Harrison & Harrison (No 3)
[2011] FamCAFC 241
•5 December 2011
FAMILY COURT OF AUSTRALIA
| HARRISON & HARRISON (NO. 3) | [2011] FamCAFC 241 |
| FAMILY COURT – APPEAL – Where the husband’s conduct in the proceedings is a relevant matter – Where the husband did not indicate what happened to a sum of money removed from a superannuation account – Where the Federal Magistrate elected to proceed on an undefended basis – Where as a party to the proceedings the husband had a clear duty to provide information to the wife and the court – Where while the obligation was on the husband, the wife could have made her own enquires – Where it was found that the Federal Magistrate erred in his discretion – Appeal allowed and matter remitted for re-hearing. FAMILY LAW – APPEAL – Appeal against a costs order – Where it was submitted the consequences of non-disclosure are contained in the Rules – Where having found there had been non-disclosure by the husband the Federal Magistrate was entitled to make a costs order – Where it was found it was within the Federal Magistrate’s discretion to make such an order. FAMILY LAW – COSTS – Costs certificates granted pursuant to the Federal Proceedings (Costs) Act 1981 (Cth) for both the appeal and the re-hearing. |
| Family Law Act 1975 (Cth) Family Law Rules 2004 (Cth) Federal Proceedings (Costs) Act 1981 (Cth) |
| In the marriage of Black and Kellner (1992) FLC 92-287 Luciano & Luciano [2000] FamCA 401 Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 Kannis & Kannis (2003) FLC 93-135 Mezzacappa and Mezzacappa (1987) FLC 91-853 Reed and Reed; Draper (Intervener) (1995) FLC 92-649 Re F: Litigants in Person Guidelines (2001) FLC 93-072 In the marriage of Stein and Stein (1986) FLC 91-779 In the marriage of Weir and Weir (1993) FLC 92-338 |
| APPELLANT: | Mr Harrison |
| RESPONDENT: | Mrs Harrison |
| FILE NUMBER: | MLC | 6568 | of | 2008 |
| APPEAL NUMBER: | SA | 96 | of | 2010 |
| DATE DELIVERED: | 5 December 2011 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | May, Ainslie-Wallace & Johnston JJ |
| HEARING DATE: | 6 October 2011 |
| LOWER COURT JURISDICTION: | Federal Magistrates Court |
| LOWER COURT JUDGMENT DATE: | 11 June 2010 |
| LOWER COURT MNC: | [2010] FMCAfam 663 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Mort |
| SOLICITOR FOR THE APPELLANT: | Perisic & Thomas Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Nicholson |
| SOLICITOR FOR THE RESPONDENT: | MacKinnon Jacobs Lawyers |
Orders
The appeal is allowed.
Paragraphs 1, 2 and 3 of orders made by Federal Magistrate O’Sullivan on 11 June 2010 be set aside.
The application of the wife pursuant to s 79A of the Family Law Act 1975 (Cth) be remitted for re-hearing before a Federal Magistrate other than Federal Magistrate O’Sullivan.
The Court grants to the appellant a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by the appellant in relation to the appeal.
The Court grants to the respondent a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by the respondent in relation to the appeal.
The Court grants to each of the parties a costs certificate pursuant to the provisions of s 8 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to each of the parties in respect of the costs incurred by the appellant and respondent in relation to the re-hearing of the application.
IT IS NOTED that publication of this judgment under the pseudonym Harrison & Harrison (No 3) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: SA 96 of 2010
File Number: MLC 6568 of 2008
| Mr Harrison |
Appellant
And
| Mrs Harrison |
Respondent
REASONS FOR JUDGMENT
Introduction
The proceedings before the Federal Magistrate concerned the wife’s application pursuant to s 79A of the Family Law Act 1975 (Cth) (“the Act”). The application was necessary because contrary to final property orders the husband dealt with the superannuation in a manner which defeated the orders.
The husband appeals from all of the orders of Federal Magistrate O’Sullivan made 11 June 2010. The notice of appeal was filed after leave was granted to appeal out of time.
The orders made by the Federal Magistrate were those as sought on behalf of the wife and provided:
1.Pursuant to section 79A(1)(b) and section 79A(1)(C) of the Family Law Act 1975 (“the Act”), paragraph 2(f) of the Final Orders of the Family Court of Australia made on 6 August 1998 be varied.
2.Pursuant to section 90MS of the Act a flagging order be made, directed to the trustee of the husband’s superannuation fund or funds.
3.There be a splitting order pursuant to section 90MT of the Act and the husband and [K] Pty Ltd forthwith and do all such acts and things necessary to effect the sale of the assets in the [Harrison] Superannuation Fund of which [K] Pty Ltd is currently the Trustee (“the fund”) and to transfer the proceeds to the REST Superannuation Fund in the wife’s name (“the wife’s fund”).
4.The husband and [K] Pty Ltd and all their servants and agents are hereby restrained from dealing with any of the superannuation funds held in Trust by [K] Pty Ltd, or where the husband is a sole or joint beneficiary except in accordance with these orders.
5.The husband pay the wife’s costs of $6,630 in full by not later than
17 December 2010.
6.The wife serve a sealed copy of these orders upon the [K] Pty Ltd within (7) days.
