Jess & Jess
[2021] FedCFamC1F 24
•8 September 2021
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Jess & Jess [2021] FedCFamC1F 24
File number(s): MLF 3444 of 2006 Judgment of: WILSON J Date of judgment: 8 September 2021 Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – restriction on publication of court proceedings – s 121 of the Family Law Act – trustees of the bankrupt estate of the first respondent wishing to apply to the Federal Court of Australia in the exercise of jurisdiction under the Bankruptcy Act, for orders ratifying the trustees’ entry into a litigation funding agreement – in making that application, trustees will divulge information of which s 121 prohibits disclosure – trustees seeking approval under s 121(9)(g) of the Family Law Act – review of authorities – application by trustees earlier opposed but subsequently not opposed by the represented third parties – application approved under s 121(9)(g). Legislation: Bankruptcy Act 1966 ss 19, 30(1)
Constitution of the Commonwealth of Australia Chapter III
Family Law Act 1975 ss4(1), 117(1), 117(2A), 121(9)(g)
Federal Court of Australia Act 1976 s 17(4), 37AF and 37AG
Federal Court Rules 2011 r 20.31
Insolvency Practice Schedule (Bankruptcy) s 90-15
Trustee Act 1958 (Vic) s 67Cases cited: Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297
Corporate Affairs Commission (South Australia) v Australian Central Credit Union (1985) 157 CLR 201
De Santis v Aravanis (2014) 227 FCR 404Dickason v Dickason (1913) 17 CLR 50
DOQ17 v Australian Financial Security Authority (No 3) [2019] FCA 1488
Fitzgerald v Fish (2005) 33 Fam LR 123Gibb & Gibb [1978] FamCA 8
Harman v Secretary of State for the Home Department [1983] 1 AC 280
Hearne v Street (2008) 235 CLR 125
Hinchcliffe v Commissioner of Police of the Australian Federal Police (2001) 118 FCR 308
In the Marriage of Hogan (1986) 10 Fam LR 681
Jess & Jess [2021] FamCAFC 159Martin v Martin [2015] WADC 138
McPherson v McPherson [1936] AC 177
Minister for Immigration and Border Protection v Egan [2018] FCA 1320Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355
R Pty Ltd (as trustee for the Fletcher Trust) v Jones and Another (2016) 56 Fam LR 445
Re Condon, ex parte James [1874] All ER Rep 388
Re David Hurt (1988) 80 ALR 236
Re Edelsten, Donnelly v Edelsten and Others (1988) 18 FCR 434
Re W: Publication Application (1997) 137 FLR 205Russel v Russel (1976) 134 CLR 495
Scott v Scott [1913] AC 417Sitwell v Sitwell (2014) 51 Fam LR 158
SRD v Australian Securities Commission (1994) 52 FCR 187
Winters & Winters [2015] Fam CA 195
Ying v Song [2010] NSWSC 1500Division: Division 1 First Instance Number of paragraphs: 62 Date of hearing: 12 July 2021, 20 August 2021 & 6 September 2021 Place: Melbourne Counsel for the Applicant: Not applicable Solicitor for the Applicant: Kenna Teasdale Lawyers Counsel for the First Respondent: Not applicable Solicitor for the First Respondent: Mr J Counsel for the Second, Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth, Thirteenth, Fourteenth, Fifteenth, Sixteenth, Seventeenth, Eighteenth, Nineteenth, Twentieth, Twenty-First, Twenty-Second, Twenty-Third, Twenty-Fourth, Twenty-Fifth, Twenty-Sixth, Twenty-Seventh, Twenty-Eighth and Twenty-Ninth Respondents: Mr I. Waller QC with Mr J. Mereine Solicitor for the Second, Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth, Thirteenth, Fourteenth, Fifteenth, Sixteenth, Seventeenth, Eighteenth, Nineteenth, Twentieth, Twenty-First, Twenty-Second, Twenty-Third, Twenty-Fourth, Twenty-Fifth, Twenty-Sixth, Twenty-Seventh and Twenty-Ninth Respondents: HWL Ebsworth Lawyers Counsel for the Intervener: Mr S. Maiden QC with Ms E. Nikou Madalin Solicitor for the Intervener: Lander & Rogers ORDERS
MLF 3444 of 2006 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS JESS
Applicant
AND: MR J AS LEGAL PERSONAL REPRESENTATIVE FOR MR JESS SNR (DECEASED)
First Respondent
MR JESS JNR
Second Respondent
PPP INVESTMENTS PTY LTD (ACN …) (and others named in the Schedule)
Third Respondent
MR K AND MR L AS TRUSTEES OF THE BANKRUPT ESTATE OF MR JESS SNR
Intervenor
ORDER MADE BY:
WILSON J
DATE OF ORDER:
8 SEPTEMBER 2021
THE COURT ORDERS THAT:
1.In these orders –
(a)‘Act’ means the Family Law Act 1975 (Cth);
(b)‘approval application’ means the application to be made by the trustees to the Federal Court of Australia as set out in paragraphs 6 to 11 of the affidavit of Mr K sworn 4 June 2021, including any appeal flowing therefrom;
(c)‘bankrupt estate’ means the bankrupt estate of Mr Jess Snr (Deceased) in administration numbered VIC …;
(d)‘proceedings’ means, collectively, the proceedings in this Court numbered MLF3444/2006 and SOA74/2019; and
(e)‘trustees’ means the Trustees of the Bankrupt Estate.
