Hunt v Hunt

[2006] FamCA 167

FAMILY LAW ACT 1975

IN THE FAMILY COURT OF AUSTRALIA

AT No. SYF5099 of 2003

IN THE MATTER OF:	H	Mrs	Wife
AND	H	Mr	Husband
AND	PL	Mr	Second Respondent
AND	P Pty Ltd		Third Respondent
AND	PL, RS and DH as executors of the Estate of AL		Fourth Respondent

REASONS FOR JUDGMENT

CORAM:	O’Ryan J
DATE OF HEARING:	15 December 2005
DATE OF JUDGMENT:	14 March 2006

APPEARANCES:

Mr Rares SC, Mr Richardson SC and Mr Beaumont of Counsel	(instructed by Briggs & Associates, Solicitors, appeared on behalf of the wife.
Mr Schonell of Counsel	(instructed by Swaab Attorneys,) appeared on behalf of the husband,.
Mr Hammerschlag SC and Mr Livingstone of Counsel	(instructed by Landerer & Co) appeared on behalf of PL and P Pty Ltd.
Mr Reynolds SC and Mr Perren of Counsel	(instructed by Barkus Edwards Doolan, Solicitors) appeared on behalf of PL, RS and DH as executors of the Estate of AL.

FAMILY LAW - PROPERTY SETTLEMENT- Application for summary dismissal of wife’s section 79 application- Wife also seeking to set aside transfer of shares in a company from executors of an estate to the husband pursuant to s 109B- Jurisdiction to make orders in favour of the wife challenged on constitutional grounds- Jurisdiction also challenged on ground of no reasonable prospects of success.

FAMILY LAW - PROPERTY SETTLEMENT- SECTION 79- Review of power to alter property interests.

FAMILY LAW - PROPERTY SETTLEMENT- THIRD PARTIES AND FAMILY LAW- Whether Parliament has power to intrude upon rights, duties and obligations of third parties in family law proceedings- Courts with jurisdiction under the Family Law Act 1975 (Cth) have power to make orders affecting third parties and sometimes directly against third parties- Provisions enabling orders binding third parties include 106B, 79A, 85A and since repeal of s 79(3) there is nothing in wording of the Family Law Act 1975 (Cth) preventing s 78 binding third parties.

FAMILY LAW - JURISDICTION- CONSTITUTIONAL VALIDITY- Whether test of constitutional validity is “sufficient” rather than “close” connection between law and power in s 51- Sufficient connection test endorsed by a majority of the High Court in P and P (1994) 120 ALR 545 is the correct test to apply. Whether section 106 B is a valid law of the Commonwealth- The court is bound by Gould and Gould: Swire Investments Ltd(1993) FLC 92-434 therefore s 106B is constitutionally valid. Whether section 90AE(2)(a) and 90AF(2)(a) are valid laws of the Commonwealth- Test of sufficient connection satisfied- Both provisions are properly characterised as being with respect to marriage, divorce or matrimonial causes, or at least incidental thereto- The capacity of the court to make orders affecting third parties is carefully controlled and confined to ensure it remains within power- This is evident in the scheme of Part VIIIAA- Section 90AE is directed towards making s 79 effective and section 90AF is directed towards making s 114 effective, these provisions being sufficiently connected the marriage and matrimonial causes powers respectively. Parliament has chosen language of used by the High Court of “reasonably necessary, or reasonably appropriate and adapted” to division of property between parties to a marriage in s 90AE(3) and s 90AF(3) which limits the court to making orders that are within power. Section 90AE(1)(d) is also supported by Corporations power in s 51(xx) of Constitution.

Actors and Announcers Equity Association of Australia and Others v Fontana Films Pty Ltd (1982) 150 CLR 169
Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (the Engineers case) (1920) 28 CLR 129
Antonarkis v Delly (1976) 10 ALR 251
Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337
Attorney-General (Vic) v Commonwealth (Marriage Act Case) (1962) 107 CLR 529
Australian National Airways Pty Ltd v The Commonwealth & Ors (1945) 71 CLR 29
Bayside City Council v Telstra Corporation Ltd (2004) 216 CLR 595
Botany Municipal Council v Federal Airports Authority (1992) 175 CLR 453
Bourke and Ors v State Bank of New South Wales (1990) 170 CLR 276
Burton v Honan (1952) 86 CLR 169
Coghlan and Coghlan (2005) FLC 93-220
Cormick, In the Marriage of (1984) 156 CLR 170
Cuncliffe v The Commonwealth (1994) 182 CLR 272
Davis v the Commonwealth (1988) 166 CLR 79
Dougherty v Dougherty and Another (1987) 163 CLR 278
Dowal v Murray (1978) 143 CLR 410
F, Re; Ex parte F (1986) 161 CLR 376
Fisher v Fisher (1986) 161 CLR 438
Ford v Ford (1947) 73 CLR 524
Fountain v Alexander (1982) 150 CLR 615
Gazzo v Comptroller of Stamps (Vic) (1981) 149 CLR 227
Gould and Gould: Swire Investments Ltd (1993) FLC 92-434
Grain Pool of Western Australia v The Commonwealth of Australia and Another (2000) 202 CLR 479
Hickey and Hickey and Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143
JEL and DDF (2001) FLC 93-075
Jumbunna Coal Mine NL v Victoria Coal Miners’ Association (1908) 6 CLR 309
Lambert; Ex parte Plummer (1980) 146 CLR 447
Lansell v Lansell (1964) 110 CLR 353
LSH, Re; ex parte RTF (1987) 164 CLR 91
Mallet and Mallet (1984) 156 CLR 605
Maritime Union of Australia, Re; Ex parte CSL Pacific Shipping Inc (2003) 200 ALR 39
Nationwide News Pty Ltd v Wills (1992) 177 CLR 1
Norbis v Norbis (1986) 161 CLR 513
P v P (1994) 181 CLR 583
Precision Data Holdings Ltd v Wills (1991) 173 CLR 167
R v Coldham & Ors; Ex parte the Australian Social Welfare Union (1983) 153 CLR 297
R v Cook; Ex parte C (1985) 156 CLR 249
R v Demack; Ex parte Plummer (1977) 137 CLR 40
R v Dovey; Ex parte Ross (1979) 141 CLR 526
R v Humby; Ex parte Rooney (1973) 129 CLR 231
Rich and Anor v Australian Securities and Investments Commission (2004) 209 ALR 271
Russell v Russell; Farrelly v Farrelly (1976) 134 CLR 495
Sanders v Sanders (1967) 116 CLR 366
Singh v Commonwealth and Another (2004) 209 ALR 355
State of Victoria v The Commonwealth (1971) 122 CLR 353
Storey v Lane (1981) 147 CLR 549
V v V (1985) 156 CLR 228
Vitzdamm-Jones v Vitzdamm-Jones; St Clair v Nicholson (1981) 148 CLR 383
Wakim, Re; Ex parte McNally (1999) 198 CLR 511
Warby and Warby (2002) FLC 93-091
Western Australia v The Commonwealth (The Native Title Case) (1995) 183 CLR 373

