Costello & Anor and Condi & Anor
[2012] FamCA 355
•16 May 2012
FAMILY COURT OF AUSTRALIA
| COSTELLO AND ANOR & CONDI AND ANOR | [2012] FamCA 355 |
| FAMILY LAW – PROPERTY – Application by husband and wife for summary dismissal of proceedings brought by a judgment creditor of the husband under s 79A(1) that a consent s 79 property order between the husband and the wife be set aside – Jurisdiction – Whether the judgment creditor is a person affected by the s 79 order – Whether the judgment creditor has shown a reasonable cause of action that a miscarriage of justice occurred by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance – Whether s 79A application has no reasonable likelihood of success – Application for summary dismissal dismissed FAMILY LAW – PROPERTY – Application by husband and wife for summary dismissal of proceedings brought by a judgment creditor of the husband that a financial agreement between the husband and the wife be declared invalid and/or set aside for non-compliance with s 90G and/or set aside under s 90K(1)(aa) – Jurisdiction – Whether the judgment creditor has standing to apply for the financial agreement to be declared invalid and/or set aside under s 90G and/or to be set aside under s 90K(1)(aa) – Whether the judgment creditor has shown a reasonable cause of action under s 90G and/or s 90K(1)(aa) – Whether the s 90G and/or s 90K(1)(aa) applications have no reasonable likelihood of success – Application for summary dismissal dismissed FAMILY LAW – PROPERTY – Application by husband and wife for summary dismissal of proceedings brought by the receiver of a former legal partnership of which the husband was a partner prior to its dissolution that a consent s 79 property order between the husband and the wife be set aside – Jurisdiction – Whether the receiver is a person affected by the s 79 order – Whether the receiver has shown a reasonable cause of action that a miscarriage of justice occurred by reason of fraud duress suppression of evidence (including failure to disclose relevant information) the giving of false evidence or any other circumstance – Whether s 79A application has no reasonable likelihood of success – Application for summary dismissal allowed – Proceedings commenced by receiver under s 79A summarily dismissed FAMILY LAW – PROPERTY – Application by husband and wife for summary dismissal of proceedings brought by the receiver of a former legal partnership of which the husband was a partner prior to its dissolution that a financial agreement between the husband and the wife be declared invalid and/or set aside for non‑compliance with s 90G and/or set aside under s 90K(1)(aa) – Jurisdiction – Whether the receiver has standing to apply for the financial agreement to be declared invalid and/or set aside under s 90G and/or to be set aside under s 90K(1)(aa) – Whether the receiver has shown a reasonable cause of action under s 90G and/or s 90K(1)(aa) – Whether the s 90G and/or s 90K(1)(aa) applications have no reasonable likelihood of success – Application for summary dismissal allowed – Proceedings commenced by receiver s 90G and/or s 90K(1)(aa) summarily dismissed FAMILY LAW – PRACTICE AND PROCEDURE – Interlocutory injunction against wife not to sell, transfer, mortgage, encumber or otherwise deal with matrimonial home registered in her sole name pursuant to the s 79 property order – However leave given to wife to apply on notice to mortgage, encumber or otherwise deal with the matrimonial home provided that she may be able to demonstrate that such would preserve until trial the husband’s former interest in it FAMILY LAW – PRACTICE AND PROCEDURE – Directions for pleadings disclosure and other matters |
| Bankruptcy Act 1966 (Cth) s 58(1), s 58(3), s 121, s 204(5), s 204(6) Bankruptcy and Family Law Legislation Amendment Act 2005 (Cth) Family Law Act 1975 (Cth) s 71A(1), s 74, s 79, s 79A(1), s 79A(2), s 79A(4), s 80(1)(k), s 90C, s 90G, s 90K(1), s 90K(1A), s 90K(3) Family Law Amendment Act 2003 (Cth) Partnership Act 1891 (Qld) s 5, s 6 Family Law Rules 2004 Rule 1.04, 10.12, 13.08(1) Uniform Civil Procedure Rules 1999 (Supreme Court of Queensland) |
| Australian Securities & Investments Commission v Rich (2003) FLC 93-171 A V Dicey, A Treatise on the Rules for the Selection of Parties to an Action (William Maxwell & Son, 1870) J O’Donovan, Thomson Reuters, Company Receivers and Administrators, vol 2 (at service 126) |
| FIRST APPLICANT: | Mr Costello |
| SECOND APPLICANT: | Mr Ferro |
| FIRST RESPONDENT: | Mr Condi |
| SECOND RESPONDENT: | Mrs Condi |
| FILE NUMBER: | BRC | 3380 | of | 2011 |
| DATE DELIVERED: | 16 May 2012 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | O’Reilly J |
| HEARING DATE: | 6 December 2011 and 4 May 2012 |
REPRESENTATION
| COUNSEL FOR THE FIRST APPLICANT: | Mr North SC with him Mr Waterman (4 May 2012) Mr Waterman (6 December 2011) |
| SOLICITORS FOR THE FIRST APPLICANT: | Byrne Legal Group |
| SOLICITORS FOR THE SECOND APPLICANT: | Mr Muller Rodgers Barnes & Green |
| COUNSEL FOR THE RESPONDENTS: | Ms Carew |
| SOLICITORS FOR THE RESPONDENTS: | Rice Naughton Buckley |
Orders
IT IS ORDERED
The application in a case filed 23 August 2011 by the first respondent and the second respondent for summary dismissal of the proceedings commenced by the initiating application of the first applicant filed 20 April 2011 (amended initiating application filed 17 June 2011) is dismissed.
The application in a case filed 23 August 2011 by the first respondent and the second respondent for summary dismissal of the proceedings commenced by the initiating application of the second applicant filed 20 April 2011 (amended initiating application filed 24 June 2011) is allowed and accordingly those proceedings are summarily dismissed.
AND UPON THE UNDERTAKING AS TO DAMAGES BY THE FIRST APPLICANT CONTAINED IN HIS AFFIDAVIT FILED 20 APRIL 2011 PARAGRAPH 55
IT IS ORDERED UNTIL FURTHER ORDER
The second respondent is restrained from selling transferring mortgaging encumbering or otherwise dealing with the property situate at Suburb B more particularly described as Lots 201 and 202 on …04 title reference …77 (the property).
The second respondent however may apply on notice to vary or narrow the terms of the injunction by mortgaging encumbering or otherwise dealing with the property provided that she may be able to demonstrate that such would preserve until trial the first respondent’s former interest in it, such application if any to be listed for hearing before the Honourable Justice O’Reilly at a time and date to be arranged between the Manager Judicial Services and the Associate.
AND IT IS DIRECTED
The first applicant, by his solicitors, may inspect and copy Family Court of Australia file BRF…/2005 by arrangement with the docket Registrar or the case co‑ordinator by 4pm on Wednesday 23 May 2012.
Any application by the first respondent and the second respondent for amendment under the slip rule in relation to the consent property order made on 11 May 2005 in file BRF…/2005 be filed by 4pm on Friday 25 May 2012 and be listed for hearing before the Honourable Justice O’Reilly at a time and date to be arranged between the Manager Judicial Services and the Associate.
The first applicant file and serve points of claim (in substitution for the document styled further and better particulars already delivered) by 4pm on Friday 8 June 2012.
The first respondent and the second respondent each file and serve points of defence by 4pm on Friday 29 June 2012.
The first respondent and the second respondent each file and serve a financial statement by 4pm on Friday 29 June 2012.
The first applicant, the first respondent and the second respondent make disclosure under Chapter 13 of the Family Law Rules 2004 relevant to the matters in the points of claim points of defence and financial statements by 4pm on Friday 6 July 2012 and complete inspection and copying by 4pm on Friday 13 July 2012.
The first applicant’s proceedings otherwise be listed before the docket Registrar for a trial directions hearing at 11.15am on Friday 20 July 2012.
AND IT IS FURTHER ORDERED
The costs of the first applicant, the first respondent and the second respondent of and incidental to the application in a case for summary dismissal filed by the first respondent and the second respondent 23 August 2011 and of the application for interlocutory relief by the first applicant set out in his amended initiating application filed 17 June 2011 are reserved to the trial judge.
Any applications for costs in relation to the proceedings commenced by the second applicant be listed for hearing before the Honourable Justice O’Reilly at a time and date to be arranged between the Manager Judicial Services and the Associate.
IT IS NOTED that publication of this judgment under the pseudonym Costello and Anor & Condi and Anor is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 3380 of 2011
| Mr Costello |
First Applicant
And
| Mr Ferro |
Second Applicant
And
| Mr Condi |
First Respondent
And
| Mrs Condi |
Second Respondent
REASONS FOR JUDGMENT
Background
By a consent property order made on 11 May 2005 under s 79 of the Family Law Act 1975 (Cth) (the Act) between Mr Condi (the husband) and Mrs Condi (the wife), the husband agreed to transfer to the wife all of his right title and interest in and to their matrimonial home at Suburb B so that she would become the sole registered owner of it.
The consent s 79 property order provided:
BY CONSENT IT IS ORDERED
By way of property settlement pursuant to s 90C of the Family Law Act :-
1.Within thirty (30) days of these orders the husband shall transfer to the wife all his right title and interest in and to the matrimonial home situated at [Suburb B] in the State of Queensland described as Lots 201 and 202 on RP …04 … Title Reference …77.
2.The husband shall pay to the wife a weekly sum of $450.00 indexed annually in accordance with the CPI index for her maintenance and support.
3.Save as aforesaid, each party shall hereinafter hold as his and her own property all other assets and/or financial resources including but not limited to real estate, cash, bank and building society accounts, shares, motor vehicles, interest in businesses and superannuation and neither party shall hereinafter be entitled to claim against any such interest in property and/or financial resources so held by the other.
4.Either party may have liberty to apply in respect of these orders by giving five (5) days notice to the other.
There is dispute as to whether the reference “s 90C” in the order should be amended under the slip rule so as to read “s 79”. I will return to this later. Plainly however as a consent property order can only be made under s 79 that is the provision under which the order was made.
On an earlier date, 27 April 2005, the husband and the wife signed a s 90C financial agreement. Neither the financial agreement nor evidence of its contents is in evidence. However, the wife refers to it in her affidavit filed 24 May 2011 par 22 as being signed 27 April 2005. The wife’s affidavit, par 23, deposes that on 27 and 28 April 2005 she and the husband signed an Application for Consent Orders and Minutes of Consent which resulted in the making of the consent order. The proximity of the dates lead potentially to the inference that the financial agreement was to similar effect as the consent order. However, this is presently not the subject of evidence.
The wife said in her affidavit, par 24, that on or about 14 May 2005 the husband’s interest in the matrimonial home was transferred to her.
It is common ground that the wife became the sole registered owner of the matrimonial home. The transfer is dated 14 July 2005. A title extract shows the transfer also as 14 July 2005.
The first applicant is a judgment creditor of the husband.
He alleges that at the time of the signing of the financial agreement, and at the time of the making of the s 79 consent order, the husband well knew of a claim by him for unpaid wages due to him by a legal partnership styled X Firm conducted by Mr Costello Snr, his father, and Mr Condi, the husband, which ultimately resulted in the first applicant becoming a judgment creditor of the former partners, and well knew that the transfer would be likely to have the effect that his claimed debt would not be able to paid out of the assets of the partnership or by him as a person jointly and severally liable for the claimed debt.
The second applicant is a court appointed receiver of the former legal partnership, appointed on 4 May 2005 by the Supreme Court of Queensland.
He alleges that at the time of the signing of the financial agreement, and at the time of the making of the s 79 consent order, the husband well knew that appointment of a receiver to the former legal partnership was likely; well knew that the creditors of the partnership were extensive and not likely to be paid out of the assets of the partnership upon dissolution and winding up; that the husband had made unauthorised drawings on the partnership account (meaning, it would appear, drawings for which there were insufficient profits to justify the drawings); and well knew that the transfer would be likely to have the effect that the creditors of the partnership or some of them would not be able to be paid out of the assets of the partnership or by him as a person jointly and severally liable for the debts of the partnership; and/or that he would be unable to repay the drawings which constituted assets of the partnership necessary to pay the creditors of the partnership.
