Jacobs & Vale
[2008] FMCAfam 641
•1 July 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| JACOBS & VALE | [2008] FMCAfam 641 |
| FAMILY LAW – Binding financial agreement – setting aside. PRACTICE & PROCEDURE – Summary judgment – whether the applicant has no reasonable prospect of successfully prosecuting his claim considered. |
| High Court Rules 1952 O26 r.18 Family Law Act 1975 ss.90B(1), 90K Federal Magistrates Act 1999 s.17A Federal Magistrates Court Rules2001 rule 13.10 |
| Commercial Bank of Australia v Amadio (1983) 151 CLR 447 Muschinski v. Dodds (1985) 160 CLR 583 David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 Louth v Diprose (1992) 175 CLR 621 Lindon v The Commonwealth (1996) 70 ALJR 541 Bigg & Suzi [1998] FLC 92-799 Pelerman & Pelerman [2000] FLC 93-037 Vivid Entertainment LLC v Digital Sinema Australia Pty Ltd [2007] FMCA 157 White Industries Australia v Assistant Commissioner of Taxation [2007] FCA 511 Jefferson Ford Pty Ltd v Ford Motor Company of Australia Limited [2008] FCAFC 60 |
| Applicant: | MR JACOBS |
| Respondent: | MS VALE |
| File Number: | BRC 251 of 2007 |
| Judgment of: | Jarrett FM |
| Hearing date: | 28 April 2008 |
| Date of Last Submission: | 6 May 2008 |
| Delivered at: | Brisbane |
| Delivered on: | 1 July 2008 |
REPRESENTATION
| Counsel for the Applicant: | Ms Carew |
| Solicitors for the Applicant: | Jones McCarthy Lawyers |
| Counsel for the Respondent: | Ms Hogan |
| Solicitors for the Respondent: | Cooper Grace Ward Lawyers |
ORDERS
That the respondent’s application for summary dismissal filed on
22 April, 2008be dismissed.
By consent, that pursuant to clause 17.2 of the binding financial agreement entered into between the parties on the 7th October, 2002 the sum of $30,000.00 (being the sum certified as proper by the respondent’s solicitor) shall be held by the solicitors for the applicant in an investment account on trust for the husband for the purpose of providing security for legal costs.
That the solicitor’s for the applicant provide details of the investment established pursuant to order 2 hereof to the wife’s solicitors;
That the solicitor’s for the applicant only disburse or otherwise deal with that fund:
(a)a lawful demand from the wife’s solicitors to do so; or
(b)further order of the Court.
IT IS NOTED that publication of this judgment under the pseudonym Jacobs & Vale is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRC 251 of 2007
| MR JACOBS |
Applicant
And
| MS VALE |
Respondent
REASONS FOR JUDGMENT
In his application for final orders filed on 19 March, 2008 Mr Jacobs applies for orders that:
a)
the binding financial agreement entered into by the parties on
7 October, 2002be set aside;
b)a property adjustment order be made pursuant to s.79 of the Family Law Act 1975 whereby the respondent is ordered to pay to the applicant $381,963.00;
c)the respondent pay his costs of the proceedings.
The respondent, Ms Vale, applies for an order that the principal proceedings be summarily dismissed. Alternatively, she asks for an order that Mr Jacobs provide security for her costs of the proceedings in the sum of $30,000.
Background
The parties entered into a financial agreement (as that phrase is defined in s.90B(1) of the Family Law Act 1975 on 7 October, 2002. They married on 12 October, 2002 separated on 7 January, 2006 and divorced shortly thereafter on 21 March, 2007.
The financial agreement records in schedules 1 and 2 thereof, the assets, financial resources and liabilities of the parties at the time the agreement was executed. Mr Jacobs’ net worth was approximately $54,900 and Ms Vale’s net worth was approximately $1,290,800.
It was not suggested in argument that there were any formal matters that invalidated the financial agreement or in any way deprived it of its status as a financial agreement which bound the parties under the Family Law Act (see s.90G(1) of the Act).
Summary Dismissal
Section 17A of the Federal Magistrates Act 1999 provides as follows:
17A(1) The Federal Magistrates Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is prosecuting the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding.
17A(2) The Federal Magistrates Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is defending the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.
17A(3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:
(a) hopeless; or
(b) bound to fail;
for it to have no reasonable prospect of success.
17A(4)This section does not limit any powers that the Federal Magistrates Court has apart from this section.
Rule 13.10 of the Federal Magistrates Court Rules2001 reflects s.17A of the Act. The Rule is in the following form:
13.10 The Court may order that a proceeding be stayed, or dismissed generally or in relation to any claim for relief in the proceeding, if the Court is satisfied that:
(a) the party prosecuting the proceeding or claim for relief has no reasonable prospect of successfully prosecuting the proceeding or claim; or
(b) the proceeding or claim for relief is frivolous or vexatious; or
(c) the proceeding or claim for relief is an abuse of the process of the Court.
