C Pty Limited & Ors & PGW As Liquidator of S Pty Limited (in Liq)
[2011] FamCAFC 231
•9 December 2011
FAMILY COURT OF AUSTRALIA
| C PTY LIMITED AND ORS & PGW AS LIQUIDATOR OF S PTY LIMITED (IN LIQ) | [2011] FamCAFC 231 |
| FAMILY LAW – APPLICATIONS FOR LEAVE TO APPEAL – where two applications for leave to appeal were filed – where leave to appeal is required as these are interim financial proceedings – where the basis upon which leave is sought in both applications is essentially the same – where the jurisdiction of the Family Court to hear an application by the Liquidator of S Pty Limited to recover from Mr and Mrs Rand monies that S Pty Limited as guarantor had paid to discharge a loan to National Australia Bank is challenged – where if the Court has the jurisdiction to hear that application it should exercise that jurisdiction – where the exercise of jurisdiction by the Family Court to hear an application by C Pty Limited to reverse the decision by the Liquidator to reject a proof of debt is challenged – where the applicants contend that both applications should be transferred to the Supreme Court of New South Wales – where the issues raised are of importance – leave granted. FAMILY LAW – APPEAL – THE APPEAL BY MR AND MRS RAND – where the appellants argue that the trial judge was in error in finding that the guarantee proceedings were a “matrimonial cause” within s 4(1)(f) of the Family Law Act 1975 (Cth) – where the trial judge found that both the s 79 proceedings and the winding up proceedings were matrimonial causes and the guarantee proceedings were related to them – where there is no doubt that the Family Court has jurisdiction to hear the winding up proceedings pursuant to the power vested in it under s 1337C of the Corporations Act 2001 (Cth) – where the “remoteness” of the guarantee proceedings from the s 79 proceedings is dependent upon the meaning of the phrase “in relation to” in s 4(1)(f) of the Family Law Act 1975 (Cth) – where the necessary connection is established and the trial judge was correct in finding that the guarantee proceedings are a “matrimonial cause” and that the Family Court has jurisdiction to hear the proceedings – where the trial judge erred in holding in the alternative that the guarantee proceedings were a civil matter arising under the Corporations Act 2001 (Cth) and within the jurisdiction of the Family Court – where the guarantee proceedings arise under general law and are not a civil matter arising under the Corporations Act 2001 (Cth) – where the trial judge was correct in holding in the further alternative that the guarantee proceedings were within the Family Court’s accrued jurisdiction – where the winding up proceedings have not been completed and they therefore satisfy the need for there to be a family law claim as part of the justiciable controversy – where the trial judge was correct in exercising his discretion to exercise the jurisdiction – where it is beyond doubt that the trial judge correctly applied the criteria for the exercise of jurisdiction – whether the trial judge erred in concluding that the conduct of the Rands was “wrongful” – where this is a challenge to the trial judge’s findings as to the facts – where there were no oral submissions made by either side in relation to this challenge – where this challenge fails given that it was a challenge to orders 4 and 5 of the trial judge which orders have been complied with – where the trial judge was correct in rejecting the application of Mr and Mrs Rand for security for costs against S Pty Ltd in respect of the guarantee proceedings – where the trial judge was correct in applying s 117 of the Family Law Act 1975 (Cth) instead of FAMILY LAW – APPEAL – THE APPEAL BY C PTY LIMITED – where the appellant complains that the trial judge erred in dismissing the application to transfer the proof of debt proceedings – where the appellant concedes that in the event that the guarantee proceedings are found to be a matrimonial cause and the Family Court has original jurisdiction to hear those proceedings it is not appropriate to transfer them – where it was found that the guarantee proceedings are within the original jurisdiction of the Family Court – where this appeal becomes “academic” – appeal dismissed. FAMILY LAW – COSTS – where the appellants seek that the respondent pay the costs of and incidental to the appeal and the proceedings before the trial judge – where the respondent sought an order for costs – where both the appellants sought that a regime be put in place for the filing of written submissions on costs and for further evidence to be presented – where the respondent did not oppose this – where a regime as requested was put in place. |
| Corporations Act 2001 (Cth) ss 58AA, 233, 471B, 477, 1321, 1335, 1337C(1), 1337J and Division 1 of Part 9.6A Family Law Act 1975 (Cth) ss 4(1)(f), 31(1)(a), 39, 79 and 117 Jurisdiction of Court (Cross-Vesting) Act 1987 (Cth) s 5(4) and s 5(5) |
| Kennon v Spry (2008) 238 CLR 366 Perlman v Perlman (1984) 155 CLR 474 R v Ross-Jones; Ex Parte Green (1984) 156 CLR 185 Warby and Warby (2002) FLC 93-091 |
| APPELLANT: | C Pty Limited |
| RESPONDENT: | PGW as Liquidator of S Pty Limited (In Liq) |
| APPEAL NUMBER: | EA | 102 | of | 2010 | |
| 1st APPELLANT: | Mr Rand | ||||
| 2nd APPELLANT: | Mrs Rand | ||||
| RESPONDENT: | PGW as Liquidator of S Pty Limited (In Liq) |
| APPEAL NUMBER: | EA | 104 | of | 2010 |
| FILE NUMBER: | SYF | 2153 | of | 2001 |
| DATE DELIVERED: | 9 December 2011 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Strickland, Ainslie-Wallace & Murphy JJ |
| HEARING DATE: | 19 May 2011 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 28 July 2010 |
| LOWER COURT MNC: | [2010] FamCA 646 |
REPRESENTATION
| COUNSEL FOR THE APPELLANTS: | Mr Feller SC |
| SOLICITOR FOR THE APPELLANTS: | Cadmus Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Cotman SC |
| SOLICITOR FOR THE RESPONDENT: | Brown & Partners |
Orders
Leave to appeal be granted in respect of both appeals.
The appeals be dismissed.
The parties are at liberty to file written submissions with regard to the costs of the appeals and to adduce any further evidence in relation thereto by way of affidavit in accordance with the following timetable:
(a) on behalf of the respondent within twenty-eight (28) days hereof;
(b)on behalf of the appellants any response thereto within twenty-eight (28) days thereafter;
(c)on behalf of the respondent in reply thereto within fourteen (14) days thereafter.
Each submission and affidavit have endorsed on the cover sheet the date on which a copy thereof was served on the other party or parties.
IT IS NOTED that publication of this judgment under the pseudonym C Pty Limited and Ors & PGW as Liquidator of S Pty Limited (In Liq) is approved pursuant to
s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EA 102 of 2010; EA 104 of 2010
File Number: SYF 2153 of 2001
| C Pty Limited |
Appellant
And
PGW as Liquidator of S Pty Limited (In Liq)
Respondent
And Between
| Mr Rand |
First Appellant
And
| Mrs Rand |
Second Appellant
And
| PGW as Liquidator of S Pty Limited (In Liq) |
Respondent
REASONS FOR JUDGMENT
Introduction
There are two applications for leave to appeal, and if leave is granted, two appeals before us, both Notices of Appeal being filed on 16 August 2010.
The appeals are against orders made by Cohen J on 28 July 2010 whereby
his Honour, inter alia, dismissed applications to transfer the two applications before the Family Court of Australia to the Supreme Court of New South Wales.
In the first application for leave to appeal (EA 102 of 2010) the applicant is
C Pty Limited, and in the second application (EA 104 of 2010) the applicants are Mr Rand and Mrs Rand. The respondent in both applications is
Mr PGW, the Liquidator of S Pty Limited (In Liquidation).
Background
On or about 21 November 2002 S Pty Limited entered into a loan agreement with the National Australia Bank Limited (“NAB”) for an advance of $3,700,000 to enable S Pty Limited to discharge an existing loan facility and mortgage of $4,221,344.
