan v Ekici [2012] VSC 256, Dixon J identified three elements at [74] to identify capacity:
a. An ability to identify and comprehend the existence of an event, transaction or issue which requires management — a decision or a choice.
b. Once the matter is identified, insight into, and understanding of, the matter is needed. The person must be able to understand or appreciate and recall the relevant facts, the alternatives available, whether by action or inaction, including seeking advice or assistance where appropriate, with sufficient clarity to permit rational choice or decision.
c. The person must have the capacity to reason, to make a rational decision or choice about the steps to be taken, or avoided, to achieve an appropriate outcome or otherwise give effect to or implement a transaction.
Rule 11.08 of the then FMC Rules, which were applicable at the time, relevantly provided:
Person who needs a litigation guardian
(1) For these Rules, a person needs a litigation guardian in relation to a proceeding if the person does not understand the nature and possible consequences of the proceeding or is not capable of adequately conducting, or giving adequate instruction for the conduct of, the proceeding.
The issue therefore becomes whether, as at the date of the making of the Consent Orders on 4 November 2009, the husband was a person who fell in the definition of r 11.08.
In that respect, counsel for the husband relied on the opinion of
Dr N as expressed in his report dated 14 August 2015 which was attached to his affidavit of that date. Dr N expressed the opinion that the husband “has a chronic delusional belief involving his family, his neighbours, the police and the government”. Dr N summarised his opinion as to the husband’s likely mental health state in 2009 as follows:
He has a chronic condition which appears to have emerged in the mid 1990s. There were a number of admissions to psychiatric hospitals in that time. However, he did not continue treatment after discharge, and invariably relapsed. I understand his last admission to hospital was in 2013. He has been reasonably adherent to treatment in the last two years, despite not fully accepting that he has any kind of mental illness. The medication has reduced his level of agitation and the intensity of his beliefs. However, those beliefs have not changed.
With regards his state of mind in 2009, I understand that he was not receiving treatment around that time and hence he is likely to have been affected by an acute exacerbation of his chronic condition. During acute exacerbations of mental illness, he would be unable to communicate effectively in order to instruct a legal representative, or make rational decisions about the conduct of his legal proceedings. [31]
[31] Annexure “A” to the affidavit of Dr N filed 18 August 2015.
It is to be observed that Dr N did not express the view that by virtue of having a mental illness, the husband would be unable to communicate effectively to instruct a legal representative or make rational decisions about the conduct of his family law proceedings. Rather, Dr N expressed the view that such incapacity on the part of the husband would occur “during acute exacerbations” of the husband’s mental illness.
The task before the Court then becomes one of assessing whether in the period leading to the making of the Consent Orders, as well as the day of the making of the Consent Orders, the husband was suffering from such an “acute exacerbation” of his mental illness.
Dr N impressed me as a particularly genuine and sincere witness. He readily conceded, however, that the husband did not attend his service until 2011 and accordingly, his assessment of the husband’s state of mind was dependent upon medical records from that time. Dr N acknowledged that, in expressing his opinion in his report, he could have more thoroughly explained his course of reasoning by reference to the reports he had considered in his assessment. Specifically, in cross examination Dr N said:
A. …I’m just surprised that I didn’t try to summarise them a little more in the letter. That’s what I would normally do in this situation; I would make reference to the information in it.
Q. You would have tried to explain your course of reasoning to reach a conclusion. But your letter doesn’t do that; is that right?
A. That’s correct, yes. [32]
[32] Transcript 5 May 2016 page 129 lines 17-22.
Further, Dr N agreed that there were historical events that could have been relevant to his opinion of the husband’s likely state of mental health in 2009 had he had knowledge of them. These included a motor vehicle accident in 2009 and the fact that the husband had been hit in the head during an assault that occurred in 2010 or 2011.
In that respect Dr N said during the course of cross examination:
Q. If you were trying to assess a patient’s condition in 2009, it would be relevant to you to know that after the relevant date in 2009 and prior to your first seeing the patient he had been hit around the head with a metal broomstick causing psychiatric problems?
