Hadwick and Scadden
[2020] FamCAFC 168
•16 July 2020
FAMILY COURT OF AUSTRALIA
| HADWICK & SCADDEN | [2020] FamCAFC 168 |
| FAMILY LAW – APPEAL – PROPERTY – LEAVE TO APPEAL – Summary dismissal – Setting aside property settlement consent orders – Appeal against orders dismissing the applicant’s application to summarily dismiss the respondent’s application to set aside property settlement consent orders – Failure to provide financial disclosure – Whether the respondent’s entitlement to disclosure and discovery merged into the consent orders – Whether the respondent’s application was an abuse of process – Doctrine of res judicata – Anshun estoppel – Where the applicant’s claim that the respondent is estopped from pursuing proceedings to set aside the property settlement consent orders is misconceived – Application for leave to appeal dismissed – Applicant to pay the respondent’s costs of the application in a fixed sum. |
| Family Law Act 1975 (Cth) ss 45A, 79, 79A, 90SM, 90SN, 117 Federal Circuit Court Rules 2001 (Cth) rr 14.02, 14.04, 16.05, 24.03, 24.04 |
| Blair v Curran (1939) 62 CLR 464; [1939] HCA 23 Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502; [1988] HCA 21 Field & Mighell [2017] FamCAFC 60 Gilbert v Estate of the late Gilbert (1990) FLC 92-125; [1989] FamCA 95 Metwally v University of Wollongong (1985) 60 ALR 68; [1985] HCA 28 Pagliotti & Hartner (2009) FLC 93-393; [2009] FamCAFC 18 Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45 Reid & Lynch (2010) FLC 93-448; [2010] FamCAFC 184 Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507; [2015] HCA 28 |
| APPLICANT: | Mr Hadwick |
| RESPONDENT: | Ms Scadden |
| FILE NUMBER: | BRC | 5302 | of | 2018 |
| APPEAL NUMBER: | NOA | 99 | of | 2019 |
| DATE DELIVERED: | 16 July 2020 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Brisbane (via videolink) |
| JUDGMENT OF: | Aldridge, Watts & Tree JJ |
| HEARING DATE: | 5 June 2020 |
| LOWER COURT JURISDICTION: | Federal Circuit Court of Australia |
| LOWER COURT JUDGMENT DATE: | 11 October 2019 |
| LOWER COURT MNC: | [2019] FCCA 2899 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr van der Weegen |
| SOLICITOR FOR THE APPLICANT: | Pippa Colman & Associates Law Practice Pty Ltd |
| COUNSEL FOR THE RESPONDENT: | Mr Bunning |
| SOLICITOR FOR THE RESPONDENT: | Barry Nilsson Lawyers |
Orders
The application for leave to appeal the orders made by the primary judge on 11 October 2019 as amended on 18 March 2020 be dismissed.
The applicant is to pay the respondent’s costs fixed in the sum of $10,772.23.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Hadwick & Scadden has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
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 r 17.02 Family Law Rules 2004 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NOA 99 of 2019
File Number: BRC 5302 of 2018
| Mr Hadwick |
Applicant
And
| Ms Scadden |
Respondent
REASONS FOR JUDGMENT
Mr Hadwick (“the applicant”) and Ms Scadden (“the respondent”) are engaged in proceedings pursuant to s 90SN of the Family Law Act 1975 (Cth) (“the Act”). The respondent sought to have property settlement consent orders made pursuant to s 90SM of the Act by Judge Turner on 24 October 2018 (“the consent orders”) set aside because of what she asserted was the applicant’s inadequate disclosure as to the current structure and financial position of the parties’ businesses. Relevantly for present purposes, pursuant to the consent orders, the applicant was to receive all of the parties’ interest in DA Pty Ltd (Order 2(a) of the consent orders), whilst the respondent was to receive all the parties’ interest in “[C] Pty Ltd, including [D] Pty Ltd, subject to paying the [applicant] the payment of $1,000,000” (Order 4(h) of the consent orders).
