Ian Charles Fowell Spry v Helen Marie Moylan

[2010] HCATrans 195

[2010] HCATrans 195

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M7 of 2010

B e t w e e n -

IAN CHARLES FOWELL SPRY IN HIS PERSONAL CAPACITY AS TRUSTEE OF THE ICF SPRY TRUST

Applicant

and

HELEN MARIE MOYLAN

First Respondent

ELIZABETH ANNE FOWELL SPRY

Second Respondent

CATHARINE SARAH FOWELL SPRY

Third Respondent

CAROLINE JANE FOWELL SPRY

Fourth Respondent

PENELOPE SARAH FOWELL SPRY

Fifth Respondent

EDWIN PHILIP KENNON (TRUSTEE OF THE CATHERINE SPRY TRUST, THE CAROLINE SPRY TRUST AND THE PENELOPE SPRY TRUST AND IAN CHARLES FOWELL SPRY (TRUSTEE OF THE CATHERINE SPRY TRUST, THE CAROLINE SPRY TRUST AND THE PENELOPE SPRY TRUST AND IAN CHARLES FOWELL SPRY (TRUSTEE OF THE ELIZABETH SPRY TRUST)

Sixth Respondents

Application for special leave to appeal

HEYDON J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 30 JULY 2010, AT 10.00 AM

Copyright in the High Court of Australia

__________________

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friend, MR J.F.P.C.C. WALSH OF BRANNAGH, for the applicant.  (instructed by Nedovic & Co.)

MR J.T. GLEESON, SC:   May it please the Court, I appear with MR P. KULEVSKI for the first respondent.  (instructed by Kennedy Wisewoulds)

HEYDON J:   Thank you.  The second, fourth and fifth respondents have not entered an appearance.  An affidavit of Olivia Emily Grobtuch dated 28 July 2010 annexes letters of the second respondent on behalf of herself and the fourth and fifth respondents.  Those letters record that those respondents do not wish to be associated with the proceedings.  The third respondent has indicated that she does not wish to supplement her written submission by oral argument and the so‑called sixth respondents have indicated that they will not present oral argument because they accept and endorse the submissions of the applicant.  Yes, Mr Jackson.

MR JACKSON:   Your Honours, may I just say something about the affidavit to which your Honour has referred and it is just this.  If your Honours go to paragraphs 3 and 4 of that affidavit, your Honours will see that it is said in paragraph 4 that “The children were not parties to the proceedings in the Full Court at the time of the judgment below”.  Could I just say this, your Honours, that the four children were parties to the appeal to the Full Court.  You can see that from the notice of appeal at page 31.  They did not participate in the proceedings in the Full Court.  You will see that in the Full Court’s reasons at page 40, paragraph 20, but they did not cease to be parties and there does not appear to be any order removing them as parties.  The rules of this Court in paragraph 41.01.1 require them to be made parties to the appeal. 

Your Honours, could I go to the substance of the matter.  The Full Court of the Family Court in this case held that the Family Court was empowered to order that the funds of the ICF Spry Trust be utilised to satisfy three things; the balance of the applicant’s personal obligation to the first respondent in respect of the balance of the amount which he had been ordered to pay her, secondly, interest on that amount and, thirdly, costs of the proceedings in the Family Court.  Your Honours, that can be seen from a number of references.  May I take your Honours very briefly to two of them.  One is at page 127 of the application book and, your Honours, in particular, paragraphs 355 through to 358 and, secondly, your Honours, page 132, paragraph 134.

HEYDON J:   Page 132, paragraph?

KIEFEL J:   You mean 384?

MR JACKSON:   I am sorry, your Honour, 384. 

HEYDON J:   Thank you.

MR JACKSON:   Your Honours, the basis upon which that was done was that it was authorised by the observations of Justices Gummow and Hayne in the earlier case in the Court, Kennon v Spry. I will give your Honours the reference in just a moment, if I may, and I will take the relevant passages in just a moment. That appears from the Full Court’s reasons at page 126, paragraphs 353 through to, I think, paragraph 356 and, in particular, paragraph 356. Could we observe in passing, your Honours, that there was not unanimity of a majority in this Court in Kennon v Spry, and I will come to illustrate that in a few moments, if I may.