Counsel for Mr Jacobs submitted that the principles to be applied on an application for summary dismissal are to be found in cases such as Bigg & Suzi [1998] FLC 92-799, Pelerman & Pelerman (2000) FLC 93-037 and in the following passage by Kirby J in Lindon v The Commonwealth (1996) 70 ALJR 541 at 544:
The approach to be taken by the court to the Commonwealth's application for summary relief is not in doubt:
1. It is a serious matter to deprive a person of access to the courts of law for it is there that the rule of law is upheld, including against government and other powerful interests. This is why relief, whether under O 26, r 18 or in the inherent jurisdiction of the court, is rarely and sparingly provided.
2. To secure such relief, the party seeking it must show that it is clear, on the face of the opponent's documents, that the opponent lacks a reasonable cause of action or is advancing a claim that is clearly frivolous or vexatious.
3. An opinion of the court that a case appears weak and such that it is unlikely to succeed is not, alone, sufficient to warrant summary termination. Even a weak case is entitled to the time of a court. Experience teaches that the concentration of attention, elaborated evidence and argument and extended time for reflection will sometimes turn an apparently unpromising cause into a successful judgment.
4. Summary relief of the kind provided for by O 26, r 18, for absence of a reasonable cause of action, is not a substitute for proceeding by way of demurrer. If there is a serious legal question to be determined, it should ordinarily be determined at a trial for the proof of facts may sometimes assist the judicial mind to understand and apply the law that is invoked and to do so in circumstances more conducive to deciding a real case involving actual litigants rather than one determined on imagined or assumed facts.
5. If, notwithstanding the defects of pleadings, it appears that a party may have a reasonable cause of action which it has failed to put in proper form, a court will ordinarily allow that party to reframe its pleading. A question has arisen as to whether O 26, r 18 applies to part only of a pleading.27 However, it is unnecessary in this case to consider that question because the Commonwealth's attack was upon the entirety of Mr Lindon's statement of claim.
6. The guiding principle is, as stated in O 26, r 18(2), doing what is just. If it is clear that proceedings within the concept of the pleading under scrutiny are doomed to fail, the court should dismiss the action to protect the defendant from being further troubled, to save the plaintiff from further costs and disappointment and to relieve the court of the burden of further wasted time which could be devoted to the determination of claims which have legal merit.
(footnotes omitted)
At the time Lindon was decided, O 26 r 18 of the High Court Rules 1952 was in the following terms:
Striking out pleading where no reasonable cause of action disclosed
(1)The Court or a Justice may order a pleading to be struck out on the ground that it does not disclose a reasonable cause of action or answer.
(2)In that case, or in case of the action or defence being shown by the pleadings to be frivolous or vexatious, the Court or a Justice may order the action to be stayed or dismissed, or judgment to be entered accordingly, as is just.
The principles set out by Kirby J in Lindon were applied by the Full Court of the Family Court in Bigg & Suzi (1998) 22 Fam LR 700 and Pelerman & Pelerman (2000) 26 Fam LR 505.
In Bigg & Suzi the Full Court identified three sources for the Family Court’s power to summarily dismiss proceedings (at paras. 5.5 – 5.9). The first is that court’s inherent jurisdiction. The second and third were, by reason of s.38(2) of the Family Law Act which permitted recourse to the High Court Rules when the Family Law Rules were insufficient, O 26 r 18 and O 63 rr 1 and 2 of the High Court Rules. The Full court determined that the Court’s inherent power and the power conferred by the High Court Rules was to be exercised according to Kirby J’s statement of principle in Lindon (at para 5.10).
In Pelerman the Full Court referred to Bigg v Suzi and summarised the relevant principles as follows (at p. 511):
(a) The power for summary dismissal is a discretionary one.
(b) Relief “is rarely and sparingly provided”.
(c) The parties seeking summary dismissal must show that the application is “doomed to fail” or as has been otherwise described “that the opponent lacks a reasonable cause of action or is advancing a claim that is clearly frivolous or vexatious”.
(d) A weak case or one that is unlikely to succeed is not “sufficient to warrant termination”.
(e) “If there is a serious legal question to be determined, it should ordinarily be determined at a trial”.
(f) “If notwithstanding the defects of pleadings, it appears that a party may have a reasonable cause of action which it has failed to put in proper form, a Court will ordinarily allow that party to reframe its pleadings”.”It will immediately be appreciated that the power possessed by the Federal Magistrates Court pursuant to the Federal Magistrates Act and the Federal Magistrates Court Rules is fundamentally different to the power identified in Lindon, Bigg v Suzi and Pelerman.
