Jess & Jess (No 4)
[2022] FedCFamC1F 530
Federal Circuit and Family Court of Australia
(DIVISION 1)
Jess & Jess (No 4) [2022] FedCFamC1F 530
File number(s): MLF 3444 of 2006 Judgment of: WILSON J Date of judgment: 29 July 2022 Catchwords: FAMILY LAW – MAJOR COMPLEX FINANCIAL PROCEEDINGS LIST – application to set aside 24 September 2009 consent orders pursuant to s 79A(1A) and s 79A(1)(a) – fraudulent deed of declaration of trust – deed intended to cheat the wife out of her s 79 entitlement – consent orders set aside. Legislation: Family Law Act 1975 (Cth) ss 79, 79A(1A), 79A(1)(a) and 79A(2)
Matrimonial Causes Act1959 (Cth)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 Part 7
Real Property Act 1861 (Queensland)
Cases cited: Allan v Transurban City Link Ltd (2001) 208 CLR 167
Ascot Investments Pty Ltd v Harper (1982) 148 CLR 337
B Pty Ltd v K (2008) 39 Fam LR 488
Bacall & Zagar [2020] Fam CA 350
Balnaves v Balnaves (1988) 12 Fam LR 488
Barker v Barker (2007) 36 Fam LR 650
Bigg v Suzi (1998) 22 Fam LR 700
Burns v Burns (1967) 10 FLR 441
Calderbank v Calderbank [1975] 3 All ER 333
Cao & Trong [2019] FamCA 336
Clifton v Stuart (1990) 14 Fam LR 511
Clone Pty Ltd v Players Pty Ltd (in liq)(receivers and managers appointed) [1889] AC 337
Derry v Peek [1889] AC 337
Eaby v Speelman [2015] FamCAFC 104
Farley (Aust) Pty Ltd v J.R. Alexander & Sons (Queensland) Pty Ltd (1946) 75 CLR 487
Federal Commissioner of Taxation v St Helen’s Farm (ACT) Pty Ltd (1981) 146 CLR 336
Gitane v Velacruz (2008) 39 Fam LR 460
Hickox v Hickox [1964] ALR 1095
Hicks & Hicks [2018] Fam CAFA 37
HIH Casualty and General Insurance Ltd v Chase Manhattan Bank [2003] UKHL 6
Hill v Zuda Pty Ltd [2022] HCA 21
In Re Avery's Patent (1887) 36 Ch D 307
In the Marriage of Gebert (1990) 14 Fam LR 62
In the Marriage of Heath; Westpac Banking Corporation Intervening (1983) 9 Fam LR 97
In the Marriage of McCabe (1995) 19 Fam LR 579
In the Marriage of Oastler (1989) 16 Fam LR 674
In the Marriage of Patching (1995) 18 Fam LR 675
In the Marriage of Prowse (1994) 18 Fam LR 348
Jess & Jess (No 3) [2022] FedCFamC1F 408
Jess & Jess (2021) 63 Fam LR 545
Jess & Jess [2022] HCASL 24
John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1
Jonesco v Beard [1930] AC 298
Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563
Lazarus Estates Ltd v Beasley [1956] 1 QB 702
Marshall v Director-General, Department of Transport (2001) 205 CLR 603
Marvel v Marvel (2010) 43 Fam LR 348
McNamara (McGrath) v Consumer, Trader and Tenancy Tribunal (2005) 221 CLR 646
Morrison & Morrison (1994) 18 Fam LR 519
Mullane v Mullane (1983) 158 CLR 436
Nocton v Lord Ashburton [1914] AC 932
Ogden Industries Pty Ltd v Lucas [1970] AC 113
Pearce & Pearce [2016] FamCAFC 14
Public Trustee (as executor of the estate of Gilbert) v Gilbert (1991) 14 Fam LR 573
Re Livanos [1955] St R Qd 362
Redmond & Redmond [2014] FamCAFC 155
SS & AH [2010] FamCAFC 13
Stanford v Stanford (2012) 247 CLR 108
Suiker & Suiker (1993) 17 Fam LR 236
Thomas, as Trustee of the Bankrupt Estate of Hicks & Hicks [2018] FamCAFC 37
Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (2000) 200 CLR 591
Waimiha Sawmilling Co Ltd v Waione Timber Co Ltd [1926] AC 101
Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 259
Zurich Insurance Company PLC v Hayward [2015] EWCA Civ 327
Zurich Insurance Company PLC v Hayward [2017] AC 142
Articles Dr Joshua D Wilson SC and Michael Mckiterick, ‘Locus Standi In Australia – A Review Of The Principal Authorities And Where It Is All Going’ (Research Paper, The University of Melbourne, Conference of The Civil Justice Research Group, 2010). Division: Division 1 First Instance Number of paragraphs: 182 Date of hearing: 16 and 17 June 2022 Place: Melbourne Counsel for the Applicant: Mr L. Glick QC with Mr G. Dickson QC and Ms L. Johnston Solicitor for the Applicant: Kenna Teasdale Lawyers Legal personal representative of the First Respondent: Mr W.P. Howard Counsel for the Second Respondent: Mr A.J. Myers AC QC with Mr I. Waller SC and Mr J. Mereine Solicitor for the Second Respondent: HWL Ebsworth Lawyers Counsel for the Intervenors: Mr H. Austin QC with Ms N. Papaleo Solicitor for the Intervenors: 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 RESPRESENTATIVE OF MR JESS SNR (DECEASED)
First Respondent
MR JESS JNR
Second Respondent
MR K AND MR L
Intervenors
order made by:
WILSON J
DATE OF ORDER:
29 JULY 2022
THE COURT ORDERS THAT:
1.Pursuant to s 79A(1A) of the Family Law Act the consent orders made by the Honourable Justice Cronin on 24 September 2009 are set aside.