The first thing we would seek to say, your Honours, is that the view taken by the Full Court in this case, in our submission, is not what Justices Gummow and Hayne said at that passage.  Could I take your Honours to Kennon v Spry 238 CLR 366. The relevant passage is at page 411. Your Honours will see paragraphs 137 and 138, and those are the passage which are relevant. In paragraph 137 the issue being dealt with there was whether the value of the trust fund, because of the first respondent’s interest as a potential beneficiary – your Honours, I put it in that slightly global way because a number of views were expressed as to the nature of her interest – could be taken into account in determining the property of the parties to the marriage, or either of them and that was the matter at issue in those proceedings. Your Honours will see the last six or seven lines of paragraph 137 particularly.

Your Honours, when one came to paragraph 138, however, what was being dealt with was how the applicant might seek to meet a personal obligation to pay the first respondent and, if I could just say, your Honours, those observations were, so far as the case was concerned, in our submission, obiter.  If one goes to the observations at paragraph 138, it is not, with respect, entirely clear what was intended by them and (b) how they could be applied to the course taken in the present case.  May I say a number of things in that regard, your Honours.  Your Honours will see that paragraph 138 commences with the words:

If the husband wishes to satisfy his obligations to the wife under order 4 by recourse to the augmented assets of the Trust then it is open to him to approach the court –

and your Honours will see the remainder of that sentence.  Your Honours, could I just say, he did not wish to do so, rather the opposite.  The question which also arises is whether the Court that is referred to in paragraph 138 is the Family Court or is it a court ordinarily having jurisdiction in relation to trusts, such as the Supreme Court of Victoria, and then there are indications both ways, your Honours.  The types of orders referred to in paragraph 138, or spoken of by the Judges there, would seem to be those which might be made by the Supreme Court of Victoria under a common enough provision, such as section 63 of the Trustee Act, allowing variation, to put it shortly, of trusts.

On the other hand, the words “just and equitable”, which also appear in paragraph 138, as used in the last sentence, may perhaps reflect section 79(2) of the Family Law Act, although the forms of orders that are there set out do not.  Your Honours, to put it shortly, the observations at paragraph 138 do not, in our submission, suggest that there is an obligation on the present applicant to apply trust funds to meet his own debts.  The observations, in our submission, do not lend support to the views of the Full Court and we would submit it cannot be said that the reasons of the other members of the Court in Kennon v Spry result in a majority in support of that approach.

Could I, in that regard, your Honours, say this.  Your Honours will see Chief Justice French at page 391 of Kennon v Spry in paragraph 67 and your Honours, he appears to accept that an order could be made under section 79 requiring the application of assets of the trust, in whole or in part, towards the first respondent. That appears to have been in support of the conclusion that the trust fund was property of the parties to the marriage. It is not clear, with respect, whether his Honour was saying that the order could simply be made under section 79 in the manner done here and could we refer your Honours to what he said in paragraph 80 at page 395.

Your Honours, if he did take that view, he was the only member of the Court to do so, because your Honour Justice Kiefel decided on the basis of section 85A(1) and your Honour Justice Heydon was in dissent on the matter.  So, your Honours, we would submit it is by no means apparent that the view of Justices Gummow and Hayne was a majority view, albeit, we would add, with respect, on observations which were obiter in those proceedings and, secondly, that if it were, that it was followed.  Your Honours, the decision of the Full Court has given the Family Court a very wide jurisdiction and, your Honours, could I take your Honours for a moment to our summary of argument at page 175 and, in particular, paragraphs 24 to 25 and may I just say these things, your Honours. 