That loan was secured by a number of securities granted in favour of the NAB including a registered mortgage over the title to the property situated at
P of which S Pty Limited was the registered proprietor.
On or about 27 November 2002 Mr and Mrs Rand entered into a loan agreement with the NAB for an advance of $700,000. That loan was secured by a number of securities granted in favour of the NAB including a guarantee and indemnity in favour of the Bank by S Pty Limited.
That loan was arranged to enable Mr and Mrs Rand to discharge a separate earlier loan facility entered into by them with the NAB in October 2002 to enable S Pty Limited to repay an outstanding loan account to a previous shareholder in the sum of $252,577.70, and to provide the balance of $447,432.30 for S Pty Limited to discharge more of the existing loan facility and mortgage referred to above. The payout of the loan account was necessary to ensure that C Pty Limited could take a transfer of that shareholder’s share in S Pty Limited. A loan account of $420,000 was then created as a result of this transaction as a prerequisite of C Pty Limited becoming a shareholder of S Pty Limited given that that was the amount of the loan accounts of each of the other two shareholders. The balance of $280,000 was then treated as a secured loan by C Pty Limited to S Pty Limited.
On or about 4 October 2005 Mr and Mrs Rand entered into a new loan agreement with the NAB in the amount of $670,000 (being the balance of principal owing to the Bank pursuant to the previous loan after S Pty Limited’s payment of $30,000 of principal) in substitution for the earlier loan. This substituted loan was also secured by a number of securities granted in favour of the NAB including a guarantee and indemnity in favour of the Bank by S Pty Limited.
Following the establishment of the substituted loan S Pty Limited continued to pay to the NAB all interest payments due to it in respect of that loan as they fell due.
On 1 December 2005 the NAB appointed a receiver and manager to S Pty Limited pursuant to the securities held by it.
On 10 January 2006 a protracted s 79 hearing between the husband,
Mr M Rand, and the wife, Ms N Rand, concluded before Rowlands J. In those proceedings, Mr Rand, the husband’s father, was the third respondent,
Mrs Rand, the husband’s mother, was the fourth respondent and C Pty Limited was the eleventh respondent. Rowlands J ordered, inter alia, that the husband transfer to the wife all his entitlements in the Rand Family Trust and that S Pty Limited be wound up pursuant to s 233 of the Corporations Act 2001 (Cth) (“the Corporations Act”).
S Pty Limited had three shareholders, namely the Rand Family Trust (of which the wife was trustee as from 2005), C Pty Limited (which was controlled by
Mr Rand) and H Pty Limited (which was controlled by a person unrelated to the wife or the husband). By consent order made on 23 June 2006, Mr PGW was appointed as Liquidator of S Pty Limited (“the Liquidator”).
A further order was made by consent on 23 June 2006 restraining the Liquidator from paying out any monies to the shareholders of S Pty Limited whether by repayment of loan account, by distribution and winding up, or otherwise, pending further order of the Court.
On or about 7 July 2006 the receiver and manager sold the property owned by S Pty Limited at P. The net sale proceeds of $4,434,622.51 were applied by the NAB to discharge the loan to S Pty Limited and the loan to Mr and Mrs Rand. The latter payment discharged the entire liability of Mr and Mrs Rand to the NAB under their loan.
On 29 June 2007 C Pty Limited lodged with the Liquidator a formal proof of debt in the amount of $289,743.58, asserting that it had paid monies to the Liquidator of R Pty Limited for S Pty Limited’s benefit. The Liquidator rejected that proof of debt.
There was an appeal by Mr and Mrs Rand, C Pty Limited, and another company against the orders made by Rowlands J, and on 29 April 2008 the Full Court delivered judgment. A number of the orders made by Rowlands J were reversed, but the orders concerning the winding up of S Pty Limited and the appointment of the Liquidator were not disturbed.
On 19 June 2009 the Liquidator of his own motion admitted C Pty Limited to proof as an unsecured creditor in the sum of $557,792. This included the C Pty Limited shareholder loan account of $420,000, but did not include the alleged debt of $289,743.58 referred to above.
On 21 July 2009 C Pty Limited filed an Application in a Case seeking an order from the Court reversing the Liquidator’s decision to reject the proof of debt dated 29 June 2007 and instead accept proof for the full sum claimed, being $289,743.58.
On 26 August 2009 Cohen J made orders which substantially determined the creditors to whom the Liquidator was justified in making payments, but significantly no payment was able to be made to C Pty Limited, until the resolution of the Liquidator’s claim concerning the recovery of payments made by the NAB to discharge the loan to Mr and Mrs Rand out of the funds of S Pty Limited.
On 23 April 2010 the Liquidator filed an Application in a Case seeking to recover from Mr and Mrs Rand the monies that S Pty Limited, as guarantor, had paid to discharge the loan made to Mr and Mrs Rand by the NAB.
On 16 June 2010 the Liquidator filed an Application in a Case seeking that judgment be entered for want of a defence against Mr and Mrs Rand in the proceedings filed on 23 April 2010 and for dismissal for want of prosecution of C Pty Limited’s application filed on 21 July 2009.
On 21 June 2010 Mr and Mrs Rand filed an Application in a Case seeking to transfer the application filed on 23 April 2010 to the Supreme Court of New South Wales, alleging that the Family Court of Australia lacked jurisdiction.
On 21 June 2010 C Pty Limited filed an Application in a Case seeking to transfer the application filed on 21 July 2009 to the Supreme Court of New South Wales.
On 5 July 2010 Mr and Mrs Rand filed another application seeking security for costs of $400,000 against S Pty Limited.
On 5 July 2010 the matters came before Cohen J for hearing and his Honour delivered judgment on 28 July 2010.
Reasons for judgment of the trial judge
Cohen J commenced his reasons for judgment by outlining the history of the proceedings, as set out above. His Honour then determined that it was appropriate to first deal with the issue of jurisdiction and secondly the applications for “undefended judgments”.
His Honour found that at the time of the trial before Rowlands J the value of
S Pty Limited depended on the value of the family property at P, which in turn determined the value of the interest of the Rand Family Trust in S Pty Limited. His Honour recorded that Rowlands J had ordered S Pty Limited be wound up because it had “acted in an oppressive manner toward the trust” including by attributing to R Pty Limited a loan account of $430,837 which was in reality the property of the trust, and then by way of a deed of company arrangement transferring the ownership of this loan account to Mr Rand through his ownership of G Pty Limited.
His Honour went on to outline the application filed by C Pty Limited against
S Pty Limited on 21 July 2009 and the subsequent application filed by the Liquidator against Mr and Mrs Rand on 23 April 2010.
Cohen J determined that the claim on the guarantee was related to the winding up, which was part of the s 79 proceedings and was therefore a matrimonial cause, within paragraph (f) of the definition of “matrimonial cause” in s 4(1) of the Family Law Act 1975 (Cth) (“the Act”). The guarantee proceedings were directed at providing the wife with her entitlement under s 79 of the Act; they were therefore related to the s 79 proceedings and were a matrimonial cause. Consequently, his Honour determined that pursuant to s 31(1)(a) of the Act the Family Court had original jurisdiction to hear the guarantee proceedings and that the Supreme Court of New South Wales had no jurisdiction to hear those proceedings.
His Honour found that if he was wrong that the guarantee proceedings were a matrimonial cause there were other bases on which the Family Court of Australia had jurisdiction.
