C and C

[2001] FMCAfam 146

FEDERAL MAGISTRATES COURT OF AUSTRALIA

C & C [2001] FMCAfam 146

FAMILY LAW – Property – Trust Property – Application for Summary Dismissal – Application dismissed – Spousal Maintanence – Family Law Act 1975 s 38(2), 85 repealed, 106B.

Lindon v The Commonwealth (No 2) (1996) 70 ALJR 541, Bigg v Suzi (1998) FLC 92-799, Aldred (1986) FLC 91-753, Whitaker and Whitaker (1980) FLC 90-813, Pflugradt and Pflugradt (1981) FLC 91-052, Holley and Holley (1982) FLC 91-257, Gelley and Gelley (No 2) (1992) FLC 92-291, Hajduk and Hajduk (1983) FLC 92-383, Lawson v Lawson and Wallmans (1999) FLC 92-874, Stack v Coast Securities (No 9) (1983) 154 CLR 261,Re Wakim; Ex Parte McNally (1999) 163 ALR 270, Ferrall and McTaggart (trustees for Sapphire Trust) & Ors v Blyton (2000) FLC 93-054.

Applicant: W J C

Respondent: R C

Second Respondent K C

File No:   ZP 385 of 2000

Delivered on: 20 July 2001

Delivered at: Parramatta

Hearing Date: 22 May 2001

Judgment of: Scarlett FM

REPRESENTATION

Solicitor for the Applicant: Mr Farah Marsdens
DX 5107, Campbelltown NSW

Counsel for the Respondent: Mr Sansom

Solicitor for the Respondent: Mr Jamieson, Champion Legal
DX 8220, Parramatta NSW

Counsel for the 2^nd Respondent: Mr Kearney

Solicitor for the 2^nd Respondent Ms Parkin, Coleman and Greig
DX 8226, Parramatta

ORDERS

1. Order 9 of the wife’s Amended Application filed on 23 February 2001 is dismissed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
PARRAMATTA

ZP 385 of 2000

W J C

Applicant

And

R C

Respondent

And

K C

Second Respondent

REASONS FOR JUDGMENT

1. This is an application by the wife for certain property orders. The first respondent is her former husband; the second respondent is the husband’s mother. In her amended application filed on 23 February 2001, the applicant seeks a number of orders, of which the following are immediately relevant:

   (1)That the property known as and situate at 36 U Street, M, be declared to be the sole property of the husband.

   (2)That the husband indemnify the wife and keep her indemnified against any liability owing from funds received by or lent to him by his mother.

   (3)That the husband pay to the wife within 28 days of the date of these Orders an amount of $62,500.00 representing one-half of the equity in the property at 36 U Street, M.

   (4)The Court notes that the property at 36 U Street, M is held on trust for the husband by the husband’s mother.

   (5)

   That in the alternative to a finding that the property at

   
   

   36 U Street, M is held on trust for the husband by the husband’s mother that any and all payments or dispositions of money to the husband’s mother made by the mother (sic) towards price or acquisition costs of the property at 36 U Street, M be set aside pursuant to Section 85 of the Family Law Act.

2. The application seeks other property orders and an amount of spousal maintenance, but these orders are not relevant to the matter that the Court has to decide at this stage. In their responses, the first and second applicants seek orders that the application be dismissed.

Background

1. The short facts are that the husband is aged 49 and the wife is aged 45. They were married on 30 December 1978. They separated in September 1997 or 1998, and a decree nisi dissolving their marriage was pronounced on 26 November 1999.

2. The husband had purchased a home unit prior to the marriage, and the parties lived in it after they were married. They sold the home unit and bought other property, eventually buying a house at K. They lived in this house until 1989, when it was sold and the proceeds of sale were used to pay outstanding debts arising from a failed business venture. The parties then lived in rented accommodation.

3. In late 1990, the second respondent purchased the property at M. It is common ground that the house was purchased with the intention of the husband and wife living in it. The applicant says that she and the first respondent provided some of the purchase price and the second respondent agreed to provide the balance. The respondents each say that the entire purchase price came from the second respondent’s funds. On settlement, the husband and wife moved into the house and commenced to pay rent. The applicant still resides there with the children.