A. Yes, that would be a relevant historical event, yes.
Q. It would be vital to know that wouldn’t it?
A. It depends on the injuries that were sustained, but – how serious the injuries were. But, yes, it could be relevant to the course of schizophrenic illness or – or any related cognitive impairment.
Q. And if there was also an assault that necessitated an ambulance being called, that would be relevant to you as well, would it not?
A. Yes. And again, you know, the – the duration of unconsciousness and – and the duration of post-traumatic amnesia is your best shorthand for how – how serious the brain damage was.
Q. And it would be relevant to you if there was another motor vehicle accident, say, in December ’09 when you’re looking at October ’09 as the relevant date?
A. Yes, of course. Yes.
Q. And you have not been able to take those matters into account in preparing your report?
A. That’s right. I didn’t know about any of that. [33]
[33] Transcript 5 May 2016 page 126 lines 43-46 and page 127 lines 1-15.
The further difficulty I have with the report of Dr N is that his opinion is based on the understanding that the husband was not receiving treatment for his mental health in 2009.
The evidence was that the husband was discharged from a hospital where he was receiving treatment for his mental health in April 2009. He was discharged on a community treatment order to stay with his brother Mr G at his home at Suburb I. No evidence was presented that the husband was not provided with treatment in accordance with the community treatment order. I accept the validity of the submission by counsel for the wife that, as Mr G was not called to give evidence in the proceedings, a Jones v Dunkel inference can be drawn that his evidence would not have assisted the husband’s case.
Despite being impressed by Dr N as a particularly genuine and sincere witness, his own evidence was such that I must attach little weight to his opinion that, at the time the Consent Orders were made, it is likely that the husband was suffering from an “acute exacerbation” of his mental illness.
The best available evidence regarding the state of the husband’s mental health at that time is in the form of contemporaneous accounts.
All parties acknowledge that the husband had issues with his mental health during the course of the marriage and that he continues to have those issues. This is acknowledged, for instance, in a letter from R & Associates to the husband dated 17 February 2009 wherein it is stated under the heading “Contribution”:
[The wife] cared for you for a substantial period during cohabitation while you had a mental health illness.
Further it was accepted that at the time the husband was served with the wife’s Application for Divorce on 13 February 2009, he was receiving mental health treatment at X Hospital.[34]
[34] Annexure “B” to affidavit of Mr R filed 7 October 2015.
However, there is no evidence that the husband was suffering an “acute exacerbation” of his mental illness in the period immediately prior to the making of the Consent Orders. Indeed, the indications are to the contrary. For instance, the “Deed of Agreement” provided by H Legal on behalf of the husband, directly to the wife in the period shortly prior to 8 September 2009, included provision for either party to rescind the agreement prior to completion if one of the parties became “mentally ill”. The clear implication from the inclusion of that provision is that H Legal did not consider the husband to be mentally ill at that time.
In giving evidence about his advice to the husband regarding the proposed terms of settlement that ultimately led to the Consent Orders, Mr H gave evidence that there was “some confusion at various points during the course of this”.[35] However, Mr H’s evidence was that he did not, at the time, regard the husband as being impaired by a mental health condition. Mr H’s evidence to that effect was:
[35] Transcript 5 May 2016 page 136 line 24.
Q. You don’t have qualifications to express a medical opinion, do you?
A. No. But I do have a psych degree.
Q. When did you get that?
A. Same time I got the law degree. I completed my degree in eighty – sorry, 98.
Q. And I just want to confine your answer to your impressions that you’ve – in 2009, October 2009?
A. Of course. Okay.
Q. You with your psych degree didn’t twig with any mental illness that stopped this man giving you proper instructions or understanding your advice?
A. I accepted the easiest answer at the time – or what seemed to be the most obvious answer, that there was a language barrier.
Q. If there was any suspicion in your mind, with the benefit of your psych degree, or otherwise, that this was a man who had psychiatric difficulties, you would not have allowed this to take the course that it took?
