Faldyn & Badenoch (No 2)
[2022] FedCFamC1A 204
Federal Circuit and Family Court of Australia
(DIVISION 1) APPELLATE JURISDICTION
Faldyn & Badenoch (No 2) [2022] FedCFamC1A 204
Appeal from: Badenoch & Faldyn (No 2) [2022] FedCFamC2F 794 Appeal number(s): NAA 131 of 2022 File number(s): HBC 184 of 2019 Judgment of: ALDRIDGE J Date of judgment: 8 December 2022 Catchwords: FAMILY LAW – APPEAL – PROPERTY – Appeal from property settlement orders – Bankruptcy – Where the orders were made with the consent of the first respondent and the trustee in bankruptcy – Where there was no appearance by the appellant at the time those orders were made – Procedural fairness – Whether the appellant continued to have rights under s 79 of the Family Law Act 1975 (Cth) to obtain property settlement orders despite his bankruptcy – Where on the facts of this case, there is no basis for the appellant to pursue a claim under s 79 of the Act – No error is established – Appeal dismissed – Appellant to pay the costs of the first respondent, second respondent and third respondent in a fixed sum.
FAMILY LAW – APPEAL – APPLICATION IN AN APPEAL – Where the appellant made an oral application to adduce evidence on the appeal – Where the relevant rules in respect of seeking to adduce further evidence were not complied with – The further evidence did not indicate the appellant had been misled – Where the evidence was available to be used at the hearing – Where the proposed evidence could not demonstrate error on part of the primary judge – Application dismissed.
Legislation: Bankruptcy Act 1966 (Cth) ss 4, 58, 60, 116
Family Law Act 1975 (Cth) Pt VIII, ss 79, 79A
Federal Circuit and Family Court of Australia (Family Law) Rules2021 (Cth) r 13.39
Cases cited: Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27
Calvin & McTier (2017) FLC 93-785; [2017] FamCAFC 125
CDJ v VAJ (1998) 197 CLR 172; [1998] HCA 67
Cummings v Claremont Petroleum NL (1996) 185 CLR 124; [1996] HCA 19
Gabel & Yardley (2008) FLC 93-386; [2008] FamCAFC 162
Kioa v West (1985) 159 CLR 550; [1985] HCA 81
Lenova & Lenova (Costs) [2011] FamCAFC 141
Sloan & Sloan [2018] FamCA 610
Number of paragraphs: 65 Date of hearing: 7 October 2022 Place: Sydney (via video link) The Appellant: Self-represented litigant Solicitor for the First Respondent: Murdoch Clarke Lawyers Solicitor for the Second Respondent: Katsikaris Family Lawyers Counsel for the Third Respondent: Mr Johnson Solicitor for the Third Respondent: O’Neill Partners ORDERS
NAA 131 of 2022
HBC 184 of 2019FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MR FALDYN
Appellant
AND: MS BADENOCH
First Respondent
MR A FALDYN
Second Respondent
MR GRAY AS THE TRUSTEE IN BANKRUPTCY
Third Respondent
order made by:
ALDRIDGE J
DATE OF ORDER:
8 december 2022
THE COURT ORDERS THAT:
1.The appellant’s oral application to adduce further evidence is dismissed.
2.The appeal is dismissed.
3.The appellant is to pay the costs of the first respondent fixed in the sum of $3,999, the second respondent fixed in the sum of $1,815 and the third respondent fixed in the sum of $3,826.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Faldyn & Badenoch (No 2) has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALDRIDGE J:
Introduction
This is an appeal against property settlement orders made by a judge of the Federal Circuit and Family Court of Australia (Division 2) in proceedings between Ms Badenoch (“the first respondent”) and Mr Faldyn (“the appellant”) on 16 May 2022.
The appellant became a bankrupt on 16 December 2021 when a sequestration order was made against him. Mr Gray, his trustee in bankruptcy (“the Trustee”) was joined as a party to the proceedings.
Mr A Faldyn, the appellant’s father, was also a party to the proceedings (“Mr A Faldyn”) as the second respondent.
