Ferrall v Blyton - [2000] FamCA 1442

[2000] FamCA 1442

FAMILY LAW ACT 1975

IN THE FULL COURT

OF THE FAMILY COURT OF AUSTRALIA Appeal Nos.ALE 14 and 21 of 1999
AT MELBOURNE File No. SY10513 of 1997

BETWEEN:

MICHAEL FERRALL AND BRUCE MCTAGGART

AS TRUSTEES FOR THE SAPPHIRE TRUST

AND

MICHAEL FERRALL AND GEOFFREY ROBERT GARROTT
AS TRUSTEES FOR THE OPAL TRUST

AND

GEOFFREY ROBERT GARROTT

AND

ANDROS NOMINEES PTY LIMITED (Applicant Third Parties)

AND

KEVIN JAMES BLYTON (Respondent Husband)

AND

MICHELLE ANNE BLYTON (Respondent Wife)

AND

THE ATTORNEY - GENERAL OF THE COMMONWEALTH
(Intervener)

REASONS FOR JUDGMENT OF THE FULL COURT

CORAM:  NICHOLSON CJ, LINDENMAYER & KAY JJ
DATE OF HEARING:         4 AND 5 APRIL 2000
DATE OF JUDGMENT:     17 NOVEMBER 2000

APPEARANCES:

Mr D. F. Jackson QC and Mr M. Errington of Counsel (instructed by Stuart Fowler & Associates, Solicitors, Level 7, 299 Elizabeth Street, Sydney NSW 2000) appeared on behalf of the Applicant Third Parties.

Mr P. Brereton SC with Mr N. Jackson of Counsel (instructed by Lopich & Associates, Solicitors, Suite 7, Level 1, 45 Novar Street, Yarralumla ACT 2600) appeared on behalf of the Respondent Husband.

Mr Bell, Solicitor, David Bell & Associates, 99 Elizabeth Street, Sydney, NSW 2000, appeared on behalf of the Respondent Wife.

Mr. H. Burmester QC for the Attorney-General of the Commonwealth of Australia, Intervening.

NAME OF APPEAL: Michael Ferrall and Bruce McTaggart as Trustees for the Sapphire Trust & Ors v Blyton & Blyton; Attorney-General for the commonwealth (Intervener)

ALE 14 and 21 of 1999

CORAM:  Nicholson CJ, Lindenmayer and Kay JJ
DATE OF HEARING         4 and 5 April 2000
DATE OF JUDGMENT:     17 November 2000

CATCHWORDS

Appeals - Leave to Appeal - Practice and procedure - Application by third parties for summary dismissal - Refused by trial Judge - Trial Judge held to have been correct - Third parties had not filed any evidence - Inappropriate for the Full Court to determine the substantive legal issues - Bass v Perpetual Trustees Company Limited & Others (1999) 198 CLR 334 applied - Leave to Appeal refused.
Property - Section 85 Family Law Act - whether an allotment of shares in a corporation may constitute an “instrument or disposition” to which s.85 the Act applies.
Property settlement – Disposal of assets to third parties by husband – Applications by husband inter alia under ss. 78, 85 Family Law Act and the Corporations Law - Trial Judge granted interim injunctions restraining third parties from disposing of or dealing with certain property- Trial Judge refused to summarily dismiss applications - Trial Judge held to have been correct.
Jurisdiction - Whether Court has accrued jurisdiction - Trial Judge granted interim injunctions affecting third parties - Trial Judge refused to summarily dismiss applications - Trial Judge held to have been correct.
Evidence - Certificate under s.128 Evidence Act - Granted by trial Judge to husband - Husband gave evidence of scheme to dispose of assets to third parties - Grant of the certificate found to have been open to the trial Judge - Leave to Appeal refused.

These were applications by third parties for leave to appeal from orders made by O’Ryan J, on 2 August 1999 and 8 December 1999. Proceedings under the Family Law Act were commenced by the wife’s application made on 31 October 1997 against the husband for settlement of property and spousal maintenance. The present proceedings, however, related to issues between one Geoffrey Garrott and entities and interests associated with him ("the applicants") and the husband supported by the wife for the purpose of the applications ("the respondents").

As the applicants had filed no affidavits at any stage, the Full Court and the trial Judge had been required to rely upon untested evidence. The applicants filed no material before his Honour nor did they seek to do so on appeal.

ALE 14 of 1998

This application for leave sought to challenge his Honour’s grant of a certificate to the husband pursuant to s.128 of the Evidence Act 1995 and in so doing to set aside the injunctions granted and extended on the basis of the evidence given with the protection of the certificate. That evidence concerned a scheme devised by Mr Garrott to protect the husband from any order that this Court might make against the husband's assets at the behest of the wife. The scheme was said to involve a range of transactions which were meant to put assets and resources out of the husband's ownership and control until family law proceedings had been completed.

Before the Full Court, the applicants for leave to appeal submitted the trial Judge erred because:

the question of whether a certificate should be granted arises only when the witness “objects” to giving evidence and in this regard they referred to the opening words of s.128(1) and the reference in s.128(4) to “overruling the objection.” They said that in this case, the husband sought to give evidence and was not objecting to doing so and that as a consequence the terms of the section were not satisfied; and
no such certificate should have been granted until Notice had been given to the Attorney-General. Referring to the decision of Young J in HPM Industries P/L v Graham (Unreported, Supreme Court of New South Wales, Equity Division, Number 2720 of 1996, 17 July 1996), they submitted that such a requirement arose because of the public interest in the granting of such a certificate.

The respondents submitted that:

there was nothing to suggest that s.128 was intended to operate only in relation to cross-examination and said that it clearly extended to evidence in chief in respect of evidence which a witness would otherwise wish to give except that it would be self-incriminatory;
there was no need to give Notice to the Attorney General and this was not a requirement of the section;
that an appeal does not lie from a certificate in that it is not a decree within the meaning of s.94(1)(a) of the Family Law Act; and
that in any event it would be invidious to grant leave to appeal even if an appeal does lie, in circumstances where evidence has been given in reliance upon it.

Counsel for the Attorney-General of the Commonwealth, supported the respondents' position and said that while one of the factors considered by the Court under s.128(5) is the interests of justice, this does not give rise to a requirement to notify the Attorney-General.

ALE 21 of 1999

In this application the applicants basically contended that O’Ryan J was wrong in granting injunctions restraining them from disposing of or otherwise dealing with certain property. They contended that his Honour should have acceded to an application made by them to summarily dismiss the husband’s applications in this regard. The four substantive issues sought to be raised by the applicants were:

Whether an allotment of shares is capable of being set aside as an instrument or disposition under s.85 of the Act
Whether under s.78 of the Act a declaration may be made as to the existence of a trust over the property of a third party, in favour of a party to a marriage so as to bind the third party.
Whether the Family Court of Australia has accrued jurisdiction which would in any event empower it to make such a declaration; and
Whether the Family Court of Australia has jurisdiction to appoint a receiver of a corporation.

Contrary to the submissions of the applicants, both the respondents and Counsel for the Attorney-General of the Commonwealth argued that the answer to each of these questions is in the affirmative.

Held: (per curiam) applications for leave to appeal refused; directions made as to the filing of any applications as to costs

ALE 14 of 1999

The trial Judge was clearly correct in holding that it was within his discretion to grant such a certificate. It would be unrealistic to limit the availability of a certificate to a situation where a witness is asked a particular question in cross-examination. The availability of a certificate clearly applies to evidence given in chief. Otherwise an inappropriate forensic advantage would rest with the other party who would be in a position to prevent the question of an objection arising by simply not seeking to cross-examine. In the particular circumstances of the Family Court of Australia, where evidence in chief is normally given by affidavit, the witness in this case was objecting, in the sense required by s.128, by indicating that he would not file the affidavit unless a certificate was given.

In respect of the issue of Notice to the Attorney-General the Full Court agreed with the learned trial Judge that this must be a matter of discretion and in the circumstances of this case the Full Court was not shown any reason why O’Ryan J’s discretion had miscarried.

The Full Court did not find it necessary to determine whether an appeal lies from the grant of a certificate beyond saying that there seemed to be considerable substance in the respondent Counsel's point as to the adverse effects upon the operation of the section and its aims if evidence given under the purported protection of the certificate were later to be found to be admissible against the witness in question following a successful appeal against the grant of a certificate.

ALE 21 of 1999

The Full Court observed that the principles governing summary dismissal had been considered by differently constituted Full Courts in the cases of Bigg v Suzi (1998) FLC ¶92- 799 Pelerman v Pelerman (2000) FLC ¶93-037. While the Court has jurisdiction summarily to dismiss or stay an application, its exercise is reserved for a case in which it can be demonstrated that the substantive application cannot possibly succeed. In a case such as the present, the question is whether, assuming in favour of the husband the matters of fact on which he relies, nonetheless, his case as a matter of law is so clearly untenable that it cannot possibly succeed.

The trial Judge was correct to find that the applicants had not satisfied the test. Even a determination that any one of the major issues is reasonably arguable would defeat any such application. It was obvious from his Honour's judgment that each of the issues is reasonably arguable, and that view was supported by the respondents and Counsel for the Attorney-General before the Full Court. The applicants had not demonstrated that the trial Judge's decision to refuse to order summary dismissal was demonstrably wrong in law.

The Full Court noted the procedural and evidentiary background of the proceedings, and that the issues had not come before it in the form of a case stated pursuant to s.94A nor by way of demurrer. It also considered that the question of jurisdiction will depend upon the findings of fact that are made once the competing versions are evaluated. Having regard to Bass v Perpetual Trustees Company Limited & Others (1999) 198 CLR 334, the Full Court was of the view that the applications were inappropriate and premature vehicles for determining the important questions of jurisdiction that were sought to be raised or to comment further upon them.

REPORTABLE

INTRODUCTION

These are applications for leave to appeal from orders made by O’Ryan J, on 2 August 1999 and 8 December 1999.

The proceedings were commenced by the wife’s application made on 31 October 1997 against the husband for settlement of property and spousal maintenance. The present proceedings, however, relate to issues between one Geoffrey Garrott and entities and interests associated with him ("the applicants") and the husband supported by the wife for the purpose of the applications ("the respondents").

The application numbered ALE 14 of 1999 seeks to challenge his Honour’s grant of a certificate to the husband pursuant to s.128 of the Evidence Act 1995 and in so doing to set aside the injunctions granted and extended on the basis of the evidence given with the protection of the certificate.

In the application numbered ALE 21 of 1999 the applicants basically contend that O’Ryan J was wrong in granting injunctions restraining them from disposing of or otherwise dealing with certain property. They contend that he should have acceded to an application made by them to summarily dismiss the husband’s applications in this regard.

We turn now to the background of this case, noting that it relies upon untested evidence, but in circumstances where the applicants in the proceedings before us have filed no affidavits at any stage.

BACKGROUND

The respondents in this matter were married on 24 August 1991, after cohabiting for about one year prior to this date. The husband and wife finally separated on 28 December, 1997, when the wife left the former matrimonial home in Jindabyne with the only child of the marriage.

When the parties separated the husband had effective ownership and control of various companies and as such had effective ownership and control of six out of eight major radio stations from the Southern Highlands of New South Wales to the Victorian border.