2.Pursuant to section 121(9)(g) of the Act, for the purpose of creditors of the bankrupt estate being given an opportunity to be heard in relation to and participating in the approval application, the trustees have leave to disclose to the creditors of the bankrupt estate an account of the proceedings including –
(a)the existence of the proceedings;
(b)the names of the parties to the proceedings;
(c)the factual background to the proceedings;
(d)the procedural history of the proceedings, and further procedural matters as and when they arise;
(e)the finding of fact and reasons for judgment dated 4 December 2018 (including the orders to which that finding and judgment relates);
(f)the reasons for judgment dated 15 November 2019 (including any the orders to which that judgment relates);
(g)the notice of appeal dated 13 December 2019 in proceeding number SOA74/2019; and
(h)copies of any future orders, declarations, and reasons for judgment made in the proceedings.
3.Prior to 4pm on 20 September 2021 and prior to the trustees filing the originating application the proposed draft of which has been canvassed above, the legal representatives of the trustees and of the represented third parties must confer with a view to agreeing on a mechanism to be implemented so as to reduce as far as possible if not eliminate the risk of creditors of the bankrupt estate of the first respondent further disseminating any information they are given by the trustees following the making of these orders.
4.Each party is to bear his, her or its own costs of and incidental to the trustees’ application for orders under s 121(9)(g).
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Jess & Jess has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
WILSON J:
The litigation between the applicant and the first respondent was commenced in 2006. Subsequently, the first respondent passed away. Protracted litigation has ensued between the trustees of the bankrupt estate of the first respondent and the son of the applicant and first respondent. An array of corporate entities is now involved. Aspects of this litigation have been the subject of detailed reasons for judgment. The case has been the subject of an appeal, the decision in which was handed down on 25 August 2021.[1]
[1] Jess & Jess [2021] FamCAFC 159.
The trustees of the first respondent’s bankrupt estate have entered into an agreement for litigation funding. During the pendency of the appeal, the trustees’ solicitors sought an urgent listing of the application they now bring. The trustees’ solicitors requested the trustees’ application to be brought before another judge. The application was allocated to me. For the reasons that follow, the trustees’ application under s 121(9)(g) of the Family Law Act is approved.
THIS APPLICATION IN OVERVIEW
On 24 June 2021, Mr K and Mr L, as trustees of the bankrupt estate of Mr Jess Snr, filed an application in a case pursuant to which the trustees sought leave under s 121(9)(g) of the Family Law Act to disclose certain information in relation to this proceeding to –
(a)the Federal Court of Australia; and
(b)the creditors of the bankrupt estate of Mr Jess Snr.
Paragraphs 2 and 3 of the trustees’ application in a case records information in respect of which leave under s 121(9)(g) is sought. Relevantly paraphrased, it relates to the existence of this proceeding, the names of the parties to it and of persons related to those parties or connected with the matter to which the proceeding relates, the factual background, the procedural history, the reasons dated 4 December 2018 and 15 November 2019, the notice of appeal dated 13 December 2019 and copies of future orders, declarations and reasons for judgment in the proceeding.
Without the grant of leave, s 121 operates to prohibit the dissemination of the information paraphrased above.
The trustees explained that they sought leave under s 121(9)(g) of the Family Law Act to disclose the information paraphrased above in connection with an application to be made to the Federal Court of Australia.[2] Again relevantly paraphrased, Mr K swore –
(a)that the trustees have entered into a litigation funding agreement with Claims Funding Australia Pty Ltd so as to fund the trustees’ remuneration and costs in this proceeding and in appeal SOA74 of 2019;
(b)the trustees wish to obtain orders to meet the funding;[3]
(c)the approval application in the Federal Court requires the trustees to divulge details of the litigation in this court (including the appeal);
(d)the trustees propose to give historical and updated evidence to the Federal Court about the litigation in the Family Court and to adduce documentary evidence including reasons for judgment, orders and the notice of appeal but not affidavits filed or discovered documents; and
(e)the trustees propose to seek confidentiality orders from the Federal Court of Australia.
[2] The precise factual basis of the application was recorded between paragraphs six to 11 of the affidavit of Mr K sworn 4 June 2021.
[3] Mr K called the application in the Federal Court the “approval application”.
THE HEARING ON 12 JULY 2021
This application first came before me on 12 July 2021 in urgent circumstances. Mr Maiden QC who appeared with Ms Nikou Madalin pressed for the orders appearing in the trustees’ application in a case filed 24 June 2021. Mr Gregory, the solicitor for the applicant and Mr J, as the legal personal representative for the deceased first respondent, provided submitting appearances. Mr Waller QC who appeared with Mr Mereine for Mr Jess Jnr and the third to 29th respondents contended that the trustees’ application should be dismissed. After debate, it became apparent to me that the trustees’ application was general and unspecific in certain respects, especially in relation to the precise information the trustees intended to put before the Federal Court and hence, the precise information in respect of which they needed approval under s 121(9)(g) of the Family Law Act to divulge. In the upshot, on 12 July 2021 I made orders by consent adjourning the further hearing of the trustees’ application to 20 August 2021 and additionally ordered as follows –
1.On or before 4:00pm on 14 July 2021 the intervenors must file and serve an affidavit exhibiting a draft of the affidavit and exhibits they propose to file in the intended application to the Federal Court of Australia described in paragraphs 6 to 11 of the affidavit of Mr K sworn 4 June 2021.
2.On or before 4:00pm on 19 21 July 2021 any party seeking to be heard in respect of the s 121 application must file any affidavit and written submissions, which submissions shall identify the substance of the relevant party’s position in respect of the s 121 application.
3.Where no material is filed in accordance with paragraph 2 above, the relevant party must inform the court by email to …, copied to all other parties, that it does not oppose or takes no position in respect of the s 121 application.
