Grattan and Grattan and Anor

[2014] FamCA 271

FAMILY COURT OF AUSTRALIA

GRATTAN & GRATTAN AND ANOR [2014] FamCA 271

FAMILY LAW – Partial property – Order sought against third party – Jurisdiction and power considered – No power to make order – Wife also seeks husband pay single expert costs with adjustment at trial – Basis for making such an order considered – Order made.

Family Law Act 1975 (Cth)

Kyriakos v Kyriakos [2013] FamCAFC 22

APPLICANT: Mr Grattan

RESPONDENT: Ms Grattan

INTERVENOR: B Pty Ltd

FILE NUMBER: MLC 4259 of 2013

DATE DELIVERED: 30 April 2014

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: By way of written submissions

SUBMISSIONS RECEIVED FROM

THE APPLICANT: Dr Ingleby

THE RESPONDENT:	Mr Glick SC with Mr Strum
THE INTERVENOR:	Mr Dickson SC

Orders

1. That the application by the wife that B Pty Ltd be jointly and severally liable with the husband for the payment of $500,000 by way of partial property settlement is dismissed.

2. That the husband pay the costs of the single expert property valuer (S) at first instance and an adjustment be made in the final property settlement in favour of the husband for one half of such obligations out of the wife’s entitlement.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Grattan & Grattan has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 4259  of 2013

Mr Grattan

Applicant

And

Ms Grattan

Respondent

And

B Pty Ltd

2^nd Respondent

REASONS FOR JUDGMENT

1. On 23 December 2013, the wife sought an order that the husband and B Pty Ltd pay to her a further sum of $500,000 (that is, in addition to $500,000 that was ordered in her favour on 30 September 2013) “as and by way of further partial property settlement”.

2. The order made on 30 September 2013 was a consent order in which it was said:

   1.That [B Pty Ltd] in its own right and in its capacity as trustee of the (Unit Trust) be joined as a party to these proceedings.

   …

   3.That the husband and [B Pty Ltd] jointly and severally pay or cause to be paid to the wife the sum $500,000 as and by way of partial property settlement.

   B Pty Ltd was joined that day as a party.

3. The power of the Court to make the order now sought is disputed by the husband and B Pty Ltd.

4. Section 39 of the Family Law Act 1975 (Cth) (“the Act”) provides that a matrimonial cause may be instituted under the Act in the Family Court. The relevant requirements for that proceeding (s 39(4)) have been met.

5. Relevantly, matrimonial cause means:

   proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them…

6. Section 79 of the Act empowers the Court to make such order as it considers appropriate in the property proceedings “altering the interests of the parties to the marriage in the property”.

7. The fact that the order made on 30 September 2013 was made by consent does not mean that the Court has (or perhaps had) jurisdiction and power to make it or indeed, the one now sought by the wife. It is conceivable, despite the wording of the order, that another head of power than s 79 of the Act was used. There is no indication to me in the order that the issue of power was raised. Whilst becoming a party to proceedings creates rights, duties and liabilities (s 92) the Court must look to its jurisdiction and power to make any orders against a party and cannot go beyond its jurisdiction (re Ross-Jones; exparte Green [1984] HCA 82; (1984) 156 CLR 185).

8. In this application the jurisdiction is disputed.

9. The application for the order sought does not invoke the s 117 power. Indeed, the application filed on 23 December 2013 seeks a further partial property settlement, the power for which lies in s 79. The use of the word “further” does not advance the issue because, in my view, there is no power to make a property settlement order per se against B Pty Ltd. It may be that orders could be made under Part VIIIAA but that issue was not canvassed.

10. In their submissions, counsel for the wife submitted that the husband has at all times been aware that the wife sought a partial property settlement against him personally and in his capacity of controlling various entities including B Pty Ltd.  It was submitted that the husband had not filed any replying material, had consented to the joinder of the company and the company remained a party.  It was submitted that the husband and B Pty Ltd were on notice and indeed, the earlier order was made against the husband.  It is B Pty Ltd about which the jurisdiction arises.  The proposed order arises because of the order made against the husband.  It is sought to make the husband’s entities jointly and severally liable.  I do not discern that order is some sort of guarantee but rather, a specific exercise of the Court’s power to make the company pay.