According to the husband, in or about March, 1997, the husband’s financial adviser and accountant, Mr Garrott, one of the applicants for leave to appeal, expressed his concern that the respondents’ marriage was not going to last. It appears that in accordance with advice proffered by him to the husband, a scheme was devised by Mr Garrott to protect the husband from any order that this Court might make against his assets at the behest of the wife

The husband says that on 6 April 1997 he caused there to be an increase in the home loan owed by him and the wife to Andros Nominees Pty Ltd and purchased 5 more shares in Capital Radio Network Pty Ltd. The Sapphire Trust was established to hold these 5 shares for the benefit of the husband and his family. As a result of this transaction the husband and wife became beneficially entitled to 54% of the issued shares in Capital Radio Network Pty Ltd. The husband further says that at a later point in time he discovered that the Garrott family was also mentioned in the trust deed, that Mr Garrott was named as Appointor of the trust, and that he did not understand what that meant.

The husband deposes that following separation, Mr Garrott obtained legal advice for the husband and instructed the husband’s legal representatives.

On 31 December, 1997, Loughnan JR made a number of orders as a result of an application for property settlement, residence and spousal maintenance filed by the wife. According to the husband, by January 1998, Mr Garrott had consulted solicitors and devised a plan pursuant to which the wife would not receive “anything”. According to the husband, he was told by Mr Garrott that:

“The orders that Michelle has got don’t stop other directors being appointed to the companies. We should do this, and then we will come up with an excuse for why the companies need more money. The excuse can be that Andros has lent the companies too much money and want it reduced. The new directors will decide to raise the money by way of share issues which they will vote for. As you and Michelle now do not have the ability to raise any money, because we have tied up all your assets, the directors will then have to offer the shares to other shareholders or new shareholders who will be me.” (Paragraph 5 AB76).

The fundamental cornerstone of the scheme was the premise that the Family Court of Australia does not have the power to overturn the issue of shares.

The relevant companies affected by the scheme were:

·     Capital Radio Network Pty Ltd,
·     Radio Snowy Mountains Pty Ltd,
·     Radio Canberra Pty Ltd,
·     Radio Goulburn Pty Ltd,
·     Ski FM Broadcasters Pty Ltd,
·     Snowy Mountains FM Pty Ltd.

The husband has sworn that he agreed to the scheme based on the assurances of Mr Garrott that when the family law proceedings were settled, everything would be restored to its original position. Through a combination of appointing directors who were informed of the “scheme”, signing backdated letters and placing ingenuous phone calls, the husband significantly decreased the value of his financial holdings.

In an attempt to execute the scheme, the husband signed a backdated deed of share mortgage in favour of Andros Nominees Pty Ltd over his shares in Capital Radio Network Pty Ltd, Radio Snowy Mountains Pty Ltd and Snowy Mountains FM Pty Ltd.

In January 1998, the husband ceased to be Chairman of Directors of Capital Radio Network Pty Ltd and Mr Garrott replaced him. At this time the husband asserts that he held 51-4% of the shares, whereas Mr Garrott maintains it was 49%. The effect of the scheme reduced the husband and wife’s shareholding to 8%.

With the power he had acquired Mr Garrott appointed his son-in-law, Geoffrey McTaggart, and his cousin, Michael Ferrall, to positions of control and according to the husband, when he raised concerns about being restored to his original financial situation, Mr Garrott told him that nothing was going to be altered until he signed the settlement with his wife. This was negotiated for $200,000 in circumstances where the husband says he had asked to borrow the monies from Mr. Garrott. The husband also acknowledges that the wife approached him to have settlement discussions between them personally because her solicitor had ceased to act for her and she was unable to afford to continue incurring legal fees.

According to the husband, it then became apparent to him that Mr Garrott wanted to retain some of the husband’s interests for what the husband says Mr Garrott described as “compensation for the personal stress and suffering”. The husband says that Mr Garrott would not discuss changing back the arrangements until he had signed the settlement with his wife and that in June 1999 was told by Michael Ferrall that he – Mr Ferrall had been appointed to sell the radio station interests. The husband says he was told by Mr. Ferrall:

“If you agree to me becoming managing director of Capital Radio Network Pty Ltd and if you write to Geoffrey [Garrott] saying you will never take legal action against him on any matter and if you sign your settlement with Michelle then you might be able to get some of your interests back.”

The husband says that on 23 June 1999, he was then informed that Messrs Garrott and Ferrall were offering to sell Capital Radio Network Pty Ltd.

THE ORDERS OF 25 JUNE 1999

In proceedings before O’Ryan J on 25 June 1999, the husband, having been granted a certificate by his Honour under s.128 of the Evidence Act 1995 (Cth) (“the Evidence Act”) in respect of the evidence contained in his affidavit sworn on that day, made admissions therein in relation to a number of issues which were identified in the trial Judge’s reasons for judgment delivered following a directions hearing in the pending property proceedings on 31 July 1998. The husband stated in this affidavit that he had, in previous sworn affidavits, wrongly denied the wife’s assertion that the shares issue by Capital Radio and Radio SM were an attempt to reduce her equity in those companies. Further, he said that he also wrongly denied the wife’s allegation that he had an effective ownership and control of the companies. In this affidavit, the husband said that he estimated his true financial worth to be a total of $5,798,000.00.

The husband asserted that he and Mr Garrott, conspired to take steps to alter the parties’ financial position in an effort to defeat the legitimate claims of wife. In his affidavit, the husband said that he expected, however, that he would recover ownership and control from Mr Garrott once the family law proceedings were completed. (Mr. Garrott referred to this as an “equity reinstatement”). In giving this evidence, the husband outlined various events that took place between himself and Mr. Garrott in order to implement the scheme. The husband described conversations that he had with various persons in relation to a sale of Capital Radio Network Pty Limited for $15 million.

The husband outlined about what he understood to be the possible sale of the relevant interest and that Mr Garrott was hurrying to conclude a sale in circumstances without effecting the equity reinstatement. The husband submitted that the injunction that he then sought was urgent because of the pending sale and also that there was a seriously arguable case from the point of view of the wife, because the husband had now admitted the correctness of assertions that she had been making about the extent of the parties’ financial circumstances and the reasons why various transactions were undertaken after they separated.

The husband also submitted that if the injunctions were not granted, there was a prospect of assets being placed beyond the reach of the jurisdiction of the Family Court in the event that this Court made orders pursuant to s.79 and granted the relief sought by the wife pursuant to s.85.

In response, the wife sought orders in relation to costs, but in all other respects, consented to the relief sought by the husband.

O’Ryan J accepted the husband’s submissions and was of the opinion that in the circumstances the orders sought by the husband should be made. His Honour stated at para 28 of his ex tempore judgment.

“Clearly what has happened since the parties separated in late 1997, and what has been happening recently in terms of the relationship between the husband and Mr Garrott, and the possible sale of Capital Radio Network Pty Limited, lead to the inevitable conclusion that if relief of the type sought was not granted then it could cause significant, and in my opinion, grave injustice to the wife.”

His Honour ordered that the following parties should be added as respondents to the proceedings:

-Radio Snowy Mountains Pty Ltd (“Radio SM”)
-Capital Radio Network Pty Ltd (“Capital Radio”)
-Michael Ferrall and Bruce McTaggart as trustees for the Sapphire Trust
-Michael Ferrall and Geoffrey Robert Garrott as trustees for the Opal Trust

-Geoffrey Robert Garrott
-Andros Nominees Pty Limited

By paragraph 1 of his orders, his Honour that day also made the following interim injunctions as sought by the husband in the terms of a document titled “Draft Minutes of Orders” dated 25 June 1999:

“3. Pursuant to s114(3), the parties described in the Schedule be restrained until 5pm on 29 June 1999 from by themselves, their servants and agents, doing, causing to be done, or permitting to be done any of the following:
3.1Alienating or further encumbering any of the assets or undertaking of Radio Snowy Mountains Pty Limited (“Radio SM”), Capital Radio Network Pty Limited (“Capital Radio”), or any subsidiary of either of them, including without limiting the generality of the foregoing the radio broadcasting assets of Radio Canberra Pty Limited, Radio Goulburn Pty Limited and/or Radio Perth Pty Limited, except in the ordinary course of business.
3.2Alienating or further encumbering any shares in Radio SM, Capital Radio, or any of their subsidiaries.
3.3Enforcing any right or power of Andros Nominees Pty Limited under a Deed of Share Mortgage between the Husband and Andros Nominees Pty Limited.
3.4Issuing new shares, or otherwise altering the shareholdings, in Radio SM, Capital Radio, or any subsidiary of either of them.
3.5Removing, replacing, or appointing any trustee of the Opal Trust or the Sapphire Trust.
3.6Exercising any power of appointment or distribution of capital or income, or any power of revocation, variation or re-settlement in respect of the Opal Trust or the Sapphire Trust.
3.7Removing, replacing or appointing any director of Capital Radio, Radio SM, or any subsidiary of either of them."

The Husband’s application filed 25 June 1999 was made returnable before the Court on 29 June 1999 with orders made for service upon the additional respondents. The Court noted the husband’s undertaking as to damages.

29,. On 29 June 1999, Moore J ordered that the matter be stood over for further mention before O’Ryan J on 2 August 1999, that any application by the respondents together with affidavits in support be filed and served by 26 July 1999, and that the injunctions be extended until 2 August 1999.

THE ORDERS OF 2 AUGUST 1999

The Certificate

A preliminary issue on that day was the husband’s applications for a certificate pursuant to s.128 of the Evidence Act relating to three affidavits he had sworn. Section 128 is in the following terms:

“(1)This section applies if a witness objects to giving particular evidence on the ground that the evidence may tend to prove that the witness:
(a) has committed an offence against or arising under an Australian law or a law of a foreign country; or
(b)is liable to a civil penalty.

(2)Subject to subsection (5), if the court finds that there are reasonable grounds for the objection, the court is not to require the witness to give that particular evidence, and is to inform the witness:
(a)that he or she need not give the evidence; and
(b)that, if he or she gives the evidence, the court will give a certificate under this section; and
(c) of the effect of such a certificate.

(3)If the witness gives the evidence, the court is to cause the witness to be given a certificate under this section in respect of the evidence.
(4)The court is also to cause a witness to be given a certificate under this section if:
(a)the objection has been overruled; and
(b)after the evidence has been given, the court finds that there were reasonable grounds for the objection.

(5)If the court is satisfied that:
(a) the evidence concerned may tend to prove that the witness has committed an offence against or arising under, or is liable to a civil penalty under, an Australian law; and
(b) the evidence does not tend to prove that the witness has committed an offence against or arising under, or is liable to a civil penalty under, a law of a foreign country; and
(c) the interests of justice require that the witness give the evidence;

the court may require the witness to give the evidence.
(6)If the court so requires, it is to cause the witness to be given a certificate under this section in respect of the evidence.
(7)In any proceeding in an Australian court:
(a)evidence given by a person in respect of which a certificate under this section has been given; and
(b)evidence of any information, document or thing obtained as a direct or indirect consequence of the person having given evidence;

cannot be used against the person. However, this does not apply to a criminal proceeding in respect of the falsity of the evidence.
(8)In a criminal proceeding, this section does not apply in relation to the giving of evidence by a defendant, being evidence that the defendant:
(a)did an act the doing of which is a fact in issue; or
(b)had a state of mind the existence of which is a fact in issue.

(9)A reference in this section to doing an act includes a reference to failing to act.
(10)If a person has been given a certificate under a prescribed State or Territory provision in respect of evidence given by the person in a proceeding in a State or Territory court, the certificate has the same effect, in a proceeding to which this subsection applies, as if it had been given under this section.
(11)The following are prescribed State or Territory provisions for the purposes of subsection (10):
(a)Section 128 of the Evidence Act 1995 of New South Wales;
(b)A provision of a law of a State or Territory declared by the regulations to be a prescribed State or Territory provision for the purposes of subsection (10).

