Harford and Harford and Anor
[2018] FCCA 3267
•12 November 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| HARFORD & HARFORD & ANOR | [2018] FCCA 3267 |
| Catchwords: FAMILY LAW – Jurisdiction – accrued jurisdiction – power of this Court. |
| Legislation: Family Law Act 1975, s.79 |
| Cases cited: Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 Warby & Warby (2002) FLC 93-091 Re Wakim; Ex parte McNally (1999) 198 CLR 51 Wade-Ferrell & Wade-Ferrell (2001) FLC 93-069 Fencott & Mullen (1983) 152 CLR 570 Valceski& Valceski (2007) 70 NSWLR 36 F Firm & Ruane and Ors (2014) FLC 93-611 Bishop & Bishop [2003] FamCA 240 (28 March 2003) Yen & Yen [2010] FamCA 1 (13 January 2010) City of Swan v. McGraw-Hill Companies Inc. [2014] FCA 442 (7May 2014) |
| Applicant: | MR HARFORD |
| First Respondent: | MS HARFORD |
| Second Respondent: | MR P HARFORD |
| File Number: | CRC 316 of 2016 |
| Judgment of: | Judge Costigan |
| Hearing date: | 17 September 2018 |
| Date of Last Submission: | 17 September 2018 |
| Delivered at: | Newcastle |
| Delivered on: | 12 November 2018 |
REPRESENTATION
| Solicitors for the Applicant: | No appearance |
| Counsel for the First Respondent: | Mr O'Brien |
| Solicitors for the First Respondent: | A J Gallagher Solicitor |
Counsel for the Second Respondent: | Mr S Priestley |
| Solicitors for the Second Respondent: | Somerville Laundry Lomax |
ORDERS
I declare that I am satisfied that the Federal Circuit Court of Australia is sufficiently vested with accrued jurisdiction and that it is appropriate for that jurisdiction to be exercised so as to deal with, hear and determine any claim by the parties.
The matter is listed on 27 November 2018 at 9.30am for a directions hearing in the Federal Circuit Court sittings at Coffs Harbour.
IT IS NOTED that publication of this judgment under the pseudonym Harford & Harford & Anor is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT NEWCASTLE |
CRC 316 of 2016
| MR HARFORD |
Applicant
And
| MS HARFORD |
First Respondent
| MR P HARFORD |
Second Respondent
REASONS FOR JUDGMENT
Introduction
These are property proceedings involving Mr Harford (‘husband’) and Ms Harford (‘wife’). Joined as a party to these proceedings is the husband’s father Mr P Harford (‘second respondent’).
The second respondent seeks orders that the wife’s claim against the husband be dismissed as the husband is an undischarged bankrupt and his exempt property does not exceed $1,500. In relation to the wife’s equitable claim against him, the second respondent urges the Court to decline to exercise its accrued jurisdiction and to dismiss the wife’s application.
The wife claims an equitable interest in the property situate and known as Property A (‘the property’). The Property A property is registered in the name of the second respondent and was treated as the matrimonial home during the husband and wife’s marriage. In the alternative, the wife claims that the second respondent pay her equitable compensation for work performed and monies spent on maintaining and improving the property.
Relationship History
The Second Respondent was born on 1939 and is 78 years of age.
The husband was born on 1974 and is 44 years of age.
The wife was born on 1980 and is 38 years of age.
The husband and wife commenced living together in 1999. In that year, the husband purchased a Motor Vehicle A for his business and between 1999 and 2011 he worked as a (occupation omitted).
It is common ground that on 2000 the second respondent purchased the property for $140,000. He paid a deposit of $60,000 together with the stamp duty and legal costs. The balance of the purchase price was funded by way of an Bank 1 mortgage.
The parties married on 2003 and separated on 19 September 2015. There are no children of the marriage.
The wife says that her understanding was that title to the Property A property would be transferred to her and the husband when they were able to take out their own mortgage.
The wife says that she and the husband lived in the property for 15 years during which time they paid the mortgage, rates and outgoings as well as attending to all maintenance and repairs in respect of same.
