Harford & Spalding
[2022] FedCFamC1A 78
•26 May 2022
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1) APPELLATE JURISDICTION
Harford & Spalding [2022] FedCFamC1A 78
Appeal from: Harford & Spalding [2021] FamCA 636 Appeal number(s): NAA 20 of 2021 File number(s): SYC 3026 of 2020 Judgment of: MCCLELLAND DCJ, TREE & WILLIAMS JJ Date of judgment: 26 May 2022 Catchwords: FAMILY LAW – APPEAL – SUMMARY DISMISSAL – Appeal from orders dismissing an application for summary dismissal – Where the application sought to summarily dismiss the husband’s claims pursuant to ss 79A and 90K of the Family Law Act 1975 (Cth) – Leave to appeal required – Whether the primary judge erred in not having regard to relevant transcript – Whether the primary judge’s reasons for judgment were adequate – Where there is merit to the appeal – Where substantial injustice would ensue if leave were refused – Leave to appeal granted – Appeal allowed – Matter remitted for rehearing – Costs ordered in favour of the wife. Legislation: Family Law Act 1975 (Cth) ss 79A, 90C, 90K
Succession Act 2006 (NSW) s 95
Cases cited: Bennett and Bennett (1991) FLC 92-191; [1990] FamCA 148
Boensch v Pascoe (2019) 268 CLR 593; [2019] HCA 49
Ebner & Pappas (2014) FLC 93-619; [2014] FamCAFC 229
Medlow & Medlow (2016) FLC 93-692; [2016] FamCAFC 34
Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25
Sun Alliance Insurance Ltd v Massoud [1989] VR 8
Number of paragraphs: 34 Date of hearing: 2 May 2022 Place: Sydney Counsel for the Appellant: Mr Kearney SC Solicitor for the Appellant: Newnhams Solicitors Counsel for the Respondent: Mr Richardson SC Solicitor for the Respondent: Licardy & Co Solicitors ORDERS
NAA 20 of 2021
SYC 3026 of 2020FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MS HARFORD
Appellant
AND: MR SPALDING
Respondent
ORDER MADE BY:
MCCLELLAND DCJ, TREE & WILLIAMS JJ
DATE OF ORDER:
26 MAY 2022
THE COURT ORDERS THAT:
1.The appeal be allowed.
2.The orders of the primary judge made 27 August 2021 be set aside.
3.The matter be remitted for rehearing before a judge of the Federal Circuit and Family Court of Australia (Division 1) other than the primary judge.
4.Within 28 days of these orders, the husband is to pay the wife’s costs of the appeal in the sum of $38,342.90.
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 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Harford & Spalding has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
MCCLELLAND DCJ, TREE & WILLIAMS JJ:
INTRODUCTION
By Amended Notice of Appeal filed on 8 December 2021, the appellant wife seeks leave to appeal and, if granted, to appeal from an order made by the primary judge on 27 August 2021 dismissing her application for summary dismissal of the respondent husband’s Initiating Application.
The husband opposes both the grant of leave and the appeal.
For the reasons which follow, leave to appeal will be granted and the appeal allowed.
BACKGROUND
The parties commenced cohabitation in 1988, were married in 1990 and separated in February 2017, albeit remaining under the one roof until December 2019.
Following an unsuccessful mediation conducted on 23 March 2020, the wife commenced property settlement proceedings on 15 May 2020. However thereafter the parties continued to engage in settlement negotiations which, on 28 May 2020, resulted in them signing proposed property settlement consent orders, entering into a Binding Financial Agreement (“BFA”) pursuant to s 90C of the Family Law Act 1975 (Cth) (“the Act”) and the husband signing a release under s 95 of the Succession Act 2006 (NSW).
The consent orders provided for the wife to pay the sum of $700,000 to the husband, and for a superannuation split of $205,000 from the wife to the husband, but otherwise each party would retain the assets held in their name or possession. The BFA essentially provided for mutual releases in respect of claims for spousal maintenance.
On 29 May 2020, Loughnan J made orders (“the 2020 orders”) in accordance with the proposed consent orders signed by the parties, after hearing submissions from each party’s counsel and the tender of a joint balance sheet.
On 27 November 2020, the husband filed an Initiating Application (subsequently amended on 11 March 2021) seeking to set aside or vary the 2020 orders pursuant to s 79A of the Act and to set aside the BFA pursuant to s 90K(1) of the Act on a number of different bases.
On 22 January 2021, the wife filed an application seeking to summarily dismiss the husband’s Initiating Application, which was heard on 23 June 2021.
On 27 August 2021, the primary judge dismissed the wife’s application for summary dismissal for reasons then delivered.