Introduction

There are pending proceedings for settlement of property pursuant to s 79 Family Law Act1975 (Cth) which were commenced by Application filed by the wife on 24 October 2003. On 4 December 2003 a Response was filed on behalf of the husband.
The Wife seeks a final order as set out in a Further Amended Application filed on 15 August 2005 namely:
“1A. Order pursuant to s.106B Family Law Act (“the Act”) or alternatively in the accrued equitable jurisdiction of the Court that:
1A.1the transfer of ordinary and management shares in [P] Pty Ltd (“[P]”) from the fourth respondents to the second respondent be set aside;
1A.2the instrument comprising a resolution of [P] signed by the husband on 25 October 2004 and signed by the second respondent on 22 October 2004 (“the resolution”) be set aside.
1B.    Declaration that the management share in [P], formerly held be the late [AL] and now held by [PL] has by operation of article 3(b)(vii) of the Articles of [P], been converted to and remains a preference share.
1C.    In the alternative to the relief sought in 1A, but only in the event that such relief is refused, declaration that the directors of [P] acted ultra vires the constitution of the company in approving the transfer of ordinary shares from the fourth respondents to the second respondent pursuant to the resolution and the resolution is invalid.
1D.    Order that consequential upon either of the orders of 1A, 1B or the declaration in paragraph 1C herein:
1D.1The second respondent shall forthwith sign all documents and do all acts and things necessary to convey the said ordinary and management shares to the fourth respondents.
1D.2[P] shall forthwith expunge the second respondent from the company register as the holder of the shares referred to in 1D.1 and restore them to the title of the fourth respondents and thereafter cause the said shares to be dealt with in accordance with article 23 of the constitution of [P].
1E.    Order that within 7 days from order 1D. being complied with, the fourth respondents shall do all acts and things necessary to comply with the obligations imposed upon them as a consequence of article 23 of the constitution of [P].
2.      Order that upon an offer of 50% of the shareholding of the ordinary shares in [P] held by the estate of the late [AL] being made by the executors of his estate to the husband in compliance with article 23 of the constitution of [P], the husband shall forthwith do all acts and things necessary to accept that offer and shall pay all monies necessary to the estate to meet his obligations determined in accordance with the articles.
3.      Order that the husband be and is hereby permanently restrained from doing any act or thing to vote in favour of any resolution approving any transfer of a management share in [P] from the estate of the late [AL] to [PL] and further he shall be restrained, without further order of the court, from resigning as a director of [P], or voting in favour of appointing any other person as a director of [P], or from doing any act of thing to waive, relinquish or release any of his rights pursuant to article 23 of the constitution of [P].
4. Order pursuant to s.79 of the Act that the husband shall forthwith sign all documents and do all acts and things necessary to transfer and assign to the wife 50% of all shares held by him in [P] and further within 28 days of him becoming the registered holder of any further shares in [P] acquired from the estate of the late [AL] he shall sign all documents and do all acts and things necessary to transfer 50% of those shares to the wife.
5.      Order that [P] shall, upon receipt of share transfers executed in accordance with the obligations of the husband pursuant to order 4, register those share transfers and ensure that the wife is recorded as the sole holder of the shares transferred to her.
6.      That in the event that the relief sought in orders 1 – 5 inclusive is refused then order that within 3 calendar months the husband shall pay to the wife $50,000,000 (fifty million dollars) and in the event that he should fail, neglect or refuse to pay the whole or any part of such sum then interest shall accrue thereafter on such part as remains outstanding at the rate from time to time prescribed pursuant to the Family Law Rules, calculated on a compounding basis at daily tests until paid in full.
7.      That the husband’s obligation to pay the sum referred to in order 6 shall be charged in favour of the wife as a fixed charge of the husband’s shares in the following:
7.1[H] Pty Ltd ACN […]
7.2[D] Pty Ltd ACN […]
7.3 [I] ACN […]
7.4[P] Pty Ltd ACN […]
7.5[Y] Pty Ltd ACN […]
and all of his interest in each of the properties referred to in order 8 and such charge shall confer upon the wife all rights of a chargee as set out in s.109 Conveyancing Act 1919 (NSW).
8.      Order that upon the husband having complied with his obligations pursuant to orders 1-5 inclusive, or order 6 as the case may be, together with his obligations pursuant to orders 9 and 10, the wife shall sign all documents and writing and do all acts and things necessary to transfer to the husband her right, title and interest subject to existing encumbrances in:-
8.1[W] in the State of New South Wales
8.2[C] in the State of New South Wales
8.3[G] in the State of New South Wales
8.4[O] in the State of New South Wales
8.5[S] in the State of New South Wales
8.6[D] in the State of New South Wales
8.7[T] in the State of New South Wales
8.8The issued share capital and any loan account in [H] Pty Limited (“the company”) and further at that time she shall do all acts and things necessary to resign as a Director of the company.
9.      Order that within 21 days of date of Orders the husband and wife shall do all things and execute all documents and the husband to pay all monies to effect a discharge of mortgage to Westpac Banking Corporation over the following properties:
9.1[O] in the State of New South Wales and being the whole of the land in Folio Identifiers […]
9.2[S] in the State of New South Wales being the whole of the land in Folio Identifier […]
9.3[D] in the State of New South Wales being the whole of the land in Folio Identifier […] and […]
9.4[T] in the State of New South Wales being the whole of the land in Folio Identifier […]
and further, within the time stated do all acts and things to execute all documents to transfer his interest in these properties to the wife unencumbered.
10.     Order that the husband within 7 days of the date of Orders pay all monies, do all things and execute all documents necessary to effect a transfer of 2003 Mercedes Benz SL 500 motor vehicle registered number […] in the wife’s possession into the wife’s sole name free of any encumbrance and in the event that he fails, neglects or refuses to do so then the wife shall return the motor vehicle to the husband’s possession and he shall pay to her the sum of $190,000.
11.     Order that the husband shall henceforth indemnify the wife and keep her indemnified in relation to all actions, suits or claims which may be made against the wife as a result of her ownership of any of the above properties or her directorship of the company such liabilities to include accrued and future income tax and capital gains tax and any liability arising as a result of her having guaranteed the payment of any monies or the performance of any duties by or on behalf of the company.
12.     Order that the husband shall henceforth indemnify and keep indemnified the wife in respect of any action, claim or demand made against her by or on behalf of the company by reason of her allegedly being indebted to the company pursuant to any loan account or on any other account whatsoever.
13.     Order that as and from the date of Orders the wife be declared solely entitled and the husband to have no interest in:-
13.1[P]
13.2[U]
13.3Monies in any bank, building society or financial institution in the wife’s sole name.
13.4Furniture and effects, personalty and jewellery in the wife’s sole possession or control.
13.5Any entitlement the wife may have to [A] Superannuation Fund or any other superannuation entitlement.
14.     Order that the husband and the second, third and fourth respondents pay he wife’s costs of and incidental to these proceedings in such proportions as the Court may determine.”
The Husband seeks an order as set out in a Further Amended Response filed on 6 September 2005.
The Second Respondent is PL. The Third Respondent is P Pty Ltd. The Husband and PL are the only current surviving shareholders of the Third Respondent. The Fourth Respondents are PL, RS and DH as executors of the estate of the late AL. AL also held shares in the Third Respondent and during his lifetime the only other shareholders were the Husband and the Second Respondent.
An Objection to Jurisdiction was filed on behalf of the Second, Third and Fourth Respondents on 26 May 2005. A further Objection to Jurisdiction was filed on behalf of the Fourth Respondents on 29 August 2005.
The Second and Third Respondents seek that orders 1A, 1B, 1C, 1D, 1E, 2, 4 and 5 of the Wife’s further amended application be summarily dismissed on the basis that
(a)the Court has no jurisdiction to make the Orders; and
(b)there is no reasonable likelihood of success.
(See Amended Response of Second and Third Respondents filed on 8 December 2005). There is no challenge to the Court's jurisdiction to make orders 6–14.
The Second and Third Respondents also seek that orders made against them on 8 August 2005 be discharged. The Application was filed to ensure an appropriate procedural vehicle for determination of the issues.
The Fourth Respondents support the orders sought by the Second and Third Respondents. The Husband did not participate in the argument.
I had the benefit of written submissions on behalf of the Wife, and on behalf of the Second to Fourth Respondents. The Wife filed written submissions dated 2 September 2005. The Second and Third Respondents filed submissions dated 9 December 2005 and the Fourth Respondents filed submissions dated 9 December 2005. As well, I had the benefit of oral submissions.
In their written submissions the Second and Third Respondents make clear that the only issue presently before the Court is whether this court has jurisdiction. Moreover, they note that their submissions are directed “exclusively to the Constitutional law issues going to jurisdiction which is understood to be the only matter to be considered by the Court [on] 15 December 2005”.
The Wife submitted that the position taken by the Second and Third Respondents – that the constitutional questions are not freestanding but arise in the context of whether the Court has jurisdiction to make the orders sought – is the correct approach. It was submitted that it follows that where the Wife has pointed to alternative sources of jurisdiction to make the orders which she seeks, the matter would not be summarily dismissed even if I were to find against the Wife on some or all of the issues of constitutional validity.
On behalf of the Wife it was contended that the uncontentious facts include that the Respondents are hardly unrelated third parties with no knowledge of the relevant circumstances and that to the contrary, the Second Respondent has been a close associate and business partner of the Husband for many years and known to the Wife. The Third Respondent is the corporate entity through which this business partnership was conducted, and each of the Respondents was aware of the existence of the Family Court proceedings and of the Husband’s right of pre-emption pursuant to the Articles of Association of the Third Respondent before a purported transfer of the shares by the Fourth Respondent to the Second Respondent took place. It was contended that this situation is at the opposite end of the spectrum from that of a bona fide purchaser for value without notice. The Second Respondent is a volunteer with notice of the Husband’s prior equitable interest commensurate with his right to insist on the pre-emption provisions of the Articles of Association of the Third Respondent, and on his own case does not yet have valid legal title to those shares, but asserts a mere equity to seek rectification which arose later in time than the Husband’s equitable interest.
This case raises for consideration the power of the Commonwealth Parliament to make laws that may affect the rights, interests and obligations of parties who are not parties to a marriage in proceedings between parties to a marriage under the Family Law Act. In particular it requires consideration of the constitutional validity of s 106B of the Family Law Act and some of the provisions of Part VIIIAA of the Act.
The Second and Third Respondents submitted that at this stage three questions arise for determination:
1.is s 106B of the Family Law Act a valid law of the Commonwealth?
2.is s 90AE(2)(a) of the Family Law Act a valid law of the Commonwealth?
3.is s 98AF(2)(a) of the Family Law Act a valid law of the Commonwealth?
The Fourth Respondent submitted that the three questions that arise for determination are:
1. is s 90AE(2) of the Family Law Act a valid law of the Commonwealth?
2. is s 98AF(2) of the Family Law Act a valid law of the Commonwealth?
3. is s 106B of the Family Law Act a valid law of the Commonwealth?
Section 106B is in Part XIII of the Act and s 90AE and s 90AF are in Part VIIIAA of the Act.
Notice was given under s 78B of the Judiciary Act 1903 (Cth) of a constitutional issue to the Attorney General for the Commonwealth and the Attorney Generals for the States and Territories and none have sought to intervene at this stage. Thus I did not have the benefit of submissions on behalf of the Commonwealth.

There is what was described as an ‘initial issue’ as to the construction of s 90AE(2) and s 90AF(2). Two submissions were made in relation to the remaining issues namely:
(i)The provisions are not laws with respect to marriage within the meaning of s 51(xxi) of the Constitution.
(ii)The provisions are not laws with respect to divorce or matrimonial causes or laws with respect to parental rights or the custody or guardianship of infants within the meaning of s 51(xxii) of the Constitution.
It was submitted by the Respondents that insofar as s 90AE(2)(a) and s 90AF(2)(a) purport to permit the Court to alter the substantive rights, liabilities or property interests of a third party; or require a third party corporation to act other than to reflect in its statutory registers the legal entitlements of members to exercise their rights as members; they are not valid laws of the Commonwealth because such orders are not, and cannot be, with respect to "marriage", or with respect to "divorce" or "matrimonial causes", within the meaning of s 51(xxi) and s 51(xxii) of the Constitution. Whether a law is within the marriage power depends on whether the connection between the law and the marriage is sufficiently close to enable the court to say that the law is with respect to marriage. It was submitted that a law which permits the alteration of unqualified substantive property rights of a third party where there is no alter ego or sham assertion is not a Iaw with respect to marriage, divorce or matrimonial causes.
The jurisdiction relied upon by the Wife for the grant of order 1A is s 106B of the Family Law Act, or alternatively the accrued equitable jurisdiction of the Court: Re Wakim; Ex parte McNally (1999) 198 CLR 511. There was only a formal challenge by the Respondents to the validity of s 106B, with the result that there was no jurisdictional challenge to this order (otherwise than in the formal sense). The Wife also relies in the alternative on the accrued equitable jurisdiction of the Court. However, there was no challenge to the existence of that jurisdiction.
In support of orders 1B and 1C the Wife relies upon s 1337C(1) of the Corporations Act 2001 (Cth) “with respect to civil matters arising under the Corporations Legislation” or the accrued equitable jurisdiction of the Court.
In support of orders 1D and 1E the Wife relies first on s 90AE(2)(a) and s 90AF(2)(a) of the Family Law Act. In the alternative she relies upon s 1337C(1) of the Corporations Act and in the further alternative on the accrued equitable jurisdiction of the Court including a statutory power arising under s 65 of the Supreme Court Act 1970 (NSW) picked up by s 79 of the Judiciary Act.
In support of order 2 the Wife relies upon s 79 and s 80 of the Family Law Act.
In support of order 3 the Wife relies upon s 114 of the Family Law Act.
In support of order 4 the Wife again relies upon s 79 and s 80 of the Family Law Act.
In support of order 5 the Wife relies upon s 90AE(1)(d) of the Family Law Act. There was no constitutional challenge to the validity of s 90AE(1)(d). However, the Wife also contended that s 90AE(2)(a) enables a court to make a similar order to one authorized under s 90AE(1)(d).
On behalf of the Wife it was submitted that the legislative power of the Parliament to make a law such as Part VIIIAA and s 106B of the Act is to be found in s 51(xx) of the Constitution, where it affects rights or liabilities of trading or financial corporations together with the referred powers of the States with respect to corporations and s 122 in respect of the Territories, and with respect to a party to a marriage, in ss 51(xxi) and (xxii), (xxxi) and (xxxix) of the Constitution.

