Jess & Jess (No 4)
[2023] FedCFamC1A 189
•3 November 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1) APPELLATE JURISDICTION
Jess & Jess (No 4) [2023] FedCFamC1A 189
Appeal from: Jess & Jess(No 7) [2023] FedCFamC1F 291
Jess & Jess(No 8) [2023] FedCFamC1F 395
Appeal numbers: NAA 123 of 2023
NAA 143 of 2023File number: MLF 3444 of 2006 Judgment of: ALDRIDGE, RIETHMULLER & SCHONELL JJ Date of judgment: 3 November 2023 Catchwords: FAMILY LAW – APPEAL – Application to appeal from orders dismissing an application for summary dismissal – Where the husband’s trustee in bankruptcy made claims pursuant to s 106B of the Family Law Act 1975 (Cth) to recover the husband’s business interests, held as units in a Unit Trust – Units originally held by the husband who allegedly declared that he held the Units on trust for his son – Where the declaration of trust was determined to be fraudulent – Where the trustee in bankruptcy and the wife seek to restore the Units to the husband (now the husband’s estate) for the Units to form part of the property of the parties pursuant to s 79 – Where the trustee in bankruptcy seeks to set aside the transfer of the Units to the son as at the time of transfer to ensure the Units were held by the husband at the time of bankruptcy, so as to vest in the bankruptcy trustee – Leave to appeal required – Leave to appeal refused – Appeal dismissed – Applicants to pay costs of first respondent wife and intervener in fixed sum.
FAMILY LAW – APPEAL – Application to appeal decision of primary judge with respect to discovery – Reasons given but orders not yet made – Necessity of orders as the basis for an appeal – Leave to appeal refused – Appeal dismissed – Applicants to pay costs of first respondent wife and intervener in fixed sum.
FAMILY LAW – APPEAL – Application to appeal decision of primary judge to refuse a stay application with respect to discovery – Leave to appeal refused – Appeal dismissed – Applicants to pay costs of first respondent wife and intervener in fixed sum.
Legislation: Bankruptcy Act 1966 (Cth) ss 58, 116
Family Law Act 1975 (Cth) ss 4, 79, 79A, 90AE, 90K, 106B
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 28, 46, 67
Federal Court and Federal Circuit and Family Court Regulations 2012 (Cth) reg 4.02
Cases cited: Aitken & Aitken (2023) FLC 94-142; [2023] FedCFamC1A 69
Barre & Barre [2021] FamCA 101
BCBC Singapore Pte Ltd v PT Bayan Resources TBK (No 2) [2012] WASC 321
Bray v F Hoffman-La Roche Ltd (2002) 118 FCR 1; [2002] FCA 243
Civil Air Operations Officers Association of Australia v Airservices Australia [2020] FCA 1665
Driclad Pty Ltd v Federal Commissioner of Taxation (1968) 121 CLR 45; [1968] HCA 91
Federated Engine-Drivers and Firemen’s Association of Australasia v Broken Hill Pty Co Ltd (1911) 12 CLR 398; [1911] HCA 31
Jess & Jess (2021) FLC 94-055; [2021] FamCAFC 159
Jess & Jess [2022] HCASL 24
Jess & Jess (No 3) (2023) 374 FLR 344; [2023] FedCFamC1A 2
Khatri v Price (1999) 95 FCR 287; [1999] FCA 1289
Loder v Aysom (1988) FLC 91-955
Medlow & Medlow (2016) FLC 93-692; [2016] FamCAFC 34
NABL v Minister for Immigration and Multicultural Affairs [2002] FCA 102
Needham & Trustees of the Bankrupt Estate of Needham (2017) FLC 93-777; [2017] FamCAFC 94
PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission (2012) 247 CLR 240; [2012] HCA 33
Porter & Porter [2022] FedCFamC1F 102
R v Ross-Jones; Ex parte Green (1984) 156 CLR 185; [1984] HCA 82
Re Chemaisse; Federal Commissioner of Taxation (Intervener) (1990) FLC 92-133; [1990] FamCA 32
Re the Will of Gilbert (1946) 46 SR (NSW) 318
Southern & Southern [2019] FamCA 1002
Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 52
SunshineLoans Pty Ltd v Australian Securities and Investments Commission [2023] FCA 707
Vicinity Funds RE Ltd v Commissioner of State Revenue(Vic) [2021] VSC 200
Number of paragraphs: 45 Date of hearing: 29 August 2023 Place: Heard in Melbourne, delivered in Sydney Counsel for the Applicants: Mr Myers KC with Mr Waller KC and Mr Lum Solicitor for the Applicants: HWL Ebsworth Lawyers Counsel for the First Respondent: Mr Dickson KC with Ms Johnston Solicitor for the First Respondent: Kenna Teasdale Lawyers The Second Respondent: Did not participate Counsel for the Intervener: Mr Austin KC with Ms Papaleo Solicitor for the Intervener: Landers & Rogers ORDERS