(12)Subsection (10) applies to:
(a)a proceeding in relation to which this Act applies because of section 4; and
(b)a proceeding for an offence against a law of the Commonwealth or for the recovery of a civil penalty under a law of the Commonwealth, other than a proceeding referred to in paragraph (a).

(13)Until the day fixed under subsection 4(6), subsection (10) applies to a proceeding for an offence against a law of the Australian Capital Territory or for the recovery of a civil penalty under such a law, other than a proceeding referred to in paragraph (12)(a)."

The respondents opposed the granting of the certificate, arguing that the section does not, on its face apply to the circumstances in which the certificate was sought. It was their further submission that the Court should adopt the practice adopted by Young J in HPM Industries P/L v Graham (Unreported, Supreme Court of New South Wales, Equity Division, Number 2720 of 1996, 17 July 1996). His Honour there said that in circumstances where the evidence in respect of which a certificate is sought may constitute evidence establishing a serious criminal offence, the trial Judge should adjourn the application and give notice to the Attorney-General in order to give the Attorney-General an opportunity to make submissions in relation to the application. The respondents submitted that the Attorney-General may wish to make submissions relevant to the “public interest”.

O’Ryan J commented that the application for a certificate was “simply an application which is part of a history of litigation that has been before this Court since December 1997”. He noted that the injunctions were sought until further order on the basis that, inter alia, there will be further proceedings before the Court in relation to the husband, the wife, Radio SM, Capital Radio and the present applicants for leave to appeal.

His Honour considered that it was a matter of discretion whether to grant the certificate and whether he ought to adopt the practice outlined by Young J in HPM Industries supra, and further noted that the certificate was sought not on an ongoing basis, but only in relation to the hearing of 2 August 1999. He concluded that the circumstances were appropriate for the grant of a s.128 certificate in light of his being asked to make injunctions purporting to preserve a situation pending the determination of other proceedings and pending the determination of the application which had already been filed on behalf of the present applicants seeking a summary dismissal of the proceedings.

His Honour made the following order:

"1.That I certify that under Section 128A [sic.] of the Evidence Act 1995 (Cth) that the evidence given in these proceedings by Kevin James Blyton on 2 August 1999 a record of which is set out in the affidavits identified in the attachment marked as Exhibit A is evidence to which sub-section 128 (1) of the Evidence applies."

The Injunctions

In addition to his application to continue the injunctions granted by O’Ryan J on 25 June 1999 the husband, on 2 August 1999, filed a further application seeking to extend the reach of the injunction to the shareholding of the Opal Trust in Radio Perth Pty Ltd. The husband asserted that the scheme we have outlined above resulted in the interests of Capital Radio being significantly diminished both in terms of its quantum and value.

The husband gave evidence that in late 1998, a radio station, Radio 61X Perth was acquired by a joint venture agreed to between Grant Broadcasters and Capital Radio. However, due to the Family Court proceedings, the husband’s half interest could not be held by Capital Radio as it may have formed part of the property considered by the Court in determining the property settlement between husband and wife. The husband asserted that it was therefore decided that another vehicle (the Opal Trust) would be used to acquire and retain the interest until the property settlement proceedings were concluded.

The husband submitted that due to the disagreement between himself and Mr. Garrott, the joint venture may be excluded from Capital Radio Network’s portfolio by Mr. Garrott and hence, the husband’s interest in that group may be significantly reduced.

In addition to relying upon the reasons he gave on 25 June 1999 for issuing the interim injunctions, his Honour said:

"13.Nothwithstanding the orders made by Moore J on 29 June 1999, no affidavit material has been filed on behalf of any of the respondents. As seen, the only application filed is the Response in which, inter alia, certain of the respondents are seeking a summary dismissal of the Application of the husband.

14.I propose to continue the injunctions until further order firstly, because, as seen no material has been filed on behalf of any of the respondents and secondly, because the business of this Court may mean that the Application for summary dismissal is not necessarily finally determined on the date fixed for hearing of that application. The respondents can always make an application for a discharge or modification of the injunctions.”

In respect of the further injunctions sought by the husband in his application filed that day, O’Ryan J said at paras 17 to 19:

“17.…the husband asserts that given the falling out between he and Mr Garrott, the radio station in Perth may be precluded by Mr Garrott from the portfolio of Capital Radio Network and that the husband's interests in that group may thus be significantly reduced. I am satisfied, having regard to the husband's evidence, that prima facie he may have an entitlement to seek relief pursuant to s.85 Family Law Act in relation to the shareholding in Capital Radio Network and in turn that the underlying value of the shares in this company may be altered or affected by whether or not the half interest in the Perth radio station is included as an asset of the Capital Radio Group.

18.I am satisfied therefore that the injunction sought by the husband is necessary to preserve the underlying assets of the group in which he asserts he has an interest greater than that which is currently disclosed. As seen, the husband asserts that attempts were made by Mr Garrott to sell certain property of the group. In all the circumstances, I am satisfied that it is necessary until further order, having regard to the husband's evidence only, to grant the relief sought.

19.As to the injunction sought in relation to the proposed meeting I need not repeat all of what the husband said. However, I refer to his affidavit sworn on 28 July 1999 and the annexures to that affidavit.”

O'Ryan J then made the following orders:

”1.That the orders contained in paragraph 3 of the orders made on 25 June 1999 be extended until further order.

2. That pursuant to s.114 (3)

2.1Michael Ferrall and Geoffrey Garrott as trustees for the Opal Trust be restrained until the hearing or earlier further order by themselves, their servants or agents

2.1.1From alienating or further encumbering the shareholding of the Opal Trust in Radio Perth Pty Limited ("Radio Perth");

2.1.2From removing or replacing any director of Radio Perth or appointing any new or additional director thereof

2.2Geoffrey Robert Garrott be restrained until the hearing of [sic.] earlier further order either by himself, his servants or agents from convening, attending or voting at the meeting of the Radio Snowy Mountains Pty Limited and Capital Radio Network Pty Limited proposed to be held on 16 August 1999 or any other meeting to consider the resolutions referred to in the notices of the said meetings.

3.That notice of the orders made here on this day may be served on the parties named in the schedule to the application filed on 2 August 1999 in the first instance by facsimile transmission.
4.That the above orders are made on condition that the husband provide to the Court the usual undertaking as to damages.
5.That the husband cause to be served on Radio Snowy Mountains Pty Limited and Capital Radio Network Pty Limited a sealed copy of the orders made on this day within seven days of the date of these orders.
6.That each of the husband and the wife within 14 days of the date of these orders provide to the solicitor for Geoffrey Robert Garrott, Andros Nominees Pty Limited, Michael Ferrall and Bruce McTaggart as trustees for the Sapphire Trust and Michael Ferrall and Geoffrey Robert Garrott as trustees for the Opal Trust copies of all applications and affidavits filed by that party in the Family Court of Australia since December 1997.
7.That each of the husband and the wife within 14 days of the date of these orders provide to Radio Snowy Mountains Pty Limited and Capital Radio Network Pty Limited a copy of all applications and affidavits filed by that party in the Family Court of Australia since December 1997.
8.That the husband file and serve by 4.00 pm on 9 August 1999 any further amended application.
9.That the husband and/or the wife serve on the solicitors for each of the respondents by 4.00 pm on 9 August 1999 a list of the relevant applications and affidavits that are relied upon in support of the relief sought pursuant to ss.79 and 85A of the Family Law Act.
10.That each of the respondents file and serve by 4.00 pm on 17 August 1999 a written outline of argument in support of the Application for summary dismissal.
11.That it is NOTED that the husband gives to the Court the usual undertaking for damages and within 48 hours of today’s date file the Form of undertaking for damages in accordance with the Family Law Rules.”

THE ORDERS OF 8 DECEMBER 1999

On 6 August, 1999, an amended application was filed on behalf of the husband in which he sought the following orders (underlining in the original):
“1.     That the parties described in the Schedule be added as party respondents to the proceedings.
2.     That pursuant to Family Law Act s85, the following instruments or dispositions be set aside:
2.1The transfer on 6 April 1997 by DPIS Pty Limited at the direction of the Husband to Carol Batt and Bruce McTaggart as trustees for the Sapphire Trust of 5 shares in Capital Radio Network Pty Limited (“Capital Radio”);
2.2The Deed of Share Mortgage between the husband and Andros Nominees Pty Limited (“Andros”) executed in or about December 1997 (“the Andros Mortgage”).
2.3The issue on or about 20 January 1998 of 500 shares in Capital Radio:
(a)as to 49 shares, to Bruce McTaggart and Carol Batt as trustees for the Sapphire Trust, the trustees of which are now Bruce McTaggart and Michael Ferrall;
(b)as to 451 shares, to Carol Batt and Geoffrey Robert Garrott as trustees for the Opal Trust, the trustees of which are now Michael Ferrall and Geoffrey Robert Garrott.
2.4The issue by Radio Snowy Mountains Pty Limited (“Radio SM”) on 4 March 1998 of 30,000 shares to Capital Radio Network Pty Limited (“Capital Radio”).
2.5The issue or transfer, in or about November 1998, at the direction of the husband and/or Capital Radio, and in the interest of the husband, to Carol Batt and Geoffrey Robert Garrott as trustees of the Opal Trust, of shares in Radio Perth Pty Limited (“Radio Perth”).
3.     Further or alternatively to paragraph 2, that it be declared pursuant to Family Law Act s78:
3.1That Michael Ferrall and Bruce McTaggart as trustees for the Sapphire Trust hold upon trust for the husband their 5 shares in Capital Radio referred to in 2.1.
3.2That Michael Ferrall and Bruce McTaggart as trustees for the Sapphire Trust hold upon trust for the husband their 49 shares in Capital Radio referred to in 2.3(a).
3.3That Michael Ferrall and Geoffrey Robert Garrott as trustees for the Opal Trust hold upon trust for the husband their 451 shares in Capital Radio referred to in 2.3(b).
3.4That Capital Radio holds upon trust for the husband its 30,000 shares in Radio SM referred to in 2.4.
3.5That Michael Ferrall and Geoffrey Robert Garrott as trustees for the Opal Trust hold upon trust for the husband their shareholding in Radio Perth.
4.     Consequential orders:
4.1That Michael Ferrall and Bruce McTaggart as trustees for the Sapphire Trust transfer to the husband their 5 shares in Capital Radio referred to in 2.1.
4.2That Andros deliver up for cancellation the Andros Mortgage.
4.3That Michael Ferrall and Bruce McTaggart as trustees for the Sapphire Trust transfer to the husband their 49 shares in Capital Radio referred to in 2.3(a).
4.4That Michael Ferrall and Geoffrey Garrott as trustees for the Opal Trust transfer to the husband their 451 shares in Capital Radio referred to in 2.3(b).
4.5That Capital Radio transfer to the husband its 30,000 shares in Radio SM referred to in 2.4.
4.6That Michael Ferrall and Geoffrey Robert Garrott as trustees for the Opal Trust transfer to the husband, or alternatively to Capital Radio, their shares in Radio Perth referred to in 2.5.
5. That Geoffrey Robert Garrott and Andros Nominees Pty Limited be declared to be persons acting in collusion with the husband within the meaning of s85(4) and be ordered to pay the costs of the wife of and incidental to the above instruments and dispositions and their setting aside.
6.    That pursuant to s114(3), the parties named in the Schedule be restrained until the hearing or earlier further order from by themselves, their servants and agents, doing, causing to be done, or permitting to be done any of the following:
6.1Alienating or further encumbering any of the assets or undertaking of Radio SM, Capital Radio, or any subsidiary of either of them, including without limiting the generality of the foregoing the radio broadcasting assets of Radio Canberra Pty Limited, Radio Goulburn Pty Limited and/or Radio Perth Pty Limited, except in the ordinary course of business;
6.2Alienating or further encumbering any shares in Radio SM, Capital Radio, or any subsidiary of either of them;
6.3Enforcing any right or power of Andros under the Andros Mortgage;
6.4Issuing new shares, or otherwise altering the shareholdings, in Radio SM, Capital Radio, or any subsidiary of either of them.
6.5Removing, replacing, or appointing any trustee of the Opal Trust or the Sapphire Trust.
6.6Exercising any power of appointment or distribution of capital or income, or any power of revocation, resettlement or variation, in respect of the Opal Trust or the Sapphire Trust;
6.7Removing, replacing or appointing any director or other officer of Capital Radio, Radio SM, Radio Perth, or any subsidiary of any of them.
6.8Alienating or further encumbering the shareholding of the Opal Trust in Radio Perth Pty Limited.
7.    That until the hearing or further order, a fit and proper person be appointed receiver of the assets and undertaking of Capital Radio and Radio SM.
8.    That notice of the orders made herein ex parte may be served on the parties named in the Schedule in the first instance by facsimile transmission.
9.    Costs.
Schedule
1.    Radio Snowy Mountains Pty Limited (‘Radio SM’).
2.    Capital Radio Network Pty Limited (‘Capital Radio’).
3.    Michael Ferrall and Bruce McTaggart as trustees for the Sapphire Trust.
4.    Michael Ferrall and Geoffrey Robert Garrott as trustees for the Opal Trust.
5.    Geoffrey Robert Garrott.
6.    Andros Nominees Pty Limited (“Andros”).”