Section 79 Family Law Act

Section 90AE of the Family Law Act confers power to make certain orders in proceedings under s 79 and s 90AF confers power to make certain orders in proceedings under s 114. The submissions focussed on s 90AE(2) and the same points were made in relation to s 90AF(2) mutatis mutandis. In order to put the current issues into some context I am going to briefly consider s 79.
Section 8(1) of the Family Law Act provides that proceedings by way of a “matrimonial cause” shall not be instituted except under the Act. Section 4 defines the term “matrimonial cause”. Sections 31 and 39 of the Family Law Act invest the Family Court with jurisdiction over proceedings that can be characterised as a “matrimonial cause”. The expression “matrimonial cause” in s 4(1) is to be distinguished from the expression “matrimonial cause” in s 51(xxii) of the Constitution.
In Fisher v Fisher (1986) 161 CLR 438 Mason and Deane JJ. at p 453 said that s 79 of the Family Law Act “…authorizes the making of curial orders altering interests in property with a view to finally determining the financial relationship between the parties to the marriage…”. Under s 79 the court has power to make orders redistributing the property of parties to a marriage. The power may be exercised over any property owned by either party, or by the parties jointly. It is not limited to property acquired during the marriage and there is no concept of matrimonial property under the Act. Further, the power to redistribute property is not governed by specific rules of law; instead the court is given a wide discretionary power to make whatever orders are appropriate in the particular circumstances of the case: Mallet and Mallet (1984) 156 CLR 605. In Mallet all five justices of the High Court (Gibbs CJ., Mason, Wilson, Deane and Dawson JJ.) agreed that s 79 did not authorise the Family Court to act on any presumptions.
The discretionary power under s 79 is extremely wide but it is not uncontrolled and the Act contains a number of provisions that guide the court in exercising the discretion. Section 79(2) provides that the court shall not make an order under the section unless it is satisfied, in all the circumstances, that it is just and equitable to make the order. Section 79(4) sets out the facts that the court should take into account and they fall broadly in two groups being contributions (s 79(4)(a), (b) and (c)) that the parties have made and their respective needs and resources (s 79(4)(d), (e), (f) and (g)).
In Norbis v Norbis (1986) 161 CLR 513 Mason and Deane JJ. said at p 521:
“Section 79(1) of the Act provides that the Court may make such order as it thinks fit altering the interests of the parties to a marriage in the property of the parties or either of them. In so providing, the Act confers a very wide discretion on the Court. But that discretion is not unlimited. Its exercise is conditioned by the requirement that it is just and equitable to make the order (s. 79(2)), and that the Court take into account the matters specified in s. 79(4) and the general principles embodied in ss. 43 and 81, so far as they are applicable.”
And at pp 518-519:
“The sense in which the terms “discretion'' and “principle'' are used in these remarks needs some explanation. “Discretion'' signifies a number of different legal concepts: see, e.g., the discussion in Pattenden, The Judge, Discretion, and the Criminal Trial (1982), pp. 3-10. Here the order is discretionary because it depends on the application of a very general standard — what is “just and equitable'' — which calls for an overall assessment in the light of the factors mentioned in s. 79(4), each of which in turn calls for an assessment of circumstances. Because these assessments call for value judgments in respect of which there is room for reasonable differences of opinion, no particular opinion being uniquely right, the making of the order involves the exercise of a judicial discretion. The contrast is with an order the making of which is dictated by the application of a fixed rule to the facts on which its operation depends.
…
The point of preserving the width of the discretion which Parliament has created is that it maximizes the possibility of doing justice in every case.”
Brennan J. said at p 536:
“The orderly administration of justice requires that decisions should be consistent one with another and decision-making should not be open to the reproach that it is adventitious. These considerations are of special importance in the administration of the law relating to custody of children, maintenance and property arrangements on the dissolution of marriage. The anguish and emotion generated by litigation of this kind are exacerbated by orders which are made without the sanction of known principles and which are seen to be framed according to the idiosyncratic notions of an individual judge. An unfettered discretion is a versatile means of doing justice in particular cases, but unevenness in its exercise diminishes confidence in the legal process.”
To fall within s 79 the proceedings must be proceedings “between the parties to a marriage” and they must be “with respect to the property of the parties or either of them”. Property is defined in s 4(1) of the Act.
Although there are now a number of areas of Family Law where the jurisdiction in those areas is much less discretionary than in 1976 in those areas where there is wide discretion there has been considerable discussion about guidelines given by the Full Court of the Family Court particularly since Mallet and Norbis. In Norbis Mason, Deane and Brennan JJ. held that it would be proper for the Full Court to formulate “guidelines” as to the manner in which judges at first instance should exercise their discretion under s 79 of the Family Law Act although quite different approaches were taken by members of the High Court in relation to the role of superior courts in laying down guidelines and their status. In this case it is not necessary to further consider guidelines in family law, except to refer to an approach that has been suggested to be the preferred approach to the determination of an application under s 79 of the Act.
Hickey and Hickey and Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143 the Full Court said at p 78,386:
“39. The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s. 79. That approach involves four inter- related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss. 79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss. 79(4)(d), (e), (f) and (g), (“the other factors'') including, because of s. 79(4)(e), the matters referred to in s. 75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case: Lee Steere and Lee Steere (1985) FLC 91-626; Ferraro and Ferraro (1993) FLC 92-335; Davut and Raif (1994) FLC 92-503; Prpic and Prpic (1995) FLC 92-574; Clauson and Clauson (1995) FLC 92-595; Townsend and Townsend (1995) FLC 92-569; Biltoft and Biltoft (1995) FLC 92-614; McLay and McLay (1996) FLC 92-667; JEL and DDF (2001) FLC 93-075 and Phillips and Phillips (2002) FLC 93-104.”
See also JEL and DDF (2001) FLC 93-075 and Coghlan and Coghlan (2005) FLC 93-220.
For present purposes consideration of the rights, liabilities or property interests of third parties can arise at all stages of the above approach but in particular at steps one and four.
By sections 51(xxi) and 51(xxii) of the Constitution the Commonwealth Parliament has the power to make laws with regard to marriage, divorce and matrimonial causes. However, it was not until the Matrimonial Causes Act 1959 (Cth) became operative in 1961 that Parliament unified the various State laws in these areas. Before, each State had its’ own legislation modelled on the English Matrimonial Causes Act 1857. The Matrimonial Causes Act 1959 introduced for the first time throughout Australia, uniform provisions concerning divorce and associated property, maintenance, custody and access jurisdiction. The Family Law Act became operative on 5 January 1976 and repealed the Matrimonial Causes Act 1959 on that date.
When the Family Law Act first came into operation on 5 January 1976 it attempted to increase the scope of the Commonwealth jurisdiction in respect of property proceedings between the parties to a marriage. Under the repealed Matrimonial Causes Act 1959 court’s exercising the jurisdiction had power to effect a settlement of property in proceedings under s 86 of that Act, only if proceedings for principle relief were also brought. The Parliament has no general power under the Constitution to make laws with respect to property, and property is not referred to in s 51(xxii) as a matter on which Parliament can make laws in relation to divorce and matrimonial causes. However, s 86 was held by the High Court to be valid as an exercise of the divorce and matrimonial causes power in s 51(xxii) of the Constitution: Lansell v Lansell (1964) 110 CLR 353. Proceedings between husband and wife relating to their property, which were not connected with proceedings for principle relief, fell under State law and within the jurisdiction of State Supreme Courts. The Family Law Act however endeavoured to make changes to the division of jurisdiction; it sought to eliminate the jurisdictional split.
The Matrimonial Causes Act 1959 was primarily concerned with divorce and the principal remedies were concerned with the breakdown of marriage. Other relief such as settlement of property could be obtained however such other remedies were known as ancillary relief. The constitutional validity of the Matrimonial Causes Act 1959 relied principally on s 51(xxii) and ancillary relief was supported either by the concluding phrase of para (xxii) or the implied incidental power.
The jurisdiction conferred on the Family Court by the Family Law Act depended upon the relevant paragraph of the definition of “matrimonial cause” in s 4. In the original definition of “matrimonial cause”, the paragraph relating to property proceedings provided:
“(c)(ii) Proceedings with respect to the property of the parties to a marriage or either of them”.
There was no requirement that the property proceedings be related to divorce or nullity proceedings, or even that the proceedings had to be between the parties to a marriage.
In 1976 a challenge was made to the constitutionality of certain provisions of the Act including s 78. In Russell v Russell; Farrelly v Farrelly (1976) 134 CLR 495 the High Court held that s 51(xxi) of the Constitution empowers the Parliament to legislate in respect of the mutual rights and duties and powers between spouses and the mutual rights, duties and powers between spouses and the children of their marriage. Mason J. held at pp 538-540 that the marriage power extended to the definition of the ”… respective, rights, duties and obligations of the parties arising out of or in consequence of the marriage [and] the enforcement of the rights, duties and obligations” thereby created. The High Court recognised that the Parliament has the power under s 51(xxi) to create a jurisdiction and confer power on courts to alter and enforce rights, duties and obligations between spouses, unlike those justified by s 51(xxii) of the Constitution, unconnected with divorce: see also Dowal v Murray (1978) 143 CLR 410; Reg. v Demack; Ex parte Plummer (1977) 137 CLR 40 at p 53 per Mason J. and Reg v Lambert; Ex parte Plummer (1980) 146 CLR 447. The effect of Lansell v Lansell and Russell v Russell was that most of the ancillary provisions of the Family Law Act were dependent for validity on s 51(xxi) and not s 51(xxii).
However, in Russell v Russell the High Court held that the relevant definition of “matrimonial cause”, in its then form, was not sufficiently connected with the marriage power in s 51(xxi) of the Constitution. The wording of the definition of “matrimonial cause” was not sufficiently limited to matrimonial property or to circumstances arising from the marriage to be an exercise of the marriage power. The High Court held that sub-para (c)(ii) of the definition of “matrimonial cause” in s 4(1) could be read down only under the divorce and matrimonial causes power in s 51(xxii) of the Constitution. The effect of this was to confine the operation of s 78 and s 79 to the post divorce period.
The definition of “matrimonial cause” in s 4(1) relating to property was subsequently amended by the Family Law Amendment Act 1976 (Cth) following the decision of the High Court in Russell v Russell to provide:
“(ca) proceedings between the parties to a marriage with respect to the property of the parties to a marriage or either of them, being proceedings in relation to concurrent, pending or completed proceedings for principle relief between those parties.”
The effect of this new definition was to tie a property proceeding to divorce or nullity proceedings or other applications for principle relief and also limit the proceedings to proceedings between the parties to the marriage.
Then as a result of the Family Law Amendment Act 1983 there was inserted in the definition of “matrimonial cause” in s 4 the following definition:
“(ca) proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them, being proceedings:
(i)arising out of the marital relationship;
(ii)in relation to concurrent, pending or completed proceedings between those parties for principal relief: or
(iii)in relation to the dissolution or annulment of that marriage or the legal separation of the parties to that marriage, being a dissolution, annulment or legal separation effected in accordance with the law of an overseas country, where that dissolution, annulment or legal separation is recognized as valid in Australia under section 104.”
The significant change was sub-para (ca)(i) as it permitted property proceedings to be brought before proceedings are instituted for principal relief. Sub-paragraph (ca)(ii) was the same as the previous sub-para (ca). Sub-paragraph (ca)(iii) permitted property proceedings where the marriage had been dissolved by a foreign decree. Sub-paragraph (ca)(i) is related to the marriage power and is consistent with the High Court’s observations in Russell v Russell by limiting the proceedings to proceedings between the parties to the marriage and by requiring that the proceedings should arise out of the marital relationship. Sub-paragraphs (ca)(ii) and (iii) are related to the power to make laws with respect to divorce and, in relation thereto, matrimonial causes.
Sub-paragraph (ca) was further amended in 1984, 2000 and 2005 and currently provides:
“(ca) proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them, being proceedings:
(i)arising out of the marital relationship;
(ii)in relation to concurrent, pending or completed divorce or validity of marriage proceedings between those parties; or
(iii)in relation to the divorce of the parties to that marriage, the annulment of that marriage or the legal separation of the parties to that marriage, being a divorce, annulment or legal separation effected in accordance with the law of an overseas jurisdiction, where that divorce, annulment or legal separation is recognised as valid in Australia under section 104.”
In Fisher v Fisher sub-para (ca)(i) was treated by the High Court as constitutionally valid and referable also to the marriage power in s 51(xxi) of the Constitution because a limitation was introduced which limited the proceedings to proceedings between the parties to a marriage and proceedings “arising out of the marital relationship”: see also Dougherty v Dougherty and Another (1987) 163 CLR 278. In practice, it is now not normally necessary to rely on sub-para (ca)(ii), since sub-para (ca)(i) appears to cover at least most property proceedings brought under s 79. Sub-paragraph (ca) is no longer exclusively referable to the matrimonial causes power in s 51(xxii) of the Constitution but also referable to the marriage power in s 51(xxi). Sub-paragraph (ca)(ii) is a valid exercise of the power in s 51(xxii) of the Constitution: Russell v Russell (supra).