NAA 123 of 2023
NAA 143 of 2023
MLF 3444 of 2006FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MR JESS JNR
First Applicant
MR BAN
Second Applicant
AAA PTY LTD AS TRUSTEE OF THE BBB TRUST (and others named in the Schedule)
Third Applicant
AND: MS JESS
First Respondent
MR J IN HIS CAPACITY AS THE LEGAL PERSONAL REPRESENTATIVE OF THE LATE MR JESS SNR
Second Respondent
PPP INVESTMENTS PTY LTD (and others named in the Schedule)
Third Respondent
MR K AND MR L AS TRUSTEES OF THE BANKRUPT ESTATE OF MR JESS SNR
Intervener
ORDER MADE BY:
ALDRIDGE, RIETHMULLER & SCHONELL JJ
DATE OF ORDER:
3 NOVEMBER 2023
THE COURT ORDERS THAT:
1.Leave to appeal in appeal number NAA 123 of 2023 is refused.
2.Leave to appeal in appeal number NAA 143 of 2023 is refused.
3.Appeal number NAA 123 of 2023 is dismissed.
4.Appeal number NAA 143 of 2023 is dismissed.
5.The applicants pay the first respondent wife’s costs of the appeal fixed at $30,000.
6.The applicants pay the intervener’s costs fixed at $30,000.
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).
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
ALDRIDGE, RIETHMULLER & SCHONELL JJ:
INTRODUCTION
The applicants seek leave to appeal against interlocutory orders made by the primary judge refusing to summarily dismiss claims made by the husband’s trustee in bankruptcy and a decision with respect to discovery sought by the wife made on 27 April 2023 (NAA 123 of 2023). The applicants also seek leave to appeal against the decision of the primary judge to refuse a stay application (on 19 May 2023) with respect to the discovery decision (NAA 143 of 2023).
BACKGROUND
In 2006, the husband and wife separated after having lived together for 20 years, having had three children (who are now adults). The parties divorced in 2008.
The relevant circumstances that led to the current proceedings can be briefly summarised:
(a)On 18 December 2006, the wife commenced property settlement proceedings against the husband pursuant to the Family Law Act 1975 (Cth) (“the FLA”). A major asset of the husband was a retail business. The husband’s business interests were structured such that they were ultimately held by a company as trustee of a unit trust, units of which were held by the husband (the “Units”).
(b)In 2007, the husband’s son from a previous relationship commenced proceedings in the Supreme Court of Victoria seeking orders confirming that the husband’s Units had vested in the son, relying upon a trust deed purportedly signed by the husband in 2002.
(c)On 24 September 2009, property settlement orders pursuant to s 79 of the FLA were made by consent. Four days earlier, the wife had entered into a deed of settlement with the husband and the son foregoing any claim on the Units which the husband purported to hold for the benefit of the son pursuant to the alleged 2002 trust deed. At the time that the wife entered into the settlement she says that she was unable to prove that the trust deed was a fraudulent document. The Units were transferred to the son on that day.
(d)On 31 May 2010, the husband confessed to the wife that the trust deed was fraudulent, leading her and the husband to apply to set aside the trust deed and consequential transactions (including the 2009 settlement) relying upon s 106B of the FLA.
(e)In 2013, the wife applied for orders pursuant to s 79A of the FLA to set aside the property settlement orders entered into by consent in 2009.
(f)In 2016, the husband was declared bankrupt (on a debtor’s petition). The third respondent to the proposed appeal (the “bankruptcy trustee”) was appointed trustee of the husband’s estate in bankruptcy.
(g)On 22 August 2016, Bennett J made orders by consent joining the bankruptcy trustee as an intervener in the proceedings.
(h)In 2018, the husband died and was replaced in the litigation by the legal personal representative of his deceased estate (the “husband’s estate”) (the second respondent).