Applicants’ principal proceedings
The principal proceedings by each applicant seek that the consent property order be set aside under s 79A of the Act, that the financial agreement be declared invalid and/or set aside as not complying with s 90G of the Act and/or be set aside pursuant to s 90K(1)(aa) of the Act, and that the wife divest herself of the husband’s former right title and interest in the matrimonial home by transferring it back to him.
Applications listed
Application by husband and wife for summary dismissal
By application in a case filed 23 August 2011, the husband and the wife seek summary dismissal of the principal proceedings.
Applications by judgment creditor and receiver for interlocutory injunction, disclosure and other procedural orders
The judgment creditor and the receiver by mirror applications seek:
1. An interlocutory injunction against the wife not to transfer further encumber or otherwise deal with “the one-half interest” in the [B] property acquired by transfer to her by the husband
2. Disclosure of documents by the husband and the wife
3. Financial disclosure by the husband and the wife
4. Leave to inspect and copy Court File BRF…/2005 in which the consent property order was made and pursuant to which the transfer occurred
5.The husband and the wife file and serve affidavits in response to the substantive affidavits of the judgment creditor and the receiver.
Relevant statutory provisions
Setting aside a property order/consequential relief
Section 79A(1), insofar as is relevant to the present applications, provides:
SECTION 79A SETTING ASIDE OF ORDERS ALTERING PROPERTY INTERESTS
79A(1) Where, on application by a person affected by an order made by a court under section 79 in property settlement proceedings, the court is satisfied that:
(a)there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance;
…
the court may, in its discretion, vary the order or set the order aside and, if it considers appropriate, make another order under section 79 in substitution for the order so set aside. (emphasis added)
Ms Carew of Counsel, for the husband and the wife, pointed to the circumstance that the judgment creditor and the receiver seek only that the s 79 order be set aside and not that it be varied or that any other s 79 order be made in substitution, questioning the utility of such.
The judgment creditor and the receiver however are seeking retransfer of the husband’s former interest in the matrimonial home to him (amended initiating application of each, pars 3 and 4), in the following terms:
3.That a one-half share in fee simple as tenant in common in all that land more particularly described as Lots 201 and 202 on RP …04, … and being the whole of the land the subject of Title Reference …17 be vested and registered in the name of [Mr Condi]…
4.That a Form 14 General Request, or any other necessary documents, be lodged and registered in the Department of Environment and Resource Management, Brisbane, by the First Applicant to give effect to such vesting.
Counsel and Mr Muller, solicitor, at my invitation, each provided supplementary written submissions in relation to this aspect of the relief sought, and attended a brief relisting of the matter on 4 May 2012, as a result of which I am satisfied that if the s 79 order were to be set aside under s 79A, the further relief sought in pars 3 and 4 would be available under s 80(1)(k): see the supplementary written submissions filed 3 May 2012 (folios 25, 26 and 27); and Davidson & Davidson (No 2) (1994) FLC 92‑469 extracted in the supplementary submissions of Mr North SC and Mr Waterman.
Counsel referred also to the circumstance that if by the s 90C financial agreement made 27 April 2005 the husband transferred his interest in the property to the wife, then on 11 May 2005, by reason of s 71A(1), the Court had no power on 11 May 2005 to make the s 79 order; but that if the financial agreement was then operative and binding the power under s 90K(3) would remain available.
If the proceedings are not summarily dismissed, attention would need to be given to amendment of pars 3 and 4 squarely to invoke s 80(1)(k) and s 90K(3), and to place a positive obligation on the wife (or a Registrar in default) to sign all documents necessary to retransfer to the husband his former interest in the property.
This approach is consistent with Lindon v The Commonwealth (No 2) (below), Kirby J, fifth point.
Ms Carew referred to s 79A(2), claiming that the wife is a bona fide “other person interested” in the relief sought by the judgment creditor and the receiver. It provides:
79A(2) In the exercise of its powers under subsection (1), (1A) or (1C), a court shall have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested.
Section 79A(4) identifies a creditor of a party to the proceedings in which a s 79 order was made as “taken to be” a person whose interests are affected by the order if the creditor may not be able to recover his or her debt because the order has been made. It provides:
79A(4) For the purposes of this section, a creditor of a party to the proceedings in which the order under section 79 was made is taken to be a person whose interests are affected by the order if the creditor may not be able to recover his or her debt because the order has been made.
Section 80(1)(k) provides:
SECTION 80K GENERAL POWERS OF THE COURT
80(1) The court, in exercising its powers under this Part, may do any or all of the following:
…
(k)make any other order (whether or not of the same nature as those mentioned in the preceding paragraphs of this section), which it thinks it is necessary to make to do justice; and
… .
Setting aside a financial agreement/consequential relief
It is not necessary for present purposes to set out s 90C or s 90G.
Section 90K relevantly provides:
SECTION 90K CIRCUMSTANCES IN WHICH COURT MAY SET ASIDE A FINANCIAL AGREEMENT OR TERMINATION AGREEMENT
90K(1) A court may make an order setting aside a financial agreement or a termination agreement if, and only if, the court is satisfied that:
…
(aa) a party to the agreement entered into the agreement:
(i)for the purpose, or for purposes that included the purpose, of defrauding or defeating a creditor or creditors of the party; or
(ii)with reckless disregard of the interests of a creditor or creditors of the party; or
…
(b)the agreement is void, voidable or unenforceable;
…
90K(1A) For the purposes of paragraph (1)(aa), creditor, in relation to a party to the agreement, includes a person who could reasonably have been foreseen by the party as being reasonably likely to become a creditor of the party.
…
90K(3) A court may, on an application by a person who was a party to the financial agreement that has been set aside, or by any other interested person, make such order or orders (including an order for the transfer of property) as it considers just and equitable for the purpose of preserving or adjusting the rights of persons who were parties to that financial agreement and any other interested persons. (emphasis added)
…
Relevant rules
The Family Law Rules 2004, Rule 10.12, provide:
RULE 10.12 APPLICATION FOR SUMMARY ORDERS
10.12 A party may apply for summary orders after a response has been filed if the party claims, in relation to the application or response, that:
(a) the court has no jurisdiction;
(b) the other party has no legal capacity to apply for the orders sought;
(c) it is frivolous, vexatious or an abuse of process; or
(d) there is no reasonable likelihood of success.
Principles concerning applications for summary dismissal
If the Court plainly has no jurisdiction, or there is plainly demonstrated a want of legal capacity to apply for orders sought, or if a matter plainly is frivolous or vexatious or an abuse of process an application for summary dismissal must succeed.
Otherwise, the authorities make clear that the power for summary dismissal is to be exercised sparingly. Whilst some older authorities (including in this Court) refer to the test as “doomed to fail”, Rule 10.12(d) of the Family Law Rules 2004 (above) uses the expression “no reasonable likelihood of success”. In the most recent authority in this Court, Friar & Friar [2011] FamCAFC 71, Thackray and Watts JJ dealt with the relevant principles at [48]-[53]. They observed at [50] that the Rules properly are read as supplementing the power of the Court under s 118(1) to dismiss frivolous or vexatious proceedings and are also to be read in the context of the many cases confirming the Court’s inherent power to dismiss or permanently stay an application which cannot succeed:
50.The Rules are properly read as supplementing the power of the Court to dismiss frivolous or vexatious proceedings pursuant to s 118(1) of the Act. The Rules are also to be read in the context of the many cases confirming the Court’s inherent power to dismiss or permanently stay an application which cannot succeed, as to which see the authorities discussed in Bigg v Suzi (1998) FLC 92-799 at 84,974.
After setting out at [51] the relevant passage in Lindon v The Commonwealth (No 2) (1996) 70 ALJR 541 at 544-5, their Honours said at [52] and [53]:
52. While Kirby J expressed the test as requiring the applicant for summary dismissal to demonstrate, by reference to the opponent’s documents, that “the opponent lacks a reasonable cause of action or is advancing a claim that is clearly frivolous or vexatious”, the test has also been formulated in many other ways (see General Steel Industries Inc v Commissioner for Railways (N.S.W.) (1964) 112 CLR 125 at 129). However, for the purposes of an application for summary dismissal under the Act, the test is that laid down by the Rules, namely that the claim must be “frivolous, vexatious or an abuse of process” or has “no reasonable likelihood of success”.
53. Regardless of the formulation, “exceptional caution” must be used in applications for summary dismissal and the power should be “sparingly employed”: Barwick CJ in General Steel Industries (supra at 129). (emphasis added)
In Lindon (above) the third point of Kirby J is that a case which initially can appear weak, after evidence and argument and extended time for reflection, will sometimes turn an apparently unpromising cause into a successful judgment.
It is useful at this stage to set out the principles in Lindon which conveniently I will take from Custodio & Pinto (2006) FLC 93-279 at [6], per Finn J:
Principles relevant to an application for summary dismissal
6. … [T]he principles which govern an application for summary relief are as stated by Kirby J in Lindon v The Commonwealth (No 2) (1996) 70 ALJR 541 at 544-5:
The approach to be taken by the Court to [an] application for summary relief is not in doubt:
1. It is a serious matter to deprive a person of access to the courts of law for it is there that the rule of law is upheld, including against government and other powerful interests. This is why relief, whether under O 26, r 18 or in the inherent jurisdiction of the Court, is rarely and sparingly provided; [General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 128f; Dyson v Attorney-General [1911] 1 KB 410 at 418.]
2. To secure such relief, the party seeking it must show that it is clear, on the face of the opponent's documents, that the opponent lacks a reasonable cause of action [Munnings v Australian Government Solicitor (1994) 68 ALJR 196 at 171f, per Dawson J] or in advancing a claim that is clearly frivolous or vexatious; [Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91.]
3. An opinion of the Court that a case appears weak and such that it is unlikely to succeed is not, alone, sufficient to warrant termination. [Coe v The Commonwealth (1979) 53 ALJR 403; Wickstead v Browne (1992) 30 NSWLR at 5-7.] Even a weak case is entitled to the time of a court. Experience teaches that the concentration of attention, elaborated evidence and argument and extended time for reflection will sometimes turn an apparently unpromising cause into a successful judgment;
4. Summary relief of the kind provided for by O 26, r 18, for absence of a reasonable cause of action, is not a substitute for proceeding by way of a demurrer. [Coe v The Commonwealth (1979) 53 ALJR 403 at 409.] If there is a serious legal question to be determined, it should ordinarily be determined at a trial for the proof of facts may sometimes assist the judicial mind to understand and apply the law that is invoked and to do so in circumstances more conducive to deciding a real case involving actual litigants rather than one determined on imagined or assumed facts;
5. If, notwithstanding the defects of pleadings, it appears that a party may have a reasonable cause of action which it has failed to put in proper form, a court will ordinarily allow that party to reframe its pleading. [Church of Scientology v Woodward (1980) 154 CLR 25 at 79.] A question has arisen as to whether O 26, r 18 applies to part of a pleading. [Northern Land Council v The Commonwealth (1986) 161 CLR 1 at 8.]… ; and
6. The guiding principle is, as stated in O 26, r 18(2), doing what is just. If it is clear that proceedings within the concept of the pleading under scrutiny are doomed to fail, the Court should dismiss the action to protect the defendant from being further troubled, to save the plaintiff from further costs and disappointment and to relieve the court of the burden of further wasted time which could be devoted to the determination of claims which have legal merit. (emphasis added)
After reference to Bigg & Suzi (1998) FLC 92‑799; Pelerman& Pelerman (2000) FLC 93-037; Beck & Beck (2004) FLC 93-181 and other authorities, in particular Beck & Beck at [20] and [21], Finn J then said at [11]:
11. In the recent decision in Bain Pacific Associations LLC, BCIP Associates II-B and Pacific Equity Partners (NZ) Limited, and others and Kelly [2006] FamCA 518, having referred to what was said in paragraph 21 of the judgment in Beck (supra), the Full Court of this Court accepted the proposition:
21.… that apart from material in the case of the respondent to an application for summary dismissal, the court may have regard to relevant non-contentious facts, even if raised by the applicant for summary dismissal. (emphasis added)
Objections to evidence
On 6 December 2011, I ruled in favour of the admission of relevant non‑contentious facts adduced in the affidavit of the wife filed 24 May 2011, but limited to the purposes for which Ms Carew sought to use those facts: see the ex tempore reasons for judgment 6 December 2011, in particular at [13].