4. The husband’s financial difficulties continued and he became bankrupt in August 1993. Neither the husband nor the wife owns any substantial assets apart from a motor car and some furniture.

Issues

1. Apart from the wife’s claim for spousal maintenance, the issue between the parties concerns the house at M. The wife seeks that the husband be declared to be the sole owner of the property, that he indemnify her against any monies owing to his mother, that he pay her $62,500 and that the Court note that the property is held on trust for the husband by his mother. In the alternative, the wife seeks that payments by the husband to the mother of any contribution towards the purchase price of the property be set aside under Section 85 (now Section 106B) of the Family Law Act 1975.

2. The two respondents say that the Federal Magistrates Court does not have the jurisdiction to make the declaration sought by the Applicant wife. They also say that the alternative claim is not supported by any evidence. They ask for an order for summary dismissal of the wife’s application in so far as the M property is concerned. This would have the effect of dismissing the wife’s claim against the second respondent entirely, and leaving her with only a small property claim and a claim for spousal maintenance against the husband.

Summary dismissal

1. The law relating to the Court’s power to strike out or dismiss proceedings summarily has been discussed by the High Court of Australia in Lindon v. The Commonwealth (No. 2) (1996) 70 ALJR 541 and by the Full Court of the Family Court of Australia in Bigg v. Suzi (1998) FLC 92-799. In the latter case, the Full Court, comprising Barblett DCJ, Lindenmayer and Finn JJ, upheld the inherent power of the Family Court to dismiss or stay permanently an application which cannot succeed.

2. In addition, Section 38(2) of the Family Law Act gives the Family Court to apply the rules of the High Court where its own rules are insufficient. In Aldred (1986) FLC 91-753, Nygh J applied O 63 rr 1 and 2 of the High Court rules to stay an application that could not succeed. O 26 r 18 gives the Court power to strike out a pleading that does not disclose a reasonable cause of action or answer. The power is discretionary.

3. The principles that govern the exercise of the Court’s discretion are set out in the decision of Kirby J in Lindon v The Commonwealth (No. 2) at 544-5. They can be summarised as follows:

   (a)It is a serious matter to deprive a person of access to the court, so relief is “rarely and sparingly provided”;

   (b)The party seeking such relief 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;

   (c)“An opinion of the Court that a case appears weak and such that it is unlikely to succeed is not, alone, sufficient to warrant termination … Even a weak case is entitled to the time of a court”;

   (d)Summary relief for absence of a reasonable cause of action is not a substitute for proceeding by way of a demurrer…if there is a serious legal question to be determined, it should ordinarily be determined at a trial;

   (e)If 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 that pleading; and

   (f)“The guiding principle is 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”.

The claim under s 85(106B)

1. The wife’s amended application filed on 23 February 2001 included an alternative Order 9, being an application to set aside any payments made by the husband to his mother by way of contribution towards the purchase price of the M property. This application is said to be pursuant to Section 85 of the Family Law Act, but this section was repealed late in 2000 and was replaced by section 106B.

2. Section 106B(1) provides that:

   “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”.

3. Section 106B(1) is in similar terms to the old section 85(1), which has been examined in a number of reported decisions. In Whitaker and Whitaker (1980) FLC 90-813, Nygh J held that there must be some connection between the disposition sought to be set aside and the defeat or likely defeat of the order. Where an order for maintenance was defeated not by a transfer of property but the husband’s bankruptcy and supervening events which ended his capacity to earn an income, the transfer of property could not be set aside under section 85.

4. In Pflugradt and Pflugradt (1981) FLC 91-052, Elliott J held that the word “anticipated” (relating to “anticipated order”) in section 85 is used in the sense of expected or foreseen as being likely or reasonably probable. The elements of expectation or foreseeability must be considered on an objective basis. The court set aside a deed of trust made by the husband relating to the matrimonial home, which had been made two years after the parties had separated and after the wife had obtained maintenance orders.