(i)In mid 2019, the husband’s estate was discharged from bankruptcy.
(j)On 15 November 2019, Bennett J, after finding that the declaration of trust was fraudulent (as explained by the Full Court in Jess & Jess (2021) FLC 94-055 at [73]–[79] and [143]), made a declaration that the trust deed “was not executed on the date that it bears”. An application for leave to appeal that order was dismissed (Jess & Jess [2022] HCASL 24) and an application for special leave to appeal to the High Court was refused.
(k)On 29 July 2022, the property settlement orders between the husband and wife (made on 20 September 2009) were set aside pursuant to s 79A of the FLA with the consent of the husband’s estate and the bankruptcy trustee. An appeal by the son and related parties against the orders setting aside the original property settlement orders was dismissed (Jess & Jess (No 3) (2023) 374 FLR 344).
The wife and the bankruptcy trustee seek orders pursuant to s 106B of the FLA setting aside the alleged 2002 trust deed, the 2009 settlement deed, and the transfer of the Units to the son. They also seek orders for the recovery of the Units (and, on the case of the wife, any traceable proceeds). The effect of the orders sought by the wife and the bankruptcy trustee are to restore the Units to the husband (now the husband’s estate), so that the Units form part of the property that can be the subject of property settlement orders pursuant to s 79 of the FLA. The trustee in bankruptcy seeks orders that the impugned transactions be set aside as at the time they were made to ensure that the husband held the Units at the time of his bankruptcy (or at least prior to the discharge from bankruptcy), so that the Units would then vest in the bankruptcy trustee: see s 58 of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”).
The proposed appeals require leave as they concern interlocutory orders: see s 28(3)(e)(i) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (“the FCFCOA Act”) and reg 4.02 of the Federal Court and Federal Circuit and Family Court Regulations 2012 (Cth). To obtain leave the applicants must show that the decision of the primary judge was “attended by sufficient doubt to warrant it being reconsidered by the Full Court and [that] substantial injustice would result if leave were refused, supposing the decision to be wrong”: see Medlow & Medlow (2016) FLC 93-692 at [57] (emphasis in original). Whilst a “tight rein” must be kept on appeals concerning practice and procedure (as identified in the oft cited passage by Sir Frederic Jordan in Re the Will of Gilbert (1946) 46 SR (NSW) at 323), this does not prevent an appeal court from correcting such orders where it is appropriate to do so.
REFUSAL OF THE PRIMARY JUDGE TO SUMMARILY DISMISS THE BAKRUPTCY TRUSTEES SECTION 106B CLAIM
The applicants set out three proposed grounds of appeal directed to whether the claim by the bankruptcy trustee should have been summarily dismissed:
1. The primary judge failed to determine, on the balance of probabilities, the essential facts upon which the existence of the Court’s jurisdiction to make the orders sought ultimately depends (the jurisdictional facts) and consequently failed to positively find that the Court had jurisdiction to entertain the Trustees’ claims in the Cross-Claim dated 11 November 2022 (Cross-Claim).
2. The primary judge erred in holding (at [18]) that the finding of jurisdictional facts can be postponed until the trial of the proceeding and consequently erred in holding (at [41], [75], [78] and [80]) that the determination of whether the Cross-Claim concerns vested bankruptcy property held by the Trustees be postponed until the trial of the proceeding.
3. The primary judge ought to have found that the Cross-Claim does not concern vested bankruptcy property held by the Trustees and accordingly ought to have held that the Court does not have jurisdiction to entertain the Cross-Claim.
(Amended Notice of Appeal filed 24 July 2023)
The Court has power to summarily dismiss a claim if satisfied that a party has no reasonable prospects of prosecuting the proceedings: see s 46(2) of the FCFCOA Act.
There is no question that the claim between the wife and the bankruptcy trustee is a matrimonial cause within the jurisdiction of the Court: the orders joining the bankruptcy trustee (which were not challenged) were made pursuant to s 79(11) of the FLA which required, inter alia, that “the court is satisfied that the interests of the bankrupt’s creditors may be affected by the making of an order under this section in the proceedings”: see s 79(11)(d) of the FLA.
