Badenoch & Faldyn & Anor
[2020] FCCA 1530
•22 June 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BADENOCH & FALDYN & ANOR | [2020] FCCA 1530 |
| Catchwords: FAMILY LAW – Property – interim proceedings – application by the husband to set aside sale of property under s.106B – order sought by the wife for summary dismissal. |
| Legislation: Family Law Act 1975 (Cth), ss.45A, 79, 106B Federal Circuit Court of Australia Rules 2001 (Cth), rr.11.02, 13.10 Federal Circuit Court of Australia Act 1999 (Cth), s.17A |
| Cases cited: Abdullah & Abdullah (1981) FLC ¶91-003 |
| Applicant: | MS BADENOCH |
| First Respondent: | MR FALDYN |
| Second Respondent: | MR A FALDYN |
| File Number: | HBC 184 of 2019 |
| Judgment of: | Judge Baker |
| Hearing date: | 12 May 2020 |
| Date of Last Submission: | 12 May 2020 |
| Delivered at: | Hobart |
| Delivered on: | 22 June 2020 |
REPRESENTATION
| Counsel for the Applicant: | Mr Foster |
| Solicitors for the Applicant: | Murdoch Clarke |
| Counsel for the First Respondent: | Self-represented |
| Solicitors for the First Respondent: | N/A |
| Counsel for the Second Respondent: | Mr Katsikaris |
| Solicitors for the Second Respondent: | Katsikaris Family Lawyers |
ORDERS
The application in a case filed 8 January 2020 be dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Badenoch & Faldyn & Anor is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT HOBART |
HBC 184 of 2019
| MS BADENOCH |
Applicant
And
| MR FALDYN |
First Respondent
| MR A FALDYN |
Second Respondent
REASONS FOR JUDGMENT
Introduction
An application in a case was filed by the first respondent husband (“the husband”) on 8 January 2020, to set aside the sale of the property at B Street, Suburb C (“the property”) pursuant to s.106B(1) of the Family Law Act 1975. He also sought an order to add Mr Badenoch as a party to the proceedings. Mr Badenoch is the father of the applicant wife (“the wife”).
The substantive proceedings commenced on 6 March 2019, when the wife filed an initiating application for a property order. She sought an order that the net proceeds of sale of the property be paid to her.
On 11 June 2019, the husband filed a response seeking dismissal of the wife’s application.
On 29 August 2019, the second respondent (“the second respondent”), who is the husband’s father, filed an application in case. He sought leave to intervene and an order that the wife pay him the sum of $143,915.86. On 3 September 2019, the court ordered that the second respondent have leave to intervene.
On 10 September 2019, the husband filed an amended response and sought an order that the proceeds of sale of the property be paid to him.
On 20 September 2019, the husband filed a further amended response, in which he sought parenting orders and an order that the proceeds of sale of the property be “placed in trust to be administered for and on behalf of the child and for her best interests”.
On 8 January 2020, the husband filed this application in a case to set aside the sale of the property and to add Mr Badenoch as a party. The husband is self-represented.
The wife opposed the application and sought that it be summarily dismissed.
The second respondent opposed the application and sought that it be dismissed.
Background
The parties were married in 2009 and separated on 2 September 2016. They have a daughter, X, born in 2010. She lives with the wife in Tasmania. The husband lives in New South Wales.
The husband had not been living with the wife since 21 November 2016. He had been undertaking building work on the property for the purpose of its completion up until then. He said that the wife “abandoned the property” in approximately February 2017.
The wife sold the property in 2018 and did not give the husband notice or seek his consent. The property was listed with D Real Estate Agent, Suburb E, NSW for auction on 3 June 2018. The listing indicated an inspection would take place on 13 May.
Before the auction the method of sale was changed to private treaty and the sale price was limited to a range of $340,000 to $360,000. Another inspection was listed for 2 June. The property was recorded as sold on 14 June 2018 by D Real Estate Agent, Suburb E, and the Domain website recorded the property as being sold for $340,000.
