Gong & Zao
[2021] FamCAFC 110
•16 July 2021
FAMILY COURT OF AUSTRALIA
Gong & Zao [2021] FamCAFC 110
Appeal from: Zao & Gong [2020] FamCA 621 Appeal number(s): EAA 121 of 2020 File number(s): SYC 2998 of 2018 Judgment of: ALDRIDGE, AUSTIN & TREE JJ Date of judgment: 16 July 2021 Catchwords: FAMILY LAW – APPEAL – PROPERTY – Summary dismissal – Appeal against orders dismissing the appellant’s application to summarily dismiss the respondent’s application seeking a division of funds held in Australia – Whether the property of the parties in Australia has already been dealt with by orders made in China – Doctrine of res judicata, claim estoppel and Anshun estoppel – Whether the respondent is estopped from prosecuting his proceedings – Consideration of principles in Clayton & Bant (2020) 95 ALJR 34 – Where the appellant failed to establish that the funds were an issue in the proceedings in China or that the Court in China intended to deal with the funds – The primary judge erred in the approach taken and incorrect test was applied – The application for summary dismissal should fail – The Court cannot be satisfied that the respondent’s application had no reasonable prospects of success – Application for leave to appeal allowed – Appeal dismissed – Appellant to pay the respondent’s costs in a fixed sum. Legislation: Family Law Act 1975 (Cth) ss 45A, 79
Family Law Amendment (Family Violence and Other Measures) Act 2018 Sch 1, s 14
Family Law Rules 2004 (Cth) r 10.12
Cases cited: Clayton v Bant (2020) 95 ALJR 34; [2020] HCA 44
Ebner & Pappas (2014) FLC 93-619; [2014] FamCAFC 229
Friar & Friar [2011] FamCAFC 71
Lindon v The Commonwealth (No. 2) (1996) 136 ALR 251; [1996] HCA 14
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45
Ritter & Ritter and Anor (2020) FLC 93-957; [2020] FamCAFC 86
Spencer v The Commonwealth (2010) 241 CLR 118; [2010] HCA 28
Division: Appeal Division Number of paragraphs: 43 Date of hearing: 27 May 2021 Place: Sydney Counsel for the Appellant: Mr Lloyd SC with Mr Ford Solicitor for the Appellant: JC Legal Counsel for the Respondent: Mr Livingstone Solicitor for the Respondent: Sunfield Chambers Solicitors & Associates ORDERS
EAA 121 of 2020
SYC 2998 of 2018APPEAL DIVISION OF THE FAMILY COURT OF AUSTRALIA
BETWEEN: MS GONG
Appellant
AND: MR ZAO
Respondent
ORDER MADE BY:
ALDRIDGE, AUSTIN & TREE JJ
DATE OF ORDER:
16 JULY 2021
THE COURT ORDERS THAT:
1.The application for leave to appeal the orders made by a judge of the Family Court of Australia on 31 July 2020 which was filed on 26 August 2020 be allowed.
2.The appeal be dismissed.
3.The appellant pay the respondent’s costs fixed in the sum of $13,025.76.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Gong & Zao has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALDRIDGE, AUSTIN & TREE JJ:
INTRODUCTION
This is an appeal from orders made on 31 July 2020 by a judge of the Family Court of Australia (“the Family Court”) who refused to dismiss property proceedings summarily when it was contended that the property of the parties in Australia had already been dealt with by orders made in the People’s Republic of China (“China”).
Ms Gong (“the appellant”) and Mr Zao (“the respondent”) live primarily in China where they have all of their assets, save one.
In September 2014, the parties transferred AUD 5,030,000 to Australia where it remains invested. The transfer was a condition for the issue of a Business Innovation and Investment (Provisional) visa (subclass 188) in the Significant Investor stream (“the visa”). The visa was granted on 9 December 2014 and expired on 9 December 2018.
The respondent filed an Initiating Application pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”) on 14 May 2018 seeking a division of the funds held in Australia.
On 15 April 2019, the appellant filed a divorce application in China which was granted on 12 August 2019. The respondent asserted that he had not been served with the application but on 3 December 2019, his appeal was dismissed by the Appeal Court in China.
One of the orders made by the Court in China at first instance on 12 August 2019 was:
The properties, revenues, creditor’s rights and debts under the name of either party shall be owned or borne by that party.
The appellant’s contention is that this order was intended to and did apply to the funds held in Australia, which are held in her name and that it gave rise to a res judicata or, alternatively, a claim estoppel which precluded the respondent from prosecuting his proceedings.
Relying on these contentions, the appellant filed an Application in a Case on 16 March 2020 which sought the summary dismissal of the proceedings. The application was dismissed by the primary judge on 31 July 2020.
As we shall explain, we are satisfied that the primary judge erred in the manner asserted in the Notice of Appeal, but that on the correct application of the law to the facts in this matter, nonetheless, the application for summary dismissal should fail. The appeal will, therefore, be dismissed.