By affidavit sworn 14 July 2021, Mr K deposed to the precise documentation he swore to put before the Federal Court on the return of the trustees’ application for ratification of the trustees’ entry into the litigation funding agreement. Specifically, Mr K exhibited to his 14 July 2021 affidavit the following –
(a)a draft originating application;[4] and
(b)a draft affidavit and exhibits to be sworn by Mr K.[5]
[4] That document was marked as exhibit “[Mr K]1”.
[5] That document was marked as exhibit “[Mr K]2”.
It is utile to make some observations about each of those two documents.
THE PROPOSED ORIGINATING APPLICATION
The proposed proceeding is to be brought under the Bankruptcy Act. In it the trustees seek declaratory relief that they were and are justified in entering into and implementing a litigation funding agreement with Claims Funding Australia Pty Ltd dated 14 April 2020.[6] The trustees also seek an order that insofar as their entry into the litigation funding agreement involved a breach of trust, then they are relieved from personal liability for any such breach.[7]
[6] Part A, details of claim.
[7] Part B, details of claim.
In the originating application the trustees sought orders under s 17(4) of the Federal Court of Australia Act for the hearing of the proceeding to be conducted in closed court to the exclusion of the public.[8] The trustees sought orders under s 37AF and s 37AG of the Federal Court of Australia Act for the documents enumerated in paragraph 2(a) – (c) to be kept confidential.[9]
[8] Paragraph 1, confidentiality orders.
[9] Paragraph 2, confidentiality orders.
The trustees proposed writing to every creditor of the bankrupt estate of the first respondent within seven days of the making of the order by the Federal Court notifying those creditors of the matters set out in paragraph 5 of the proposed originating application.
As final orders the trustees also sought orders[10] that they were justified in entering into the litigation funding agreement. They also sought orders to be relieved from personal liability for any breach to the extent that their entry into the agreement was a breach of trust.[11]
[10] This was pursuant to s 30(1) of the Bankruptcy Act 1966 or alternatively
[11] They sought this order pursuant to s 67 of the Trustee Act 1958 (Vic).
THE PROPOSED CONFIDENTIAL AFFIDAVIT
An unsworn draft of Mr K’s proposed affidavit was exhibited to his 14 July affidavit. Some of the more important matters canvassed by Mr K in the unsworn proposed confidential affidavit were as follows –
(a)the trustees were appointed as joint and several trustees following the first respondent’s presentation of his own petition in bankruptcy on 8 July 2016;
(b)as at 5 August 2016 the bankrupt disclosed in his statement of affairs net divisible assets of $2,280,000 and creditors totalling $110,463,557; [12]
[12] Report to creditors dated 5 August 2016 paragraphs 1(b) and 1(c).
(c)unsecured creditors amounted to $107,948,259;[13]
[13] Report to creditors dated 5 August 2016 paragraph 5.10.
(d)as at 5 August 2016 the bankrupt was involved in seven separate pieces of litigation;[14]
[14] Report to creditors dated 5 August 2016 pages 15 & 16.
(e)only this family law litigation and the proceeding in the Federal Court for ratification of the litigation funding agreement may bear upon the conduct of the bankrupt estate;[15]
[15] Report to creditors dated 5 August 2016 page 21.
(f)according to the trustees’ report to creditors dated 24 April 2020, the bankrupt’s total assets were unconfirmed whereas the total of his unsecured creditors was confirmed as being $120,884,310;[16]
[16] Section 6.
(g)the trustees reported their intention to take part in this family law litigation including appeals;[17]
[17] Section 11.
(h)the trustees exhibited the funding agreement as executed by the trustees and by the funder, clause 2.1 of which contained the condition precedent requiring the trustees to seek orders from a court having jurisdiction under the Bankruptcy Act to the trustees’ entry into the funding agreement;
(i)the administration of the bankrupt estate largely revolves around the outcome of the Family Court proceeding and the (then) pending appeal by reason of the impact of each on the recovery and realisation of assets of the bankrupt estate for the benefit of the creditors;[18]
[18] Paragraph 8 of Mr K’s draft confidential affidavit.
(j)several creditors, described as “adverse creditors”, are parties to the Family Court litigation, some of whom would stand to benefit from the trustees’ failure in the Family Court litigation;[19]
(k)a précis of the Family Court litigation was given;[20]
(l)if the applicant’s appeal were upheld, the trustees take the view that the deed of trust will be set aside or declared a sham, the second respondent will not be entitled to the units and corresponding ownership and control of the 13th respondent (XC) such that the units plus any other relevant property or assets flowing from the units would vest in the bankrupt estate for redistribution between the bankrupt estate and the applicant in accordance with the Family Law Act;[21]
(m)if the trust deed is set aside, the claim made by the Deputy Commissioner of Taxation for $115,404,320 representing 95% in value of creditors, would fall away as no capital gains tax event would have occurred so as to attract the imposition of capital gains tax;[22]
(n)the trustees take the view they must now become immersed in all aspects of the family law litigation in this court in order to fulfil their duties at law for the benefit of creditors;[23]
(o)ongoing disputation is likely in relation to the assets that vest in the bankrupt estate and whether any of those assets were derived by reason of the personal exertion of the second respondent;[24]
(p)to date, the trustees have been able to acquire little in the way of commercial information in respect of assets and liabilities;[25]
(q)the costs of the trustees to date is in the vicinity of $2,000,000;
(r)in September 2019 the trustees sought funding and in November 2019 were provided with the funder’s indicative term sheet that led to the entry into the funding agreement; and
(s)the trustees seek approval for their entry into the funding agreement.
[19] Paragraph 12 of Mr K’s draft confidential affidavit.
[20] Paragraphs 17 – 30 of Mr K’s draft confidential affidavit.
[21] Paragraph 31 of Mr K’s draft confidential affidavit.
[22] Paragraph 32 of Mr K’s draft confidential affidavit.