5. The Court held that the question to be decided was whether at the time the disposition was made a property application by the wife, with a consequent order, was objectively to be foreseen or to be expected by the husband as being likely or reasonably foreseen. The Court also held that it was equally foreseeable that the former matrimonial home, which was the husband’s only asset, was the wife’s only recourse for enforcement of the existing maintenance orders, which were substantially in arrears. “The very existence of an order which has not been complied with raises the reasonable expectation that some proceedings might be taken - and some further order made - for its enforcement at some stage” (at 76430).

6. The Full Court of the Family Court considered the decisions in Whitaker and Whitaker and Pflugradt and Pflugradt in Holley and Holley, (1982) FLC 91-257. The Full Court approved both of these decisions, quoting with approval the passage in Whitaker where Nygh J said at 75129:

   “Section 85 is not a provision which enables a party long after the event to upset past transactions because the present funds or resources of the respondent turn out to be insufficient.” (at 77440).

7. In Gelley and Gelley (No. 2) (1992) FLC 92-291, it was held that a disponer’s mere intention to defeat an existing or anticipated order, without more, did not attract the operation of section 85(1). Before section 85(1) applies the applicant must establish that the distributions defeat or are likely to defeat the disponer’s capacity to meet an existing or anticipated order.

8. Hajduk and Hajduk (1983) FLC 92-383 is a case where a wife sought to have set aside transfers of two properties to two other relatives. The applications failed. The Court held that the applicant bore the onus of establishing that at the time of each transaction a reasonable with the knowledge of the husband at the time of disposition would anticipate that it was likely that the wife would initiate proceedings and that an order would be made which would be defeated by the transaction. The court also held that the evidence did not support a finding that at or about the date of the transfer, the relationship between the husband and the wife was such that they were contemplating a separation which may have led to the institution of property proceedings.

9. In the present case, the transaction sought to be set aside took place in 1990. The parties did not separate until seven or eight years later. There is no evidence that there was other than a harmonious matrimonial relationship between the parties at the time that the property was purchased. The submission that the husband falsely represented to the wife that the property was being purchased as the property of the husband and the wife falls far short of proving that the transaction was entered into to defeat an order over ten years in the future.

10. Section 106B, like section 85 before it, does not enable a party to set aside a transaction made in the past merely because the respondent’s present funds are insufficient to meet a property claim (see Whitaker and Whitaker, supra). It follows that the applicant’s claim under Section 106B(1) cannot be sustained. As it is doomed to fail, this part of the application should therefore be summarily dismissed.

Declaration of trust and accrued jurisdiction

1. Orders 1 and 8 sought in the wife’s application ask the court to make a declaration that the property at M is the property of the husband, held in trust for him by his mother, the second respondent. The respondents seek that this part of the application should also be summarily dismissed, saying that the Federal Magistrates Court has no power to make a declaration of trust, which is a State issue rather than a matter arising under a Federal law. The only way that the Federal Magistrates Court could hear that issue would be if it were to have accrued jurisdiction.

2. Counsel for both respondents relied on the decision of Lindenmayer J in Lawson v Lawson and Wallmans (1999) FLC 92-874, to argue that this court does not have the jurisdiction to hear the matter. In order for the Federal Magistrates Court to hear the claim, two matters need to be established:

   b)The court must be shown to have accrued jurisdiction; and

   c)The State matter to be decided must be part of a single justiciable controversy.

3. At this stage in the life of the Federal Magistrates Court, there are no decisions by the High Court that either establish or refute the proposition that the Federal Magistrates Court has accrued jurisdiction to determine the non-federal aspects of a single justiciable controversy. The question was considered in relation to the Family Court in Lawson, where Lindenmayer J referred to the decision of the High Court in Stack v Coast Securities (No.9) (1983) 154 CLR 261, where Mason, Brennan and Deane JJ held that the Constitution gives the Federal Parliament the power “to give authority to federal courts to decide the whole of a single judiciable controversy of which a federal issue forms an integral part (at 293). In Lawson, Lindenmayer said that he was “content to assume, without deciding, that in a proper case this court, no less than the Federal Court, has accrued jurisdiction to determine the non-federal aspects of a single justiciable controversy which also involves a federal issue which is within the Court’s primary jurisdiction conferred by the (Family Law) Act” (at 86375).