THE APPEAL
Although there were five grounds of appeal, they raised but two issues – whether the primary judge applied the correct principles on the applications for summary disposal and matters involving claims of res judicata and claim estoppel.
Did the primary judge correctly apply the principles concerning summary judgment? (Grounds 4 and 5)
It may be wondered why the appellant troubled the primary judge by advertence to s 45A of the Act, since her application for dismissal of the respondent’s application was premised entirely upon estoppel principles. Either the proceedings in Australia were estopped or they were not. In the former case, the proceedings had to be dismissed, but in the latter case they could not be. If the proceedings were not estopped, there was no other basis upon which the appellant contended the proceedings had no reasonable prospect of success so as to engage s 45A of the Act. However, having been taken to s 45A of the Act, the primary judge did not apply its principles correctly. We will therefore deal with the grounds of appeal which cover the subject of summary dismissal.
The provisions of s 45A of the Act apply to applications for summary disposal of proceedings under the Act initiated both before and after its commencement date of 1 September 2018 (Family Law Amendment (Family Violence and Other Measures)Act 2018 (Cth) Sch 1, s 14).
It provides that a court may make a decree for one party, as to the whole or any part of the proceedings, where the Court “…is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceedings or that part…” (s 45A(2) of the Act). The proceedings need not be “hopeless” or “bound to fail” for the section to apply (s 45A(3) of the Act).
The section is in similar terms to r 10.12(d) of the Family Law Rules 2004 (Cth) which provides that a person may apply for summary orders where “there is no reasonable likelihood of success”. As was explained in Ebner & Pappas (2014) FLC 93-619 (“Ebner”), this rule replaced the earlier test for summary dismissal, which looked to see whether the proceedings were doomed to fail, with a less stringent test.
As the present test is a “different enquiry” to the earlier one, “it is dangerous to seek to elucidate the meaning of the statutory expression ‘no reasonable prospect of successfully prosecuting the proceeding’ by reference to what is said in those earlier cases” (Spencer v The Commonwealth (2010) 241 CLR 118 per Hayne, Crennan, Kiefel and Bell JJ at [56]).
Nonetheless, the cautions against the too ready inclination to summarily dispose of proceedings expressed by Kirby J in Lindon v The Commonwealth (No. 2) (1996) 136 ALR 251 at 255–256 remain relevant.
In the reasons for judgment, the primary judge at [30]–[41] extensively referred to Friar & Friar [2011] FamCAFC 71 (“Friar”) which applied the earlier “doomed to fail” test and at [42]–[51] to Ritter & Ritter and Anor (2020) FLC 93-957 (“Ritter”) which applied the current test at. In the course of the latter discussion the primary judge said:
47.The relevant paragraph of the Act in relation to summary dismissal applications is section 45A and as the Court stated in Ritter, a “Judge is obliged to consider whether the husband had no reasonable prospect of success in prosecuting his application under section 79A taking his case at its highest”…
The primary judge also referred to the Court having to consider whether the applicant, who is the respondent in this appeal, “has no reasonable prospect of success” (at [52]) but that was in the context of the earlier discussion concerning Friar. The opening sentence of [52] itself noted that Ritter was “a recitation of Justice Finn’s decision in Friar”.
Friar was concerned with the application of a differently drafted rule and the application of different principles to those discussed in Ritter. The extensive reference to and reliance on Friar leads us to the conclusion that we cannot be satisfied that the correct principles were applied.
It follows that Grounds 4 and 5, which assert that the primary judge applied the wrong test succeed.
Was there some form of estoppel? (Grounds 1, 2 and 3)
The concepts of res judicata, claim estoppel (also referred to as cause of action estoppel) and Anshun estoppel (named after the decision of Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589) are quite distinct (Clayton v Bant (2020) 95 ALJR 34 (“Clayton”)) and care should be taken not to confuse them.
Regrettably, that was not always the case with the submissions before us.
The “application of the doctrine of res judicata hinges on the controversy that has been quelled in the earlier proceeding” (Clayton as per Gordon J at [53]). One must therefore look to the nature of both proceedings in order to determine the question.
In Clayton, Kiefel CJ, Bell and Gageler JJ said:
26.Once it is appreciated that the rights in issue in the property settlement proceedings and in the spousal maintenance proceedings are the statutory rights of the wife to seek orders under ss 79(1) and 74(1) of the Act, it is apparent that the ruling made by the Dubai Court cannot give rise to a res judicata in the strict sense in which that term continues to be used in Australia. The rights created by ss 79(1) and 74(1) cannot “merge” in any judicial orders other than final orders of a court having jurisdiction under the Act to make orders under those sections. The rights of the wife to seek orders under ss 79(1) and 74(1) continue to have separate existence unless and until the powers to make those orders are exercised on a final basis and thereby exhausted.
(Footnotes omitted)
Also to the same effect, see Gordon J at [53]–[56] and Edelman J at [72] in Clayton.