[23] Paragraph 36 of Mr K’s draft confidential affidavit.
[24] Paragraph 40 of Mr K’s draft confidential affidavit.
[25] Paragraph 42 of Mr K’s draft confidential affidavit.
THE TRUSTEES’ PROPOSAL TO DISSEMINATE CERTAIN INFORMATION
The trustees contemplate producing an account of this proceeding and the appeal in SOA74/2019 –
(a)to the Federal Court of Australia; and
(b)to the creditors of the bankrupt estate of the first respondent.
The information the trustees propose to provide to the Federal Court as well as to the creditors of the bankrupt of the first respondent’s estate is essentially the same.[26] The “creditors” with which paragraph 3 of the trustees’ application in a case is concerned number 27, seven of whom carry the appellation “adverse creditors”. In dollar value the claims they make in total aggregate $120,884,310. That includes the value of claims the adverse creditors make amounting to $2,791,331.63. Some discrepancies exist between the identity of creditors in paragraph 51 of Mr K’s proposed draft affidavit and the creditors listed in paragraph 6.7 of the trustees’ 24 April 2020 report to creditors but those discrepancies are of no particular moment for present purposes. In short, the number of creditors to whom the trustees intend to provide the information identified in paragraph 3 of the trustees’ application in a case is less than 30, very few of whom are natural persons.
[26] Save that paragraph 2.3 of the trustees’ application in a case is not replicated in paragraph 3 of the trustees’ application in a case.
THE REASONS WHY THE TRUSTEES INVOKE S 121
In their written submissions in support of this application before me, counsel for the trustees gave various reasons for the trustees’ request for approval under s 121 of the Family Law Act. Relevantly paraphrased, they sought approval to disclose an account of the Family Court litigation (including the appeal) –
(a)to the Federal Court – so that it might hear and determine the funding approval application; and
(b)to creditors of the bankrupt estate – to the extent that the funding approval application requires the publication of additional identifying details not presently in the knowledge and possession of those creditors, for the purpose of those creditors having an opportunity to participate in the approval application.
FURNISHING INFORMATION TO THE FEDERAL COURT OF AUSTRALIA
Relevantly paraphrased, s 121(1) of the Family Law Act creates a criminal offence for publishing by various means or disseminating “to the public or to a section of the public”,[27] by any means, any account of any proceedings or part thereof under the Family Law Act that identifies –
(a)a party to the proceeding;
(b)a related or associated person with a party or a person in any way allegedly concerned in the matter to which the proceeding relates; or
(c)a witness in the proceeding.
[27] The word “publishes” is addressed in s 121(2) in the context of publishing a list of proceedings under the Family Law Act.
Section 121(3) provides that “an account of proceedings, or any part of proceedings” referred to in s 121(1) is taken to identify a person where any one of the several factors set out in the subsections of s 121(3) apply. The list is very broad, seemingly reflective of a legislative intent to not limit the generality and breadth of s 121(1).
Section 121(9) of the Family Law Act prescribes the circumstances in which the indictable offence created by s 121 does not apply. The trustees in this case expressed their observation that s 121(9)(a) may apply. Counsel for the trustees contended that in relation to the proposed disclosure of the material to which the proposed Federal Court application applies, it is arguable that –
(a)disclosure to a court is not “dissemination to the public within the meaning of s 121(1)”;[28]
(b)but if disclosure to a court is a dissemination to the public, then the trustees enjoy the protection of s 121(9)(a) of the Family Law Act where approval is given.[29]
[28] Paragraph 11 of the trustees’ counsels’ 9 July 2021 written submissions.
[29] Ibid, citing Re Edelsten; ex parte Donnelly (1988) 18 FCR 434, Ying v Song [2010] NSWSC 1500 (at [210]) and R Pty Ltd v Jones (2016) 56 Fam LR 445.
Yet the trustees concurrently contended that s 121(9)(a) may not apply to the Federal Court application they propose to make because the trustees’ approval application would not be brought before a court exercising jurisdiction pursuant to the Family Law Act.[30] In support of that submissions the trustees’ counsel argued that “court” as defined in s 4(1) of the Family Law Act meant the court exercising jurisdiction “by virtue of this Act”, meaning the Family Law Act. They also argued that the approval application proposed for issue in the Federal Court is not a relevant proceeding.
[30] Paragraphs 12 and 13 of the trustees’ counsels’ written submissions.
In their written submissions, counsel for the represented third parties did not join issue on the construction of s 121(9)(a), especially whether the “court” to which s 121(9)(a) is directed is a court empowered to exercise jurisdiction under the Family Law Act.
DISSEMINATION OF INFORMATION TO THE FEDERAL COURT
It became first necessary to consider whether the prohibition in s 121(1) applied to the trustees’ proposed application to the Federal Court of Australia pursuant to which they sought certain approvals under the Bankruptcy Act. If it did, the second issue was whether s 121(9)(a) of the Family Law Act applied.
The first issue invoked a consideration of whether the furnishing to the Federal Court of the proposed Mr K affidavit exhibiting documentation relevant to this proceeding is caught by the wording in s 121(1) “or otherwise disseminates to the public or to a section of the public…any account of any proceedings…under this Act” that identifies the matters in subsections 121(1)(a), (b) or (c).
In my view, the answer is in the negative.
The Federal Court of Australia is not understood as a matter of Australian constitutional law to be “the public” or “a section of the public”. Nor is it to be so understood as a matter of legal doctrinal orthodoxy.