In their amended response filed on 12 August 1999, the present applicants sought, inter alia, summary dismissal of orders 2, 3, 4, 5 and 7 of the husband's amended application. His Honour heard argument on 13 October 1999 and reserved judgment. On 8 December 1999 he delivered judgment and dismissed the application for summary dismissal. We turn now to examine O'Ryan J's reasons.

THE REASONS FOR JUDGMENT DELIVERED 8 DECEMBER 1999

O'Ryan J recorded that it was common ground that he had jurisdiction to summarily dismiss or stay the application and that for the purposes of determining the application, he should proceed on the basis of accepting the evidence filed to date in the husband's case.

After setting out the history of the matter, his Honour proceeded to outline the approach he considered that he was required to take in determining the application for summary dismissal. At paras 267 and 268 he said:

“267.The relevant test has been variously described. The relevant portions of the decisions of Barwick CJ in General Steel Industries v Commissioner for Railways (NSW) (1964) 112 C.L.R 125 and of Cross J in Brimson v Rocla Concrete Pipes Ltd (1982) 2 N.S.W.L.R 937 are set out by Nygh J in Aldred and Aldred; Westpac Banking Corp. (1986) FLC 91-753 at 75,492.
268.The mere fact that an applicant's prospects of success are slim is not enough. The case of the applicant needs to be so clearly untenable that it cannot possibly succeed before it would be summarily dismissed: Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1995-1997) 188 C.L.R 241 at 271 per McHugh J.”

He then proceeded to consider and determine each of the “five discrete contentions" on the part of the applicants for summary dismissal. He characterised them as follows:

"271.Firstly, that an allotment of shares is not an “instrument or disposition” to which s.85 Family Law Act, 1975 can apply and thus the claims for that relief are untenable at law (Orders 2.3 and 2.4).

272.Secondly, that upon its proper construction s.78, Family Law Act does not empower the Family Court of Australia to declare that a person or entity, not being a party to a marriage, holds an interest in property on trust for a party to a marriage and in the alternative, if the contrary be found, then s.78 is beyond Commonwealth Legislative power and thus the relief sought is untenable (Orders 3.1 to 3.5 inclusive and Orders 4 and 5 consequently failing as comprising only consequential relief, dependant upon Order 3).

273.Thirdly, that a necessary element, precedent to the application of s.85, is that the transaction under attack take place at a time at which it can objectively be determined that an order is anticipated. A transaction occurring on 6 April 1997 fails to satisfy this element and is thus rendered untenable (Order 2.1).

274Fourthly, that the only power to appoint a receiver, on either an interim or final basis, in respect of the assets and undertakings of third party corporations arises under the Corporations Law. There is no jurisdiction in the Family Court to make orders under this legislation and thus the relief is untenable (Order 7) and in any event the relief can only be maintained as something consequential or upon or incidental to the foregoing relief in the amended application.

275.Fifthly, that the s.85 application addressing the interest in Radio Perth Pty Ltd will, if successful, have no net impact upon the financial position of the husband or any relevant entity and as such can have no effect of being likely to defeat orders. Thus an essential criteria of s.85 is not satisfied and the claim becomes untenable (Order 2.5)."

The Section 85 Application

Section 85 of the Family Law Act 1975 (Cth) (“the Act”) is as follows:
“85(1) In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
85(2) The court may order that any money or real or personal property dealt with by any such instrument or disposition may be taken in execution or charged with the payment of such sums for costs or maintenance as the court directs, or that the proceedings of a sale shall be paid into court to abide its orders.
85(3) The court shall have regard to the interests of, and shall make any order proper for the protection or, a bona fide purchaser or other person interested.
85(4) A party or a person acting in collusion with a party may be ordered to pay the costs of any other party or of a bona fide purchaser or other person interested of and incidental to any such instrument or disposition and the setting aside or restraining of the instrument or disposition.
85(5) In this section, disposition includes a sale and a gift."
His Honour's approach began from the following footing:

“277.I accept that prior to the allotments, the shareholding of the husband and the wife was proportionately much greater. The effect of the allotments was to reduce their proportionate shareholding in the companies, and therefore to reduce the value of their interest in the companies.
278.The issue is, does the Family Court have jurisdiction pursuant to s.85 Family Law Act to set aside the share allotments. In this case there is no issue that the effect of the allotments was to significantly reduce the extent and value of the property of the parties and that this in turn will significantly affect the entitlement of the wife. Further, that the 'scheme' was a deliberate attempt to achieve this outcome. As seen, Mr Garrott told the husband in early January 1998 that he had received legal advice that the Family Court does not have the power to overturn the issue of shares. In my reasons for judgement (sic) delivered on 31 July 1998 I identified this as an issue to be determined at the final hearing and referred to the decision of the High Court in Ord Forrest Pty Ltd v The Commissioner of Taxation (1973) 130 C.L.R 124.

…

282.In Ord Forrest Pty Ltd v Federal Commissioner of Taxation (supra) the issue was whether an allotment of shares in a corporation constituted a disposition of property for the purposes of the Gift Duty Assessment Act 1941-1967 (Cth). Section 4 (1) of the Act provided that in the Act the term 'disposition of property' included, inter alia, the allotment of shares in a company. Stephen J heard the matter as a single justice and on appeal the proceedings were heard and determined by Barwick CJ, McTiernan, Gibbs and Mason JJ who were divided and thus a statutory majority applied, determining that the allotment did so constitute a disposition for the terms of the statute, which by its terms defined an allotment of shares in a company as a “disposition of property”. The decision of the statutory majority was affirmed when the issue was revisited by the High Court in Federal Commissioner of Taxation v St. Helens Farm (ACT) Pty Ltd [1980-1981] 146 C.L.R 336.

283.On appeal, each of the four judges in Ord Forrest agreed that as a matter of general law an allotment of shares in a corporation did not constitute a transfer or disposition of property.”

O'Ryan J then considered two first instance decisions of the Court.

“287.In Turnbull v Turnbull & Ors. (1991) FLC 92-258 the husband was replaced as the major equity shareholder in a company by a trust of which he was a beneficiary. This was done by the allotment of shares in the relevant company to a trust of which the husband did not have the power of appointment and removal of trustee. Baker J applied s.85 to make orders setting aside the allotment of shares. On behalf of the applicants it is submitted that it seems clear from his Honour’s reasons that there was no debate before him as to whether s.85 could relevantly be applied and thus no ratio emerges from the decision.”

The second first instance decision was that of Moss J in Wilson v Wilson; Figtree GardensCaravan Park Pty Ltd (1994) FLC ¶92-498. Relying upon Ord Forrest, his Honour had held that an allotment of shares in a corporation could not constitute a disposition of property for the purposes of s.85. In para 288 of his reasons, O'Ryan J cited the following statement by Moss J in Wilson at 81,189.
"Although the expression in s.85(1) "disposition" is not followed by the words such as "of property", it seems clear the expression itself could have no other meaning than a "disposition of property"…and that this is so seems to be put beyond any doubt by the context in which the expression is used, and especially having regard to the provisions of sub-sections (2), (3) and (5) of the section."
In the following paragraph of his judgment, O'Ryan J said:
“289.Moss J then referred to the definition of property in s.4 Family Law Act and thereafter dealt with the history of the phrase "disposition of property" when used in a legal context. He said that the inquiry was whether the allocation by a company of its shares constitutes a disposition of property within the meaning of s.85(1). He found that he was bound by the decision of the High Court in Ord Forrest namely that an allotment of shares in a company cannot be described as a disposition of property in the ordinary meaning of that expression and therefor s.85 could not apply.”
O'Ryan J noted however at para 290:

“290.The issue was raised in the context of a summary dismissal application dealt with by me in Majewski v Majewski (No. SY3778 of 1994. 8.5.97. Unreported). I found it unnecessary to determine the issue, having concluded that the proceeding would be properly dismissed upon another basis. Therefor my comments, directed to the arguments reliant upon Moss J’s decision in Wilson, were confined to obiter dicta. However, I did express doubt as to the validity of the analysis undertaken by Moss J. I do not suggest that I undertook a detailed consideration of the issues involved and for that reason alone confirm that what I said was simply obiter dicta. I said (at p 11):

’With respect to Moss J, in my opinion, the answer to the question is not resolved by the decision of the High Court in Ord Forrest (supra) and that the expression “disposition” may not be restricted to a “disposition of property”. Moss J referred to the definition of “property” in s.4 and to s.79 but appears to have said nothing about the concept of “financial resource”. If the approach taken by Moss J is correct then the disposition of a financial resource could not be attacked under s.85. Further, it would mean that in circumstances where the only property of the parties was shares in a company held by only one party, then relief sought in financial proceedings could easily be defeated by the allotment of shares in the company to a third party. Section 85 applies to proceedings “under this Act” and its’ application is not confined to proceedings for spousal maintenance.’”

O'Ryan J then identified the following submissions by the applicants:

“291.… that if the analysis by Moss J is ultimately accepted as being correct then the matters of legislative history to which he refers and the fact of the legislation being enacted well after the High Court’s decision in Ord Forrest is important. It is submitted that quite clearly, had the Parliament intended so, the concern of simple evasion expressed by me in Majewski could easily have been overcome by the incorporation in the Family Law Act of a definition of ‘disposition’ for the purpose of s.85, to specifically incorporate an allotment of shares in a corporation which, consistently with Ord Forrest, would see an allotment drawn into the web of s.85.