The husband deposed that his father claims approximately $150,000 in capital loans advanced to the wife. The H valuation annexed to the husband’s affidavit indicates that the land was purchased in 2009, the home was built in about 2012, and additions were made in 2015.
The husband’s case is that the wife sold the property by private treaty and not by auction, and she sold it under its market value of $500,000. He asserted that it was sold under value and in circumstances: “to defeat any legitimate claims by myself in the best interest (sic) of my daughter and third parties whom have a legitimate claims against the property for funds previously advanced for its construction.”
The husband believes that after repayment of legitimate third party claims, the funds held in trust “would result in my daughter X receiving almost nothing for her ongoing support.”
The registered proprietors of the property, Mr F and Ms G, have not been added as parties to the proceedings.
It is not controversial that the only asset of the parties of any value is the sale proceeds of $200,000 held in trust by Suburb E Conveyancing.
Relevant Law
Neither the husband nor both counsel assisted the court by citing any relevant case-law.
The wife is seeking a summary dismissal of the application.
As this court is exercising jurisdiction under the Family Law Act 1975 (“the Act”), s.45A of the Act applies,[1] which contains similar provisions to s.17A of the Federal Circuit Court of Australia Act 1999 and Rule 13.10 of the Federal Circuit Court Rules 2001. Section 45A of the Act provides as follows:
[1] Federal Circuit Court of Australia Act 1999, s.17A(5).
No reasonable prospect of successfully defending proceedings
(1) The court may make a decree for one party against another in relation to the whole or any part of proceedings if:
(a) the first party is prosecuting the proceedings or that part of the proceedings; and
(b) the court is satisfied that the other party has no reasonable prospect of successfully defending the proceedings or that part of the proceedings.
No reasonable prospect of successfully prosecuting proceedings
(2) The court may make a decree for one party against another in relation to the whole or any part of a proceedings if:
(a) the first party is defending the proceedings or that part of the proceedings; and
(b) the court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceedings or that part of the proceedings.
When there is no reasonable prospect of success
(3) For the purposes of this section, a defence or proceedings or part of proceedings need not be:
(a) hopeless; or
(b) bound to fail;
to have no reasonable prospect of success.
Proceedings that are frivolous, vexatious or an abuse of process
(4) The court may dismiss all or part of proceedings at any stage if it is satisfied that the proceedings or part is frivolous, vexatious or an abuse of process.
(5) To avoid doubt, proceedings or a part of proceedings are not frivolous, vexatious or an abuse or process merely because an application relating to the proceedings or the part is made and later withdrawn.
Costs
(6) If the court makes a decree, or dismisses all or part of proceedings, under this section, the court may make such order as to costs as the court considers just.
Action by court on its own initiative or on application
(7) The court may take action under this section on its own initiative or on application by a party to the proceedings.
This section does not limit other powers
(8) This section does not limit any powers that the court has apart from this section.
In Friar & Friar,[2] the Full Court of the Family Court discussed the principles which should be applied for summary dismissal. At paragraph 51, the Full Court extracted an outline of the principles governing summary dismissal applications as set out by Kirby J in Lindon v Commonwealth of Australia (No 2):[3]
1. It is a serious matter to deprive a person of access to the courts of law for it is there that the rule of law is upheld, including against Government and other powerful interests. This is why relief, whether under O 26, r 18 or in the inherent jurisdiction of the Court, is rarely and sparingly provided;
2. To secure such relief, the party seeking it must show that it is clear, on the face of the opponent's documents, that the opponent lacks a reasonable cause of action or is advancing a claim that is clearly frivolous or vexatious;
3. An opinion of the Court that a case appears weak and such that it is unlikely to succeed is not, alone, sufficient to warrant summary termination. Even a weak case is entitled to the time of a court. Experience teaches that the concentration of attention, elaborated evidence and argument and extended time for reflection will sometimes turn an apparently unpromising cause into a successful judgment;
4. Summary relief of the kind provided for by O 26, r 18, for absence of a reasonable cause of action, is not a substitute for proceeding by way of demurrer. 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;
5. If, notwithstanding the defects of pleadings, it appears that a party may have a reasonable cause of action which it has failed to put in proper form, a court will ordinarily allow that party to reframe its pleading. A question has arisen as to whether O 26, r 18 applies to part only of a pleading. However, it is unnecessary in this case to consider that question because the Commonwealth's attack was upon the entirety of Mr Lindon's statement of claim; and
6. The guiding principle is, as stated in O 26, r 18(2), doing what is just. If it is clear that proceedings within the concept of the pleading under scrutiny are doomed to fail, the Court should dismiss the action to protect the defendant from being further troubled, to save the plaintiff from further costs and disappointment and to relieve the Court of the burden of further wasted time which could be devoted to the determination of claims which have legal merit. (footnotes omitted)[4]
[2] [2011] FamCAFC 71.