THE REASONS FOR JUDGMENT
At [61]–[73] the primary judge discussed the balance sheet listing the parties’ assets and liabilities, including designer clothing owned by the wife, which had been before Loughnan J and, in particular, the difference in the values which each party contended should be attributed to that clothing; the husband contended a value of $1,162,000 whereas the wife contended a value of nil. At [65]–[67] her Honour noted the parties’ respective explanations for their contended values of the designer clothing as contained at note 2 to the balance sheet.
The primary judge said as follows in relation to the husband’s claim (which ultimately failed) that he relied upon the wife’s nil value when entering into the consent orders:
91.It is clear from these paragraphs of the husband’s affidavit that he had come to his own assessment of the value and quantity of the wife’s international and designer clothing, including J Company clothing, in her possession before entering into the consent orders given this is the basis of how he reached his value for those items in her possession. It is clear from the husband’s own material, the balance sheet and the husband’s notes to the balance sheet that he was aware of the extent of the wife’s clothing and had formed a view as to its value and quantity.
92.The husband now says to the Court that he accepted the wife’s value of the items in her possession at that time and entered into the consent orders on this basis.
93.However this case is inconsistent with the evidence which is that he did not accept her values when entering into the consent orders. The husband put forward his own values and then entered into the consent orders despite the significant difference in those values.
94.Accepting his case on this issue at its highest, the evidence is that:
(1)He accepted the wife’s values given her expertise in the industry;
(2)This was a decision he took in light of what he knew at the time which was that he disputed the value of her items and the quantity of items she had disclosed;
(3)That he tendered a document to the Court with the dispute as to values clearly shown; and
(4)He entered into the orders notwithstanding these disputes.
95.The husband had equal input with the wife into the creation of the balance sheet and each were legally represented before his Honour and at the mediation. There is no evidence of any valuations by independent sources of these contested items and the husband was at liberty to obtain his own independent valuations. His evidence that he accepted the wife’s values when entering into the consent orders given her expertise in the industry is inherently unbelievable and unreliable given the evidence he relied upon when the orders were made in Court.
96.The husband had an opportunity to question all the items the wife put on the balance sheet and the value she ascribed thereto and if he disagreed with the figures or quantity disclosed by the wife, as he clearly did from a reading of the joint balance sheet, he had his remedies including withdrawing his consent to the making of the orders. The husband has no reasonable prospects of successfully prosecuting a case pursuant to section 79A of the Act to set the orders aside on the basis that he relied upon the wife’s values when entering into the consent orders.
Later, her Honour considered the husband’s claim that at the time of the 2020 orders, the wife misled the Court as to the value of her designer clothing which, potentially, both caused a miscarriage of justice in the Court’s making of the consent orders and comprised fraud inducing him to enter into the BFA. Particularly, the husband claimed that because he had sold some of the wife’s clothing which he had retained under the 2020 orders, for about $28,000, it followed that the clothing retained by the wife could not have been of no value in 2020.
As her Honour recorded at [138]:
138.Annexure “E” to the husband’s affidavit of 22 April 2021 indicates the husband received from auction about $28,000 in two lots for the clothing, $40,645 for the jewellery, $114,600 for the J Company bags, $4,170 for “luxury bags-general”, and decorative arts, $19,600, a total of some $207,008.
Her Honour then concluded as follows:
139.Accepting this evidence, it is clear that the international designer clothing in the husband’s possession had a value. Although the husband does not directly state in his material and nor were submissions made to this effect, on this evidence the Court can draw an inference that similar items in the wife’s possession have a value as well. On this evidence the husband has an arguable case that international clothing in the wife’s possession has a value and that for the wife to have ascribed “NIL” as a value on the balance sheet is potentially the wife misleading the Court or failing to disclose material evidence leading to a potential miscarriage of justice.
…
142.I have found that the husband has an arguable case under section 79A of the Act that the wife misled the Court or failed to disclose the value of items in her possession being international designer clothing leading to a potential miscarriage of justice. This finding may also support an arguable case to set the BFA aside on the ground set out in section 90K(1)(a)…
143.Thus the wife’s application for summary dismissal of the husband’s application under section 79A and section 90K of the Act must fail.
LEAVE TO APPEAL
Leave to appeal the order dismissing the wife’s application for summary dismissal is required (Ebner & Pappas (2014) FLC 93-619). The test adopted in this Court provides that leave to appeal will only be granted where the decision of the primary judge was attended by sufficient doubt to warrant its reconsideration and a substantial injustice would ensue if leave were refused (Medlow & Medlow (2016) FLC 93-692). Thus the merits of any proposed appeal are relevant to the success of the application for leave to appeal. It is therefore convenient to address the proposed grounds before returning to the question of leave to appeal.
