Deputy Commissioner of Taxation v Kliman

JFDEPUTY

[2002] FamCA 629

FAMILY LAW ACT 1975

IN THE FULL COURT OF

THE FAMILY COURT OF AUSTRALIA

AT MELBOURNE

Appeal No SA 40 of 2001

SA 48L of 2001

File No ML 10733 of 1998

IN THE MATTER OF:

DEPUTY COMMISSIONER OF TAXATION

Applicant/Appellant Intervener

- and -

LEONARD JACK KLIMAN

Respondent/Husband

- and –

SUSAN DOROTHY KLIMAN

Respondent/Wife

REASONS FOR JUDGMENT

BEFORE: Ellis ACJ, Finn & Coleman JJ

DATE OF HEARING: 13^th day of September 2001

DATE OF JUDGMENT: 7^th day of August 2002

APPEARANCES: Mr Burmester of Queen’s Counsel and Mr Kendall of Queen’s Counsel with Mr Holmes of Counsel, (instructed by the Australian Government Solicitor, Level 21, 200 Queen Street, Melbourne VIC 3000) appeared on behalf of the Applicant/Appellant Intervener.

Mr Strum of Counsel, (instructed by Taussig Cherrie & Associates, Level 8, 469 LaTrobe Street, Melbourne VIC 3000) appeared on behalf of the Respondent Husband.

Mr Bisucci of Counsel, (instructed by Isaac Brott & Co., Level 2, 493-495 Little Bourke Street, Melbourne VIC 3000) appeared on behalf of the Respondent Wife.

CATCHWORDS: JURISDICTION – Property settlement - Injunctions –– whether the Court has jurisdiction to grant on the application of a third party intervener (who is a public authority) an interlocutory injunction to preserve the assets of the husband and/or the wife

Legislation: Family Law Act 1975 - s 4(1) “matrimonial cause”; s 34; s 79; s 80; s 92; s 114(1) and 114(3).

Case law cited:
Ascot Investments Pty Ltd v Harper and Harper (1981) 148 CLR 337; (1981) FLC ¶91-000;
Dougherty & Dougherty v Dougherty (1987) FLC ¶91-823;
Biltoft and Biltoft (1995) FLC ¶92-614;
Zdravkovic and Zdravkovic (1982) FLC ¶91-220;

Waugh and Waugh (2000) FLC ¶93-052;
Jackson and Sterling Industries Limited (1987) 162 CLR 612;
Patrick Stevedores Operations No 2 Proprietary Limited and Others and Maritime Union of Australia and Others (1998) 195 CLR 1;
Cardile v LED Builders Pty Ltd (1999) 198 CLR 380;
Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 185 ALR 1.

This was an application for leave to appeal and an appeal by the Deputy Commissioner of Taxation (“the DCT”) against certain orders made by Wilczek J on 29 June 2001.

The effect of those orders was to uphold a claim by the husband that the Court had no jurisdiction to grant on the application of the DCT (who had intervened in property settlement proceedings between the husband and the wife) orders restraining both the husband and the wife from disposing of property pending the determination of the property settlement.

In July 1999 Frederico J had granted such interlocutory restraining orders. However, when the DCT sought to vary those orders, the husband filed an objection to jurisdiction, asserting:

that the DCT is not a party to the marriage;
that the DCT is an unsecured creditor of a party to the marriage; that the Family Court does not have jurisdiction to entertain the application for interim orders instituted by the DCT as they do not constitute a “matrimonial cause” within s 4(1);
that the application for interim orders instituted by the DCT are not proceedings “in relation to” the pending proceedings between the parties to the marriage in that they are not related to the marriage of the parties or the relationship of the parties to the marriage but are related to a debt owed by the husband to the DCT which is the subject of proceedings in the Supreme Court of Victoria between the husband and the DCT;
that the Family Court does not have power under the Family Law Act 1975 to make the interim orders sought by and in favour of the DCT; and
that notwithstanding that leave to intervene in the proceedings between the husband and the wife was granted to the third party pursuant to s 92 of the Family Law Act 1975 by Frederico J on 28 July 1999, that does not confer upon the third party the rights and liabilities of a party to a marriage under that Act.

In a judgment delivered and by his orders made, on 29 June 2001, Wilczek J upheld the husband’s objection to jurisdiction, dismissed the DCT’s application for a variation of the interlocutory restraining orders made by Frederico J, and discharged those orders.

By the time of the hearing before Wilczek J (June 2001), the DCT had obtained a judgment in the Supreme Court of Victoria against the husband for a sum in excess of $1,300,000 on account of unpaid tax. Also, by the time of that hearing the DCT had filed an application in the Family Court seeking a final order in the following terms:

“As part of any final property settlement or order as between the parties that this Honourable Court consider the debt owed by the Husband to the Deputy Commissioner of Taxation and provision be made for payment of such debt by the parties or either of them to the Deputy Commissioner of Taxation.”

The Full Court granted the DCT’s application for leave to appeal; allowed the appeal; set aside the orders which were the subject of the appeal; dismissed the husband’s Response objecting to jurisdiction; and ordered that the husband pay the DCT’s costs of the appeal.

Per: the whole Court:-

That while s 92(3) of the Act operates to deem an intervener to be a party to the proceedings with all the rights, duties and liabilities of a party, the sub-section does not confer on the intervener the right to seek any substantive relief which is not otherwise available to the intervener under some other provision of the Act: see Ascot Investments Pty Ltd v Harper and Harper (1981) 148 CLR 337 at 357; (1981) FLC ¶91-000 at 76,063 per Gibbs J.

That the DCT should be regarded as having intervened in the matrimonial cause constituted by the property settlement proceedings between the husband and the wife (“paragraph ca” proceedings within the definition of “matrimonial cause”); and that those proceedings did not lose their character as a “matrimonial cause” because of the DCT’s intervention. (Dougherty & Dougherty v Dougherty (1987) FLC ¶91-823 per Mason CJ and Wilson and Dawson JJ at 76, 194 applied).

Per: Ellis ACJ and Finn J:-

As to the source of power in the Act to make the interlocutory restraining (or asset preservation) orders sought by the DCT, s 114(3) could on its face be relied on by an intervener in proceedings between the parties to a marriage for property settlement, given that there is no express limitation in the sub-section as to the parties who can make an application under the sub-section.

But query whether the true source of the power to grant asset preservation orders may actually be s 34 of the Family Law Act 1975 rather than s 114(3). (See Waugh and Waugh (2000) FLC ¶93-052 and Cardile v LED Builders Pty Ltd (1999) 198 CLR 380). For present purposes, it was sufficient to conclude that whether the power to make asset preservation orders in proceedings under the Act arises under s 34(1) or under s 114(3), it is clear from decisions of the High Court that the purpose of such a power is to prevent the abuse or frustration of the processes of the Court. See in this regard Jackson and Sterling Industries Limited (1987) 162 CLR 612 at 617, 623; Patrick Stevedores Operations No 2 Proprietary Limited and Others and Maritime Union of Australia and Others (1998) 195 CLR 1 at 32-33; Cardile v LED Builders Pty Ltd (supra); and Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 185 ALR 1 at [60].

When regard is had to the fact that the Court may, in exercising the property settlement jurisdiction, take into account the interests of significant third party creditors and can certainly, pursuant at least to the provisions of s 80(1)(f) (if not elsewhere), make an order for the payment of a debt owed by one of the parties to a marriage to “a public authority” (into which category the DCT must come) for the benefit of a party to the marriage, and when it is remembered that the essential purpose of an asset preservation order is to prevent an abuse or frustration of the processes of the Court, then in circumstances such as the present, where the intervener DCT seeks final orders, there would be jurisdiction to grant in favour of the DCT, the asset preservation orders sought against the husband. It is reasonable to assume that a payment of a party’s tax debt is, at least objectively, a payment for his or her benefit.

Such asset preservation orders could be sought not only against the party to the marriage who is the judgment debtor to the DCT, but also against the other party to the marriage, on the basis that property which is owned at the commencement of the proceedings by that other party may well be the subject of an order in the property settlement proceedings, for transfer to the other party (that is, the debtor party), and thus become available to satisfy the debt owed to the DCT.

However, the Court would need to know more about many aspects of the present case before it could conclude that such restraining orders should be granted in this case. As was made clear by the High Court in Sterling Industries (supra), and by the Full Court of this Court in Waugh (supra), asset preservation orders should not be lightly made.

Per: Coleman J:-

The jurisdiction to make the injunctive orders sought by the DCT existed under s 114(3). There were proceedings pending at the time, which came within the definition of “matrimonial cause” in paragraph (ca) of the definition thereof in s 4(1) of the Act, and in which the DCT had intervened pursuant to the provisions of s 92(3) thus acquiring the rights and liabilities of a party. In “paragraph (ca)” proceedings, an interlocutory order or injunction can be made if the Court considers it just or convenient under s 114(3). That sub-section does not provide that it is only parties to the marriage who can apply for such an injunction. There is nothing to say that an intervener party cannot make such application. The jurisdiction to entertain the application thus existed, and the applications should have been determined on their merits. If on the contrary, the jurisdiction did not exist by virtue of paragraph (ca) of the definition of “matrimonial cause” in s 4(1), paragraph (f) of the definition could be relied upon to attract the jurisdiction created by s 114(3), as the DCT’s application for an interlocutory injunction was clearly an application “in relation to” the pending proceedings for settlement of property.

Husband to pay the costs of the DCT of and incidental to the application for leave to appeal and the appeal.

REPORTABLE

ELLIS AND FINN JJ: This application for leave to appeal and appeal by the Deputy Commissioner of Taxation (hereafter referred to as “the DCT”) raise the question of whether, in circumstances where the DCT has obtained a judgment debt against one party to a marriage in a State Supreme Court and has intervened in property settlement proceedings between the parties to the marriage, there is jurisdiction to grant the DCT an interlocutory order (or injunction) restraining both parties to the marriage from disposing of their property (pending the final determination of the property settlement proceedings).

The matter comes before this Court by way of an application for leave to appeal certain orders made by Wilczek J on 29 June 2001, whereby his Honour dismissed various applications by the DCT for the grant of interlocutory restraining orders of the type and in the circumstances just described. His Honour also discharged certain similar interlocutory restraining orders which had been previously made by Frederico J. In the lengthy and considered reasons for judgment which his Honour gave when he made his orders of 29 June 2001, his Honour concluded that this Court had no jurisdiction under the Family Law Act 1975 (“the Act”) to grant the interlocutory restraining orders sought.