The decision of Morling J in Re Edelsten; ex parte Donnelly[31] provides useful guidance on the concept of dissemination to the public. There, his Honour held that in the context of s 121(1) of the Family Law Act the phrase “disseminates to the public” should be taken as a reference to a widespread communication with the aim of reaching a wide audience. Morling J held that it could not have been intended by the legislature that the restriction on dissemination in s 121 should apply, for example, to conversations between a party to a Family Court proceeding and a close personal friend. While the issue of the application of s 121 was considered in R Pty Ltd (as trustee for the Fletcher Trust) v Jones and Another,[32] and Morling J’s decision in Re Edelsten; ex parte Donnelly was cited, no substantive consideration to the operation of the section in R Pty Ltd (as trustee for the Fletcher Trust) v Jones and Another was given and in any event, the learned judge simply accepted, without deciding, the submissions of counsel for the parties that no breach of s 121 was involved. Further, so far as the decision in Sitwell v Sitwell[33] was concerned, it addressed whether an injunction application was properly refused, an issue entirely different to the matter with which I am presently concerned.
[31] (1988) 18 FCR 434.
[32] (2016) 56 Fam LR 445 (at [38]).
[33] (2014) 51 Fam LR 158.
Prior to resuming the contested debate in this case on 20 August 2021 I brought to the attention of the parties and invited submissions in relation to the decision of Kenny J in Hinchcliffe v Commissioner of Police of the Australian Federal Police.[34] There, her Honour applied the observations of Morling J in Re Edelsten; ex parte Donnelly as well as the observations of the High Court in Corporate Affairs Commission (South Australia) v Australian Central Credit Union.[35] Ultimately, Kenny J concluded that the High Court’s decision did not assist the applicant’s case in the case before her Honour. However, Kenny J drew from the decision of the plurality in ACCU[36] the following –
The decision in CCU does not, I think, assist the Hinchcliffes. First, I note that the central question (whether the members of the ACCU constituted a "section of the public" for the purposes of s 5(4) of the Companies (South Australia) Code) arose in a very different legislative context from this case. To the extent that the remarks in ACCU are apposite here, they tend against the Hinchcliffes. In a joint judgment, Mason ACJ, Wilson, Deane and Dawson JJ observed (at 208):
"For some purposes and in some circumstances, each citizen is a member of the public and any group of persons can constitute a section of the public. For other purposes and in other circumstances, the same person or the same group can be seen as identified by some special characteristic which isolates him or them in a private capacity and places him or them in a position of contrast with a member or section of the public."
[34] (2001) 118 FCR 308.
[35] (1985) 157 CLR 201.
[36] (1985) 157 CLR 201, 208.
In my view, to say that the furnishing of documentation to an officer in a registry of the Federal Court or even to a justice of the Federal Court is a dissemination to the public or to a section of the public is to attribute to s 121(1) a legislative intention that is not manifest from a plain reading of the section, at least according to principles of contemporary statutory construction.[37]
[37] Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 to name but a few.
To my way of thinking, the prohibition reposed in s 121(1) forbidding the dissemination of certain information to the public or to a section of the public does not apply in the circumstances of this application by the trustees –
(a)for filing in the Federal Court of Australia the proposed originating application under the Bankruptcy Act; or
(b)for filing in the Federal Court of Australia the proposed confidential affidavit of Mr K together with the proposed exhibits “[Mr K]1” and “[Mr K]2”.
Having regard to my conclusion that s 121 is not contravened by the trustees filing their proposed approval application, it follows that no order is required under s 121(9)(g) in relation to the proposed documentation to be filed in the Federal Court of Australia.
THE HEARING ON 20 AUGUST 2021
Most of the hearing on 20 August 2021 was devoted to submissions by the trustees on the one hand and by the represented third parties on the other hand in relation to how the trustees’ proposal would be implemented to ensure that, as near as possible, further dissemination by creditors of the information derived from the family law litigation was curtailed. On behalf of the trustees, Mr Maiden QC proposed –
(a)a minor alteration to the proposed originating application;
(b)the deletion of pages 170 – 356 from exhibit “[Mr K]1”; and
(c)redactions to certain documents making up exhibit “[Mr K]2”.
Mr Maiden QC further submitted that the court to which the approval application could be made included this court. However, he submitted that the trustees instructed their counsel to make the approval application before the Federal Court of Australia and, to that end, no change in strategy had been engaged in by the trustees.
Mr Waller QC, on behalf of the represented third parties, submitted that unless and until a new tranche of documentation was produced by the trustees, it was impossible to tell how substantial were the trustees’ proposed alterations to the documentation on which they would base their approval application. There seemed to me to be merit in Mr Waller QC’s request. However, the task of producing again the documentation on which the trustees proposed to rely, altered in the modest way Mr Maiden outlined, was likely to be productive of excess costs and delay, a feature already looming large in this case. In the upshot, I made directions for the trustees to produce their proposed amendments to their documentation by 4pm on 27 August 2021, for the represented third parties to respond thereafter and for the further hearing of this application to be adjourned to 6 September 2021. The trustees complied.
FURNISHING INFORMATION TO CREDITORS
The trustees have expressed their intention to provide creditors of the bankrupt estate with their proposed originating application and the affidavit of Mr K together with the exhibits thereto. The trustees recognise that they need approval under s 121(9)(g) to do so. The trustees did not contend that by their furnishing of the proposed originating application along with Mr K’s affidavit and exhibits they were not disseminating any account of a proceeding or part thereof to the public or to a section of the public. Instead they sought approval to their proposed course under s 121(9)(g).