His Honour then set out the arguments of C Pty Limited and Mr and Mrs Rand as to jurisdiction as follows:
20.The [Rands] and [C Pty Limited] argue that, although the Family Court has statutory control over the Liquidator’s power to take action on the guarantee against the [Rands], that does not mean the Court has jurisdiction to hear the action on the guarantee. It is submitted that such an action is based on contract and, as such, the Supreme Court of New South Wales has jurisdiction and that there is nothing in the Corporations Act or the Family Law Act which gives the Family Court jurisdiction to hear an ordinary contract claim. It is submitted that the fact that [C Pty Limited’s] claim against the Liquidator is brought in the Family Court does not raise any associated jurisdiction pursuant to s 33 of the Family Law Act or accrued or inherent jurisdiction of the type recognised in In the Marriage of Warby (2001-02) 28 FamLR 443.
21.At the heart of the third, fourth and eleventh respondents’ argument about jurisdiction is the submission that the final orders in the s79 proceedings have been made, so there is nothing for the guarantee issue to accrue to and that there is no relationship between [C Pty Limited’s] claim to overturn the rejection of its proof of debt for the guarantee claim against the [Rands] despite the patently misleading appearance of a temporal relationship which arose in the course of the Court’s supervision of the winding up of [S Pty Limited].
His Honour did not accept these arguments. He analysed the basis of the orders made by Rowlands J and then concluded as follows:
24.The litigation before me which is the subject of the 23 April 2010 application by the liquidator and the 21 July 2009 application of
[C Pty Limited] against the liquidator came before me originally because the Family Court of Australia had made the [S Pty Limited] winding up order and as a consequence of it the Court was exercising its jurisdiction and power to control and to supervise the exercise of the Liquidator’s powers in the winding up. There can be no realistic doubt that his Honour ordered the winding up to ensure that the wife’s rights to attain a proper s79 settlement would be protected because of the Court’s continuing power to supervise the winding up. That is why his Honour said that he was making the orders he made in order to uphold his decision.25.Thus, as is inherent in his Honour’s decision, the supervision of the Court of the winding up of [S Pty Limited] is necessary to achieve the result under s 79 which his Honour found to be just and proper. That supervision includes ensuring that the Liquidator gets in moneys owed to [S Pty Limited] to pay out its debts and make a proper distribution among its creditors and members. The relevant litigation is before the Court because it is part of the process of winding up which is being supervised.
26.Accordingly, as it is part of the winding up, I find that the dispute between the Liquidator and the Third and Fourth Respondents based on the guarantee is within the jurisdiction of the Family Court to hear and determine pursuant to the Corporations Act
ss 58AA, 233 and 477 if it is not a matrimonial cause.27.…Section 1337C of the Corporations Act confers jurisdiction on the Family Court “with respect to civil matters arising under the Corporations legislation” and applies here to provide yet another basis for the Court’s jurisdiction to hear and determine the guarantee dispute.
However, his Honour did acknowledge that if he was in error in finding that the meaning of “matrimonial cause” and the Corporations Act conferred jurisdiction on the Court to hear the guarantee dispute, his Honour was not satisfied that the Court would have jurisdiction pursuant to s 33 of the Act because such jurisdiction did not extend to hearing a dispute over implied terms of a contract between guarantor and debtor; that is a dispute within State jurisdiction.
His Honour then turned to consider the accrued jurisdiction of the Court. His Honour said this:
29.…Here the judiciable controversy which was decided by Rowlands J. included the wife’s application to wind up [S Pty Limited].
His Honour did so for the purpose of attaining her rightful share of the matrimonial property in the face of the conspiracy between the husband and his father which involved both [S Pty Limited] and
[C Pty Limited] to deprive the wife of what was justly her share by depleting the husband’s property and trust property to the immediate benefit of the husband’s father and ultimately of the husband. The winding up application was properly part of the family law claim.30.Any dispute over the implementation of the orders made by Rowlands J. or in relation to the winding up order or the winding up itself is part of the whole justiciable controversy of which the family law claim forms part. Accordingly, the current dispute in the winding up over the effect of the payment to the bank by [S Pty Limited] as guarantor for the [Rands] and the alleged creation of a resultant indebtedness by the [Rands] to [S Pty Limited] is, I find, within the Court’s accrued jurisdiction.
His Honour then went on to address whether the Court should, in its discretion, exercise the accrued jurisdiction to hear the guarantee dispute by testing the facts of this case against the six criteria laid down by the Full Court in Warby and Warby (2001) FLC 93-091. His Honour’s conclusions in relation to each criterion can be summarised as follows:
1.What the parties have done:
Firstly, the guarantee claim arises out of
[Mr Rand’s] deliberate actions to deprive the wife of her just entitlements against the husband. Thus the winding up and its incidents were part of the process of achieving justice pursuant to s 79 for the wife. Secondly, the issue of jurisdiction was only raised well after the matter was listed for final hearing but his Honour indicated that he could relist the hearing expeditiously and avoid any further delay. The additional delay caused by a transfer to the Supreme Court would be “unconscionable” to the wife as well to the other creditors of [S Pty Limited].
2.The relationship between or among them:
Rowland J found that
[Mr Rand] and the husband had collaborated to defeat the wife’s interests and it can be inferred that [Mr Rand’s] attitude to the wife is unchanged. Thus, because of the delay, transfer was likely to harm and therefore defeat the wife’s interests.
3.The laws which attach rights or liabilities to their conduct and relationships: Although the guarantee dispute was in essence contractual, there were better reasons for treating it “as part of a large dispute [rather] than in isolation”.
4.Whether the claims are part of a single justiciable controversy and in determining that question whether the claims are “attached” and not “severable” or “disparate”: The Family Court was more appropriate as there was an interrelationship between the s 79 orders and the guarantee dispute. The outcome of the guarantee dispute would affect the amount the wife recovers from the winding up of [S Pty Limited] and it was also important that the issue of costs be dealt with in the Family Court of Australia.
5.Whether the claims are non-severable from a matrimonial cause and arise out of a common substratum of facts:
Because the s 79 proceedings had concluded the common factual ground between the
s 79 proceedings and the guarantee dispute was not a reason for the Family Court to hear the matter.
6.Whether the Court has the power to grant appropriate remedies in support of the “attached” claims: As it had control over the liquidator and the winding up the Family Court could grant appropriate relief.
Ultimately, in weighing these considerations, his Honour concluded there was an “overwhelming imbalance in favour of not transferring the matter from the Family Court”.
Turning to consider C Pty Limited’s application of 21 July 2009, his Honour also determined that the Family Court had the jurisdiction to deal with the proof of debt claim, largely for the same reasons that were applicable to the guarantee dispute. In relation to the statutory scheme for dealing with creditor’s claims on a winding up of companies, his Honour made particular reference to ss 471B and 1321(d) of the Corporations Act and Pt 5.6 of the Corporations Regulations 2001 (Cth).
His Honour went on to consider whether the Family Court should transfer the proof of debt proceedings to another court in the exercise of the Court’s discretion under s 1337J of the Corporations Act. Ultimately, his Honour concluded that:
51.Not only does the Supreme Court have no jurisdiction to hear the dispute over the proof of debt, because it is a matrimonial cause, the scheme of the Corporations Act is such that transfer is only to be made if there are good reasons for it and/or it is in the interests of justice to do so. There are no good reasons and it is in the interest of justice not to do so. I shall refuse the application for transfer of the debt dispute.
Turning to the Liquidator’s application for “undefended judgments”, Cohen J set out a chronology of the procedural issues leading up to the hearing of the guarantee dispute on 5 July 2010, particularly noting each party’s delay or failure in filing and serving documents. His Honour also recorded Mr Rand’s intention to travel overseas for a lengthy and indeterminate period around the time of the hearing. Cohen J acknowledged that the appellants’ failure to file and serve their points of claim and defence in a reasonable time was unjustified and their excuses for failure were insignificant, but ultimately held that the interests of justice would not be served by immediately precluding them from defending their guarantee claim and pursing the debt claim.
Lastly, his Honour considered the application by Mr and Mrs Rand against
S Pty Limited on 5 July 2010 for $400,000 by way of security for costs. As the applicants did not specify for which claim they were seeking security, Cohen J determined that the application was only in relation to the guarantee dispute.