Third Parties and Family Law

In family law proceedings issues relating to third parties are of considerable practical importance for a number of reasons. The financial affairs of parties to a marriage often include and involve companies and trusts, and are intertwined with the financial and property interests of other family members and others. Sometimes there are issues as to title to property made available to the parties to a marriage for example, in the context of family breakdown there can be a dispute about whether property acquired by one of the parties was intended to be a gift or a loan. There can be issues about whether the parties to a marriage have an interest in property held by a third party. There can be issues about what order to make in circumstances where a third party may have an interest in property in which a party to the marriage also has an interest. There can be issues about how to deal with the interest of a party to the marriage in a third party such as a company or a trust. There are often issues about the interface between the financial circumstances of the parties to a marriage and third parties which includes banks and other financial institutions and so on. The interests of third parties who have commercial or personal relationships with one or more of the spouses may often be liable to be affected by the resolution of the matrimonial dispute.
Both as a matter of interpretation of the Family Law Act and as a matter of constitutional power it has sometimes proved difficult for courts which have jurisdiction under the Act to deal effectively with such matters. Issues that arise have been dealt with by a variety of approaches including concepts of alter ego and sham, the accrued jurisdiction and until Wakim the cross-vesting of laws scheme.
However, it has always been the case that courts having jurisdiction under the Family Law Act can make orders which have an effect on a third party and in some circumstances may make orders directly against third parties. The court has always, to some extent, had power to bind third parties, for example by injunction on an interlocutory basis: Sanders v Sanders (1967) 116 CLR 366; Antonarkis v Delly (1976) 10 ALR 251 and R v Dovey; Ex parte Ross (1979) 141 CLR 526.
The power of Parliament to make laws that confer jurisdiction on courts to make orders which affect the rights of third parties in relation to the interests of parties to a marriage arising out of the marriage relationship was established even before the Family Law Act. As was pointed out in the submissions on behalf of the Wife at common law a married woman had limited power to own and deal with property because of the principle of unity of property. However, by the end of the 19^th century, due to devices in the equity courts, and then legislative reforms beginning with the Married Women’s Property Acts which introduced a separate property regime married women were given the legal right to own and control property and incur liabilities. These changes had an effect on the interests of third parties in relation to the interests of the parties to a marriage.
In Sanders v Sanders, an order had been made under s 124 of the Matrimonial Causes Act1959 (see now s 114(3) Family Law Act), for the transfer by the husband to the wife of a leasehold property which comprised the former matrimonial home. After the order was made, but before the transfer was affected, the house, which was insured, was destroyed by fire. The wife sought an interlocutory injunction to restrain the insurance company from paying out the insurance moneys to the husband or any other person. The High Court upheld the grant of the injunction. Barwick CJ., with whom McTiernan and Windeyer JJ. agreed, said at p 372:
“That power may be exercised to maintain an existing situation until the court can decide what should be done upon the substantive application for maintenance, even though its exercise involves third parties, and the rights of any such party or parties in relation to one or both of the parties to the matrimonial cause, or in relation to the property of one or both of those parties.”
However, in the context of s 114 of the Family Law Act, which is the almost identical successor of s 124 of the Matrimonial Causes Act 1959, limitations on the Court’s power to affect third parties were imposed by the decision of the High Court in Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337. The case was concerned with issues of statutory interpretation and in particular the ambit of the powers granted to the Family Court under s 80 and s 114 of the Family Law Act. The decision was based on a construction of the Family Law Act and the intention to be imputed to Parliament and was not founded on constitutional limitations. Gibbs J. said at p 354:-
“The authorities to which I have referred establish that in some circumstances the Family Court has power to make an order or injunction which is directed to a third party or which will indirectly affect the position of a third party. They do not establish that any such order may be made if its effect will be to deprive a third party of an existing right or to impose on a third party a duty which the party would not otherwise be liable to perform. The general words of ss.80 and 114 must be understood in the context of the Act, which confers jurisdiction on the Family Court in matrimonial causes and associated matters, and in that context it would be unreasonable to impute to the Parliament an intention to give power to the Family Court to extinguish the rights, and enlarge the obligations, of third parties, in the absence of clear and unambiguous words. It can safely be assumed that the Parliament intended that the powers of the Family Court should be wide enough to prevent either of the parties to a marriage from evading his or her obligations to the other party, but it does not follow that the Parliament intended that the legitimate interests of third parties should be subordinated to the interests of a party to a marriage, or that the Family Court should be able to make orders that would operate to the detriment of third parties.”
Therefore the High Court held that though the Family Court may grant an injunction directed to a third party, or which may indirectly affect the position of a third party, it could not do so if its effect would be to deprive a third party of an existing right, or to impose on a third party a duty which the third party would not otherwise be liable to perform – except in the case of shams and puppets. The effect of this decision being that the Family Court did not have the power to order a family company, in which the husband had a substantial interest, to transfer the husband's shares to the wife.
Section 78(1) expressly authorises the court, in proceedings between the parties to a marriage with respect to existing title or rights in respect of property, to declare the title or rights if any that a party has in respect of property. On its face, this is not limited to the rights of each party vis a vis the other, but embraces the rights of one party vis a vis a third party. Section 78(2) then authorises consequential orders to give effect to the declaration. Formerly, s 78(3) provided that such a declaration was binding on the parties to a marriage but not on any other person. However, s 78(3) was repealed by the Law and Justice Legislation Amendment Act 1988 (Cth) in respect of proceedings instituted after its commencement.
Since the repeal of s 78(3), there is nothing in the wording of the Act to prevent, in appropriate cases, declarations being made under s 78 which bind third parties as well as parties to the marriage. In Warby and Warby, (2002) FLC 93-091 the Full Court, in the course of considering the availability of accrued jurisdiction, adverted to this at p 88,792:
“87. Seventhly, there is the issue of the Family Court of Australia’s capacity to adjudicate and make orders with respect to third parties. The wife’s submissions conceded that orders may in limited circumstances affect the rights of third parties and that is clearly correct. Section 78 of the Family Law Act confers the power to make a declaration with respect to existing title or rights. Since the amendment of the Act in 1988, the provision is not expressly confined to the property of the parties to the marriage or either of them and there is no authority which says that such a declaration may not bind a third party. Relevantly too, the ratio decidendi of Gould and Gould; Swire Investments Ltd, makes clear that this is within the constitutional power of the Commonwealth Parliament in so far as s.85 (as it then was) of the Family Law Act is concerned and, by way of obiter dicta, such validity should be assumed with respect to the exercise of other powers conferred by Part VIII of that Act.”
There is then s 106B of the Family Law Act which I will shortly deal with. However, I observe that in Gould and Gould: Swire Investments Ltd (1993) FLC 92-434 Fogarty J. said that aside from s 85 of the Family Law Act, which is now embodied in s 106B there are other provisions in the Family Law Act which may have an impact upon the property rights of third parties such as ss 78 (since its amendment in 1988), 79A and 85A.
In 2001 Part VIIIB which deals with superannuation interests was introduced (see s 90MZD, orders binding on a trustee). In 2005 the Bankruptcy and Family Law Legislation Amendment Act 2005 (Cth) made amendments to the Family Law Act and the Bankruptcy Act 1966 (Cth) relating to the interaction between family law and bankruptcy law. For example a trustee in bankruptcy can make an application under s 106B of the Family Law Act and this is an example of a situation where a third party is able to invoke a power under the Act against another third party.
Third parties also frequently participate in proceedings relating to children either as an applicant for orders or as a respondent and the constitutional basis for power to make orders in such proceedings has been the subject of a number of decisions of the High Court: Reg v Demack & Others; Ex parte Plummer (supra); Dowal v Murray (supra); Reg v Lambert; Ex parte Plummer (supra); Vitzdamm-Jones v Vitzdamm-Jones; St Clair v Nicholson (1981) 148 CLR 383; Fountain v Alexander (1982) 150 CLR 615; V v V (1985) 156 CLR 228 and Re: LSH; Ex parte RTF (1987) 164 CLR 91.