292.It is submitted that Moss J expressed the opinion that the reference to ’disposition’ in s.85 could have no other meaning than a disposition of property. His Honour referred to the decision of the Full Court in Re Public Trustee for the State of South Australia and Keays (1985) 10 Fam LR 610 where the Full Court said at 617:

’In deciding the appeal the first issue which has to be considered is whether the indenture of 2 February 1983 disposed of “property” of the husband within the meaning of s.4 (1). If it did not, the basis for applying s.85 (1) would disappear since its exercise would not revest any assets or entitlement in the husband.’

293.It is submitted that the reasoning of Moss J is consistent with the proposition that an order pursuant to s.79 can only be satisfied out of ‘property’. It is submitted that when a necessary element for the application of s.85 is to demonstrate that the instrument or disposition under attack will ‘defeat’ or is ‘likely to defeat’ an order, it is only property out of which an order can be satisfied that can have this effect. It is said that this submission is made reliant upon the trite principle that whilst the existence of a ‘financial resource’ can and will be taken into account in determining the appropriate order pursuant to s.79 to be made, the order itself cannot be directed against the financial resource nor predicated upon the basis that the financial resource will be the source from which it will be satisfied. Thus, any transaction that may be undertaken affecting a financial resource can simply be taken into account eg. by assuming that a resource that a party has disposed of notionally remains with the party, in determining the s.79 proceeding.

294.Further, it is submitted that the distinction drawn by me between ’property’ and ’financial resource’ and the question of whether the reference to a ’disposition’ in s.85 necessarily only relates to property is irrelevant.

295.It is submitted that there is no doubt that a share in a company, once allotted, is property. Further, that the shares that the husband held in the relevant companies prior to any such allotments were property and that neither of them are or were ’financial resources’.

296.It is submitted that there is no ’instrument’ to attack under s.85 and the court is left only with the question of a ’disposition’. It is submitted that the analysis undertaken by the High Court in Ord Forrest whilst using the phrase ’disposition of property’ from time to time gains no independent status from the reference to ’property’. In other words the analysis read as simply applying to ’disposition’ follows exactly the same logical path. It is said that each of the passages quoted above support the proposition that in the allotment of a share there is simply no ’disposition’. It is the allotment that the husband’s application seeks to attack and nothing else.

297.It is submitted that a ’disposition’ for the purposes of s.85 has been held to embrace ’any form of alienation’: Bassola v Bassola (No.1) (1985) 10 Fam LR 413 at 416 per Connor J. and Hudson and Hudson (1986) FLC 91-768 per Gee J. If the ‘property’ analysis were correct, then this alienation must be necessarily involve [sic.] the movement of property from one to another. If the ‘financial resource’ analysis is correct then the alienation must similarly involve at least the movement of rights from one to another. It is said that none of this analysis fits with the High Court’s analysis of the effect, at law, of the allotment of shares in a corporation.”

His Honour then recorded the wife's submission that there had been a transfer of value from the husband and the wife to the other shareholders, that this constituted a disposition of value previously held by the husband and wife to the other shareholders, and that "there is no reason to limit 'disposition' to one of property, nor to a sale or a gift". (at para 298).

His Honour cited the Full Court's decision in In the Marriage of Gould (1993) 17 Fam LR 156, citing particularly two aspects of the remarks of Fogarty J.

In Gould at 168, Fogarty J referred with apparent approval to comments by Nicholson CJ in what is reported as Halabi v Artillaga & Ors (1994) FLC ¶92-470 at 80, 885. Fogarty J had said:

"an applicant under s 85 may establish that claim by demonstrating that the pool of property of the parties has been diminished by the making of the instrument or disposition in question to an extent that is likely to have an impact on anticipated orders."

The second feature of Fogarty J's remarks extracted by O'Ryan J concerned the history of similar provisions predating s.85 (found in Gould at 170, 174 and 179). O'Ryan J said that "[t]he power conferred upon the court by s.85 is a wide power because of the varied circumstances that may arise which would otherwise defeat anticipated orders”. (at para 301).

O'Ryan J then referred to the Full Court's decision in Re Twigg and Keady (1996) 21 Fam LR 82 as an example of how s. 85 was not concerned only with transactions to defeat an order with respect to property settlement under s. 79 of the Act and that the Court would have jurisdiction under s. 85 notwithstanding that neither party is a party to a marriage. O'Ryan J also referred to In the Marriage ofDavidson (1994) 17 Fam LR 656 where the Full Court found s.85 to be applicable to a complex financial transaction which was not a disposition of property.

His Honour considered cases that had examined the definition of “disposition” including the discussions in Henty House Pty Ltd (In Voluntary liquidation) v Federal Commissioner of Taxation (1953) 88 CLR 141 and the Full Court's decisions in Bassola and Bassola: the Official Trustee in Bankruptcy (Intervener)(No 3) (1986) FLC ¶91-760 which did not disagree with Connor J's general statement in Bassola and Bassola: the Official Trustee in Bankruptcy (Intervener)(No 1) (1985) 10 FamLR 413 that the meaning of “disposition” under s. 85 embraces any form of alienation. (We note in passing in this regard that the final sentence of para 311 is inconsistent with his Honour's prior analysis in that it suggests that "O'Connor J” (sic) confined the meaning of "disposition" narrowly to a transfer of proprietary rights. We are confident this was no more than a proofing error.)

After turning to consider some case law under the Family Provision Act 1982 (NSW) his Honour concluded that when the definitions are read in conjunction with the purpose of s.85, namely to provide relief where an unscrupulous party has sought to avoid a just and equitable provision of property, s.85 does apply to catch the disposition of valuable benefits not strictly constituting property. O’Ryan J said:
”318.Thus the error in the approach on behalf of the applicants regarding an allotment of shares, in so far as an s.85 application is concerned, is that it focuses on the fact that new property has been created whereas the real concern of the section is to determine whether an unscrupulous act regarding the party's property has occurred and in this sense, 'transfer' is to be understood in a much broader way.
319.In my view, to focus on the 'transfer of proprietary rights in property, whether by sale of gift or otherwise or the 'creation of new property', when it is clear that what has occurred is precisely the thing that this section was enacted to deter is an artificial approach.
320.Thus while I agree that the approach of Moss J may be technically correct in the context of revenue or real property legislation it is my respectful view that this approach should not be adopted in the context of proceedings under the Family Law Act as such an approach would unnecessarily limit the wide ambit of s.85.
321.Indeed, in my view, the case law demonstrates that section 85. covers a wide ambit and there is nothing to suggest that the words 'disposition' or 'alienation' are to be interpreted narrowly. They are to be read to give effect to the intention of the section and that is to enable the Court, in the context of applications pursuant to s.79, to effect a just and equitable distribution of property and to set aside transactions which have the effect of trying to defeat such orders.
322.In my opinion, s.85 does apply to catch the disposition of valuable benefits not constituting property as strictly defined. A material reason for that view is because the reference in s.85 to ’disposition’ provides for a linkage with the ultimate object of s.85 namely to prevent something that may defeat an existing or anticipated order. Such an order may potentially be made pursuant to the power contained in s.74 and or .s79. For either of such orders to be made the property or financial resources of a party are fundamentally relevant. Therefor [sic.] should a ’disposition’ cause a loss of property and or financial resources that ’loss’ or diminution may in turn defeat an order e.g an allotment of shares that causes the diminution of the value of existing shareholding. An ’instrument’ which is likely to defeat a claim may be the subject of s.85 relief regardless of whether or not it alienates, encumbers or otherwise deals with property: see In the Marriage of Davidson and Davidson (supra). In my opinion, ’disposition’ should not be construed any more narrowly.”

His Honour commented that another reason why the application should be dismissed was that the allotment of shares was part of a chain of connected transactions designed to significantly diminish the pool of assets available. His Honour cited the Full Court case of Bassi and K.D. Sales Force Specialists Pty Ltd v Maas (1999) FLC ¶92-867 to support this statement and said that it was possible that the allotments or series of transactions could be regarded as instruments for the purposes of s.85. At para 324, O'Ryan J cited the following passage from Bassi:
"Given those findings and the chronology of events set out in paragraph 68, we think that it is artificial, and potentially misleading, to look at all of the dispositions and the West Samoan transaction as if they were each a separate and isolated transaction. Although the trial Judge did not make a specific finding that all of those events formed part of a single transaction, or chain of transactions, with a common purpose, we think that it is clearly implied that that was the case. In any event, given the chronology and his Honour’s findings, we think the inevitable inference to be drawn is that all of those events (including the Samoan venture) were part of a chain of connected transactions intended, by the husband at least, to significantly diminish the pool of assets available for division in the property proceedings between him and the wife, and thus to defeat (at least in part) an anticipated order in her favour in those proceedings. His Honour certainly found that the husband and the first appellant ’well knew’ that those transactions would diminish the husband’s capacity to meet his obligations to the wife, and if they knew that would be the effect, and proceeded nevertheless, an intention to produce that effect must be inferred against them.
In those circumstances, we consider that it is wrong and artificial to look at the Samoan transaction as a separate event and, merely because it fortuitously followed the bulk of the dispositions to the appellants, and because of its quantum, to conclude that it was that transaction, rather than the dispositions to the appellants, which defeated or (at the time) was likely to defeat the anticipated order in the wife’s favour. Rather we think that it was the combination of those dispositions and the Samoan transaction, which constituted a single chain of connected transactions, which had that effect. In those circumstances we consider it is open to the wife to seek to attack, through s.85, either the whole chain of transactions or any link or group of links in it which are amenable to such attack. It cannot be a defence to such an attack on some links of the chain for the parties to those links to point to other links which, in purely temporal terms, occurred later, and say that but for those later links the effect, which is a condition precedent to the operation of s.85, would not have occurred. Just as each link of a chain contributes to the chain’s ability to hold a load, so each transaction in this chain of transactions contributed to the overall effect, namely the likely defeat of an anticipated order in the wife’s favour in the proceedings".
We note in this regard that an application for leave to appeal against the Full Court's decision in that case was dismissed by Gleeson CJ and Gaudron J on 4 August 2000 (Bassi & Anor v Maas S198 of 1999).

O'Ryan J's conclusions on the summary dismissal application in respect of the s.85 claim were as follows:

“325.In my opinion, there is sufficient argument which could be made at trial that the Family Court does have power, pursuant to s.85, in appropriate circumstances, to set aside an allotment of shares in a company. Thus the proposition that the husband's case should be summarily dismissed cannot succeed.

326.Another reason why the application should be dismissed is that the argument has been largely confined to whether or not the transactions may be a disposition. However, s.85 also applies to instruments and it may be that the allotments or series of transactions are instruments for the purposes of s.85. This issue was not argued before me. However, given that it is an application for summary dismissal it is open to me to so find.

327.If I am wrong in the conclusion that I have reached then I accept the submission made, perhaps indirectly or inadvertently, on behalf of the applicants, that there would need to be an amendment to s.85 to ensure that the Family Court does have the power. I would thus urge upon the Parliament to urgently consider the possibility of legislative amendment to s.85 given the advice that seems to be abroad in the legal community that one way that legitimate claims pursuant to s,79 Family Law Act may be defeated, where the significant property is shares in a company, is to 'water' down the extent and value of such property by a simple allotment of shares in the relevant corporation: see "Section 85 and Multi-respondent Proceedings", Australian Family Lawyer, Michael Errington"

328.For the reasons I have given I propose to dismiss the application in so far as it seeks that the claim for relief pursuant to s.85 should be summarily dismissed.”