The nature of the power conferred by s.17A of the Federal Magistrates Act has been comprehensively considered by Driver FM in Vivid Entertainment LLC v Digital Sinema Australia Pty Ltd [2007] FMCA 157. In that case his Honour considered the numerous decisions of the Federal Court in which the meaning of the identically worded s.31A of the Federal Court Act were considered. His Honour concluded:
29. I agree with French J that s.17A, like s.31A, has nothing to do with striking out pleadings. The section, and the Court rules which amplify it, deal with summary judgment and summary dismissal. Pleadings may be relevant in order to determine whether a party should receive summary judgment or suffer summary dismissal but the section, and the rules, are not vehicles for dealing with deficient pleadings. That is, if anything, more clear in this Court, which is not a court of pleadings. Further, in considering whether an apparently hopeless case can be saved by amendment, or further evidence, it may be necessary to consider the conduct of the party who would benefit from that indulgence, and the other circumstances of the proceedings, and determine whether that party is entitled to it, or whether the party should be denied that indulgence.
30. Otherwise, in the absence of guidance from the Full Federal Court on the interpretation of s.31A, I will follow the cautious approach of Rares J and Jacobson J. In particular, I agree with and will apply the principles summarised by Jacobson J, in the following slightly amended terms:
· In assessing whether there are reasonable prospects of success on an application or a response, the Court must be cautious not to do an injustice by summary judgment or summary dismissal.
· There will be reasonable prospects of success if there is evidence which may be reasonably believed so as to enable the party against whom summary judgment or summary dismissal is sought to succeed at the final hearing.
· Evidence of an ambivalent character will usually be sufficient to amount to reasonable prospects.
· Unless only one conclusion can be said to be reasonable, the discretion under s.17A cannot be enlivened.
· The Court should have regard to the possibility of amendment and additional evidence in considering whether only one conclusion can be said to be reasonable. In that consideration, the conduct of the parties and the other circumstances of the case may be relevant.
(footnotes omitted)
Since Driver FM’s judgment, the Full Court of the Federal Court of Australia has considered the approach to s.31A of the Federal Court of Australia Act. In Jefferson Ford Pty Ltd v Ford Motor Company of Australia Limited [2008] FCAFC 60 the Full Court consisted of Finkelstein, Rares and Gordon JJ. Finkelstein J summarised the approach thus:
21 In Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 70 IPR 146 Rares J attempted to describe the requisite standard under s 31A. After reviewing many cases, most from different and not necessarily analogous areas, he came down to the view (expressed at 157) that if there was "a real issue of fact to be decided" or "possibly, where there is a real issue of law" to be resolved the matter should go to trial. This, with respect, does not seem to be very far removed from the old O 14 test. So the standard must be found elsewhere.
22 Perhaps one should look further at what Parliament intended to achieve. In O 14 cases, to show cause against an application for summary judgment, a defendant is required to go into some detail and state clearly and concisely the facts to be relied upon: Country Estates Pty Ltd v Leighton Contractors Pty Ltd (1975) 49 ALJR 173, 173-174. This requires only the material facts to be stated as distinct from the evidence that would establish those facts: Ritter v North Side Enterprises Pty Ltd (1975) 132 CLR 301, 304. If the test under s 31A raises the hurdle for the opposing party, it may be necessary for that party at a minimum to provide an outline of the evidence that will be relied upon. The outline must be sufficient to show that there is a genuine dispute about facts that are material to the outcome of the case. That will enable the judge to make some assessment of the merits. It would not, of course, be necessary, in most cases, to require the party to do more than provide an outline, because that would turn the summary judgment application into a trial.
23 In other words, the section requires the judge to conduct what might loosely be described as a preliminary trial and look more closely than he would under an O 14 application to a party’s assertion that there is a real question of law or fact to be decided. Such an assertion is to be examined with a critical eye. The judge is to decide whether the opposing party has evidence of sufficient quality and weight to be able to succeed at trial. There will be cases where the asserted facts appear to be so improbable that there is no point in allowing them to go to trial. There will be others where the opposing party has not been able to show that the asserted facts are likely to be established at a trial. On questions of law, the judge should conduct an inquiry into their merit, not for the purpose of resolving them (though this can be done – see Rosser v Austral Wine and Spirit Co Pty Ltd [1980] VR 313, 320) and also not simply to determine whether the argument is hopeless, but in order to decide whether it is sufficiently strong to warrant a trial. If the judge is satisfied that he (or she) is able to resolve any contested legal issue at a summary hearing and without undue delay, it may be better all around if that be done. If not, then at least the merits must be tested. That will then give s 31A a substantial operation, which is what, it seems to me, was intended.