Constitutional Validity of Section 106B Family Law Act

The Wife is seeking an order pursuant to s 106B of the Family Law Act. Section 106B which is the cognate successor to s 85 of the Act provides:
“(1)     In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
(1A)   If:
(a)a party to a marriage is a bankrupt; and
(b)(b) the bankruptcy trustee is a party to proceedings under this Act;
the court may set aside or restrain the making of an instrument or disposition:
(c)which is made or proposed to be made by or on behalf of, or by direction or in the interest of, the bankrupt; and
(d)which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
(1B)   If:
(a)a party to a marriage is a debtor subject to a personal insolvency agreement; and
(b)the trustee of the agreement is a party to proceedings under this Act;
the court may set aside or restrain the making of an instrument or disposition:
(c)which is made or proposed to be made by or on behalf of, or by direction or in the interest of, the debtor; and
(d)which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
(2)     The court may order that any money or real or personal property dealt with by any instrument or disposition referred to in subsection (1), (1A) or (1B) may be taken in execution or charged with the payment of such sums for costs or maintenance as the court directs, or that the proceeds of a sale must be paid into court to abide its order.
(3)     The court must have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested.
(4)     A party or a person acting in collusion with a party may be ordered to pay the costs of any other party or of a bona fide purchaser or other person interested of and incidental to any such instrument or disposition and the setting aside or restraining of the instrument or disposition.
(4AA) An application may be made to the court for an order under this section by:
(a)a party to the proceedings; or
(b)a creditor of a party to the proceedings if the creditor may not be able to recover his or her debt if the instrument or disposition were made; or
(c)any other person whose interests would be affected by the making of the instrument or disposition.
(4A)   In addition to the powers the court has under this section, the court may also do any or all of the things listed in subsection 80(1).
(5)     In this section:
"disposition" includes:
(a)a sale or gift; and
(b)the issue, grant, creation, transfer or cancellation of, or a variation of the rights attaching to, an interest in a company or a trust.
"interest":
(a)in a company includes:
(i)a share in or debenture of the company; and
(ii)an option over a share in or debenture of the company (whether the share or debenture is issued or not); and
(b)     in a trust includes:
(i)a beneficial interest in the trust; and
(ii)the interest of a settlor in property subject to the trust; and
(iii)a power of appointment under the trust; and
(iv)a power to rescind or vary a provision of, or to rescind or vary the effect of the exercise of a power under, the trust; and
(v)an interest that is conditional, contingent or deferred.”
The Second, Third and Fourth Respondents accept that I am presently bound by the decision of the Full Court in Gould and Gould: Swire Investments Ltd and accordingly bound to reject their submissions. The only issue before me is as to the constitutional validity of s 90AE(2) and s 90AF(2).
In Gould Fogarty J. found that s 85 was constitutionally valid. Nicholson CJ. and Finn J. agreed with the judgment of Fogarty J.
In Gould the third parties submitted, relying principally on Ascot Investments Pty Ltd v Harper that s 85 was beyond constitutional power if, on its proper construction, it may operate to deprive a third party of its property or of the use and enjoyment of its property. It was submitted that it was supportive of the absence of a constitutional base for orders which impact upon the rights of third parties. Fogarty J. said at pp 80-438-80,439:
“Whilst the history of the matter is important, ultimately the essential issue here is whether s. 85 is within the Commonwealth powers with respect to marriage, divorce and matrimonial causes or ancillary thereto. Such a provision if confined to the parties to the marriage and those over whom they exercise effective control would obviously be within power. However, the issue agitated on behalf of the third parties is that the constitutional power does not extend so as to impact upon the property of a third party. This would seem to suggest that there is to be implied into placitum (xxi) and (xxii) a limitation which does not attach to any other of the powers in s. 51: Bourke & Ors v State Bank of New South Wales (1990) 170 CLR 276 at 284-5, and that the Parliament cannot legislate under these powers so as to affect third party rights.
He concluded at p 80,442:
“I agree with the submissions for the Commonwealth that it is not necessary to rely upon the incidental power (s. 51(xxxi)) to support s. 85 since a grant of legislative power in the Constitution extends to all matters incidental to the subject matter of the power and which are necessary for the reasonable fulfilment of the legislative power over that subject matter or to matters the control of which is found necessary to effectuate its main purpose. However, if it were necessary to rely on the incidental power, section 85(1) would be within it since to bring a law within the incidental power it is sufficient that the provision is appropriate to effectuate the exercise of the power or that it is incidental to the execution of the power: see Burton v Honan, supra, at pp. 177-9; Gazzo, supra, at p. 236; Fisher, supra, at FLC p. 75,594; CLR p. 448, and Nationwide News Pty Ltd v Wills (1992) 108 ALR 681, at pp. 687-8, 734-5, 739 and 745.
I conclude that s. 85 falls within the Commonwealth powers to legislate in relation to marriage, divorce and matrimonial causes or is ancillary thereto. It may more obviously fall within the heading of matrimonial causes, especially as history indicates that provisions of this type have long been understood as an integral part of the matrimonial cause jurisdiction and would have been so understood at the time of the Constitution and since. It should also, in my view, be seen as having a sufficient connection with the marriage power. It arises as a necessary consequence of and has, in my view, a sufficient connection with marriage and the power to regulate disputes arising from that relationship. Without that specific power, involving if necessary third parties, the natural ambit of the general power would be unduly diminished.”
Prior to receipt of the submissions on behalf of the Respondents submissions were made on behalf of the Wife in relation to the constitutional validity of s 106B. I observe that it was submitted that further support for the conclusions reached by the Full Court in Gould can be found in the decision of the High Court in Storey v Lane (1981) 147 CLR 549 on the constitutional validity of bankruptcy provisions. Gibbs CJ. (with whom Mason, Wilson and Brennan JJ. agreed) observed that the equitable distribution of the assets of an insolvent debtor is a fundamental purpose of the bankruptcy law, and that any system of bankruptcy may frequently require ancillary provisions to prevent the scheme of the Act from being defeated. His Honour gave as an example provisions to prevent individual actions by creditors to obtain payment, which are analogous to s 106B. In the same case, Murphy J. observed at p 559 that it is immaterial that such provisions invade the “general law” of the States: see also Precision Data Holdings Ltd v Wills (1991) 173 CLR 167.
It was submitted that even if an acquisition of property were involved then for the reasons given by the Full Court in Gould, it would not be otherwise than on just terms. Section 106B(3) expressly provides that the court “must have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested”. If they do not come within these terms, then the protection will not be attracted.

Part VIIIIAA of the Family Law Act

Overview

The Family Law Amendment Act2003 (Cth) received assent on 17 December 2003 and commenced on 17 December 2004. It inserted Part VIIIAA in the Family Law Act which conferred power to bind third parties in financial and injunctive proceedings.
Section 90AA provides that the object of Part VIIIAA is to allow the court, when it is either making an order altering property interests in respect of the parties to a marriage under s 79, or making an order or injunction under s 114 to make an order under s 79 or s 114, or grant an injunction under s 114, that is directed to, or alters the rights, liabilities or property interests of a third party. When consideration is given to s 90AE(2)(b) and s 90AF(2)(b) the Parliament, in clear and unambiguous words, has expressed an intention to give power to deal with the rights and interests of third parties and not simply procedural rights and interests.