The bankruptcy trustee, having been joined as a party to the proceeding, may apply for orders pursuant to s 106B of the FLA, which relevantly provides:
106B Transactions to defeat claims
(1) In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
(1A) If:
(a) a party to a marriage, or a party to a de facto relationship, is a bankrupt; and
(b) the bankruptcy trustee is a party to proceedings under this Act;
the court may set aside or restrain the making of an instrument or disposition:
(c) which is made or proposed to be made by or on behalf of, or by direction or in the interest of, the bankrupt; and
(d) which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
…
(4AA)An application may be made to the court for an order under this section by:
(a) a party to the proceedings; or
…
(c) any other person whose interests would be affected by the making of the instrument or disposition.
Whilst the husband’s estate was discharged from bankruptcy some years ago, the term “bankrupt” includes a person “who has been discharged from bankruptcy”: see s 4(6) of the FLA.
The bankruptcy trustee is a party to the proceedings and there is no doubt that the interests of the bankruptcy trustee were affected by the making of the dispositions in issue, as the transactions divested the bankrupt of significant property (the Units) which would otherwise have vested in the bankruptcy trustee upon the husband’s bankruptcy.
The applicants argue that the Units do not fall within the definition of “vested bankruptcy property” as neither the trust deed, nor the settlement deed have yet been set aside pursuant to s 106B of the FLA. The argument commences with the proposition that any order made pursuant to s 106B could only take effect on the date the order is made, and thus, the Units could only become property of the husband (now the husband’s deceased estate) on the date of the order pursuant to s 106B. As a result, the property would be “acquired” by the husband after the date of discharge from bankruptcy and would not vest in the bankruptcy trustee: see s 58(1)(a) and s 116(1)(a) of the Bankruptcy Act. Thus, it is argued by the applicants, the claim by the bankruptcy trustee pursuant to s 106B of the FLA is not a “matrimonial cause” as defined in s 4 (definition of ‘matrimonial cause’ para (cb)), as that part of the definition provides for “proceedings … with respect to any vested bankruptcy property”.
In order to sustain this argument, the applicants say that the application by the bankruptcy trustee pursuant to s 106B of the FLA is a separate cause of action and not an incident of the “matrimonial cause” that is pending between the wife and the bankruptcy trustee with respect to property that has already vested in the bankruptcy trustee. However, this argument has a number of difficulties. First, a claim pursuant to s 106B is not an independent cause of action that may be pursued otherwise than as an incident of a matrimonial cause: see the opening words of s 106B(1) and the discussion in Porter & Porter [2022] FedCFamC1F 102 at [51] et seq. Secondly, an order under s 106B will be relevant to the exercise of the discretion to make any order pursuant to s 79 of the FLA that may affect vested bankruptcy property (other than the property the subject of the s 106B order) as it will affect the overall value of the property of the parties that must be identified in order to properly consider whether orders should be made pursuant to s 79: see Stanford v Stanford (2012) 247 CLR 108 at [37]. Thirdly, if the applicants’ reading of s 106B were correct, then the specific right of a bankruptcy trustee to bring an application, as set out in s 106B(4AA)(a) of the FLA, would be pointless as any property already divested would no longer be “vested bankruptcy property”. As the primary judge said at [78]:
78.… It would be most peculiar, to say nothing of inequitable, contrary to public policy and an affront to justice, that jurisdiction was denied to a party (the trustees) where the alleged want of jurisdiction was occasioned by acts described elsewhere as being fraudulently committed by one or more of the parties asserting the want of jurisdiction.
Whether orders pursuant to s 106B can take effect on the date of the impugned transaction is a question that has not been authoritatively determined and is clearly a matter appropriately considered after findings as to the actual facts of the case: see Loder v Aysom (1988) FLC 91-955 at 76,905 per Mason CJ, Brennan and Deane JJ. Whether such a result flows in this case will depend upon questions of fact and law that are yet to be determined.
The applicants also argue that the bankruptcy trustee does not have the right to seek orders to “enlarge the vested bankruptcy property” (applicants’ Summary of Argument filed 24 July 2023, paragraph 49), referring to the statement in Needham & Trustees of the Bankrupt Estate of Needham (2017) FLC 93-777 that s 79(1) of the FLA “does not … empower the Respondent Trustees to … enlarge the vested bankruptcy property available to the bankrupt spouse’s creditors” (at [37], approving the primary judge’s statement).