2.The further hearing of this proceeding is adjourned until 10:00am on 16 August 2022.
3.On or before 4:00pm on 14 August 2022 the parties must confer and bring in a minute that gives effect to these reasons.
4.Costs of all parties are reserved.
5.The minute referred to in paragraph 3 must identify a staged approach for affidavits and submissions in support of any costs application any party seeks.
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
introduction
When this proceeding, commenced in 2008, was before Mushin J for fixing for trial on 17 February 2007, it was fixed by consent as a one day trial. Over the following 16 years, events have unfolded that have rendered Mushin J’s fixture ambitious, to say the least. After a lengthy trial before Bennett J in 2018, an unsuccessful appeal to the Full Court of this court[1] and the High Court’s refusal of special leave to appeal,[2] this proceeding is before me in the court’s Major Complex Financial Proceedings List on the return of the wife’s application in a proceeding for leave to rely on s 79A of the Family Law Act.
[1] Jess & Jess (2021) 63 Fam LR 545.
[2] Jess & Jess [2022] HCASL 24.
Expressed most basically, the wife, for whom Mr Glick QC, Mr Dickson QC and Ms Johnson appeared, contended that the settlement into which she entered on which consent orders were made by Cronin J on 24 September 2009 was premised on fraud.
In her amended application in a proceeding dated 7 June 2022 which I heard on 16 and 17 June 2022, the wife pressed the relief in paragraphs 1 and 2. They were as follows –
1.That the final property orders made by consent on 24 September 2009 (2009 Orders) by set aside pursuant to section 79A(1A) of the Family Law Act 1975 (Cth) (the Act).
2.In the alternative to order 1 hereof, the 2009 Orders be set aside pursuant to section 79A(1)(a) of the Act (in accordance with the proposed minute of consent order signed on 1 March 2022 by the Applicant, First Respondent and Trustee in Bankruptcy).
The represented third parties, for whom Mr AJ Myers AC QC appeared with Mr Waller QC and Mr Mereine of counsel, opposed the wife’s application.
The trustees-in-bankruptcy, represented by Mr Austin QC and Ms Papaleo supported the wife’s application.
On behalf of the represented third parties, Mr Myers AC QC contended that no actual finding of fraud was made by Bennett J, certainly not a finding as might support a plea of estoppel. Further, Mr Myers argued that an application for a s 79A order was to be heard at the same time as the s 79 application, not in the bifurcated manner urged by the wife.
As these reasons explain, in my judgment an order, now, should be made pursuant to s 79A(1A) of the Family Law Act, setting aside the consent orders made on 24 September 2009.
STATUTORY FRAMEWORK
The provisions relevant to the various contentions of the parties were as set out below.
Section 79A(1) was as follows –
(1) Where, on application by a person affected by an order made by a court under section 79 in property settlement proceedings, the court is satisfied that:
(a) there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance; or
(b) in the circumstances that have arisen since the order was made it is impracticable for the order to be carried out or impracticable for a part of the order to be carried out; or
(c) a person has defaulted in carrying out an obligation imposed on the person by the order and, in the circumstances that have arisen as a result of that default, it is just and equitable to vary the order or to set the order aside and make another order in substitution for the order; or
(d) in the circumstances that have arisen since the making of the order, being circumstances of an exceptional nature relating to the care, welfare and development of a child of the marriage, the child or, where the applicant has caring responsibility for the child (as defined in subsection (1AA)), the applicant, will suffer hardship if the court does not vary the order or set the order aside and make another order in substitution for the order; or
(e) a proceeds of crime order has been made covering property of the parties to the marriage or either of them, or a proceeds of crime order has been made against a party to the marriage;
the court may, in its discretion, vary the order or set the order aside and, if it considers appropriate, make another order under section 79 in substitution for the order so set aside.
Section 79A(1A) was as follows –
A court may, on application by a person affected by an order made by a court under section 79 in property settlement proceedings, and with the consent of all the parties to the proceedings in which the order was made, vary the order or set the order aside and, if it considers appropriate, make another order under section 79 in substitution for the order so set aside.
Section 79A(2) was as follows –
In the exercise of its powers under subsection (1), (1A) or (1C), a court shall have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested.
Of s 79A, the High Court in Mullane v Mullane[3] held as follows –
The effect of treating the order as if it had been made under s. 79 is that, subject to a limited jurisdiction to vary it or set it aside, the power of the Family Court to make an order under s 79 is treated as having been exercised and as exhausted by that notional exercise.
[3] (1983) 158 CLR 436, 440.
The fraud alleged
The word “fraud” is used in s 79A(1)(a). No distinction is drawn there between equitable fraud in the sense used in Nocton v Lord Ashburton[4] or common law fraud in the sense used in Derry v Peek.[5]On behalf of the wife it was contended in written submissions that the section is enlivened and the “fraud” there mentioned engaged by conduct that was unscrupulous and dishonest conduct.[6]
[4] [1914] AC 932.