Rares J. took a different view:
73 The parties accepted both before the primary judge and before us that the test to be applied under s 31A of the Federal Court of Australia Act was that which I stated in Boston Commercial Services Pty Limited v GE Capital Finance Australasia Pty Limited (2006) 236 ALR 720 esp at 731 [45]. Because neither party challenged that test, it is neither necessary nor appropriate to examine it in this appeal for the reasons given in Roy Morgan Research Centre Pty Limited v Commissioner of State Revenue (Vic) (2001) 207 CLR 72 at 82-83 at [23] per Gaudron, Gummow, Hayne and Callinan JJ; In the Matter of an Application by the Chief Commissioner of Police (Vic) (2005) 79 ALJR 881 at 886 [29] per Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ. If the Court were to consider departing from that formulation of the test, the parties are entitled to be heard on the question. The Court’s function is to decide the litigation on the issues fought by the parties. It is not entitled, without either party raising an issue, let alone addressing it, to embark after reserving judgment on a determination of an important question of statutory construction which is not an issue in the litigation.
Gordon J. took yet another view:
123. Section 31A is a summary procedure. It enables the Court to give judgment where a proceeding or part of a proceeding has "no reasonable prospects of success". A number of principles inform consideration of an application for judgment under s 31A of the Federal Court Act.
124. First, the express words of s 31A impose a different and less stringent test to that described in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129-30. As was explained in the second reading speech of the Migration Litigation Reform Bill 2005 which introduced s 31A of the Federal Court Act, the legislative purpose of s 31A was to strengthen " ... the power of the court to deal with unmeritorious matters by broadening the grounds on which federal courts can summarily dispose of unsustainable cases": Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 70 IPR 146 at [45]; Paramasivam v University of New South Wales [2007] FCAFC 176 at [41] and PZ Cussons (International) Limited v Rosa Dora Imports Pty Ltd [2007] FCA 1642 at [13].
125. That such a provision should exist is not surprising. In modern litigation, cost and delay are two prominent features of the legal landscape: Gleeson CJ (1998) Commentary on Paper by Lord Browne-Wilkinson (Supreme Court of New South Wales Judges’Conference) (viewed 26 November 2007) (stating that "civil litigation is far too expensive" and "there should be an increased emphasis on summary disposal of proceedings which are amenable to such treatment"). Section 31A is a provision which permits, and assists, the Court to manage proceedings and therefore assists in controlling the cost of, and delays in, resolving proceedings by summarily dismissing claims which have no reasonable prospect of success. At the same time, it is a provision that ensures that no injustice is done to a party. The mechanism adopted to achieve these objectives is that before judgment is entered, the claim or part of the claim must have "no reasonable prospect of success."
126. Secondly, assessment of whether a proceeding or a part of a proceeding has no reasonable prospects of success will necessarily require:
1. identification of the cause of action pleaded;
2. identification of the pleaded facts said to give rise to that cause of action;
3. a review of the evidence (if any) tendered in support of the claim for judgment;
4. identification of the defence pleaded;
5. identification of any facts pleaded which are said to give rise to the defence; and
6. a review of the evidence (if any) tendered in defence of the claim.
The method by which such a claim or part of a claim will be assessed will vary depending on the nature of the cause of action, the identity of the parties, the pleaded facts and the evidence, if any, tendered.
127. Thirdly, each case must be considered separately. No particular hard and fast rules can be set down, only general principles. One principle is that the moving party bears the onus of persuading the court that the opponent has no reasonable prospect of success (see Crayford Freight Services Ltd v Coral Seatel Navigation Co (1998) 82 FCR 328 at 333). As noted earlier, however, s 31A has lessened the standard that must be met. In that regard, it must be emphasised that once a moving party has established a prima facie case that the opponent has no reasonable prospect of success, the opposing party must respond by pointing to specific factual or evidentiary disputes that make a trial necessary; general or non-particularized denials will be insufficient to defeat the motion: see Fortron Automotive Treatments Pty Ltd v Jones (No 2) [2006] FCA 1401 at [22]. In other words, it is inappropriate in defence of a claim for judgment under s 31A of the Federal Court Act to seek to defend by merely putting a claimant to formal proof: Vans, Inc v Offprice.Com.Au Pty Ltd [2006] FCA 137 at [12]. This is not a new concept. It finds earlier reflection in ss 190(4) and 191 of the Evidence Act 1995 (Cth) and O 33, O 34 and O 34B of the Federal Court Rules.
128. Another, fourth principle, is that the trial court’s decision to grant summary judgment is to be made as a question of law and reviewed as such by the appellate court. Although ss 31A(1)-(2) state that the court "may" give summary judgment, the word "may" is used here in its empowering sense, not in a discretionary sense: Leach v R (2007) 230 CLR 1 at [38]; Finance Facilities Pty Ltd v Federal Commissioner of Taxation (1971) 127 CLR 106 at 134-35 and Automotive, Food, Metals Engineering, Printing and Kindred Industries Union v Mechanical Engineering Services Pty Ltd [2007] FCA 1736 at [21] (collecting cases where the use of "may" in a statute was "to confer a power and not a discretion"). As the High Court explained in Mitchell v R (1996) 184 CLR 333 at 345-46 (footnotes omitted)…See also Leach v R (2007) 230 CLR 1 at [38]ff.