[3] (1996) 136 ALR 251.
[4] Friar & Friar [2011] FamCAFC 71, [51].
The Full Court in Friar & Friar,[5] stated that the test has been formulated in many other ways and cited General Steel Industries Inc. v Commissioner for Railways (N.S.W).[6] The Full Court stated:
Regardless of the formulation of the test laid down by the Rules, “exceptional caution” must be used in applications for summary dismissal and the power should be “sparingly employed”: Barwick CJ in General Steel Industries (supra at 129).[7]
[5] [2011] FamCAFC 71.
[6] (1964) 112 CLR 125.
[7] Friar & Friar [2011] FamCAFC 71, [52]–[53].
In the determination of the application for summary dismissal, the court must only take into account the material relied on by the respondent to make out the application for summary dismissal, or take “the respondent’s case “at its highest” unless the respondent’s version is inherently incredible or unreliable”.[8]
[8] Ritter & Ritter and Anor (2020) FLC ¶93-95, [66], citing Munnings v Australian Government Solicitor (1994) 68 ALJR 169 at 171; Bigg & Suzi (1998) FLC ¶92-799; and Webster v Lampard (1993) 177 CLR 598 at 608.
The applicant for summary dismissal has the onus of proving that the respondent has no reasonable prospect of success.
Section 106B
Section 106B of the Act provides:
(1) In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
(2)…
(3) The court must have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested.
(4) …
(5) In this section:
disposition includes:
a sale or gift; and…
In an application pursuant to s.106B, the court can determine it on a preliminary basis prior to the determination of the s.79 proceedings where it is appropriate and practical to do so.[9]
[9] VC & CG and ORS (2010) FLC ¶93-434 at 84,747 citing Gould and Gould; Swire Investments Ltd (1993) FLC ¶92-434.
Under s.106B, it is an order and not a claim that must be anticipated.[10] In ANZ Banking Group Ltd v Harper & Ors,[11] the Full Court of the Family Court of Australia made it clear that the anticipated order must also be of the kind which is actually made.
[10] Pflugradt & Pflugradt (1981) FLC ¶91-052.
[11] (1988) FLC ¶91-938.
The test of whether the sale was likely to have the effect of defeating an anticipated order is an objective one.[12]
[12] Pflugradt & Pflugradt (1981) FLC ¶91-052.
Even if a sale is innocent, it can nevertheless be set aside if it has the effect of defeating an existing or anticipated order.[13] The court is required to have regard to the interests of a bona fide purchaser or other person interested:[14]
A court in the exercise of its discretion would under normal circumstances be loath to set aside a transaction entered into with a bona fide purchaser for full value and in the ordinary course of business.[15]
[13] Abdullah & Abdullah (1981) FLC ¶91-003.
[14] Family Law Act 1975 (Cth), s.106B(3).
[15] Abdullah & Abdullah (1981) FLC ¶91-003, 76,085, as cited in Anthony Dickey, Family Law (5th ed, 2007) 680.