More precisely stated, s 79(1) of the FLA makes provision for the solvent spouse to seek an alteration of the property interests of the bankruptcy trustee with respect to vested bankruptcy property but does not make provision for the bankruptcy trustee to seek orders altering the property interests of the solvent spouse. There is nothing in s 79 that would prevent the bankruptcy trustee from seeking orders (other than pursuant to s 79(1) of the FLA) to restore or enlarge the property of the solvent spouse or the property of the bankruptcy trustee as an incident of determining what orders, if any, should be made in favour of the solvent spouse with respect to vested bankruptcy property. If orders pursuant to s 106B of the FLA resulted in the Units being within the definition of “vested bankruptcy property” (if the orders take effect on a date earlier than the date on which they are made), thus protecting creditors from the husband’s fraud, such an effect would not be the result of property orders against the wife pursuant to s 79(1) of the FLA.
The bankruptcy trustee argues that the husband’s rights to pursue orders under s 106B of the FLA (which the husband had exercised by filing an application in 2013 in the proceedings, prior to being declared bankrupt) are a chose in action which vested in the trustee in bankruptcy and is therefore within the definition of “vested bankruptcy property”. The trustee points to the decision in Southern & Southern [2019] FamCA 1002 (followed in Barre & Barre [2021] FamCA 101) where rights to impugn a financial agreement (pursuant to s 90K of the FLA) were found to be a chose in action that vested in a bankruptcy trustee, arguing that it is analogous to the present claim by the trustee pursuant to s 106B. The applicants (who have benefited from the husband’s fraud) argue that the husband should not be permitted to seek relief from his own fraud, yet no such limitation appears in the words of s 106B, nor would public policy necessarily demand such a result when it is the bankruptcy trustee who seeks the relief for the benefit of the creditors. This question, together with the argument as to whether the rights of the husband to seek orders pursuant to s 106B (already the subject of an application prior to his sequestration) are a chose in action that vests in the bankruptcy trustee, are best determined once findings are made as to the facts.
The primary judge carefully considered the importance of determining whether he had jurisdiction to decide the application by the bankruptcy trustee before proceeding to make orders granting relief. His Honour, at [10], referred to the oft quoted statement of Griffith CJ in Federated Engine-Drivers and Firemen’s Association of Australasia v Broken Hill Pty Co Ltd (1911) 12 CLR 398 at 415 that it is the first duty of a court to satisfy itself that it has jurisdiction. Where a court makes holding orders or grants interlocutory injunctions, it is important to determine the question of jurisdiction quickly: see R v Ross-Jones; Ex parte Green (1984) 156 CLR 185 at 202.
However, determining the question of jurisdiction also requires consideration of issues of case management in order to determine how best to manage a matter where the question of jurisdiction involves complex questions of law and fact. As Katz J said, in Khatri v Price (1999) 95 FCR 287 at [14]:
14.… The duty has been generally understood instead as permitting the court concerned to exercise a discretion (subject, obviously (if the court is not the High Court), to appellate or supervisory review, whichever is appropriate) to postpone determining the question of its jurisdiction until after it has heard the whole case, provided, however, that having done so, it then ‘first’ determines that question.
This decision (although not specifically the quoted passage) was referred to with approval by the High Court in PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission (2012) 247 CLR 240 at [16]. Whilst not universally accepted without reservation, the relevant passage in Khatri has been cited numerous times with approval in other courts: SunshineLoans Pty Ltd v Australian Securities and Investments Commission [2023] FCA 707 at [61] (Yates J); Vicinity Funds RE Ltd v Commissioner of State Revenue (Vic) [2021] VSC 200 at [16] (Nichols J); BCBC Singapore Pte Ltd v PT Bayan Resources TBK (No 2) [2012] WASC 321 at [27] (Pritchard J); Civil Air Operations Officers Association of Australia v Airservices Australia [2020] FCA 1665 at [31] (Murphy J); Bray v F Hoffman-La Roche Ltd (2002) 118 FCR 1 at [185]–[187] (Merkel J); and NABL v Minister for Immigration and Multicultural Affairs [2002] FCA 102 at [2] (Allsop J, as his Honour then was).