Section 90AB provides a definition of "marriage" which is taken to include a void marriage and "third party" which is defined to mean a person who is not a party to the marriage. A third party would include an individual and corporation.
By s 90AC, Part VIIIAA is given effect "…despite anything to the contrary in any…other law (whether written or unwritten) of the Commonwealth, a State or Territory” and “…anything in a trust deed or other instrument", whether made before or after the commencement of Part VIIIAA. Further, nothing done in compliance with Part VIIIAA by a third party is to be treated as resulting in a contravention of any such law or instrument. Section 90AC thus makes it clear that, in the event of inconsistency with other instruments or laws, Part VIIIAA is to override any other law of the Commonwealth or a State or Territory, and any trust deed or other instrument, even where it is made after the commencement of Part VIIIAA. Further, when complying with Part VIIIAA, a third party will not be taken to contravene any other law or instrument. Section 90AC is similar to s 90MB which is in Part VIIIB of the Act.
While it remains to consider whether the substantive provisions (especially s 90AE(2) and s 90AF(2)) are otherwise laws with respect to marriage and matrimonial causes, s 90AC does not alter that characterisation merely because it overrides state laws or the general law: see Fisher v Fisher (supra) at pp 453-454 and P v P (1994) 181 CLR 583.
Section 90ACA provides that the powers of the court under Part VIIIAA do not apply to eligible annuities which are defined in sub-sec (2). Section 90ADA provides that Part VIIIAA does not affect the operation of any other provision of the Act.
Section 90AD provides that, for the purposes of Part VIIIAA, “a debt owed by a party to a marriage” is to be treated as “property” for the purposes of para (ca) of the definition of “matrimonial cause” in s 4 of the Act, and for the purposes of s 114(1)(e). The definition of "matrimonial cause" in para (ca) of the definition of that term, in s 4 relates to proceedings between parties to a marriage with respect to the property of parties to the marriage. Similar provision is made in respect of injunctions in relation to the property of a party, for the purposes of s 114(1)(e). Section 90AD is similar to s 90MC which is in Part VIIIB of the Act.
Division 2 of Part VIIIAA deals with orders under s 79. Section 90AE provides:
“(1)     In proceedings under section 79, the court may make any of the following orders:
(a)an order directed to a creditor of the parties to the marriage to substitute one party for both parties in relation to the debt owed to the creditor;
(b)an order directed to a creditor of one party to a marriage to substitute the other party, or both parties, to the marriage for that party in relation to the debt owed to the creditor;
(c)an order directed to a creditor of the parties to the marriage that the parties be liable for a different proportion of the debt owed to the creditor than the proportion the parties are liable to before the order is made;
(d)an order directed to a director of a company or to a company to register a transfer of shares from one party to the marriage to the other party.
(2)     In proceedings under section 79, the court may make any other order that:
(a)directs a third party to do a thing in relation to the property of a party to the marriage; or
(b)alters the rights, liabilities or property interests of a third party in relation to the marriage.
(3)     The court may only make an order under subsection (1) or (2) if:
(a)the making of the order is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage; and
(b)if the order concerns a debt of a party to the marriage—it is not foreseeable at the time that the order is made that to make the order would result in the debt not being paid in full; and
(c)the third party has been accorded procedural fairness in relation to the making of the order; and
(d)the court is satisfied that, in all the circumstances, it is just and equitable to make the order; and
(e)the court is satisfied that the order takes into account the matters mentioned in subsection (4).
(4)     The matters are as follows:
(a)the taxation effect (if any) of the order on the parties to the marriage;
(b)the taxation effect (if any) of the order on the third party;
(c)the social security effect (if any) of the order on the parties to the marriage;
(d)the third party's administrative costs in relation to the order;
(e)if the order concerns a debt of a party to the marriage—the capacity of a party to the marriage to repay the debt after the order is made;
Note: See paragraph (3)(b) for requirements for making the order in these circumstances.   Example: The capacity of a party to the marriage to repay the debt would be affected by that party's ability to repay the debt without undue hardship.
(f)the economic, legal or other capacity of the third party to comply with the order;
Example: The legal capacity of the third party to comply with the order could be affected by the terms of a trust deed. However, after taking the third party's legal capacity into account, the court may make the order despite the terms of the trust deed. If the court does so, the order will have effect despite those terms (see section 90AC).
(g)if, as a result of the third party being accorded procedural fairness in relation to the making of the order, the third party raises any other matters—those matters;
Note: See paragraph (3)(c) for the requirement to accord procedural fairness to the third party.
(h)any other matter that the court considers relevant.”
Section 90AE confers certain powers to make orders under s 79 binding third parties. The power is discretionary and there is no obligation to make any of the orders identified in the section. The discretion given by s 90AE(1) and s90AE(2) must however, be exercised by reference to the matters set out in s 90AE(3) and s 90AE(4). The discretion is therefore broad but is not unfettered. The third party must be accorded procedural fairness in relation to the making of an order under s 90AE. Further, the court must always make orders that are just and equitable.
Section 90AE(1)(d) provides that in proceedings under s 79 the court may make an order directed to a director of a company or to a company to register a transfer of shares from one party to the marriage to the other party. It would appear to deal with the circumstances in Ascot Investments v Harper and thus would prevent a party escaping an obligation to transfer property legitimately the subject of an order under s 79 to the other party to the marriage because of the refusal of a director of the company or the company itself to register the transfer. By reason of s 90AC it is irrelevant that it may override the articles of a company, the general law, or a state law. Although there is no issue in this case as to the constitutional validity of s 90AE(1) I accept the submission on behalf of the Wife that s 90AE(1)(d) is a law with respect to marriage or matrimonial causes and is also supported by the corporations power in s 51(xx) of the Constitution: Actors and Announcers Equity Association of Australia and Others v Fontana Films Pty Ltd (1982) 150 CLR 169.
The effect of s 90AE(3) is to prescribe circumstances which must exist before the Court can exercise its discretion to make an order under s 90AE(1) or s 90AE(2). It sets out preconditions to the exercise of power. So, if the court were satisfied that the conditions in s 90AE(3)(c), (d) and (e) were met, and that for the purposes of s 90AE(3)(a), the making of the order were either “reasonably necessary” or was “reasonably appropriate and adapted, to effect” what s 79(1) is directed to achieving, namely, a division of property between spouses, the court can then make an order.
The matters in s 90AE(3) include (see s 90AE(3)(e)) the matters in s 90AE(4) and relevantly include the economic, legal or other capacity of the third party to comply with the order (see 90AE(4)(f)), and if as a result of the third party being accorded procedural fairness, it raises any other matters, the court must take into account those matters (see s 90AE(4)(g)).
To the extent that the laws of a State would apply to interfere with the exercise of power under s 90AE(1) or s 90AE(2), s 90AC has the effect of excluding the operation of those laws and, if s 90AE(1) and s 90AE(2) are a valid law, by reason of that exclusion s 109 of the Constitution makes the State laws inoperative: P v P (supra) at p 607 per Mason CJ. Deane, Toohey and Gaudron JJ.; Western Australia v The Commonwealth (The Native Title Case) (1995) 183 CLR 373 at pp 464-468 per Mason CJ., Brennan. Deane. Toohey. Gaudron and McHugh JJ.; Botany Municipal Council v Federal Airports Authority (1992) 175 CLR 453 at pp 464-466; Bayside City Council v Telstra Corporation Ltd (2004) 216 CLR 595 at pp 627-629 per Gleeson CJ., Gummow, Kirby and Heydon JJ.
Division 3 of Part VIIIAA deals with orders and injunctions under s 114. Section 114 confers power on the court to grant injunctions in proceedings of the kind referred to in para (e) of the definition of “matrimonial cause” in s 4(1), including an injunction in relation to the property of a party to a marriage. Section 90AF provides:
“(1)     In proceedings under section 114, the court may:
(a)make an order restraining a person from repossessing property of a party to a marriage; or
(b)grant an injunction restraining a person from commencing legal proceedings against a party to a marriage.
(2)     In proceedings under section 114, the court may make any other order, or grant any other injunction that:
(a)directs a third party to do a thing in relation to the property of a party to the marriage; or
(b)alters the rights, liabilities or property interests of a third party in relation to the marriage.
(3)     The court may only make an order or grant an injunction under subsection (1) or (2) if:
(a)the making of the order, or the granting of the injunction, is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage; and
(b)if the order or injunction concerns a debt of a party to the marriage—it is not foreseeable at the time that the order is made, or the injunction granted, that to make the order or grant the injunction would result in the debt not being paid in full; and
(c)the third party has been accorded procedural fairness in relation to the making of the order or injunction; and
(d)for an injunction or order under subsection 114(1)—the court is satisfied that, in all the circumstances, it is proper to make the order or grant the injunction; and
(e)for an injunction under subsection 114(3)—the court is satisfied that, in all the circumstances, it is just or convenient to grant the injunction; and
(f)the court is satisfied that the order or injunction takes into account the matters mentioned in subsection (4).
(4)     The matters are as follows:
(a)the taxation effect (if any) of the order or injunction on the parties to the marriage;
(b)the taxation effect (if any) of the order or injunction on the third party;
(c)the social security effect (if any) of the order or injunction on the parties to the marriage;
(d)the third party's administrative costs in relation to the order or injunction;
(e)if the order or injunction concerns a debt of a party to the marriage—the capacity of a party to the marriage to repay the debt after the order is made or the injunction is granted;
Note: See paragraph (3)(b) for requirements for making the order or granting the injunction in these circumstances.
Example: The capacity of a party to the marriage to repay the debt would be affected by that party's ability to repay the debt without undue hardship.
(f)the economic, legal or other capacity of the third party to comply with the order or injunction;
Example: The legal capacity of the third party to comply with the order or injunction could be affected by the terms of a trust deed. However, after taking the third party's legal capacity into account, the court may make the order or grant the injunction despite the terms of the trust deed. If the court does so, the order or injunction will have effect despite those terms (see section 90AC).
(g)if, as a result of the third party being accorded procedural fairness in relation to the making of the order or the granting of the injunction, the third party raises any other matters—those matters;
Note: See paragraph (3)(c) for the requirement to accord procedural fairness to the third party.
(h)any other matter that the court considers relevant.”
Section 90AF creates a similar regime as regards s 79 and like s 90AE it is far reaching.
Division 4 of Part VIIIAA deals with “Other matters”. Section 90AG deals with orders and injunctions binding on trustees, and provides that if an order or injunction binds a person in the capacity of trustee in relation to property, then the order or injunction is also binding (by force of the section) on any person who subsequently becomes the trustee. Thus its effect is that successive trustees will be bound by orders or injunctions made under Part VIIIAA.
Section 90AH provides that a third party is not liable for loss or damage suffered by any person because of things done (or not done) by the third party in good faith in reliance on an order or injunction made or granted by a court in accordance with Part VIIIAA. It provides third parties with protection from liability for loss or damage suffered by any other person, where the third party is acting in good faith in reliance on a court order or injunction under Part VIIIAA.
Section 90AI deals with service of documents on a third party. Documents should be served in accordance with applicable rules of court or other method of service provided by law.
Section 90AJ deals with the expenses of the third party. It has the effect that if the court has made an order or granted an injunction in accordance with Part VIIIAA and a third party has incurred expense as a necessary result of the order or injunction, the court may make such order as it considers just for the payment of the reasonable expenses of the third party incurred as a necessary result of the order or injunction. In deciding whether to make an order for third party expenses, and subject to what the court considers just, the court must take into account the principle that the parties to the marriage should bear the reasonable expenses of the third party equally. Regulations are authorised to provide, in situations where the court has not made an order for third party reasonable fees for the third party to charge fees to cover the reasonable expenses incurred as a necessary result of the order or injunction and if such fees are charged, that each of the parties to the marriage is separately liable to pay to the third party an amount equal to half of those fees; and for conferring jurisdiction on a particular court or courts in relation to the collection or recovery of such fees.
Section 90AK provides that the court must not make an order or grant an injunction under Part VIIIAA if the order or injunction would result in the acquisition of property from a person other than on just terms, and be invalid because of s 51(xxxi) of the Constitution. The terms “acquisition of property” and “just terms” are defined to have the same meaning as in s 51(xxxi) of the Constitution.
In this case no issue properly arises with respect to s 51(xxxi) of the Constitution and that is because s 90AK expressly provides that the Court must not make an order or grant an injunction in accordance with Part VIIIAA if the order or injunction would result in the acquisition of property from a person otherwise than on just terms; and be invalid because of s 51(xxxi) of the Constitution.
In conclusion, when consideration is given to each of the provisions of Part VIIIAA it is clear that they are directed to making effective the powers under s 79 and s 114 of the Family Law Act. In my opinion, this is necessary given the need in financial proceedings between parties to a marriage under the Family Law Act to deal with issues that arise which interface between the interests of parties to the marriage and the rights, duties and obligations of third parties.

Constitutional Validity of sections 90AE and 90AF

The submissions focussed on s 90AE(2) and as I have already observed the same points were made in relation to s 90AF(2) mutatis mutandis.
The main heads of Commonwealth legislative power are contained in s 51 of the Constitution. The section begins with the words “The Parliament shall…have power to make laws…with respect to…” and then lists specific topics which include:
“(xxi) Marriage:
(xxii)Divorce and matrimonial causes; and in relation thereto, parental rights, and the custody and guardianship of infants:
...
(xxxix)Matters incidental to the execution of any power vested by this Constitution in the Parliament ..."
Generally speaking, these constitutional heads of power are translated into powers which the Family Court may exercise under the Family Law Act by reference to a series of “matrimonial cause” defined in s 4(1).
It is necessary to ask whether the law is one which can be described as a law “with respect to” one of the subject matters expressly listed in s 51 or is a matter incidental within the meaning of s 51(xxxix). In TheGrain Pool of Western Australia v The Commonwealth of Australia and Another (2000) 202 CLR 479 a majority (Gleeson CJ., Gaudron, McHugh, Gummow, Hayne and Callinan JJ.) stated at p 492 (footnotes omitted):
“The general principles which are to be applied to determine whether a law is with respect to a head of legislative power such as s 51(xviii) are well settled. They include the following. First, the constitutional text is to be construed "with all the generality which the words used admit”. …Secondly, the character of the law in question must be determined by reference to the rights, powers, liabilities, duties and privileges which it creates. Thirdly, the practical as well as the legal operation of the law must be examined to determine if there is a sufficient connection between the law and the head of power. Fourthly, as Mason and Deane JJ explained in Re F; Ex parte F.
"In a case where a law fairly answers the description of being a law with respect to two subject-matters, one of which is and the other of which is not a subject-matter appearing in s 51, it will be valid notwithstanding that there is no independent connexion between the two subject-matters."
Finally, if a sufficient connection with the head of power does exist, the justice and wisdom of the law, and the degree to which the means it adopts are necessary or desirable, are matters of legislative choice “
See also Australian National Airways Pty Ltd v The Commonwealth & Ors (1945) 71 CLR 29 at p 81 per Dixon J.; Jumbunna Coal Mine NL v Victoria Coal Miners’ Association (1908) 6 CLR 309 at pp 367-368 per O’Connor J. The Queen v Coldham & Ors; Ex parte the Australian Social Welfare Union (1983) 153 CLR 297 at p 314 per Gibbs CJ., Mason, Murphy, Wilson, Brennan, Deane and Dawson JJ. and Singh v Commonwealth and Another (2004) 209 ALR 355 at p 400 per Gummow, Hayne and Heydon JJ..
The approach to characterisation of heads of power requires the consistent application of general principle and this was described by Senior Counsel for the Wife as the ‘plenary approach’ mandated by the High Court in Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (the Engineers case) (1920) 28 CLR 129. The process of legal construction is that the words of the Constitution be given their full and fair meaning: see also The State of Victoria v The Commonwealth (1971) 122 CLR 353 and Singh v Commonwealth and Another (supra) at p 402 per Gummow, Hayne and Heydon JJ..