The Claim for Declaratory Relief under Section 78

The trial Judge explained that each declaration sought by the respondents to the present application for leave was a declaration to the effect that the applicants hold property or interests in property on trust for the husband. The trial Judge acknowledged that the jurisdiction for making declarations pursuant to s.78 is founded in ss.31 and 33 of the Act and that proceedings pursuant to that section had to be proceedings by way of a “matrimonial cause” brought under s.8 of the Act, as opposed to proceedings falling within the scope of State legislation.

His Honour recognised that the nature of the declarations sought would affect third party rights in respect of property and, in this regard, the applicants argued that if the Court were to make the declarations sought, it would be exercising jurisdiction ordinarily found in State courts. They also submitted that the proposed application of s.78 “clearly offends the well established principles as to the extent of the power of the Family Court of Australia to make orders affecting the rights of third parties: Ascot Investments Pty Ltd v Harper (1980-81) 148 CLR 337 esp 354 per Gibbs J”. They also submitted “that the stated exceptions (sham, alter ego, etc.) have no relevance to the statutory relief sought in the present proceedings”. (para 349). His Honour said:
“350.Upon this construction it is submitted that s.78 is ultra vires the legislative power of the Commonwealth. It is submitted that the jurisdiction that the husband invites the court to exercise is one involving the jurisdiction ordinarily with State courts and about which there is an absence of Commonwealth legislative power. Further, it is said that in so far as such declarations under s.78 may be confined to proceedings between husband and wife, and binding only upon them, the constitutional power arising in relation to matrimonial causes would clearly authorise the legislation. It is submitted that this does not and cannot authorise the determination of the rights of the third parties. It is said that whilst in some cases a more extended view of the Commonwealth legislative power might be convenient, it simply does not arise under the Constitution and it was the acknowledged difficulties thereunder that led to the State and Federal Cross-Vesting Scheme.”

The husband’s submission was that the repeal of sub-s.(3) of s.78 effected subsequent to the implementation of the State and Commonwealth Cross-Vesting Scheme which came into force on 1 July 1988 “would appear to be a clear indication that the Parliament intended that declarations made under s 78 could bind third parties, if joined”. (para 344). His Honour took the following view:

“351.The proceedings between the parties are a matrimonial cause. In those proceedings it has become necessary, in the circumstances of this case, to determine the extent of the property of the parties. In order to resolve that issue it has become necessary to determine if property held by a third party is in fact property of the parties or one of them. I accept the submission made on behalf of the husband that, in those circumstances, because this requires determination of the rights of a third party does not mean that those proceedings are not a matrimonial cause. Further, even if such determination can be made binding upon a third party that does not deprive the proceedings of the characteristic of a matrimonial cause. The power to legislate with respect to ’matrimonial causes’ includes matters incidental thereto and s.85 is an example of how this can affect third parties.

352.In my view, there is another reason why the application should be dismissed. In the circumstances of this case there may be an issue, to be determined at the trial, namely whether the exceptions in AscotInvestments Pty Ltd v Harper (supra) do apply.

353.In this case, I do not know, and would not attempt to speculate about, what the evidence may ultimately reveal and what findings may be made. However, there may be an issue of fraud.

354.A further submission was made on behalf of the applicants namely that in any event the declaration sought in Order 3.5 must fail. It is submitted that the evidence addressing this issue is confined to the husband’s affidavits of 23.July 1999 and 28.August 1999. It is said that accepting this evidence it is clear that if the alleged trust was to arise for the benefit of anybody it would be for Capital Radio Network Pty Ltd and not for the husband. It is said that this analysis is entirely consistent with what was put by Senior Counsel for the husband on 2 August 1999 when pursuing interlocutory relief to support an intended application for the declaration where Mr Brereton SC said (transcript page 18):

’Now, that has not been perhaps sufficiently precise to draw to the attention of the respondents that it is alleged that Capital Radio owns beneficially the interest in Radio Perth held nominally by the Opal Trust but what is contended is that the interest of the Opal Trust in Radio Perth is held beneficially for Capital Radio as part of the scheme described in the husband’s original affidavit.

My learned friend is correct when he says that no application has yet been filed seeking final relief in respect of that holding. I am in the position to undertake that within 48 hours an amended application will be filed seeking a declaration pursuant to Section 78 that the Opal Trust holds those shares upon trust for Capital Radio and an order pursuant to Section 85 setting aside the disposition by which those shares were invested in the Opal Trust. That application has already been drafted.’

355.It is submitted that the relevant application when ultimately filed did not seek a declaration for the benefit of Capital Radio Network Pty Ltd and instead seeks a declaration in favour of the husband which is wholly contrary to the evidence in the husband’s case. It is my view that this is an issue that will have to be determined at the trial and hence does not justify the summary dismissal of the husband’s application.”

Accrued Jurisdiction

The husband submitted before O'Ryan J that, in any event, the declarations could be made within the Court’s accrued jurisdiction.

His Honour acknowledged that he had received detailed submissions on the subject and briefly reviewed the law in relation to the concept of accrued jurisdiction pursuant to s.33 of the Act and cases such as Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261. His Honour noted that while it was yet to be authoritatively determined by the High Court of Australia that the Family Court of Australia has accrued jurisdiction to determine a non-federal aspect of a single justiciable controversy which falls within its jurisdiction (Smith v Smith (1986) FLC ¶91-732), his Honour proceeded on the basis that the Family Court does have accrued jurisdiction. His Honour cited Lawson and Lawson and Wallmans (now reported (1999) FLC ¶92-874) and Smith and Smith (No 2) (1985) FLC ¶91-604 as support for this proposition.

His Honour then turned his attention to determining whether or not the husband’s claims were part of a single justiciable controversy. In deciding this point his Honour referred to the principles set out in Philip Morris v Adam P. Brown Male Fashions Pty Ltd (1981) 148 CLR 457 and ReWakim, Ex Parte McNally (1999) 163 ALR 270.

His Honour found that in the context of family law, non-federal law matters would be considered to be within the jurisdiction of the Family Court only if they were ‘non-severable’ from a matrimonial cause and arose out of a common substratum of facts.

His Honour held in this regard:

“387.I am of the opinion, that the relief sought in this case may be part of the same justiciable controversy as that in respect of which the power under s.85 is invoked (see pa 7 of Husband’s Submissions in Reply). I am satisfied that the claims may arise out of the same transactions and the same facts are relied upon.”

Accordingly, his Honour refused to summarily dismiss this aspect of the case.

The “Anticipated Order”

The applicants submitted that given the transaction attacked in order 2.1 of the amended application filed on 6 August, 1999, actually occurred on 6 April, 1997, which was prior to the separation of the husband and the wife, there was no existing or objectively anticipated order.

The trial Judge stated that he did not accept this submission because in March, 1997, Mr Garrott had expressed his concern to the husband that the marriage was not going to last. His Honour found that establishing the required nexus in the circumstances was a question of fact to be determined at trial.

The Corporations Law

The applicants submitted that the evidence did not reveal any basis upon which the order sought in paragraph 7 – the appointment of a receiver over Capital Radio and Radio SM – should be made and furthermore it was contended that the Family Court did not have jurisdiction to make such an order.

The trial Judge found that the relief sought in paragraph 7 of the orders sought had the potential to be sought as a consequential order providing orders were made pursuant to either ss.78 or 85 or relying upon s.80 (subject to jurisdiction).

Radio Perth and Section 85

This segment of the application concerned the husband seeking to set aside the “issue or transfer, in or about November 1998, at the direction of the husband and/or Capital Radio, and in the interest of the husband, to Carol Batt and Geoffrey Robert Garrott as trustees of the Opal Trust, of shares in Radio Perth Pty Limited (“Radio Perth”)”.

The applicant submitted that the evidence failed to demonstrate any basis upon which the transaction had the effect of being “likely to defeat” any order and that the purchase price was for proper value and negotiated at arm’s length.

The trial Judge found that the resolution of this issue would depend on the ultimate findings made at trial and subsequently refused to summarily dismiss that aspect of the application.

The Trial Judge's Conclusion

The trial Judge concluded that the application of the husband and the wife was not so clearly untenable that it could not possibly succeed and therefore his Honour dismissed the application for summary dismissal.

THE APPLICATIONS FOR LEAVE TO APPEAL

Appropriate notice under the Judiciary Act 1903 (Cth) had been delivered to Commonwealth and State Attorneys-General. At the hearing of the applications, in addition to Counsel appearing for the parties, Mr. Burmester QC appeared and made submissions on behalf of the Attorney General for the Commonwealth.

The Certificate Under Section 128 Evidence Act

The first matter that needs to be determined is whether O’Ryan J was correct in granting a certificate to the husband under s.128 Evidence Act.

The substance of the argument put by the applicants was that this certificate should not have been granted and they said that it followed from this that, had it not been granted, the evidence would not have been admitted and there would have been no basis for O’Ryan J to resist the applications to summarily dismiss the husband’s application of 6 August 1999 in the absence of such evidence. This raises two sub-issues these being:

a)Is his Honour’s grant of the certificate subject to appellate review?
b)If his Honour was wrong in granting such a certificate, does the fact that he has done so alter the fact that the evidence has been admitted and was relied upon by the primary Judge?

Mr Jackson QC for the applicants submitted that the question of whether a certificate should be granted arises only when the witness “objects” to giving evidence and in this regard they refer to the opening words of s.128(1) and the reference in s.128(4) to “overruling the objection”. They said that in this case, the husband sought to give evidence and was not objecting to doing so and that as a consequence the terms of the section were not satisfied.

Secondly they said that no such certificate should have been granted until Notice had been given to the Attorney-General. They submitted that such a requirement arose because of the public interest in the granting of such a certificate and in this regard they relied upon the decision of Young J in HPM Industries P/L v Graham supra.

In reply, Mr Brereton SC for the respondents said that there was nothing to suggest that s.128 was intended to operate only in relation to cross-examination and he said that it clearly extended to evidence in chief in respect of evidence which a witness would otherwise wish to give except that it would be self-incriminatory. He said that all that was intended by the reference to “objects” in sub-s.(1) and “objection” in sub-s.(4) was to cover the situation of witnesses giving evidence both in chief and in cross-examination. In this regard he relied upon the decision of the Full Court in Atkinsonv Atkinson (1997) FLC ¶92-728. He pointed out that the offer of a certificate does not compel the witness to give the evidence but if the witness does so, the Court must give a certificate. He said this was inconsistent with the section being concerned only with a witness who objects to giving the evidence at all and wholly consistent with its being directed to a witness who, subject to the offer of a certificate, wishes to give evidence. He also said there was no need to give Notice to the Attorney General as argued by Mr. Jackson, noting that this was not a requirement of the section.

Finally, he said that an appeal does not lie from a certificate in that it is not a decree within the meaning of s.94(1)(a). He said that in any event it would be invidious to grant leave to appeal even if an appeal does lie in circumstances where evidence has been given in reliance upon it.

Mr Burmester QC for the Attorney-General of the Commonwealth, supported Mr Brereton’s position. In particular he said that while one of the factors considered by the Court under s.128(5) is the interests of justice, this does not give rise to a requirement to notify the Attorney-General.

The trial Judge considered that it was a matter of discretion whether he granted the certificate and/or whether he adopted the practice outlined by Young J in HPM Industries P/L v Graham (supra). He pointed out that the certificate in question was sought only in relation to the hearing he was conducting which was simply to make injunctions preserving a situation pending the determination of other proceedings and not in relation to any other proceeding.