The primary judge concluded that the answers to the complex questions that arise in this case were more appropriately given after the Court “makes findings of fact or addresses issues of mixed fact and law” (at [75]). The jurisdictional challenge relates to only one part of proceedings that are otherwise patently within the jurisdiction of the Court. A separate trial on these questions alone would cause considerable expense and delay. There are no relevant “holding orders” or “interim injunctions”. In the present proceedings, all of the parties will remain in the matter regardless of the outcome of the jurisdictional challenge and the issues identified in the s 106B application by the bankruptcy trustee will be litigated by the wife in any event (as there is no basis for a jurisdictional challenge to the wife pursuing these claims). Consequently, it is unsurprising that the primary judge declined to summarily dismiss the application by the bankruptcy trustee nor order a separate trial on this issue.
We are not persuaded that the primary judge erred in the exercise of his discretion when declining to grant summary judgment. To the extent that the issues may include a question of jurisdiction, we are not persuaded that it was outside the broad ambit of the primary judge’s discretion to conclude that, in these particular proceedings, the jurisdiction arguments can be appropriately determined at the trial of the matter (although necessarily prior to the other determinations that would be required in the matter).
As a result, we are not persuaded that the decision of the primary judge refusing to summarily dismiss the claims of the bankruptcy trustee for orders pursuant to s 106B of the FLA is attended by sufficient doubt as to warrant its reconsideration. Nor are we persuaded that there is any significant injustice to the applicants if the application for leave to appeal is refused (even if the primary judge had erred in declining to summarily dismiss the application), as substantially the same claims pursuant to s 106B are being pursued by the wife in the proceedings of which the bankruptcy trustee and applicants would remain parties in any event.
The application for leave to appeal against the orders of the primary judge refusing summary judgment should be dismissed.
DISCLOSURE ORDERS GROUNDS
The applicants also seek leave to appeal from the primary judge’s decision with respect to disclosure concerning the wife’s claims, on the following grounds:
4. The primary judge erred in finding (at [146]) that the represented third parties are required to make discovery of documents created after 20 September 2009 for the purpose of the wife undertaking a process of tracing in the absence of a finding that the wife had pleaded as a material fact any identifiable asset which could constitute the necessary proprietary base from which she could undertake a process of tracing.
5. The primary judge ought to have held that discovery by the represented third parties be limited to documents created on or before 20 September 2009 which are relevant to the wife’s application pursuant to section 106B of the Family Law Act 1975 (Cth) for orders setting aside the Deed of Declaration of Trust, Deed of Settlement dated 20 September 2009 and the instrument for the transfer of units dated September 2009 (referred to in [43](a)).
(Amended Notice of Appeal filed 24 July 2023)
The primary judge gave reasons for judgment on the disclosure arguments, however orders for disclosure were not made at that time. Instead, directions were made for the parties to “bring in an agreed minute in relation to discovery as between all parties subsequent to the year 2009” (Order 4 of the orders made 27 April 2023).
Whilst inappropriately expressed (as the parties cannot be ordered to agree), we proceed on the basis that the primary judge intended to direct the parties to attempt to reach an agreed Minute of Order with respect to disclosure that reflected the reasons for judgment. One ordinarily expects that legal practitioners would be able to assist a busy court, if requested, to draw a proposed minute for the assistance of the judge, at least where the reasons make clear what the terms of the order will be or the issues are not complicated. There is no suggestion that draft Minutes of Orders have been provided to the primary judge, nor any request made for the matter to be re-listed for orders to be made.
Reasons for judgment are not appealable, only the orders giving effect to the reasons. Until there are orders made giving effect to the reasons there is no appealable order or decree: see Driclad Pty Ltd v Federal Commissioner of Taxation (1968) 121 CLR 45 at 64. The applicants seek to overcome this difficulty by relying upon Aitken & Aitken (2023) FLC 94-142 to argue that the primary judge effectively refused to make orders.
The primary judge did not have the benefit of the reasons in Aitken’s case at the time he gave judgment, as Aitken was decided after the directions were made. Aitken’s case counsels against the practice of requesting the parties to draw orders reflecting the terms of a judgment. In Aitken, there was a repeated refusal of a primary judge to make final orders after the parties were unable to reach agreement as to the terms of orders necessary to reflect reasons for judgment that had been delivered after a final hearing, where the parties had already provided detailed draft orders, and where one party asserted that they lacked the capacity to comply with the proposed orders: see Aitken at [35]–[36].
On the material before the Court, we are not persuaded to draw the inference that the primary judge has abdicated his judicial duty to quell the disclosure dispute.