In his judgment, Coleman J has set out in detail the factual background to this matter. He has also examined in depth the submissions made to us on behalf of the DCT, the husband and the wife in this case, and the issues which arise from those submissions. His Honour has concluded that there is jurisdiction to make the interlocutory restraining orders sought by the DCT; that accordingly the application for leave to appeal and the appeal should be allowed; that the orders made by Wilczek J on 29 June 2001 should be set aside; and that the husband should pay the costs of the DCT of and incidental to the application for leave to appeal and the appeal.

We agree with his Honour’s conclusions, but wish to add some observations of our own.

In summary, the undisputed facts about this matter appear to be as follows.

On 10 November 1998, the husband filed an application against the wife seeking orders for property settlement. (A copy of that application was not before us and thus we do not know the nature of the orders sought by the husband).

On 21 July 1999, the DCT filed an application (in Form 8) seeking leave to intervene in the proceedings between the husband and the wife, and orders restraining the husband and the wife (both personally and in their capacities as directors and shareholders of certain companies) from dealing with any asset in which they had a legal or beneficial interest “save for complying with any Terms of Settlement agreed to between the parties and [the DCT]” other than in the normal course of business or for normal living expenses.

On 28 July 1999, Frederico J made orders granting the applications by the DCT for intervention and for the interlocutory restraining orders. There was no appeal against those orders.

On 30 August 1999, the DCT filed an application (in Form 7) seeking that “[by] way of final property settlement as between the parties that prior to the distribution of such property as between the Husband and Wife”, the DCT “be first paid by the parties or either of them the sum of $1,000,802.55” and the sum of $270,033, together with additional tax for late payment and penalty interest.

On 31 October 2000, that is some fifteen months after Frederico J had made the original interlocutory restraining orders, the DCT filed a further interlocutory application (in Form 8) seeking that the original interlocutory restraining orders be varied to restrain the parties from disposing of income as well as assets, save in the normal course of business or for normal living expenses or otherwise with the agreement of the DCT.

On 30 March 2001, the husband filed a “Response objecting to jurisdiction” (Form 14), in which, in summary, he asserted that the application for interim orders by the DCT as a third party unsecured creditor did not constitute a “matrimonial cause” and thus was not within the jurisdiction of the Family Court. It was also asserted that intervention did not confer on the DCT the rights and liabilities of a party to the marriage.

On 11 April 2001, the DCT filed a further application in Form 8 seeking a further variation to the orders originally made by Frederico J on 28 July 1999; the variation sought would define more precisely the use which the parties could make of their income and assets for living expenses and legal expenses.

On 26 April 2001, the husband filed a response (in Form 8A) seeking that the latest application by the DCT (that is, that filed on 11 April 2001) be dismissed, and that the restraining orders made by Frederico J be discharged.

The husband’s Response objecting to jurisdiction and the latest application of the DCT for a variation of the interlocutory restraining orders made by Frederico J, were heard by Wilczek J on 18 May, and 14, 15 and 21 June 2001.

On 29 June 2001, his Honour delivered his judgment upholding the claim of the husband (which was supported by the wife) that there was no jurisdiction in the Family Court to make the orders sought by the DCT. Accordingly, his Honour discharged the interlocutory restraining orders made by Frederico J, and dismissed, in effect, all outstanding applications by the DCT for interlocutory orders and for “substantive” final orders.

Again, as Coleman J has provided a summary of Wilczek J’s reasons for judgment, it is unnecessary that we do so. There are however, two important factual matters which emerge from Wilczek J’s judgment, which require emphasis.

First, his Honour recorded (in paragraph 98) that on 14 June 2001 (that is, during the course of the hearing before him), he was informed by Senior Counsel for the DCT that “on 12 June 2001, judgment was entered against the husband in the Supreme Court of Victoria for an amount of $1,324,250.86 plus an amount of interest of $33,069.05, plus orders for costs” and that “the judgment was entered ‘unopposed’ ”.

The second factual matter referred to in his Honour’s judgment, which is important for present purposes, is the position in relation to the DCT’s claim for final orders, which his Honour recorded to be as follows:
7.In so far as the DCT had, by the time of the orders of Frederico J on 28 July 1999 only filed a Form 8 Application, a Form 7 Application was filed by the DCT (no. 41) on 30 August 1999 and the orders sought were:
“1.By way of final property settlement as between the parties that prior to the distribution of such property as between the Husband and Wife the Deputy Commissioner of Taxation of Australia be first paid by the parties or either of them the sum of $1,000,802.55 together with interest as and from..
2.By way of final property settlement as between the parties that prior to the distribution of such property as between the Husband and Wife the Deputy Commissioner of Taxation of Australia be first paid by the parties or either of them the sum of $270,033.00 together with additional tax for late payment and penalty interest for late payment as calculated pursuant to s. 207 and s. 207A of the INCOME TAX ASSESSMENT ACT 1936.”
…
26.Early in Mr Strum’s submissions he turned to the DCT’s Form 7 Application for Final Orders (no. 41) to which I have referred in paragraph 7 of these Reasons, with Mr Strum highlighting the wording of the DCT seeking an order “by way of final property settlement as between the parties…” and submitting that there is no jurisdiction for the DCT to seek such an order. Further submissions on that point were not necessary as Mr Kendall Q.C., at that stage, rose to his feet and made the concession that the DCT will not be pursuing that application.
…
61.It will be recalled that (see paragraphs 26 and 27 of these Reasons) a concession had been made by Mr Kendall Q.C., that the DCT would not be proceeding with the Form 7 Application for Final Orders (no. 41). I had suggested, as an appropriate housekeeping exercise, perhaps a document could be filed to make that clear, such as by some notice, or, that if an oral application was sought, I would grant the oral application for the DCT to seek leave to withdraw the Form 7 Application filed on 30th August 1999. After the luncheon adjournment that was raised again, and Mr Kendall, whilst not resiling from the concession made during the morning wished, as I understood it, the opportunity to remain for another Form 7 to be filed seeking different relief, perhaps a “Declaration” that the husband is indebted to the Deputy Commissioner of Taxation. I indicated that I did not consider this Court had the jurisdiction or power to make “declarations” of that kind; subject to a hearing with appropriate evidence, this Court may well make “findings” as to liabilities, including taxation liabilities.

…
99.The third significant development on the morning of the second day of hearing, was the filing of an amended Form 7 Application for Final Orders on behalf of the DCT (no. 142).
100.I refer to paragraph 7 of these Reasons where I made reference to the Form 7 Application filed by the DCT (no. 41) on 30 August 1999.
101.I refer to paragraphs 26 and 27 of these Reasons where I indicated discussions taking place concerning that Form 7 and concessions that were made by Mr Kendall concerning that application. And I refer to paragraph 61 of these Reasons when the issue of the appropriateness or otherwise of the orders sought in that application was again considered later on the first day of hearing and it was foreshadowed that possibly an amended Form 7 would be coming to hand before the hearing resumed.

102.It was thus in those circumstances that the DCT’s amended Form 7 (no. 142) came to hand on 14 June 2001 and the orders that are sought in that applications are as follows:
“1.As part of any final property settlement or order as between the parties that this Honourable Court consider the debt owed by the Husband to the Deputy Commissioner of Taxation and provision be made for payment of such debt by the parties or either of them to the Deputy Commissioner of Taxation.
2.The husband and wife or either of them pay the costs of the Intervener.
3.Such further order or orders as this Honourable Court deems fit to make.”

The position of an intervener in proceedings under the Act

Sub-sections 92(1) and 92(3) of the Act provide:
(1) In proceedings other than proceedings for principal relief, any person may apply for leave to intervene in the proceedings, and the court may make an order entitling that person to intervene in the proceedings.
…
(3) Where a person intervenes in any proceedings by leave of the court the person shall, unless the court otherwise orders, be deemed to be a party to the proceedings with all the rights, duties and liabilities of a party.

The operation of s 92(3) was explained by Gibbs J in Ascot Investments Pty Ltd v Harper and Harper (1981) 148 CLR 337 at 357; (1981) FLC ¶91-000 at 76,063:
Section 92(3) enables the court to make an order either in favour of or against an intervener if such order is one that can properly be made as a matter of substantive law; the subsection removes a possible procedural obstacle, but does not alter substantive rights and duties. It does not give the Family Court power to impose new duties upon, or to annual the rights of, third parties who are interveners. If the court had no power, apart from sec. 92(3), to order Ascot Investments to register the transfers, that subsection did not confer that power on it.

It is thus clear that while s 92(3) operates to deem an intervener to be a party to the proceedings with all the rights, duties and liabilities of a party, the sub-section does not confer on the intervener the right to seek any substantive relief which is not otherwise available to the intervener under some other provision of the Act. We would add that we do not understand any party to have asserted a contrary position before us.

It thus becomes necessary to consider what (if any) other provision in the Act confers on the DCT a right to seek the substantive relief which he sought (be it by way of interlocutory or final relief). Before addressing that issue, it is necessary to determine what were the actual proceedings in which the DCT had intervened. This is for the reason that certain of the powers conferred on the Family Court to grant injunctive orders (being the powers contained in ss 114(1) and 114(3)) are conferred only in the context of jurisdiction being exercised in particular types of proceedings. There is also the issue, which was agitated before us, of what (if any) would be the “matrimonial cause” constituted by the intervention of the DCT.

In which proceedings (within the definition of “matrimonial cause”) did the DCT intervene?

We understood that it was the submission of Counsel for the DCT that the proceedings in which his client had intervened were proceedings either between the husband and the wife for property settlement, or between the husband and the wife for an injunction arising out of the marital relationship (that is, proceedings within either paragraph (ca) or paragraph (e) of the definition of “matrimonial cause” in s 4(1) of the Act), and that no further proceedings were (or could be) instituted by the mere fact of intervention by the DCT. (See in this regard paragraph 42 of Counsel’s written submissions and also Transcript of the hearing before us at pages 40 and 70).

As to the suggestion raised in Counsel’s submissions that the DCT has intervened in proceedings within paragraph (e) of the definition of “matrimonial cause”, that paragraph is in the following terms:
(e) proceedings between the parties to a marriage for an order or injunction in circumstances arising out of the marital relationship (other than proceedings under a law of a State or Territory prescribed for the purposes of section 114AB)

In the present case, at least in so far as we are aware, there were no proceedings on foot between the husband and the wife for an injunction, and thus there were no “paragraph (e)” proceedings in which the DCT could have intervened. The only proceedings which were on foot between the husband and the wife were for property settlement.