[5] [1889] AC 337.
[6] Paragraph 4 of the wife’s written submissions dated 10 June 2022.
They argued that the relevant unscrupulous and dishonest conduct involved the deceased first respondent and his son Mr Jess Jnr manufacturing a fraudulent deed of declaration of trust which was intended by them to cheat the wife out of her s 79 entitlement to a just and equitable property settlement”.[7]
[7] Ibid.
All parties conceded that s 79A required the fraud or other conduct that is engaged by the section to result in a miscarriage of justice.
However, counsel for the wife were reticent about embracing the aphorism adopted by Denning LJ (then as Master of the Rolls) in Lazarus Estates Ltd v Beazley[8] that “fraud unravels everything”. They cast this application on the basis that in this case, after a lengthy hearing the court found that the husband and his son set out to deceive both the wife and the court with a “contrived, manufactured and fraudulent document”.[9] Counsel for the wife argued that the husband and Mr Jess Jnr had engaged in deceit. The point is developed below.
[8] [1956] 1QB 702, 712.
[9] Paragraph 5 of the wife’s written submissions dated 10 June 2022.
Section 79A as the reflex of s 79
While s 79A does not contain any stipulation about the justice and equity of making an order under s 79A, the wife’s counsel described as their “first submission”[10] that s 79A is the reflex of s 79. They said “it’s the other side of the coin”.[11] They argued that the statutory gateway in s 79A(1)(a) involves first, an application being made by a person affected by an order. Second, it involves that there has been a miscarriage of justice by reason of fraud and other matters. Conversely, they submitted that s 79(1A) did not contain those criteria. They argued that s 79A(1A) was a separate stand-alone provision. Then s 79A(2) contained a different reference to “other person interested” as opposed to the requirement in s 79A(1)(a) for the applicant to be a “person affected”. Counsel for the wife contended that the represented third parties needed to show the existence of an interest in the order but not some commercial interest in the outcome. They argued that the order under s 79 created the linkage with the interest[12] for the purposes of s 79A(2) and only if a person has an interest which requires protection is that person a “person interested” to be heard on a s 79A application. Counsel for the wife argued that just as a s 79 order should not be made unless the court is persuaded that the alteration of property interests is just and equitable, so too on a s 79A application, it being the reflex of s 79, a s 79A order should not be made where the facts show a fraudulent document[13] with the result that a miscarriage of justice has occurred.
[10] 16 June 2022 T58 L20.
[11] Ibid.
[12] Ibid T60 L5.
[13] Ibid T70.
The relevant order the wife wanted set aside, made by Cronin J, was the subject of the wife’s affidavit made on 30 March 2022 filed in support of this application. Relevantly paraphrased, the following matters emerged from that affidavit –
(a)the husband and wife married in 1988 and divorced in May 2008, although Mr Jess Jnr is the husband’s son of a previous relationship;
(b)in 2006 the husband and the wife were involved in litigation commenced in what was then the Family Court of Australia;
(c)during the currency of litigation in the Family Court, Mr Jess Jnr commenced litigation in the Supreme Court in which Mr Jess Jnr alleged that in 2002 the husband executed a deed of declaration of trust pursuant to which he declared that he held his units in the Jess Retail Unit Trust (“JRUT”), established in 1983, on trust for Mr Jess Jnr and that since 2002, Mr Jess Jnr was the beneficial owner of the husband’s units in JRUT;
(d)by reason of the deed of declaration of trust, Mr Jess Jnr had effective control of all the assets of the X Group of Companies, especially the Y Business;
(e)the effect of the deed of declaration of trust was to significantly decrease the assets available for division between the husband and the wife in the Family Court litigation as the wife contended that the husband’s units in JRUT formed part of the property interests to be divided between the husband and the wife;
(f)the trial of the Supreme Court proceeding was fixed to commence in late 2009, while the Family Court litigation was still on foot; and
(g)the Supreme Court litigation was settled in 2009 on a Sunday.
As an exhibit to her 30 March 2022 affidavit the wife exhibited a deed of settlement, a binding financial agreement and consent orders intended to be made by the Family Court.
The deed of settlement was dated 20 September 2009. Pursuant to clause 6 of the deed, the parties agreed that by not later than 25 September 2009 the husband and the wife would seek consent orders from the Family Court in the form marked Annexure A to the settlement deed. Pursuant to clause 13 of the deed, the husband acknowledged that Mr Jess Jnr is and had been since 2002 the beneficial owner of the husband’s units in JRUT.
The wife deposed to the husband’s units in JRUT being transferred to Mr Jess Jnr pursuant to the deed of declaration of trust.
The wife also deposed to filing an initiating application in the Family Court on 3 September 2013, subsequently amended on 16 April 2014. In it the wife specifically raised a plea in reliance upon upon s 79A(1)(a) and a related plea for property adjustment orders consequent “upon the setting aside or rendering nugatory of the consent order, deed of settlement and the deed of declaration of trust”.
The wife deposed to (although in a manner that was more a submission) the crux of the amended initiating application being that the documentation pursuant to which the husband’s units in JRUT were transferred to Mr Jess Jnr and therefore were removed them from the property pool was a fraud and a sham in that the deed of declaration of trust was brought into existence in 2006 or 2007 but at all events not on the date it bears, namely 28 February 2002.