The applicant’s view was that the respondent’s application under s 90SN of the Act was misconceived and sought to have it summarily dismissed pursuant to s 45A(4) of the Act. That application was dismissed by a judge of the Federal Circuit Court of Australia on 11 October 2019. The applicant seeks leave to appeal and, if leave is granted, to appeal against that decision.
Order 1 made on 11 October 2019 was to dismiss “the response to an application in a case filed by the [applicant] on 29 August 2019” (as per the original). On 18 March 2020, that order was amended pursuant to r 16.05(2)(e) of the Federal Circuit Court Rules 2001 (Cth) (“the Federal Circuit Court Rules”) so as to more accurately identify the outcome of the application. It states:
1.That the [applicant’s] application for a summary decree that the respondent’s application pursuant to section 90SN(1)(a) and (b) be dismissed as an abuse of process pursuant to section 45A(4) of the Act or on the basis [o]f res judicata and an order as to costs pursuant to s 45A(6) of the Act be dismissed.
(As per the original)
Nothing turns on the amendment.
The parties commenced a relationship in early 2000 and maintained a de facto relationship until they separated in March 2018. During that time, they bought and sold a number of properties and developed two businesses, which can generally be described as “Business D” and “Business C”. The evidence does not clearly identify the corporate and trust structure of these businesses and the parties do not agree on what entity actually operated each business. Indeed, little regard seems to have been had to such niceties. For example, in each of the parties’ affidavits that were before Judge Turner, the assets of the corporations and trusts were listed individually rather than the interests held by the parties in those entities, thus ignoring the corporate and trust structure. Further, the use of “Business D” and “Business DA” was not always consistent.
The applicant’s evidence before Judge Turner identified two companies, being “The C Group Pty Ltd” of which the respondent was the sole director and “D Pty Ltd” of which he was the sole director. The applicant did not describe the shareholding of either company. He said that he had been acting as the nominee director of the first company for at least five years (Applicant’s affidavit filed on 17 May 2018, paragraph 33). He then said that he and the respondent “have a 50% interest each in the [D] trust” (Applicant’s affidavit filed on 17 May 2018, paragraph 46), although its role was not explained.
Confusingly, the applicant added:
34.We have been operating [Business C] and [Business D] as a husband and wife team. [Business D] has been trading under The [C] Group [Pty Ltd] utilising [Business C’s] tax credits. It has always been the plan to separate [Business D’s] financials from [Business C] so that [Business D] could, at some future point in time, be sold as a standalone operation…
(Applicant’s affidavit filed on 17 May 2018)
For her part, the respondent identified three relevant entities. The respondent said that she was the sole director and shareholder of “The C Group Pty Ltd” which traded as “Business DA” and owned the trademarks for products known as “Product D” and “Product E” (Respondent’s affidavit filed on 23 July 2018, paragraph 23).
The respondent asserted that “D Pty Ltd” (which was the trustee of the D Trust) and DA Pty Ltd, which are both owned and controlled by the applicant and were registered on 17 December 2012 and 20 March 2018 respectively, were used by the applicant to take over the business of The C Group Pty Ltd for his own benefit (Respondent’s affidavit filed on 23 July 2018, paragraph 23).
The respondent’s case in the proceedings pursuant to s 90SN of the Act is, to put it very generally, that the applicant did not tell her that he had diverted the business of The C Group Pty Ltd to DA Pty Ltd which, as already recorded, was a company owned and controlled by the applicant, nor did the applicant disclose the records of the businesses which would have shown this to be the case and that had he done so, she would not have agreed to pay $1 million to receive the assets to be retained by her which included C Pty Ltd and D Pty Ltd.
It was not in dispute that the applicant had the effective control over all the businesses for several years. In 2010, the respondent was diagnosed with an autoimmune disease. This lead to her playing a reduced role in the businesses and saw the applicant take on a greater role in them.