The evidence
Accordingly, in what follows, I have had regard to all of the evidence (save for 3 paragraphs in the wife’s affidavit filed 24 May 2011 ruled out by consent), including the non-contentious facts in that affidavit, but for the limited purposes described in the reasons for judgment 6 December 2011 and the ruling made to reflect those reasons for judgment.
Flaws in consent property order
I have referred earlier to the error in the consent property order concerning its reference to “s 90C”.
The order is further flawed by the inclusion of par 2, concerning spousal maintenance, which order can be made only pursuant to s 74, having regard to the matters in ss 72 and 75.
Ms Carew of Counsel, for the husband and the wife, submitted, and Mr Waterman of Counsel, and Mr Muller, solicitor, for the first and second applicants respectively refuted, that because a property order can only be made under s 79, and a spousal maintenance order can only be made under s 74, the order would be likely to be amenable to correction under the slip rule. For present purposes, limited to the summary dismissal application, I accept Ms Carew’s submission. Although at present no application is made under the slip rule, I thus will proceed on the basis that such correction upon any future proper application is likely to be made, subject however to hearing full argument later if any slip rule amendment sought is opposed.
Relevance of documents styled “Further and Better Particulars”
On 26 May 2011, Registrar Stoneham ordered that within 21 days the applicants each deliver a document styled further and better particulars of their claims, as specified in that order (order 2).
Accordingly, the applicants each delivered further and better particulars, as ordered: first applicant, affidavit Mr Y filed 5 December 2011, annexure PJB1; second applicant, affidavit Mr Muller filed 23 June 2011, annexure SGM2. The first applicant’s document was delivered 9 June 2011, within time. The second applicant’s document was delivered 24 June 2011, two weeks late. Presently nothing turns on that.
Ms Carew submitted however that because pleadings in this Court were “abolished” in 1995, the determination of the summary dismissal application must be made on the evidence that the applicants present to support their substantive claims, and not the further and better particulars documents.
Often, in this Court, points of claim and points of defence are ordered. Thus, in Friar & Friar (above) Finn J observed (at [7]) that in that particular case the basis on which the application for summary dismissal was to be determined, by agreement, was the wife’s points of claim, and not her evidence, which Finn J observed “is the more usual course in this jurisdiction”, noting however that in that case no issue was raised in the appeal concerning the approach taken.
For abundance of caution, I will ignore the two documents styled further and better particulars, and have regard only to the evidence, and any properly arguable inferences arising from it relied on by the applicants which they would seek to have drawn at the trial, as well as the evidence of the applicants for summary dismissal which inclusion, for limited purposes, already I have made clear.
Summary dismissal
Ms Carew of Counsel, for the husband and the wife, framed her case primarily around Rule 10.12, in particular (a) and (d), submitting that the Court has no jurisdiction in relation to the proceedings commenced by the first applicant and the second applicant; or in the alternative, if there is jurisdiction, the claims they have made have no reasonable likelihood of success. Further, Ms Carew argued that if there is jurisdiction, and a reasonable likelihood of success in the primary claims, the non-contentious facts in the wife’s affidavit, and other matters, have effect that there is no reasonable likelihood of success in having the statutory discretions exercised in the applicants’ favour, and the further effect that the discretionary power to order or not to order summary dismissal should be exercised in favour of ordering summary dismissal.
It is convenient to list Ms Carew’s specific grounds, and then deal with each in turn.
Further, to avoid confusion, it is convenient to deal first and discretely with the submissions, argument and conclusions concerning the first applicant, and then secondly and discretely with the submissions, argument and conclusions concerning the second applicant.
First applicant
Ms Carew submitted:
1.The Court has no jurisdiction for the first applicant’s s 79A claim.
2.If there is jurisdiction, there is no reasonable likelihood of success of the first applicant proving a miscarriage of justice for the purpose of the first applicant’s s 79A claim.
3.If there is jurisdiction, and a reasonable likelihood of success in proving a miscarriage of justice there is no reasonable likelihood of success in having the discretion under s 79A exercised to set aside the s 79 consent order.
4.The Court has no jurisdiction for the claims by the first applicant under s 90G or s 90K(1)(aa).
5.If there is jurisdiction, there is no reasonable likelihood of success in these claims.
6.If there is jurisdiction, and a reasonable likelihood of success in establishing a ground under s 90K(1)(aa), there is no reasonable likelihood of success in having the discretion under s 90K(1) exercised to set aside the financial agreement.
7.In any event, the discretionary power to order or not to order summary dismissal should be exercised in favour of summary dismissal.
Section 79A
No jurisdiction
Background
The following facts appear to be non-contentious.
The first applicant was an employed solicitor with the legal partnership X Firm from 21 September 1987 until 30 June 1989. He was made a “salaried partner” in 1989. His retainer however was for salary only. He continued in that role until dissolution of the partnership on 3 May 2010. (See the order of P D McMurdo J in the Supreme Court of Queensland, 4 May 2005, order 9).
Between 1989, and 3 May 2010, he was not paid his full salary.
On 29 October 2004, he had made demand on the partners of the partnership for unpaid salary of $74,402 plus interest $15,293 to 12 October 2004. The claim was not paid.
Importantly, the salary claimed by the first applicant dated back to the 1999-2000 tax year: see the letter 29 October 2004, first applicant’s affidavit filed 20 April 2011, annexure AC1, setting out in a table the first applicant’s claim as at that date, dating back to the 1999/2000 tax year onwards.
On 3 March 2005, the first applicant commenced proceedings BE… of 2005 in the District Court of Queensland. Mr Costello Snr, the first applicant’s father, did not contest the claim. Mr Condi, the husband, filed a defence on 6 April 2005. He contested the claim for 5 years until 22 March 2010, until notifying he would no longer contest the claim. By that stage, a trial had been set down for 5 days before McGill DCJ to commence on 19 April 2010.
At a mention on 7 April 2010, the husband’s lawyers appeared to announce that the husband no longer opposed the claim but did not consent to judgment. The matter thus was heard on 7 April 2010. McGill DCJ gave judgment on 22 April 2010, supported by extensive reasons. The judgment was against both Mr Costello Snr and Mr Condi for $147,635 being $91,694 unpaid salary and $55,941 interest. Mr Condi, the husband, was ordered to pay the costs of the proceedings. Later, on 11 August 2011, costs of $69,486 were assessed and ordered against Mr Condi, the husband.
On 4 September 2010, McGill DCJ’s judgment was served on the husband, with a demand for payment. On 2 September 2011, the costs order was served on the husband, with a demand for payment.
The judgment amount and the costs amount remain unsatisfied.
Person affected?
Ms Carew submitted that for the purpose of s 79A(4), in order to be a creditor who is “taken to be” a person whose interests are affected by the making of a a s 79 order, there needs to be a temporal connection between the existence of the debt and the making of the s 79 order, so that, at the time the s 79 order was made, the creditor “may not be able to recover his or her debt because the order has been made”. Thus, Ms Carew argued, if a person becomes a creditor after the making of a s 79 order that is “as good as it gets”, but the person is not thus a person affected. Ms Carew argued that at the time the s 79 order was made the first applicant was only a claimant, and not a creditor, and did not become a creditor until the judgment 22 April 2010. She argued further that because the first applicant’s claim was against the partnership, it was thus liable to be paid out of the partnership assets, so that the first applicant was not a creditor of the husband and thus not a creditor of “a party to the proceedings”.
The first part of Ms Carew’s submission as to the necessity for temporal connection appears to be correct, that is that s 79(4) is intended to operate only in respect of creditors who have debts unpaid as at the date of the making of a s 79 order, and indeed is supported by the Full Court’s observation (obiter) in DFC of T (WA)v Spanjich & Spanjich (1988) FLC 91-974 at 77,048, R col, first new paragraph, that a miscarriage of justice within the meaning of s 79A(1)(a) can only arise “from circumstances in existence at the date of the order”.
However, the first applicant at the time the s 79 order was made indeed was a creditor. He was a creditor from the 1999/2000 tax year and continuing: see the letter 29 October 2004, annexure AC1, already referred to; and reasons for judgment McGill DCJ at [37]-[41].
It is erroneous to suggest that a person who is owed money is not a creditor until he obtains a judgment and becomes a judgment creditor. On the contrary, the judgment recognises the existence of the earlier claimed but unpaid debt, so that the debtor/creditor relationship subsisted in this case from the 1999/2000 year continuing to and existing as at 11 May 2005 when the consent s 79 property order was made.
It is erroneous also to suggest that because the debt was a “partnership debt” it was not a debt of the husband. A partnership is not an entity but “simply the relation which subsists between persons carrying on a business in common with a view to profit”: Partnership Act 1891 (Qld) s 5(1). Thus, all of the partners of a partnership are liable for the debts of the partnership in respect of which they have rights of contribution inter se: Partnership Act 1891 (Qld) s 6(1)(c); reasons for judgment McGill DCJ [16].
In this case, the husband and Mr Costello Snr owned the firm equally: reasons for judgment McGill DCJ also at [16].
Further, the defendant in the District Court proceedings was not “the partnership”, but the two partners, Mr Condi, the husband, as the first defendant and Mr Costello Snr as the second defendant.
The first applicant thus was a creditor of the husband at the time of the making of the s 79 order, at least in relation to the unpaid salary $91,694 (but not the interest and costs, those being later discretionary awards), and the husband was “a party to the proceedings” in which the s 79 order was made.
Ms Carew next submitted that the first applicant has failed to prove, and cannot at a trial prove, that the first applicant “may not be able to recover his debt because the order has been made”, because there is no evidence that the husband’s partner, Mr Costello Snr, could not at the time the s 79 order was made, or indeed now, pay the judgment debt, nor that recovery has been attempted against Mr Costello Snr, but failed, for recovery either out of the assets of the partnership by way of Mr Costello Snr’s personal liability for the debt or against him personally.
As to the assets of the partnership, Ms Carew submitted that there is no evidence that at the time the s 79 order was made the assets of the partnership were insufficient to meet the reasonably anticipated debts of the partnership.
The first applicant, by his affidavit filed 20 April 2011, pars 31, 32 and annexure AC11, shows that based upon the books and records of the partnership, information from Mr Costello Snr and also the receiver of the partnership, who is the second applicant, as at 11 May 2005 the list of creditors was as per annexure AC11, totalling $797,307.
The receiver, the second applicant, in his affidavit filed 20 April 2011, pars 10-13, and in his further affidavit filed 29 September 2011, pars 35-37, referred to net receipts of $167,585 as at 31 December 2007, and proofs of debt lodged of the order of $132,322 as at the time of the earlier affidavit 20 April 2011 (sworn 25 March 2011), and of $256,267 as at the date of the later affidavit 29 September 2011 (sworn 28 September 2011). (I leave aside, for present purposes, reference to the incurrence and payment of the receiver’s fees and outlays).
In the latter affidavit the receiver said that he had not yet adjudicated upon the proofs of debt.
During argument, Mr Muller, solicitor for the receiver, explained that ordinarily a receiver will not embark upon the adjudication of proofs of debt until and if it is known that there will be moneys and assets of the partnership out of which a dividend can be paid to the creditors whose proofs are admitted.
In a more recent affidavit filed 6 December 2011, par 3, the receiver said that the figure $132,322 in his first affidavit was erroneous and that the figure $256,267 in his second affidavit is correct. He referred to the proofs of debt register, annexure JF1 to his third affidavit, showing that of the sum $256,267, $99,003 was referable to the claim of the first applicant, and that of the $256,267, two small amounts of $616 and $2000 have been paid out.