The trustees advanced five grounds that they said supported the grant of approval under s 121(9)(g). Those grounds were –
(a)the proposed approval application is made by officers of the court,[38] properly, and in good faith having regard to their fiduciary obligations and duties under s 19 of the Bankruptcy Act;
(b)the trustees intend to seek a closed court[39] and a confidentiality regime[40] so that creditors have an adequate opportunity to be heard;
(c)the various respondents to the family law litigation who will or may wish to be heard on the approval application are likely to need to discuss the family law litigation either with the judge on the return of the approval application or among themselves;
(d)it is not pragmatic to publish an anonymised account of the evidence in the family law litigation and the trustees are unable to give a sensible account of the family law litigation without disclosing the relationship of the parties (respondents in the Family Court litigation) and the bankrupt; and
(e)no minors are directly concerned in the Family Court litigation and therefore, a risk of the sort canvassed in DOQ17 v Australian Financial Security Authority (No 3)[41] does not arise.
[38] Counsel cited Re Condon, ex parte James [1874] All ER Rep 388, Re David Hurt (1988) 80 ALR 236 and De Santis v Aravanis (2014) 227 FCR 404 (at [43]).
[39] A closed court can be ordered under s 17(4) of the Federal Court of Australia Act.
[40] Section 37AF and s 37AG permit orders to be made in relation to confidentiality of transcript, for example.
[41] [2019] FCA 1488.
Until 6 September 2021 the represented third parties opposed the grant of approval under s 121(9)(g). Their counsel submitted that to do otherwise than refuse the orders sought by the trustees –
“would permit the unrestricted disclosure of information and documents from the Family Court proceeding to all of the creditors, notwithstanding the undisputed adverse consequences taken into account by [the judge] in making the non-disclosure orders. That imprimatur, without any limitation or restriction on the further dissemination of the information and documents by creditors, is likely to circumvent section 121(1) of the Family Law Act 1975 (Cth) and result in the publication and/or dissemination of the private relationships and financial affairs of the Jess family, including in the media.”[42]
[42] Paragraph 5.2 of the written submissions of the represented third parties dated 21 July 2021.
In developing submissions on behalf of the represented third parties, various propositions were advanced, distilled in the manner that follows. The represented third parties contended –
(a)the trustees appear to intend to disclose information and documents produced in the Family Court to all of the creditors without any apparent restriction or limitation on the further dissemination of that information by them;[43]
(b)the trustees do not intend to keep any of the documents in exhibit Mr K2 confidential from any of the creditors;[44]
(c)the “factual background” and “procedural history” which Mr K proposes to disclose to all creditors is not “a relatively high-level account” as was described at the 12 July 2021 hearing before me[45] and the draft Mr K affidavit exposes issues that are the subject of the reasons for judgment dated 4 December 2018, they are the subject of a non-disclosure order and they are the subject of the appeal judgment which was then pending;[46]
(d)the trustees seek the court’s imprimatur to disclose to all creditors, without any restrictions binding the creditors from further dissemination by them –
(i)pages 170 to 356 of exhibit Mr K1;
(ii)all documents forming exhibit Mr K2; and
(iii)the issues covered by the 4 December 2018 reasons including by the non-disclosure order.[47]
[43] Paragraph 3.5 of the written submissions of the represented third parties dated 21 July 2021.
[44] Paragraph 3.6 of the written submissions of the represented third parties dated 21 July 2021.
[45] T12 L19.
[46] Paragraph 3.13 of the written submissions of the represented third parties dated 21 July 2021.
[47] Paragraph 3.16 of the written submissions of the represented third parties dated 21 July 2021.
Counsel for the represented third parties pointed out that creditors of the bankrupt estate include substantial corporations with a large number of employees.[48] They also pointed out that by operation of Rule 20.31 of the Federal Court Rules, creditors to whom incomplete documentation was provided could apply for production of all documentation. They submitted that arguably, that could involve their seeking production of 23,000 pages of documents.
[48] Paragraph 3.18 of the written submissions of the represented third parties dated 21 July 2021.
By the end of the hearing on 20 August 2021 and after the trustees made minor modifications to documents in accordance with the suggestions made by Mr Maiden QC, the case returned before me on 6 September 2021.
THE HEARING ON 6 SEPTEMBER 2021
On 6 September 2021 Mr Waller QC for the represented third parties informed me that his clients no longer opposed the approval sought by the trustees under s 121(9)(g) of the Family Law Act. However, Mr Waller submitted that irrespective of his position in not opposing the trustees’ application, approval under s 121(9)(g) was a matter for the court in the exercise of the discretion conferred by that subsection.
WHETHER TO GRANT APPROVAL UNDER S 121(9)(G)
After having proceeded for considerable time and at significant cost in this litigation the trustees have reached a point where they require funding in order to further perform their duties under the Bankruptcy Act. Their funding agreement is subject to a condition precedent that requires court approval ratifying the entry into that agreement. This court may have power to make the orders sought ratifying the funding agreement but the trustees seek approval from the Federal Court. The Federal Court possesses the necessary power to make the orders the trustees seek. In order to apply for that order, the trustees wish to place before the Federal Court information the dissemination of which is, prima facie, forbidden under s 121 of the Family Law Act if disseminated to the public or to a section of the public. The trustees wish to give the creditors of the bankrupt estate an opportunity to be heard on the trustees’ application. The creditors represent a section of the public. Disseminating information in this proceeding to all creditors, not just the represented third parties, attracts the operation of s 121(1) unless an order is made under s 121(9)(g).
The represented third parties once opposed the grant of that order under s 121(9)(g). Among other reasons, the represented third parties argued that an existing non-publication order is in operation. They earlier contended that no mechanism was offered by the trustees constraining employees of large institutional creditors from further disseminating information otherwise subject to the prohibition on publication set out in s 121.