We turn then to the submission that the proceedings in which the DCT intervened were proceedings within paragraph (ca) of the definition of “matrimonial cause”. That paragraph is as follows:
(ca) proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them, being proceedings:
(i) arising out of the marital relationship;
(ii)in relation to concurrent, pending or completed proceedings between those parties for principal relief; or
(iii)in relation to the dissolution or annulment of that marriage or the legal separation of the parties to that marriage, being a dissolution, annulment or legal separation effected in accordance with the law of an overseas jurisdiction, where that dissolution, annulment or legal separation is recognized as valid in Australia under section 104

In support of the submission that the DCT had intervened in the proceedings for property settlement between the husband and the wife (that is, proceedings within paragraph (ca) of the definition), Counsel relied on the following passage from the joint judgment of Mason CJ and Wilson and Dawson JJ in Dougherty & Dougherty v Dougherty (1987) FLC ¶91-823 at 76, 194:
In the course of argument, considerable attention was paid by counsel to the application in the circumstances of the present case of para. (cg) and (f) of the definition of ‘matrimonial cause’ in sec. 4(1) of the Act. Those paragraphs read as follows:
``(cg) proceedings by or on behalf of a child of a marriage against one or both of the parties to the marriage with respect to the welfare of the child;
...
(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) to (eb), including proceedings of such a kind pending at, or completed before, the commencement of this Act;''
However, on the view we take of the matter we do not find it necessary to consider those paragraphs. In our opinion, there is only one proceeding before Elliott J. It is the matrimonial cause constituted by the application of the wife for an alteration of the property interests of the parties to the marriage on grounds arising out of the marital relationship (see para. (ca)(i) of the definition, infra ). The filing of M's application did not mark the commencement of a new proceeding, based upon the definition of ‘matrimonial cause’ described in either para. (cg) or (f). On the contrary, he sought and was given leave pursuant to sec. 92 to intervene in the proceeding begun by his mother. He thereupon became a party to that proceeding and it is in that way that his claim falls to be determined.

It must of course be remembered that the facts in Dougherty (supra) were that an adult child had intervened in property settlement proceedings between his parents under s 79 of the Act and also that s 79(1) expressly provides that in proceedings with respect to the property of the parties to the marriage
… the court may make such order as it considers appropriate altering the interests of the parties in the property, … including an order requiring either or both of the parties to make, for the benefit of … a child of the marriage, such settlement or transfer of property as the court determines.
However, we are not persuaded that the express reference in s 79(1) to the powers to make an order for the benefit of a child to the marriage, would limit the application of what was said by the High Court in Dougherty (supra) concerning the effect of intervention, to cases in which the intervener is a child of the marriage. In exercising jurisdiction in property settlement proceedings between parties to a marriage, the Court has available a range of powers which can be exercised as part of that jurisdiction. In addition, the Court in exercising its powers under Part VIII (which includes s 79), may make any of the orders set out in s 80.

Moreover, the Court has long recognised that as an essential first step in the exercise of its jurisdiction under s 79, it must first determine the property of the parties to a marriage, and it does this by deducting from the value of their assets the value of their liabilities. In this context, the Court generally always has regard to the position of significant creditors.

The Court’s long-established approach to the treatment of the liabilities of the parties, and to the protection of creditors to whom significant liabilities are owed, was explained in detail by the Full Court (Nicholson CJ, Ellis and Buckley JJ) in Biltoft and Biltoft (1995) FLC ¶92-614 at 82,124 – 82,129, and need not be repeated here.

Furthermore, there is some authority (albeit by way of obiter dicta only) in the decision of the Full Court (Pawley SJ, Strauss and Treyvaud JJ) in Zdravkovic and Zdravkovic (1982) FLC ¶91-220, that the Court can, as part of its jurisdiction under s 79, order the discharge of a debt to a third party (whether or not that party has intervened) - at 77,205-77,206:
We are, however, of opinion that in an appropriate case, as part of the adjustment of the financial rights of the parties, the Court may in proceedings under sec. 79 order the discharge of a debt to a third person, whether such person is an intervener or not. Once it is clear and beyond doubt that a debt is owing to a third person and that all the probabilities are that it will be enforced unless it is discharged by payment, then the Court is not precluded from ordering its discharge by the parties or one of them as a condition or as part of the overall readjustment of the parties' financial rights, if such a course is convenient or just. Situations, where such orders have been appropriate and where they have been made, are numerous. Amongst the almost innumerable examples which come to mind are the discharge of a debt due under some credit facility granted to both or one of the parties, the payment of existing liabilities of one or both of the parties to a store or for medical or like accounts, or for rates or income tax liabilities or motor car registration or insurances. The mere fact that a debt is owed to a relative does not prevent the Court from ordering its discharge by payment as a term or condition of an order under sec. 79, provided it is recognized by all concerned that it is a debt then due and owing, and likely to be enforced, if it is not repaid.
The Court is not precluded from ordering the discharge of such a debt merely because the creditor has not obtained judgment or has not made a claim in the proceedings for repayment, nor is the Court limited to making a finding binding on the parties as to what the debt is and then ''to determine in what proportions the parties should be responsible for the debt . . . and then order that they indemnify each other against liability . . . in those respective proportions'' (cf. Anderson's case at p. 76,771). An order requiring the discharge by payment of a debt owing by the parties or one of them to a third person is not a settlement of property on such third person if such an order is made as a condition or a term of an alteration of the parties' interests in their property or the property of either of them (see sec. 80(i)). Further, the doing of justice between the parties may require that a party should be ordered to pay a debt or part of a debt, and that the other party should be relieved from any possible risk of having to pay that debt or that part of it (sec. 80(k)). It is difficult to understand why the Court's powers should be limited to fixing proportions of contributions towards payment of a debt and to the granting of indemnities. Indemnities may turn out to be worthless and a party may have to meet commitments which the Court intended the other to meet. There is no good reason precluding the Court from granting the more efficacious remedy, namely discharge by payment in the appropriate proportions which eliminates unnecessary risks.

It will be useful at this point to set out the terms of s 80, emphasising in particular paragraphs (i) and (k), to which the Full Court drew attention in Zdravkovic (supra), and also paragraph (f), which could have application in the context of a case involving the DCT:
(1)      The court, in exercising its powers under this Part, may do any or all of the following:
(a)      order payment of a lump sum, whether in one amount or by instalments;
(b)      order payment of a weekly, monthly, yearly or other periodic sum;
(ba)    order that a specified transfer or settlement of property be made by way of maintenance for a party to a marriage;
(c)      order that payment of any sum ordered to be paid be wholly or partly secured in such manner as the court directs;
(d)     order that any necessary deed or instrument be executed and that such documents of title be produced or such other things be done as are necessary to enable an order to be carried out effectively or to provide security for the due performance of an order;
(e)      appoint or remove trustees;
(f)      order that payments be made direct to a party to the marriage, to a trustee to be appointed or into court or to a public authority for the benefit of a party to the marriage;
(g)      [Repealed].
(h)      make a permanent order, an order pending the disposal of proceedings or an order for a fixed term or for a life or during joint lives or until further order;
(i)       impose terms and conditions;
(j)       make an order by consent;
(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
(l)       subject to this Act and the applicable Rules of Court, make an order under this Part at any time before or after the making of a decree under another Part.

In our view, therefore, the protection of third party creditors can be said to be a part of the exercise of the jurisdiction under s 79 where it is in the interests of one or both of the parties to a marriage that there be such protection. Accordingly, we are satisfied (having regard to the approach of the High Court in Dougherty (supra)), that the DCT is to be regarded as having intervened in the property settlement proceedings between the husband and the wife, that is, in proceedings within paragraph (ca) of the definition of “matrimonial cause”. In other words, there were no separate or new proceedings instituted by the intervention of the DCT.

There might be an argument that where property settlement proceedings are on foot between a husband and a wife, that is “paragraph (ca) proceedings”, and either of the parties to the marriage, or (as has happened in the present case) an intervener in the proceedings, files an application for some form of interlocutory relief, then those interlocutory proceedings come within paragraph (f) of the definition of “matrimonial cause”, rather than within paragraph (ca).

Paragraph (f) is as follows:
(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) to (eb), including proceedings of such a kind pending at, or completed before, the commencement of this Act.

However, “proceedings” is defined in s 4 of the Act to mean:
…a proceeding in a court, whether between parties or not, and includes cross‑proceedings or an incidental proceeding in the course of or in connexion with a proceeding.

Therefore in view of this definition of “proceedings”, any proceedings for interim, interlocutory or procedural relief, which are instituted by any party (including an intervener) in the course of paragraph (ca) proceedings, are in our opinion proceedings within paragraph (ca) of the definition.

Finally, in connection with this question of what were the proceedings to which the intervening DCT became a party, it was the husband’s assertion that the Court lacked jurisdiction to make the interlocutory orders sought by the DCT because there was no valid matrimonial cause before it. Again, in our view, it is clear from the above-quoted statement by Mason CJ and Wilson and Dawson JJ in Dougherty (supra) that property settlement proceedings between a husband and a wife, which would otherwise be a valid matrimonial cause within paragraph (ca) of the definition, do not lose that character simply because a third party has intervened in those proceedings.

The powers in the Act to grant the restraining orders sought

Continuing then on the basis that the DCT intervened in the matrimonial cause constituted by the proceedings for property settlement between the husband and the wife, the question then becomes what, if any, power is there in the Act for the Court to grant the interlocutory orders which the DCT sought restraining the husband and the wife from disposing of their property?

According to the written submissions (paragraph 11) of Senior Counsel for the DCT, the Family Court “has jurisdiction to grant the injunctions sought” by the DCT pursuant to:
(i)the associated jurisdiction of the Court under s. 33 of the Act and the powers available under s. 34; and
(ii)s. 114 of the Act.

We will deal with the sections relied on by the DCT in reverse order.

Sub-sections 114(1) and 114(3) provide the following powers to grant “injunctions” in the following circumstances:
(1)      In proceedings of the kind referred to in paragraph (e) of the definition of matrimonial cause in subsection 4(1), the court may make such order or grant such injunction as it considers proper with respect to the matter to which the proceedings relate, including:
(a)      an injunction for the personal protection of a party to the marriage;
(b)      an injunction restraining a party to the marriage from entering or remaining in the matrimonial home or the premises in which the other party to the marriage resides, or restraining a party to the marriage from entering or remaining in a specified area, being an area in which the matrimonial home is, or the premises in which the other party to the marriage resides are, situated;
(c)      an injunction restraining a party to the marriage from entering the place of work of the other party to the marriage;
(d)     an injunction for the protection of the marital relationship;
(e)      an injunction in relation to the property of a party to the marriage; or
(f)      an injunction relating to the use or occupancy of the matrimonial home.
…
(3)      A court exercising jurisdiction under this Act in proceedings other than proceedings to which subsection (1) applies may grant an injunction, by interlocutory order or otherwise (including an injunction in aid of the enforcement of a decree), in any case in which it appears to the court to be just or convenient to do so and either unconditionally or upon such terms and conditions as the court considers appropriate.