THE APPEAL
The Amended Notice of Appeal extends to six grounds as follows:
1. That Her Honour erred in finding, to the extent that such findings were made:
1.1that the international and designer clothing (“the items”) retained by [the wife] pursuant to the Orders of 29 May 2020 (“the Consent Orders”) could be inferred to be of relevant value to [the wife] at the time of the Consent Orders; and
1.2that the assertion of [the wife] that the value of such items was ‘nil’ was potentially misleading or could amount to a relevant failure to disclose material evidence.
2. That Her Honour erred in:
2.1finding that the transcript of the proceedings on 29 May 2020 was not and, to the extent that Her Honour did so, could not be before the Court;
2.2failing to have regard to the transcript of the proceedings on 29 May 2020; and
2.3failing to have regard to the correspondence emanating from [the husband] in the period from 16 December 2019.
3.That Her Honour having found that at the time and for the purpose of entry of the Consent Orders [the husband]:
3.1did not accept and did not rely upon any assertion of [the wife] as to the value of the items; and
3.2came to his own assessment as to the value of such items before and for the purpose of entering into the said Consent Orders;
erred in finding, to the extent that any such findings were made:
3.3that there was any relevant non-disclosure or misleading evidence on the part of [the wife]; and
3.4that any such matter(s) was capable of giving rise to a miscarriage of justice sufficient to engage s79A(1)(a) and or otherwise entitled [the husband] to relief pursuant to s.90K(1).
4.That Her Honour erred in failing to evidently consider and determine whether any finding made as to the items was sufficient to:
4.1amount to a miscarriage of justice; and
4.2if so, provide any proper basis for the setting aside or variation of the Consent Orders.
5.That Her Honour erred in finding (and in finding as sufficient) for the purpose of s.90K that [the wife] misled the Court or failed to disclose the value of the items.
6.That Her Honour erred in failing to deliver adequate reasons.
Two matters stand out from these grounds. The first is that, if established and if material, the relatively straightforward, frank error in relation to the transcript of the hearing before Loughnan J not being before the primary judge, raised by Ground 2, would necessitate the upholding of the appeal. The second matter, which is related to the first, is that the tension within the reasons of the primary judge between the conclusions in [91]–[96] on the one hand, and [138]–[143] on the other, permeates several of the grounds. Particularly, under Ground 6 the wife challenges the adequacy of the primary judge’s reasons explaining the contended inconsistency explicitly raised by Ground 3 and, to a lesser extent, Grounds 1, 4 and 5 as well.
It is convenient to consider those matters at the outset, as a consequence of which, as shall be seen, it is not necessary or indeed appropriate to further traverse the grounds.
The transcript issue
The primary judge recorded at [51] that her Honour “[did] not have the transcript of the proceedings before [Loughnan J] before [her] as the husband did not rely upon this transcript” and hence the only possible inference is that the primary judge therefore had no regard to it.
It is clear her Honour erred in reaching that conclusion, as the wife’s counsel tendered the relevant transcript before her Honour without objection, and both counsel for the wife and husband thereafter made submissions on its contents. That much is unarguably established from a reading of the transcript of the 23 June 2021 hearing before the primary judge. Particularly, whilst the wife acknowledged that the usual approach adopted in such proceedings for summary dismissal required the Court to only have regard to the husband’s material, she argued that did not preclude the Court from having regard to other material which is properly before it, and her Honour seemed to accept this argument (Transcript 23 June 2021, p.10 lines 30–46). Given that the transcript was uncontroversial, the wife’s submission was correct.
In thereafter failing to have regard to the transcript and, particularly, the submissions made by each party’s counsel before Loughnan J in seeking the 2020 orders, her Honour further erred. That is because the transcript of 29 May 2020 clearly demonstrates that both counsel made the submission that, notwithstanding the unresolved issue of the value of the wife’s designer clothing, each party nonetheless sought that the consent orders be made.
Thus at the hearing before Loughnan J, then senior counsel for the wife said:
… We run into some difficulties when we come to the question of valuation of my client’s personal property and there’s a substantial difference as between the parties.
The short reason for that being that my client is not permitted to sell items which she has received, subject to the policy of her employer, whilst employed by her employer which we say affects their market value. Both parties have come to a commercial decision to resolve that. The husband will retain some of my client’s personal property but your Honour will have seen the restraint on him using her name to sell that…
(Transcript 29 May 2020, p.2 lines 29–38) (Emphasis added)
Likewise, then counsel for the husband said:
[COUNSEL FOR THE HUSBAND]: … It is my client’s decision, after having the benefit of legal advice, to proceed with this settlement. Your Honour may take comfort in knowing that the parties participated in a mediation … on 23 March. It was a long mediation. They were both represented. I was in attendance with my client and the wife was represented by her lawyer. That mediation went for some 10 hours and whilst this resolution doesn’t precisely arise from the matters that were resolved at the mediation, it has been an ongoing discussion between the parties, directly for the most part, in recent weeks to resolve the matter.