The represented third parties no longer oppose the approval sought by the trustees. However, independent of the fact that the represented third parties no longer oppose the trustees’ application, I must be persuaded that approval should be granted under s 121(9)(g). I take the view that the trustees should be able to bring their approval application to the Federal Court using information derived from this court. The issues about which the represented third parties expressed their apprehension, the more important of which was the seeming absence of control over further dissemination of information, can (and probably should) be the subject of address before the Federal Court to enable a justice of that court, if thought appropriate, to fashion such control mechanisms as are deemed appropriate that alleviate the concerns of the represented third parties. As to their contention that the non-publication orders of 4 December 2018 should not be interfered with, it needs scarcely to be said that those orders were made almost three years ago and since then expensive and time consuming aspects of this litigation have played out, not the least of which has been the appeal. If the trustees are funded, as Mr K has sworn, the trustees will press ahead with a view to the ultimate goal of eliminating the capital gains tax liability thereby enhancing the pool of assets available for division to the parties to this Family Court proceeding as well as to the general body of unsecured creditors. Experience shows that this litigation has a considerable distance still to travel. If I were to refuse the trustees’ application, a serious risk of the stultification of the litigation would present itself.
Counsel brought to my attention a collection of authorities in this court in relation to the construction of s 121. Many of those authorities related to parenting issues.[49] Others related to the dissemination of information to statutory bodies or other courts.[50] This application was novel in that –
(a)it was brought by the trustees, self-evidently, not parties to the marital relationship;
(b)it involved the question of the application of s 121(9)(g) in the context of a proposed application to another court established pursuant to Chapter III of the Constitution of the Commonwealth of Australia;
(c)it did not involve aspects of parenting or anything associated with children or their best interests;
(d)it raised complex issues of personal insolvency; and
(e)it raised or was likely to raise the actual or potential tension between permitting the trustees to better perform their duties under the Bankruptcy Act on the one hand while concurrently giving effect to the legislative intendment underpinning the general prohibition in relation to the dissemination of information in litigation under the Family Law Act on the other hand.
[49] Re W: Publication Application (1997) 137 FLR 205, Russel v Russel (1976) 134 CLR 495 and Winters & Winters [2015] Fam CA 195.
[50] De Santis v Aravanis (2014) 227 FCR 404, [43], Dickason v Dickason (1913) 17 CLR 50, DOQ17 v Australian Financial Security Authority (No 3) [2019] FCA 1488, [136], Gibb & Gibb [1978] FamCA 8, Martin v Martin [2015] WADC 138, [23]-[25], McPherson v McPherson [1936] AC 177, Minister for Immigration and Border Protection v Egan [2018] FCA 1320, R Pty Ltd (as trustee for the Fletcher Trust) v Jones and Another (2016) 56 Fam LR 445, Re Edelsten, Donnelly v Edelsten and Others(1988) 18 FCR 434, Scott v Scott [1913] AC 417, Sitwell v Sitwell (2014) 51 Fam LR 158, 166 [33], SRD v Australian Securities Commission (1994) 52 FCR 187, 189 and Ying v Song [2010] NSWSC 1500, [210].
The trustees have gone to considerable lengths to devise a mechanism that has the effect of preventing creditors from further disseminating the information that the trustees propose providing to those creditors thereby enabling these creditors to be meaningfully involved in the approval application. Yet it must at once be acknowledged that very real practical obstacles present themselves in binding creditors, such as the two major banks in this instance, to confidentiality, especially having regard to the fact that any obligation of confidentiality binding upon those banks may translate to thousands of bank employees. The employees themselves will not be burdened by an obligation of confidentiality. Their employer will, however.
Should that be a reason to refuse this application under s 121(9)(g)?
In my view, the answer is in the negative. I accept that bank employees mentioned above may not be bound by a Harman undertaking[51] as would otherwise apply to the litigants themselves. However, it seems to me that this litigation is likely to involve substantial ongoing skirmishing. As has already been recorded, Mr Waller QC informed me on 12 August 2021 that the losing party to the appeal is likely to seek special leave to appeal from the High Court of Australia. The trustees have sworn that they need ongoing funding to advance this litigation in the overall. It is a commonplace event in the commercial arena in insolvency litigation for the trustee in bankruptcy or liquidator to be funded. Where interested creditors decline to fund the trustee or liquidator, the trustee or liquidator often seeks funding from a commercial entity.
[51] Harman v Secretary of State for the Home Department [1983] 1 AC 280 as applied in Hearne v Street (2008) 235 CLR 125.
The trustees’ actions in entering into the litigation funding agreement is, in and of itself, unexceptional. But in litigation under the Family Law Act, s 121 operates to prohibit the dissemination of certain information, absent approval under s 121(9)(g). The represented third parties once urged me to refuse approval under s 121(9)(g). They cited technical deficiencies in the material on which the trustees rely. It seems plain enough that the trustees are likely to intensify their efforts against the represented third parties once the court ratifies the trustees’ entry into the litigation funding agreement. In any event, if I were to refuse this application, the trustees are highly likely to be stultified in their ongoing administration of the bankruptcy of the first respondent. I take the view that the steps the trustees will undertake to maintain confidentiality are practical and achievable. It remains to be seen whether the Federal Court of Australia, drawing on its expertise in class action litigation when issues of confidentiality arise, adds a layer of protection in addition to the trustees’ proposed measures.
CONCLUSION ON THE TRUSTEE’S APPLICATION UNDER S 121(9)(G)
For those reasons I make the orders in paragraph 1 and 3 of the trustees’ application in a case dated 21 June 2021. In my view, no leave is required under s 121(9)(g) to disclose the information canvassed in paragraph 2 of the trustees’ application in a case.
For the purpose of paragraph 4 of the trustees’ application in a case, I direct that prior to 4pm on 20 September 2021 and prior to the trustees filing the originating application the proposed draft of which has been canvassed above, the legal representatives of the trustees and of the represented third parties confer with a view to agreeing on a mechanism to be implemented so as to reduce as far as possible if not eliminate the risk of creditors of the bankrupt estate of the first respondent further disseminating any information the trustees give those creditors following the making of these orders.