In our view, s 114(1) cannot be relied on by the DCT as a source of power for the restraining orders which he seeks. This is because the power to grant such orders or injunctions as are available under the sub-section, can only be exercised according to the express words of the sub-section in “proceedings of the kind referred to in paragraph (e) of the definition of ‘matrimonial cause’ in subsection 4(1)”, that is, in “proceedings between the parties to a marriage for an order or injunction in circumstances arising out of the marital relationship …”.

As earlier discussed, there are, in the present case, no proceedings on foot between the husband and the wife for an order or injunction in circumstances arising out of the marital relationship. Accordingly, no reliance by the DCT can be placed on the powers contained in s 114(1) to provide the interlocutory relief which he seeks.

However, s 114(3) could on its face be applied in “paragraph (ca)” proceedings for property settlement between the parties to a marriage, and presumably on the application of a party who is an intervener in such proceedings, given that there is no express limitation in the sub-section as to the parties who can make an application under the sub-section (and given also that it would appear from the decision of the High Court in Dougherty (supra) that proceedings between parties to the marriage for property settlement do not lose their character as such proceedings because of the intervention of a third party).

The question is, however, whether an interlocutory order for the preservation of assets is an order which can in fact be made under s 114(3) (which, it would be fair to say, has been a long-standing view in this Court). This question arises because in the relatively recent decision of the Full Court (Lindenmayer, Coleman and Brown JJ) in Waugh and Waugh (2000) FLC ¶93-052, it was recognised (albeit in a relatively oblique way), that having regard to the decision of the High Court in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380, a decision concerned with the powers contained in s 23 of the Federal Court of Australia Act 1976 and the use of “Mareva” orders, the true source of the power to grant asset preservation orders may actually be s 34 of the Family Law Act 1975.

Section 34 of the Act is in the following terms:
(1) The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, and to issue, or direct the issue of, writs of such kinds, as the Court considers appropriate.
(2) Without limiting the generality of subsection (1), the Court may issue, or direct the issue of, writs and orders of such kinds as are prescribed by the standard Rules of Court.

Section 23 of the Federal Court of Australia Act 1976 is in the following terms, which are similar to s 34 (although containing an express reference to “interlocutory orders”):
(1) The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court considers appropriate.

Although in the present case s 34 was said to be relied on by the DCT as a source of power for the restraining orders sought, no submission (written or oral) was developed on behalf of any party in relation to the section. Accordingly, it would not be appropriate to determine in this case the question raised in Waugh (supra) as to whether s 34, rather than s 114(3), is the true source of power in the Act to make asset preservation orders in all or at least certain cases (depending perhaps on the claims made in relation to, or the legal or equitable entitlements in, the property sought to be preserved). (See in relation to these issues, a paper delivered at the 10^th National Family Law Conference in Melbourne in March 2002 by the Honourable Justice Gummow entitled Family Law and the High Court).

For present purposes, it is sufficient to conclude that whether the power to make asset preservation orders in proceedings under the Act arises under s 34(1) or under s 114(3), it is clear from decisions of the High Court that the purpose of such a power is to prevent the abuse or frustration of the processes of the Court. See in this regard Jackson and Sterling Industries Limited (1987) 162 CLR 612 at 617, 623; Patrick Stevedores Operations No 2 Proprietary Limited and Others and Maritime Union of Australia and Others (1998) 195 CLR 1 at 32-33; Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at 393-394; and Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 185 ALR 1 at [60].

We have earlier referred to the manner in which this Court, in exercising jurisdiction in property settlement proceedings, may take into account the interests of significant third party creditors and can certainly, pursuant at least to the provisions of s 80(1)(f) (if not elsewhere), make an order for the payment of a debt owed by one of the parties to a marriage to “a public authority” (into which category the DCT must come) for the benefit of a party to the marriage. When regard is had to this aspect of the property settlement jurisdiction, and when it is remembered that the essential purpose of an asset preservation order is to prevent an abuse or frustration of the processes of the Court, then in circumstances such as the present, where the intervener DCT seeks final orders (even in the terms recorded in paragraph 102 of Wilczek J’s judgment: see paragraph 18 above), there would, in our opinion, be jurisdiction to grant in favour of the DCT, the asset preservation orders sought against the husband. It is reasonable to assume that a payment of a party’s tax debt is, at least objectively, a payment for his or her benefit.

We are also of the view that such orders could be sought not only against the party to the marriage who is the judgment debtor to the DCT, but also against the other party to the marriage, on the basis that property which is owned at the commencement of the proceedings by that other party may well be the subject of an order in the property settlement proceedings, for transfer to the other party (that is, the debtor party), and thus become available to satisfy the debt owed to the DCT.

We stress that we have not concluded that such restraining orders should be granted in the present case. Much more would be required to be known about many aspects of the case, particularly the reasons why the DCT seeks the relief he does in this Court (and not elsewhere). It should also be borne in mind in this context, as was made clear by the High Court in Sterling Industries (supra), and by the Full Court of this Court in Waugh (supra), that asset preservation orders should not be lightly made.

Generally in relation to the issues raised in this case, it needs to be borne in mind that the various High Court authorities (such as Ascot Investments (supra); Re Ross-Jones; Ex Parte Green (1984) FLC ¶91-555; and Perlman v Perlman (1984) FLC ¶91-500), on which reliance was placed on behalf of the husband and the wife in asserting that there was no jurisdiction in this Court to make the restraining orders sought, were concerned with situations in which the rights of third parties could be said to be the subject of alteration or curtailment by the Family Court. That of course is not the present case.

In view of the conclusion we have reached concerning the jurisdiction under either s 114(3) or s 34(1) to grant to the DCT in an appropriate case the restraining orders which he seeks, it is unnecessary to express any view on the operation in this case of s 33 of the Act, which provides for what is termed “the associated jurisdiction”, and on which some reliance was placed by the DCT.

Finally, we consider that there can be no question but that leave to appeal should be granted in this case, given the important jurisdictional question raised.

COLEMAN J: This application for leave to appeal and appeal by the Deputy Commissioner of Taxation (hereafter referred to as the “DCT”) concern the issue of whether there is jurisdiction in the Family Court to grant on the application of a third party, who has intervened in property settlement proceedings between a husband and wife under the Family Law Act 1975 (“the Act”), an interlocutory injunction to preserve the assets of the husband and/or of the wife, in order that such assets remain available to satisfy a claim by the third party against the husband and/or the wife (which claim may be taken into account, or ordered to be satisfied, in the determination of the property settlement proceedings).

On 11 July 2001, the DCT filed an application pursuant to Order 32A Rule 2 of the Family Law Rules for leave to appeal against the following orders made by Wilczek J on 29 June 2001:-
2. That orders (2) and (3) of the orders of Frederico J of 28 July 1999 be discharged.
3.  That in so far as the DCT’s amended Form 7 Application filed on 14 June 2001 purports to seek substantive orders in favour of the Deputy Commissioner of Taxation, such part of the said Form 7 be dismissed.
…
5.  That the Form 8 Application of the DCT filed 31 October 2000 be dismissed.
6.  That the amended Form 8 Application of the DCT filed on 11 April 2001 be dismissed.
7.  That, subject to the orders of this day, the husband’s Form 14 Application filed 30 March 2001 be otherwise dismissed.

On 16 July 2001, Kay J, a Judge of the Appeal Division, directed that “subject to any Order of the Full Court, the proposed appeal be argued with the application for leave to appeal on the basis of the Notice of Appeal annexed to the Affidavit of A Zafirou”, and that “the application proceed in all respects as if it were an appeal pursuant to section 94 of the Family Law Act 1975 from the decree of the Honourable Justice Wilczek of 29 June 2001”.

On 24 August 2001, the DCT filed an amended Notice of Appeal in respect of the trial Judge’s orders of 29 June 2001. In that amended Notice of Appeal, in lieu of the trial Judge’s orders, the DCT sought:-
1. That the appeal by [sic] allowed and the respondents pay the Appellant’s costs of the appeal.
2. That paragraphs 2, 3, 5, 6 and 7 of the orders of the Honourable Justice Wilczek made on 29 June 2001 be set aside, and that in lieu thereof it be ordered that the Form 14 Application filed by the husband on 30 March 2001 be dismissed with costs.

Leonard Jack Kliman (“the husband”) and Susan Dorothy Kliman (“the wife”) resisted the application / appeal and sought to maintain the trial Judge’s orders.

Pursuant to the directions of 16 July 2001, the application has been heard as if it were an appeal pursuant to s 94 of the Act.

Background

The matters to which I refer, by way of background to the proceedings before this Court, are sourced to the trial Judge’s reasons for judgment.

On 10 November 1998, the husband filed an application for settlement of property. The respondent to such application was the wife. Subsequent to that date each party filed extensive documentation.

On 21 July 1999, the DCT filed an application (in Form 8) seeking, in essence, leave to intervene in the proceedings between the husband and the wife, and interlocutory injunctive orders restraining the husband and the wife from dealing with their assets. The proceedings between the husband and the wife for settlement of property were “pending” at that time.

On 28 July 1999, Frederico J, at a time when the husband and wife were both represented, made orders in the following terms:-
1.Pursuant to section 92 of the Family Law Act 1975 (as amended) the Deputy Commissioner of Taxation of the Commonwealth of Australia have leave to intervene in these proceedings.
2. Until further Order the husband and wife be restrained by themselves and by their servants from charging or dealing with in any manner whatsoever with any of the assets with which they have either a legal or beneficial interest other than in the normal course of business and save for complying with any Terms of Settlement agreed to between the parties and the Deputy Commissioner of Taxation of the Commonwealth of Australia and normal living expenses.
3. Until further Order the husband and wife be restrained by themselves and by their servants and agents and in their capacity as a director and/or shareholder of any corporate entity inclusive of but not limited to Jonequille Pty Ltd, Win Grange Pty Ltd, L J Kliman Pty Ltd and Big Boy Stuff Pty Ltd from charging or dealing with in any manner whatsoever with any of the assets in which they have a legal or beneficial interest other than in the normal course of business and save for the complying with any Terms of Settlement agreed to between the parties and the Deputy Commissioner of Taxation of the Commonwealth of Australia and normal living expenses.
4. Reserve all questions of costs.

There was no appeal against any of those orders.

On 30 August 1999, the DCT filed an application (in Form 7) seeking orders in the following terms:-
1. By way of final property settlement as between the parties that prior to the distribution of such property as between the Husband and Wife the Deputy Commissioner of Taxation of Australia be first paid by the parties or either of them the sum of $1,000,802.55 together with interest as and from..[sic]
2. By way of final property settlement as between the parties that prior to the distribution of such property as between the Husband and Wife the Deputy Commissioner of Taxation of Australia be first paid by the parties or either of them the sum of $270,033.00 together with additional tax for late payment and penalty interest for late payment as calculated pursuant to s. 207 and s. 207A of the INCOME TAX ASSESSMENT ACT 1936.