7.All extant applications be dismissed and removed from the Pending Cases List.
The husband articulates ten grounds of appeal. In summary, those grounds include that the Federal Magistrate erred in various findings of fact against the husband, erred in affording improper weight to various factors, erred in the application of the provisions of ss 79, 75(2) and 117(2A) of the Act, failed to give any or any adequate reasons, and failed to afford the husband procedural fairness and natural justice.
We intend to allow the appeal on a number of grounds. Central to this decision is the absence of evidence before the Federal Magistrate which was necessary and has lead to an erroneous decision.
Background
Under substantive property orders the wife was to receive a defined share of the husband’s interest in the C Superannuation Scheme. Despite the existence of injunctions to preserve the wife’s interest in the superannuation, the husband transferred his superannuation interest to a superannuation fund under the control of his son apparently with considerable loss of value. The effect of this was that the interest which the wife had in superannuation under the orders was in reality no longer available to her. The husband failed to disclose relevant details in relation to the remaining superannuation. The Federal Magistrate found that the husband had not made a full and frank disclosure and failed to comply with orders requiring him to file further material in this regard. In these circumstances the Federal Magistrate gave leave for the wife’s s 79A application to be heard as undefended proceedings. His Honour also found that in circumstances since the order was made it was impracticable for the order to be carried out and he also found that the husband had defaulted in his obligations under the orders by alienating his and the wife’s superannuation entitlements under the orders. Accordingly, his Honour varied the substantive orders under s 79A of the Act.
The relevant facts as recounted by the Federal Magistrate are uncontroversial.
The wife was born in 1953 and the husband was born in 1958.
The parties were married in February 1981. They separated in August 1996.
The wife was employed as a shop assistant, earning $315.00 per week. The husband, an undischarged bankrupt at the time of the hearing was employed by a banking institution and earning $1,400.00 per week.
There were proceedings between the parties in the Family Court of Australia in 1997 and 1998. Ultimately, orders were made by consent on 6 August 1998. Those orders (also pursuant to s 79A) relevant to the hearing before the Federal Magistrate and this appeal are as follows:
…
2. That pursuant to Section 79A(1A) of the Family Law Act 1975:
…
(f) After cessation of the husband’s employment the husband pay to the wife a sum or sums of money equivalent to the wife’s share of the husband’s superannuation benefits and the husband’s departure benefits within 30 days of the payment day or days and for the purposes of this Order:
(i) “cessation of the husband’s employment” means cessation of his employment with [his banking employer] howsoever caused or whensoever occurring;
(ii) “the wife’s share” means the amount of amounts calculated in accordance with the following formula:
A x B/C x 25% = wife’s sharewhere A is the husband’s superannuation benefits and/or the husband’s departure benefits, B is that period of time occurring between 7th February 1981 and 4th August 1886 (sic) which overlaps with C or any part of C, and C is the period during which the husband has been a beneficiary of the [C] Superannuation Scheme (or its predecessor or successor) in the case of the husband’s superannuation benefits and the period of time which is relevant to the calculation of the husband’s departure benefits in the case of the husband’s departure benefits;
(iii) “the husband’s superannuation benefits” means the amount net of all taxation and all other compulsory fees, charges or imposts that would be payable to the husband if he exercised the maximum permissible lump sum option available to him at the time of the payment day;
(iv) “the husband’s departure benefits” means the amount nett of all taxation and all other compulsory fees, charges or imposts that is paid to the husband by reason of the cessation of the husband’s employment and which is specifically calculated by reference to the length of the husband’s service in his employment and which service includes any part of the period 7th February 1981 to 4 August 1996; and
(v) “the payment day” means the day or days upon which the husband actuall7y (sic) receives the husband’s superannuation benefits and the husband’s departure benefits; and
(vi) that save as otherwise provided each party forgoes any claim they may have to any superannuation benefits belonging to or earned by the other.
3. That the husband:
(a) continue to provide and maintain an authority to the Trustees of the [C] Superannuation Scheme to notify the wife in writing immediately the husband becomes entitled to the proceeds of his superannuation benefits; and
(b) be restrained by himself, his servants and agents from:
(i) making any election the effect of which would reduce his lump sum entitlement to less than 25% of which it would otherwise be; and
(ii) disposing or transferring his superannuation fund monies with the [C] Superannuation Scheme; without the prior written consent of the wife.
The application before the Federal Magistrate was that of the wife, who filed an amended application seeking various property orders and ancillary orders on 3 February 2010. The final orders sought by the wife were:
1.THAT pursuant to section 79A (1)(b) and 79(1)(c) Family Law Act 1975 this Court set aside paragraph 2(f) of the Final Orders of this Court made August 6, 2008.
2.THAT pursuant to Section 90MS Family Law Act a flagging order be made directed to the trustee of the Husband’s Superannuation fund or funds.
3.THAT the Husband make a payment to the Wife particulars of which will be specified upon the Husband making discovery pursuant to paragraphs 2 and 3 of the interim application.
4.THAT further or in the alternative:
4.1.That [K] Pty Ltd be joined as a party to these proceedings.