The orders made by the primary judge were made with the consent of the first respondent, Mr A Faldyn and the Trustee. There was no appearance by the appellant when they were made. The orders were:
BY CONSENT IT IS ORDERED:
1.That within 7 days of the date of these orders the [first respondent] shall do all acts and things necessary to authorise M Conveyancing to disburse the remaining proceeds of sale of the property at B Street, Suburb C (“B Street, Suburb C property”) currently held in the trust account of M Conveyancing as follows:
1.1$10,000 to the Trustee in Bankruptcy of the Estate of [the appellant] as nominated by the Trustee in Bankruptcy (Fourth Respondent).
1.2 The balance then remaining:
1.2.1 50% to the [first respondent] as nominated by her.
1.2.2 50% to [Mr A Faldyn] as nominated by him.
2. That in the event [the first respondent] refuses or neglects to execute any deed, document or instrument necessary to give effect to Order 1 herein then the Registrar of the Court shall be appointed pursuant to section 106A of the Family Law Act 1975 (Cth) to execute such deed, document or instrument in the name of [the first respondent] and do all acts and things necessary to give validity and operation to the deed, document or instrument.
3. The Court otherwise notes that these orders are in full and final satisfaction of the respective claims (if any) pursuant to Section 79 of the Family Law Act 1975 (Cth) by the:
3.1 [the first respondent].
3.2 [Mr A Faldyn].
3.3 Trustee in Bankruptcy in relation to the vested matrimonial property of [the appellant].
4 That [Mr A Faldyn] shall indemnify and keep indemnified [the first respondent] and the [the Trustee] in relation to any claim or any monies owed to O Pty Ltd in relation to any financial contribution by the said company towards the acquisition, conservation or improvement of the B Street, Suburb C property.
5. That there be no order as to costs in relation to the financial aspect of these proceedings.
6. That Mr Gray, Trustee in Bankruptcy … and Mr A Faldyn … are excused from further attendance in these proceedings.
The appellant asserts the primary judge erred by failing to afford him procedural fairness by the wrongful termination of his rights under Part VIII of the Family Law Act 1975 (Cth) (“the Act”) “to litigate the substantial money assets [the first respondent] has persistently and unlawfully concealed from the court” (Appellant’s Summary of Argument filed on 19 August 2022, paragraph 17).
Oral application to adduce evidence on the appeal
At the hearing of the appeal, the appellant made an oral application to adduce evidence in the appeal. After hearing arguments from the parties, I indicated that the application would be refused. These are my reasons.
Rule 13.39 of the Federal Circuit and Family Court of Australia (Family Law) Rules2021 (Cth) requires a person who seeks to adduce further evidence on the hearing of an appeal to file an application at least 14 days before the date of the commencement of the sittings in which the appeal is listed for hearing. The application must be accompanied by an affidavit which must state:
(a)The facts on which the application relies;
(b)The grounds of appeal to which the application relates;
(c)The evidence, or at least, the nature of the evidence the applicant wants the appeal court to receive; and
(d)The reason why the evidence was not adduced at the hearing.
It follows that the appellant needs to be relieved of both the time limit and need to file an affidavit provided for in the rule. The appellant did not produce such an affidavit. He said that his failure to comply with the rule was because he was not aware of it. That is not a persuasive reason to grant the oral application, even for a litigant in person. One of the main purposes of the rule is to give the other parties to the appeal adequate notice of the material sought to be adduced.
The appellant had served some but not all of the material on the other parties.
The first respondent and the Trustee indicated that they would wish to adduce further evidence themselves if the application was to be granted. This would require the adjournment of the appeal. The appellant is not in a position to pay any costs that would be wasted if there was such an adjournment, so that the cost of it would be thrown upon the respondents to the appeal.
These are powerful reasons which are sufficient in themselves to refuse the application.
Although the appellant initially referred to a number of documents, he ultimately pressed for the reception of three.
The first and the second are the will and grant of probate to the estate of the first respondent’s late father. They were annexed to an affidavit of the appellant made on 18 October 2021. The documents show that the first respondent’s father died in early July 2021, leaving an estate valued at $972,573.09. The first respondent is entitled to a one third share of that estate, subject to an advance of $40,000 being taken into account.