Ms Carew referred to the list of the creditors, annexure AC11, totalling $797,307 as at 11 May 2005, and made the following observations: (1) CBA, owed $321,061 (item 3), CBA being a secured creditor, was paid out of sale proceeds of A Property; (2) the claimed unsecured debts thus amounted to about $462,246; (3) a loan debt of $66,000 owed to Mr Costello Snr, a partner (item 30) can be disregarded as “not a creditor item” meaning, I think, not an external creditor item; and (4) that if other amounts which are “not creditor items” are excluded (items 31, 32), the unsecured creditors (according to Ms Carew’s calculations) totalled $250,367 as at 11 May 2005.
Against that Ms Carew put that, by reference to annexure JF3 to the receiver’s second affidavit filed 29 September 2011, being a letter 11 January 2008 from the receiver to Mr Costello Snr, with 2 attachments, in addition to the receipts of $167,585 balance in the receiver’s bank account, should be added $21,405 held in a trust account as sale proceeds of the partnership’s library (although subject to a dispute) so that the assets of the partnership totalled $188,990, seemingly as at the date of annexure JF3, namely 11 January 2008. Ms Carew put further that, by reference to an attachment to annexure JF3 (second attachment), being a list of receipts and payments as at 31 December 2006, the actual partnership assets as at that date including “debtors collected” amounted to $221,595 ($54,009 having been paid for receiver’s costs) to which sum of $221,595, when the library value of $21,405 is added, shows that the partnership assets at the date of its dissolution 3 May 2005, and thus as at the date of the s 79 order 11 May 2005, amounted to $243,000 “at least”, pointing to the circumstance that the receiver has not as yet listed the assets of the partnership as at 3 or 11 May 2005.
So put, Ms Carew submitted that the first applicant has failed to show that his then claimed debt, then $113,011 as at 11 May 2005: annexure AC11, item 1, could not have been recovered out of the partnership assets.
Ms Carew submitted thus that in respect of the first applicant’s case, “it all hinges on” this circumstance, that is, that as at the date the s 79 order was made, the partnership assets amounted to $243,000; the first applicant’s claim then was only $113,011, so that, put simply, he cannot at any trial prove that as at the date the s 79 order was made he “may not be able to recover his debt because the order has been made”. Ms Carew relied heavily on the circumstance that the receiver has yet to adjudicate on the proofs of debt of the remaining unsecured creditors, and submitted thus that there is a lack of certainty as to whether those claimed debts are true debts (proofs of debts lodged $256,267); and that accordingly the assets of the partnership as at the date the s 79 order was made were sufficient to meet the joint and several liability of the husband personally and of Mr Costello Snr personally.
Mr Waterman of Counsel, for the first applicant, submitted that although the partnership dissolution which occurred on 3 May 2005 was based upon “irreconcilable differences”, and not insolvency, the net asset position of the partnership, as at that date, insofar as is known, as analysed by Ms Carew, “coupled with the existence of the District Court action”, and the circumstance that the several unsecured creditors listed in annexure AC11 have made the claims they have made, totalling $256,267 (presuming those to be the unsecured creditors who have lodged the proofs of debt), and even if items 30, 31 and 32 are excluded, the effect nonetheless is that as at the date the s 79 order was made the first applicant indeed was in the position of a creditor who “may” not be able to recover his debt because the order has been made, and that he thus should be permitted to take his case to trial, having regard not only to the likely partnership asset/potential liability position but also because, by the s 79 order the husband put out of reach the only real property asset in his name out of which the debt to the first applicant realistically could have been paid, in particular having regard to the existence of the creditors of the partnership.
Mr Waterman submitted that on 11 May 2005, the date the s 79 order was made, a receiver already had been appointed to get in the partnership assets and pay the partnership debts, with the necessary effect also that the partnership assets, when realised, would be diminished by the receiver’s proper remuneration and outlays: see the order P D McMurdo J in the Supreme Court of Queensland, 4 May 2005, order 4, which provides that the receiver be remunerated out of the assets of the partnership including as to his outlays.
Mr Waterman submitted thus that there is jurisdiction, because the first applicant plainly was a creditor of the husband personally at the time the s 79 order was made, the husband being a partner in the firm and thus personally liable for the first applicant’s debt; the husband was “a party to the proceedings” in which the s 79 order was made; and that the first applicant has shown a “strong prima facie case” that he is and was a person whose interests are affected by the order, when it was made, as a creditor who “may” not be able to recover his debt because the order has been made; and further that the circumstance that the primary judgment debt $91,694 is still not paid is powerful proof that at the time of the making of the s 79 order he was a person who “may” not be able to recover his debt because the order has been made.
In my view, Ms Carew’s submission as to want of jurisdiction fails.
As explained, the first applicant was a creditor of the husband (and of Mr Costello Snr), as at the date the s 79 order was made. Both the husband, and Mr Costello Snr, were personally liable for the debt: see above my reference to the Partnership Act 1891 (Qld) and the observations by McGill DCJ in his reasons for judgment at [16].
The husband was a “party to the proceedings” in which the s 79 order was made.
The first applicant later became a judgment creditor of the husband. However, as at the date the s 79 order was made, he already was a creditor, as explained.
Despite Ms Carew’s careful analysis of the state of the assets and liabilities of the partnership as at the date the s 79 order was made, and taking into account that the receiver has not as yet provided a list of assets of the partnership as at the date of its dissolution, the reality is that it is likely, on the receiver’s figures, that the partnership assets, seemingly at best $243,000 after the secured creditor (CBA) realised its security and debt, were as at 11 May 2005 insufficient to meet the claims of the unsecured creditors of the partnership $250,367 (Ms Carew’s calculation based on annexure AC11) or potentially $256,267 (proofs of debt lodged but not yet adjudicated).
Although the receiver has not as yet formally provided a list of assets of the partnership as at the date of its dissolution, I would be inclined to infer that if there were further assets than the $243,000 presently identified, the receiver would have obtained that information by inquiry of both partners, and by reference to the books and records of the partnership, so that by 20 April 2011, the date of his first affidavit, nearly 6 years after the commencement of the receivership, he would have taken in all of the assets and realised them, so that it is not likely, I would infer, that there are further assets than presently taken in. Indeed, it would be expected that if there were further assets, then the receiver would have referred to them in his letter 11 January 2008 earlier referred to and in his affidavit material.
Moreover, of the identified assets $243,000, the circumstance that the receivership had commenced on 4 May 2005, before the date of the s 79 order had the effect that as at 11 May 2005, the date of that order, the receiver’s fees and outlays already were being incurred to diminish the then net asset position of the partnership.
Thus, it is I think more likely than not that at a trial jurisdiction will be attracted by the first applicant plainly coming within s 79A(4) so as to be a “person affected” within the meaning of and for the purpose of s 79A(1), in particular because by the s 79 order, the husband, plainly, put his interest in the matrimonial home beyond the reach of the first applicant, and the partnership assets were unlikely to be able to satisfy the first applicant’s debt so that, more likely than not, at a trial the first applicant will prove that he is a person whose interests are affected by the order because as a creditor he “may” not be able to recover his debt because the order has been made.
Further, the circumstance that there is no evidence that the first applicant has attempted to recover his debt from Mr Costello Snr, and failed, belies the circumstance that Mr Costello Snr did not defend the District Court action, but did not pay the debt before the commencement of that action, during it, or subsequently. One available inference thus is that if Mr Costello Snr had the financial capacity to pay the debt, he would have paid it, before being sued, when sued, or during the 5 years life of the District Court action, or subsequently. It is not incumbent however on the first applicant to prove at trial, let alone now, before trial, that there was no prospect of recovering his debt from some other source, namely a joint debtor, but only that, as at the date the s 79 order was made, he “may” not be able to recover his debt because that order has been made.
Whilst at any trial, if a jurisdictional fact in a statutory provision cannot be proved, a power based upon the proof of the necessary jurisdictional fact cannot be exercised, the time to prove a jurisdictional fact is at a trial, and not before a trial.
The case is not one in which, at this stage of the proceedings, I am able to conclude that there is no jurisdiction “even on the face of the first applicant’s own case” as put by Ms Carew. The case of the first applicant, that by reason of s 79A(4) he is a “person affected” within the meaning of s 79A(1) is strongly arguable in my view at a trial.
Miscarriage of justice – no reasonable likelihood of success?
Ms Carew submitted that there is no reasonable likelihood of success in the first applicant proving that the making of the s 79 order caused a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence, or any other circumstance (s 79A(1)(a)), because, again, he is unlikely to prove at a trial that at the time the s 79 order was made it was unlikely that his debt could not be paid from other sources, for example, the partnership assets, and/or Mr Costello Snr, so that in effect the order could not be shown to be “contrary to law and justice”.
In Barker & Barker [2007] FamCA 13 the Full Court referred to Bigg v Suzi (1998) FLC 92-799 and the line of authority following it:
120.A miscarriage of justice under s 79A(1)(a) will occur if circumstances exist which “for some significant reason, make the order contrary to law and justice according to law as it relates to the integrity of the judicial process [original emphasis]” (Bigg v Suzi (supra) at 84,982). See also Suiker (supra); Public Trustee (as executor of the estate of Gilbert) v Gilbert (supra)). Whilst cases such as Suiker (supra), Holland v Holland (1982) FLC ¶91-243 and Gebert v Gebert (1990) FLC ¶92-137 indicate that the words “miscarriage of justice” should not be construed narrowly and the phrase “integrity of the judicial process” should not be taken only to refer to the hearing in the court, the circumstances creating the miscarriage must nevertheless have been such as to have had an influence on the outcome of the litigation. …
…
123.As previously discussed, in order for a claim under s 79A(1) to succeed, the Court must be satisfied that a miscarriage of justice has resulted. It is not sufficient to merely establish the existence of one or more of the stated grounds, such as suppression of evidence. In Livesey v Jenkins (supra), Brandon LJ had this to say about the nexus between non-disclosure and setting an order aside (at 445-6):
I would end with an emphatic word of warning. It is not every failure of frank and full disclosure which would justify a court in setting aside an order of the kind concerned in this appeal. On the contrary, it will only be in cases when the absence of full and frank disclosure has led to the court making, either in contested proceedings or by consent, an order which is substantially different from the order which it would have made if such disclosure had taken place that a case for setting aside can possibly be made good. Parties who apply to set aside orders on the ground of failure to disclose some relatively minor matter or matters, the disclosure of which would not have made any substantial difference to the order which the court would have made or approved, are likely to find their applications being summarily dismissed, with costs against them, or, if they are legally aided, against the legal aid fund.
We agree with this statement.
Mr Waterman submitted that the making of the s 79 order on 11 May 2005 infers the likelihood of the suppression of evidence, being the wilful failure to disclose to the Court relevant information, and thus its wilful concealment, namely:
1.The existence of the District Court action commenced on 3 March 2005, and that the husband had been sued personally for the debt in that action claimed by the first applicant.
2.The fact of the appointment of a receiver to the partnership by order of the Supreme Court of Queensland made on 4 May 2005.
Mr Waterman pointed to the circumstance that until there is leave to inspect and copy the file relating to the application for consent orders, BRF…/2005, including in particular the application itself, having regard to the information required to be disclosed in it according to the Court’s pro forma application for consent orders (Form 11), the first applicant is not in the position squarely to allege the suppression of evidence, wilful failure to disclose relevant information, or its wilful concealment, and that at this stage he is thus confined to rely on the inference that these two matters are unlikely to have been disclosed, because if they had been disclosed to the Court, it is unlikely that the Court would have made the consent s 79 order by which the husband divested himself of his only real property asset.
Further, Mr Waterman submitted that it may be likely that the husband entered into the s 79 order with the intent to defraud or defeat the first applicant as a creditor of the husband; and that similarly this cannot squarely be alleged, or fully particularised, until there is leave to inspect and copy file BRF…/2005, to mount an inferential case as to intent if the 2 matters referred to were not disclosed in the Form 11 document.