11. It was observed that the husband has significant control and the parties’ interest in B Pty Ltd and a unit trust was estimated by the husband to be $4 million.  It was therefore submitted that because:

    (a)the husband and B Pty Ltd had previously consented to an order to be jointly and severally liable; and

    (b)the husband was in default of his obligation to make disclosure;  and

    (c)the units in the unit trust of which B Pty Ltd is the trustee is under the control of the husband in the sense that he is the guardian and the appointor, it was just and equitable for the Court to make the order against B Pty Ltd.

12. In reply, the husband submitted that as he had already consented to the order in personam for $500,000 there was no cogent basis in fact or law for B Pty Ltd to be jointly and severally liable.

13. B Pty Ltd in its own right submitted that the Court had no power to make the order sought.

14. In reply, counsel for the wife submitted that the only outstanding issue was whether or not B Pty Ltd ought to be made jointly and severally liable with the husband. It was said that that was an important consideration because the husband had failed to comply with his obligations. Underlying that submission was a statement that the husband controlled the various entities for the purposes of s 79 of the Act. Whilst that is superficially attractive, the problem is that the evidence does not enable me to make a finding to that extent nor that the property of B Pty Ltd is indeed property of the parties at this stage.

15. Reference was made by counsel to the Full Court decision in Kyriakos v Kyriakos [2013] FamCAFC 22 and whilst that case is distinguishable, it serves as a timely reminder that the Court must contemplate its jurisdiction and power. In Kyriakos, a Federal Magistrate made an order against a third party without stipulating the head of power.  The Full Court (Finn and Strickland JJ with whom Forrest J agreed) said that there was a legal requirement to identify the relevant head of power.  Their Honours went on to say:

    Counsel for the appellant was prepared to acknowledge that the fact that the litigation funding order was here made against a third party, may well carry the implication that it was being made pursuant to the power to make orders for costs under s 117 of the Act. This would be so because the other heads of power which authorities such as Zschokke and Strahan recognise as being available to support an interim litigation funding order, being s 74 (the spousal maintenance power) and s 79 (the property settlement power), could not support an order against a third party.

16. The issue of the powers such as in s 106B were contemplated by the Full Court in Kyriakos but it is not necessary for me to consider that here because of the precise nature of the wife’s application. 

17. In my view as the head of power relied upon was s. 79, there is no power for me to make the order against B Pty Ltd on the material before me.

18. The wife had a second application relating to the payment of the costs for the single expert.  She sought an order that the husband pay those costs at first instance and that she reimburse him for one half of the total amount from her final property settlement.

19. Whilst the wife acknowledged having received $1 million in two partial property settlements, she submitted that this amount of money would be used primarily to support the children and herself and to fund her costs and disbursements for the proceedings.  It was submitted that as the husband had the use of funds of the parties from within the relevant entities, it was inappropriate that she have to use her personal money whilst he was using the parties’ money.  The husband submitted in reply that there was no evidentiary basis to make that submission.

20. I am not determining any issue here other than who is to fund the immediate payment with the ultimate intention of rectifying any prejudice arising from these interlocutory orders at the trial.

21. Rule 15.47 of the Family Law Rules 2004 states that the parties are equally liable to pay a single expert witnesses’ reasonable fees and expenses incurred in preparing a report. That rule however applies unless the Court orders otherwise (see rule 1.12). Rule 1.09 makes clear that if the Court has any doubt or difficulty because of the absence of a legislative provision relating to practice or procedure, it may make such order as it considers necessary and that includes (rule 1.10) the making of an order with the imposition of terms, conditions and consequential orders.

22. The evidence is that the husband has more control of the finances than the wife.  I am not in a position to say whether the husband is funding his legal expenses out of the parties’ joint monies at this stage but on the husband’s assessment of the worth of the interests in the entity, he is in a much stronger financial position than is the wife.  In my view that is a sufficient basis to justify the husband paying the expense now and the adjustment being made at trial.

23. There will be orders accordingly.

I certify that the preceding Twenty Four (24) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 30 April 2014.

Associate: 

Date:  30 April 2014