The other document is an affidavit made by the appellant on 4 October 2022 in which he deposed to conducting a real property search on 3 October 2022 which showed that the first respondent had recently purchased a property. The appellant was unable to say why the search had not been done earlier.
The appellant referred to the first respondent’s interest in the estate and the real property as “concealed assets”. That can hardly be so as the appellant seems to have been well aware of the interest in the estate for at least a year. Nonetheless, he asserted that the first respondent had concealed the assets from the Court.
In an affidavit filed on 9 March 2021, the first respondent deposed that she had just the one asset, but that was before her father died. The appellant then asserted that because the first respondent had not filed a further affidavit or Financial Statement, she had concealed the assets from the Court.
Given the appellant’s knowledge of the assets that assertion carries no weight.
The question of whether the first respondent disclosed her interest in her father’s estate to the other parties is a matter for them but given the special nature of inheritances received after separation (Calvin & McTier (2017) FLC 93-785), the first respondent’s care of the child for many years and the consent orders, any non-disclosure may not have led to a miscarriage of justice.
The short point is that any non-disclosure to the appellant had no consequence because he was already aware of it.
As was explained in CDJ v VAJ (1998) 197 CLR 172, evidence that was available to be used at the hearing will not normally be received on appeal. Further, the proposed evidence indicated that the appellant had not been misled. It is difficult to see therefore, how the proposed evidence could demonstrate error on the part of the primary judge.
It followed that the oral application was dismissed.
The Appeal
The Amended Notice of Appeal has 22 grounds, but most are statements of fact or submissions. The appellant’s argument fell neatly into just Grounds 17, 18 and 19.
Did the primary judge deny the appellant procedural fairness on 16 May 2022 by making orders in the appellant’s absence? (Ground 17)
The appellant’s oral submission was that the primary judge “excluded” him from the consideration of the property orders. As the transcript shows, this is an entirely exaggerated misdescription. The appellant simply did not turn up having been given the opportunity to do so.
The matter came before her Honour at 9.33 am for a case management hearing (conducted via video conference) for both parenting and property matters. All of the parties, including the appellant, appeared as well as an Independent Children’s Lawyer.
After there was some discussion of particular aspects of the property proceedings, her Honour was informed that some settlement negotiations had recently taken place. Counsel for Mr A Faldyn asked for the matter to be adjourned so that the negotiations could continue. She added that the matter could be resolved that day (Transcript 16 May 2022, p.6 lines 10–16).
After further discussion, counsel for Mr A Faldyn said:
[COUNSEL FOR MR A FALDYN]: …this matter be stood over, if you would indulge us, your Honour, till the afternoon for those negotiations to take place with respect to the property matter. Those discussions to take place. And we’re hopeful we can reach a resolution of the property matter.
(Transcript 16 May 2022, p.30 lines 25–28)
The primary judge asked the appellant “do you have any opposition to me giving the parties some time to pursue these negotiations?” (Transcript 16 May 2022, p.8 lines 26–27). He replied:
[THE APPELLANT]: Not at all, your Honour. I think that – I think that the bankruptcy trustee, from my understanding, has to make a decision and so I believe I’m out of it until that decision is made and I am, at least to some extent.
(Transcript 16 May 2022, p.8 lines 33–25)
The property aspect of the matter was then stood down until 3.00 pm.
The appellant could have been under no doubt that the purpose of the matter being stood down was so that not only could settlement discussions take place, but it was also anticipated that they would be successful and consent orders could be placed before the Court later that day.
At the conclusion of the parenting matter, her Honour addressed the appellant and said:
HER HONOUR: …if you wish to – if you wish to participate, you just use the same dial-in link at 3 pm today.
(Transcript 16 May 2022, p.13 lines 39–40)
The appellant did not take up that invitation to appear at the resumed hearing of the property proceedings.
In Kioa v West (1985) 159 CLR 550, Mason J said at 582:
It is a fundamental rule of the common law doctrine of natural justice expressed in traditional terms that, generally speaking, when an order is to be made which will deprive a person of some right or interest or the legitimate expectation of a benefit, he is entitled to know the case sought to be made against him and to be given an opportunity of replying to it…
Again, in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, the significance of the opportunity to put forward a party’s case was identified (at [94]).