A claim was subsequently lodged pursuant to a Total and Permanent Disability Policy and in due course the respondent received approximately $3.1 million net upon settlement of the claim. The funds were used to pay down the lines of credit held by the parties, approximately $340,000 was spent on cosmetic improvements, jewellery and share purchases and the rest was used to acquire properties and some online businesses.
The applicant filed an Initiating Application on 17 May 2018 seeking division of the parties’ property pursuant to s 90SM of the Act. As can been seen, the parties were at odds as to the correct operation of the businesses and which entity owned which asset.
The respondent was concerned to ascertain the true financial picture of the businesses. She asserted that as those businesses had been under the control of the applicant for some time, he was obliged to give complete financial disclosure of them and the companies that operated them. In addition, in an affidavit filed by the respondent on 23 July 2018, the respondent raised specific issues of discovery. The respondent said:
23.…
(j) [D Pty Ltd] doesn’t appear to have earnt any revenue despite the [applicant’s] statement that it has “propped up [Business C].” Attached hereto and marked Exhibit “SLS7” are a true and correct copies [sic] of Activity Statements obtained from the ATO for periods in 2016, 2017 and 2018. Each of these statements show that [D Pty Ltd] hasn’t reported any activity during those years. I suspect that the revenue has been earnt by [DA Pty Ltd]. I require full and frank disclosure of all records in the [applicant’s] possession, custody or control with respect to either [Business C] trading as [Business D], [D Pty Ltd] and [DA Pty Ltd].
…
41.In response to paragraph 46 of the [applicant’s] affidavit, I note the [applicant] wants to run [D Pty Ltd] and [Business C] as separate entities. There was no separate business until separation when the [applicant] has [undertaken] various actions to divest [Business C’s] assets and clients and transfer those to the entity [D Pty Ltd]. I require a full forensic accounting of the financial books of account of each entity since 2010 to determine the current financial positions of [Business C] trading as [Business D], [D Pty Ltd] and [DA Pty Ltd].
(Emphasis omitted)
Notwithstanding that it seems to be common ground that this disclosure was not given by the applicant, the parties agreed to resolve the property settlement proceedings. On 24 October 2018, Judge Turner was invited to make, and did make, the consent orders to which we have already referred.
The respondent did not pay the sum of $1 million to the applicant, which the consent orders required to be paid and, accordingly on 17 October 2018, the applicant filed an Application in a Case seeking enforcement of the consent orders. An Amended Application in a Case was filed by the applicant on 7 June 2019. The respondent filed a Response to that application on 5 July 2019, seeking, amongst other orders, “[t]hat the Orders made on 24 October 2018 be set aside pursuant to section 90SN(1)(a) and/or 90SN(1)(b) of the Family Law Act 1975” (as per the original).
The matter came before the primary judge on 9 September 2019 when the applicant made an oral application pursuant to s 45A(4) of the Act for summary dismissal of the respondent’s application made under s 90SN of the Act. Directions were made for the matter to proceed by way of written submissions and on 11 October 2019 the applicant’s oral application for summary dismissal was dismissed.
Section 45A(4) of the Act provides that the Court may dismiss all or any part of proceedings if it is satisfied that the proceedings or part is an abuse of process.
The applicant asserts that the respondent’s claim under s 90SN of the Act to set aside the consent orders is an abuse of process because it “is a guise to re-litigate the issues that merged into the judgment of [h]er Honour Judge Turner on the 24 October” (Applicant’s Summary of Argument filed on 6 March 2020, paragraph 4.4). It is submitted that as the respondent had sought discovery and disclosure in the proceedings but had settled those proceedings before the discovery or disclosure had been given, or it was at least completed to the respondent’s satisfaction, the respondent’s entitlements (or rights as the applicant described them) to disclosure and discovery by the applicant merged into the consent orders and that she was thereafter forever barred from raising any issues relating to want of proper disclosure or discovery. Thus, the applicant submits that although s 90SN(1)(a) of the Act provides that where a Court is satisfied that there has been a miscarriage of justice by reason of suppression of evidence, including the failure to disclose relevant information, the giving of false evidence or any other circumstance which justifies the setting aside of the existing property settlement orders, that subsection cannot apply where the orders were made by consent whilst disclosure remained incomplete.