A. If I had – if I had really twigged on it, yes, it – I would have certainly done things a bit differently. [36]
[36] Transcript 5 May 2016 page 136 lines 29-46.
For the reasons discussed above, I place little weight on the opinion of
Dr N and prefer the contemporaneous evidence provided by Mr H regarding the presentation of the husband at the time shortly prior to the Consent Orders being made.
In light of that contemporaneous evidence, the husband has not satisfied me on the balance of probabilities that, at the time the terms of settlement were agreed upon in October 2009 and at the time the Consent Orders were made on 4 November 2009, he was a person who was not competent to conduct litigation without a case guardian as contemplated by r 11.08 of the then FMC Rules.
I am strengthened in that view by the fact that subsequent to receiving injuries in a motor vehicle accident in December 2009, shortly after the Consent Orders were made, the husband instructed Brydens Lawyers to act on his behalf in respect to a personal injury action arising from the accident. There was no evidence that the husband had required a case guardian for the purpose of those proceedings.
Possible unconscionable conduct
While it was not articulated in written submissions prepared on behalf of the husband, there was at least a suggestion during the hearing that the husband was the victim of unconscionable conduct as a result of his mental illness.
In Saintclaire & Saintclaire (2015) FLC 93-684 at 80,608, the Full Court usefully summarised the existing law dealing with the concept of unconscionability in the following terms:
20. Equity might set aside a transaction or agreement:
…whenever one party to a transaction is at a special disadvantage in dealing with the other party because illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect his ability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands.
21. Importantly:
Mason J in Amadio’s case … was at pains to emphasise that the mere circumstance that there was some difference in the bargaining power of the parties was not enough; “the disabling condition or circumstance [must be] one which seriously affects the ability of the innocent party to make a judgment as to his own best interests”.
22. Recently, the principles were reiterated this way:
The doctrine of unconscionability will intervene to prevent a donee from retaining the benefit of a gift where a person under a special disability has transferred it to them in circumstances where it would not be in good conscience to do so. A special disability is an attribute of the donor, which renders them incapable of making a judgment as to his or her own interests. Equity will intervene when the donee has actual knowledge or knowledge of the facts that would raise a question in the mind of a reasonable person that the donor suffers from a special disadvantage and takes advantage of it.
(Footnotes omitted)
In this case, there is certainly evidence that the wife’s solicitor knew that the husband suffered from a mental illness. As noted, this was confirmed in the initial offer of settlement made to the husband by R & Associates. Further, R & Associates were also aware that in February 2009 the husband had been admitted in order to undergo mental health treatment at X Hospital. The mere fact that a person has a mental illness does not, however, mean that they lack competence to enter into legal relations at a relevant time.[37]
[37] See for example Clemens v Byrnes [2007] NSWSC 421; Tu v Tu [2008] NSWSC 458 and Briton v Kipritidis [2015] NSWSC 1499.
As noted in the report of Dr N, the husband’s inability to provide instructions and make rational decisions about the conduct of legal proceedings would occur during an “acute exacerbation” of the husband’s mental illness. There is no evidence that the wife or the wife’s solicitor were on notice of any such acute exacerbations of the husband’s mental illness at the time the terms of settlement were agreed upon and the Consent Orders were made. The solicitors for the wife were entitled to rely upon the representation contained in the proposed “Deed of Agreement” served upon the wife shortly prior to 8 September 2009 to assume that the husband was not suffering from a mental illness that prevented him from entering into legal relations.
There is no evidence that the wife or the wife’s solicitors were advised of any such incapacity on the part of the husband that prevented him from properly conducting his case with the assistance of his legal representatives. Further there is no evidence that the wife or her solicitors took advantage of the husband’s mental illness. Accordingly, I am not satisfied that the wife and/or the wife’s solicitors engaged in any unconscionable conduct in respect to the husband.