129. As in the cases cited, s 31A must be read as conferring a power while indicating the circumstances in which it is to be used, ie, when there is "no reasonable prospect of success". To construe the statute otherwise would give judges discretion to allow even hopeless cases to proceed, which could not have been within the contemplation of a legislature that intended to make summary judgment easier to obtain. Therefore, to the extent that previous decisions of the Federal Court may be understood as suggesting that s 31A confers a general discretion (eg Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 70 IPR 146 at [45]), such a construction of the statutory language is rejected.
130. A fifth principle is that where there is a real issue of fact relevant to a pleaded cause of action, it is unlikely that that part of the proceeding has no prospect of success: see Boston Commercial Services at [44]. So, for example, if the pleadings, affidavits, and other materials considered in connection with the summary judgment motion, reveal a factual dispute and that factual dispute must be resolved to determine whether or not the claim succeeds, it cannot be said that the claim has "no reasonable prospect of success": see Fortron Automotive Treatments Pty Ltd v Jones (No 2) [2006] FCA 1401 at [20] (stating that summary judgment should be made by reference to the pleadings, affidavits, and other evidence as appropriate under the circumstances) and Commonwealth Bank of Australia v ACN 000 247 601 Pty Ltd (in liq) [2006] FCA 1416 at [32]. On the other hand, if the factual contest is unnecessary to the resolution of the cause of action pleaded, then in the absence of other relevant material, there is nothing to prevent the court entering judgment on that claim.
131. By contrast, the existence of a real issue of law does not necessarily preclude summary judgment. This is so because, assuming that there is no relevant factual dispute (or if the relevance of the factual dispute depends, as in the instant case, on the resolution of the legal dispute), the court can generally hear and decide a disputed point of law without the need for a trial or evidentiary hearing. In such cases, the proper course for the court would be to accept submissions and hear argument from the parties in connection with the notice of motion hearing. Even under the earlier, different and more stringent test, "argument, perhaps even of an extensive kind" was permitted "to demonstrate that the case of [a party] is so clearly untenable that it cannot possible succeed": General Steel Industries at 130. Once the court resolves the issue or issues of law, it will then be clear whether the opposing party has reasonable prospects of success and summary judgment can be granted or refused accordingly.
132 I now come to a final, sixth principle, which is that in determining whether a real issue of fact exists such as to preclude summary judgment, the court must draw all reasonable inferences - but only reasonable inferences - in favour of the non-moving party: Commonwealth Bank of Australia v ACN 000 247 601 Pty Ltd (in liq) [2006] FCA 1416 at [30]; Boston Commercial Services at [45]. I emphasize "reasonable" because it is on this point that the lowering of the bar effected by s 31A becomes clear. By distinguishing between "hopeless" cases and those without reasonable prospects for success, the statute makes clear that the court need not (indeed, must not) refuse summary judgment on the basis of a factual dispute said to arise only from a plausible, as opposed to a reasonable, inference.
In the absence of clear guidance from the Full Court of the Federal Court, it is appropriate to follow the conclusions reached by Driver FM in Vivid Entertainment. Having regard to each of the reasons in Jefferson Ford his Honour’s decision is not clearly wrong.
It is also worthwhile to record the remarks of Lindgren J in White Industries Australia v Assistant Commissioner of Taxation [2007] FCA 511 at [55] – [59]:
55. Section 31A and the identically worded s 17A of the Federal Magistrates Act 1999 (Cth) ("the FM Act") were introduced by the Migration Litigation Reform Act 2005 (Cth) (No 137 2005) which commenced on 1 December 2005. On the Second Reading Speech on the Bill for that Act, the Attorney-General said that the new provision would strengthen "the power of the courts to deal with unmeritorious matters, by broadening the grounds on which federal courts can summarily dispose of unsustainable cases". By "broadening the grounds" the Attorney-General was referring to the formula "no reasonable prospects of success" as contrasted with a "hopeless" or "bound to fail" test. It is reasonable to think that the Attorney-General may have had in mind migration cases in particular.
56. If the Government’s chief purpose was to facilitate expeditious disposal of legally unmeritorious migration cases, in my respectful view the measure was misconceived. First, I suggest that any assumption that there were migration cases that were not summarily dismissed because they were found not to be "hopeless" or "bound to fail", but that would have been summarily dismissed because they were without any reasonable prospect of success, is without foundation.
57. Second, it is no secret that although migration cases at first instance in the Federal Magistrates Court of Australia and on appeal to this Court are numerous, most of them occupy little hearing time. Not infrequently, the applicant or appellant does not appear. More often, he or she appears unrepresented and either makes no submissions or makes a short submission that fails to address the issue before the Court. The time taken in migration cases for a Federal Magistrate or Judge to read the papers in readiness for a final hearing is no greater, I suggest, than the time required to read the same papers in readiness for the hearing of a motion for summary dismissal.