The second respondent says that the husband and wife paid rent of $150 per week. He says that it was a non-commercial rent and there were periods when no rent was paid at all. He deposes:
‘I was happy to have my son and daughter-in-law living nearby and in circumstances where I knew they would not complain about my cane farming business of [sic] the boundary of the subject property.’[1]
[1] Affidavit of Mr P Harford filed 14 March 2017 [14]
The wife deposes that she and the husband carried out renovations on the property to the value of $10,000.[2]
[2] Affidavit of wife filed 19 January 2017 [10]
The second respondent says the Bank 1 mortgage was refinanced and increased to $94,000 on 21 June 2001 and the $15,000 was lent to the husband to carry out repair work to his Motor Vehicle A. He says that a condition of the loan was that the husband would pay an ‘increased amount to my Bank 1 invest loan account each month to repay the Motor Vehicle loan’[3] and the rent on the property was increased to $250 per week. The husband says $166.18 per week.[4]
[3] Affidavit of second respondent filed 14 March 2017 [16]-[17]
[4] Affidavit of husband filed 11 December 2017 [34]
It is common ground between the parties that shortly before separation the wife moved out of the property and went to live next door with the second respondent and his wife between 15 December 2015 and 7 February 2016.
The husband moved out of the property in April/May 2016.
The property is agreed to be valued at $450,000.
A second significant issues in this matter is the source and characterisation of the sum of $100,000 made available to the husband and wife in September 2010 for the purchase of the business ‘Business’.
The husband says that the monies were advanced by his mother by way of a loan repayable on the sale of the business. The wife says it was a gift to them both from the husband’s uncle Mr R. The business was sold on 4 September 2016 for $50,000 and the net proceeds of sale paid into the trust account of the wife’s solicitors. The current trust balance appears to be $43,564.60.[5] The husband’s mother is now seeking repayment of the $100,000.
[5] Affidavit of husband filed 11 December 2017 [69]
Litigation History
The proceedings were commenced by the husband by way of initiating application filed on 7 November 2016 with a first return date of 13 February 2017.
On 19 January 2017 the wife filed a response alleging that the property was being held on trust for the wife and husband by the second respondent.
On 13 February 2017 the matter came before Judge Middleton in Coffs Harbour and the wife was directed to reply to a request for further and better particulars in relation to the alleged trust and the existence of a loan. The second respondent was directed to file and serve his response, financial statement and affidavits and the matter was adjourned to 6 April 2017.
On 14 March 2017 the second respondent filed his response material.
On 6 April 2017 the proceedings were adjourned by Judge Middleton for the parties to arrange an external mediation.
On 1 May 2017 the matter came before Judge Cassidy who directed the parties to attend an external mediation through Relationships Australia (Victoria). Her Honour also made directions for disclosure and exchange of valuations of any relevant assets prior to the mediation.
On 18 September 2017 the matter came before Judge Harper who allocated a final hearing date in the week commencing 13 February 2018.
The matter came before me for the first time on 15 February 2018. There was agreement between the parties that the hearing was not ready to proceed on the basis of inadequate disclosure and the need for the wife to properly plead her case for relief against the second respondent. I adjourned the matter to a date to be advised noting that the legal representatives would prepare a minute of consent orders to address the outstanding issues.
On 28 February 2018 I made orders by consent in Chambers which provided, inter alia:
· That within 14 days the second respondent produce to the wife all documents in support of his assertion that the husband and wife were only renting the Property A property together with identified tax returns between 2000 and 2016;
· That within 21 days the wife file and serve an amended response specifying the state law on which she relies, an affidavit pursuant to rule 4.06(3) of the Family Law Rules 2004, a statement of claim pleading her case for relief against the second respondent and an affidavit in support;
· That within 21 days of service of the above documents the second respondent file a reply to the statement of claim and affidavit in support; and
· Adjourning the matter to 30 April 2018 for directions.
On 24 March 2018 the wife filed an amended response and supporting affidavits.
On 17 April 2018 the husband was declared bankrupt and notice of these proceedings was given to the husband’s trustee in bankruptcy.
On 30 April 2018 the matter came before me in the Coffs Harbour sittings and I extended time for compliance by the second respondent in relation to the order for disclosure made on 28 February 2018, while the parties and Court awaited notification of the trustee in bankruptcy’s election.