The wife deposed to the findings of Bennett J on 4 December 2018 pursuant to which her Honour declared that the deed of declaration of trust was not executed on the date it bore.
The wife deposed to a statement made by Mr Waller QC on 3 March 2022 when Mr Waller QC submitted on behalf of the represented third parties that he was prepared to conceded that the finding by Bennett J about the deed of declaration of trust amounted to a finding of fraud.
The wife’s 7 June 2022 affidavit was, in the main, responsive to the affidavit of Mr Jess Jnr made 16 May 2022. However, to that affidavit the wife exhibited a large number of documents on which she relied to make good her contentions anterior to her entry into the terms of settlement that preceded the filing of consent orders made by Cronin J. It is utile to explain the contents of those exhibited documents, to which I now turn.
A chain of emails and attachments were relevant. At 1:17pm on 15 July 2009 Mr ZZ of S Lawyers provided the husband with a draft letter for the husband’s consideration. The draft letter was expressed to be a draft letter to go on Mr Jess Snr’s letterhead. The draft letter was addressed to the wife and was marked without prejudice. In the opening lines of the draft letter the writer (the husband) stated how he and the wife had discussed a potential resolution of various disputes between them as well as the wife’s dispute with Mr Jess Jnr. He then put forward a proposal for a possible settlement of the disputes. He proposed paying the wife $31,000 per month totalling $372,000 per annum and the assumptions of other financial obligations. The husband proposed that Mr Jess Jnr had agreed to withdraw his litigation so long as the wife executed terms as proposed. The husband proposed the selection of one of five mediators to mediate the dispute. The husband stated that there would be no agreement (I infer, in the nature of a compromise) until all terms were agreed, reduced to writing and signed by them.
At 2:24pm on 15 July 2009 Mr ZZ sent an email jointly to the husband and also to Mr Jess Jnr. It was addressed “[Mr Jess Snr] and [Mr Jess Jnr]”. The email included an attachment, being the drafted letter previously provided for the husband’s comment, altered by deleting the words “[Mr Jess Snr] offer to [Ms Jess]” and deleting the words of the final paragraph “provided [Ms Jess] signs”. A draft of the revised letter was provided with the email sent at 2:24pm on 15 July 2009, although the revised draft was not marked up, thereby making the amendments difficult to discern.
At 3:33pm on 17 July 2022 an email was sent from the email account of Mr Jess Jnr addressed to the husband. With that email was the revised version of the husband’s suggested proposal to the wife but with Mr Jess Jnr’s mark-ups to the draft letter. Some mark-ups were commentary, providing Mr Jess Jnr’s construction of the way in which the proposal would operate in reality. In other respects, Mr Jess Jnr redrafted the proposal to make it more conversational.
At 4:58pm on 17 July 2009 Mr Jess Jnr sent an email to the husband attached to which was another version of the suggested proposal to resolve the disputes between the husband, the wife and Mr Jess Jnr.
When each suggested proposal is examined, it is readily apparent that no reference was made in any of the suggested proposals that units in JRUT were under consideration. Those units were not mentioned expressly or by necessary implication. Even recognising that the husband did not respond to the two emails from Mr ZZ or the two emails from Mr Jess Jnr, nothing in the email chain just recorded revealed that the husband incorporated into the suggested settlement proposal the units in JRUT. By the same token, in Mr Jess Jnr’s redrafts of Mr ZZ’s suggested proposal, so too was there no incorporation of units in JRUT. In the final draft that Mr Jess Jnr sent at 4:58pm on 17 July 2009, he included the following wording which was intended to be read as if written by the husband –
[Ms Jess] the $1,904,019 is obviously a significant amount of money that will be difficult for me to deal with. I will obviously have to ask [Mr Jess Jnr] to assist me with this and also will need to obtain third party finance.
The total of above payments when you calculate them over 10 Years equates to $19,040,190 almost $20 million.
(errors in original)
It seems that negotiations progressed and culminated in a deed of settlement being executed as well as consent orders being made. Taking first the deed of settlement, it was a comprehensive document redolent of the complexities of drafting that conventionally underpin releases in substantial litigation. Pursuant to clause 6 of the deed, the husband and the wife agreed that by not later than 25 September 2009 or such later date as was agreed, they would seek final orders in their litigation then on foot in what was then the Family Court of Australia. The form of orders they agreed to seek was marked as annexure A to the deed. In the passages below I address the consent orders. However, the deed of settlement also included clause 13 pursuant to which the husband acknowledged that Mr Jess Jnr was and had been since 2002 the beneficial owner of the husband’s units in JRUT.
Paragraph 2 of the minute of consent orders provided that by 25 September 2009 (or such other date as was mutually agreed) the husband would cause to be paid to the wife $17 million on certain terms.
The application for approval of the consent minute came before Cronin J at 9:11am on 24 September 2009. The transcript of that application reveals the information provided to Cronin J, presumably to enable Cronin J to be satisfied that the joint consent orders were in fact just and equitable. Counsel then appearing for the wife submitted as follows –
There’s real property in the name of the husband alone, real property in the name of the husband and the wife, real property in the name of [PPP Investments Pty Ltd] either its own right or as trustee of the [PPP Trust]. That’s an entity which the– associated with the wife. There’s personal chattels and jewellery and there’s various debts. The husband has a loan account with the [X Group] or [X Pty Ltd] and there’s a dispute as to the quantum of that. Your Honour will probably be aware that there have been lengthy proceedings both here and in the Supreme Court.