Cohen J went on to outline his concerns about S Pty Limited’s ability to meet a costs order. His Honour then considered whether an order should be made having regard to the matters specified in paragraphs (a) to (g) inclusive of
s 117(2A) of the Act so far as they were relevant. In that context his Honour considered the financial position of both Mr and Mrs Rand and S Pty Limited, as well as the other costs recovery options for the Rands and the conduct of both parties during the proceedings. Cohen J determined that $400,000 for the Rands’ legal costs in the guarantee dispute was an excessive estimation. Ultimately, his Honour found that such an application should have been filed earlier and that it was only Mr Rand’s wrongful actions in leaving Australia during the course of proceedings that gave him the ability to apply for costs and therefore under s 117(2A)(c) Cohen J held that security should not be ordered, despite the real possibility that if S Pty Limited loses the guarantee claim it would not be able to meet a costs order in full.
Orders made on 28 July 2010
Cohen J made the following orders on 28 July 2010:
(1)The application of the Third and Fourth Respondents filed
21 June 2010 is hereby dismissed.(2)The application of the Eleventh Respondent filed 21 June 2010 is hereby dismissed.
(3)The application of the Third and Fourth Respondents filed
5 July 2010 for an order for security for costs against [S Pty Limited (In Liq)] is hereby dismissed.(4)That if within 21 days of these orders the Third and Fourth Respondents fail to file and serve their points of defence in response to the points of claim annexed to the Application in a Case filed herein by [S Pty Limited (In Liq)] on 23 April 2010 there shall be by this order judgment for [S Pty Limited (In Liq) against the Third and Fourth Respondents in the sum of $693,114.11 plus interest at the rate or rates provided by the Family Court Rules from 7 July 2006 to the date of payment of the said sum plus interest pursuant to this order and that sum and interest from 7 July 2006 and calculated pursuant to the said rules shall hereby become due and payable by the said respondents from the date of judgment.
(5)That if within 21 days of these orders the Eleventh Respondent fails to file and serve its points of claim in its application filed 21 July 2009 that application hereby shall be dismissed.
(6)Costs are reserved.
(7)That the matter is stood over for mention and further directions to Monday 16 August 2010 at 10am.
C Pty Limited seeks leave to appeal orders 2 and 5.
Mr and Mrs Rand seek leave to appeal orders 1, 3 and 4.
Leave to appeal
Leave to appeal is required here because these were interim financial proceedings.
The bases on which the applicants in each Notice of Appeal seek leave to appeal are principally the same.
To obtain leave it is of course necessary to demonstrate that the trial judge has made an error of principle and/or caused a substantial injustice. Here we consider that leave should be granted because of the importance of the issues raised, namely and primarily whether the Family Court of Australia has jurisdiction to hear the guarantee proceedings, and if so whether it should exercise that jurisdiction, and whether despite having jurisdiction to hear the appeal against the rejection by the Liquidator of C Pty Limited’s proof of debt, those proceedings should be heard and determined by the Family Court of Australia, or be transferred to the Supreme Court of New South Wales.
Thus, turning to the grounds of appeal and orders sought.
Grounds of appeal and orders sought
The common grounds of appeal contained in both Notices of Appeal can be summarised as follows:
·The trial judge erred in finding that the value of the Rand Family Trust was and still is dependent on the value of its interest in S Pty Limited.
·The trial judge’s findings were against the weight of the evidence or were not supported by any evidence.
·His Honour erred in considering issues that were not raised or submitted by the appellants or the respondent and in making findings based on assumptions and speculations.
·His Honour also erred in not considering submissions made by senior counsel for the appellants and made his findings based on bias and prejudice.
·The trial judge erred in failing to consider the Full Court judgment, whilst referring to Rowland J’s judgment which was reversed on appeal.
·The trial judge erred in finding that the Supreme Court of New South Wales did not have jurisdiction to hear the proceedings and that if the Family Court had the jurisdiction to wind up S Pty Limited it had the jurisdiction to hear its debt proceedings pursuant to s 39 of the Family Law Act 1975 (Cth).
·His Honour erred in interpreting the definition of matrimonial cause and s 1321 of the Corporations Act 2001 (Cth) and in finding that the dispute should be treated as part of a larger dispute, rather than in isolation.
·His Honour erred in finding there was an overwhelming imbalance in favour of not transferring the matter from the Family Court.
·His Honour erred in finding that the date for hearing was suitable for the appellants and was listed without objection.
·His Honour erred in finding that the Family Court has exclusive jurisdiction.
·His Honour erred in finding that there were no good reasons to transfer the proceedings and that it was in the interests of justice not to do so.
·The trial judge erred in directing Mr and Mrs Rand to file a response within 21 days and C Pty Limited to file points of claim and in doing so denied the Rands and C Pty Limited procedural fairness.
We note that a ground of appeal in each Notice of Appeal was that “His Honour erred in basing his findings on bias and prejudice”. At the commencement of the hearing this ground of appeal was abandoned.
Mr and Mrs Rands' additional grounds of appeal in relation to the guarantee dispute can be summarised as follows:
·The trial judge erred in finding that the completed s 79 proceedings between the husband and wife were related to the guarantee proceedings instigated by S Pty Limited against the appellants.
·His Honour erred in finding that the guarantee dispute was a civil matter within the jurisdiction conferred upon the Family Court by s 1337C of the Corporations Act 2001 (Cth).
·The trial judge erred in finding that the Family Court had original jurisdiction pursuant to s 31(1) of the Act to hear the guarantee dispute, jurisdiction to hear it under the Corporations legislation, and that the proceedings were within the Family Court’s accrued jurisdiction.
·His Honour erred in finding that:
oThe guarantee dispute relate to the winding up.
oThe guarantee proceedings are related to the winding up proceedings and therefore to the s 79 proceedings as they too are a matrimonial cause.
oThe guarantee proceedings are directed at providing the wife with her entitlement under s 79.
·The trial judge erred in finding that the Liquidator personally would be a party against whom a costs order could be made. His Honour also erred in taking into consideration issues that are normally considered in matrimonial cause proceedings, rather than commercial proceedings, when he dealt with the security for costs application.
·
The trial judge erred in finding that the applicant’s solicitor had a duty to contact the respondent. His Honour also erred in directing the appellants to file a response to the respondent’s application within
21 days and in doing so denied the appellants procedural fairness.
C Pty Limited seeks that orders 2 and 5 made by Cohen J on 28 July 2010 be set aside and that an order be made for the proceedings to be transferred to the Supreme Court of New South Wales.
Mr and Mrs Rand seek that orders 1, 3 and 4 made by Cohen J on
28 July 2010 be set aside and an order be made that the Family Court of Australia does not have jurisdiction to hear the proceedings instituted by the respondent on 23 April 2010.
In relation to costs, both C Pty Limited and Mr and Mrs Rand seek orders that the respondent pay the appellants’ costs of and incidental to the appeal and the proceedings before Cohen J.
Applications in an appeal
In each appeal there was an application in an appeal filed seeking the same orders, namely allowing further evidence to be adduced comprising the documents annexed to an affidavit of the solicitor for all of the appellants sworn on 16 May 2011.
The documents are as follows:
a)A copy of the affidavit of the Liquidator sworn on 27 March 2009 together with annexure “C” to that affidavit which shows the proof of debt of C Pty Limited as being admitted.
b)
A copy of the transcript of the hearing before Cohen J on
26 August 2009.
c)
A copy of the amended response of Mr and Mrs Rand filed on
8 March 2011 to the claim by the Liquidator under the guarantee.
d)A copy of the Application in a Case filed by C Pty Limited on 11 March 2011 seeking leave to commence the proceedings and in the event that leave is granted seeking declarations, and the points of claim in support of the application filed on 21 July 2009 and the declaratory relief.