4.2. That pursuant to section 79A Family Law Act this Court vary the orders of the Family Court herein made August 6, 1998.
4.3.That there be a splitting order under section 90MT Family Law Act 1975 as follows:
4.4. That this Court allocate to the Wife out of the interest held by the Husband in the [Harrison] Superannuation Fund of which [K] Pty Ltd is currently the Trustee (the Fund) the sum of $70,000 (the base amount).
4.5. That pursuant to section 90MT(1)(a) of the Family Law Act 1975, whenever the Trustee of the Super Fund makes a splittable payment from the interest held by the husband, the Trustee will pay to the wife or her administrators, executors, beneficiaries, heirs or assigns the entitlement calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 and there shall be a corresponding reduction in the entitlement the husband would have had in the Super Fund but for these Orders.
4.6. That the Wife shall be entitled to transfer her entitlement to REST Superannuation member … in her sold name.
4.7.That Order 4.5 has effective from the operative time.
4.8. That the operative time of these orders is 4 business days after service of the sealed orders upon the Trustee.
5.THAT if the available assets in the Fund are less than the base amount then the following provisions shall apply:
5.1. That the Husband and [K] Pty Ltd should do everything necessary to effect the sale of the assets in the Fund and to transfer the proceeds to the REST Superannuation Fund in her name (the Wife’s fund).
5.2. That the whole of the amount so transferred under 5.1 shall form part of the base amount available under a splitting order to the Wife.
5.3. That the Husband shall take all steps and sign all documents to transfer to the Wife’s Fund pursuant to splitting orders the whole of the Husband’s account balance from the [C] Superannuation Fund as it accrues on the annual basis on June 30 of each year until the combined amounts from the [Harrison] Superannuation Fund and the [C] Superannuation Fund total the base amount referred to in paragraph 4.4.
6.THAT the Husband be and is hereby restrained taking any long service leave without the Wife’s prior consent in writing.
7.THAT the Husband give 14 days written notice that in the event that he becomes eligible to receive any departure benefits within the meaning of the 1998 Orders of the Family Court herein. (our emphasis)
On 22 December 2009 the husband filed a response to the application asking that the following orders be made:
1. That pursuant to Section 79A(1)(b) and 79A(1)(c) Family Law Act 1975 this Court make orders relating to paragraph 2(f) of the final orders of this Court made August 6, 1998.
2. That “superannuation” to include any superannuation benefits in the name of the husband that the trustee of the [Harrison] Superannuation fund ([K] Pty Ltd) transfers to either the [C] Superannuation Fund of any other complying superannuation fund after the liquidation and winding up of the [Harrison] Superannuation Fund ([K] Pty Ltd).
On 12 February 2010 the Court made orders joining [K] Pty Ltd, the trustee of a superannuation fund previously controlled by the husband.
In addition, the following orders were made:
5.That the husband forthwith do all things required and to authorise and direct that the director of [K] PtyLtd (sic) as trustee of the [Harrison] Superannuation Fund wind up the fund and transfer the balance to the [C] Superannuation Fund.
6.That the husband forthwith take steps to ensure that the wife’s solicitors are provided with relevant financial documents including but not limited to tax returns, sale of property and sale of assets.
For the purpose of the hearing before the Federal Magistrate a statement of agreed facts was prepared by the parties. That statement provided:
1.Orders were made by the Family Court of Australia on 6th August 1998, defining the wife’s entitlement to the share of the husband’s superannuation then held with the [C] Superannuation Fund (“the fund”).
2.On 21 February 2006 the husband removed the sum of $449, 318.88 from the fund and transferred it to the [Harrison] Superannuation Fund.
3.The balance remaining in the fund after this transfer was $10,000.
4.[K] Pty Ltd (“the company”) was at the time of the said transfer controlled by the husband as sole director, a position he had held from 13th December 2005 until 1st November 2008.
5.The husband transferred the said sum from the fund without the prior written consent of the wife.
6.On 4th March 2009 the Federal Magistrates Court of Australia made a finding that the husband breached the Orders of 6 August 1998 in failing to obtain the wife’s consent in writing regarding the transfer of said funds.
7.On 1 November 2008 the husband ceased to be a director of [K] Pty Ltd operating as trustee for the [Harrison] Superannuation Fund but is and has at all material times since the establishment of the [Harrison] Superannuation Fund remained as the sole beneficiary of the [Harrison] Superannuation Fund.
8.from the 1st November 2009, [Ms F], the husband’s daughter was the director of [K] Pty Ltd until 27th April 2009.
9.From 27 April 2009 until the present date, the husband’s son [Mr H] is the director of [K] Pty Ltd.
10.The fund has a balance of $4,369 as at today’s date.
11.Orders were made in the Federal Magistrates Court on 12 February 2010 for [K] Pty Ltd as trustee of the [Harrison] Superannuation Fund to be wound up with all funds to be transferred to the [C] Superannuation fund.
12.As at today’s date [K] Pty Ltd’s superannuation fund held by him has not been wound up.
13.As at today’s date, the exact value of [K] Pty Ltd has not been ascertained.
(our emphasis)
It can be seen that the parties agreed that the husband had wrongfully dealt with the superannuation fund. He was found to have been in breach at a contravention hearing on 4 March 2009 and, we are told, fined in the sum of $2,000.00.