In any event, it is difficult to see how the applicants could resist making discovery with respect to the consequences of the disposition of the Units as this would almost certainly be relevant to the exercise of the Court’s discretion pursuant to s 106B of the FLA.
To the extent that the claim by the wife is expressed as a “tracing claim”, the applicants argue that the wife is unable to trace the property in the Units as she never held a proprietary interest in the Units, only the husband held such an interest. The discovery would be necessary for the wife to identify the consequences of the transfer of the husband’s Units to the son in order to seek such further orders (pursuant to s 106B of the FLA) as may be required to effect the return of the full value of the Units. The wife also argues that her claim for the settlement of the Units (or part of them) upon her, pursuant to s 79 of the FLA, gives her a proprietary claim sufficient to found the tracing claim. This argument was not well developed and may be difficult to sustain in light of the decision in Re Chemaisse; Federal Commissioner of Taxation (Intervener) (1990) FLC 92-133 at 77,915.
To the extent that the wife’s reliance upon equitable tracing principles is based upon the husband having an equitable proprietary interest in the property “derivative of the original” Units (that is, tracing follows the husband’s property in the Units into the substitute property), the wife is entitled to attempt to prove that the husband’s equitable proprietary interests in this respect are part of the “property” of the husband for the purpose of the s 79 proceedings. If the husband’s tracing rights are only a mere equity outside the ambit of “property” as the term is used in the FLA, s 90AE(2) provides a broad power for the Court to make orders against a third party “in relation to the property of a party” and s 90AE(3)(a) provides that such orders may be made if “reasonably necessary … to effect a division of property”. The effect of s 90AE(2) of the FLA, in this respect, appears to allow the wife to pursue a claim of the husband against a third party in order to obtain the relief the husband would obtain had he sought the remedy, as an incident of obtaining her relief pursuant to s 79 of the FLA. That is, s 90AE appears to admit of a spouse pursuing the other spouse’s rights in a way that is analogous to subrogation for the purpose of recovery upon those rights in order to access property for the purpose of a property settlement pursuant to s 79. Without this power, a wife’s claim for a property settlement could easily be stymied by a husband failing to effectively pursue his rights against another to recover what may be the most substantial asset for property settlement.
However, it is not appropriate to attempt to determine the complex issues that may arise with respect to s 106B of the FLA, equitable tracing or the operation of s 90AE of the FLA, at this point in the proceedings, for the purpose of determining arguments as to disclosure.
We are not persuaded that appealable orders have yet been made, nor that either limb of the test in Medlow has been established with respect to the discovery judgment. As a result, the application for leave to appeal with respect to the disclosure findings should also be dismissed.
REFUSAL TO GRANT A STAY
The applicants also seek leave to appeal against a refusal by the primary judge to grant orders staying the decision with respect to discovery on the following grounds:
1. The primary judge erred ([10], [11] and [15]) in finding that the Appeal will not be rendered nugatory unless the April Orders are stayed.
2. The primary judge ought to have granted a stay of the April Orders pending the determination of the Appeal in circumstances where:
(a) The Appeal would be rendered nugatory if a stay was not granted because the subject matter of the Appeal would be destroyed if discovery and inspection was required to be given before the Appeal is determined.
(b) Although paragraphs 4 and 5 of the April Orders were interlocutory, they required the consideration and application of a fundamental legal principle in respect of tracing. That fundamental legal principle, and its proper application, is central to the Appeal against those orders.
(c) The balance of convenience favoured the grant of a stay.
(d) The Applicants had identified an adverse and severe consequence if the stay was not granted, being the unjustified incursion into their private affairs which could not be undone if the Appeal is successful.
(Notice of Appeal filed 25 May 2023)
As noted above, there are not yet orders for discovery. It was open to the applicants to request that the primary judge make orders, which would then have provided them with a basis for an appeal: they did not do so. As there have not yet been orders for disclosure, there were no orders to be stayed. Thus, the application for leave to appeal the refusal to grant a stay must fail.
In any event, we are not persuaded that the primary judge’s refusal to grant a stay (even if there had been orders made reflecting his Honour’s reasons for decision on this issue) is attended by sufficient doubt to warrant it being reconsidered by the Full Court due to a number of important factors in the present proceedings. First, a powerful factor that weighs against a stay of a discovery order is that the present proceedings have been pending for over nine years and a stay would inevitably add to the delay in holding a trial of the matter. Secondly, a successful appeal would not have been rendered nugatory without a stay as the wife could be ordered to return or destroy any discovered documents and, in the event that the material so compromised her representatives, which seems unlikely, there is power to injunct representatives from continuing to act. Thirdly, the potential for an appeal to be rendered nugatory is but one of the relevant factors to be taken into account when considering granting a stay.