The applicant made it clear that he did not rely on s 45A(2) of the Act which permits the Court to make a decree against one party if the Court is satisfied that the moving partying has no reasonable prospect of successfully prosecuting the proceedings or any part of the proceedings. We accept therefore that the primary judge did not need to consider that issue as her Honour did (at [58]–[65]). We also accept that the primary judge mistakenly referred to s 17A of the Federal Circuit Court of Australia Act1999 (Cth) which contains no provision for summary dismissal for abuse of process, instead of s 45A(4) of the Act. However, nothing of consequence turns on that because her Honour did turn her mind to the abuse of process issue at [67]–[72]. Grounds 1 to 5 which deal with these issues and have some force are thus not relevant to the findings as to any abuse of process. As the success of those grounds of appeal would not lead to the appeal being allowed, we shall say no more about them. Ground 6 which asserts that the primary judge did not consider s 45A(4) of the Act at all, clearly fails. Whilst her Honour did not directly refer to that subsection, the point was dealt with as we have just explained.
Whilst the applicant’s submissions at times assert that the respondent had waived her rights to disclosure or discovery, it is clear from them that waiver was not relied on as a basis for the relief sought by him.
The remaining grounds of appeal proceed on the assumption that the applicant’s assertion that the respondent’s rights to have the applicant give complete disclosure merged into the consent orders so that she cannot now raise the issue. In other words, it is said that the doctrine of res judicata applies to preclude the respondent from ever raising the issue of the adequacy of the applicant’s disclosure again. Alternatively, it is said that the respondent ought to have raised the issue of the applicant’s inadequate disclosure in the earlier proceedings before Judge Turner and could not do so in the proceedings before the primary judge because “that claim or issue was so connected with the subject matter of the first proceeding as to have made it unreasonable in the context of the first proceeding for the claim not to have been made or the issue not to have been raised in that proceeding” (Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 (“Anshun”) as explained in Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507 (“Tomlinson”) at [22]).
We do not accept this to be the position for a number of reasons.
First, res judicata and the principle in Anshun are common law doctrines (Tomlinson at [21]), which have no application to the statutory rights provided by s 90SN of the Act. That section, as is obvious from its terms, takes as its starting point that final property settlement orders made under s 90SM of the Act (final in the sense that the orders deal with all of the parties’ property) preclude any reconsideration of the division of the parties’ property. Thus, the issue of the appropriate division of the parties’ property has been decided and the matter may be described as res judicata. It matters not that the proceedings were determined by consent (Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502 at 508).
The sets of circumstances in s 90SN(1) of the Act which can justify the setting aside of the otherwise final property settlement orders extend beyond the common law entitlements to have a judgment set aside for fraud or misrepresentation for example, or pursuant to r 16.05 of the Federal Circuit Court Rules. There is no reason to read s 90SN(1)(a) (described above at [18]) other than in accordance with its terms which make it plain that it is not fettered by the common law considerations of res judicata, issue estoppel or the principle in Anshun. The provision would be of very limited application indeed if that was the case.
Section 79A of the Act, which is in similar terms to s 90SN and applies to parties who have been married, has been described as a “remedial section intended to overcome miscarriages of justice and certain other specific difficulties or hardships and should be construed liberally to effect its intended purpose” (Gilbert v Estate of the late Gilbert (1990) FLC 92-125 at 77,838). That purpose would not be achieved at all if the approach suggested by the applicant was to be adopted.