On 31 October 2000, the DCT filed a further application (in Form 8) for interlocutory relief seeking orders in the following terms (emphasis added):-
1. That the Husband forthwith make available for inspection by the Deputy Commissioner of Taxation those documents not the subject of privilege.
2. That paragraph 2 of the orders of the Honourable Justice Frederico made 28^th July 1999 be varied and substituted by the following:
That until further order the husband and wife be restrained by themselves and by their servants and agents from charging or dealing with in any manner whatsoever with any of the assets and income with which they have or will have either a legal of beneficial interest other than in the normal course of business, normal living expenses and save for complying with any Terms of Settlement agreed to between the parties and the Deputy Commissioner of Taxation of the Commonwealth of Australia.
3. That paragraph 3 of the order of the Honourable Justice Frederico made 28^th July 1999 be varied and substituted by the following:
That until further order the husband and wife be restrained by themselves and by their servants and agents and in their capacity as a director and/or shareholder of any corporate entity inclusive of but not limited to Jonequille Pty Ltd, Win Grange Pty Ltd, L J Kliman Pty Ltd and Big Boy Stuff Pty Ltd from charging or dealing with in any manner whatsoever with any of the assets and income in which they have or will have a legal or beneficial interest other than in the normal course of business, normal living expenses and save for complying with any Terms of Settlement agreed to between the parties and the Deputy Commissioner of Taxation of the Commonwealth of Australia.
4. Such further or other order as this Honourable Court deems fit to make.
5.The husband and the wife pay the costs of the Deputy Commissioner of Taxation of the Commonwealth of Australia of and incidental to this application.”

On 30 March 2001, the husband filed a Response Objecting to the Jurisdiction of the Court (Form 14) in the following terms:-

“Grounds relied upon by the husband:-

1.  The applicant third party is not a party to the marriage.
2.  The applicant third party is an unsecured creditor of a party to the marriage.
3. The Family Court does not have jurisdiction to entertain the application for interim orders instituted by the applicant third party as they do not constitute a “matrimonial cause” as defined in sec. 4(1) of the Family Law Act 1975.
4.  In particular, the application for interim orders instituted by the applicant third party are not proceedings “in relation to” the pending proceedings between the parties to the marriage in that they are not related to the marriage of the parties or the relationship of the parties to the marriage but are related to a debt owed by the husband to the third party which is the subject of proceedings in the Supreme Court of Victoria between the husband and the third party.
5.  Further, the Family Court does not have power under the Family Law Act 1975 to make the interim orders sought by and in favour of the applicant third party.
6. Notwithstanding that leave to intervene in the proceedings between the husband and the wife was granted to the third party pursuant to sec. 92 of the Family Law Act 1975 by the Honourable Court on 28 July, 1999, that does not confer upon the third party the rights and liabilities of a party to a marriage under that Act.

On 11 April 2001, the DCT filed a further application (in Form 8) seeking interlocutory orders in the following terms (emphasis added):-
1. That the Husband and Wife each forthwith make available for inspection by the Deputy Commissioner of Taxation those documents not the subject of privilege.
2. That paragraph 2 of the orders of the Honourable Justice Frederico made 28^th July 1999 be varied and substituted by the following:
That until further order the husband and wife be restrained by themselves and by their servants and agents from charging or dealing with in any manner whatsoever with any of the assets and income with which they have or will have either a legal of beneficial interest other than in the ordinary course of business and save for complying with any Terms of Settlement agreed to between the parties and the Deputy Commissioner of Taxation of the Commonwealth of Australia, save and except that each of the husband and wife respectively:
(a)    may use a sum not exceeding $300.00 per week from their said assets or income, respectively, for living expenses;
(b)   subject to the terms hereinafter provided, may use such sums derived from their said assets and income respectively as are necessary to pay for their reasonable legal costs and disbursements and any reasonable accounting costs incurred in connection with this proceeding, and in the case of the husband, in connection with Supreme Court proceeding number 4659 of 1999.
3.That paragraph 3 of the orders of the Honourable Justice Frederico made 28^th July 1999 be varied and substituted by the following:
That until further order the husband and wife be restrained by themselves and by their servants and agents and in their capacity as a director and/or shareholder of any corporate entity inclusive of but not limited to Jonequille Pty Ltd, Win Grange Pty Ltd, L J Kliman Pty Ltd and Big Boy Stuff Pty Ltd from charging or dealing with in any manner whatsoever with any of the assets and income in which they have or will have a legal or beneficial interest other than in the ordinary course of business of each such particular entity.
4. The Husband and Wife respectively provide to the legal representatives of the Deputy Commissioner of Taxation at least 14 days written notice of his or her intention to pay any legal costs or accounting expenses as allowed for in paragraph 2(b) hereof and provide with such notice itemised accounts for each expense which it is proposed be made.
5. Liberty to apply be granted to the Deputy Commissioner of Taxation to apply in relation to any payments to be made pursuant to paragraph 2 hereof.
6.       Such further or other order as this Honourable Court deems fit to make.
7. The husband pay the costs of the Deputy Commissioner of Taxation of the Commonwealth of Australia of and incidental to this application.
On 26 April 2001, the husband filed a response (in Form 8A) seeking orders in the following terms:-
“1. That the interveners Amended Form 8 Application filed 11 April, 2001 be dismissed;
2. That paragraphs 2 and 3 of the orders made by the Honourable Justice Frederico on 28 August, 1999 be discharged;
3. In the event that the husband’s Form 14 Response objecting to jurisdiction is dismissed, then the further hearing of the Intervener’s Amended Form 8 Application filed on 11 April, 2001 be adjourned to a date to be fixed and the husband file any affidavit material in which he seeks to rely upon within 14 days.
4. That the intervener pay the husband’s costs of and incidental to these proceedings on an indemnity basis.”

On 3 May 2001, the wife filed a response (in Form 8A) seeking orders in the following terms:-
1. That the interveners Amended Form 8 Application filed 11 April 2001 be dismissed;
2. That paragraph 2 and 3 of the orders made by the Honourable Justice Frederico on 28 August 1999 be discharged;
3. That the intervener pay the wife’s cost [sic] of and incidental to these proceedings.

On or about 12 June 2001, the DCT obtained judgment against the husband in the Supreme Court of Victoria for “an amount in the region of $1.3 million”.

The trial Judge’s orders of 29 June 2001 (now the subject of this appeal) discharged the injunctive orders made by Frederico J on 28 July 1999. Subsequent to his Honour’s delivery of judgment on 29 June, an application was made on behalf of the DCT for a stay of the orders made earlier that day. His Honour then ordered:-
1. That, until further order, or until the determination of the Appeal filed by the Deputy Commissioner of Taxation of Australia, this day, is determined, Order (2) of the Orders made by me earlier this day, be stayed.
2. That there be general liberty to apply.

Judgment of the trial Judge

Having chronicled the background to the proceedings, and referred to the extensive list of authorities to which he had been referred during the course of the hearing, the trial Judge considered the provisions of s 92 of the Act, and closely examined the numerous authorities to which he had been referred.

The trial Judge examined the provisions of s 114(1) and discussed the submissions made to him in that regard, then turned his attention to the provisions of s 114(3), and to the submissions made by Counsel with respect to that sub-section.

Under the heading “COMMENTS, CONCLUSIONS AND ORDERS”, the trial Judge elucidated the reasoning process which led to his conclusion in relation to the applications before him. He noted that the DCT “at all relevant times, was seeking a Mareva injunction, in relation to which the High Court dealt with the principles to be considered in Cardile and Ors v LED Builders Pty Ltd [(1999) 198 CLR 380]”. Having discussed the nature of such an order, the trial Judge returned to the provisions of s 92(3) of the Family Law Act, and particularly to the extent to which intervention pursuant to that section conferred upon a third party, such as the DCT, “rights” which it would not otherwise be able to assert in the Family Court. His Honour concluded:-
I do not accept the argument on behalf of the DCT (if I understood it correctly) that s. 92(3) provides some type of “gateway” through which the DCT may enter into the arena and then be deemed to be an equal participant with the husband and wife in respect to, inter alia, an ability to seek orders as if the DCT was a party to the marriage, as distinct from being a party to the proceedings.
Further, his Honour said, “If the DCT does not have rights as a matter of “substantive law” then, on my interpretation of the authorities, the DCT does not acquire such rights through the act of intervention”, and thus concluded that “the provisions of s. 92(3) do not operate to confer jurisdiction” to grant the injunction sought by the DCT.

Of s 114(1) of the Act, the trial Judge observed:-
Proceedings of the kind referred to in paragraph (e) of the definition of ‘matrimonial cause’ in sub-section 4(1) are proceedings between the parties to a marriage for an order or injunction in circumstances arising out of the marital relationship. Thus, as a matter of ‘substantive law’ parties to proceedings can obtain an injunction under s. 114(1) if those parties are parties to a marriage and the circumstances in which the injunction arises is one that springs from their marital relationship.

Having indicated that:-
During the course of Mr Strum’s [Counsel for the husband] submissions, generally, I found myself to be in prima facie agreement with what was being put …

the trial Judge concluded:-
To consider the circumstances in which a person, as a matter of “substantive law”, and who is a party to the proceedings but who is not a party to the marriage, can obtain an injunction then this possibility, in my view, could only arise within the context of s. 114(3), which relates to “proceedings outside subsec (1)” in circumstances where the court is already exercising jurisdiction in a “matrimonial cause” that involves a third party. …

Ultimately, his Honour did not:-
…consider that s. 114(1) is of any assistance to the DCT in that an injunction under that provision can only be granted in proceedings between the parties to a marriage. And an injunction under s. 114(3) can only be granted where it is ancillary to the exercise of jurisdiction other than under s. 114.

The trial Judge recorded his acceptance of a submission on behalf of the husband with respect to s 114(3) in the following terms:-
(b) Those sub-sections can only apply where the proceedings thereunder constitute a matrimonial cause… (there is a) need for the court to have the jurisdiction to exercise any power under sec. 114 irrespective of intervention under sec. 92(3).

His Honour made further reference to Re Ross-Jones; Ex parte Green (1984) FLC ¶91-555 and concluded that the Family Court did not have jurisdiction to make the orders sought by the DCT in the amended Application filed 11 April 2001. As that application “presumably incorporates” the earlier application of the DCT of 31 October 2000, that too was accordingly dismissed.