By demonstrating that none of the matters in s.106B have a reasonable prospect of being established, the wife can satisfy the court on the husband’s material that his claim should be dismissed.
In this matter there are “proceedings under this Act”, and a “disposition”, the sale of the property, has been made by a party, the wife.
The issue to be determined is whether the husband has no reasonable prospect of success in establishing that the sale of the property was made by the wife to defeat an anticipated order in these proceedings, or regardless of the intention with which she made the sale, that it would be likely to defeat an anticipated order.
The Husband’s Submissions
The husband correctly submitted that the court does not have to find that the wife intended to defeat an anticipated order, as such a finding can be made irrespective of her intention.
The final property order sought by the husband is that the proceeds of sale of the property be “placed in trust to be administered for and on behalf of the child and for her best interests.”
The husband asserted that the property was sold under value and in circumstances “to defeat any legitimate claims by myself in the best interests of my daughter and third parties whom have a legitimate claims against the property for funds previously advanced for its construction.”
The husband asserted that the purchasers are investors, who are experienced in buying distressed sales, and in the circumstances of this case are not bona fide purchasers.
It was submitted by the husband that the wife should have sold the property by public auction to find its true market price.
The husband referred to a profile report for the median price for a similar certified house in the area, which indicated the median house value for the Suburb C area was $565,430 for the period May 2013 to May 2018. He relied on a valuation undertaken by H Valuers dated 4 October 2016, which indicated the value of the property at $500,000 some two years prior to the sale of the property.
The Wife’s Submissions
Counsel for the wife submitted that:
[the husband’s] misconceived proposal is that the order that might be defeated if this transaction was not set aside is the order that would otherwise result in:
…my daughter X receiving almost nothing for her ongoing support.
…it’s not the role of the court in property proceedings to make orders and there is no application for orders for X’s support. That’s a child support matter, of course.
It was submitted that this order could not reasonably have been anticipated by the wife in these proceedings as X was living with the wife. It was submitted that the order sought is not an order that could be defeated by the sale of the property.
It was submitted that there is no evidence that the sale was made to defeat legitimate claims by third parties. The second respondent, who is a third party, is not seeking to set aside the sale. He is pursuing a claim against the wife. It was submitted that setting aside the sale is not necessary to achieve justice for the second respondent.
It was submitted that there is no evidence that the $200,000 held in trust would not be sufficient to meet a claim by anyone.
There is also no evidence that the property was sold under market value. The valuation relied upon by the husband was prepared in October 2016, two years prior to the date of sale. It was an indicative/cursory valuation and the valuer had not entered the property. It was submitted that the valuation is useless.
Accordingly, it was submitted that the husband has failed to satisfy the court that he has an “arguable case” that the effect of the sale made in June 2018 would likely defeat an order that could have reasonably been anticipated in these proceedings. It was submitted that the claim is frivolous and vexatious.
The Second Respondent’s Submissions
Counsel for the second respondent submitted that the sale of the property did not have the immediate effect of placing the very asset about which an order is being sought beyond the reach of the husband.
The second respondent’s claim before the court has not been defeated.
It was submitted that the husband does not seek a property order for himself, and it follows that no order or anticipated order can be defeated.
Consideration
The husband in his amended response sought an order that the proceeds of sale of the property be “placed in trust to be administered for and on behalf of the child and for her best interests.”
Section 79(1) of the Act provides:
(1) In property settlement proceedings, the court may make such order as it considers appropriate:
(a) in the case of proceedings with respect to the property of the parties to the marriage or either of them—altering the interests of the parties to the marriage in the property; or
…
including:
…
(d) an order requiring:
(i) either or both of the parties to the marriage; or
…
to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines.
The court therefore has power to make a property order in favour of a child of the marriage pursuant to s.79(1)(d)(i). An order may be made where a child has made contributions to the acquisition, conservation or improvement of property of the parties or either of them under s.79(4), and the court considers it is just and equitable to make an order.[16]
[16] Dougherty v Dougherty (1987) 163 CLR 278.