The fact that a party could have obtained full disclosure but decided not to do so before entering into consent orders is not therefore a bar to relief under this section. It is, of course, a consideration to be taken into account when determining whether any non-disclosure led to a miscarriage of justice that would justify reconsideration of earlier orders. It follows that the applicant’s claim that the respondent is estopped from pursuing proceedings pursuant to s 90SN of the Act is misconceived.
That conclusion is sufficient to dispose of the applicant’s present application for leave to appeal.
Secondly, we do not accept that an entitlement to have proper disclosure given by the other party is “a right or obligation which was asserted in the proceeding and which was determined by the judgment” (Tomlinson at [22]). In Blair v Curran (1939) 62 CLR 464 (“Blair”), Dixon J explained this as follows at 531–532:
A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion…
…
Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded…
The respondent’s entitlement to have the applicant comply with a rule of the Court as to the disclosure of his financial affairs (r 24.03 and r 24.04 of Federal Circuit Court Rules) or to seek further discovery (r 14.02 and r 14.04 of Federal Circuit Court Rules) is not a right, the determination of which, is legally indispensable to the making of property settlement orders under s 90SM of Act. These are procedural rights only. Thus, decisions made by judges as to what discovery should be given, do not give rise to even an issue estoppel, because they are interlocutory and are not the determination of a fact or issue essential to the determination of the action. Further, “[f]indings, however deliberate and formal, which concern only evidentiary facts and not ultimate facts forming the very title to rights give rise to no preclusion” (Blair at 532).
Thirdly, it is not entirely correct for the respondent’s entitlement to disclosure to be categorised as a right or a claim that she is entitled to pursue. Rather, the applicant remains obliged to comply with the Federal Circuit Court Rules, whether or not the respondent presses claims for discovery of particular classes of documents. The respondent’s “right” to proper disclosure is not a right which is subject to her obtaining an order for it to take place.
We therefore consider that the primary judge was correct to find that “to enliven the doctrine of res judicata would be to undermine the operation of any application brought before the Court pursuant to section 79A or 90SN” (at [68]).
We do not accept that this finding is contrary to what was stated by Strickland J in Field & Mighell [2017] FamCAFC 60 at [21]. In that case, his Honour said that the wife was seeking “under the guise of s 79A proceedings … to retry issues that the trial judge had already finally determined”, but that was in the context that “none of the 32 orders sought by the wife could successfully invoke the application of s 79A of the Act”. In such a case, as we have pointed out, the earlier findings stand. That is not the case here and Ground 9 which asserts that it is, must fail.
It follows that the answer to the question of whether the primary judge failed to acknowledge that the respondent’s claims of inadequate disclosure now made in the proceedings pursuant to s 90SN of the Act were the same as the claims for inadequate disclosure in the s 90SM proceedings, which is a question posed by Ground 7, is irrelevant because no estoppel arises.
Ground 8, which challenges the primary judge’s decision not to address the question of abuse of process, as opposed to res judicata, is also misconceived. Whilst we accept that abuse of process “is inherently broader and more flexible than estoppel” (Tomlinson at [25]), the abuse identified by the applicant, as we have already quoted, is that the respondent is attempting to re-litigate issues that merged into the consent orders. In other words, the only abuse of process identified is said to be the bringing of proceedings which are estopped.
The applicant submits that the primary judge erred because her Honour failed to find that there was “a common substratum of judicial controversy” between the s 90SM proceedings and the proceedings pursuant to s 90SN of the Act (Ground 10). The quotation comes from Pagliotti & Hartner (2009) FLC 93-393 at [123]. There, the Full Court found that proceedings commenced in Australia under s 79 of the Act revealed “a common substratum of judicial controversy” with earlier property settlement proceedings that had been completed in Italy. Nonetheless, the Full Court found at [125] that the trial judge did not err in finding that the earlier proceedings did not give rise to a res judicata. The paragraph relied upon by the applicant is of no assistance in this case and highlights the danger of relying on quotations taken out of context.
