Costello & Anor and Condi & Anor - [2012] FamCA 355

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…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2012] FamCA 355
Decision Date: 16 May 2012

CaseChat Overview and Summary

The case involved applications by a husband and wife for the summary dismissal of proceedings initiated by a judgment creditor of the husband and the receiver of a former legal partnership in which the husband was a partner. The judgment creditor and the receiver sought to set aside a consent property order made between the husband and wife under section 79 of the *Family Law Act 1975* (Cth) and to invalidate or set aside a financial agreement between them under sections 90G and 90K of the Act. The court was required to determine whether the judgment creditor and the receiver had standing to bring these applications, whether they had shown a reasonable cause of action, and whether their applications had a reasonable likelihood of success.

The court considered whether the judgment creditor and the receiver were persons affected by the property order and financial agreement, and whether they had demonstrated a miscarriage of justice due to fraud, duress, suppression of evidence, false evidence, or other circumstances. The husband and wife argued that the proceedings had no reasonable likelihood of success and therefore should be summarily dismissed. The judgment creditor alleged that the husband was aware of his impending judgment debt when the financial agreement was signed and the property order was made, and that the transfer of assets was likely to prevent the debt from being paid. The receiver alleged that the husband was aware of the likely appointment of a receiver, the extent of partnership creditors, and his own unauthorised drawings, and that the transfer of assets would prejudice these creditors.

The court dismissed the application for summary dismissal of the proceedings brought by the judgment creditor, finding that he had shown a reasonable cause of action and that his application had a reasonable likelihood of success. However, the court allowed the application for summary dismissal of the proceedings brought by the receiver, finding that his applications under sections 90G and 90K, and his application to set aside the section 79 order, had no reasonable likelihood of success. The court also granted an interlocutory injunction restraining the wife from dealing with the matrimonial home, subject to her ability to demonstrate that any dealings would preserve the husband's former interest until trial. Directions were also given for pleadings, disclosure, and financial statements, and the matter was listed for a trial directions hearing.

Orders

Orders of the court

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.

10.

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.

11.

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

12.

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.

13.

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.

Background

Background to the litigation

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) 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]. 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. 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. 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.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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. 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. By application in a case filed 23 August 2011, the husband and the wife seek summary dismissal of the principal proceedings. 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 husband2. Disclosure of documents by the husband and the wife3. Financial disclosure by the husband and the wife4. Leave to inspect and copy Court File BRF…/2005 in which the consent property order was made and pursuant to which the transfer occurred5.The husband and the wife file and serve affidavits in response to the substantive affidavits of the judgment creditor and the receiver.

Ratio Decidendi

Legal Principle Established

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