Leave to amend the Notice of Appeal

I have referred to the amended Notice of Appeal filed 24 August 2001. Such notice sought to add an additional ground to those previously raised. It was conceded on behalf of the DCT that in the circumstances, leave to amend was required. Leave to amend was opposed. Written submissions on behalf of the DCT addressed the issue, and provide a reasonable explanation for the failure to include the additional ground in the earlier Notice of Appeal. More importantly, Counsel for the husband and the wife, conceded that the facts had all been dealt with and were “all before the Court”, that there was no prejudice arising out of the amendment, other than that further Grounds of Appeal had to be faced, and that they were “ready to meet the point”. The Court allowed the DCT to amend its Grounds of Appeal in terms of the Notice filed 24 August 2001. The facts and circumstances to which I have referred provide sufficient justification for allowing the DCT to so amend.

The issue of leave to appeal

In relation to this issue of whether leave to appeal was required in this case, it was submitted on behalf of the DCT that “the decision and order made by Wilczek J that the Court had no jurisdiction to make the said orders made by Frederico J is a final order rather than in [sic] interlocutory order”. It was submitted that, if however, “the Court be of a contrary view” leave to appeal such orders should be granted. It was submitted, following the decision of the High Court in Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 that “the judgment of Wilczek J contains an error of principle and that the result of that error causes substantial injustice” to the DCT “because he is denied the right to seek an interlocutory injunction”.

On behalf of the husband and the wife, it was submitted that leave was required but that, whether the test be “cumulative or disjunctive” (Page 9 Respondent Husband’s Summary of Argument) leave should be refused following the decision in Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (supra), on the basis that neither of the requirements there referred to could be satisfied by the DCT.

The question of whether or not leave to appeal is required is not easily answered. In Malouf v Malouf and Ors (1999) 167 ALR 383 at 391, a Full Bench of the Federal Court (Beaumont, Lee and Dowsett JJ) said that:-
… for the purposes of determining whether there is an appeal as of right, itself dependent upon whether the decision in question was final or interlocutory, the test is whether or not the order in question precludes a further application. …

Arguably, the refusal of interlocutory injunctions of the kind sought by the DCT would not preclude a further application for similar relief. In the present circumstances however, the trial Judge dismissed the application of the DCT, and set aside interlocutory injunctive orders previously made in favour of the DCT, on the basis that there was no jurisdiction in the Court to grant such relief. It is difficult in those circumstances to see how, on any subsequent application for similar relief, the decision of the trial Judge would not be relied upon by the husband and wife to resist such application in reliance upon the doctrine of res judicata.

It is suggested in Spencer Bower, Turner and Handley, The Doctrine of Res Judicata, Third Edition, Butterworths, London, 1996 at 171 that:-
Although some interlocutory orders may finally determine some question and be binding in later stages of the proceedings, the dismissal of an interlocutory application is not final and will not bar a further application on the ground of res judicata, although the further application is not likely to succeed unless supported by additional evidence or a different argument.

The text does not, in its discussion of “interlocutory decisions which are final for res judicata” provide any examples of decided cases shedding helpful light on the current debate. The cases cited turn largely on their own facts and jurisdictional contexts.

The submission on behalf of the DCT that the trial Judge’s orders were, in substance, final orders is thus not able to be lightly dismissed, notwithstanding that the nature of the relief sought, and previously obtained, was clearly “interlocutory”.

Other than to the extent indicated, this issue was not thoroughly agitated on appeal. I am thus reluctant to express a concluded view on the issue. Moreover, the question does not ultimately become critical given my conclusions as to the merits of the DCT’s challenges to the trial Judge’s decision in relation to the issue of jurisdiction to grant an interlocutory injunction in favour of the DCT, and the reality that, in the circumstances of this case, a successful challenge to the trial Judge’s decision on the question of jurisdiction necessarily requires the DCT to demonstrate an “error of principle”.

Issues to be raised on appeal
Section 92

Sub-section 92(3), which is relevant for present purposes, provides:-
92(3) [Rights of intervener] Where a person intervenes in any proceedings by leave of the court the person shall, unless the court otherwise orders, be deemed to be a party to the proceedings with all the rights, duties and liabilities of a party.

In relation to the operation of s 92(3), the trial Judge said:-
243.Accordingly (and there was no dispute at this level) the DCT can intervene in those proceedings between the husband and the wife.
244.I do not accept the argument on behalf of the DCT (if I understood it correctly) that s. 92(3) provides some type of “gateway” through which the DCT may enter into the arena and then be deemed to be an equal participant with the husband and wife in respect to, inter alia, an ability to seek orders as if the DCT was a party to the marriage, as distinct from being a party to the proceedings.
245.To that extent, it would be correct to say, that the plain words of s. 92(3) may well mislead one if one did not have the benefit and the knowledge of what the High Court had to say in Ascot Investments Pty Ltd v Harper.
246.Accordingly, in relation to s. 92(3), one needs to ask whether the DCT (or any other third party) is intervening in proceedings because such party is entitled to relief as a matter of “substantive law” or not. If not, then the intervention would be on the basis of participating in the proceedings, procedurally, with the right to be heard etc.
247.If the DCT does not have rights as a matter of “substantive law” then, on my interpretation of the authorities, the DCT does not acquire such rights through the act of intervention. I say that having regard to the words of Gibbs J in Ascot and Harper at p. 76,063 (already referred to in para 34 of these Reasons), and worthy of repetition:
“It is obvious that this subsection must be read down; it cannot mean that any intervenor, whatever his, her or its situation, is to have all the rights and liabilities of a party to a marriage… S 92(3) enables the Court to make an order either in favour of or against an intervenor if such order is one that can properly be made as a matter of substantive law; the subsection removes a possible procedural obstacle, but does not alter substantive rights and duties. It does not give the Family Court power to impose new duties upon, or to annul the rights of, third parties who are interveners…”. (The emphasis is mine).
248.In case it is thought that, perhaps, there is some misunderstanding about the words of Gibbs J, as Mr Strum [Counsel for the husband] pointed out, one can turn to the portion of the judgment of Barwick C.J. at p. 76,055, having referred to the operation of s. 92, then went on to say:
“I have considerable difficulty in understanding why the joinder of the appellant as a party can in any respect add to the court’s power or authority so as to provide a basis for the order for the registration of the shares. Whatever the effect of s. 92, it is, in my opinion, quite clear that its operation cannot in this case cause any relevant accretion of jurisdiction to the Family Court.” (The emphasis is mine).
249.Thus, I conclude, the provisions of s. 92(3) do not operate to confer jurisdiction.

In written submissions on behalf of the DCT, Counsel referred to the provisions of s 92(3) and then proceeded to make the following submissions (which despite their length, we set out in full):-
17.     …At paragraphs 245 to 249 of his reasons his Honour considered Ascot Investments v. Harper (supra) and concluded that the provisions of section 92(3) of the Act “…do not operate to confer jurisdiction.” This is to misunderstand the purpose of section 92(3) which is not intended to be a jurisdictional provision.
18. Section 92 confers statutory power on the court to allow a party to intervene, and deals with the rights of interveners. The procedural effect of an intervention is set out in Dougherty v. Dougherty (1987) FLC 91-823 at page 76.194. …It is submitted that the critical words in section 92(3) of the Act for the purposes of this proceeding are the word “proceedings” and the word “rights” which appear therein. It is submitted that section 92(3) of the Act confers on an intervener all of the rights, duties and liabilities as those of a party to the proceedings. Significantly, the section does not describe the rights, duties and liabilities as those of a party to a marriage. It follows that the “rights” referred to in the sub-section are those of a party to the proceedings. It is submitted that the expression “…all of the rights…” appearing in section 92(3) of the Act is of wide ambit and should not be confined merely to a right to be heard in the proceeding. Such an interpretation of section 92(3) is contrary to the generally understood position that an Intervener in proceedings becomes a party with all the privileges of a party and bound by the resulting decision: Corporate Affairs Commission v. Bradley [1974] 1 NSWLR 391, 396; United States Tobacco Co v. Minister for Consumer Affairs (1988) 20 FCR 520, 534. To confine the rights of an intervener to a right to be heard would mean, for instance, no order could be made against an intervener in relation to additional costs incurred as a result of the intervention.
19. It is submitted that Wilczek J interpreted section 92(3) of the Act, incorrectly. Further, he misapplied the decision of the High Court in Ascot Investments v. Harper (supra). In that case, the High Court concluded that the Family Court did not have jurisdiction or power to make orders adversely affecting interests of or imposing new duties on third party interveners. Gibbs J in that context construed section 92(3) as only procedural. When Gibbs J referred to reading down the section he was only making the point that the provision did not confer any additional power to make orders in relation to third party interveners (148 CLR at 357). The High Court was not, in any event, dealing with the situation where an intervener was seeking orders against a husband or wife. Reliance on that case to read down section 92(3) is, therefore, misplaced.
20.     In Bailey v. Bailey (1990) FLC 92-117, the Full Court of the Family Court accepted that an intervener could obtain a stay of application for a property settlement in the Family Court, pending the determination of a common law claim by an intervener against the estate of the husband in a State Supreme Court.
21.     At p 77, 775, the Full Court indicated, without deciding the matter, that there was much to be said for an argument that the stay order was in the nature if an interim injunction. It is submitted that Bailey’s case (supra) indicated by implication that the Full Court accepted that an intervener could obtain interlocutory orders in the Family Court. It is submitted that Bailey’s case is an example (albeit in the context of a stay of proceedings only) of the making of an order in favour of an intervener.
22.     The right of an unsecured creditor to intervene in an existing property proceeding was considered by the Full Court in Biltoft v Biltoft (1995) FLC 92-614 wherein the husband claimed that he owed a debt to a third party, which debt was not property quantified. In their joint judgement [sic], Nicholson CJ, Ellis and Buckley JJ dealt with the rights of third party creditors to intervene in a proceeding in which orders are sought under s. 79 of the Family Law Act. Their Honours said, at page 81, 138-9 (sic – see 82, 128-9):
“There is an obligation on both parties to disclose any significant creditors or any significant claim against either of them by a third party. If, as a result of the order of the [C]ourt in the property proceedings, the ability of a creditor or claimant to recover his or her debt or claim is likely to be affected, notice of the Family Court proceedings must be given to that creditor or claimant. He/she may then intervene in the Family Court proceedings and either seek a stay of those proceedings or some appropriate order which recognises his/her rights.” (emphasis added)
23. It is submitted that Wilczek J erred in determining that Section 92(3) of the Act should be read down so as to confine the word “rights” appearing therein to mean no more than a right to be heard at the trial of a particular proceeding brought by the parties to a marriage. Such a conclusion fails to give the expression “all the rights, duties and liabilities of a party” their full force and effect. There is no justification for confining the word rights in the way which His Honour did.