In any event, the judicial controversy in the two proceedings is quite different. In proceedings under s 90SM of the Act, the controversy is the identification and proper distribution of the parties’ property. A claim under s 90SN(1) of the Act, raises the controversy as to whether there has been a miscarriage of justice such that earlier orders should be set aside.
Further, the applicant identifies the common area of controversy as the respondent’s similar claims for disclosure. As we have pointed out, this is not a relevant issue. There is no substance in Ground 10.
Ground 11 which asserts that the primary judge wrongly failed to take into account the applicant’s “material”, must fail because the applicant’s submissions do not identify what material should have been taken into account and how that material would have affected the outcome.
In Ground 12 the applicant submits that the primary judge erred when her Honour said that the applicant’s “primary position” was “that the Court should reject the argument that the consent orders have been obtained by fraud” (at [24]).
The applicant’s written submissions to the primary judge said:
2.5.Fraud has been raised, tangentially, by the Respondent’s [sic] in paragraph 85 b. of her affidavit filed 5 July 2019. Therefore, the Court must first consider whether the Consent Orders were obtained by fraud…
(Applicant’s written submissions filed on 16 September 2019)
It follows that her Honour’s description was accurate. In any event, as the primary judge considered all of the applicant’s arguments, any erroneous description of one of them as being primary, is of no effect. Ground 12 is entirely meritless.
We are quite unable to find any paragraph in her Honour’s reasons for judgment in which any weight was given to the respondent’s claims that her consent to the consent orders was due, at least in part, to her ill mental health at the time (although, her contentions to that effect are recorded at [61]). Ground 13 must therefore fail at the threshold.
Ground 14 asserts that the primary judge erred by “misconstruing and not giving due consideration to the dicta in [Reid & Lynch (2010) FLC 93-448 (“Reid”)] at [228]–[229]; [216]; [220] and [226]” (as per the original). Paragraphs [228] and [229] in Reid set out the basic principles of res judicata and Anshun estoppel, essentially as we have identified them earlier. Clearly, her Honour had them in mind (indeed, she quoted another passage from Reid at [69]) and, as we have said, correctly applied them. The relevance of the other paragraphs referred to by the applicant in Ground 14 escapes us. No appealable error can arise from the mere failure of a judge to quote every authority offered up by a party.
Ground 15 which asserts a similar failure to “address or consider” the decision in Anshun fails for the same reason. It was not a relevant consideration in any event, as that doctrine does not limit the operation of s 90SN of the Act, as already discussed above.
Finally, it is necessary to record the applicant’s oral submission before us that because the respondent’s application under s 90SN of the Act was made in response to an enforcement application, it was necessarily an abuse of process.
This argument was not the subject of a ground of appeal and was not directly raised before the primary judge (noting that paragraph 3.13 of the applicant’s written submissions to her Honour filed on 16 September 2019 does not do so). Had it been raised, it is easy to envisage that evidence could have been called to explain why the respondent’s application under s 90SN of the Act was brought at that particular time (Metwally v University of Wollongong (1985) 60 ALR 68 at 71). That is sufficient for the submission not to be accepted.
Further, if there is a proper basis for bringing an application to set aside the consent orders, the fact that it was brought in response to enforcement proceedings does not, of itself, point to an abuse of process.
We are not satisfied that the decision of the primary judge is attended by sufficient doubt to warrant it being reconsidered by the Full Court. The application for leave to appeal will therefore be dismissed.
Costs
The application for leave to appeal has been wholly unsuccessful (s 117(2A)(e) of the Act). As the applicant properly conceded, he should pay the respondent’s costs, which are in the sum of $10,772.23 at scale. There will be an order to that effect.
I certify that the preceding forty-nine (49) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Aldridge, Watts & Tree JJ) delivered on 16 July 2020.
Associate:
Date: 16 July 2020
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