58. Third, while s 31A of the FCA Act (mutatis mutandis, s 17A of the FM Act) achieves nothing of significance in relation to migration cases, it is of general application and therefore affects all proceedings brought in the Court. The question of the precise meaning of s 31A of the FCA Act and s 17A of the FM Act and of any change they have made has already been the subject of numerous decisions in this Court and the Federal Magistrates Court. The most recent review of them of which I am aware is that of Driver FM on 19 March 2007 in Vivid Entertainment LLC v Digital Sinema Australia Pty Ltd [2007] FMCA 157 at [18]- [28]. The authorities to which his Honour referred are: Howard v Australian Fisheries Management Authority [2006] FMCA 975; MG Distribution Pty Ltd v Khan [2006] FMCA 666; Cate v International Flavours and Fragrances (Aust) Pty Ltd [2007] FMCA 36; Vans Inc v Offprice.Com.Au Pty Ltd [2006] FCA 137; Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 701 IPR 146; Jewiss v Deputy Commissioner of Taxation [2006] FCA 1688; Alphapharm Pty Ltd v Merck & Co Inc [2006] FCA 1227; Duncan v Lipscombe Child Care Services Inc (2006) 150 IR 471; Australian and International Pilots Association v Qantas Airways Ltd [2006] FCA 1441; Commonwealth Bank of Australia v ACN 000 247 601 Pty Ltd (in liq) (formerly Stanley Thompson Valuers Pty Ltd) [2006] FCA 1416; Fortron Automotive Treatments Pty Ltd v Jones (No 2) [2006] FCA 1401; Hicks v Ruddock [2007] FCA 299. Not one of these cases was a migration case. In other words, the task of exploring the meaning of s 31A has arisen in a wide range of the cases in the Federal Magistrates Court and this Court, with the striking exception of migration cases, no doubt for the reason that I mentioned earlier: the provision is of no practical importance in them.
(my emphasis)
As his Honour makes clear, s.17A is a provision of general application to all proceedings in the Federal Magistrates Court. So too, rule 13.10 of the Federal Magistrates Court Rules2001 is a rule that applies to all proceedings commenced in this court. There is nothing in the Federal Magistrates Act, the Federal Magistrates Court Rules or the Family Law Act to suggest the contrary.
The nature of the relief sought
The Court has power under s.90K of the Family Law Act to set aside the financial agreement if one of the five grounds specified in s.90K(1) is established. Sub-section 90K(1) of the Family Law Act provides:
90K Circumstances in which court may set aside a financial agreement or termination agreement
(1) A court may make an order setting aside a financial agreement or a termination agreement if, and only if, the court is satisfied that:
…
(aa) either party to the agreement entered into the agreement:
…
(b) the agreement is void, voidable or unenforceable; or
…
(e) in respect of the making of a financial agreement--a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable; or
…
Mr Jacobs alleges that the financial agreement entered into on the
7 October, 2002should be set aside because Ms Vale’s conduct leading to the making of the financial agreement was unconscionable both for the purposes of s.90K(1)(e) and as that term is known in equity and thereby rendering the agreement voidable or unenforceable. It was also submitted that Ms Vale’s conduct in denying Mr Jacobs an interest in their property beyond that provided for the financial agreement, will lead to her unjust enrichment by reason of contributions to that property made by him during the course of the relationship.
Mr Jacobs relies on the following facts which are set out in his affidavit filed on the 19 March, 2008:
13. At the commencement of our relationship I was working for both [X] full time as a project architect on a salary of $80,000 per annum. I was also working part time, mornings and afternoons for [Z] as a project manager for 25 hours a week at $35.00 an hour. [Ms Vale] was working as a solicitor on $55.000.00 per annum.
14. About 6 months prior to our marriage, [Ms Vale] and I had discussed entering into a BFA. [Ms Vale] told me that her parents would not allow her to marry me without one.
15. I initially objected to the agreement. I did not think it was necessary.
16. However, in order to keep the peace, I said to [Ms Vale] at one stage that “what’s yours is yours, what’s mine is mine and what we do together is split down the middle”.
17. I understand that [Ms Vale] then instructed her Solicitors to prepare a Section 90B Financial Agreement. [Ms Vale] arranged for me to meet with a lawyer to discuss the agreement.
18. I did not want to sign the agreement. I did not consider that it was a positive step at the beginning of our marriage.
19. During our engagement I was living on the Gold Coast but would travel to Brisbane to spend the weekends with [Ms Vale] at her home. On the evening of Sunday 6 October 2002, as we were going to bed [Ms Vale] told me that she had arranged a meeting for me the following day at the solicitors firm […] on the Gold Coast.