The trust was not a sham.  It had been in existence for years.  Of course, the assets of the trust had come from the efforts, to put it neutrally, of the parties to the marriage, but the moneys were not put into the trust conditionally.  The trustee was entitled to give weight to his own views and, your Honours, we would ask the question, why should the assets go to satisfy all the obligations, including for costs and interest, of the applicant, personally, to the first respondent?  Your Honours, what about the interest of the other potential beneficiaries of whom there were some who were not parties to the proceedings?

HEYDON J:   Who do not wish to be here today.

MR JACKSON:   No, your Honour, they fall into two classes, class one being the children, one of whom has made a submission.  The other three, so far as the children are concerned – your Honour, I was actually speaking about people other than the children, but so far as the three other children are concerned, they are prepared to abide the order of the Court on this application.  If the matter goes further, it may be a different matter.  Could I also say, your Honours, that there were other potential beneficiaries and they do not seem to have been made parties to the proceedings at all.

KIEFEL J:   All of this leaves the question whether or not the Full Court order in fact attached to trust moneys or whether they were Dr Spry’s moneys.

MR JACKSON:   Not quite, with respect, your Honour, because you will see that the reasons of the – perhaps if I go to the orders first of all.  If your Honour goes to the orders of Justice Coleman, which are at pages 29 and 30, you will see that at paragraph 1 that she be paid nearly $1 million out of the balance of the money held by the stakeholders.  Order 2 relates to the money held by the stakeholders, and so too does order 3.  Your Honours, in the context of the matter, at least some of, some of, those moneys must have been moneys of the trust. 

The point we seek to make, and I will not go into it in detail, your Honours, is just this, that there was evidence, which the primary judge seems not to have discounted, from the four girls that there was about $3.6 million which was moneys of the trust which formed part of the $4.4 million that was there.  So it must have been some of it, your Honour.  Your Honours, we go into some more detail in our submissions on the issue, but it is not an issue which can just be dismissed, with respect, as turning on questions of what the evidence was and the burden of proof.

KIEFEL J:   Dr Spry seems to think that it requires some clarification because he wishes to put in further evidence about it.

MR JACKSON:   Your Honour, that is the next to point to which I wish to come.  Your Honour, could I just finish on the point I was making before.  We say the propriety of the course adopted below was not one that was decided in favour of its adoption in Kennon v Spry and the issue should be dealt with by this Court.  Could I come to the further evidence aspect, your Honours. 

There were two applications by the applicant to adduce further evidence and, your Honours, the Family Court, of course, under section 93A(2) has power to admit such evidence on appeal, a discretion of course.  The further evidence was rejected on grounds that included the fact that the trust assets could be used in any event.  Your Honours will see that at page 120, first of all in paragraph 319 and your Honours will see the reference – that is dealing with the first application of 30 March, as you will see from paragraph 317. 

One of the grounds was that the trust assets could be used to satisfy the claims and so it did not really matter, and the second, your Honours, was, one can see, dealt with at the same page, 120, at paragraph 322, and your Honours will see again the reference to the trust funds.  So, your Honours, the view of the Full Court as to the propriety of admitting the further evidence was an issue which itself depended on the view that they took as to the ability to have recourse to the trust funds. 

Now, your Honours, it may be that that would be regarded as a factor which in the end is one which was not decisive, but the point we would seek to make about it is simply this, that in circumstances where there is, in our submission, a perfectly arguable special leave issue on the question which is a principle question, then another issue turning in part on that at least should be the subject of a possible appeal, whether it be needed to be decided be another question. 

Your Honours, the only other question was the question of interest and $54,000, I think, your Honours, was in issue, a modest sum, our learned friends suggested, and, your Honours, two issues arose in relation to it.  The relevant provision can be seen at page 20 of the application book, section 117B.  It is set out in paragraph 113 on that page.  Your Honours will see that subsection (1) provides that where:

a court makes an order for the payment of money . . . interest is payable, at the rate prescribed by the applicable Rules of Court –

There is then provision in subsection (2) for there to be a change of the rate, for example, applicable. Your Honours, two issues arose in relation to that. One was whether a judge, other than the judge who made the original order, could exercise powers under section 117B(2) and the Full Court said no. It did so at page 157 and your Honours will see that in paragraph 478. Your Honours, could I say that our submissions on this issue appear at page 176, in paragraph 30, and the point we seek to make, is that the issues which may make it appropriate to make an order under that provision may not arise until after, or well after, the making of the order for payment and that the restriction imposed by the Full Court is not contemplated by the statute.