On 16 July 2018 the trustee in bankruptcy filed an application in a case seeking to be joined as a party to the proceedings in his capacity as trustee of the bankrupt estate of the husband. The first return date of that application was the 16 July 2018. On that date there was no appearance by or on behalf of the husband, Mr O’Brien of Counsel appeared on behalf of the wife, Mr S Priestley of Counsel appeared on behalf of the second respondent, and the trustee in bankruptcy Mr C was self-represented. I heard brief submissions from Counsel and adjourned the matter to 19 July 2018 for my reserved decision.
On 19 July 2018 I made the following orders and directions:
1. Pursuant to s60(3) of the Bankruptcy Act (Cth) 1966 the application in a case filed by Mr C in his capacity as Trustee of the Bankrupt Estate of Mr Harford is dismissed.
2. The matter is adjourned to 17 September 2018 at 9.00am for argument of the jurisdictional issue in the Federal Circuit Court of Australia sitting at Coffs Harbour (allocating 2 hours).
3. The second respondent file and serve a point form outline of argument and a list of authorities not exceeding two (2) pages by 4.00pm on 17 August 2018.
4. The first respondent file and serve a point form outline of argument and list of authorities by 4.00pm on 31 August 2018.
5. The solicitor for the second respondent to forthwith notify the applicant intervenor of the outcome of today’s hearing.
On 17 September 2018 the hearing in relation to the jurisdictional issue proceeded. There was no appearance by or on behalf of the husband, Mr O’Brien appeared via telephone on behalf of the wife and Mr S Priestley appeared on behalf of the Second Respondent.
Issues for Determination
The argument on the applications concerned two (2) issues:
(a)Whether the orders sought by wife against the second respondent attracted the accrued jurisdiction of the Court, and
(b)If so, whether the Court ought to exercise the jurisdiction so accrued.
Submissions
The Court had the benefit of written and oral submissions on behalf of the wife and second respondent.
Counsel for the second respondent Mr S Priestley submitted that the course of action the Court should adopt was to decline to exercise its accrued jurisdiction and dismiss the wife’s application. The wife could then commence fresh proceedings in the Supreme Court of NSW, where the claims could be dealt with more expeditiously and where the husband’s trustee in bankruptcy could be joined and participate in the proceedings. The written submissions filed on behalf of the second respondent[6] read as follows:
[6] Written Submissions of Second Respondent filed 31 August 2018
· The First Respondent has made a claim against the Second Respondent in her Amended Response filed 21 March 2018 to the following effect:
o 1. A declaration that the Second Defendant holds the property located at Property A …….on trust for the Applicant and the First Respondent as tenants in common in equal shares.
o That the second respondent pay the sum of $390,000 into the Trust Account of AJ Gallagher Solicitor and that money………..be applied to clear debts owned by the Applicant and the First Respondent (the debts are listed as totalling $79,968.12).
o 5 and 6. That should the Second Respondent fail to comply with Order 1, above, then with 14 days of the expiration of the said period the Second Respondent shall do all acts and things and sign all necessary documents to effect a sale of Property A ….and:
§ The listing price for the property shall be no less than $450,000.
§ Various orders as to the conduct of the sale.
§ The balance to be equally divided between the First Respondent and the Applicant.
· On 26 March 2018 the First Respondent as Plaintiff filed a Statement of Claim in this Court naming the Second Respondent as Defendant seeking to the following effect;
o A declaration that the Second Respondent holds the property at Property A [sic] in trust for herself and Mr Harford as tenants in common in equal shares.
o Alternatively that the defendant pay equitable compensation to the plaintiff.
· The amount of equitable compensation sought is not pleaded.
· The claim for a declaration is based on an alleged breach of an agreement by the defendant and/or the claim is based on an alleged breach of promise on which the Plaintiff alleges she acted.
· The Second Respondent has claimed against the First Respondent:
o That the First Respondent’s Response be dismissed.
o That the First Respondent do all things necessary at her own expense to remove a caveat registered over Property A.
o That the First Respondent pay the Second Respondent’s costs.
· This court is a court founded on statute and can only exercise an equitable jurisdiction over claims by a party against another where the two litigants are not within a married or de facto relationship if the claim is incidental or associated with a claim that does come with its jurisdiction.