20. I was travelling to the Gold Coast the next day for work.
21. [Ms Vale] told me that evening that we would not be getting married unless I attended the offices of Primrose Couper Cronin Rudkin to sign the agreement. I attended the offices of Primrose Couper Cronin Rudkin on the 7 October 2002 during my lunch break. I was there for approximately 30 minutes. I had not seen a copy of the agreement before attending those offices although I had provided [Ms Vale] with information for the Schedule setting out my assets and liabilities at the time.
22. I signed the agreement because I wanted the wedding to go ahead.
24. Prior to my signing the agreement [Ms Vale] I did not discuss the terms of the agreement. The only discussions we had were in relation to the compensation payment to me for my assistance with the supervision of the construction of the house and the conceptual design.
25. We agreed that I would sketch a design of the house and have a builder design and construct the home. I would supervise as the superintendent of the construction.
26. I had fully intended to keep working full time during the construction. There as no suggestion by either of us that I quit my job or take a larger role in the construction. I did not intend to renew my builder’s licence as I was only supervising the construction.
27. [Ms Vale] and I agreed that it would take approximately two months to produce the conceptual design and approximately ten months to supervise the construction. We estimated that it would take 100 hours for the design process and 500 hours for the supervision. At a rate of $50.00 an hour over 600 hours, this equates to $30,000.00. This is the figure we used for the compensation payment in the agreement.
28. As it happened, however, I had to leave full time employment and take on the responsibility for the construction of our home to the extent that neither of us had foreseen when entering into the BFA on the 7 October 2002.
Much of Mr Jacobs’ claim is centred on the work that he says he completed in organising and carrying out the construction of a home on some land gifted to Ms Vale by her father. His claim is that the amount of work that he performed, and the fact that he gave up his own employment for a time, was never contemplated by the parties when they made the financial agreement and if it is not set aside, Ms Vale will have the benefit of all of his hard work and other contributions to that property.
For her part, Ms Vale denies that she said to Mr Jacobs that her parents would not allow her to marry him unless they entered into the financial agreement. She does concede that she said to him that if there was no agreement in place by the time that they married, her parents would not provide any financial assistance to the parties. Ms Vale denies that
Mr Jacobs ever refused to sign the agreement. She alleges that he accepted the need for it and it was provided to him well before their wedding so that he could consider its terms and take advice upon it. She denies that she said that they would not marry unless the agreement was signed.
Unconscionable conduct was described by Deane J in Commercial Bank of Australia v Amadio (1983) 151 CLR 447 at 474 as:
Unconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so.
Later, in Louth v Diprose (1992) 175 CLR 621 his Honour restated the relevant principle:
11. It has long been established that the jurisdiction of courts of equity to relieve against unconscionable dealing extends generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party to the transaction with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that special disability was sufficiently evident to the other party to make it prima facie unfair or "unconscionable" that that other party procure, accept or retain the benefit of, the disadvantaged party's assent to the impugned transaction in the circumstances in which he or she procured or accepted it. Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable: "the burthen of shewing the fairness of the transaction is thrown on the person who seeks to obtain" or retain the benefit of it ((42) See per Lord Hatherley, O'Rorke v. Bolingbroke (1877) 2 App Cas 814, at p 823; Fry v. Lane (1888) 40 Ch D 312, at p 322; Blomley v. Ryan [1954] HCA 79; (1956) 99 CLR 362, at pp 428-429; Commercial Bank of Australia Ltd. v. Amadio [1983] HCA 14; (1983) 151 CLR 447, at p 474.).
12. The adverse circumstances which may constitute a special disability for the purposes of the principle relating to relief against unconscionable dealing may take a wide variety of forms and are not susceptible of being comprehensively catalogued ((43) See Commercial Bank of Australia Ltd. v. Amadio (1983) 151 CLR, at p 474). In Blomley v. Ryan ((44) (1956) 99 CLR, at p 405), Fullagar J. listed some examples of such special disability: "poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary". As Fullagar J. remarked ((45) ibid), the common characteristic of such adverse circumstances "seems to be that they have the effect of placing one party at a serious disadvantage vis-a-vis the other".
Whether the principles to be applied when determining a claim of unconscionable conduct for the purposes of s.90K(1)(e) are the same as those set out above and which might otherwise lead the court to conclude that the financial agreement is voidable at the election of
Mr Jacobs does not yet need to be decided. Sub-sections 90K(1)(b) and 90K(1)(e) are probably directed at different matters – the former to the circumstances in which the agreement was formed and the latter to the overall circumstances in which it might be argued that the retention of a benefit derived from a joint endeavour which has failed to the exclusion of the other party or parties to that endeavour is unconscionable (see Muschinski v. Dodds (1985) 160 CLR 583).
As to the principles to be applied to Mr Jacobs’ claim that Ms Vale would be “unjustly enriched” by the contributions made by him, it is appropriate to have regard to the judgment of Mason C.J., Deane, Toohey, Gaudron and Mchugh JJ in David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353:
45. Although this alternative approach is not greatly different from that stated above, it does have important consequences in relation to the elements of the action which the plaintiff must plead and prove. It also appears to proceed from the view that in Australian law unjust enrichment is a definitive legal principle according to its own terms and not just a concept.