The appellant was afforded the opportunity to present his case at the time the consent orders were made. He knew such orders were in contemplation.
There was no denial of procedural fairness and this ground does not succeed.
Further, as I will explain shortly, the appellant has no right to be heard in relation to the orders, unless he satisfied the primary judge that exceptional circumstances existed which justified him being granted leave to do so.
Did the making of the consent orders wrongfully terminate the appellant’s rights under
Part VIII of the Act? (Grounds 18 and 19)The premise in this ground of appeal is that, in the circumstances of this case, the appellant continued to have rights under s 79 of the Act to obtain property settlement orders despite his bankruptcy. In particular, he asserted that he could receive a division of the first respondent’s “concealed assets” because they were not vested assets.
In my opinion, both contentions are wrong and misconceived.
It is useful to start with the proposition that there can be only one exercise of power under s 79 of the Act. In Gabel & Yardley (2008) FLC 93-386, Bryant CJ and Coleman J explained it as follows:
66.In Hickey and the Attorney-General for the Commonwealth of Australia (Intervenor) (2003) FLC 93-143 the Full Court accepted that:
Although there may be partial or interim orders (section 79(6) of the Act) ultimately there is only one exercise of power under section 79 in respect of the property of the parties, even though that single exercise of power may be reflected in a complex order of many paragraphs or clauses, each dealing with a different item of property and some dealing with questions of implementation.
67.Logically, until that “one exercise of power under s 79” has been completed, most obviously by the making of orders with respect to the totality of the “property” of the parties to the marriage or either of them, the power has not been spent or exhausted, but exercised partially or in an interim manner.
Here the orders are clearly not interim but final. That is made plain by the terms of cl 3 of the consent orders. Thus, any issue of concealed property, if any, and whether that led to a miscarriage of justice, is a matter for an application under s 79A of the Act.
This is sufficient to find that, notwithstanding the terms of cl 3, which omit any reference to the appellant’s rights, the orders effected a final division of the property as between the respondents and the Trustee.
What then were the appellant’s rights, if any?
When the appellant became a bankrupt his property vested in his Trustee pursuant to
s 58 of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”). However, not all of that property is divisible amongst the bankrupt’s creditors due to the operation of s 116 of that Act.
The bankruptcy also brings into operation s 79(11) of the Act which provides:
Alteration of property interests
…
(11) If:
(a)an application is made for an order under this section in proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them; and
(b) either of the following subparagraphs apply to a party to the marriage:
(i) when the application was made, the party was a bankrupt;
(ii)after the application was made but before it is finally determined, the party became a bankrupt; and
(c)the bankruptcy trustee applies to the court to be joined as a party to the proceedings; and
(d)the court is satisfied that the interests of the bankrupt’s creditors may be affected by the making of an order under this section in the proceedings;
the court must join the bankruptcy trustee as a party to the proceedings.
Both s 79(11)(c) and s 79(11)(d) applied in this matter. Therefore, the appellant was not entitled to “make a submission to the court in connection with any vested bankruptcy” without the leave of the court (s 79(12)). Such leave is to be given only in exceptional circumstances (s 79(13)).
The phrase “vested bankruptcy property” is a reference to property that has vested in the trustee under the Bankruptcy Act (s 4 of the Act).
The effect of these provisions is that unless there is some property of the bankrupt that has not vested in the trustee, the bankrupt party cannot, in the absence of leave, make any submissions at all: he or she has no right to be heard at all.
The division of property that takes place in relation to the vested bankruptcy property is the division of that property along with the other property of the non-bankrupt party. The bankrupt has no interest in the outcome of those proceedings. It follows that s 79(12) of the Act prevents the bankrupt party from making submissions unless he or she has leave or unless there is property of the bankrupt that has not vested, or at the least, there is non-divisible property that can be retained by the bankrupt pursuant to s 116 of the Bankruptcy Act.
There is no suggestion of any such property here, so that the only division of property that can occur is that between the respondents and the Trustee, on which the appellant, absent leave, has no right to be heard. That includes any issue of “concealed property”.
It is implicit in the appellant’s submissions that he has retained a right to seek orders against non-vested property, namely, other property owned by the first respondent or as he particularly put it, her “concealed property”. That is not correct.