Mr Waterman relied upon one authority, Official Trustee in Bankruptcy v Bryan & Gatenby (deceased) (2006) FLC 93-258, per Young J, as an analogous case in which a husband and wife entered into a s 79 consent order, which provided that the husband transfer to the wife his interest in jointly held land, in circumstances in which the husband and the wife were aware, but did not disclose to the Court, the existence of creditors of the husband. At [144], Young J, on the particular facts of the case, observed that (as is the case here) the s 79 order was made “on the documents” by consent, to be contrasted by an order made by a judge after a trial, and concluded as to the non-disclosure of the existence of the husband’s creditors:
144.… [T]here was a lack of full and frank disclosure, wilful concealment and suppression of evidence which led to a miscarriage of justice pursuant to which the s.79 orders (sic), subject to issues of discretion, could be set aside or varied. …
I accept Mr Waterman’s submission that the timing of the application by the husband and the wife for the making of the s 79 order is suspicious, in particular having regard to the detailed chronology set out in the first applicant’s principal affidavit filed 20 April 2011, and leads to the inference, at least for the purpose of this summary dismissal application, that it is likely that at the time the s 79 order was made, the husband wilfully concealed from the Court the 2 matters specified in Mr Waterman’s submissions. I am able safely to draw the inference as to this likelihood because, if such disclosure had been made, it is unlikely, plainly, that the Court would have made the consent s 79 property order, and is likely to have required that notice be given to the first applicant, and possibly also the second applicant, in his capacity as the receiver of the husband’s legal practice.
If, at the end of the day, after there is inspection of file BRF…/2005 by the first applicant, those matters were fully and frankly disclosed, nonetheless the first applicant has the argument of an inferential case that the chronology he relies on is sufficient for a Court to consider and determine whether the husband in entering into the s 79 order did so with the intention to defraud or defeat the first applicant as a creditor.
The first applicant relies also on the circumstance that the husband and the wife remain married, and that the husband continues to live in the matrimonial home and to enjoy its benefits.
On the basis of the above analysis, I am unable to conclude that the first applicant has no reasonable likelihood of success in proving that a miscarriage of justice has occurred by the making of the s 79 order, by reason of a circumstance then existing which, for significant reason, made the s 79 order contrary to law and justice as it relates to the integrity of the judicial process.
All contrary arguments put by Ms Carew (summarised in her written submissions, par 44), have been dealt with earlier.
Exercise of the s 79A(1) discretion – no reasonable likelihood of success?
Ms Carew, after reference to the authorities (written submissions, pars 46 and 47, including McIntyre & McIntyre (1994) FLC 92-468 at 80,860 per Finn J; and Gallo v Dawson (1990) 93 ALR 479 at 481), relied upon:
1.Delay by the first applicant in filing his s 79A application
2.Hardship/prejudice to the husband and the wife if the s 79 order is set aside
3.Absence of demonstrated hardship/prejudice to the first applicant if the s 79 order is not set aside
4.Under s 79A(2) the Court is obliged to have regard to the interests of the wife as a bona fide “other person interested” in the relief sought by the first applicant and to make any order proper for the protection of the wife as such.
Delay
Ms Carew submitted that the first applicant has not explained the delay of nearly 6 years between 11 May 2005 when the s 79 order was made and the commencement of these proceedings on 20 April 2011.
The first applicant says however that he was not given notice of the application for the making of the s 79 order: affidavit filed 20 April 2011, par 52; affidavit 15 September 2011, par 9.
Hardship/prejudice to the husband and the wife
Ms Carew relied on the personal circumstances of the husband and the wife set out in the wife’s affidavit filed 24 May 2011, pars 2, 4, 6-10, 13-14, 16-18, 26, 28 and 29, to which I have had regard and need not refer to in detail or summarise.
It is sufficient to observe that the wife is 68 years and the husband 72 years, and to refer to Ms Carew’s summary of their personal circumstances (written submissions, par 51):
51.The respondents will suffer severe prejudice if the order is set aside. For the past six years the respondents have lived their lives and made decisions about their finances not knowing that the applicants were likely to seek to set aside the legal arrangements they entered into six years ago. The first respondent has retired from legal practice and both respondents are now in receipt of an aged pension. The respondents are each in poor health particularly the first respondent, and the second respondent provides care for him. The first respondent suffers from multiple sclerosis and has impaired cognitive ability. His ability to defend the substantive proceedings will be severely compromised because of his disability.
In relation to the last sentence in this paragraph Ms Carew relied upon a report by a neurologist, Professor C, 20 May 2011, annexure EPC4 to the wife’s affidavit filed 24 May 2011, confirming that the husband suffers from multiple sclerosis, and expressing the view that his condition would affect his ability to understand legal advice and that whilst he copes well with day to day issues his multiple sclerosis has impaired his cognitive ability and his ability to understand complex matters. The report continues that the husband’s difficulty with complex matters could affect his ability to instruct his legal advisers and concluded that his health would affect his ability to give evidence because patients with multiple sclerosis suffer from fatigue, concluding that this circumstance, combined with his cognitive impairment has affect that his ability to give evidence would be impacted by these issues.
Absence of hardship/prejudice to the first applicant
Ms Carew submitted that the first applicant offers no evidence about attempts if any to obtain payment of his debt from Mr Costello Snr. I have dealt earlier with this.
Section 79A(2) – position of the wife as transferee
Ms Carew referred to the obligation of the Court, by way of s 79A(2), in the exercise of the Court’s power under s 79A(1), to have regard to the interests of the wife as a bona fide “other person affected”, in respect of the relief sought by the first applicant, and to make any order proper for the protection of the wife as such.
Ms Carew submitted that the wife, as transferee of the husband’s former interest in the matrimonial home is an “other person interested”. There can be no doubt that this correct. Ms Carew submitted (written submissions, pars 53, 54):
53.The only evidence relied upon by the applicants to support their claims against the second respondent are a) that she was present in the Supreme Court in March 2005 when an affidavit of [Mr Costello Snr] was read which exhibited a Profit and Loss statement for the period ended 31 December 2004 showing a trading loss of $30,551.09 and b) that she continued to live with the first respondent after the order was made… .
54.In the circumstances in which she now finds herself, being a full time carer for the second respondent and whose only income is an aged pension and carer’s pension such facts would cause a court to decline to exercise its discretion to set aside the order…
Determination as to these discretionary matters
I do not think that any of these discretionary matters has the effect of my being able to conclude on the summary dismissal application that any one of them, or some or all of them in combination, have the effect that the first applicant has no reasonable likelihood of success in having the s 79A(1) discretion exercised in his favour to have the s 79 order set aside.
As to delay, although the first applicant does not in his evidence at this stage say precisely when he became aware of the making of the s 79 order on 11 May 2005, he has sworn that neither the husband nor the wife gave him notice of the application for the making of the order: affidavit filed 20 April 2011, par 52; affidavit filed 15 September 2011, par 9. The difficulty thus with Ms Carew’s submission, at this stage, is that she does not suggest how the first applicant could have known about the making of the order when he was not given notice by the husband or the wife of either their application for the s 79 order or the making of the s 79 order.
As to claimed hardship/prejudice to the husband and the wife if the order is set aside in my view such may be likely to have little weight at a trial if there be an ultimate finding that by the s 79 order the husband intended to defeat the legitimate interest of the first applicant as an existing creditor of the husband, or if ultimately it be established that they obtained the order by the wilful concealment of the existence of the first applicant’s debt and the District Court proceedings. As to the husband’s multiple sclerosis and the circumstance that he may not be able adequately to instruct a lawyer at a trial, no doubt his legal advisers will give consideration to an application for the appointment of a legal guardian for him. If ultimately he is not able to give evidence having regard to his medical condition that is a matter which can be dealt with at trial.
The submission as to absence of hardship or prejudice to the first applicant if the order is not set aside belies that he is a significant creditor of the husband, and was such at the time of the making of the s 79 order.
In relation to s 79A(2), it is important to understand that if the s 79 order is set aside the wife would not forfeit any property or interest which she had prior to its making, but only the husband’s former interest in the matrimonial home which she acquired by the making of the s 79 order.
Further, it is not incumbent upon the first applicant to prove that the wife was complicit in any intention by the husband to defraud the first applicant or wilfully to suppress evidence or wilfully to fail to disclose relevant information or wilfully to conceal relevant information, the question under s 79A(1) being, as explained, whether a miscarriage of justice, as described in the authorities, has occurred.
In all of the circumstances, I am not able to conclude that by reason of the discretionary matters the first applicant has no reasonable likelihood of success in having the s 79A(1) discretion exercised in his favour for the s 79 order to be set aside. Rather, the matters raised by Ms Carew are ones properly to be considered by a trial judge, to give them such weight as the trial judge considers appropriate.
On a summary dismissal application, it is difficult to pre-empt or prejudge the ultimate exercise of discretion of a trial judge, in respect of each of the discretionary matters raised by Ms Carew, once the trial judge has had the opportunity of hearing all of the evidence and submissions in favour of and against ultimate exercise of the discretion.
It seems to me however that if at a trial the first applicant proves the matters in s 79(4), and that a miscarriage of justice has occurred, the discretionary matters raised do not necessarily have effect that the first applicant has no reasonable likelihood of success in having the s 79A(1) discretion exercised in his favour to set aside the s 79 order.
The discretionary power to order or not to order summary dismissal
Ms Carew relied upon the same matters as discretionary matters based on which I should order summary dismissal.
Based on the same reasoning, I make the same observations.
Conclusion
Drawing upon the principles relating to summary dismissal, earlier set out, I would determine that the applicants for summary dismissal, the husband and the wife, have failed to establish either of the grounds in Rule 10.12(a) or (d) relied on; and have failed to persuade me that the discretionary power to order or not to order summary dismissal should be exercised to order summary dismissal.
Accordingly, in the exercise of my discretion I will dismiss the application of the husband and the wife for the summary dismissal of the first applicant’s proceedings based on s 79A(1).
Financial agreement
No jurisdiction
Initially, the first applicant relied on s 90C(2), s 90G and s 90K(1)(aa). As presently framed (amended initiating application filed 17 June 2011), he relies on s 90G and s 90K(1)(aa).
The financial agreement is not in evidence, and the first applicant presently has not had disclosure of it. As mentioned earlier however there is an available inference that it is or may be to similar effect as the s 79 order.
Section 90G
In relation to s 90G, until and if there is disclosure of the financial agreement, the first applicant cannot mount a sensible case under s 90G.
That however is not a reason to summarily dismiss the first applicant’s s 90G case.
As it is, the first applicant has a present entitlement under Rule 13.08(1) to give written notice to the wife to provide a copy of the financial agreement or produce a copy of it for inspection, because the wife has referred to it in her affidavit filed 24 May 2011, par 22. Further, the available inference to which I have referred has effect that a request for disclosure of the financial agreement, or a written notice under Rule 13.08(1) to provide a copy of it, or produce a copy for inspection, could not be said to be a fishing exercise.
If after disclosure of the document, or the production of a copy of it under Rule 13.08(1), no sensible case is mounted, the matter can be revisited. It would be premature however to summarily dismiss the first applicant’s s 90G case until he has been provided with a copy of the financial agreement.
Section 90G, in its terms, unlike s 90K(1), does not provide for an application to have declared invalid/or to set aside a financial agreement. Rather, in its terms, it provides that a financial agreement is binding if and only if certain conditions are met. However, in my view if the first applicant is able to show a case under s 90K(1)(aa), it would be open to him at a trial also to argue that the s 90G conditions for validity are not met. As will be seen, thus, it is not necessary for me to determine on this summary dismissal application whether, if the first applicant is not able to show a case under s 90K(1)(aa), he would have standing to seek to have the financial agreement declared invalid under s 90G, as an intermeddler. As I have said, in relation to s 90G, until and if there is disclosure of the financial agreement, the second applicant cannot mount a sensible case under s 90G, but that is not a reason to dismiss the first applicant’s s 90G case. If after disclosure of the financial agreement no sensible case can be mounted, the matter can be revisited, unless the first applicant earlier further amends the initiating application to delete reference to s 90G.