There was no objection to the applications by the Liquidator, and accordingly we granted leave to adduce that further evidence.
In addition, senior counsel for the Liquidator made an oral application to lead further evidence comprising the two orders annexed to his written summary of argument. There was no objection to that application and accordingly we received those two orders as further evidence.
Discussion
These appeals commenced in an orthodox fashion namely, addressing the complaints that the appellants had with how the trial judge determined the two applications that were before him. However with the introduction by consent of the further evidence by the appellants the arguments, in particular of the respondent, took on a different dimension.
His Honour, despite the Liquidator’s long held position that they were interrelated, treated the two applications before him as if he was dealing with separate topics. Of course, as is apparent, despite this his Honour still found that he had jurisdiction to entertain both applications and that he should exercise his discretion to do so.
The point made by the senior counsel for the Liquidator is that the further pleadings filed by the appellants and contained in the further evidence adduced by them demonstrate beyond doubt the interrelationship between the guarantee proceedings and the proof of debt proceedings. C Pty Limited now has a parallel set of civil proceedings to the proof of debt proceedings seeking, subject to leave, declarations as to what it is owed by S Pty Limited, and as part of that exercise C Pty Limited incorporates and refers to the guarantee proceedings resulting in the prayer for relief being conditional upon the outcome of those proceedings.
As Mr Cotman put it, the issues now before the Court below are that if S Pty Limited is successful in the guarantee proceedings then the amount due to
C Pty Limited by S Pty Limited is increased by $700,000, but if S Pty Limited is unsuccessful in the guarantee proceedings then the amount due is decreased by $700,000.
This, it is said, is quite different to what was before the trial judge, and as
Mr Cotman submits this almost renders the appeals academic. At the very least, it is argued that there can no longer be any issue as to the jurisdiction to hear the guarantee proceedings. This is because the guarantee proceedings can now be viewed as being attached to the winding up proceedings which are within the primary jurisdiction of the Court, and in turn to the proof of debt proceedings in respect of which jurisdiction is conceded. There can also be no issue, it is argued, that that jurisdiction should be exercised.
The concern of the Liquidator is and always has been that there is a risk of “double-dipping” by C Pty Limited and the Rands, and that would lead to an improper diminution of the assets available to meet the property settlement orders in favour of the wife. It is said that the Rands want to not only retain the money paid out under the guarantee but also retain the benefit of the accepted debt of $557,792, when the loan monies were in effect used to fund that debt.
Mr Cotman points to the fact that this arises because of the subsequent conduct of the parties brought into the proceedings by Rowlands J, and which itself was done because of the way they had conducted themselves in relation to the affairs of S Pty Limited, C Pty Limited, the Rand Trust, and the wife. That led to the making of the winding up order, and significantly paragraph 2 of the consent orders made on 23 June 2006 when the Liquidator was appointed, namely restraining the Liquidator from paying out any money to the shareholders of S Pty Limited pending further order of the Court.
Thus, it is said, this set the scene for the need for ongoing supervision of the liquidation by the Family Court, and that is what has happened ever since. The Liquidator says that he has made his determination on the debts claimed, and
C Pty Limited is a creditor of S Pty Limited to the extent of $557,792, but, says the Liquidator, the amount paid out pursuant to the guarantee should be recovered from the Rands because when the money was originally borrowed it went to make up the debt admitted to proof.
Accordingly, Mr Cotman submits, there could never be any doubt that these proceedings are related and intertwined and that the Family Court has jurisdiction to hear and determine them, and should do so. That that is the case, and has always been the case, is now exemplified by the further pleadings.
Mr Feller for the appellants does not necessarily dispute that the further pleadings demonstrate the interrelationship between the proceedings, but he says that they do not render the appeal academic because leave is still required before those pleadings can come before the Court, and that has not yet been argued or determined. That is certainly correct, but that does not prevent the submission made by Mr Cotman that these pleadings exemplify the interrelationship between the two applications that were before the trial judge.
In any event, although we might be sympathetic to the submissions by
Mr Cotman in this regard, it is still necessary to address the question of whether his Honour erred in finding that he had jurisdiction to hear the guarantee proceedings, and in refusing to transfer those proceedings and the appeal against the rejection by the Liquidator of C Pty Limited’s proof of debt to the Supreme Court of New South Wales Naturally, they are the findings to which the primary grounds of appeal are directed and we now turn to those grounds of appeal.
In his written summary of argument senior counsel for Mr and Mrs Rand usefully refined and reframed the grounds of appeal and placed them into groupings which we find convenient to also adopt in our consideration of the challenges to the orders of the trial judge.
The appeal by Mr and Mrs Rand
Error by his Honour in holding that the guarantee proceedings are a “matrimonial cause” and therefore within the original jurisdiction of the Family Court under
s 31(1)(a) of the Family Law Act, to the exclusion of the jurisdiction of the Supreme Court of New South Wales: Notice of Appeal EA104/2010 Grounds 5, 6, 7, 8, 11 & 21.
His Honour found that the guarantee proceedings were a “matrimonial cause” coming within paragraph (f) of the definition of matrimonial cause in s 4(1) of the Act.
That paragraph provides as follows:
any other proceedings (including proceedings with respect to the enforcement of a decree or the service of process) in relation to concurrent, pending or completed proceedings of a kind referred to in any of paragraphs (a) to (eb), including proceedings of such a kind pending at, or completed before, the commencement of this Act.
His Honour’s conclusion was based on the proposition that both the s 79 proceedings and the winding up proceedings are matrimonial causes, and the guarantee proceedings are related to them. Mr and Mrs Rand though make two submissions, first, they say the winding up proceedings are not a matrimonial cause but even if they are, the guarantee proceedings are too remote from the winding up proceedings to “enliven” paragraph (f). Secondly, the guarantee proceedings are too remote from the completed s 79 proceedings to be a matrimonial cause.
As to the winding up proceedings there is no doubt that the Family Court of Australia has jurisdiction to hear them under the power vested in it under
s 1337C of the Corporations Act. However, that does not prevent those proceedings from also being a matrimonial cause relying on paragraph (f). That issue though, and the question of the remoteness of the guarantee proceedings from the s 79 proceedings depends on the meaning of the phrase “in relation to” in paragraph (f).