The wife’s superannuation entitlement was unknown because there was no evidence before the Federal Magistrate. It was the husband’s obligation to place before the court this evidence, both because of a general obligation to disclose, and more particularly as orders and directions had been made on 12 February 2010. We have already referred to the orders in relation to the superannuation fund. Directions were also made including the following:
8.The applicant do file and serve all further affidavits and other material to be relied upon by the applicant not later than 28 days prior to the trial.
9.The respondent do file and serve all further affidavits and other material to be relied upon by the respondent not later than 14 days prior to the trial.
…
AND THE COURT NOTES THAT:
A.In the event of non compliance by any party with the orders, directions, Rules or Regulations of this Court relating to:
i.the filing of documents;
ii.the payment of any applicable filing, setting down, mediation or enforcement fee or fees; and/or
iii.any other procedural issues,
the application may be struck out, the proceedings may be directed to proceed undefended or the trial date may be vacated and the Court may direct that a further date not be fixed until all parties have complied with the said orders, directions, Rules and Regulations.
Further directions were made for the filing of material on 27 April 2010. The notation was again included.
Reasons of the Federal Magistrate
As explained previously the proceedings before the Federal Magistrate concerned the wife’s application pursuant to s 79A of the Act.
After setting out the orders sought by the wife in her application, his Honour said at paragraph 4 of his reasons:
These proceedings have had a number of Court dates and a sorry history, particularly of non compliance with Court orders by the husband. Ultimately on 10 June 2010 the wife, who was represented by Mr [G], was given leave to proceed undefended. On that day, Mr [Harrison] appeared before the Court unrepresented as he has throughout these proceedings.
We would note at this point that to describe the proceedings as “undefended” was not completely correct because there was some material from the husband before his Honour and the husband made submissions to the Federal Magistrate. His Honour summarised the issues before him as follows:
18.It was the position of the parties that pursuant to section 79A(1)(b), the relevant orders should be set aside because in the circumstances that have arisen since they were made it is impracticable for the orders (or part of the order) to be carried out. In addition, pursuant to section 79A(1)(c), there was agreement that the relevant orders should be set aside because the husband had defaulted in carrying out an obligation under the orders made in the Family Court in 1998 and that in the circumstances that have arisen as a result of that default it is just and equitable to vary or set aside the orders and make another order.
19.This issue arises because of actions taken by the husband and his dealings with superannuation which had been identified in the abovementioned orders as an entitlement of both parties.
20.The history of those dealings and the resultant impact and effect on assets the wife would have otherwise been entitled to are set out in the wife’s affidavit material and the abovementioned Notice. (footnote omitted)
It was also explained by the Federal Magistrate under the section characterised as “Non disclosure” that “[t]here is also the issue of whether the husband in these proceedings has not complied with his obligation to make full and frank disclosure in financial proceedings”.
His Honour then referred to the principles applicable to non-disclosure cases as summarised in Luciano & Luciano [2000] FamCA 401, a judgment of O’Ryan J. Reference was also made to Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143
With regard to non-disclosure the Federal Magistrate concluded:
23. In this case by virtue of his non compliance with Court orders and on the material before the Court I am satisfied the husband has failed to meet his obligation to make full and frank disclosure and account for the disposition of the superannuation he has dealt with and which is now held by the second respondent.
Under the heading “Setting the relevant consent orders pursuant to section 79A” his Honour summarised the applicable law in relation to s 79A of the Act. As already mentioned the parties agreed that the grounds identified by his Honour “enlivened” in this case were the second and third grounds, namely:
·where it has become “impracticable” for the original order to be carried out (s 79A(1)(b) of the Act); and
·where a person has defaulted in carrying out an obligation imposed by the order (s 79A(1)(c) of the Act).
Despite this being conceded, the Federal Magistrate considered each of the grounds under separate headings. We will include parts of the reasons in this respect:
Impracticable circumstances
…
32.What must be demonstrated is that it is not reasonably practicable for the relevant orders to be complied with. In other words, the Court is satisfied that there are practical difficulties of real substance which are not capable of remedy by, for example, the making of further orders.
33.The Court is of the view that there are matters referred to above which, either together or in combination, would make the subject orders impracticable.
Defaulting party
34.The third situation relates to where a party has defaulted in carrying out an obligation under the orders and that in the circumstances that have arisen as a result of that default it is just and equitable to vary or to set aside the order and make another order. A party cannot rely upon his or her own default as a ground unless that circumstance is beyond his or her control.
35.The wife contends that the husband has ‘defaulted’ in his obligations pursuant to the subject orders, in that he transferred or alienated his entitlement from the wife, and by his actions further breached the obligation imposed upon him in the subject orders, by his admitted failure to notify the wife.
36.The Court finds that the husband has defaulted in his obligations under the subject orders in that he has alienated his and the wife’s entitlements under the Orders. (footnotes omitted)
Under the heading characterised as “Vary or set aside?” the Federal Magistrate said:
37.Under section 79A of the Act, the Court may vary the relevant orders or set them aside. Variation may be appropriate where the overall structure is to remain but some changes either by additions or deletions are appropriate and sufficient. If the Court chooses to set aside the relevant orders they cease to operate from that time. In that situation the Court would then proceed to make another order under section 79, but there are circumstances where it may not do so. If the Court chooses to make another order it must follow the normal section 79 steps and procedures.