Then in his opening address, Senior Counsel for the DCT identified the central issue as:-
the jurisdiction of the Court to provide relief on application of a third party interveners [sic] against parties to a marriage involved in a property dispute. It does not concern the power of a Court to alter rights of a third party. It can be focussed on the ability of the third party to seek orders in relation to existing rights that he might have against one or both parties to a marriage.

He further submitted that, the questions raised for consideration “the operation of section 92(3) of the Act dealing with the rights of an intervener, and secondly, what is the jurisdiction of this Court to grant an injunction – a Mareva injunction”, on the application of a third party intervener.

In his written submissions, Counsel for the husband (whose submissions were adopted by Counsel for the wife at the commencement of the hearing), having quoted the same passages from the judgments of Barwick CJ and Gibbs J in Ascot Investments (supra) as the trial Judge quoted in paragraphs 247 and 248 of his judgment, continued:-
Thus, it is clear and well established that the mere fact a third party intervenes or is joined in proceedings, does not give the Family Court power to impose new duties upon or to confer new rights upon that party. The intervention or joinder of a third party does not in any respect add to the Court’s powers or authority. It does not cause any accretion of jurisdiction to the Court. It merely enables the Court to make an order either in favour of or against a third party if such order is one that can properly be made as a matter of substantive law. Section 92(3) removes a possible procedural obstacle. It does not alter substantive rights and duties. If the Court has no power, apart from sec. 92(3), to grant the injunctions sought by the DCT against the husband and the wife, that subsection does not confer such power.

Specifically in relation to the passage from Gibbs J’s judgment in Re Ross-Jones; Ex parte Green (supra), on which substantial reliance was placed by Counsel for the husband, I would point out that the facts of Re Ross-Jones; Ex parte Green (supra) were significantly different, in that the husband there sought to restrain a third party from exercising its legal rights in a Court of competent jurisdiction.

Nor did that case involve an intervener seeking an interlocutory injunctive order to preserve the assets of the parties in reliance upon a judgment against one of those parties. Unlike Re Ross-Jones; Ex parte Green (supra), intervention in the present case did not raise the prospect of the Family Court having to hear and determine a dispute which it would otherwise have no jurisdiction to hear and determine, as each example referred to by Gibbs CJ envisaged.

The protection of third party interests in property settlement proceedings

It has long been recognised that in the exercise of its jurisdiction to make property settlement orders, the Family Court must first determine what are the assets and liabilities of the parties to the marriage, and in so doing, have regard to the interests of third party creditors. In support of this proposition, I refer by way of example to the following cases.

In Prince and Prince; General Credits Australia Limited (Intervenor); A-G for the State of Queensland (Intervening); A-G for the Commonwealth of Australia (Intervening) (1984) FLC ¶91-501 at 79,076 the Full Court said that:-
… the outcome [of property proceedings] … will depend upon findings made by the Court as to the parties’ assets and liabilities, their contributions and their respective financial resources, means and needs. It would be necessary for the Court to determine so far as is possible the value of the property held by each party. In accordance with the usual practice this would be done by deducting the value of outstanding mortgages, debts, and other liabilities …

In Rowell and Rowell; DFC of T (Intervenor) (sic) (1989) FLC ¶92-026 at 77,392 McCall J said:-

The Family Court has always taken into account liabilities, not only liabilities which are certain or reasonably established but even those liabilities which are contingent and which have to be established …

In Biltoft v Biltoft (supra), having quoted the “general rule” said to emerge from Rowell v Rowell (supra) and Prince v Prince (supra), the Court said at 82,128:-

… the rule is not absolute, is not prescribed by the statute and there are a number of well recognised exceptions … There is no requirement that the rights of an unsecured creditor or claim by a third party must be considered and dealt with prior to the Court making an order under s.79, nor is there a rule of priority as between a creditor claimant and a spouse. Those rights, however, cannot be ignored. They must be recognised, taken into account and balanced against the rights of the spouse. …

Thus whatever the ultimate outcome of the proceedings for the settlement of property between the husband and the wife, the DCT has a right to have its judgment debt “recognised, taken into account and balanced against the rights of the spouse”.

During the course of the hearing of the appeal, Counsel for the husband conceded that:-
…deduction of a liability, as would undoubtedly occur in this case between Dr Kliman and his wife, is not an order in favour of the third party. This Court – I think it is common ground between the husband and the wife that a tax debt, when this matter eventually reaches a property hearing between them, is a debt to be taken off the asset pool. This Court could even – it may well order the husband to pay that debt, but it is after – and then divide the property net between them, but that is not an order in my respective submission. It is an ex parte. It is not a order that can be made in favour of the Deputy Commissioner of Taxation whether or not it intervenes.

After further discussion arising out of that submission, Counsel for the husband was asked “Do you concede that in the final orders between the parties the Court could order these parties to satisfy the husband’s debt to the Taxation Department out of the property of the parties”, to which Counsel for the husband replied “yes, your Honours, yes,” from which proposition Counsel for the husband did not resile. (Compare: Zdravkovic (1982) FLC ¶91-220 at 77,205).

The Court then asked:-
Well, if you concede that, how can you say there is no jurisdiction for the Commissioner to seek an injunctive order to preserve circumstances so that that eventuality will not disappear?

To which, Counsel replied:-

Your Honour, because all the Court is doing in doing that is no different to any other case where the Court, having identified the gross assets, identifies the liabilities, orders one of the parties to discharge that liability, and the net assets are then divided between the husband and the wife.

Having regard to the concession, properly made in my view, that the husband could be ordered by the Court in the exercise of its property settlement jurisdiction to pay to the DCT the monies owed under the judgment against him in favour of the DCT, prior to any division of property between himself and the wife, I see no reason why an interlocutory injunction or order could not be made under s 114(3) in order to preserve the assets of the parties so that the possibility of such an order could not be eliminated or otherwise defeated.

It must be remembered that there is a fundamental difference between obtaining orders from the Family Court which alter or affect the interests in property of third parties, and those which merely give effect to rights or entitlements of third parties which have been, as is the case of the DCT in this appeal, previously determined according to law. Cases such as Ascot Investments Pty Ltd v Harper (supra) and Re Ross-Jones; Ex parte Green (supra) are predicated on the reality that, prima facie, the legal rights of strangers to a marriage are usually only able to be impacted upon by proceedings in the Family Court to the extent that they can be pursuant to statutory provisions such as s 106 or possibly s 79A, where a “sham” or “alter ego” scenario is revealed, or pursuant to orders made when the accrued or associated jurisdiction of the Court is invoked.

While the issue of the rights and liabilities of third parties in property settlement proceedings under the Family Law Act remains complex and in many aspects unresolved, I am satisfied that a third party can apply to the Court for an injunctive order to preserve the property of the parties where the third party has an existing legal entitlement as against a party or parties to the marriage, which impacts upon the “property of the parties to the marriage or either of them” without further adjudicative determination.

In my view, the learned trial Judge erred in holding that the DCT’s applications for interlocutory injunctions failed for want of jurisdiction. The jurisdiction to make such injunctive orders under s 114(3) existed. There were proceedings pending at the time, which came within the definition of “matrimonial cause” in paragraph (ca) of the definition thereof in s 4(1) of the Act, and in which the DCT had intervened pursuant to the provisions of s 92(3) thus acquiring the rights and liabilities of a party. In “paragraph (ca)” proceedings, an interlocutory order or injunction can be made if the Court considers it just or convenient under s 114(3). That sub-section does not provide that it is only parties to the marriage who can apply for such an injunction. There is nothing to say that an intervener party cannot make such application. The jurisdiction to entertain the application thus existed, and the applications should have been determined on their merits. If contrary to the conclusion I have reached, the jurisdiction did not exist by virtue of paragraph (ca) of s 4(1), despite the decision in Dougherty (supra), I am of the opinion that paragraph (f) of s 4(1) could be relied upon to attract the jurisdiction created by s 114(3), as the DCT’s application for an interlocutory injunction was clearly an application “in relation to” the pending proceedings for settlement of property, essentially for the reasons mentioned in paragraphs 121 to 127 of these reasons. If the DCT is entitled to appeal as of right, it would be appropriate to allow the appeal, and discharge the trial Judge’s orders and dismiss the husband’s Response objecting to jurisdiction.

In these circumstances, it is unnecessary to consider the question of whether the DCT could rely upon associated jurisdiction as the jurisdictional basis for its applications, which was a matter raised before us on behalf of the DCT.

Orders for the preservation of assets and the source of power to make such orders

I think it important to draw attention to the fact that the issue of the source of the power to grant the interlocutory injunctions or preservation orders in this case was argued principally on the basis of s 114 as the source of that power. However, in the course of his primary oral submissions and also in his submissions in reply, Senior Counsel for the DCT made some brief reference to the High Court decision in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 (which was an appeal from the Full Court of the Federal Court), and in particular to what was said by Gaudron, McHugh, Gummow and Callinan JJ in their joint judgment at paragraph 28. In an endeavour to understand what was being said by their Honours in paragraph 28, it will be useful to also set out some of the relevant preceding and succeeding paragraphs:-
25.None of the authorities cited to this Court went so far as to support an order of the width of that made in the Full Court. As the argument proceeded upon the grounds of appeal to which we have referred, several matters became apparent. One was that the English authorities appear to have developed to a stage where what is identified as the Mareva injunction or order lacks any firm doctrinal foundation and is best regarded as some special exception to the general law. Another was that, whilst it is undesirable that asset preservation orders of the Mareva variety be left as a sui generis remedy with no doctrinal roots, the term "injunction" is an inappropriate identification of that area of legal discourse within which the Mareva order is to be placed. The third was the point encapsulated in the joint judgment of this Court in CSR Ltd v Cigna Insurance Australia Ltd [(1997) 189 CLR 345 at 391 (original emphasis)]:
‘The counterpart of a court's power to prevent its processes being abused is its power to protect the integrity of those processes once set in motion’.

The integrity of those processes extends to preserving the efficacy of the execution which would lie against the actual or prospective judgment debtor [Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 623, 638]. The protection of the administration of justice which this involves may, in a proper case, extend to asset preservation orders against third parties to the principal litigation. This appeal concerns the identification of such proper cases.