That phrase has received a good deal of attention from the High Court, and two decisions in particular were cited to us by the appellant’s senior counsel, namely Perlman v Perlman (1984) 155 CLR 474 and Kennon v Spry (2008) 238 CLR 366. In the former case, Gibbs CJ said this (at 484-485):
The words “in relation to” import the existence of a connexion or association between the two proceedings, or in other words that the proceedings in question must bear an appropriate relationship to completed proceedings of the requisite kind… An appropriate relationship may exist if the order sought in the proceedings in question is consequential on or incidental to a decree made in the completed proceedings (so that, e.g., an application by a divorced wife for a settlement and transfer of property is a proceeding in relation to the completed proceedings for the divorce) …Proceedings brought to revoke an approval, in the limited circumstances permitted by s. 87(6) of the Act, would be proceedings in relation to the completed proceedings for the approval. However, an application to enforce the maintenance agreement in the present case (i.e., the deed) was not consequential on or incidental to the order approving of the maintenance agreement and it did not vary, reverse or otherwise affect the order giving the approval… Although a grant of approval was a condition of the efficacy of the maintenance agreement, the subject of the present proceedings is not the approval but the agreement. There is a connexion between the present proceedings and the deed, since the present proceedings are brought to enforce the deed; there is none, except of a remote and indirect kind, between the present proceedings and the proceedings brought to obtain the approval. So far as the present proceedings are concerned, the proceedings brought to obtain the approval simply form part of the historical background. The proceedings in the present case are not proceedings in relation to the proceedings for the approval. (authorities and footnotes omitted)
In the latter case, Kiefel J said this (at 440):
The expression “in relation to” is of wide and general import and should not be read down in the absence of some compelling reason for doing so. As Toohey and Gummow JJ said in PMT Partners Pty Ltd (In liq) v Australian National Parks and Wildlife Service, the words are prima facie broad and designed to catch things which have a sufficient nexus to the subject. The question of nexus is dependent upon statutory context. Amongst the examples given by their Honours was the consideration given by Gibbs CJ, in Perlman v Perlman, to the meaning of the words “in relation to” in the Family Law Act with reference to two sets of proceedings. His Honour said that they “import the existence of a connection or association between the two proceedings, or in other words that the proceedings in question must bear an appropriate relationship to completed proceedings of the requisite kind”. (footnotes omitted)
It seems to us that in applying these tests there can be no question that the winding up proceedings are related to the completed s 79 proceedings. Indeed, the winding up order was made in those s 79 proceedings. However, the real issue is as to the guarantee proceedings vis a vis the s 79 proceedings. The questions to be asked are what is the relationship between these two sets of proceedings, is it of the appropriate kind, and are they too remote? Mr Feller says that the examples given by Gibbs CJ in Perlman where the connection is insufficient, apply here. However, we do not agree. In our view the connection is that the guarantee proceedings are a necessary part of the winding up process that ensures that the orders made pursuant to s 79 of the Act are able to be adhered to. They are clearly interrelated in the requisite way. The orders sought are “consequential on or incidental to a decree made in the completed proceedings”. If not carried out correctly, they have the potential to affect the orders made in the s 79 proceedings by diluting the wife’s entitlement pursuant to those orders. That distinguishes this case from the examples given by
Gibbs CJ in Perlman in the paragraph quoted above. As such there can also be no question of remoteness.
We agree with the submissions of the senior counsel for the Liquidator that “[t]he Guarantee Proceedings go to the heart of the findings of Rowlands J as regards the Wife’s interests. The parent’s claim effectively seeks to remove a substantial sum from [the available assets] and give it to the parents, by reason of their debt being discharged”.
The senior counsel for Mr and Mrs Rand submitted that the subsequent proceedings could not affect the s 79 order because the percentage entitlement of the wife was fixed. However, that misses the point. Consistent with authority, it is the “real impact in money terms” that is the foundation of a just and equitable result rather than the percentage division itself. The percentage entitlement of the wife was designed to achieve a particular outcome for her, yet if the guarantee proceedings are unsuccessful that outcome will not be able to be achieved. That is the relevant issue.
We do not consider that this approach infringes on the caution expressed in
R v Ross-Jones; Ex Parte Green(1984) 156 CLR 185 that the purpose of the proceedings is not determinative of whether or not there is the requisite relationship.
Thus the necessary connection is established and we do not consider that
his Honour erred in finding that the guarantee proceedings are a “matrimonial cause”, and therefore within the original jurisdiction of the Family Court under s 31(1)(a) of the Act.
Error by his Honour in holding that the guarantee proceedings are a civil matter arising under the Corporations Act and therefore within the jurisdiction conferred on the Family Court under s 1337C of the Corporations Act: Notice of Appeal EA104/2010 Ground 12.
This of course only becomes relevant if his Honour was wrong about the proceedings being a matrimonial cause. Given we have found his Honour did not err in that regard, it is strictly unnecessary for us to address this challenge, nevertheless, we propose to do so.
His Honour’s finding was made on the basis that the dispute over the guarantee was part of the winding up process and thus was within the jurisdiction of the Family Court of Australia to hear and determine matters pursuant to ss 58AA, 233 and 477 of the Corporations Act.
Mr and Mrs Rand though argue that the guarantee proceedings are not a civil matter arising under the Corporations Act, but arise under the general law. It is said that all the Corporations Act does is enable the Liquidator to pursue S Pty Limited’s vested or accrued rights in his name.
Despite his Honour’s finding it is apparent that he was troubled by this issue, and he sought to deal with it in the following way:
27.…The dispute over the guarantee appears to me to be one which is a civil matter arising under the Corporations legislation. Although a dispute between parties over liability to indemnify arising out of a guarantee does not in itself arise out of the Corporations legislation, where there is the additional element in it of one of the parties being a company in liquidation which is suing through its liquidator as part of the process of the liquidator fulfilling his duties in the winding up, the litigation is properly characterised as arising under the Corporations legislation. Section 1337C of the Corporations Act confers jurisdiction of the Family Court “with respect to civil matters arising under the Corporations legislation” and applies here to provide yet another basis for the Court’s jurisdiction to hear and determine the guarantee dispute.
To the extent that the submissions of Mr and Mrs Rand seek to assert by use of the word “all”, that actions by a Liquidator could never be a civil matter arising under the Corporations Act, we disagree. However, we consider that
his Honour was in error in finding that the guarantee proceedings here fit that description. The fact, as pointed out by his Honour, that one of the parties was a company in liquidation which was suing through its liquidator as part of the process of the Liquidator fulfilling his duties in the winding up does not bring the proceedings within s 1337C of the Corporations Act. All that the Corporations Act does is confer on the Liquidator the right to bring the proceedings in his own name or in the name of the company in liquidation but it does not create the cause of action which the Liquidator is empowered to pursue. The cause of action is not a statutory cause of action, and that distinction can be seen for example in s 1337A which sets out the operation of Division 1 of Part 9 of the Corporations Act.
Error by his Honour in holding that the guarantee proceedings are within the Family Court’s accrued jurisdiction: Notice of Appeal EA104/2010 Grounds 13 & 14.
Again, this issue only becomes relevant if his Honour was wrong about the proceedings being a matrimonial cause. We propose though to address it.
Under the relevant authorities the Family Court “may exercise accrued jurisdiction to determine the non-federal aspects of a justiciable controversy of which the family law claim or cause of action forms a part” (Warby and Warby (2002) FLC 93-091 at 79).
The submission of Mr and Mrs Rand is that in this case it was not open to the trial judge to rely on the accrued jurisdiction of the Court to determine the guarantee proceedings. It is argued that there is no “family law claim or cause of action to which the guarantee proceedings can attach”, or put another way, there is no “single justiciable controversy” of which the guarantee proceedings can be a part. The property settlement proceedings have concluded and the only ongoing proceedings are the winding up proceedings. However, it is also said, that the “winding up order for [S Pty Limited] having been made, the actual administrative process of winding up is not a ‘justiciable controversy’”. Further, “[t]he pursuit by the liquidator, in the course of his administration of the company, of a debt allegedly owed to the company by third parties is not part of a justiciable dispute concerning the winding up of the company”.
However, we do not agree with this submission of the appellants. It is patently obvious that the winding up proceedings, being a matrimonial cause, and the guarantee proceedings which are brought by the Liquidator in the context of progressing the winding up proceedings, are part of the one “justiciable controversy”. The winding up proceedings have certainly not been completed and thus they satisfy the need for there to be a family law claim as part of the justiciable controversy. It is not open to attempt to describe actions by the Liquidator, such as instituting the guarantee proceedings, as being separate and distinct from the winding up process or as simply an administrative action.
Error by his Honour in applying relevant criteria in considering whether the Family Court should in its discretion exercise any accrued jurisdiction it may have in respect of the guarantee proceedings and in deciding that there was an “overwhelming balance” in favour of not transferring the matter from the Family Court: Notice of Appeal EA104/2010 Grounds 15, 16, 17, 22, 23, & 25.
The challenge here is to the exercise of discretion by his Honour, and in particular it is submitted that his Honour “misapplied the criteria”.