38.The Court must also consider, under s.79A(1)(c), upon a finding of default, that in the circumstances which have arisen as a result of that default, it is just and equitable to vary or set aside the order and to make another order in substitution. The Court finds that it is just and equitable to vary the order, and to substitute many of the orders sought by the wife. (footnote omitted)
His Honour was entirely correct that this is the proper approach. Unfortunately, in this case the Federal Magistrate did not have the necessary evidence to allow him to make another s 79 order. Nor did he follow the provisions of s 79, including answering the question as to whether in all the circumstances it is just and equitable to make the order (s 79(2)).
The basis for making the orders appears to be as follows:
39.I accept as Mr [G] submitted that it was as a result of the husband’s failure to be full and frank in his financial disclosure that the Court should be satisfied that there has been a miscarriage of justice. Alternatively, given the significant shortfall in the husband's superannuation entitlements, it is now impracticable for the orders to be carried out. Moreover, the husband’s default in carrying out the obligations he had under the orders warrants them being set aside.
Similar sentiments were expressed by his Honour in paragraph 53 to which we shall later refer.
As to “Third party interests” his Honour said:
40.Lastly, section 79A(2) of the Act makes it clear that the Court is required to have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or any other person interested. On the facts of the case before me all affected third parties have had notice of these proceedings the husband’s bankruptcy trustee has chosen not to attend and the second respondent has had notice of the proceedings and the orders sought by the wife.
Whilst that may have been correct, there was no valuation provided by the trustee of the superannuation fund.
The Federal Magistrate then proceeded to discuss s 79 of the Act and the well-established approach used by courts in determining applications for property settlement.
The Federal Magistrate then found that:
44.The superannuation is exempt property for the purposes of the relevant provisions of the Bankruptcy Act. The assets of the second respondent comprise the entire balance of the asset pool of the husband and the wife’s superannuation. There were no submissions made regarding the parties contributions but I am satisfied the husband’s actions amount to a significant waste of the parties assets and he engaged in a course of conduct that resulted in a diminution of the wife’s entitlements under the relevant provisions of the Orders.
45.In terms of the parties future needs again I note the submissions made by Mr [G] on behalf of the wife and take into account that the material before the Court satisfies me that there should be a significant adjustment in favour of the wife at this stage.
46.Section 79(2) of the Act provides that:
The Court shall not make an Order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the Order.
47.I have concluded that the section 75(2) factors, when taken together with the relevant section 79(4) contributions overwhelmingly weigh in favour of the wife.
48.The husband is bankrupt but it appears has an income stream. He has decided to move on with his life, leaving the wife to deal with the results of his actions in breaching the Orders and has placed her in a position where she has been unable to enjoy and benefit from the entitlement she had under the Orders.
49.It appears the husband will have some financial security by virtue of his employment and in any event more than the wife enjoys.
50.It was not disputed that it was open to the Court to make a splitting order in respect of the husband’s superannuation pursuant to the provisions of Part VIIIB of the Act. I appreciate that the husband’s exertions in the workforce resulted in the accumulation of this asset.
I also appreciate that it is only because of the nature of the superannuation that the parties have not been able to access it earlier and it is protected from the husband’s various creditors by virtue of the relevant provisions of the Bankruptcy Act 1966.51.Given my assessment of the parties’ overall contributions during the marriage and their future needs having regard to the relevant section 75(2) factors, it is my view, that the husband’s superannuation should be split on the basis set out in Exhibit A7.
In concluding the reasons the Federal Magistrate said:
52.Having considered the evidence and the submissions made by
Mr [G] for the wife and the husband in person the Court is satisfied that paragraph 2(f) of the Orders made in 1998 must be varied.53.I am satisfied that the husband’s conduct in relation to the superannuation fund and his failure to disclose the withdrawal that was made from the relevant fund and what became of it which amounted to non disclosure all warrant the above orders.
54.While it is not necessary to consider whether any of the other circumstances in section 79A(1) apply, I am satisfied that there are sufficient circumstances that subsections 79A(1)(b) and (c) have application to the facts of this case. (our emphasis)
There are a number of difficulties about this part of the judgment. The first is that the Federal Magistrate was of the view that the superannuation could be dealt with in isolation from the other property of the parties. The husband’s bankruptcy might have encouraged him in this view.
The second is the concept that non-disclosure and other aspects of the husband’s conduct would permit the orders as sought by the wife’s counsel.
It is apparent from the written submissions provided by the wife’s then counsel to the Federal Magistrate, that the basis for the orders was an elaborate reconstruction of known facts, projected into an estimate of the present value of the superannuation.
The appeal is also against the orders made by the Federal Magistrate that the husband pay the wife’s costs fixed at $6,630.00. The reasons in this respect are as follows:
55.There was also before the Court an application by the wife for an order that the husband pay her costs. Once it was clarified that the Court would only entertain an application for costs in relation to the hearing in June Counsel for the wife addressed the relevant factors under section 117(2A).