Section 90K(1)/s 90K(1)(aa)
In relation to s 90K(1), curiously it does not specify (and nor does any other provision of the Act) who may be an applicant under s 90K(1), in the sense of there being any reference to a “person affected” (compare, s 79A(1)).
Thus, the category of proper applicants, I think, can be deduced by necessary implication from the terms of s 90K(1).
Presently, the first applicant relies on s 90K(1)(aa) previously set out, namely:
(aa) a party to the agreement entered into the agreement:
(i)for the purpose, or for purposes that included the purpose, of defrauding or defeating a creditor or creditors of the party; or
(ii)with reckless disregard of the interests of a creditor or creditors of the party; or …
Thus, by necessary implication, the legislative intention is gleaned that a creditor has standing to apply under s 90K(1) for a financial agreement to be set aside, on one or both of the grounds in s 90K(1)(aa).
Assuming, for present purposes, that the financial agreement is or may be to similar effect as the s 79 order in relation to the matrimonial home, that is, that by it the husband agreed to transfer his interest in it to the wife (given the proximity of dates, as I have earlier mentioned) the basis of the first applicant’s case is that the financial agreement was entered into for the purpose of, or for purposes that included the purpose, of defrauding or defeating him as a creditor of the husband, being a party to the financial agreement, or with reckless disregard to the first applicant’s interests as a creditor of the husband.
Fundamentally, Ms Carew made the same submissions as to want of jurisdiction as were relied on for her argument as to want of jurisdiction under s 79A(1) and s 79A(4), namely that the first applicant was not a creditor of the husband at the time the financial agreement was entered into. It is not necessary to set out her argument again. It is sufficient that I make the same observations, and same conclusion.
Plainly, and expressly, there are different tests under s 79A(4), on the one hand, and s 90K(1)(aa), on the other hand.
Mr Waterman, for the first applicant, submitted that the existence of the first applicant’s District Court action against the husband, commenced 3 March 2005, and that the husband had been sued personally for the first applicant’s claimed debt, together with the detailed chronology of events set out in the first applicant’s affidavit filed 20 April 2011, lead to the circumstance of there being an available inference within both limbs of s 90K(1)(aa) at the time the financial agreement was made which, according to the affidavit of the wife filed 24 May 2011, par 22, was 27 April 2005.
The definition of “matrimonial cause” in s 4(1) of the Act includes, by par (eab), reference to third party proceedings (as defined in s 4A) to set aside a financial agreement being proceedings between the parties to a financial agreement and a creditor, as founding jurisdiction: s 4A(1).
I would make the same observation as earlier made as to the time for the proof of jurisdictional facts, that is, at a trial, to be contrasted clearly with the type of case in which it is plain that there is no jurisdiction, for example, by the inability of a claimant to be within the category of persons able to sue; or the claim being one not recognised under a statute or at law; or being brought in the wrong jurisdiction.
No reasonable likelihood of success?
Ms Carew relied upon the same submissions, namely that “it all hinges on” whether at the time the financial agreement was made the first applicant was unlikely to recover his debt from other sources than the husband personally.
There is however a difference in that s 90K(1)(aa)(i) speaks squarely of “purpose” (subjective) whereas s 79A(1)(a) is concerned with the circumstance of a miscarriage of justice (ultimately objective, although the grounds plainly are capable of subjective intent); and s 90K(1)(aa)(ii) is capable of being both subjective and objective, that is to say, a “reckless disregard” might be objectively ascertained or assessed, and thus proved, without, necessarily, subjective intent or purpose.
Be that as it may, and based upon the same observations which already I have made in relation to the first applicant’s s 79A case, I am unable to conclude that the first applicant has no reasonable likelihood of success in relation to either limb of his s 90K(1)(aa) claim.
In particular, in relation to s 90K(1)(aa)(i) it is not necessary to repeat Mr Waterman’s submissions, which I accept, that the first applicant’s evidence, in particular as to the chronology of events, is sufficient for a trial judge to consider, in relation to the first limb, that the husband entered into the financial agreement for the purpose, or for purposes that included the purpose, of defrauding or defeating the first applicant as a creditor of the husband; and indeed, in relation to s 90K(1)(aa)(ii), the second limb, that the husband entered into the agreement with reckless disregard to the interests of the first applicant as a creditor of the husband.
Exercise of the s 90K(1) discretion – no reasonable likelihood of success?
Section 90K(1), like s 79A, is discretionary.
Ms Carew relied on the same arguments as in relation to the first applicant’s s 79A case, and I make the same observations and conclusions as to delay, hardship/prejudice to the husband and/or the wife if the financial agreement is set aside, and the want of hardship/prejudice to the first applicant if the financial agreement is not set aside, in the sense that these are matters of weight ultimately in the exercise of discretion by a trial judge which at this stage cannot be pre-empted or prejudged so as to conclude necessarily that the first applicant has no reasonable likelihood of success in having the discretion under s 90K(1) to set aside the financial agreement exercised in his favour, and indeed further under s 90K(3) to order that the wife transfer back to the husband his former interest in the property.
The discretionary power to order or not to order summary dismissal
Ms Carew relied upon the same matters as discretionary matters based on which I should order summary dismissal.
Based on the same reasoning, I make the same observations.
Conclusion
Again, drawing on the principles relating to summary dismissal, earlier set out, I would determine that the applicants for summary dismissal, the husband and the wife, have failed to establish either of the grounds in Rule 10.12(a) or (d) relied on; and have failed to persuade me that the discretionary power to order or not to order summary dismissal should be exercised to order summary dismissal.
Thus, it must be borne in mind that the receiver was appointed to the partnership, to get in the property and assets of the partnership, not the husband, to get in the property and assets of the husband.
Different considerations might arise if the receiver had been appointed to the personal assets property and effects of the husband. However, I need not consider that, nor express any view, as such has not occurred.
In relation to the receiver’s duty to get in the assets of the partnership, I am conscious that the receiver has claimed that the husband is a debtor to the partnership, by way of alleged unauthorised drawings on the partnership account, and is the holder of legal fees and costs due to be paid to the partnership, both disputed by the husband. The receiver however has not established these claims by any court action and judgment. The only proper way to establish such claims, when disputed, is by legal action, judgment and execution on the judgment.
If I am wrong in my tentative view (it is not a concluded view) that a court appointed receiver to a partnership is incapable of being a person affected within the meaning of s 79A(1), nothing turns on that because, as will be seen, the receiver in this particular case has failed to show a case in relation to any of the 4 categories by which he claims to be a person affected, and thus, as such, failed to show any miscarriage of justice or potential miscarriage of justice.
The four categories by which the second applicant claims to be a person affected
As will be seen, the first of these expressly was disavowed by Mr Muller during argument, the second and third are doomed to fail and, on the evidence, the fourth is I think so tenuous as to be speculative, with no evidence in support of it, let alone cogent evidence, as the second applicant has not completed the partnership accounts.
Is the receiver a person affected by the s 79 order “on behalf of” the unsecured creditors of the partnership?
Although the second applicant referred to this in par 32 of his affidavit filed 20 April 2011, Mr Muller, during argument, expressly disavowed reliance on this. Despite this, it is appropriate that I observe that as the receiver is not the agent of the unsecured creditors of the partnership, nor their trustee in relation to any property and assets of the partnership, in my view this claim could not succeed.
Is the receiver a person affected by the s 79 order in respect of his entitlement to remuneration and expenses to be paid out of the assets of the partnership pursuant to order 4 of the order of P D McMurdo J?
The answer to this is “No”, for the reason that, as expressed by order 4, the receiver’s remuneration and expenses are to be paid from the partnership assets.
Further, the receiver has no entitlement to indemnity from the personal assets of the partners so that the husband has no personal liability to the receiver in relation to his remuneration and expenses. Rosanove v O’Rourke (1988) 1 Qd R 171.
Accordingly, this ground also cannot succeed.
Is the receiver a person affected by the s 79 order in respect of the fees and outlays payable to the partnership by the husband personally in respect of the legal case concerning Ms T?
In my view this ground cannot succeed for several reasons.
The receiver, in his affidavit filed 20 April 2011, pars 14-16, deposes that prior to his appointment, and the dissolution of the partnership, it had an existing file being a personal injuries claim being conducted by the litigation guardian of a Ms T. Following the partnership dissolution on 3 May 2005 (P D McMurdo J, order 9), that case was continued by the husband by his new firm Z Firm. In the receiver’s affidavit filed 20 April 2011, pars 14-20, and his further affidavit filed 29 September 2011, pars 8-31, the receiver deposes that following his appointment he authorised the husband to continue to conduct that case and to finalise it on the basis that the fees due to the partnership in that matter up to 3 May 2005, if received by the husband, via his new firm Z Firm, would be paid to the receiver.
The receiver has identified that the husband received $228,336 in respect of legal fees and outlays for the matter, out of which, according to the receiver, some $81,422 is payable by the husband to him, as receiver, for work done prior to 3 May 2005, as assessed by a costs assessor.
It appears that the $228,336 was received by the husband on or after 1 June 2007, after settlement of the action, and that between 13 February 2008 and 15 October 2008 the husband paid third party expenses and otherwise disbursed the moneys either to himself or at his direction.
However, as at 11 May 2005, the date the s 79 order was made, not only had the moneys not been received by the husband to make him accountable to the receiver but it was not at all clear either that the fees and outlays of the partnership, subsequently assessed at $81,422, would become payable or recoverable, with effect that the receiver cannot have been a person affected “by” the s 79 order because the moneys, if any, were yet to be received by the husband.
Moreover, the particular facts are such that the Court could not be satisfied that, at the time the order was made, there was any fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance leading to a miscarriage of justice by the making of the order. There was no fraud at the time of the making of the order, and no relevant evidence to disclose which was wilfully concealed, because the event giving rise to the liability was in the future and gave rise to a future obligation, although one at the time of the order, or shortly after it, already was agreed.
Ms Carew submitted that there is no evidence as to whether the Ms T case may have been a speculative action, dependent upon successful judgment or successful resolution for the fees to be recoverable.
Indeed however, even if the case had not been a speculative one, meaning that the partnership was entitled to be paid irrespective of the outcome of the litigation, and for that or other reasons there was certainty as at 11 May 2005 that the fees would be paid upon conclusion of the litigation for the work done by the partnership up until its dissolution, there is still the circumstance that there cannot be demonstrated any miscarriage of justice at the time the order was made by reason of (relevantly) fraud, false evidence or wilful concealment of evidence. Put simply, there was no relevant information to be disclosed that in the future if and when the husband should receive certain moneys he was or would be obliged to pay part of them to the receiver. A miscarriage of justice can only arise from the circumstances in existence at the date of the s 79 order: Spanjich (above) at 77,048, R col, first new paragraph. Put shortly, the receiver’s rights were not affected by the making of the order.
If, and it appears to be the case, the husband received the moneys on or after 1 June 2007, he became a constructive trustee of the fees and outlays earned by the partnership as at 3 May 2005, and pursuant to the agreement with the receiver was obliged to pay the agreed amount to the receiver, and the receiver had a duty to collect that amount, to be established by legal action if necessary, and if necessary in the receiver’s own name if authorised by the Supreme Court of Queensland to do so (for the reasons already explained). However, even such would not have effect that the receiver would become a creditor of the husband, but rather he would seek and hold the moneys as an officer of the court, as explained. The husband, as constructive trustee, would have been obliged to hold the corpus intact, and not use the moneys for his own purposes: Potter & Potter [2003] 3 NZLR 145; HAJ Ford and WA Lee, Thomson Reuters, The Law of Trusts, vol 2, (at update 80) at [21.040] (although dealing with the comparison of loans and trusts); and see also Kawada & Kawada [2012] FamCA 273 at [66].