· The plaintiff and defendant were never in either a marital relationship or a de facto relationship.
· The applicant for property settlement orders is now an undischarged bankrupt.
· The applicant’s trustee has been refused leave to intervene as he did not elect to prosecute the application for property settlement within 28 days of receiving notice of the action and pursuant to s60(3) of the Bankruptcy Act and is now deemed pursuant to that section to have abandoned the action.
· The First Respondent has sought orders against the Applicant.
· All the Applicant’s property except his exempt property has vested in his Trustee.
· The exempt property of the Applicant is valued, based on the Applicant’s estimates at a maximum of $1500.
· The First Respondent’s claim against the Applicant should now be struck out.
· Upon the First Respondent’s claim against the Applicant being struck out the First Respondent’s claim against the Second Respondent which relies on this court exercising an accrued or associated jurisdiction must fall and should be dismissed.
· The proper court to determine the claim by the plaintiff against the defendant id [sic] the Supreme Court of New South Wales as her claim is a claim based on equity and not on any claim under the Family Law Act or any other Act within the jurisdiction of this court.
Counsel for the wife Mr O’Brien urged the Court to accept that the Federal Circuit Court of Australia has, and is entitled to exercise accrued jurisdiction sufficient to determine the issues. The written submissions of the wife read as follows:
1. The Second Respondent, inter alia, challenges the jurisdiction of the Federal Circuit Court has no jurisdiction to hear and determine the claim. This is refuted by the respondent.
2. The Federal Circuit Court of Australia (“the FCC”) gains its Family Law Jurisdiction in respect of a matrimonial cause by way of s.39 (5AA) of the Family Law Act 1975 (Cth) (“the FLA”) which gives the FCC Family Law jurisdiction to determine matrimonial causes.
3. Once vested with original Jurisdiction in a matter in the aforementioned way, the FCC is required to grant either absolutely or on such terms and conditions as the FCC thinks just, ‘all remedies to which any of the parties appears to be entitled of a legal or equitable interest claim properly brought forward by him or her in the matter, so that as far as possible, all matters in controversy between the parties may be completely and finally determined and all multiplicity of proceedings concerning any of those matters may be avoided.’[7]
4. When the FCC has jurisdiction to determine a matter, it has jurisdiction to determine the entire justiciable controversy that forms part of the same ‘matter’ and can use both federal and state laws to so do: F Firm & Ruane and Ors (2014) FLC 93-611 at 79,572’ Valceski v Valceski (2007) FLC 93-312 at [38]
5. What constitutes a matter is not controversial. The subject received thorough attention by Gummow and Hayne JJ in Re Wakim; Ex parte McNally (1999) 198 CLR 511 [135]-[147].
6. The claim against the Second Respondent, would not have arisen but for the existence of the marital relationship between the Applicant and the First Respondent. The former matrimonial property makes up the majority of the pool available to the Applicant and the First Respondent. The evidence that is relevant to the determination of the issue of contributions, will also be pertinent to the determination of the estoppel claim. Accordingly, the issue of ownership of the former matrimonial home is fundamentally woven into the fabric of the dispute that this Court is charged with determining. The jurisdiction to determine the claim rightly sits with this Court.
7. Further the Court still has jurisdiction in these proceedings as the claim by the wife for relief pursuant to s.79 of the FLA is still on foot. The Court will be required to make a decision as to the alteration of interests if the wife is found to be successful in her claim against the Second and Third Respondents.
Submission to Jurisdiction
8. In respect of the action by the Second Respondent, the attempt to challenge the jurisdiction of this Court has come too late. By filing their defence on 27 April 2018 in these proceedings, the Second Respondent have submitted to the jurisdiction and have waived their ability to object to same: City of Swan v. McGraw-Hill Companies Inc. [2014] FCA 442 (7May 2014) per Rares J.
[7] Federal Circuit Court Act 1999 (Cth), s.14
Accrued jurisdiction
Section 18 of the Federal Circuit Court of Australia Act 1999, provides:
To the extent that the Constitution permits, jurisdiction is conferred on the Federal Circuit Court of Australia in respect of matters not otherwise within its jurisdiction that are associated with matters in which the jurisdiction of the Federal Circuit Court of Australia is invoked.