The only assets – there have been valuations prepared of real estate, and that real estate has been valued in the rage of 73 million, however, that’s not of all that much assistance as that doesn’t tell your Honour what the liabilities are and it simply takes it out of the various entities. For various reasons – and there is some dispute as to those reasons – the wife would say the husband didn’t provide the material he was supposed to provide to enable us to value the entities. He would, no doubt, dispute that. But what is very clear is that in order to value the various entities and this asset pool would put both parties to an enormous expense and would be a fairly difficult and lengthy exercise.
Counsel then appearing for the husband endorsed the submissions of counsel for the wife. However, the following additional submissions were made by counsel for the husband –
There’s 17 million being paid across in cash. 4.8 of that is used to repay debt, leaving 2.2 in the wife’s hands. In addition, she retains the [Suburb AB] property which will then be unencumbered, on the husband’s figures two million or more. She retains the two properties in [PPP Investments Pty Ltd], which are the [AC Town] units and the [AD Town] property – again two million or more. She retains the jewels per clause 9 and 10 of the order – or orders 9 and 10. There is a major dispute over the value and whereabouts of those.
She retains a car, order 4(h). There are debts that are being paid out for her by the husband of 1.049 million. That’s order 11. And, in addition, although not apparent from the orders per se, the striking out of orders means that the husband’s payments already ordered by this court will not be claimed back. There’s $2.5 million in that. So the total package to the wife is, on the husband’s view, just shy of $20 million. The husband’s position is a little harder to estimate for the reasons that [Ms AE] has indicated to your Honour.
Cronin J made the orders. His Honour offered certain observations when pronouncing that the resolution was just and equitable. Cronin J said the following –
HIS HONOUR: Right. Thank you. There is a conclusion of a longstanding property dispute that began in 2006 in this court between the parties, but although I’ve had nothing to do with it up until now I’m aware that there have been proceedings in the Supreme Court and, by the sound of it, there are still some unresolved issues about liabilities on the part of the husband. It is nigh on impossible to work out the pool of assets, but it is, on one view substantial. The parties have come to a sensible conclusion of the property proceedings after a 20 year relationship.
Their conclusion has been assisted by [Mr AG] who has acted as a mediator, and the function of the court is to make orders under s 79 if it is satisfied that it is just and equitable to do so. I’m told that the parties are ready to settle at 2’oclock today pending upon what order I make. I’ve looked at the various documents that I had available to me, and I’ve been told by both counsel what this represents to their respective clients, and they can agree to disagree about what is really means, but in most senses it’s a commercial decision in the interests of both parties.
From what I can glean, it seems to me that with the enormous amount of assistance that the parties have had this is a just and equitable result for both of them and, in those circumstances, I’m prepared to make the orders. In the matter of [Jess], I will make orders by consent of the parties in the terms of the minutes, which I will mark as exhibit A.
Nowhere in the transcript of the appearance before Cronin J on 24 September 2009 was there reference to units in JRUT.
Both parties submitted, and Cronin J pronounced, that the resolution between the husband and the wife was a commercial decision.
Counsel for the wife before me contended that before approving the minute of consent orders handed up by the parties, Cronin J needed to be independently satisfied that the orders propounded represented a just and equitable resolution of the lis pendens for the purpose of s 79 of the Family Law Act. They argued that it was not competent for his Honour to merely rubber stamp the minutes, whatever may have been the commercial expediencies behind the minutes, as his Honour was unable to be satisfied that the proposed minute was just and equitable for the simple reason that Cronin J did not have a complete (or even a near-complete) picture of the totality of the parties’ assets and liabilities, notwithstanding that the marriage was of 20 years’ duration.
The trial before bennett J
At the request of the represented third parties, Bennett J ordered the bifurcation of the proceeding so that her Honour heard the question of whether the deed of declaration of trust was executed on the date it bore. It was common ground that her Honour declared that the deed of declaration of trust was not executed on the date it bears.
A dispute emerged about the proper characterisation of aspects of her Honour’s findings and in particular, whether the conclusion that the deed of declaration of trust was not executed on the date it bears is properly characterised, as a matter of law, as a finding of fraud. Mr Myers AC QC contended that her Honour’s finding about the date of execution of the deed was not, properly characterised, a finding of fraud but was merely a finding about the date of execution of the relevant document. Conversely Mr Glick QC who appeared with Mr Dickson QC and Ms L. Johnson of counsel contended that her Honour’s multiple uses of the word “fraud” or its adjectival application inexorably led to the conclusion that her Honour was persuaded that the conduct of the husband and of Mr Jess Jnr in relation to the deed of declaration of trust was in fact and in law, fraud properly so called.[14] Counsel for the wife contended that the observations of the Full Court,[15] confirmed the characterisation of the husband’s and Mr Jess Jnr’s conduct as being fraudulent. The Full Court refused to interfere with Bennett J’s judgment on that point.
[14] The wife’s counsel relied on Bennett J’s use of the word “fraud” in her Honour’s reasons at paragraphs [254] [256], [791], [890], [810], [814], [937], [953], [955], [956] and [968], for example.