If the husband breached that obligation, the action would be one for a declaration that a constructive trust arose, and for damages for breach of trust for failure to hand over the moneys to the receiver. But no relationship of debtor/creditor between the husband and the receiver would arise, because there is no relationship between a receiver and a party: Rosanove (above) at p 176. Thus, even if after such action the receiver, in his own name, obtained a judgment against the husband, such that technically the relationship of judgment creditor and judgment debtor arose, the receiver as judgment creditor would seek execution on behalf of all persons interested in the property: see again the extracts from J O’Donovan, Thomson Reuters, Company Receivers and Administrators, above.
Accordingly, this ground also cannot succeed.
Is the receiver a person affected by the s 79 order in respect of “all and any other moneys due to the receiver on any account whatsoever” including but not limited to alleged unauthorised drawings by the husband on the partnership account?
The first observation is that the claim for “all and any other moneys due to the receiver on any account whatsoever”, whilst clearly meaning moneys due to the partnership by the husband, in context, is vague and uncertain, and there is no suggestion in the receiver’s material (under this heading) of any moneys due by the husband to the partnership other than in respect of the alleged unauthorised drawings.
The receiver’s claim is framed as follows in his affidavit filed 20 April 2011, pars 21 and 22, under the subheading “Final Accounts”:
21.The final accounts for the firm are being done by me for the year ended 30 June 2004 and the period ended 3 May 2005, and it is likely that there will be an amount shown as owing by [Mr Condi] to the firm.
22.This will likely be because the drawings by [Mr Condi] during these two financial periods were not authorised by any financial accounts prepared and finalised in respect of the year ended 30 June 2004 and the period ended 3 May 2005 because the firm accounts were never completed in respect of those periods and the drawings were drawn by him in anticipation of profits which only the finalisation of the accounts will show either eventuated or didn’t eventuate. (emphasis added)
In evidence, by way, of annexure AC11 to the affidavit of the first applicant filed 20 April 2011, is a landscape format document prepared by the first applicant which he describes as detailing “the list of creditors” of the partners as at 3 May 2005 (dissolution of the partnership) and 11 May 2005 (date of the s 79 order). Items 31 and 32 in the document are as follows:
| 31 Receiver | Unauthorised drawings from [X Firm] by [Mr Condi] personally | $38,878.05 | 01/07/03-03/05/05 | Bank Transaction Audit Trail Print Outs of [X Firm] | $38,878.05 |
| 32 Receiver | Unauthorised drawings from [X Firm] by [Mr Condi] debited as “[M] Discretionary Trust Drawings” | $107,000.00 | 01/07/03-03/05/05 | Bank Transaction Audit Trail Print Outs of [X Firm] | $107,000.00 |
An asterisk and footnote provide:
* The final amount owing to the receiver is not known as at the date of this List because the accounts of [X Firm] have not yet been finalised. (emphasis added)
The date of preparation of the list is noted as 9 February 2011.
The receivership however commenced on 4 May 2005, more than 6½ years before the hearing before me on 6 December 2011.
The second applicant, it would appear, for the purpose of the summary dismissal application, adopted annexure AC11.
It appears however that the receiver has not taken any steps, despite the passage of more than 6½ years, to establish or prove the debt claimed against the husband, by preparing the final accounts of the partnership for the 2 relevant periods referred to.
The debt is denied by the husband.
Regardless however of whether the figures prepared by the first applicant in annexure AC11 are accurate, but presuming for present purposes in the second applicant’s favour that they are accurate as drawings by the husband, on the second applicant’s own evidence, par 22 above as set out, he purports to “swear the issue” rather than to present any factual evidence in support of his claim. Indeed, by par 22, he confesses in effect that “because the firm accounts were never completed” he really does not know whether the drawings exceeded profits, and said “only the finalisation of the accounts will show” whether the anticipated profits, from which the drawings were made, “either eventuated or didn’t eventuate”.
This is not merely weak evidence, but no factual evidence, based upon any proper factual analysis, that the husband is indebted to the partnership by his drawings. The claim thus is so tenuous as to be speculative, and is unsupported.
The circumstance that annexure AC11 does not refer to any drawings by Mr Costello Snr in the 2 relevant periods might tend to suggest either that he did not make any drawings or alternatively that items 31 and 32 represent drawings by the husband beyond those of Mr Costello Snr. This however is a distraction, and not to the point, which is that the second applicant has offered no factual evidence to support his claim of debt of the husband.
I appreciate that the receiver has not completed the final accounts of the partnership. However, that is circular, is not a substitute for necessary evidence and thus does not assist his case.
I am conscious indeed of Lindon, in particular Kirby J’s third point, that even a “case which appears weak” is not, alone, sufficient to warrant termination.
There is however an acute difference between a “weak case”, and a “claimed” case based upon no evidence to support it other than an affidavit purporting to swear the issue that it is “likely” there would be a debt, but coupled with a confession that it is not even known whether if the accounts were completed a debt would be shown.
Although the summary dismissal power must be used “rarely and sparingly”, in my view a speculative case unsupported by any factual evidence is a proper case in which the power should be used.
On all of the evidence in relation to category 4, I would determine thus that the receiver has not shown a reasonable cause of action (Lindon, Kirby J, second point); with effect that within the meaning of Rule 10.12(d) I would determine that the claimed cause of action has no reasonable likelihood of success, particularly because and on the second applicant’s own case, even after 6½ years of opportunity he does not have any requisite evidence on which properly to base the claim.
Miscarriage of justice – no reasonable likelihood of success?
In the circumstances, it is not necessary to consider this aspect of the matter concerning the second applicant.
However, in light of my determinations and observations, in my view the second applicant has no prospect of proving a miscarriage of justice in relation to him as receiver.
Exercise of the s 79A(1) discretion – no reasonable likelihood of success?
Ms Carew relied on the same matters as in relation to the first applicant.
In relation to delay, the second applicant says also that he was not given notice of the application for the making of the s 79 order: affidavit filed 29 September 2011, par 40; and deposes that at the time of the making of the s 79 order, 11 May 2005, the husband knew of the appointment of a receiver to the partnership on 4 May 2005.
Otherwise, I would refer to and rely on the observations made in relation to Ms Carew’s submissions in the first applicant’s case.
The discretionary power to order or not to order summary dismissal
Ms Carew relied upon the same matters as discretionary matters based on which I should order summary dismissal.
Based on the same reasoning, I make the same observations.
Conclusion
Drawing upon the principles relating to for summary dismissal, earlier set out, and Rule 10.12(a) and (d), the determinations and observations I have made have effect that in the exercise of my discretion I will summarily dismiss the second applicant’s proceedings insofar as they are based on s 79A(1).
Financial agreement
No jurisdiction
Initially, the second applicant relied also on s 90C(2), but in his amended initiating application relied only upon s 90G and s 90K(1)(aa).
Section 90G
I would rely on the same observations as already made in relation to the first applicant’s case.
Section 90K(1)/ s 90K(1)(aa)
In relation to s 90K(1), I would refer to the same observations as made in relation to the first applicant’s case, as to who may be persons entitled to apply.
The second applicant, like the first applicant, relies on s 90K(1)(aa).
As to s 90K(1)(aa), as it relates to persons not party to a financial agreement, in Australian Securities & Investments Commission v Rich (2003) FLC 93‑171, O’Ryan J held:
109. No express part of Part VIIIA purports to authorise the institution of a proceeding pursuant to s 90K by a third party who is affected, or claims to be affected, by, or as a consequence of the operation of a contract to which the Part applies.
110. In my view, the absence of any language in s 90K confining its operation to applications by a party to a marriage does not, upon proper construction, operate to broaden the scope of jurisdiction. In The Queen v Ross-Jones; Ex Parte Beaumont Gibbs J. observed, after referring to the terms of ss 78 and 79 of the Act, that:
“These sections are expressed to confer powers which the court may exercise if it has jurisdiction, rather than to confer or expand jurisdiction, and I do not regard them as throwing any light on the extent of the Court’s jurisdiction. Before the powers which they grant may be exercised there must be a “matrimonial cause” within par. (ca) of the definition.”
111. In summary, no part of the definition of “matrimonial cause” authorises the institution of proceedings by ASIC pursuant to s 90K. Further, the power cannot arise from the terms of s 90K or any other provision of the Act. In my view, the construction contended for by ASIC is not supported by consideration of the terms of s 90K and s 90KA. If it had been intended that jurisdiction would be conferred by those provisions then it would have been a matter of simply stating it. The terms of these provisions are to be compared with s 67ZC which supports the ‘welfare’ jurisdiction.
…
113. If there is a right at law to prosecute against the respondents in relation to the agreement it is in another court and without recourse to any power afforded by the Family Law Act. The fact that the agreement complies with s 90G of the Act has a consequence with respect to the statutory rights that would otherwise exist under the Act between the husband and the wife. However, that does not elevate the agreement to having any greater status than it would otherwise have at law in relation to any third party. Rights as between the respondents and ASIC remain to be determined according to law, including principles of equity and perhaps bankruptcy law.
Conclusion
114.I am of the view, for reasons I have given, that I have no jurisdiction to make the orders sought by ASIC pursuant to s 90K and I propose to dismiss its’ application.
…
118. In my view, consideration should be given to conferring jurisdiction on this Court to deal with an application by the third party whose interests may be adversely affected by the terms of a binding financial agreement to set aside the agreement. There are public policy reasons for why this should be so. Thus Part VIIIA should be reviewed, at least in terms of its effect on the legitimate interests of third parties, because the Family Law Act may be made “…an instrument of harm to a third party”. (footnotes omitted)
At [112], his Honour considered whether par (f) of the definition of “matrimonial cause” in s 4(1) of the Act might apply to give rise to jurisdiction, and said:
112....However, such a course is dependent upon the existence of a presently constituted matrimonial cause.
Paragraph (f), in s 4(1) of the Act, provides:
(f)any other proceedings (including proceedings with respect to the enforcement of a decree or the service of process) in relation to concurrent, pending or completed proceedings of a kind referred to in any of paragraphs (a)-(eb), including proceedings of such a kind pending at, or completed before, the commencement of this Act. (emphasis added)
I have determined already that the first applicant has a presently constituted matrimonial cause, by reference to par (eab) of the definition. I have considered whether, thus, the second applicant could “shirt-tail” the first applicant’s proceedings, those being competent by par (eab) of the definition, by reference to par (f). However, the proceedings of the second applicant would have to be “in relation to” the first applicant’s proceedings. On no view could the second applicant’s proceedings be said to be “in relation to” the first applicant’s proceedings, even in the widest sense of that expression.
After ASIC v Rich, decided on 15 October 2003, the Family Law Amendment Act 2003 (Cth) (No 138 of 2003) was enacted, the date of assent being 17 December 2003, by which the amendments which founded jurisdiction for the first applicant were introduced, namely (I will refer only to the presently relevant provisions):
· Section 4, definition “matrimonial cause”, par (eab)
· Section 4A(1)
· Section 4A(2)
in relation to jurisdiction; and
· Section 90K(1)(aa)
· Section 90K(1A), in relation to s 90K(1)(aa) “creditor”,
in relation to power.
Section 4A(1) (together with s 4A(1A)), later introduced, are stated exhaustively, not non-exhaustively. Thus, the two provisions state respectively that “third party proceedings means” and that “third party proceedings also means”, proceedings, as defined, which would exclude the receiver in the present case. Neither provision is expressed in the manner “third party proceedings includes”.
Relevantly, thus, to attract jurisdiction, the receiver needs to be:
· a creditor, or a person who could reasonably have been foreseen by the court as being reasonable likely to become a creditor of the husband: s 4A(1)(b)(i); s 4A(2); (see also s 90K(1)(aa) “creditor”; s 90K(1A) “person who could reasonably have been foreseen by “the party” as reasonably likely to become a creditor”); or
· a government body acting in the interests of a creditor: s 4A(1)(b)(iii);
before there is any entitlement to apply to set aside a financial agreement on a ground specified in s 90K(1)(aa).