The bankrupt’s right to seek orders, that is, where proceedings have commenced, which includes seeking property orders by way of a response, is prescribed by s 60(2) of the Bankruptcy Act. The decision to maintain the proceedings is for the trustee in bankruptcy to determine, not the bankrupt.
The bankrupt contended that his right to commence proceedings did not vest in the Trustee and that it followed he had a right to pursue the “concealed property”. The first point is correct (see Sloan & Sloan [2018] FamCA 610 (“Sloan”)) but the second is not.
The position is analogous to the facts in Cummings v Claremont Petroleum NL (1996) 185 CLR 124. There the appellants sought to appeal against judgments that had been given against them and the question was whether the right to appeal had vested in their trustee in bankruptcy. At 139, Brennan CJ, Gaudron and McHugh JJ said:
In this case, although we would not regard the right to appeal as property of the respective bankrupt appellants, the decision reached by the majority of the Full Court of the Federal Court was correct. The bankruptcy of the appellants leaves them without such an interest in the judgment against them as would support their institution of an appeal in their own names.
It makes no difference if the proposed appeal by the bankrupt would lead to a surplus in the bankrupt estate (at 138).
The appellant placed great reliance on Sloan. That was a different case because there was a superannuation interest which was not divisible amongst creditors pursuant to s 116 of the Bankruptcy Act and was regarded as non-vested bankruptcy property in which the bankrupt party retained an interest. Thus the right under s 79 of the Act was coupled with property in which the bankrupt had an interest.
In Sloan, Gill J said:
24.However, the weakness in relation to the current case is illustrated by her concession that the Husband could continue in relation to the superannuation component of the claim. The adjustment of parties’ superannuation interests is, like real estate, shareholdings or cash, within the ambit of property within both ss 79 and 90SM of the Family Law Act 1975. While there may be distinctions in how a Court deals with these different types of property, an adjustment falls to be determined in relation to them as a single discretion. They are each the objects of the same overarching discretion, a discretion that does not allow for different items of property to be considered in isolation from others, particularly given that any adjustment must be considered to be just and equitable in relation to the whole of the considerations contained within ss 79 and 90SM, not simply the considerations applied to a fraction of the property of the parties.
25.The effect of these considerations is that the right to litigate, in this case pursuant to s 79, has not vested in the trustee. Further, given that aspects of that right concern property that will not form a part of the estate available for distribution to the creditors, but rather will deal with interests that will lie with the bankrupt, the issue of standing identified in Cummings does not stifle the Husband’s proceedings in this case. That means that these considerations do not see the ending of the Husband’s application.
(Emphasis in original)
The effect of such a finding is that the bankrupt party would be entitled to seek orders in relation to the superannuation and make submissions in the s 79 hearing which would otherwise take place between the other party and the trustee in bankruptcy. There would not be two such hearings with one as to superannuation and another as to the balance of the property.
Here there is no property in which the bankrupt has retained an interest and his right under s 79 is entirely devoid of content.
It follows that Sloan does not assist the appellant.
Thus, on the facts of this case, there is no basis whatsoever, for the appellant to pursue a claim under s 79 of the Act against any concealed assets. Further, the power under s 79 has been has been fully exercised.
It remains only to add that there is no evidence whatsoever of “concealed assets”. The appellant had known of the first respondent’s interest in her father’s estate since October 2021 and chose not to do anything about it or raise the issue until he filed the present Notice of Appeal.
Grounds 18 and 19 do not succeed.
Conclusion and Costs
The appeal will be dismissed.
The appeal has been wholly unsuccessful. The appellant opposed an order for costs on the basis that he is on a disability pension. That is a matter which must be taken into account.
However, impecuniosity is not necessarily a bar to a costs order being made (Lenova & Lenova (Costs) [2011] FamCAFC 141).
In my opinion, the appeal was misconceived and the appropriate order is that the appellant pay the first respondent’s costs fixed in the sum of $3,999, the second respondent’s costs fixed in the sum of $1,815 and the third respondent’s fixed in the sum of $3,826.
I certify that the preceding sixty-five (65) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Aldridge. Associate:
Dated: 8 December 2022
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