We observe that the appellants suggest that his Honour also erred in failing to “sufficiently or clearly indicate the extent to which [the criteria] were being used to define the content of the accrued jurisdiction of the Court or to determine whether to exercise the discretion of the Court”. However, we do not accept this submission. We consider it beyond doubt that his Honour used the criteria set out in paragraph 95 of Warby to determine whether to exercise the accrued jurisdiction, rather than to determine whether the Court had that jurisdiction. The appellants failed to take us to anything which persuades us otherwise.
The first challenge is to his Honour taking into account the conduct of
Mr Rand in relation to the wife. It is said that Mr Rand’s conduct was dealt with in the s 79 proceedings and is no longer material, but that misses the point. Mr and Mrs Rand cannot escape the fact that as a result of their conduct not only was there a need for a winding up order, but it also necessitated the ongoing supervision of that winding up order by the Family Court. That then encompasses the guarantee proceedings which as far as the Liquidator was concerned are intertwined with the proof of debt proceedings. As has become blindingly obvious, and as is exemplified by the amended pleadings, the transactions the subject of these proceedings are all interrelated. Thus, there is no error here by the trial judge.
The second challenge is to his Honour taking into account the fact of the appellant’s conducting themselves until quite late in the piece “as though the dispute would be heard by the Court”. However, we fail to see how his Honour has erred in taking this into account. We consider it highly relevant conduct to the exercise of discretion if a party allows a matter to proceed without objection to the jurisdiction and only takes the point at a late stage in the proceedings. Thus, again there is no error here by the trial judge.
As part of this challenge it is said that his Honour should not have taken into account the delay that would occur if he transferred the proceedings to the Supreme Court of New South Wales, compared with how quickly the matter could be heard by his Honour. Again, we fail to see how his Honour has erred. The question of delay and how quickly the matter can be heard in the available jurisdictions is a prime consideration in relation to exercising the accrued jurisdiction.
The next challenge is to how his Honour addressed “the relationship between the parties”. It is apparent that his Honour’s treatment of this criterion was somewhat confused. He suggested that the relationship between the Liquidator and Mr and Mrs Rand, namely the very parties to the guarantee proceedings, was irrelevant, and turned instead to the relationship between the wife on the one hand and the husband and Mr Rand on the other. We consider that the relationship between all the parties in these intertwined proceedings, as well as the parties to the property settlement proceedings, is relevant to the exercise of discretion here. Thus, his Honour was only partially correct in how he dealt with this issue. However, we consider that this is inconsequential given the weight of the other criteria favouring the exercise of the accrued jurisdiction.
As to the third criterion, his Honour, as is acknowledged in the written submissions of Mr and Mrs Rand, correctly identified that the principles that apply to the determination of the guarantee dispute are contractual, and they can be more appropriately applied in a State court. The criticism is that
his Honour did not give sufficient weight to this consideration, however we reject that claim. His Honour made it abundantly clear that “in isolation” that consideration would be significant, but not where as here the guarantee proceedings were part of a larger dispute. We also agree with the submission of the senior counsel for the Liquidator that, “[i]t is the context that is so important here, the subject transaction occurring as it did within a factual matrix that has been extensively analysed by the Family Court so as to determine where relevant interests lie … Isolation of the guarantee transaction from that substrate takes it out of the very substratum of facts the Family Court is concerned about”. Thus again there is no error here by the trial judge.
With the next criterion, once again, his Honour became confused. His Honour was looking at the s 79 orders and the interrelationship with the guarantee proceedings as being the other part of the single justiciable controversy. In fact though it is the winding up proceedings which are the matrimonial cause to which the guarantee proceedings are attached for the purposes of finding that single controversy. That has become quite apparent from the further evidence presented by Mr and Mrs Rand, and that evidence demonstrates that this criterion is clearly satisfied here. However, that is not to say that the effect of the guarantee proceedings on the wife’s entitlement under the property settlement orders is not a relevant consideration in the exercise of discretion. As we have already observed, senior counsel for Mr and Mrs Rand stressed on a number of occasions that the current proceedings are not related to the completed s 79 proceedings because the wife’s percentage entitlement to the assets is “set in stone” by the orders made and cannot be altered by the subsequent proceedings. However, to repeat, that is not the point. The outcome of the current proceedings will affect the wife’s property settlement entitlement one way or the other, and that creates the link and justifies the retention of the matter by the Family Court. As senior counsel for the Liquidator said in his written summary of argument:
67.The Family Court is competent to determine the Guarantee Proceedings and, in light of the purpose of the winding up order being made and the restrictions placed upon the Liquidator in making payments in the liquidation, it is the only forum for resolution of this dispute.
We are sympathetic to the complaint by Mr and Mrs Rand that his Honour not only erroneously took into account the issue of costs and what orders for costs could be made in addressing this criterion, but also his Honour misdirected himself as to what costs orders could be made and the basis for that. However, despite these errors, we are satisfied on the evidence that was before the trial judge and the further evidence before us that there is one justiciable controversy such as to attract the exercise of the accrued jurisdiction.
The next criterion is really an extension of the previous one. It is beyond doubt that there is a common substratum of facts, however, whether the claims are non-severable is not so clear. Indeed, his Honour did not place any weight on this factor finding that “the common factual ground is not a reason for the Family Court to hear the contract claim”, but of course his Honour was looking at the s 79 proceedings as the proceedings to which the guarantee proceedings would need to attach. In any event, it is difficult to see that Mr and Mrs Rand could complain about this finding by his Honour.
With the final criterion, Mr and Mrs Rand take no issue with his Honour’s finding that the Family Court has the power to grant appropriate remedies in relation to the guarantee proceedings.
In summary then, although there was some confusion on the part of the trial judge as to his approach to one or two of these criteria we are not persuaded that his Honour erred in finding that the Family Court should exercise the accrued jurisdiction and hear and determine the guarantee proceedings.
Error by his Honour in failing to consider whether the guarantee proceedings should be transferred to the Supreme Court of New South Wales pursuant to s 5(4) or s 5(5) of the Jurisdiction of Court (Cross-Vesting) Act 1987.
This challenge was not the subject of any ground of appeal and no submissions were directed to it beyond simply suggesting that his Honour failed to consider the cross-vesting legislation. It was also not suggested that his Honour was asked to consider this. In any event we do not find any merit in this complaint. Similar, if not the same considerations apply when addressing whether a claim should be transferred to another Court under the cross-vesting legislation as when addressing whether the accrued jurisdiction should be exercised, and thus consideration of the cross-vesting legislation would not have produced any different result here.
Error by his Honour in concluding that the conduct of Mr & Mrs Rand was “wrongful”: Notice of Appeal EA104/2010 Grounds 23, 24, and 25.
This challenge in effect relates to his Honour taking into account what he considered to be wrongful conduct on the part of Mr and Mrs Rand. It is said that his Honour erred in finding such conduct wrongful.
This is essentially a challenge to his Honour’s findings as to the facts, and the issue raised was set out in the written summary of argument of Mr and Mrs Rand. There were no oral submissions made to us by either side in relation to that challenge at the hearing of the appeal.
We have carefully considered the written argument of Mr and Mrs Rand and we are not persuaded that the trial judge erred in making any of his findings in this regard. Indeed, we are comforted in reaching that conclusion by reading the transcript of the cross-examination before his Honour of the solicitor for
Mr and Mrs Rand as to the delays to which we were referred by the Liquidator’s senior counsel in his written summary of argument.
We also observe that despite this being a challenge to orders 4 and 5 made by the trial judge, the further evidence indicates that those orders have now been complied with and thus the challenge would appear to fall by the wayside.
The appeal by C Pty Limited
We observe that there is no challenge to the jurisdiction of the Family Court to hear the appeal by C Pty Limited against the rejection by the Liquidator of its proof of debt (s 1337C(1) of the Corporations Act). Thus, the complaint is that
his Honour erred in dismissing that application to transfer those proceedings under s 1337J of the Corporations Act.