As a result, we are not persuaded that the applicants should be granted leave to appeal from the refusal of the primary judge to grant a stay.
CONCLUSION
As we are not persuaded that the applicants have satisfied either limb of the Medlow test with respect to any of the proposed grounds of appeal, the applications for leave to appeal must be refused.
We take this opportunity to note that this litigation has been pending for a considerable number of years. Whilst there are many complex issues that may arise, these are, in our view, appropriately dealt with after a trial where the relevant facts are determined. It is clear that the primary judge is appropriately focussed upon managing the litigation toward a final hearing at the first reasonable opportunity in accordance with the overarching purpose of the practice and procedure provisions (see s 67 of the FCFCOA Act). In the context of this case, the statement of Sir Frederick Jordan in Re the Will of Gilbert (cited above at [5]) is particularly apt.
Costs
The parties agreed that should the applications for leave to appeal be refused, the applicants should bear the costs of the wife and the bankruptcy trustee.
The parties requested that the Court determine lump sum costs orders rather than referring the costs for assessment pursuant to the rules. The costs incurred by the parties (only with respect to the appeal) were claimed as follows:
(a)The applicants incurred costs which they estimated to be $302,490.64 at scale.
(b)The bankruptcy trustee incurred costs which they estimated at $125,028.91 if assessed at scale.
(c)The wife incurred costs estimated at $40,919 if assessed at scale.
We note that the matter concerns significant underlying assets and complex long running litigation. The applicants were represented by two senior counsel and a junior counsel. However, the issues were limited and the relevant material in the appeal book was not large. We are not persuaded that the parties’ costs estimates, with respect to party/party costs, are reasonable.
It was accepted that a significant part of the costs incurred by the applicants related to the reliance of the bankruptcy trustee on sub-paragraph (f) of the definition of “matrimonial causes” in s 4 of the FLA, which argument was abandoned shortly before the hearing of the appeal. We also note that the wife took no part in the appeal with respect to the bankruptcy trustee and that the bankruptcy trustee took no part in the appeal with respect to the disclosure findings.
We are persuaded that the applicants should pay the costs of the wife fixed at $30,000, and part of the bankruptcy trustee’s costs fixed at $30,000.
I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Aldridge, Riethmuller & Schonell. Associate:
Dated: 3 November 2023
SCHEDULE OF PARTIES
MLF 3444 of 2006 Applicants
Fourth Applicant:
GGG PTY LTD
Fifth Applicant:
EEE PTY LTD
Sixth Applicant:
HHH PTY LTD
Seventh Applicant:
X CORPORATION PTY LTD
Eighth Applicant:
X PROPERTIES PTY LTD
Ninth Applicant:
X-1 PROPERTIES PTY LTD
Tenth Applicant:
NNN PTY LTD
Eleventh Applicant:
QQQ PTY LTD AS TRUSTEE OF THE RRR FAMILY TRUST
Twelfth Applicant:
SSS PTY LTD AS TRUSTEE OF THE TTT INVESTMENT TRUST
Thirteenth Applicant:
VVV PTY LTD
Fourteenth Applicant:
MS C JESS
Respondents
Fourth Respondent:
CCC PTY LTD AS TRUSTEE OF THE DDD UNIT TRUST
Fifth Respondent:
JJJ PTY LTD
Sixth Respondent:
LLL PTY LTD
Seventh Respondent:
MMM PTY LTD
Eighth Respondent:
X HOLDINGS PTY LTD
Ninth Respondent:
X INTERNATIONAL PTY LTD
Tenth Respondent:
X-1 PTY LTD
Eleventh Respondent:
X PTY LTD AS TRUSTEE OF THE JESS RETAIL UNIT TRUST
Twelfth Respondent:
NNN PTY LTD
Thirteenth Respondent:
OOO PTY LTD
Fourteenth Respondent:
Y (NZ) LIMITED
Fifteenth Respondent:
Y (WA) PTY LTD
Sixteenth Respondent:
Y INTERNATIONAL PTY LTD
Seventeenth Respondent:
X-2 PTY LTD
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