46. The two decisions of this Court just mentioned reject that approach. In Pavey and Matthews Deane J. stated ((76) (1987) 162 CLR, at pp 256-257):
"To identify the basis of such actions as restitution and not genuine agreement is not to assert a judicial discretion to do whatever idiosyncratic notions of what is fair and just might dictate. ... That is not to deny the importance of the concept of unjust enrichment in the law of this country. It constitutes a unifying legal concept which explains why the law recognizes, in a variety of distinct categories of case, an obligation on the part of a defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff and which assists in the determination, by the ordinary processes of legal reasoning, of the question whether the law should, in justice, recognize such an obligation in a new or developing category of case".
Accordingly, it is not legitimate to determine whether an enrichment is unjust by reference to some subjective evaluation of what is fair or unconscionable. Instead, recovery depends upon the existence of a qualifying or vitiating factor such as mistake, duress or illegality. As this Court stated in Westpac Banking Corporation ((77) (1988) 164 CLR, at p 673):
"In other words, receipt of a payment which has been made under a fundamental mistake is one of the categories of case in which the facts give rise to a prima facie obligation to make restitution, in the sense of compensation for the benefit of unjust enrichment, to the person who has sustained the countervailing detriment".
Conclusion
In my view it cannot be said that Mr Jacobs’ has no reasonable prospect of successfully prosecuting his application. There are issues of fact to be decided between the parties. The terms of the conversations between them leading to the execution of the financial agreement are in dispute. The circumstances surrounding the execution of the agreement are in dispute. If those factual disputes are resolved in Mr Jacobs’ favour arguably, and I put it no higher than that, he has some prospects of establishing his claim to relief. There is nothing to suggest that the court will be driven to reject his version of the relevant circumstances.
An examination of the evidence, even that led on behalf of Ms Vale, may reveal an imbalance in the relationship between the parties such as to attract the operation of the principles in relation to unconscionable conduct as occurred in Louth v Diprose. There may also be scope for finding that Ms Vale’s insistence upon her legal entitlements pursuant to the agreement is unconscionable in the Muschinski v. Dodds sense.
The application for summary dismissal must be refused.
I turn to the question of Ms Vale’s claim for an order that Mr Jacobs provide security for her costs of the action. There was some consternation at the hearing of the application about the nature of the claim. Mr Jacobs apprehended that the claim was pressed as an exercise of the court’s power pursuant to s.117(2) of the Family Law Act. Ms Vale’s submissions, however, referred to and relied upon clause 17 of the financial agreement, which is in the following terms:
17. If, notwithstanding the provisions of this agreement, and save and except for the purposes of enforcement of the provisions of this agreement, either party institutes any proceedings, claims or actions against the other, of the other heirs, executors, administrators and personal representatives in any Court in Australia in relation to the subject matter of this agreement:
17.1 This agreement may be pleaded in full bar to and discharge of any such action, proceeding or claim: and
17.2 The provisions of this clause shall be deemed and construed as constituting consent to an order for security for legal costs on a solicitor and own client basis in such sum as shall be certified as proper by the legal practitioner acting on behalf of the defendants party or on behalf of the defendant party’s heirs, executors, administrators and personal representatives.
The claim for an order for security for costs in not a claim for enforcement of clause 17 of the agreement as such. The Court’s power to make the relevant order is s.117(2) of the Family Law Act. Clause 17 of the agreement simply provides Mr Jacobs consent to the agreement. The agreement remains in place until it is set aside by the Court, and so, in my view, Mr Jacobs’ consent remains operative.
In any event, in supplementary submissions delivered by Mr Jacobs’ solicitors, he has indicated that he will consent to the following order:
That pursuant to clause 17.2 of the binding financial agreement entered into between the parties on the 7th October, 2002 the sum of $30,000.00 (being the sum certified as proper by the wife’s solicitor) shall be held by the solicitors for the husband in an investment account on trust for the husband for the purpose of providing security for legal costs.
The specific order sought by Ms Vale was for her solicitor’s to hold the fund in an account controlled by them, but I see little difference between that and that to which Mr Jacobs will agree. There should be an obligation, however, upon the husband’s solicitors to:
a)provide details of the fund’s investment to the wife’s solicitors;
b)to only pay that fund out upon:
i)a lawful demand from the wife’s solicitors to do so; or
ii)further order of the Court.
Although I have not heard the parties on the question of costs, I am inclined to order that the costs of the application shall be each party’s costs in the cause. If a different order for costs is sought I shall hear the parties as to that.
I certify that the preceding thirty-seven (37) paragraphs are a true copy of the reasons for judgment of Jarrett FM
Acting Associate: E.Crutchfield
Date: 1 July 2008
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