Precisely the same consideration applies to the order of the Court in China and no res judicata can be established.
The appellant’s alternative submission was that the proceedings were barred by claim estoppel which would operate to preclude the assertion by the respondent of any right non-existence of which was asserted by the appellant in the proceedings in China (to adopt the words of Kiefel CJ, Bell and Gageler JJ in Clayton at [29]). Their Honours explained:
34.Founded on the twin policies of ensuring finality in litigation (thereby promoting respect for and efficient use of courts as well as avoiding inconsistent judgments) and of ensuring fairness to litigants (by sparing them the stress and expense of duplicative proceedings), the focus of the common law doctrine of estoppel is on “substance rather than form”. The doctrine looks not for absolute identity between the sources and incidents of rights asserted or capable of being asserted in consecutive proceedings. The doctrine looks rather for substantial correspondence between those rights. Enough for its operation is that the rights are of a substantially equivalent nature and cover substantially the same subject matter…
(Footnotes omitted)
In this case, this required the appellant, who bore the onus of proof to establish “a factual foundation for the operation of one or other forms of those forms of estoppel” so as to prove that the ruling of the Court in China “had the meaning and determinative operation” for which she contended (Clayton at [30]). Thus, in order to show that the proceedings in China had dealt with the division of the funds in Australia the appellant had to prove that the division of that asset was an issue before the Court in China, that the Court had legal authority to deal with that division and, finally, that it exercised that authority.
Here, there was no evidence before the primary judge as to the content of the divorce proceedings in China other than the two sets of reasons already referred to earlier.
In the first set of reasons, the Court in China referred to the notarised Prenuptial Property Agreement made at the time the parties remarried on 18 January 2016. The Court said:
The agreement is the true intention of both parties and does not violate the mandatory provisions of the law, which should be confirmed to be effective by law. According to the plaintiff’s court statement, they neither purchase anything jointly, nor have common creditor’s rights, debts and securities after their marriage. Therefore, the properties, incomes, creditor’s rights and debts under the names of both parties shall be implemented in accordance with the agreement…
The Appeal Court in China affirmed that reasoning.
There is no reference to particular property in either judgment. The appellant relies upon the Prenuptial Property Agreement to assert that, as it covered all the parties’ property, it must have included the deposits in Australia. It too is in general terms, and would not alert a reader to the existence of the Australian assets. The appellant has therefore failed to establish that the deposits were an issue in the proceedings in China or that the Court in China intended to deal with them.
The appellant relied on the evidence of Mr H, an experienced family lawyer in China and also an Adjunct Professor at the Law School of J University, who prepared a report dated 27 February 2019, which was well before the filing of the divorce proceedings in China or their resolution. Unsurprisingly, it did not deal directly with the issues raised by them. The appellant submitted however, that the following passages established that the Court in China had jurisdiction to deal with the division of property located in Australia.
In his report, Mr H said:
If there is no common property after marriage between the parties, the court may not support the applicant’s claim.
…
In summary, if the two parties commence legal proceedings to settle the property of this case in Chinese courts, the AU$5 million will be judged as the [appellant’s] pre-marital personal property without division.
(Mr H’s report dated 27 February 2019, p.18–19)
In addition, the respondent relied on the following passage:
If the applicant sues in China for a division of AU$5 million, the court will not support its claim when applying Chinese law.
(Mr H’s report dated 27 February 2019, p.18)
We do not know what to make of these two selections as they do not seem easily reconcilable. Further, the respondent’s contention in Australia was that although the deposits were held in the name of the appellant he had, in fact, contributed to them.
The evidence of Mr H falls short of establishing that the Court in China had the legal authority to divide the deposits held in Australia.
The primary judge did not determine the application for summary judgment on these considerations. Her Honour relied instead on the proposition that the appellant had submitted to the jurisdiction by her conduct in the Family Court proceedings (at [81] and [94]) and therefore there could be no estoppel. The jurisdiction of the Family Court, however, was never in question. The point was, instead, whether the order of the Court in China estopped the respondent from seeking his proposed orders from another court.
Her Honour did not apply the correct principles and thereby erred.
Ground 2 was not separately addressed and we shall say no more about it.
What order should be made?
The appellant accepts that leave to appeal is required (Ebner at [30]–[32]). As we have found error in the approach of the primary judge it would be unjust for the application not to be reconsidered.
As we have already explained, the evidence before the Court did not enable us to form the view that there was the requisite correspondence between the proceedings in China and the proceedings in Australia, so that the decision of the Court in China had “the meaning and determinative operation” (Clayton at [30]) which meant that the issues raised in Australia had already been determined.
It follows that there will be a grant of leave but the appeal will be dismissed.
COSTS
The appeal has been wholly unsuccessful and the appropriate order is that the appellant pay the respondent’s costs fixed in the sum of $13,025.76, being the unchallenged amount sought by the respondent at scale.
I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Aldridge, Austin & Tree. Associate:
Dated: 16 July 2021
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