[15] For example, at paragraph [143] of the Full Court’s reasons.
As has already been recorded, the trustees-in-bankruptcy consented to the orders sought by the wife in her 30 March 2022 application and, through their counsel, supported the wife’s application debated on 16 and 17 June 2022.
The represented third parties relied on the affidavit of Mr CC sworn 9 May 2022 as well as the affidavit of Mr Jess Jnr sworn 16 May 2022. It is necessary to say a little about each.
Mr CC has been the solicitor for Mr Jess Jnr and X Corporation Pty Ltd (“XC”) for many years. In his affidavit he deposed to the more important matters in this application as follows –
(a)between 2006 and 2008 his firm represented XC in the Supreme Court in proceeding … of 2006;
(b)during that period he knew that the husband and the wife were embroiled in litigation in the Family Court of Australia, as this court was then known;
(c)during the same period Mr Jess Jnr had commenced a proceeding in the Supreme Court against the wife seeking declaratory relief in relation to the deed of declaration of trust dated 28 February 2002;
(d)his firm did not represent the husband in the Family Court proceeding nor did his firm represent Mr Jess Jnr in the Supreme Court proceeding;
(e)Mr CC’s firm acted for the husband in the Supreme Court proceeding;
(f)at 3:50pm on 6 August 2009 Mr CC received a telephone call from Mr Gregory of Kenna Teasdale, the solicitors for the wife, informing him that a mediation was sought and that “[Mr Jess Snr’s] list was a good start for discussing settlement as it was not wide of the mark” (his words);
(g)on 7 August 2009 Mr CC spoke with Mr Gregory by telephone and they discussed potential mediators;
(h)in the afternoon on 7 August 2009 Mr CC received an email from Mr Gregory stating that Mr AG was available to act as the mediator;
(i)a little after 4:00pm on 7 August 2009 Mr CC sent an email to Mr Gregory confirming that Mr AG could be retained as mediator on 19 August 2009, although as Mr CC had not acted for any of the parties he would not act in the mediation; and
(j)on 18 August 2009 Mr CC attended a conference with Mr M QC, junior counsel, solicitors and various others in order to prepare for the mediation, the file note of which[16] was in such staccato terms that it was barely comprehensible.
[16] This document became exhibit MCC4 to Mr CC’s affidavit.
At paragraph 17 of his affidavit Mr CC recorded his understanding of a particular matter. He gave as the basis of his understanding of that matter the comments made by Mr M although Mr CC did not detail the comments allegedly made by Mr M that gave rise to Mr CC’s understanding. Mr CC deposed to the following –
Based on the comments made by [Mr M] during this meeting, I understood that as part of the settlement discussions which would take place at the mediation the following day, the mediator was likely to insist that [XC] and the units in the [Jess Retail Unit Trust] be included in the pool of assets.
It must be observed at this juncture that on an interlocutory application of which this was one, affidavit evidence based on information and belief is generally admissible so long as the source of the information is given and the witness deposes to his or her belief in its truth. In the passage extracted immediately above in relation to paragraph 15 of his affidavit, no reference was made of Mr M canvassing units in JRUT. No reference was made in the narration of the conference on 18 August 2009 to the likelihood of the mediation canvassing some insistence by the mediator on XC and the units in JRUT being included in settlement discussions about the pool of assets. The evidentiary foundation for Mr CC’s statement in paragraph 17 of his affidavit was not laid out.
Mr CC deposed to the events at the mediation that he said he attended representing XC. He exhibited his own file note of the mediation. An important entry on that file was the following, being a record of words said to have fallen from the mediator –
Allow for no deed of trust – i.e. [Mr Jess Snr] owns units – what value? Say $50 million.
Mr CC stated that the mediator made it clear (although Mr CC did not say what the mediator actually said by which it might be objectively assessed that the mediator “made it clear”) that settlement negotiations would proceed on the basis that the Family Court would give no weight to the deed of declaration of trust regardless of the outcome of the Supreme Court litigation and would therefore adjust the matrimonial pool as if the husband owned the units in JRUT.
Mr CC deposed to various offers being put. However, Mr CC did state that for the majority of the time he remained in a separate room with Mr ZZ, the husband and Mr Jess Jnr.
Between paragraphs 21 and 27 of Mr CC’s affidavit Mr CC deposed to his handwritten notes of records of offers exchanged. The formulations of those proposals incorporated cash, mortgage indebtedness, real property, jewellery and credit card indebtedness. Nowhere did Mr CC recorded that units in JRUT were included in any proposal. However, in paragraph 28 Mr CC record that the mediator stated that he (the mediator) would recommend an offer which would result in the wife receiving $25 million, being somewhere between 30% and 40% of the value of the pool that included XC and the units in JRUT.
That proposal was not accepted. The mediation failed.
Mr CC deposed to events following the unsuccessful mediation. He deposed to being copied into a letter dated 8 September 2009 from the husband’s solicitor which contained a settlement proposal. That letter was expressed to be without prejudice and was said to be made in reliance upon the principles in Calderbank v Calderbank.[17] The proposal said nothing about the units in JRUT.
[17] [1975] 3 All ER 333.
Mr CC deposed to the deed of settlement being executed by all parties on 20 September 2009. He stated that under the deed the wife received almost $29.5 million.