The second basis, your Honours, on which the Full Court dealt with this issue was that it said the primary judge had applied the wrong test.  You will see that at page 158 in paragraphs 481 and 482.  Their Honours seem to have said that the test was one of applying the interests of justice.  Your Honours, if one goes back to page 20, the provision does not really quite say that, nor is it apparent, in our submission, that what the judge was doing was not to act in the interest of justice.  His reasons appear at page 22.  They run, essentially, from paragraph 124 through to 132.

It is true that he refers to the question of appropriate compensation for the first respondent being out of the money, but, your Honours, that is really what interest provisions are for and that is what the public interest, in our submission, would require.  So, your Honours, to put is shortly, our

case, in our submission, is one where it is appropriate for the grant of special leave because the principle issue is one which does give great breadth to the powers of the Family Court.  It is an issue that has not been decided by the Court.  It is an issue that arises directly here and should be dealt with by the Court.

HEYDON J:   Yes, thank you, Mr Jackson.  The Court will adjourn briefly to consider the future course of the hearing of the application.

AT 10.22 AM SHORT ADJOURNMENT

UPON RESUMING AT 10.25 AM:

HEYDON J:   We will not trouble you, Mr Gleeson.

The applicant raises six special leave questions.  The first is whether “a trustee of a discretionary trust the objects of which may be treated as including the trustee’s former wife can be compelled by order of the Family Court of Australia to pay over to the former wife sufficient assets of the trust in order to satisfy orders for payment of money made against the trustee personally by that Court as to property settlement, interest thereon and costs of proceedings.”  The applicant has raised grounds for questioning the correctness of parts of the reasoning of the courts below.  Whether or not these grounds would be made out on an appeal there is no reason to suppose that the actual orders of the court below were incorrect.

The second special leave question is whether “in circumstances where the evidence demonstrated that a sum held by stakeholders was partly the property of a husband personally and partly his property as trustee of a discretionary trust, the burden of demonstrating what part of the property was the husband’s property lay on a former wife seeking to obtain the husband’s property to satisfy orders in her favour for a property settlement, interest and costs.”  The applicant trustee had, on his own case, withdrawn the trust property from investment and intermingled it with non‑trust property so that the whole of the property was in the form of cash.  The court below did not err in concluding that in these circumstances a burden lay on the trustee to explain who owned which part of the intermingled fund.

The third special leave question is whether “the approach taken by the Full Court in rejecting the applicant’s applications of 30 March 2009 and 9 November 2009 to adduce further evidence involved too narrow an application of s.96A(2) of the Family Law Act1975.”  There is no reason to doubt the correctness of the decisions attacked, which were discretionary decisions on a matter of practice and procedure.

The fourth special leave question is whether “the power under s.117B(2) of the Family Law Act may only be exercised by the Judge making the order for payment of money referred to in s.117B(1).” The fifth special leave question is whether “the approach to the selection of a rate of interest payable under s.117B(2) taken by the primary Judge was inappropriate.” Whatever the answer to these questions, no injustice in the outcome in relation to the rate of interest selected in the Full Court has been demonstrated.

The sixth special leave question is whether “and in what circumstances Part VIIIAA of the Family Law Act 1975 is applicable as against trusts.” Whatever the answer to this question, the orders below are correct for reasons other than Part VIIIAA.

The application for special leave to appeal is dismissed with costs.

The Court will now adjourn in order to reconstitute.

AT 10.28 AM THE MATTER WAS CONCLUDED