Presumably, s 4A(1)(b)(iii), amended by No 115 of 2008, also was a legislative response to ASIC v Rich.
“Government body”, by s 4A(2), is defined to mean the Commonwealth, a State or a Territory, or an official or authority of such.
Plainly the receiver is not within this description.
Further, for the reasons already explained, the receiver is not a creditor of the husband, or a person who reasonably could have been foreseen by the Court (or the husband) to have become such, even in relation to the Ms T matter, at the time the financial agreement was made; nor in relation to the claimed unauthorised drawings, as explained. When and if the receiver receives partnership assets, he does not do so in his own right. He derives no title to the assets and they do not vest in him. As an officer of the court, “technically” he holds the assets on behalf of the court, until paid to the rightful owners: J O’Donovan, Thomson Reuters, Company Receivers and Administrators, above.
I turn now to s 90K(3), which for convenience I will set out again:
90K(3) A court may, on an application by a person who was a party to the financial agreement that has been set aside, or by any other interested person, make such order or orders (including an order for the transfer of property) as it considers just and equitable for the purpose of preserving or adjusting the rights of persons who were parties to that financial agreement and any other interested persons. (emphasis added)
Section 90K(3) thus confers neither jurisdiction nor power to set aside a financial agreement. Rather, it is a provision predicated upon the circumstance of a financial agreement already having been set aside. Once that has occurred, on a competent application, s 90K(3) in effect provides for the making of consequential orders.
I am constrained therefore to conclude that the Court has no jurisdiction in respect of the second applicant’s proceedings to set aside the financial agreement, for the want of standing of the second applicant to apply.
The rights of the unsecured creditors of the partnership, insofar as they may wish to sue the partners or either of them, “remain to be determined according to law ... including perhaps bankruptcy law”: O’Ryan J in ASIC v Rich, at [113].
As I have determined that there is no jurisdiction, it is not necessary to consider the matter of whether there is no reasonable cause of action.
Conclusion
Drawing upon the principles relating to summary dismissal, earlier set out, and Rule 10.12(a), I will summarily dismiss the second applicant’s proceedings insofar as are based on s 90K(1)(aa).
Injunction
The first applicant and the second applicant each seek an interlocutory injunction against the wife not to “transfer further encumber or otherwise deal with” the “one-half interest” in the Suburb B property acquired by the wife by transfer to her from the husband.
As mentioned, the s 79 order relevantly provides:
1. Within thirty (30) days of these orders the husband shall transfer to the wife all his right title and interest in and to the matrimonial home situated at [Suburb B] in the State of Queensland described as Lots 201 and 202 on …04 …Title Reference …77.
The transfer was effected 14 July 2005.
Principles
In order to succeed in the grant of an interlocutory injunction it is incumbent upon the applicants to prove that the issue to be tried, if the evidence remains as it is, carries a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial; and that the inconvenience or injury which each would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the wife would suffer if an injunction is granted: Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 at [65] and [70].
Further, in relation to asset preservation injunctions, an applicant must establish in addition to the conditions ordinary to the grant for injunctive relief that unless restrained there is a real risk or danger that a respondent will dispose of or dissipate assets in his possession or under his control so as to defeat any judgment which the applicant may obtain. It is a requirement in considering such that the court if making a restraint make it no wider than necessary to achieve that end. The grant of the relief plainly is discretionary and most usually will be provided where a propensity to shift or conceal assets apparently to defeat a judgment already has been manifested. Cardisle v LED Builders Ltd (1999) 198 CLR 380. Jackson v Sterling Ltd (1987) 162 CLR 612. Waugh v Waugh (2000) FLC 93-052 at [32]–[34]. Mullen v De Bry (2006) FLC 93-293 at [41]-[44] explaining pars [45]-[46] in Waugh. In Mullen, the Full Court concluded, [46] –[47]:
46. Finally, we think it helpful to recognise that the essential power being exercised in this case is simply described in section 114(3):
A court … may grant an injunction … in any case in which it is just or convenient to do so …
47.Ultimately, each case will involve an overall assessment of a number of factors to determine the just or convenient result. Not all cases with the same identity of factors will necessarily produce the same result because of varying weight individually and comparatively.
Submissions
Ms Carew submitted that, even if there is no summary dismissal, there is “no need” for the injunction sought. Ms Carew, however, made plain also that no undertaking was or would be provided by the wife in lieu of the injunction sought.
It is implicit in Mr Waterman’s case that for such parts of the first applicant’s claims for which there is no summary dismissal, there is a sufficiently reasonable likelihood of success to preserve the status quo pending the trial; and that the balance of convenience favours grant of the injunction. As to risk, Mr Waterman submitted that if the injunction is not granted, such is demonstrated by the transfer from the husband to the wife which already has occurred such that unless restrained, the wife, as the husband already has done, might further transfer or deal with the property, in particular the husband’s former interest in it, so as to defeat the first applicant’s judgment debt.
Mr Muller relied upon Mr Waterman’s submissions as to risk although, plainly, in the context of the second applicant’s case, he not being a judgment creditor.
Decision
As I have determined that there will be summary dismissal of the second applicant’s proceedings, no question arises as to the grant of an injunction in the second applicant’s favour.
It seems to me that if the evidence remains as it is in relation to either or both of the first applicant’s claims under s 79A and s 90K(1)(aa) there is a sufficient likelihood of success to warrant the grant of the injunction, and further that if the wife should transfer or encumber the husband’s former interest in the matrimonial home the inconvenience or injury which the first applicant would be likely to suffer if an injunction is refused outweighs the injury the wife would suffer if an injunction is granted.
Further, as submitted by Mr Waterman, which I accept, the history of the actions by the husband and the wife, at least in relation to the s 79 order (the financial agreement not yet being in evidence so as to ascertain precisely its terms) seemingly to defeat the first applicant’s claim as a creditor, which claim existed at the time of the making of the s 79 order, has the effect that unless restrained there is a real risk or danger that the wife might transfer or encumber or otherwise deal with the husband’s former interest in the property so as to defeat the first applicant’s claims against the husband.
As it is, the title extract shows that already the property bears an encumbrance, being a mortgage registered on 15 November 2005, so that even after the s 79 order the wife, it appears, has dealt with the property by encumbering it.
In all of the circumstances, I am of the view that it is both just and convenient to grant the injunction.
During argument, Counsel agreed that it is not possible for restraint to operate in relation to a “one half-interest” of a property when the title is held by one person indivisibly. That is to say, whilst it is possible to transfer a one-half interest, it is not possible to encumber a one-half interest, although it is possible to encumber a property only to the value of a one-half interest, namely the wife’s interest, but not the former interest of the husband.
The matter is further unclear because the former title extract is not in evidence so presently it is not established whether previously the husband and the wife held the property as tenants in common in equal shares, or as joint tenants, or otherwise.
Thus, in order to preserve until trial whatever was the husband’s former interest in the property, and being mindful that an injunction should be no wider than necessary to achieve the end of not defeating any final judgment which the first applicant might obtain, it is both just and convenient to order that until further order the wife be restrained from selling, transferring, mortgaging, encumbering or otherwise dealing with the property, but with an order that she may apply on notice to vary or narrow the terms of the injunction when the precise nature of the husband’s former interest in it can be identified by reference to the former title extract, to allow the husband’s former interest in it to be preserved and to allow the wife, if she wishes, to deal with the equivalent of her former interest in any way she wishes, eg if in the future she should seek a Hogan order or any other order.
The value of the property presently is not the subject of evidence, nor the value of the existing encumbrance. These matters will need to be the subject of evidence on any application by the wife for variation of any of the terms of the injunction.
By such orders, the wife will be fully protected as to her own former interest in the property which existed prior to the transfer to her of the husband’s interest in it.
I will make orders accordingly.
Inspection of Family Court of Australia file BRF…/2005
The first applicant and the second applicant each seek an order for the inspection of Family Court file BRF…/2005 being the proceedings in which the s 79 order was made upon the signing and filing by the husband and the wife of an application for consent orders and minute of orders: wife’s affidavit 24 May 2011, par 23.
As I have mentioned already the pro forma application for consent orders (Form 11) requires parties to list their assets and liabilities.
I will deal with this aspect of the matter now only in relation to the first applicant.
This relief was most strenuously resisted by Ms Carew, on the basis that such is at best a fishing exercise. Ms Carew submitted that unless and until the first applicant can particularise a case of, for example, suppression of evidence and, relevantly, wilful concealment of it, the application must be dismissed. This is an impossible argument. The first applicant cannot particularise what he may seek to allege ought to have been disclosed to the Court but was not until he knows what actually was disclosed to the Court. The circumstances of the commencement of the first applicant’s District Court action against the husband on 3 March 2005, of the filing by the husband of a defence in that action on 6 April 2005, and of making application for the consent s 79 property order on or about 28 April 2005, while all along still married to the wife, and still living in the matrimonial home, makes patently clear that in these proceedings, in which I have determined already that the first applicant has shown a reasonable cause of action under s 79A, has effect that he must have opportunity to inspect and copy that file as the very next step in the proceedings in order to be able fully to particularise his case. There is no point in alleging, for example, that the husband failed to disclose existence of the District Court action, and then have the husband produce the application for consent orders to prove that the husband’s allegation is wrong. Rather, the first applicant needs to inspect and copy the application for consent orders so that if the husband indeed did disclose existence of the District Court action the first applicant’s and the Court’s time is not wasted. There are many examples of proper relief granted for disclosure before action. Moreover, as I have mentioned earlier, the first applicant has an existing right under Rule 13.08(1), by written notice, to require the wife to provide a copy of or produce for inspection a copy of the application for consent orders, as a document referred to in the wife’s affidavit filed 24 May 2011, par 23.
There is, as I have observed earlier, at least the inference that the husband did not disclose the claim against him by the first applicant because if he had the consent order may be unlikely to have been made without notice to him.
In my view the present state of the evidence of the first applicant has the effect that, far from being a fishing exercise, the circumstances of the case compel an order that he may inspect and copy the file BRF…/2005.
I have referred already to the circumstance that the first applicant has deposed to the fact that he has not given notice by the husband or the wife as to their application for the consent s 79 order. In ASIC v Rich (above) O’Ryan J dealt with this at [36]-[45], citing at [43], Official Trustee in Bankruptcy v Donovon (1996) FLC 92-703 in which the Full Court held that a failure by a party seeking orders affecting the property of the parties to notify a person who might be affected by the orders sought “will constitute a miscarriage of justice” for the purposes of s 79A. In my view, in the circumstances of this particular case, the lack of notice is a further good reason compelling that the first applicant may inspect and copy the court file in which the s 79 order was made.
I will therefore order that the first applicant, by his solicitors, may inspect and copy file BRF…/2005.
Procedural matters
Any application by the husband and the wife under the slip rule should be made promptly. I will include an order about this.
On 26 May 2011, Registrar Stoneham ordered that the first applicant deliver further and better particulars of his claim.
In my view, after file BRF…/2005 is inspected and copied, the claim of the first applicant should be clearly stated in a pleading styled points of claim, so that points of defence may then be delivered in response by the husband and the wife, who should also each file and serve a financial statement.
I will make procedural orders about these matters, and concerning disclosure and inspection under the Rules.
Presently, I will not order (as sought by the first applicant) that the husband and the wife respond to his substantive affidavits. The better course is that after the steps to which I have referred there be a trial directions hearing before the docket Registrar, who, I would anticipate, will order that there be one trial affidavit per party and one trial affidavit of any of their witnesses.
Costs
It is appropriate that costs as between the husband and the wife, and the first applicant, be reserved to the trial judge.
I will order that any applications for costs in relation to the proceedings commenced by the second applicant be listed at a time and date to be arranged.
I certify that the preceding two hundred and ninety (292) paragraphs are a true copy of the reasons for judgment of the Honourable Justice O’Reilly delivered on 1 May 2012.
Associate:
Date: 16 May 2012
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