Your Honour quite rightly notes the very different contentions by each party in relation to the balance sheet. We ultimately could not agree on the appointment of a valuer and a valuation process for items that my client would say are very valuable. The wife has a different view about the value that should be attributed, based on the limitation she says her employer places on what she can do with these items and how she can use them and the fact that she contends she can’t sell them.
HIS HONOUR: Yes.
[COUNSEL FOR THE HUSBAND]: But having regard to all of the circumstances, my client instructs me very clearly – and I met with him in person yesterday – that he wants to go ahead with this settlement and is completely aware of the process that the legislation provides for for [sic] property settlement. He is aware of his rights in relation to spousal maintenance…
(Transcript 29 May 2020, p.3 line 34 to p.4 line 10) (Emphasis added)
The materiality of these errors is clear, in that the transcript directly bears upon the arguability of the husband’s claims of the wife’s potential misleading of the Court, or non-disclosure, leading to a miscarriage of justice (s 79A), or that the BFA was procured by fraud (s 90K(1)(a)).
Hence, Grounds 2.1 and 2.2 have merit.
Adequacy of the primary judge’s reasons
In Bennett and Bennett (1991) FLC 92-191 at 78,266, the Full Court adopted the following test articulated by Gray J in Sun Alliance Insurance Ltd v Massoud [1989] VR 8 at 18:
The adequacy of the reasons will depend upon the circumstances of the case. But the reasons will, in my opinion, be inadequate if:
(a)the appeal court is unable to ascertain the reasoning upon which the decision is based; or
(b) justice is not seen to have been done.
The two above stated criteria of inadequacy will frequently overlap. If the primary Judge does not sufficiently disclose his or her reasoning, the appeal court is denied the opportunity to detect error and the losing party is denied knowledge of why his or her case was rejected.
We have already set out the relevant passages of the primary judge’s reasons earlier in this judgment. Notwithstanding the findings at [91]–[96], the primary judge nonetheless later concluded that the same conduct by the wife, which had not misled the husband, potentially led to a miscarriage of justice and may have fraudulently induced the husband to sign the BFA. Given the earlier findings, it was incumbent upon the primary judge to adequately expose the reasoning by which her Honour concluded that the evidence established sufficiently arguable claims under either s 79A or s 90K(1)(a), the latter being particularly fraught given that it was the husband who needed to show he was induced to enter the BFA by the wife’s fraud, and given the finding at [95]. However there is no sufficient disclosure of the reasoning. Therefore there is merit in Ground 6.
Given that, as we shall shortly explain, the matter will need to be remitted for rehearing, it is not appropriate for us to consider the balance of the grounds which deal with the issue of whether the husband had an arguable case under either statutory provision (Boensch v Pascoe (2019) 268 CLR 593 at [7]–[8]).
CONCLUSION
As we noted earlier, it is necessary, given the merit of the appeal, to nonetheless return to the question of leave.
We are satisfied that substantial injustice would be suffered by the wife if she were denied the opportunity of prosecuting her meritorious appeal, particularly because otherwise she would thereafter be compelled to resist the husband’s claims, and hence potentially be deprived of the finality arguably effected by the 2020 orders and the BFA. We are not satisfied that a costs order in her favour made after any dismissal of the husband’s application would adequately alleviate that injustice.
Leave to appeal will be granted and the appeal allowed.
REMITTER OR RE-EXERCISE
In the event the appeal succeeded, although the wife sought that we dismiss the husband’s Initiating Application in the re-exercise of the primary judge’s discretion, the husband sought remitter as he wished to put on further material, including as to why the items which he sold or had sought to sell (including the items recorded by the primary judge at [138]) appear not to have been disclosed by him on the balance sheet tendered before Loughnan J, a matter likely relevant if we were to re-exercise the primary judge’s discretion. In those circumstances, it seems to us that remitter is the appropriate course.
COSTS
If the appeal succeeded, the wife sought costs in the total sum of $38,342.90. No submissions were advanced by the husband against that quantum, but rather he opposed any order for costs against him on the grounds of the disparity in the parties’ financial positions. Whilst that is likely so, it does not in this case tell significantly against an order for costs, as even impecuniosity is no bar to a costs order (Northern Territory v Sangare (2019) 265 CLR 164). The husband is to pay the wife’s costs as claimed within 28 days.
I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Deputy Chief Justice McClelland and Justices Tree & Williams. Associate:
Dated: 26 May 2022
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