56.The focus of the submissions by Counsel for the wife having regard to the above factors was that the husband has caused the proceedings by his breach of court orders and caused them to be prolonged and had put the wife to additional expense.
57.The wife’s costs were quantified in accordance with the scale set out in the Federal Magistrates Court Rules 2001 at $6,630 and the husband indicated he didn’t wish to make any submissions in relation to the above factors. Counsel for the wife didn’t oppose the husband being given time to pay any order for costs.
58.On the basis of the material before the Court and having considered the relevant factors in section 117(2A) there are circumstances in this case which justify a costs order due to the husband’s breach of and non compliance with court orders which have necessitated further proceedings.
The appeal
In counsel for the husband’s written submissions it was explained that the grounds of appeal would be addressed in the following manner, grounds 1 to 6 and ground 9; grounds 7 and 8; and, lastly ground 10. We will consider the grounds of appeal in the same consolidated order but will deal with the costs appeal last.
Before dealing with the grounds specifically, we make mention of the observations made by counsel for the husband about the material before the Federal Magistrate and how the matter was heard. As counsel correctly said:
2.0.6Both parties were in breach of Orders made 27 April, 2010, in terms of the wife failing to file further material by 11 May, 2010 and the husband by 25 May, 2010. The husband was self-represented and one might well understand his failure to file material in circumstances where there was no opportunity for him to respond to the wife’s trial affidavit. Materials relied upon by the Court were set out in the Judgment. There is no mention of the husband’s Response filed 22 December, 2009, wherein he seeks final orders. Further there is no explanation in the Judgment or in the Transcript why the Court proceeded to hear the wife’s Amended Application on an undefended basis. I shall refer to this is (sic) more detail below.
2.0.7On the issue of valuation evidence, little assistance was provided to His Honour and the following matters resulted in a plethora of consequential errors:
(i)There was no evidence in terms of the value of the Fund as at the date of the 1998 Orders;
(ii)In the [Harrison Superannuation] Fund, as at the date of the Judgment, there allegedly existed somewhere between $0 and $130,000 (“the valuation range”). The Judgment and Exhibit A7 referred to at paragraph 51 therein are both silent as to the valuation range; on the other hand, the Transcript is replete with such references. On an evidentiary note, it is noteworthy that His Honour was prepared to take into account evidence from the husband’s Affidavit as to the valuation range; however His Honour appeared to disregard the remainder of the husband’s Affidavit, without providing any reason at all. Further, such evidence was untested due to His Honour’s decision to proceed improperly or inappropriately on an undefended basis. There was no testing of the evidence.
(iii)There was no proper evidence available to allow for an accurate calculation of the wife’s alleged entitlement.
(iv)There was no valuation as at:
(i) 1998;
(ii) 10 June, 2010
as to the real property secured by the wife pursuant to the 1998 Orders;
(iv)There was no documentary evidence of monies received by the wife with respect of the sale of [G property]. The wife quantified monies that she received without any proper particulars. As such, she failed to make full and frank disclosure. Her Counsel did not raise this issue and it is not apparent that His Honour turned his mind to it.
(v)The husband and the wife disputed each other’s evidence in their respective Affidavit material and such contrary evidence was not dealt with by His Honour or at all in his Judgment.
(vi)There was no evidence of wastage or non proven as against the husband, in accordance with the usual principles.
(vii)There was no evidence in terms of the appropriate taxation rate to apply to the wife’s gross entitlement.
(footnotes omitted)
In our view these difficulties on their own support the appeal being allowed and orders set aside, however we will deal with the submissions of both parties under the grounds.
Counsel for the wife at the commencement of their written submissions correctly identified that the husband is seeking to appeal a discretionary judgment. Reference was made to the well known authorities dealing with such appeals. While this submission is superficially correct it disguises the real problems which, as we have mentioned, include the absence of essential evidence, mistakes in the approach to a s 79A application and an error in making orders to “vary” existing orders.
We do not see that the main difficulty in this case is the exercise of discretion leading to a certain result expressed in percentage terms and/or dollar terms, rather the problems are of a more fundamental nature.
Grounds 1, 2, 3, 4, 5, 6 & 9
In summary the husband’s grounds of appeal provide that the Federal Magistrate erred in:
1. Failing to exercise his Honour’s discretion according to law by:
a. failing to make a clear assessment of the pool of assets;
b. failing to make any adequate or proper assessment of the parties’ contributions as required by s 79(4)(a) to (c) of the Act;
c. failing to properly consider the parties’ needs pursuant to s 75(2) of the Act;
d. transferring the total unqualified balance of the husband’s superannuation entitlement to the wife’s superannuation fund.
2. Considering against the husband, the following matters;
a. previous non-compliance with orders;
b. lack of cooperation in the production of financial documentation, and;
c. alleged actions giving rise to “a significant waste of the parties’ assets”
pursuant to s 79(4)(a) to (c) of the Act and then again pursuant to s 75(2) of the Act “without particularity or definition”.
3. Failing to give proper consideration to material matters, including the parties’ previous property settlement pursuant to s 75(2) factors.