We think the trial Judge was clearly correct in holding that it was within his discretion to grant such a certificate. Firstly, we think it would be unrealistic to limit the availability of a certificate to a situation where a witness is asked a particular question in cross-examination. We think the availability of a certificate clearly applies to evidence given in chief, otherwise an inappropriate forensic advantage would rest with the other party who would be in a position to prevent the question of an objection arising by simply not seeking to cross-examine.

In the particular circumstances of the Family Court of Australia, evidence in chief is normally given by affidavit. We think that in the circumstances of the present case, the witness was objecting, in the sense required by s.128, by indicating that he would not file the affidavit unless a certificate was given. We see the situation as no different from that which would have been the case if he had been sworn in and asked to answer questions concerning the matter in evidence in chief, and had objected to doing so without the issue of such a certificate.

So far as the issue of Notice to the Attorney-General is concerned, we agree with the learned trial Judge that this must be a matter of discretion and in the circumstances of this case we were not shown any reason why O’Ryan J’s discretion had miscarried.

Finally, on the question of whether an appeal lies from the grant of a certificate we do not find it necessary to determine this issue beyond saying that there seems to be considerable substance in Mr Brereton’s point as to the adverse effects upon the operation of the section and its aims if evidence given under the purported protection of the certificate were later to be found to be admissible against the witness in question following a successful appeal against the grant of a certificate.

For all of these reasons we will refuse the application for leave to appeal numbered ALE 14 of 1999.

The Refusal To Order Summary Dismissal

We now turn to the application filed on the 23 December 1999 (numbered ALE 21 of 1999) whereby the applicants seek leave to appeal from the further orders of O’Ryan J made on 8 December 1999. His Honour there refused their application for summary dismissal of the proceedings instituted against them by the husband and the wife. The applicants assert that his Honour erred through:

holding that an allotment of shares in a corporation may constitute an “instrument or disposition” to which s.85 the Act applies;
holding that s.78 empowers the Family Court to declare that a third person holds an interest in property on trust for a party to the marriage or, alternatively, failing to hold that such declarations would be beyond Commonwealth legislative power
holding that a disposition under s.85 may be constituted by a transfer of value;
holding that the allotments may be caught under s.85 by comprising part of a chain of connected transactions and in doing so misapplied authority and failed to address whether an event forming part of such a chain must necessarily be susceptible to s.85;
holding that the Family Court has power to appoint a receiver;
holding that accrued jurisdiction empowered the Family Court to grant the relief sought pursuant to s.78;
holding the Family Court was invested with accrued jurisdiction in non-Federal matters involving proceedings other than between parties to a marriage;
taking into account an argument that an allotment of shares might constitute an “instrument” for the purposes of s.85 in circumstances where no party raised this argument or provided evidence to enable his Honour to come to such an independent view;
forming the view that the appointment of a receiver may be made as a consequential order and in doing so acted upon an irrelevant matter because only interim orders are sought for such an appointment which are not consequential upon the granting of any part of the substantive relief;
considering the relevance of accrued jurisdiction when the declarations were sought only on a statutory basis;
taking into account the exceptions in Ascot Investments v Harper (supra) when the express terms of the relief sought exclude such a position;
taking into account the meaning of the word “alienation” when determining the proper application of s.85;
finding the allotments of shares had the effect of transferring value from the husband and the wife to the holders of the shares allotted;
finding that further evidence and findings were yet to be taken into account in relation to both the relief sought by the respondents in paragraphs 2.5, 3.5 and 2.1 of the amended application filed 6 August, 1999, and the argument advanced in relation to whether the orders were anticipated as at 6 April, 1997, as opposed to taking the evidence of the respondents before him at its highest.

A primary issue identified by his Honour is what needs to be shown by an applicant to achieve the summary dismissal of proceedings. His Honour's review of the law at paras 267 and 268 was as follows:

“267.The relevant test has been variously described. The relevant portions of the decisions of Barwick CJ in General Steel Industries v Commissioner for Railways (NSW) (1964) 112 C.L.R 125 and of Cross J in Brimson v Rocla Concrete Pipes Ltd (1982) 2 N.S.W.L.R 937 are set out by Nygh J in Aldred and Aldred; Westpac Banking Corp. (1986) FLC 91-753 at 75,492.
268.The mere fact that an applicant's prospects of success are slim is not enough. The case of the applicant needs to be so clearly untenable that it cannot possibly succeed before it would be summarily dismissed: Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1995-1997) 188 C.L.R 241 at 271 per McHugh J.”

Reference does not appear to have been made, either before his Honour or at the hearing before us to the Full Court decision of Bigg v Suzi (1998) FLC ¶92- 799 in which the Full Court considered an appeal from an order by a trial Judge summarily dismissing a husband's application under s.79A. Barblett DCJ, Lindenmayer and Finn JJ there discussed the power of the Court to "strike out" or "dismiss" proceedings summarily. Their Honours said (at 84,973-5):

“5.1 At common law the concept of ’striking out’ applied to a pleading in an action rather than to the action itself, although an action might sometimes be ’struck out’ of the court's list as a means of effectively staying it until further order. [R. v. McGowan (1984) VR 1000 at 1002; Miller v. Hanson (1891) 17 VLR 715 at 716; Roberts v. Gippsland Agricultural and Earthmoving Contracting Co. [1956] VLR 555 at 565; Aiken v. Aiken [1941] VLR 124; Bennett and Bennett (1985) FLC ¶91-617 at 79,994; and Tudor and Tudor (1992) FLC ¶92-273]. If it was the intent of the order to put an end to the action for all time, the action was ’dismissed’ rather than ’struck out’, and judgment entered for the defendant.
5.2 The former O 11 r 11 of the Family Law Rules, which was in force from 1989 to 1995, empowered this court to order that the whole or any part of a ’pleading’ be ’struck out or amended’ where, inter alia, it disclosed ’no valid claim for relief’ or was ’scandalous, frivolous or vexatious’ or was ’an abuse of the process of the court’. At that time, ’pleading’ was defined as including ’an application, answer, cross application ...’ etc., and a system of pleadings operated under the rules, the effect of which was that an ’application’ was both the initiating process in relation to a claim and the pleading of all the necessary facts relied upon to establish that claim, i.e. a combination of the writ and the statement of claim, in common law terms.
5.3 Thus, it is unclear what the precise legal effect would have been of an order made under that rule that an application be ’struck out’. In practice, if the court concluded that the claim made in an application could not possibly succeed, the application was either dismissed or permanently stayed, rather than being struck out.
5.4 The amendment to the rules in 1995 which abolished pleadings also removed from those rules the express power, formerly contained in O 11 r 11, to order a ’pleading’ to be ’struck out or amended’, since such a rule, in the absence of ’pleadings’ would be a nonsense. However, it was not disputed before as that this court has the power, which Hilton J purported to exercise, of summarily dismissing or permanently staying a proceeding in which no reasonable or probable cause of action is shown, or which, for any reason, the court is satisfied cannot possibly succeed.
5.5 That this Court has the necessary inherent power to dismiss or permanently stay an application which cannot succeed, was recognised by Nygh J in Aldred (1986) FLC ¶91-753 and affirmed by the Full Court in Spellson (1989) FLC ¶92-046. In Aldred, in addition to referring to the authorities concerning the inherent powers of this Court, his Honour referred to Halsbury's Laws of England 4th Edition vol 37 Practice and Procedure, paragraph 435, where it is said:
’`So under its inherent jurisdiction the court may strike out the whole or part of the indorsement on a writ or stay or dismiss an action which is frivolous or vexatious or an abuse of process or which must fail or which the plaintiff cannot prove, and which is without a solid basis ..’''

5.6 It is also stated in Halsbury that the power to strike out, stay or dismiss under the court's inherent jurisdiction is discretionary.
5.7 Further, pursuant to s 38(2) of the Act, the Family Court may, where its own rules are insufficient, apply the rules of the High Court. Included in those latter rules is O 26 r 18 which is as follows:
’`(1) The Court or a Justice may order a pleading to be struck out on the ground that it does not disclose a reasonable cause of action or answer.
(2) In that case, or in case of the action or defence being shown by the pleadings to be frivolous or vexatious, the Court or a Justice may order the action to be stayed or dismissed, or judgment to be entered accordingly, as is just.’

5.8 In Aldred (supra), Nygh J relied upon s 38(2) of the Act to draw upon O 63 rr 1 and 2 of the High Court Rules, which are as follows:-
’`1. The Court or a Justice may, at any time after the instituion of a proceeding, direct a stay of proceedings, either as to the whole or part of the proceeding or as to any proceedings under a judgment or order given or made in the proceeding.
2. An application to stay proceedings on the ground that there is not a reasonable or probable cause of action or suit, or that the proceeding is vexatious and oppressive or is an abuse of the process of the Court, may be made at any time and whether the plaintiff does or does not admit the allegations of fact, if any on which the application is founded.’'

5.9 It will be seen that the powers in O 26 r 18 and O 63 rr 1 and 2 are discretionary, and that in the former those powers include a power to dismiss an action where either a pleading is ’struck out’ or the action is shown to be frivolous or vexatious.
5.10 The principles which govern the exercise of that discretion, be it exercised under O 26 r 18, or under the inherent power, [or, we would suggest, under O 63 rr 1 and 2] were recently stated by Kirby J in Lindon v. The Commonwealth (No. 2) (1996) 70 ALJR 541 at 544-5, as follows:
’`The approach to be taken by the Court to the Commonwealth's application for summary relief is not in doubt:

1. It is a serious matter to deprive a person of access to the courts of law for it is there that the rule of law is upheld, including against government and other powerful interests. This is why relief, whether under O 26, r 18 or in the inherent jurisdiction of the Court, is rarely and sparingly provided; [General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 128f; Dyson v Attorney-General [1911] 1 KB 410 at 418.

2. To secure such relief, the party seeking it must show that it is clear, on the face of the opponent's documents, that the opponent lacks a reasonable cause of action [Munnings v Australian Government Solicitor (1994) 68 ALJR 196 at 171f, per Dawson J] or in advancing a claim that is clearly frivolous or vexatious; [Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91.]

3. An opinion of the Court that a case appears weak and such that it is unlikely to succeed is not, alone, sufficient to warrant termination. [Coe v The Commonwealth (1979) 53 ALJR 403; Wickstead v Browne (1992) 30 NSWLR at 5-7.] Even a weak case is entitled to the time of a court. Experience teaches that the concentration of attention, elaborated evidence and argument and extended time for reflection will sometimes turn an apparently unpromising cause into a successful judgment;

4. Summary relief of the kind provided for by O 26, r 18, for absence of a reasonable cause of action, is not a substitute for proceeding by way of a demurrer. [Coe v The Commonwealth (1979) 53 ALJR 403 at 409.] If there is a serious legal question to be determined, it should ordinarily be determined at a trial for the proof of facts may sometimes assist the judicial mind to understand and apply the law that is invoked and to do so in circumstances more conducive to deciding a real case involving actual litigants rather than one determined on imagined or assumed facts;

5. If, notwithstanding the defects of pleadings, it appears that a party may have a reasonable cause of action which it has failed to put in proper form, a court will ordinarily allow that party to reframe its pleading. [Church of Scientology v Woodward (1980) 154 CLR 25 at 79.] A question has arisen as to whether O 26, r 18 applies to part of a pleading. [ Northern Land Council v The Commonwealth (1986) 161 CLR 1 at 8.] However, it is unnecessary in this case to consider that question because the Commonwealth's attack was upon the entirety of Mr Lindon's statement of claim; and

6. The guiding principle is, as stated in O 26, r 18(2), doing what is just. If it is clear that proceedings within the concept of the pleading under scrutiny are doomed to fail, the Court should dismiss the action to protect the defendant from being further troubled, to save the plaintiff from further costs and disappointment and to relieve the court of the burden of further wasted time which could be devoted to the determination of claims which have legal merit.’”