Further, a law which is of a character within power is valid, even though it is capable of bearing another character which is not within power; The State of Victoria v The Commonwealth (supra); Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd (supra); Rich and Anor v Australian Securities and Investments Commission (2004) 209 ALR 271.
The Parliament can, if it chooses, legislate with respect to rights and obligations by vesting jurisdiction in courts to make orders creating those rights or imposing those obligations including enforcing those rights and obligations. The power includes vesting a discretionary jurisdiction on a court exercising the judicial power of the Commonwealth to make orders which create rights or impose liabilities: Precision Data Holdings Ltd v Wills (supra) at pp 190-191 per Mason CJ. Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ.
Each of the marriage, and the divorce and matrimonial causes powers, are powers which relate to status, and laws which prescribe the incidents of that status are within legislative power: Sing v The Commonwealth of Australia (supra) and Ford v Ford (1947) 73 CLR 524. Parliament therefore can legislate in respect of the mutual rights, duties and powers between spouses and confer a jurisdiction on courts concerning spouses.
However, there is no requirement that courts alone determine the rights, duties and status of parties to a marriage and these can be determined legislatively, or even administratively: The Queen v Humby; Ex parte Rooney (1973) 129 CLR 231. For example, Parliament can under s 51(xxii) dissolve marriage by Act of Parliament: per Mason J. at p 248.
In Russell v Russell the majority held that the marriage power in para (xxi) is not limited by para (xxii) and that Parliament can legislate with respect to rights and duties between spouses and with respect to rights, duties and powers between spouses and their children and confer a jurisdiction on courts to enforce and alter such rights, duties and powers in proceedings which, unlike those justified under s 51(xxii), are unconnected with divorce or any other form of principal matrimonial relief. In P v P Mason CJ., Deane, Toohey and Gaudron JJ. at p 600 held that the grants of legislative power in paras (xxi) and (xxii) are cumulative, each must be given its full scope and effect, and neither is to be read down by reference to the other.
In Fisher v Fisher Mason and Deane JJ. at pp. 452-3 said:
"It is well settled that the constitutional concept of marriage, considered as a head of legislative power, embraces marriage as a relationship. In the exercise of that legislative power, Parliament may regulate the relationship and, subject to the requirement that the law remain one “with respect to” marriage, attach to it such consequences as Parliament considers appropriate. It follows that Parliament may make provision for the alteration of the interests of the parties to a marriage in their property or the property of either of them by reference to considerations arising out of the relationship. And it may make such provision by conferring jurisdiction on a court to make orders altering such interests. This is precisely what s.79, especially sub-ss. (1), (2) and (4), does. It is for this simple reason that it is within the central area of the marriage power, without there being any occasion to engage in discussion about the need for a connexion with the subject matter of the power, whether close or otherwise — an exercise which is more appropriately undertaken when the operation of the law is not on the subject matter of the power, but on something which is incidental to it."
Then after referring to what s 79 authorizes and orders made under that section said at p 453:
“They fall within the central area of the marriage power because they create rights which are grounded in that relationship. True it is that orders made under s.79 do not give effect to antecedent rights arising in virtue of the marital relationship. Instead they perform a dual function by creating and enforcing rights in one blow, so to speak: see generally R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett [(1945) 70 CLR 141 at pp 165-169]. However, the rights are created by virtue of the exercise of a judicial discretion which necessarily takes account of considerations arising out of the marital relationship: see s. 79(4). They are rights which would not have come into existence but for that relationship.”
The question that arises is whether the Parliament has the power under the marriage and divorce and matrimonial causes powers to make laws which intrude upon the rights, duties and obligations of third parties. This issue was raised in Gould and Fogarty J. pointed out at p 80,438 that the argument in that case that the constitutional power does not extend this far would seem to suggest that there is to be implied in paras (xxi) and (xxii) a limitation which does not attach to any other of the powers in s 51: Bourke and Ors v State Bank of New South Wales (1990) 170 CLR 276 at pp 284-285. In Burton v Honan (1952) 86 CLR 169 the High Court upheld the validity of legislation, as being a law with respect to customs and excise, which provided for the forfeiture of goods even though they were in the hands of a bona fide purchaser for value: see especially per Dixon CJ. at pp 178-179: See also Precision Data Holdings Ltd v Wills (supra) at pp 190-191.
The common law unity of property principle and the separate property regime that was introduced for married women by the legislative reforms beginning with the Married Women’s Property Acts in the late 19^th century affected third parties who dealt with a married woman: see Ford v Ford (1947) 73 CLR 524 at p 535 per Dixon J.. In Ford Dixon J. also said at p 535 that it is inherent in a law as to status that it defines "…the legal position of the individual in or with regard to the rest of the community”.
In Gazzo v Comptroller of Stamps (Vic) (1981) 149 CLR 227 Mason J. said at p 247 that a law may define the rights of one party to the marriage against a third party, if to do so is incidental to, or is reasonably necessary for, dealing with the mutual rights and obligations of the parties to the marriage and can be supported under s 51(xxi).
In Re F; Ex parte F (1986) 161 CLR 376 Mason and Deane JJ. at pp 386-387 defined “marriage'' as a “social institution'' which has “traditionally been a source of rights and duties of persons other than those who are the immediate parties to it''. They said at p. 389:
"...a law which directly and on its face operates upon or affects the subject of “Marriage” e.g., a law which operates to confer rights or impose obligations upon the parties to a marriage or third persons by reference to or arising out of marriage—comes within the central area of the grant of legislative power contained in s. 51(xxi) and must, for the purposes of that paragraph, be characterised as a law with respect to marriage."
Mason and Deane JJ. at pp 389-390 pointed out that a law which does not, on its face, directly operate upon or affect marriage will not necessarily be invalid and validity:
" ... will depend upon the nature and strength of any connexion between what the law does and marriage: “for on the one hand the subject matter may itself involve or include a penumbra of things that are incidental, consequential and ancillary and a law as to some aspects of these things would not be ultra vires, and on the other hand the operation of a law upon any subject may not be apparent on its face but yet be clear when the actual practical working of cause and effect is perceived'” (per Dixon C.J. in The Marriage Act Case) ... All that is necessary is that any connexion between what the law does and “Marriage'” is sufficient to enable the law to be fairly characterised not only as a law with respect to that other subject matter but also as a law with respect to marriage."
In Re: LSH; ex parte RTF (1987) 164 CLR 91 Mason CJ. gave a criterion for the permissible reach of s 51(xxi) over third parties and said at p 100:
“The making of an order (by the Family Court) against a third party may be essential to the protection and enforcement of the rights and interests of the parties to a marriage or either of them”.
In conclusion, just as with the power under s 51(xvii) to make laws with respect to bankruptcy and insolvency, it is within the legislative power of the Commonwealth to make laws under paras (xxi) and (xxii) with respect to the consequences, not just for parties to a marriage but also for those with whom they are in a relationship and the rights, duties and obligations of a third party.
The Respondents submitted that in order for a law to be characterised as a law on a subject or power, there must be a relevance to or connection with the subject in the Constitution. There were detailed submissions in relation to a number of cases which I observe were discussed by Fogarty J. in Gould. It was submitted that s 90AE(2) and s 90AF(2) are not laws with respect to marriage within the meaning of s 51(xxi) of the Constitution and are not laws with respect to divorce or matrimonial causes or laws with respect to parental rights or the custody or guardianship of infants within the meaning of s 51(xxii) of the Constitution. It was submitted that a law with respect to one of the subject matters in s 51 of the Constitution must have a sufficient connection with the relevant head of power and in the context of paras (xxi) and (xxii), the High Court has held that a test of “close connexion" must be satisfied: see Reg vLambert; Ex parte Plummer (supra) and Gazzo v Comptroller of Stamps (Vic) (supra). It was submitted that s 90AE(2) and s 90AF(2) cannot be said to have the requisite “close connexion” with either paras (xxi) or (xxii). It was submitted that a law which permits the alteration of unqualified substantive property rights of a third person where there is no alter ego or sham assertion is not a law with respect to marriage, divorce or matrimonial causes.
It was submitted that the decisions of the High Court in Reg v Lambert, Gazzo v Comptroller of Stamps (Vic) and Russell v Russell support this submission, particularly when read in conjunction with Ascot Investments Pty Ltd v Harper. It was submitted that these decisions are binding on me as a single judge of the Family Court and must be followed until such time as they are overruled (if ever) by the High Court.
In Dowal v Murray the High Court by a majority of four to one upheld the validity of s 61(4) of the Family Law Act notwithstanding the proceedings involved a dispute between one spouse and a third party. The proceedings could be justified under the marriage power even though they involved a third party as sole respondent. The apparent requirement in Russell v Russell that proceedings under the Family Law Act must involve both parties to a marriage in order to be justified under the marriage power in s 51(xxi) was disposed of on the basis that this was not an essential requirement for constitutional validity: see for example Stephen J. at pp 424-425.
In Reg v Demack; Ex parte Plummer Gibbs J. held at p 46 that:
“…a law is not a law with respect to marriage simply because it has some operation with respect to custody of a child of a marriage.”
As a result custody orders under s 10 of the Family Law Act could not validly extend to the custody of a child whose care and control had been vested in State authorities under State law. Section 10 of the Family Law Act was then amended to overcome the problem.
However, in Reg v Lambert; Ex parte Plummer the High Court (Barwick CJ, Gibbs, Aickin and Wilson JJ. with Stephen, Mason and Murphy JJ dissenting) held that the Family Law Act was invalid to the extent that it purported by s 10(3) (see now s 69ZK) to enable a custody order under the Family Law Act to override a similar order under State child welfare legislation. The majority held that it was not a law with respect to marriage. Gibbs J. said at pp 456-457:
"The crucial question, however, is whether the legislation creates, defines or declares rights or duties that arise out of, or have a close connexion with, the marriage relationship. If not, the law cannot be said to be one with respect to marriage.
…
The question whether a law is one with respect to marriage is one of degree. The answer to it depends on the closeness of the connexion between the law and the marriage relationship.”
Murphy J. at pp 469-470 held that such an approach was contrary to what was held in Attorney-General (Vic) v Commonwealth (Marriage Act Case) (1962) 107 CLR 529 at p 560 that the marriage power is “entitled to as wide an interpretation as it can reasonably bear” and should be given “no narrow or restrictive construction”.
In Gazzo v Comptroller of Stamps (Victoria) a majority (Gibbs CJ., Stephen and Aickin JJ., with Mason and Murphy JJ. dissenting) decided that s 90 of the Family Law Act was invalid. The section exempted from state taxes transfers of property under maintenance agreements between husband and wife approved by the Family Court. The issue was whether a transfer of land pursuant to an approved maintenance agreement was exempt from Victorian stamp duty. The majority held that this exemption was not a law with respect to marriage or divorce or matrimonial causes. Gibbs CJ. conceded at pp 236-237 that, if s 90 ‘render[ed] effective orders made by a court under…the Family Law Act…and is therefore incidental to the subject matter of the power given by paras (xxi) and (xxii)’, it would be valid. However, he thought that the purpose of an order approving the transfer of property between husband and wife could be fully achieved whether or not state tax was payable on the transfer. Referring to what he said in Reg v Lambert; ex parte Plummer, the Chief Justice said at pp 234-235:
"The question in each case is whether the connexion between the law and the marriage relationship is sufficiently close to enable it to be said that the law is in truth one with respect to the relationship. It is not enough that the law incidentally touches upon marriage, or that the Parliament has seized on the fact of marriage as a justification for the enactment of a law which really deals with some other topic.”
Gibbs CJ. held that the provision was invalid as the connection of s 90 with marriage and with matrimonial causes was only what he described at p 234 as “a remote one”. He also held at p 238 that s 90 could not be regarded as incidental to the subject matter of the power given by paras (xxi) and (xxii). Similar tests were applied by Stephen J. at p 241 and Aickin J. at pp 266-267.
Mason and Murphy JJ., expressed their dissent and at pp 246-247, Mason J. said:
"There are no compelling reasons here to reject the normal principle that an individual grant of power under the Constitution should be accorded a full operation according to its terms.
…
Accordingly, a law may define the rights of one party to the marriage against a third party, if to do so is incidental to, or is reasonably necessary for, dealing with the mutual rights and obligations of the parties to the marriage. There is therefore no a priori rule that, because a law deals with the rights or obligations of one party to a marriage as against a person not a party to the marriage, it cannot be supported under s. 51(xxi).”
In relation to the statement by Gibbs J. in Reg v Lambert; Ex parte Plummer, about a “close connexion” Mason J. said at p 248:
"For my part, I should have thought that the word `sufficient' more accurately expresses the degree of connexion with the subject of the power which constitutional principle requires. The word `close' is perhaps too limiting, suggesting too strict a nexus."
Murphy J., after referring at p 252 to the presumption of validity in relation to Commonwealth legislation, said at p 254:
"The phrase `with respect to' requires only `a relevance to or connexion with the subject assigned to the Commonwealth Parliament'..."
He rejected the “close connexion'' formulation (at p 255) and said at p 258:
"The power to regulate the ownership or division of matrimonial property on divorce or during marriage is thus at the heart of the legislative powers to make laws with relation to marriage, divorce and matrimonial causes."
In Re F; Ex parte F the High Court (Gibbs CJ., Wilson, Brennan and Dawson JJ., with Mason and Deane JJ dissenting) held that s 5(1)(e)(i) of the Family Law Act was not a valid exercise of the power conferred by s 51(xxi) or (xxii). The section was a deeming provision as to an ex-nuptial child of one spouse who was ordinarily a member of the household of the parties to a marriage: see also In the Marriage of Cormick (1984) 156 CLR 170 and R v Cook; Ex parte C (1985) 156 CLR 249 in which the High Court also dealt with 1983 amendments to the Family Law Act which had sought to extend jurisdiction under the Act in custody proceedings by deeming provisions. In re F; Ex parte F Mason and Deane JJ. at pp 388-391 adopted the conventional broader approach to characterisation of a law as one with respect to one of the subject matters in s 51 including the marriage and divorce and matrimonial causes powers.
In Fisher v Fisher it was held that s 79(8) of the Family Law Act, which gives a discretion to order the continuance of property proceedings by the legal personal representative of a party to a marriage after the death of one of those parties during the proceedings, was a valid law with respect to marriage. In a joint judgment Mason and Deane JJ. at p 453 stated:
"Even in such a case it is a mistake to insist on the existence of a “close” connexion, as if this were some immutable dictate proceeding from the Constitution itself. In this respect, while the actual decision in Gazzo v. Comptroller of Stamps (Vict.) must be respected unless and until it is overruled, we consider that the authority of that case should be confined to its particular facts for the reason that we regard the reasoning underlying the decision as fundamentally unsound."
Thus Mason and Deane JJ. adopted the broader approach to characterisation in proceedings relating to property.
In P v P the majority (Mason CJ., Deane, Toohey, Gaudron and McHugh JJ.) held that Part VII of the Family Law Act conferred power to authorise the carrying out of the sterilization of a child and the conferring of that power was within the power of the Commonwealth and the exercise of that discretion, and the operation of any order made was not limited by the existence of s 35 of the Guardianship Act 1987 (NSW). In a joint judgment Mason CJ., Deane, Toohey, Gaudron JJ. said at p 600 (footnotes omitted):