4. Varying previous orders pursuant to s 79A of the Act without any proper or adequate consideration having regard to the lack of valuation evidence or at all.
5. Providing inadequate and/or unclear reasons for the variation of paragraph 2(f) of the final orders made 6 August 1998;
a. as it is unclear whether the Federal Magistrate intended to vary or discharge the order;
b. as the reasons do not adequately demonstrate his Honour’s reasoning;
c. they are confused and do not follow legal principle.
6. Alternatively to ground 5, that the Federal Magistrate did not apply the established principles in respect to making orders for the alteration of property interests.
…
9. Failing to make just and equitable orders.
In addressing these grounds of appeal counsel for the husband submitted that his Honour’s reasons in relation to setting aside or varying the orders are confusing. Because “[d]espite his contentions to set aside the order His Honour ultimately varies paragraph 2(f) of the 1998 Orders pursuant to sections 79A (1) (b) and (c)”. It was further submitted that:
2.2.5A court can ordinarily only make one order for property settlement pursuant to section 79 of the Act. It is “a once and for all” proposition. Setting aside or varying such an order is subject to a limited jurisdiction. (original emphasis) (footnote omitted)
2.2.6Although His Honour identified the provisions of section 79A to allow him to vary the 1998 Orders, His Honour paid no proper regard to his obligation to ensure that the overall result of the property settlement proceedings was just and equitable (not just the variation to paragraph 2(f))…
2.2.7His Honour could not have applied the proper approach pursuant to section 79 of the Act after making his findings pursuant to section 79A(1)(b) and (c). Despite an apparent recognition of the requisite approach and an implicit application of the steps involved, His Honour failed to identify and particularise the asset pool; he erred in failing to address adequately or at all the issues relating to the parties’ contributions or at all; and he failed to have proper regard to section 75(2) factors. In the premises, His Honour could not have properly satisfied himself that a just and equitable result was achieved. (original emphasis) (footnote omitted)
In our view, each of these submissions is correct. The appeal should be allowed and regrettably there must be a re-hearing.
It is pertinent to refer here to the written submissions on behalf of the husband addressing the costs grounds of appeal where it was submitted:
Finally, it is also unclear when determining the parties’ financial circumstances, if His Honour in fact did so; and whether proper regard was had by the Court as to the financial effect the orders would have on the husband. His Honour ordered a total transfer of all the husband’s superannuation funds (unquantified) to the wife. There was no evidence in the Transcript or the Judgment that this matter was given any consideration at all.
The appeal should be allowed on these grounds.
Ground 10
This ground asserts that the Federal Magistrate erred in failing to afford the husband natural justice, “inter alia, by unreasonably precluding the husband from the proper determination of property proceedings between the parties” by:
a. “unjustly and unfairly exercising his discretion essentially in favor of case management”;
b. failing to address any hardship caused to the husband;
c. failing to consider whether the wife would be prejudiced by an adjournment;
d. failing to consider “the extent of and course of discovery exercised by the wife in relation to the husband”;
e. granting the wife leave to file material out of time and then proceeding detrimentally against the husband on an undefended basis;
f. failing to consider the alternative of making a costs order to remedy any prejudice against the wife.
It was also contended under this ground that his Honour failed or neglected to have a proper regard to the litigant in person guidelines (see Re F: Litigants in Person Guidelines (2001) FLC 93-072).
Counsel for the husband submitted that “[a]fter declaring the (sic) both parties had failed to comply with the Court Orders in terms of filing documents, His Honour marginalized the husband by proceeding on an undefended basis”.
Further, it was submitted:
His Honour said that he was proposing to give the wife leave to proceed undefended, subject to hearing from the husband. Subsequently, he told the husband that, given his non-compliance, he was going to proceed undefended, without providing the husband with a proper explanation or inviting him to make submissions. He was not given the opportunity to make any application for an adjournment and it is not apparent that he had been invited to confer with a Duty Lawyer. Notwithstanding the fact that it was to proceed “undefended”, His Honour asked him questions intermittedly (sic). The process was not explained adequately to him and may have been confusing to him. His frustrations with the process were evident when he told His Honour “I’m not getting anywhere” to which His Honour retorted “Well, you have no one to blame but yourself”.
In response to this ground it was submitted that the husband was afforded every opportunity to put his case before the court and that he simply elected not to do so.
Counsel for the wife submitted that although the husband did not seek an adjournment of the proceedings, should such an application have been made the “application would have been doomed to fail” by application of the “court resources principle” and the “injustice principle” (see Reed & Reed; Draper (Intervener) (1995) FLC 92-649).
It was contended that given “[t]he [wife’s] desire to have the proceedings brought to a speedy completion and the [husband’s] control of the superannuation funds provides an identifiable injustice to the [wife] if an adjournment were to be granted. Any possible injustice to the [wife] could not simply be cured by an order for costs”.
Further, it was submitted:
It was therefore incumbent upon the [husband] to be ready so that his case could proceed when it was listed for hearing. There is a public interest in ensuring that trials proceed on the dates that they are listed. Parties usually wait a long time for trial dates and this matter had previously been fixed for trial on 27 April and subsequently adjourned.