26.In Jackson v Sterling Industries Ltd [(1987) 162 CLR 612 at 623.], Deane J referred to the armoury of a court of law and equity to prevent the abuse or frustration of its process in relation to matters coming within its jurisdiction. By this means, the risk of the stultification of the administration of justice is diminished. Once the source of power is recognised, then, whatever may be the limitations with respect to inferior courts [See the remarks of Dawson J in Grassby v The Queen (1989) 168 CLR 1 at 16-17 as to the powers of inferior courts enjoyed by implication.], in the case of the Federal Court the power will be seen to be comprehended by the express grant in s 23 of the Federal Court Act. In National Australia Bank Ltd v Bond Brewing Holdings Ltd [(1990) 169 CLR 271 at 277.], Mason CJ, Brennan and Deane JJ described as mistaken any proposition that Mareva relief could only be obtained against the defendant to an action if there were a positive intention to frustrate any judgment. However, the presence in s 23 of the expression "as the Court thinks appropriate" points to the requirement to develop principles governing the exercise of the power in such a fashion as to avoid abuse. This need, as indicated above, is at the heart of the present appeal. Meeting that need is not facilitated, and may be impeded, by continued attempts to force what has become known as the Mareva order into the mould of interlocutory injunctive relief as administered under that description by courts of equity.

The remedy of injunction

27.In that regard, further reference should now be made to the development of the injunctive remedy, to the strain placed upon it by its use to identify new statutory remedies and to its misapplication to identify either the nature of or the juridical foundation for the Mareva order.

28.The term ‘injunction’ is used in numerous statutes to identify a particular species of order, the making of which the law in question provides as part of a new regulatory or other regime, which may be supported by penal provisions. Notable examples in statutes presently in force nationally are found in s 80 of the Trade Practices Act (Cth) ("the Trade Practices Act"), s 114 of the Family Law Act 1975 (Cth), s 1324 of the Corporations Law (Cth) and s 170NG of the Workplace Relations Act 1996(Cth). These provisions empower courts to give a remedy in many cases where none would have been available in a court of equity in the exercise of its jurisdiction, whether to protect the legal (including statutory [See Fejo v Northern Territory (1998) 195 CLR 96 at 125-126, 139.]) or equitable rights of the plaintiff, the administration of a trust for charitable purposes, or the observance of public law at the suit of the Attorney-General, with or without a relator, or at the suit of a person with a sufficient interest.

29.In these situations, the term ‘injunction’ takes its content from the provisions of the particular statute in question [See ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 at 263-265; Bristol City Council v Lovell [1998] 1 WLR 446 at 452-454; [1998] 1 All ER 775 at 781-783.]. In other laws, for example Div 2 (ss 43-65) of Pt III of the Proceeds of Crime Act 1987(Cth), where the term ‘restraining order’ is used, remedies having some characteristics of injunctions as understood in courts of equity are given their own particular statutory designation [See also the use of the term ‘order’ in ss 80A and 87A of the Trade Practices Act 1974 (Cth) to identify respectively the powers conferred upon courts to compel the disclosure of information or publication of advertisements, and to prohibit payment or transfer of moneys or other property.].

Then, having discussed developments in courts of equity, notably in England, their Honours continued:-
41.In Australia, that view of the matter has been urged for many years [See Hetherington, ‘Inherent Powers and the Mareva Jurisdiction’, Sydney Law Review, vol 10 (1983) 76, pp 83-86.]. It is seen in the most recent statement of principle in this Court concerning the jurisdiction of the Federal Court to grant a Mareva order. In Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia [No 3] [(1998) 195 CLR 1 at 32.], in their joint judgment, Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ said:
‘Interlocutory relief
The powers of the Federal Court under s 23 of its Act are powers 'to make orders of such kinds, including interlocutory orders, as it "thinks appropriate"', as Deane J noted in Jackson v Sterling Industries Ltd [(1987) 162 CLR 612 at 622.]. He added: 'Wide though that power is, it is subject to both jurisdictional and other limits. It exists only "in relation to matters" in respect of which jurisdiction has been conferred upon the Federal Court. Even in relation to such matters, the power is restricted to the making of the "kinds" of order, whether final or interlocutory, which are capable of properly being seen as "appropriate" to be made by the Federal Court in the exercise of its jurisdiction.' One limitation on the powers of the Federal Court to grant interlocutory injunctions is that those powers must be exercised for the purpose for which they are conferred. In a later passage of the judgment of Deane J in Jackson v Sterling Industries Ltd [(1987) 162 CLR 612 at 623. See also Jago v District Court (NSW) (1989) 168 CLR 23 at 74 per Gaudron J.], his Honour said a power to prevent the abuse or frustration of a court's process should be accepted 'as an established part of the armoury of a court of law and equity' and that 'the power to grant such relief in relation to a matter in which the Federal Court has jurisdiction is comprehended by the express grant to that Court by s 23 of the Federal Court of Australia Act 1929 '. But, his Honour observed [Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 625.], orders must be framed 'so as to come within the limits set by the purpose which [the order] can properly be intended to serve'. The Mareva injunction is the paradigm example of an order to prevent the frustration of a court's process [Rahman (Price Abdul) v Abu-Taha [1980] 1 WLR 1268 at 1272; [1980] 3 All ER 409 at 411; Mercedes Benz AG v Leiduck [1996] AC 284 at 299, 306-307.] but other examples may be found [Gibbs v David (1875) LR 20 Eq 373 at 377-378; Hatton v Car Maintenance Co Ltd [1915] 1 Ch 621 at 624-625; Heavener v Loomes (1924) 34 CLR 306 at 326; Hannam v Lamney (1926) 43 WN (NSW) 68; Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264 at 276.]. The moulding of an interlocutory injunction must depend upon the circumstances of each case. As Brennan J observed in Jackson v Sterling Industries Ltd [(1987) 162 CLR 612 at 621.]: 'A judicial power to make an interlocutory order in the nature of a Mareva injunction may be exercised according to the exigencies of the case and, the schemes which a debtor may devise for divesting himself of assets being legion, novelty of form is no objection to the validity of such an order.' The general principle which informs the exercise of the power to grant interlocutory relief is that the court may make such orders, at least against the parties to the proceeding against whom final relief might be granted, as are needed to ensure the effective exercise of the jurisdiction invoked [See Tait v The Queen (1962) 108 CLR 620.]. The Federal Court had jurisdiction to make interlocutory orders to prevent frustration of its process in the present proceeding.’

42.Subject to two matters to which we shall come, this passage should be accepted as a correct statement of principle. The first matter is that, in that passage, the attention of the Court was directed to orders against parties to the proceedings and against whom final relief was sought. In that situation, the focus is the frustration of the court's process. If relief is available against non-parties, the focus must be the administration of justice. The second matter is that, to avoid confusion as to its doctrinal basis, it is preferable that references to ‘Mareva orders’ be substituted for ‘injunctions’.

43.In Australia, for many years, Mareva orders have been made in aid of the exercise of the specific remedies provided for execution against judgment debtors. Such orders are not interlocutory as they may operate after the recovery of final judgment, yet they are impermanent in the sense that they preserve assets and assist and protect the use of methods of execution and do not substitute for them [See Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 626, 633, 637; Deputy Commissioner of Taxation v Winter (1988) 92 FLR 327 at 328-331.]. In respect of their operation after, as well as before, the making of orders for final relief, the Mareva order should, in general, be supported by an undertaking as to damages.

In reading the above passages, it must be remembered that the power conferred on the Federal Court by s 23 of its Act “in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of writs of such kinds as the Court thinks appropriate”, is in virtually identical terms to s 34(1) of the Family Law Act, which is in the following terms:-
The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, and to issue, or direct the issue of, writs of such kinds, as the Court considers appropriate.

I understood Senior Counsel for the DCT to assert that what was said by the members of the High Court in Cardile (supra) at paragraph 28 (quoted above) concerning s 114 of the Act and the provision of a remedy in a case where none might otherwise have been available, supported the DCT’s reliance on s 114 in this case. I consider that there would be force in such a submission, at least in relation to s 114(3), in circumstances such as the present, where what is sought to be protected is a judgment debt.

If it be, however, that what the High Court was saying in Cardile (supra) (and also in Patrick Stevedores (supra)), that s 34(1) is the true source of the power in the Family Court to make an order preserving assets pending the making of final orders in property settlement proceedings (including orders in favour of, or for the benefit of, an intervening judgment creditor (as in the present case), then I see no reason why that section could not be relied on to support the preservation orders sought in this case.

The question of leave to appeal

Having concluded that the appeal has merit, it is appropriate to consider whether leave to appeal should be granted, if it is required. In my view, whether the test referred to in Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (supra) and adopted by this Court in Rutherford v Rutherford (supra) be conjunctive or disjunctive, to the extent necessary, leave should be granted in the circumstances of this case. The DCT has demonstrated an error of principle on the part of the trial Judge.

The husband has a very substantial judgment debt to the DCT. The debt arose because the husband failed to comply with his legal obligations under the Income Tax Assessment Act 1936. So far as injustice is concerned, other than for the short time it would no doubt take for the DCT to obtain an interlocutory injunction against the husband, presumably in terms similar to those made by Frederico J on 28 July 1999, it is arguable that there would be no substantial injustice to the DCT in refusing leave to appeal. There is no real suggestion on behalf of the husband that orders substantially in the terms previously made in this Court could be resisted if the DCT were to seek such orders in the Supreme Court of Victoria. The orders in question having existed, without opposition by the husband or wife, for almost two years in this Court, it would however, in my view, be unjust to now refuse to grant leave to appeal on that basis.

To the extent that leave to appeal is needed by the DCT, I would grant such leave and allow the appeal against the trial Judge’s orders.

Costs

Counsel for the DCT sought an order for costs in the event of the appeal being allowed. Counsel for the husband submitted “if the appeal is allowed on the basis that Wilczek J’s judgment was erroneous, then costs in the ordinary event, your Honours, being an unsuccessful respondent to an appeal” and, in response to a question from the Court “You couldn’t resist an order for costs”, “I couldn’t seriously resist it,” I am persuaded that an order for costs should be made against the husband. They were only sought against the husband, not the wife who took no real part in the proceedings before this Court. In my view the circumstances justify an order for costs and I will so order on a party and a party basis as taxed or agreed.

Orders

In my view it would be appropriate to order as follows:
1.That leave be granted to the Deputy Commissioner of Taxation to appeal against Orders 2, 3, 5, 6 and 7 made on 29 June 2001.
2. That the appeal be allowed.
3. That Orders 2, 3, 5, 6 and 7 made on 29 June 2001 be set aside.
4.That the husband's Response objecting to jurisdiction filed on 30 March 2001 be dismissed.
5.That the husband pay the costs of the Deputy Commissioner of Taxation of and incidental to the application for leave to appeal and the appeal; such costs to be as agreed and failing agreement as taxed.

I certify that the preceding 141 paragraphs
are a true copy of the reasons for judgment
of this Honourable Full Court

Associate

[2002] FamCA 629

7 August 2002