Section 14 of the Federal Circuit Court of Australia Act 1999 requires that the Court determine matters completely and finally.
In Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457, Barwick CJ observed:
‘It is settled doctrine in Australia that when a Court which can exercise Federal jurisdiction has its jurisdiction attracted in relation to a matter, that jurisdiction extends to the resolution of the whole matter. This accrued Federal jurisdiction is not limited to matters incidental to that aspect of the matter which has in the first place attracted Federal jurisdiction. It extends in my opinion to the resolution of the whole matter between the parties…”
In Warby & Warby (2002) FLC 93-091 at [79] the Full Court of the Family Court of Australia said:
“We have formed the view that as a matter of law, the Family Court of Australia is not restricted to the determination of a family law claim or proceeding; it may exercise accrued jurisdiction to determine the non-federal aspects of a justiciable controversy of which the family law claim or cause of action forms a part. The factual circumstances of the case will determine whether the jurisdiction arises and whether it is appropriate to exercise the jurisdiction.’
There are a number of criteria by which courts have determined whether a single justiciable controversy exists:[8]
“What is a single controversy ‘depends on what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct and relationships’. There is but a single matter if different claims arise out of ‘common transactions and facts’ or ‘a common substratum of facts’ notwithstanding that the facts upon which the claims depend ‘do not wholly coincide’. So, too, there is but one matter where different claims are so related that the determination of one is essential to the determination of the other, as for example, in the case of third party proceedings or where there are alternative claims for the same damage and the determination of one will either render the other otiose or necessitate its determination. Conversely, claims which are ‘completely disparate’, ‘completely separate and distinct’ or ‘distinct and unrelated’ are not part of the same matter.”
[8] Re Wakim; Ex Parte McNally ref Fencott (1983) 152 CLR 570 at 608 per Mason, Murphy, Brennan and Deane JJ
In the case of Valceski& Valceski (2007) 70 NSWLR 36 at [39], Brereton J observed[9] that “it must always be borne in mind that the ultimate question is not the existence of each of the several suggested indicia, but whether there is in substance a single justiciable controversy”.
Discussion
[9] Approved by Thackray J in F Firm v Ruane (2014) 52 Fam LR 230
A single justiciable controversy?
In the matter of F Firm & Ruane & Ors [2014] FamCAFC 189 at [46] Thackray J noted a number of examples where aspects were found to be part of a single justiciable controversy:
It is instructive to note that in those cases in which, to date, the Full Court has upheld, or sanctioned, the use of the accrued jurisdiction such as Wade-Ferrell & Wade-Ferrell (2001) FLC 93-069, Warby & Warby (2001) FLC 93-091 and Bishop & Bishop (2003) FLC 93-144, it has been the determination under state law of what is the property of the parties that has been essential for the purposes of the Family Court's jurisdiction under s 79 of the Act and thus has been the subject of the accrued jurisdiction.
The wife’s amended response filed on 21 March 2018 seeks a number of orders of which Orders 1, 2 and 5 and 6 directly involve the second respondent.
In this matter the wife is seeking a declaration that the second respondent holds the property on trust for her and her former husband. She alleges that she and the husband entered into the agreement with the second respondent in good faith and that she has acted in reliance upon that agreement. She asserts it is now unconscionable for the second respondent to deny the existence of the agreement.
Under the heading ‘promissory estoppel’ the wife pleads the matters upon which she relies in support of the cause of action. She particularises the alleged agreement and the reasons why the second respondent should be estopped from denying the existence of the agreement
In the alternative, the wife alleges that the second respondent pay her equitable compensation or damages[10] for the work carried out on the property.
[10] I assume this is in the nature of quantum meruit claim but it has not been particularised nor as Counsel for the second respondent has the claim based on equitable compensation.
The resolution of the wife’s claim to an interest in the property is central to the resolution of the s79 proceedings as between the husband and wife. It is a dispute that will determine the extent of the parties’ financial interests and must be resolved before the Court can properly exercise its power pursuant to s 79 of the Act.
Although this case involves a number of different issues requiring determination, those issues involve the property which is the asset at the centre of the controversy. The dealings between the various parties as they relate to that central asset are ‘interwoven’.