It was submitted on behalf of the wife, after referring to authorities where through lack of full and frank disclosure the court was unable to fully ascertain the extent of a party’s wealth (see In the marriage of Stein & Stein (1986) FLC 91-779; Mezzacappa and Mezzacappa (1987) FLC 91-853; In the marriage of Black and Kellner (1992) FLC 92-287 ; In the marriage of Weir and Weir (1993) FLC 92-338 and Kannis & Kannis (2003) FLC 93-135), “that the situation the husband found himself in was entirely of his own making and as such his Honour was entitled to proceed as he did”.
We accept this submission.
In an agreed statement of facts before the Federal Magistrate it was stated that $449,318.88 was removed from the relevant superannuation fund and placed in the Harrison Superannuation Fund. But the husband did not indicate with any precision what had happened to the $449,318.88. His affidavit filed on 2 December 2009 simply said that his assets in the fund would be valued anywhere between nil and $130,000.00 and included a deposit paid for an apartment.
The information about what happened to the relevant assets must either have been known to the husband or available to him upon reasonable inquiry. As a party to the proceedings he had a clear duty to provide the information to the wife and to the Court. He failed to do so. This was despite discussions on 12 February 2010, the original date fixed for the substantive hearing, that such detailed information was necessary and orders were made on that occasion to the effect that the husband provide such information by affidavit. Further orders were made on 27 April 2010 to similar effect.
In these circumstances, the Federal Magistrate decided to give leave to the wife to have her application dealt with on an undefended basis.
It can be said however, that while the obligation was on the husband, the wife could have obtained some information by means of her own enquiries.
Because in our view the appeal must succeed on the earlier grounds we do not propose to say much about this ground. Despite some departures by his Honour from the procedure one might have expected would have been adopted in a purely undefended hearing, we are not persuaded that the husband was not afforded the principles of natural justice in all the circumstances of the case. This is particularly our view in circumstances where the husband had a clear obligation to provide full details of what had become of the superannuation and its current status and he failed to do so notwithstanding repeated earlier orders by the Court that he disclose such information.
Grounds 7 & 8
These grounds contend that his Honour erred in making an order for costs against the husband pursuant to s 117(2A) of the Act (ground 7), or in the alternative, that his Honour erred in making an order for costs given the matters considered in making the orders were also the reasons for making “a significant adjustment in favour of the wife” (ground 8).
Counsel for the husband explained that the Federal Magistrate said in his Honour’s reasons that the wife filed a costs application as the husband had “caused the proceedings by his breach of court orders and caused them to be prolonged and had put the wife to additional expense”. It was argued that his Honour denied the husband natural justice in ordering costs against the husband “to effect a punishment”.
It was submitted on behalf of the husband that as the wife had been successful in previous contravention proceedings against the husband that the costs ought to have been addressed for any proven breach.
It was further submitted that the wife could “hardly be critical of the husband in terms of prolonging the proceedings due to her failure to prosecute adequately her claim and by failing or neglecting to file material in accordance with Court Orders”.
Counsel contended that his Honour’s discretion erred in making an order for costs as it is unclear what assessment, if any, he made in respect of the parties’ financial circumstances. It was also explained that the actual quantum of costs was never quantified. The submissions on behalf of the husband queried how the sum of $6,630.00 was calculated.
It was submitted that the husband was never given the opportunity to address the issue of costs or the quantum. Counsel submitted, given the husband was self represented at the hearing and given that he was an undischarged bankrupt “careful attention ought to have been given to these matters”.
As to the appeal in relation to costs it was the submission of the wife that in addition to s 117 of the Act, the consequences of non-disclosure are contained in the Rules.
It was submitted on behalf of the wife that the Federal Magistrate, having found that there had been non-disclosure by the husband, was entitled to order as he did.
Although the husband may have been given limited opportunity to make submissions in relation to costs, in our view it was well within the Federal Magistrate’s discretion to make such an order.
Conclusion
As was said by Strickland J in giving leave to file the appeal:
13.… [t]here are a number of instances where it is arguable that the Federal Magistrate has erred in the exercise of his discretion. For example, it is not apparent whether his Honour was varying or setting aside the previous orders pursuant to s 79A of the Act, and in considering the further order that he made, it is not apparent how he arrived at his decision.
In view of the circumstances of this case we are of the view that the appeal must be allowed, Orders 1, 2 and 3 must be set aside and regrettably a further trial ordered to re-hear the applications.
In our view the Federal Magistrate was placed in an invidious position. There was no application for an adjournment. The transcript reveals that the parties wished the matter to proceed. We raised this question with counsel who submitted that it would have been much better if the Federal Magistrate had not proceeded on an undefended basis. As it can now be seen the exercise was futile.
Costs
At the conclusion of the hearing submissions as to costs were heard.
Quite properly Mr Mort of counsel submitted that should the appeal be allowed a certificate should be granted to each party. Counsel for the respondent also asked for certificates for the appeal and a re-hearing.
In the circumstances, it is appropriate that we make orders granting certificates to both parties for the appeal and re-hearing.
I certify that the preceding eighty (80) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (May, Ainslie-Wallace & Johnston JJ) delivered on 5 December 2011.
Associate:
Date: 5 December 2011
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