4. Relying on that authority, I am of the view that the Federal Magistrates Court should adopt a similar approach, until a contrary decision is made by a superior court. What should then be decided is whether the matters sought to be decided in this case fall within the accrued jurisdiction of this Court.

5. In Lawson v Lawson and Wallmans (supra), the wife had brought property proceedings in the Family Court against her husband. She was also given leave to amend her application to include a cross-vested claim for damages against the husband’s solicitors. This claim was held to be beyond the jurisdiction of the Family Court as a result of the decision of the High Court in Re Wakim; Ex parte McNally (1999) 163 ALR 270, which struck down the Jurisdiction of Courts (Cross-Vesting) Act 1987. The wife sought to proceed with her claim by relying on the accrued jurisdiction of the Family Court.

6. The Court held that the wife’s claim for damages against the husband’s solicitors and the wife’s section 79 claim against the husband did not form part of a single justiciable controversy. His Honour said at 86377:

   “I am of the clear opinion that the damages claims are quite severable and disparate from the s 79 proceedings. The s79 proceedings can, and in my view should, conveniently be determined separately from the other claims. It is only once the s 79 proceedings have been completed that the wife will be able to demonstrate whether she has in fact suffered any and if so what loss and damage as a result of the conduct of the husband and/or the other party which forms the basis of her common law and statutory claims for damages.”

7. The Court concluded that the claims against the other party were entirely separate and severable from the s 79 proceedings and therefore did not fall within the court’s accrued jurisdiction.

8. In this case, I am asked to make a similar finding and summarily  dismiss this part of the wife’s application against both respondents. The applicant opposes this course.  

9. The application of this procedure was recently considered by the Full Court of the Family Court in Ferrall and McTaggart (trustees for Sapphire Trust) & Ors v Blyton (2000) FLC 93-054. The case concerned, amongst other matters, an application for leave to appeal against a decision by the trial judge to refuse summary dismissal applications by the husband. Two of the issues raised by the applicants are relevant to the matters before this court, namely:

   (a)Whether under s 78 of the Family Law Act a declaration may be made as to the existence of a trust over the property of a third party, in favour of a party to a marriage so as to bind the third party; and

   (b)Whether the Family Court of Australia has accrued jurisdiction which would in any event empower it to make such a declaration.

10. The Full Court (Nicholson CJ, Lindenmayer and Kay JJ) declined to overturn the decision of the trial judge, saying at 87887:

    “Both the respondents and Counsel for the Attorney-General of the Commonwealth argued that the answer to each of these questions is in the affirmative. In the circumstances, the difficulty of the task facing the applicants in succeeding on an application for summary dismissal needs only to be stated to be appreciated, in that even a determination that any one of the above major issues is reasonably arguable would defeat any such application…It is, we think, obvious from his Honour’s judgement that each of the issues is reasonably arguable. It therefore follows that the application for leave to appeal must fail.”

11. In the present case, the claim about the ownership of the house at M is the major part of the case against both respondents. Whether or not the husband’s mother holds the house on trust for the husband is the very issue of the property application. Without that issue, all that is left of the wife’s application is her claim for spousal maintenance. I am of the view that it is a single justiciable controversy.

12. This is not to say that the applicant’s case is a strong one. The applicant’s version of the facts differs significantly from that of the respondents, and none of this factual evidence has been tested. I am of the view, however, that the applicant’s case in respect of the two issues set out in Orders 1 and 8 is reasonably arguable. It is not frivolous or vexatious, nor is it necessarily ‘doomed to fail’. I am satisfied that it would not be an appropriate exercise of the Court’s jurisdiction to make an order summarily dismissing that part of the application.

I certify that the preceding thirty three (33) paragraphs are a true copy of the reasons for judgment of Scarlett FM

Associate:
Date:    24 September 2001