That said, C Pty Limited concedes that if we find that the guarantee proceedings are a matrimonial cause and that the Family Court has original jurisdiction to hear and determine those proceedings then it would not be appropriate to transfer the proof of debt proceedings. We have of course found that the guarantee proceedings are within the original jurisdiction of the Family Court and thus this appeal becomes academic. However, in the event that we are wrong about that we propose to still address this appeal.
Again, C Pty Limited’s senior counsel has refined and reframed the grounds of appeal and it is convenient to address those grounds by reference to how they have been presented by him.
Error by his Honour in holding that the C Pty Limited claim could have been instituted in the Family Court as a matrimonial cause or under s 233 of the Corporations Act as part of the winding up absent the enactment of Division 1 of Part 9.6A of the Corporations Act: Notice of Appeal EA102 of 2010 Ground 11.
His Honour clearly found that the proof of debt proceedings are also a matrimonial cause, and thus no issue of transfer could in fact arise because the Family Court had original jurisdiction. In making this finding his Honour relied on the same reasons as he gave for finding that the guarantee proceedings are a matrimonial cause.
In our view it was clearly open to his Honour to so find. The proof of debt proceedings can be seen to be proceedings “related to or part of” the winding up proceedings and which were in turn proceedings “in relation to” the completed property settlement proceedings.
The fact that s 1321 of the Corporations Act specifically provides for a challenge to the Liquidator’s rejection of the proof of debt does not prevent those proceedings being a matrimonial cause in this case.
Thus we find no error by the trial judge here.
Error by his Honour in holding that the Supreme Court of New South Wales does not have jurisdiction to hear the C Pty Limited claim, since only the Family Court pursuant to s 39 of the Family Law Act has exclusive jurisdiction: Notice of Appeal EA102 of 2010 Grounds 13 and 14.
This seems to raise the same complaint, namely his Honour erred in finding that the proof of debt proceedings are a matrimonial cause. However, we have found that complaint has no substance and therefore again there is no error here by the trial judge.
Error by his Honour in construing s 1321 of the Corporations Act as requiring leave of the Family Court to be obtained before the commencement of proceedings in the Supreme Court of New South Wales: Notice of Appeal EA 102/2010 Ground 12.
His Honour in fact relied on s 471B and not s 1321 of the Corporations Act as providing that proceedings could not be instituted without leave of the Court that ordered the winding up (Reasons for Judgment, paragraph 47). However, it is apparent that s 471B does not require that leave be given to appeal against the rejection by the Liquidator of a proof of debt. Senior counsel for C Pty Limited is correct in submitting that s 1321 of the Corporations Act provides for that appeal to be brought as of right. Thus, to that extent his Honour was in error. However, that is an error without consequence in that his Honour correctly, and in any event, went on to consider whether in the event that the Family Court did not have original jurisdiction the interests of justice required that the proceedings should be transferred. In that regard his Honour found:
50.…
(iii)The interests of justice. – This ground can only be effectively applied if there is jurisdiction in the transferee court. Nevertheless, it is in the interests of justice that the debt proceedings be resolved as quickly and cheaply as possible. The saving of time and/or costs is much more likely to be a consequence of a hearing in the Family Court than the transfer of the proceedings to the Supreme Court of New South Wales. There are no other valid reasons which would warrant transfer.
Error by his Honour in holding that it was not in the interests of justice that the C Pty Limited claim be transferred to the Supreme Court of New South Wales: Notice of Appeal EA102/2010 Ground 15.
C Pty Limited suggests that his Honour erred in some way in considering where the interests of justice lie by proceeding on the basis that the Supreme Court of New South Wales had no jurisdiction to hear the application. Apart from the fact that in our view his Honour was correct in that premise
his Honour plainly then considered the interests of justice in the event that the Supreme Court could hear the matter if it was transferred. We find no substance in this complaint.
C Pty Limited also complains that his Honour took into account matters about which there was no evidence, namely that there would be a saving of costs and time if the proceedings were retained by the Family Court and not transferred to the Supreme Court of New South Wales.
We accept the accuracy of that criticism. Clearly his Honour was an experienced trial judge who could speak authoritatively about when the proceedings could be disposed of in the Family Court by him and the costs thereof, but of course he had no evidentiary basis to compare that with the situation in the Supreme Court of New South Wales.
It is then said on behalf of C Pty Limited that his Honour failed to take into account factors, such as that the “natural forum” for the resolution of disputes of this type is in the Corporations List of the Supreme Court. However, that overlooks the most telling factor in support of the Family Court retaining these proceedings and that is the context of the proof of debt claim, namely that it is inextricably linked to the guarantee proceedings and to the winding up and even back to the completed s 79 proceedings. The Family Court, as is demonstrated by the orders of 23 June 2006 and 26 August 2009, had a supervisory role in the winding up, and thus it was clearly in the interests of justice for these proceedings to remain there. Moreover, we agree entirely with the submission of the senior counsel for the Liquidator that:
…as recognised by s 1337C of the Corporations Act, the Family Court (including the state family courts) is explicitly acknowledged as having jurisdiction with respect to civil matters arising under the Corporations Act (in addition to the recognition in section 58AA of that Act). Parliament would not have legislated to this effect if it was not intended that the Family Court should undertake the work that it has already undertaken in these proceedings.
Thus, although his Honour may have erred in taking into account some factors that he should not have, overall his Honour was plainly right in concluding that it was in the interests of justice that the proceedings be retained by the Family Court and not transferred to the Supreme Court of New South Wales.
The appeal against the dismissal of the application for security for costs
Error by his Honour in rejecting the application by Mr & Mrs Rand for security for costs against S Pty Limited in respect of the guarantee proceedings: Notice of Appeal EA104/2010 Grounds 27 & 28.
The challenge here by Mr and Mrs Rand is twofold. First that his Honour addressed the application for security for costs by reference to s 117 of the Family Law Act when he should have referred to s 1335 of the Corporations Act on the basis that the guarantee proceedings were not proceedings under the Family Law Act. Secondly, in exercising his discretion his Honour took into account a number of irrelevant considerations. This complaint is related to the first because it is apparent that some of the factors his Honour took into account, namely the financial circumstances of the parties and their conduct, were considered because his Honour was applying s 117 of the Family Law Act.
In any event, we do not consider that his Honour erred in applying s 117 of the Act because, as we have found, his Honour was correct in concluding that the guarantee proceedings are a matrimonial cause. Thus, there were, within jurisdiction, “proceedings” within the meaning of s 117. We also observe that during the hearing before us the senior counsel for the appellants conceded that this would be the case if the proceedings were found to be a matrimonial cause.
As to the second issue, on the basis that s 117 applied his Honour did not err in taking into account the financial circumstances of the parties, and the conduct of the parties. On these bases his Honour did not err in dismissing the application.
Conclusion
Given that we have found no merit in the grounds of appeal, both appeals must be dismissed.
Costs
At the conclusion of the hearing we sought submissions as to costs. In the event that the appeals were unsuccessful Mr Feller for the appellants indicated that there were matters that arose in the lead-up to the hearing that bear upon the question of costs and therefore he sought that a regime be put in place for the filing of written submissions on costs and for leave to be given to present further evidence on costs.
Mr Cotman’s primary submission was that the Liquidator should have an order for costs but he said he could not oppose a regime for the filing of written submissions being put in place.
In the circumstances we will put in place a regime for the filing of written submissions on costs and for any further evidence on costs to be presented by way of affidavit.
I certify that the preceding one hundred and twenty-seven (127) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Strickland, Ainslie-Wallace & Murphy JJ) delivered on 9 December 2011.
Legal Associate:
Date: 9 December 2011
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