Miscarriage of justice
If contrary to that which I have found, I had been satisfied that the husband had established a ground for setting aside the Consent Orders under s 79A(1)(a), it would nonetheless have been necessary for the husband to have satisfied me that a miscarriage of justice had occurred as result of that ground. On the facts of this case, I could not have been so satisfied.
As noted in the husband’s written submissions:
The order for exclusive occupancy prevented the husband from receiving any benefit from the home which he had brought into the marriage unencumbered unless the wife chose to sell.[38]
[38] Written submissions filed 15 June 2016 at page 25.
As further noted, in the husband’s written submission in reply, that order for exclusive occupancy (Order 8 of the Consent Orders) was an injunctive order under s 114(1)(b). That provision empowers the Court to grant an injunction:
…restraining a party to the marriage from entering or remaining in the matrimonial home or the premises in which the other party to the marriage resides, or restraining a party to the marriage from entering or remaining in a specified area, being an area in which the matrimonial home is, or the premises in which the other party to the marriage resides are, situated.
The husband’s submissions in reply criticised Dunkley FM for granting the injunction without determining that there was “an appropriate factual base supporting it”. In that respect reference was made to Grenfell & Grenfell and Ors [2010] FamCA 1078 at [75].
Even if, despite the fact that the orders were made by consent, there is substance to the submissions of the husband criticising his Honour for granting the injunction, it does not justify an order being made pursuant to s 79A setting aside the Consent Orders.
The power to set aside an order pursuant to s 79A applies to “an order made by a court under s 79”. The power does not extend to an order made pursuant to s 114(1)(b) of the Act.
Order 8 of the Consent Orders, which restrains the husband from coming near the A Street property, clearly provides context in which the other orders made pursuant to s 79 of the Act need to be construed.[39] So too, however, do other contextual considerations.
[39] In the marriage of Florie (1988) FLC 91-913 at 76,627.
In that respect, the most relevant additional consideration is that, at the time the Consent Orders were made, the husband was subject an apprehended domestic violence order. In those circumstances, orders that included an order excluding the husband from the former matrimonial home were entirely appropriate.
A further relevant consideration in deciding that there was no miscarriage of justice in the circumstances that I have outlined is that the husband had alternative accommodation available to him at the W Street property that he owned jointly with his mother and brothers.
Exercise of discretion
For the above reasons, the husband has not satisfied me that there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance justifying the varying or setting aside of the Consent Orders, as contemplated by s 79A(1)(a) of the Act.
Even if, contrary to the findings that I have made, I was satisfied that there had been such a miscarriage of justice, I would not have exercised my discretion to vary or set aside the Consent Orders for the reasons that follow.
Hardship
In exercising its discretion, the Court will be informed by the “finality principle” as discussed above. Having regard to that principle, in In the Marriage of Simpson & Hamlin,[40] the Full Court said:
…it is not sufficient that it appears that circumstances have arisen of an exceptional nature resulting in hardship to the applicant, the Court must consider in the exercise of its discretion whether that hardship is of such a serious nature and results in such inequity that it can only be rectified by the extreme step of setting aside or varying an existing order of the Court.
[40] (1984) FLC 91-576 at 79,659.
While an assertion has been made that the husband has had periods of homelessness, the evidence is that since separation, the husband’s primary residence has been the W Street property which is the property he owns jointly with his brothers. The husband’s evidence is that his brothers wish to sell that property. In that event, the husband would be able to obtain funds amounting to twenty per cent of the value of the property, which the evidence indicates is unencumbered. Further, I accept the submission by counsel for the wife that in the event of any reluctance on behalf of the husband’s brothers to sell the W Street property, the husband would have an entitlement to commence proceedings pursuant to s 66G of the Conveyancing Act 1919 (NSW).
Pending any such sale occurring, however, the evidence was that the husband is continuing to reside at the W Street property.
Further, the evidence was that the husband has funds available to sustain him. His Financial Statement filed on 24 November 2014 revealed that, as at that date, he had $64 674 in a savings account.
Accordingly, I would not be satisfied that the hardship to the husband of not setting aside the Consent Orders is of such a serious nature and would result in such inequity that it can only be rectified by the setting aside or varying of the Consent Orders.