In Pelerman v Pelerman (2000) FLC ¶93-037, a differently constituted Full Court delivered judgment while the present case has stood reserved. In para 46 (FLC ¶93-037 at 87,582) , Ellis, Lindenmayer and Rose JJ summarised the principles in Bigg v Suzi (supra) in the following manner:

"(a) The power for summary dismissal is a discretionary one.
(b) Relief "is rarely and sparingly provided".

(c) The parties seeking summary dismissal must show that the application is "doomed to fail" or as has been otherwise described "that the opponent lacks a reasonable cause of action or is advancing a claim that is clearly frivolous or vexatious".
(d) A weak case or one that is unlikely to succeed is not "sufficient to warrant termination".
(e) "If there is a serious legal question to be determined, it should ordinarily be determined at a trial."
(f) "If notwithstanding the defects of pleadings, it appears that a party may have a reasonable cause of action which it has failed to put in proper form, a Court will ordinarily allow that party to reframe its pleadings.".

Counsel for the respondent, we think correctly, pointed out that while the Court has jurisdiction summarily to dismiss or stay and application, its exercise is reserved for a case in which it can be demonstrated that the substantive application cannot possibly succeed. He pointed out that in a case such as the present, the question is whether, assuming in favour of the husband, the matters of fact on which he relies, nonetheless his case, as a matter of law is so clearly untenable that it cannot possibly succeed. In fact in the present case, the factual version advanced by the husband had not been contradicted by the applicants who filed no material before his Honour nor did they seek to do so on appeal. O’Ryan J took the view that the applicants had not satisfied this test and for the reasons hereafter appearing we think he was undoubtedly correct.

The issues raised by the applicants and summarised in their written submissions are:

1. Whether an allotment of shares is capable of being set aside as an instrument or disposition under s.85 of the Act
2. Whether under s.78 of the Act a declaration may be made as to the existence of a trust over the property of a third party, in favour of a party to a marriage so as to bind the third party.
3. Whether the Family Court of Australia has accrued jurisdiction which would in any event empower it to make a declaration to the effect of that referred to in paragraph 2 above.

A subsidiary issue is whether the Court has jurisdiction to appoint a receiver of a corporation.

Both the respondents and Counsel for the Attorney-General of the Commonwealth argued that the answer to each of these questions is in the affirmative. In the circumstances, the difficulty of the task facing the applicants in succeeding on an application for summary dismissal needs only to be stated to be appreciated, in that even a determination that any one of the above major issues is reasonably arguable would defeat any such application.

It is, we think, obvious from his Honour's judgment that each of the issues is reasonably arguable. It therefore follows that the application for leave to appeal must fail.

A problem that arises, however, in considering these issues is the way in which they come before this Court. The argument was conducted on behalf of the applicants upon the basis that the Court ought to consider the situation upon the facts as advanced by the husband. They did so without conceding this version of the facts, albeit that it was one that at this stage they did not seek to test or directly contradict. However the issue arose in the course of interlocutory proceedings and in circumstances where a full trial was contemplated, in the event of the application failing, involving issues of fact and law. The issues did not come before the Court in the form of a case stated pursuant to s.94A nor by way of demurrer. The Court’s determination as to whether the transactions in question fell within the ambit contemplated by s.85 of the Act could well depend upon the version of facts as eventually accepted by the trial Judge. A significant aspect of this question could well be whether the evidence of the husband, that the whole of the transactions involved a fraud to defeat the interests of the wife, is accepted. Similar considerations, we think, apply to the application or otherwise of s.78 of the Act. The question as to whether this is a case for the exercise of accrued jurisdiction may likewise depend on factual findings.

In Bass v Perpetual Trustees Company Limited & Others (1999) 198 CLR 334, the High Court made pertinent remarks about the circumstances in which it will be appropriate for a court to give a declaratory judgment and to state or answer preliminary questions. In their joint judgment, Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ said (footnotes omitted):

”49. As the answers given by the Full Court and the declaration it made were not based on facts, found or agreed, they were purely hypothetical. At best, the answers do no more than declare that the law dictates a particular result when certain facts in the material or pleadings are established. What those facts are is not stated, nor can they be identified with any precision. They may be all or some only of the facts. What facts are determinative of the legal issue involved in the question asked is left open. Such a result cannot assist the efficient administration of justice. It does not finally resolve the dispute or quell the controversy. Nor does it constitute a step that will in the course of the proceedings necessarily dictate the result of those proceedings. Since the relevant facts are not identified and the existence of some of them is apparently in dispute, the answers given by the Full Court may be of no use at all to the parties and may even mislead them as to their rights. Courts have traditionally declined to state - let alone answer - preliminary questions when the answers will neither determine the rights of the parties nor necessarily lead to the final determination of their rights. The efficient administration of the business of courts is incompatible with answering hypothetical questions which frequently require considerable time and cause considerable expense to the parties, expense which may eventually be seen to be unnecessarily incurred.

The procedure adopted in the present case is far removed from that concerned with demurrers, a form of procedure which assumes the truth of a particular set of facts. If the ’facts’ which are the basis of an answer to a legal question are identified, that answer will have utility for the parties provided that no other evidence could add to or qualify those ’facts’. In such a case, the parties' rights will be determined when the evidence finally determines the existence or non-existence of those ’facts’. Because that is so, demurrers have been much used in determining the rights of parties to litigation. The demurrer proceeds upon identified facts and enables a court to declare whether or not they provide a cause of action or a defence or reply to another party's pleading. Unlike the present case, however, a demurrer assumes that the pleadings exhaust the universe of relevant factual material. The utility of demurrers is, however, heavily dependent on the pleadings containing all the relevant facts. When the parties are uncertain whether further investigation will reveal further factual material, the utility of the demurrer is diminished.
It cannot be doubted that in many cases the formulation of specific questions to be tried separately from and in advance of other issues will assist in the more efficient resolution of the matters in issue. However, that will be so only if the questions are capable of final answer and are capable of being answered in accordance with the judicial process.
Preliminary questions may be questions of law, questions of mixed law and fact or questions of fact. Some questions of law can be decided without any reference to the facts. Others may proceed by reference to assumed facts, as on demurrer or some other challenge to the pleadings. In those cases, the judicial process is brought to bear to give a final answer on the question of law involved. Findings of fact are made later, if that is necessary. Where a preliminary question is a pure question of fact that, too, can be answered finally in accordance with the judicial process if the parties are given an opportunity to present their evidence and, also, to challenge the evidence led against them.
Special problems can arise where the preliminary question is one of mixed fact and law. As Brooking J pointed out in Jacobson v Ross, it is necessary in that situation that there be precision both in formulating the question and in specifying the facts upon which it is to be decided. His Honour added:
’Care must be taken to ensure that, in one way or another, all the facts that are on any fairly arguable view relevant to the determination of the question are ascertainable ... as facts assumed to be correct for the purposes of the preliminary determination, or as facts which both sides accept as correct, or as facts which are to be judicially determined. Failure to do this, and in particular failure to perceive that the facts alleged in a pleading are some only of the facts relevant to the determination of the preliminary question, may make the order for preliminary determination unfruitful.’
...
57. Judicial power involves the application of the relevant law to facts as found in proceedings conducted in accordance with the judicial process. And that requires that the parties be given an opportunity to present their evidence and to challenge the evidence led against them. It is contrary to the judicial process and no part of judicial power to effect a determination of rights by applying the law to facts which are neither agreed nor determined by reference to the evidence in the case. However, that is what happened in this case. To revoke special leave to appeal would be to sanction departure from the judicial process – a course that should not be taken even if the appellants acquiesced in the formulation of questions 2 and 3 and in the procedures which led to the answers given and the consequential orders made by the Full Court.
58. Furthermore, the answers given by the Full Court to questions 2 and 3 are more likely to impede than to facilitate the future course of the litigation. While the Full Court said that it could not make any findings of fact, its answers to questions 2 and 3 are predicated on a relationship of agency which the Full Court has implicitly found as the result of ’the amended Statement of Claim and the material in the agreed bundle of documents’. The result of the Full Court's answer is that the action can proceed only to the extent that there was conduct outside that relationship of agency. Thus, in effect the plaintiff is burdened with disproving an agency relationship. And what is the trial judge to make of the statement that ’[t]o the extent that others were involved, they seem to have been acting as mere agents of the government’? Once an issue is determined at the interlocutory stage, and the trial continues, the primary judge's hand is tied in respect of all matters of fact and law involved in that determination. In Fidelitas Shipping Co Ltd v V/O Exportchleb, Diplock LJ pointed out :
’Where the issue separately determined is not decisive of the suit, the judgment upon that issue is an interlocutory judgment and the suit continues. Yet I take it to be too clear to need citation of authority that the parties to the suit are bound by the determination of the issue. They cannot subsequently in the same suit advance argument or adduce further evidence directed to showing that the issue was wrongly determined. Their only remedy is by way of appeal from the interlocutory judgment and, where appropriate, an application to the appellate court to adduce further evidence’."

In the present case it is obvious from the decision of the trial Judge that he considered there was jurisdiction under each of the asserted bases. As we have said, this contention is supported by Counsel for the respondents and the Attorney-General of the Commonwealth. We have considered the arguments of Counsel and the decision of the trial Judge and we are not satisfied that the applicants have demonstrated that his decision to refuse to order summary dismissal was demonstrably wrong in law.

This being so it would be quite inappropriate to accede to an argument that these proceedings should be determined summarily in favour of the applicants and we do not do so. Against the procedural and evidentiary background of these proceedings we further think having regard to the dicta in Bass v Perpetual Trustees (supra) that the present applications are inappropriate and premature vehicles for determining the important questions of jurisdiction that are sought to be raised or to comment further upon them precisely because, as the trial Judge stated, the question of jurisdiction will depend upon the findings of fact that are made once the competing versions are evaluated. We agree with the respondents to the applications for leave that evidence adduced though discovery, interrogatories and cross-examination may produce further factual material which pertain to the allegations which give rise to the orders sought by the husband and wife.

Accordingly, we will also refuse the application for leave to appeal numbered ALE 21 of 1999.

COSTS

This was not a matter in which submissions in relation to costs could conveniently be made at the conclusion of the hearing of the application. Accordingly, we propose to make orders which will permit the parties to make written submissions in relation to costs.

ORDERS

The orders of the Court will be:
1.That applications for leave to appeal numbered ALE 14 of 1999 and ALE 21 of 1999 be refused.
2.The Respondents and the Intervener be at liberty to file and serve written submissions as to costs of these applications within twenty-one (21) days of this date.
3.The Applicants be at liberty to file and serve written submissions in answer thereto and in relation to costs generally within fourteen (14) days thereafter.
4.The Respondents and the Intervener be at liberty to file and serve written submissions in reply thereto within a further seven (7) days.

I certify that the 109 preceding
paragraphs
are a true copy of the reasons
for judgment delivered by this
Honourable Full Court.

Associate