s.51the Constitution

“The grants of legislative power contained in pars (xxi) and(xxii) of of are cumulative. Each must be given its full scope and effect. Neither is to be read down by reference to the other. Paragraph (xxi)'s grant of legislative power with respect to "Marriage" encompasses laws dealing with the protection or welfare of children of a marriage in so far as the occasion for such protection or welfare arises out of, or is sufficiently connected with, the marriage relationship”

It was submitted on behalf of the wife, which I accept, that in P v P a majority specifically endorsed in the context of s 51(xxi), a test of sufficient, rather than close connection. In order for a law to be characterised as a law on a subject matter or power there must be a connection with the subject assigned to the Commonwealth Parliament and the test to be applied in relation to each of the powers in s 51 of the Constitution, including paras (xxi) and (xxii), is that there must be a ‘sufficient connection’ between the law and the power: See also The Grain Pool of Western Australia v Commonwealth (supra) and Re Maritime Union of Australia; Ex parte CSL Pacific Shipping Inc (2003) 200 ALR 39 at p 48 per Gleeson CJ., McHugh, Gummow, Kirby, Hayne, Callinan and Heydon JJ.

Section 90AE(1) makes it clear that there must be proceedings under s 79 and the power may only be exercised in those proceedings. Proceedings under s 79 are proceedings between the parties to a marriage with respect to their property being proceedings that fall within para (ca) of the definition of “matrimonial cause” in s 4(1) of the Family Law Act. In those proceedings pursuant to s 90AE the court may make an order directing a third party to do a thing in relation to the property of a party to the marriage such as in Ascot Investments v Harper or that alters the rights, liabilities or property interests of a third party “in relation to the marriage”. The court may only make such an order if the pre-conditions in sub-sections (3) and (4) of s 90AE are satisfied which include affording procedural fairness to the third party.
Section 90AE(3)(a) provides that the Court may only make such an order if such is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage.
Further protections are provided. By s 90AE(3)(d) the court must be satisfied that in all the circumstances it is just and equitable to make the order. By s 90AE(3)(e), the court must be satisfied that the order takes into account the matters mentioned in sub-section (4). Those matters relevantly include the economic, legal or other capacity of the third party to comply with the order (see s 90AE(4)(f)), and if as a result of the third party being accorded procedural fairness, it raises any other matters, the Court must take into account those matters.
When s 90AE(2) is read in conjunction with s 90AE(3), s 79, and Part VIIIAA generally, it is clear that what is contemplated is not some arbitrary invasion of the rights of a third party but an alteration of those rights where they are sufficiently connected to the division of the property between parties to a marriage.
Any doubt about the sufficiency of the connection between s 90AE(2) and the marriage or divorce and matrimonial cause power is removed by the presence of s 90AE(3) which relevantly provides that the Court may only make an order under s 90A(2) if the making of the order is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage.
I accept the submission that the Parliament has chosen to adopt in s 90AE(3)(a) the language used by the High Court in deciding whether a law may be supported as incidental to a main placitum of power: Cuncliffe v The Commonwealth (1994) 182 CLR 272 at p 297 per Mason CJ.; Burton v Honan (supra) at p 177; Davis v the Commonwealth (1988) 166 CLR 79 and Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at p 30 per Mason CJ., p 86 per Dawson J. and p 101 per McHugh J.. Since the alteration of property interests between the parties to the marriage under s 79 falls within the “central area” of the marriage power, a law which is “reasonably necessary, or reasonably appropriate and adapted, to effect [that] division of property” must, by definition, at least be incidental to the marriage power, and a sufficient connection exists when the other limitations in Part VIIIAA are taken into account.
The task is to determine whether the characterisation that would support validity is sufficiently made out and I am satisfied that it has. In my view, sections 90AE(2) and 90AF(2) are, at least, supportable as incidental to the power to make laws with respect to marriage, divorce or matrimonial causes, if not indeed “central” to those powers. The requirement in s 90AE(3)(a) that the order be “reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage” ensures its validity, particularly in light of the overall scheme.
Finally, as to s 90AE(2)(a), and in the alternative, I accept that to the extent that a “third party” referred to therein is a constitutional corporation, such as the Third Respondent, or within the referred corporations power, s 90AE(1)(d) is supportable under the Corporations power in s 51(xx) of the Constitution and s 90AE(2)(a) enables a court to make a similar order to one authorized by s 90AE(1)(d): The Queen v Humby; Ex parte Rooney (supra) at pp 243-244, 248.
Submissions were made on behalf of the Respondents in relation to the construction of s 90AE(2) and s 90AF(2) and also s 90AE(3) and s 90AF(3). The submissions focussed on s 90AE(2) and s 90AE(3). It was submitted that as a matter of construction the Court’s powers under these sections are “unlimited” as to parties, “unrestricted” as to the nature of alterations, and that there is no necessity for there to be any connection between the rights, liabilities or property interests of the third party on the one hand with the marriage or the parties to the marriage on the other. It was submitted that notwithstanding the terms of s 90AE(3) and (and 90AF(3)), the order may bring about a result which only has some indirect relation to the division of property “and there is no limit on the degree of indirectness”.
The power and discretion of the Court is carefully controlled and confined. The requirement in s 90A(3)(a) (and see the identical requirement in s 90AF(3)(a)) that the making of the order be “reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage” in and of itself ensures that far from the discretion being “unlimited” or “unrestricted”, it is carefully linked, and certainly sufficiently connected, to the subject matter of marriage and matrimonial causes. In particular, it is bound up in, or at least sufficiently connected to, the central area of the marriage power, namely, the effecting of a division of property between the parties to the marriage.
I accept the submission on behalf of the Wife that nor can there be any valid objection to the fact that the expressions “reasonably necessary” and “reasonably appropriate and adapted” require a degree of discretion in assessing that test. As was submitted there is no constitutional objection to a court both creating and enforcing rights “in one blow”.

Conclusion

I am of the opinion that s 90AE(2) and s 90AF(2) are laws with respect to marriage, divorce or matrimonial causes, or at least incidental thereto, given that they are to be made in the case of s 90AE, in proceedings under s 79 for division of property orders, which orders are “central” to the marriage power and in the case of s 90AF, in proceedings under s 114, which confers power on the Court to grant injunctions, but only in proceedings of the kind referred to in para (e) of the definition of “matrimonial cause” in s 4(1). This creates a sufficient connection with each of the marriage, divorce and matrimonial causes powers.
The scheme of Part VIIIAA and the relevant impugned provisions is such as to ensure that the capacity of the court to make orders which affect third parties is carefully constrained and remains sufficiently connected to the marriage, divorce or matrimonial cause powers which support it.
I am of the opinion that s 106B of the Family Law Act is a valid law of the Commonwealth.
I am also of the opinion that s 90AE(2) and s 90AF(2) of the Family Law Act are valid laws of the Commonwealth.
Accordingly the application for summary dismissal must fail and I propose to dismiss it.

Orders

The application for summary dismissal filed on behalf of the Second and Third Respondents on 8 December 2005 be dismissed.

[2006] FamCA 167

14 March 2006