COSTS
The represented third parties applied for an order that their costs of and incidental to this application be paid by the trustees, to be assessed on a party/party basis. They sought to invoke s 117(2A) (c) and (g). They recognised that they only needed to successfully invoke one of the elements of s 117(2A).[52] They submitted that an order for costs was just in all the circumstances.[53] They argued, in essence, that –
(a)on the 12 July appearance the trustees’ application was not well formed and required considerable refinement;
(b)the trustees were given an indulgence to put their material in proper form;
(c)the trustee’s material remained defective during the appearance on 20 August 2021, requiring yet a further indulgence; and
(d)only once further refinements to the trustees’ documentation were made ahead of the 6 September 2021 appearance was the trustee’s documentation in such form as enabled the represented third parties to make an informed decision to not object to the trustees’ application.
[52] Fitzgerald v Fish (2005) 33 Fam LR 123.
[53] In the Marriage of Hogan (1986) 10 Fam LR 681.
They argued that their costs have been wasted. They sought payment of those costs.
In opposing the costs application counsel for the trustees submitted that the trustees were required to bring this application, that they are required to discharge certain duties under the Bankruptcy Act and it is not just to visit them with a costs order for performing their duties.
That seemed to miss the point Mr Waller made. No dispute emerged that the trustees needed leave to bring this application so as to apply to the Federal Court. The represented third parties contended that the hearings on 12 July and 20 August were the result of deficiencies in the trustees’ documentation.
I do not share the enthusiasm of the represented third parties for their costs application. I say that for several reasons.
First, while it is true that the principle position adopted by the represented third parties on 12 July was their request for me to dismiss the trustees’ application, I did not dismiss the trustees’ application on that date and instead invited the trustees to consider reformulating their documentation, which they did. The represented third parties maintained their concern about confidentiality. On 20 August 2021 the position of the represented third parties had not changed. They continued to oppose the grant of orders under s 121(9)(g). To my way of thinking, that conduct by the trustees in modifying their documentation, mostly at my suggestion or invitation does not warrant a costs order being made against the trustees.
Second, had I dismissed the trustees’ application for approval under s 121(9)(g) in accordance with the represented third parties’ urgings, a high likelihood existed that the trustees’ proposed course of seeking Federal Court ratification for the trustees’ entry into the funding agreement would have been stultified. In my view, the represented third parties should not have their costs for such a position.
Third, despite the submissions advanced by the represented third parties to the contrary, I found nothing in the conduct of the trustees to attract a costs order under s 117(2A)(c). To the contrary. Their continued refinement of documentation they wish to put before the Federal Court has ultimately procured the result that the represented third parties desisted in their opposition to the trustees’ application before me.
Fourth, it is not just to penalise by a costs order court officers who are discharging their statutory duties to advance interests of persons they are required by statute to advance.
So far as s 117(2A)(g) was concerned, in my view no other relevant matter was enlivened to attract the making of a costs order.
It must be remembered that absent a reason founded in s 117(2A), the usual regime prescribed by s 117(1) applies. I take the view that no order under s 117(2) is warranted. Section 117(1) applies. Each party is to bear his, her or its own costs of and incidental to the trustees’ application under s 121(9)(g) of the Family Law Act.
I certify that the preceding sixty-two (62) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wilson. Associate:
Dated: 8 September 2021
SCHEDULE OF PARTIES
MLF 3444 of 2006 Respondents
Fourth Respondent:
MR BAN
Fifth Respondent:
AAA PTY LTD AS TRUSTEE OF THE BBB TRUST (ACN …)
Sixth Respondent:
CCC PTY LTD AS TRUSTEE OF THE DDD UNIT TRUST (ACN …)
Seventh Respondent:
GGG PTY LTD (ACN …)
Eighth Respondent:
EEE PTY LTD (ACN …)
Ninth Respondent:
HHH PTY LTD (ACN …)
Tenth Respondent:
JJJ PTY LTD (ACN …)
Eleventh Respondent:
LLL PTY LTD (ACN …)
Twelfth Respondent:
MMM PTY LTD (ACN …)
Thirteenth Respondent:
X CORPORATION PTY LTD (ACN …)
Fourteenth Respondent:
X HOLDINGS PTY LTD (ACN …)
Fifteenth Respondent:
X INTERNATIONAL PTY LTD (ACN …)
Sixteenth Respondent:
X PROPERTIES PTY LTD (ACN …)
Seventeenth Respondent:
X PTY LTD AS TRUSTEE OF THE Y UNIT TRUST (ACN …)
Eighteenth Respondent:
X-1 PROPERTIES PTY LTD (ACN …)
Nineteenth Respondent:
NNN PTY LTD (ACN …)
Twentieth Respondent:
OOO PTY LTD (ACN …)
Twenty-first Respondent
QQQ PTY LTD AS TRUSTEE OF THE RR FAMILY TRUST (ACN …)
Twenty-second Respondent
X-1 PTY LTD (ACN …)
Twenty-third Respondent
Y (NZ) LIMITED (ACN …)
Twenty-fourth Respondent
Y (WA) PTY LTD (ACN …)
Twenty-fifth Respondent
Y INTERNATIONAL PTY LTD (ACN …)
Twenty-sixth Respondent
X-2 PTY LTD (ACN …)
Twenty-seventh Respondent
SSS PTY LTD AS TRUSTEE OF THE TTT INVESTMENT TRUST (ACN …)
Twenty-eighth Respondent
VVV PTY LTD (ACN …)
Twenty-ninth Respondent
MS C JESS
2
19
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