The sale of the property occurred after the parties’ separation. There was no order for property settlement at the time of the sale. The property proceedings had not been commenced and were not commenced until 2019 by the wife. This does not mean that a property order could not have been anticipated by the wife. The section does not have a “temporal limitation”.[17]
[17] Johnson & Johnson (2000) FLC ¶93-008; D’Cruz & Pierce and Ors [2008] FamCA 819.
I consider that having regard to the circumstances at the time of the sale, an application by the husband at some time with a consequent property order was objectively to be foreseen by the wife as being likely or reasonably probable. The husband had undertaken building works on the home and had made a contribution towards the property. His family had made contributions towards it.
However, I consider that there is no reasonable prospect of the husband proving the wife had an intention to sell the property to defeat an anticipated order. There is no relevant evidence that the property was sold under value. The valuation relied on by the husband is two years out of date.
Irrespective of the wife’s intention, the sale would not be likely to defeat an anticipated property order. The sale did not have the effect of placing the asset about which an order is sought beyond the reach of the husband. There is no evidence that the $200,000 net proceeds of sale are not sufficient to meet an anticipated order and thus be likely to defeat an anticipated order.
In any event, I consider that the order sought by the husband for a transfer of property pursuant to s.79 of the Act to X, could not reasonably have been anticipated by the wife. There is no evidence of any contribution to the property made by X pursuant to s.79(4) of the Act. If the order being sought by the husband is for child support, as submitted by counsel for the wife, such an order could not reasonably have been anticipated by the wife, as X was living with her.
The court is required to have regard to the interests of a bona fide purchaser pursuant to s.106B(3). In Heath & Heath,[18] Nygh J considered the meaning of bona fide purchaser in the context of an application to set aside an unregistered second mortgage and said:
The term “bona fide purchaser” therefore implies two separate conditions: (a) the acquisition of an interest for valuable consideration and (b) without notice of what might at this stage be described neutrally as “the disabling condition”.
[18] (1983) FLC ¶91-362.
There is no evidence of a lack of bona fides of the purchasers. They acquired an interest in the property for valuable consideration, the sum of $340,000. There is no evidence that the sale was not made in the ordinary course of business. A real estate agent was engaged to sell the property. The property was advertised for sale. There is no evidence that the purchasers had known or should have known that that there would be a property claim by the husband. There were no proceedings on foot at the time of the sale.
I conclude that the husband has no reasonable prospect of success in prosecuting a claim under s.106B of the Act.
Adding a party
The husband has sought to include Mr Badenoch as a party to the proceedings. He requires leave to include him as a party.[19] In support of his application the husband deposed, “I am also aware the applicant’s father Mr Badenoch loaned approximately $50,000 to the applicant towards the construction of the matrimonial home.”
[19] Federal Circuit Court Rules 2001, Rule 11.02.
The husband believes that Mr Badenoch should be joined “so that a full and final settlement may occur according to Law.” He submitted that there is no evidence that he has been repaid and the court would be interested to hear in respect of his intention about the amounts advanced by him to the wife.
It was submitted by counsel for the wife that there is no basis for adding Mr Badenoch as a party. The husband has made an assertion that he should be joined “so that a full and final settlement may occur according to law.” However, there is no evidence that Mr Badenoch or any other third party is making a claim against the wife.
It was submitted by counsel for the second respondent that there is no evidence that Mr Badenoch has a claim or intends to make a claim in the proceedings.
I am not persuaded that the wife’s father should be included as a party to the proceedings. There is no evidence that he requires payment from his daughter from the net proceeds of sale. The matters in dispute are able to be determined without his participation.
I dismiss the husband’s application in a case filed 8 January 2020.
I certify that the preceding sixty-five (65) paragraphs are a true copy of the reasons for judgment of Judge Baker
Associate:
Date: 22 June 2020
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