While it is certainly true that the wife’ claim could be severed from the other proceedings and heard separately as was argued by counsel for the second respondent the fact that an issue could be separated does not of itself lead to the conclusion that there is not a single justiciable controversy.
Counsel for the second respondent argues that the relief sought by the wife relies on state laws and is purely equitable in nature. In addition her amended response has created a number of separate and discrete issues which do not allow a characterisation of the matter as a single justiciable controversy.
While all these claims are clearly within the equitable and inherent jurisdiction of the Supreme Court and the subject property is not owned by the husband or the wife, in my view the dispute still arises from the same substratum of facts as the balance of the matters to be determined in this Court and properly considered, represents a single justiciable controversy[11].
[11]Re Wakim; Ex parte McNally (1999) 198 CLR 511 at 140
Should the jurisdiction be exercised?
In Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd [12] it was said:
‘This exercise of this jurisdiction, which for want of a better term I shall call “accrued” jurisdiction, is discretionary and not mandatory, though it will be obligatory to exercise the federal jurisdiction which has been attracted in relation to the matter.’
[12] Re Wakim; Ex parte McNally (1999) 198 CLR 511 per Barwick CJ at 475
Counsel for the second respondent submitted that when determining whether to exercise accrued jurisdiction, the Court should have regard to the decision in the Marriage of Bishop[13] at [78-404] when the Full Court said:
“We think some caution and a very careful examination of the facts needs to be exercised before applying the general notion that if a court has jurisdiction it ought to exercise it when dealing with claims involving third parties in family law cases. That caution having been said, if, as in this case the facts support the exercise of accrued jurisdiction, the Court ought not to shy away from it. It is a very important and necessary part of the Court’s powers.”
[13] [2003] FLC 93-144 at 78,404
However, in Valceski v Valceski Brereton J [2007] NSWSC 440 opined:
Whilst there may be a discretion to decline to exercise accrued jurisdiction, it will be an exceptional case in which that discretion can properly be exercised so that the whole of a justiciable controversy is not resolved in the one Court.
The point of a single justiciable controversy is to enable a Court to hear and resolve all of the issues between parties.
The second respondent submits that the issue as to the wife and husband’s entitlement to an interest in the property is discrete and severable from the resolution of the balance of matters in the Federal Circuit and to exercise the jurisdiction would engage the second respondent in a wider, more expansive litigation in which many of the issues to be determined are irrelevant to his interests. I do not agree. In broad terms there are only two (2) main issues in this case: whether the second respondent holds the property on trust for the husband and wife and whether the $100,000 advanced for the purchase of the business was a gift or a loan and who made the advance. They are matters where the second respondent has been directly or indirectly involved in the relevant transactions.
In my view the jurisdiction ought to exercised by the Court because:
a)The Court is asked to determine whether the second respondent holds the property on trust for the wife and husband which would necessitate its inclusion in the matrimonial asset pool;
b)The reality is that the proceedings cannot be properly heard and determined to finality without the exercise of that jurisdiction;
c)The claims are not severable from the matrimonial case and arise out of a ‘common sub-stratum of facts’.
d)This Court has the power to grant appropriate remedies in respect of any of the claims;
e)If the matter proceeded in the Supreme Court the same parties would be before the Court save for the husband’s trustee in bankruptcy and it cannot be assumed that he will elect to participate; and
f)To decline to exercise the jurisdiction would expose the parties to additional costs.
Conclusion
In summary, having considered the relevant legislation, regulations and authorities:
a)I am satisfied that this Court has an inherent accrued jurisdiction; and
b)I am satisfied that this is an appropriate matter for the Court to exercise its accrued jurisdiction.
Having determined that this is an appropriate matter for the Court to exercise its accrued jurisdiction, it is unnecessarily to consider the second limb of the wife’s submission which was whether the second respondent has submitted to the jurisdiction and waived his ability to object to same.
I propose to dismiss the second respondent’s application in relation to the jurisdictional issue and list the matter for further mention in the next available Circuit sittings.
I certify that the preceding sixty three (63) paragraphs are a true copy of the reasons for judgment of Judge Costigan
Date: 12 November 2018
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