The affidavit of Mr Jess Jnr made 16 May 2022 was also relied on for this application. Relevantly paraphrased he deposed to the following –
(a)XC and JRUT are interrelated in that all of the issued shares in the capital of XC are owned by JRUT[18] and so the value of the units in JRUT is directly dependent on the value of the business of XC;
[18] More correctly, those shares are owned by the trustee of JRUT.
(b)he commenced a proceeding in the Supreme Court in 2007 in which he sought a declaration that he was the beneficial owner of 103 ordinary units and one D class unit in JRUT of which the husband was recorded as the registered unit holder;
(c)in that proceeding he also sought an order requiring the trustee of JRUT to amend its register of unit holders to record Mr Jess Jnr as the holder of the 103 ordinary units and one D class unit rather than the husband;
(d)the Supreme Court litigation was fixed for trial in late 2009;
(e)on or about 17 July 2009 the husband gave Mr Jess Jnr a letter that Mr Jess Jnr said the husband had provided to the wife, which Mr Jess Jnr exhibited as exhibit 3 to his affidavit;[19]
[19] Exhibit 3 to Mr Jess Jnr’s affidavit correspondence almost precisely with the version of the same letter created at 3:33pm on 17 July 2009 which version, it was open to conclude, may have been drafted by Mr Jess Jnr himself, although I make no finding to that effect.
(f)on 17 July 2009 Mr Jess Jnr deposed to the husband informing Mr Jess Jnr that an in-principle agreement had been reached with the wife for a global settlement;
(g)in early August 2009 or thereabout the husband or his solicitors informed Mr Jess Jnr that a mediation was being planned at the wife’s request;
(h)Mr Jess Jnr sought an indicative value of XC in readiness for the mediation and he consulted Mr Y who recommended speaking with Mr AH of AJ Company;[20]
(i)Mr Jess Jnr deposed to receiving and reading the wife’s mediation position paper which included a statement to the effect that the assets of XC included assets that were the subject of the alleged declaration of trust being the units in JRUT;
(j)the wife claimed an entitlement to 40% of the net assets;
(k)on 18 August 2009 Mr Jess Jnr received an email from MR AH with an indicative valuation of the X business entities which was $41.5 million;
(l)prior to mediation, Mr Jess Jnr was advised by his counsel to attend the mediation with the most accurate financial information in relation to XC and JRUT;
(m)for the purposes of the mediation a table was produced, marked as exhibit “MJJ8” to Mr Jess Jnr’s affidavit, in which it was expressed a “grand total” in respect of the wife’s claim “which included 100% of XC and 100% of JRUT was $62,585,284 (of which) 40% of that amount was $25,034,114”;[21]
(n)on 19 August 2009 Mr Jess Jnr attended the mediation represented by Mr ZZ;
(o)Mr Jess Jnr deposed to displaying in his private breakout room the table “MJJ8 exhibit”;
(p)Mr Jess Jnr said[22] he attended the mediation “on the clear understanding” (although he did not say what information was given to him that gave rise to any such “clear understanding”) that any settlement would take into account the value of XC and the units in JRUT;[23] and
(q)no settlement was reached at the mediation.
[20] Mr Jess Jnr exhibited his file note of his conversation with both Mr Y and Mr AH as exhibit “MJJ4” to his affidavit. That note is made up of a collection of near indecipherable jottings with no narrative making the file note largely valueless in forensic terms.
[21] This appeared at paragraph 25 of Mr Jess Jnr’s affidavit.
[22] Paragraph 31(b) of his affidavit.
[23] One wonders about the probative value of that assertion because any settlement agreement would fall to be construed according to its terms irrespective of the understanding of participants at the mediation and what may have induced any participant to attend the mediation in the first place.
Mr Jess Jnr deposed to the Calderbank letter sent on 8 September 2009. He also deposed to the execution of the deed of settlement on 20 September 2009. He stated that in late 2009 the sum of $17 million was paid in accordance with the provisions of the deed of settlement.
submissions of the parties
In advance of the two day hearing of this application, written submissions were filed by all parties. At the outset I record with gratitude that the quality of those submissions and the viva voce submissions were of the highest order. In the passages below I have –
(a)synthesised the written submissions of the parties; and
(b)addressed the extensive verbal submissions pressed on 16 and 17 June 2022.
Written submissions of the wife
Counsel for the wife contended that the conception of fraud, prescribed by s 79A(1)(a) of the Family Law Act was satisfied in this case and that it resulted in a miscarriage of justice in the circumstances of this case. Counsel for the wife argued that the represented third parties have no standing to object to the orders sought by the wife, even if they are commercially “affected” by the proposed orders for the setting aside of the orders made by Cronin J. Counsel for the wife submitted that it was “plain beyond doubt” (those were the words of Mr Glick QC) that a miscarriage of justice has occurred in this case because, so they said –
(a)Mr Jess Jnr and the husband manufactured a false document designed to cheat the wife out of her statutory right to a just and equitable settlement of her property claim under s 79; and
(b)the perpetration of the fraud, in the circumstances of this case is, in and of itself, an affront to justice and constitutes a miscarriage of justice.
In developing the first ground,[24] counsel for the wife contended that the wife suspected the relevant fraud, but being confronted by the adamantine deceit of both the husband and Mr Jess Jnr in maintaining that the deed of declaration of trust was executed on the date it bore, the wife was uncertain that she could prove the fraud and, having regard to that uncertainty, the wife compromised her claim against the husband.