In considering the potential hardship to the husband, it is also appropriate to consider the potential hardship to the wife. There has been no suggestion made that she was responsible for the matters that have given rise to this application under s 79A.
The mother and the parties’ three adult children gave detailed evidence that they were each subject to serious family violence perpetrated by the husband against them. The evidence given by the wife and each of the parties’ children was clear and compelling. The wife and the parties’ son and two daughters were each visibly distressed in recounting examples of that family violence.
It is not, in these proceedings, necessary to make findings as to the precise nature of the family violence that occurred. The evidence is such that I am satisfied that in any fresh proceedings considering a variation of the Consent Orders, or new orders pursuant to s 79, that a significant issue would arise in accordance with the principles of Kennon & Kennon (1997) FLC 92-757. I am satisfied that a re-agitation of those issues would be likely to evoke the same distress on the part of the wife and the three adult children that I witnessed in these proceedings.
It is also relevant in that context that the husband too became distressed by the court process and found it necessary to leave immediately after he had given his oral evidence.[41]
[41] Transcript 5 May 2016 page 89 lines 30-38.
Delay
An additional factor which would have been relevant to the exercise of my discretion to dismiss the application is the delay in the commencement of these proceedings since the Consent Orders were made on 4 November 2009. The current application pursuant to s 79A was not filed until 24 November 2014.
I acknowledge that the delay is partly explained by the fact that, in the period since the Consent Orders were made, there have been periods during which the husband has been in receipt of medical treatment for his mental illness. However, no explanation has been provided as to the delay in the commencement of these proceedings in the period following the husband instructing The Australian Legal Practice who acted on his behalf in December 2013.[42]
[42] Annexure “X” to the affidavit of Mr R filed 7 October 2015.
Alternative remedies
Finally, it is appropriate that I give consideration to any potential alternative remedies available to the husband.[43]
[43] In the marriage of Anderson (1982) FLC 91-251 at 77,386-387 and In the marriage of Clifton and Stuart (1991) FLC 92-194.
In this matter I have expressed the opinion that Ms D was in breach of her fiduciary obligation to the husband in continuing to act for him at the same time as she was seeking employment in the firm representing the wife in the family law proceedings.
I also accept that there is a prima facie case that Mr H’s supervision of his employee, Ms D, as a recently admitted solicitor was inadequate.
In respect to both of these issues, the husband has a potential cause of action against Ms D and/or the firm that employed her.
Although the husband carries the onus of proof of establishing those matters set out in s 79A in these proceedings, the reverse would be the case in respect to important aspects of a claim for damages as a result of alleged breach of fiduciary obligation. Most significantly, in those proceedings, the fiduciary would carry the onus of establishing informed consent on the part of the husband.[44]
[44] Maguire v Makaronis (1997) 188 CLR 449 at 466.
Further, in Bank of New Zealand v New Zealand Guardian Trust Co Ltd, Tipping J said:
Once the plaintiff has shown a loss arising out of a transaction to which the breach was material, the plaintiff is entitled to recover unless the defendant fiduciary, upon whom is the onus, shows that the loss or damage would have occurred in any event, i.e. without any breach on the fiduciary’s part.[45]
[45] [1991] 1 NZLR 664 at 687 referred to in Watson and Ors v Ebsworth & Ebsworth (a firm) and Anor [2008] VSC at [136].
Orders
In summary, insofar as the husband believes he has a cause of action as a result of the conduct of his legal representatives in the s 79 proceedings that ultimately led to the making of the Consent Orders, he is entitled to pursue a remedy against those legal representatives. The circumstances of the case do not, however, justify the Court making an order pursuant to s 79A of the Act.
Accordingly, I dismiss the Initiating Application filed by the husband on 24 November 2014.
I certify that the preceding two hundred and fourteen (214) paragraphs are a true copy of the reasons for judgment of the Honourable Justice McClelland delivered on 21 September 2016.
Associate:
Date: 21 September 2016
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