[24] Paragraph 8(a) of the wife’s counsels’ written submissions.
In developing the second ground,[25] counsel for the wife contended that Mr Jess Jnr now submits that notwithstanding that the husband lied to the court, and notwithstanding that Mr Jess Jnr and the husband created a fraudulent document designed for the specific purpose of misleading the court and depriving the wife of a just and equitable settlement, and notwithstanding that the deceit was not of some trifling or insignificant matter but instead it was one involving many tens of millions of dollars worth of assets, there is no miscarriage of justice in so deceiving the court and the wife. Counsel for the wife argued that the fraud was deliberately perpetrated so as to deprive the court of jurisdiction to deal with very substantial assets in the form of units in JRUT which would otherwise form part of the parties’ legal and equitable interests. Counsel for the wife further argued that the fraud was implemented by the husband and Mr Jess Jnr lying to the court and falsifying the critical document.
[25] Paragraph 8(b) of the wife’s counsels’ written submissions.
In support of the s 79A application, the wife relied primary on s 79A(1A) or alternatively on s 79A(1)(a). Counsel for the wife contended that the legal personal representative of the husband and the wife consented to the setting aside of the consent orders made by Cronin J. The wife’s counsel attached to their submissions a document which provided as follows –
MINUTES OF CONSENT ORDERS SOUGHT BY CONSENT OF THE APPLICANT, THE FIRST RESPONDENT AND THE INTERVENERS
1.That pursuant to Section 79A(1 )(a) of the Family Law Act, the Orders made by this Honourable Court on 24 September 2009 be set aside.
IT IS NOTED:
A.That the Consent Order made by this Honourable Court on 24 September 2009 was signed by the Applicant Wife and by [Mr Jess Snr], the Respondent Husband at the time of signing.
B.That [Mr K] and [Mr L] as Trustees of the Bankrupt Estate of [Mr Jess Snr] intervened in these proceedings on 22 August 2016.
C.That [Mr Jess Snr] died on […] 2018.
D.That [Mr J] was appointed the Legal Personal Representative for [Mr Jess Snr] (deceased) on 4 December 2018.
E.That on 15 November 2019 the Honourable Justice Bennett declared that the Deed of Declaration of Trust dated 28 February 2002 was not executed on the date that it bears.
F.That on 25 August 2021 the Appeal Division of the Family Court of Australia dismissed an Appeal by the First – Tenth (1st – 10th) Appellants for leave to appeal Order 2 of the Orders made by the Honourable Justice Bennett on 15 November 2019.
G.That on 17 February 2022 the High Court of Australia dismissed the Application for Special Leave filed by the Represented Third Parties against the Orders of the Appeal Division of the Family Court of Australia on 25 August 2021.
The making of an order in accordance with that minute was premised on my agreeing with the contentions of counsel for the wife that the represented third parties have no standing. Mr Myers AC QC strenuously argued that the represented third parties in fact had standing. Before addressing the arguments pressed by Mr Myers, it is utile to record the contentions in that regard as advanced by the wife.
First, counsel for the wife submitted that the 2009 orders were made between the husband and the wife, there being no other party to those orders. It was put on behalf of the wife that the third parties do not have standing to oppose the setting aside of the 2009 orders, whether in reliance upon s 79A(1A) or in reliance upon s 79A(1)(a). That was because, so it was said, the represented third parties do not fall within the purview of s 79A(2). That section provides as follows –
In the exercise of its powers under subsection (1), (1A) or (1C), a court shall have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested.
The represented third parties were not parties to the orders made in 2009. Only the husband and wife were parties to those orders. The husband and the wife were represented by counsel before Cronin J. The third parties were not. Counsel for the wife submitted that s 79A(2) does not confer standing upon a party who was not a party to the orders sought to be set aside and even if a person (as are the third parties here) has some commercial interest that may, or which has the potential of being, adversely affected consequent upon an order setting aside the original order, then that person does not, ipso facto, have standing to oppose the making of the order setting aside the original order. They argued that s 79A(2) operates in such manner that when exercising power to set aside the relevant order (here the 2009 order), the court has regard to the interests of that person and makes an order for the protection of a bona fide purchaser or other person interested. Counsel for the wife argued that s 79A(2) does not confer standing on what they called “the interested non-party” to oppose the making of the orders but rather the section by its terms is limited to enabling the court to make an order for the protection of the person interested. They argued that the third parties in this case do not have power under s 79A(2) to oppose the s 79A application and instead the section confines the role of the interested non-party to seeking a protective order in the court’s exercise of discretion under s 79A when making a new order under s 79. Counsel for the wife argued that the represented third parties were impermissibly conflating s 79A(2) with some alleged general right to oppose a 79A application. They contended that under s 79A(2) the represented third parties were limited to seeking orders for their protection.
Counsel for the wife recognised that the Family Law Act confers upon a “person affected” by an order under s 79 the entitlement to apply for an order under s 79A.[26] The statutory “gateway” (their word) is the phenomenon of being “a person affected”. The status of an applicant “as a person affected” confers the entitlement to apply yet neither s 79A(1)(a) nor s 79A(1A) confer on a person affected the right to oppose the application for such an order and on a proper construction of s 79A read as a whole, only s 79A(2) entitles a person affected to seek orders for protection in accordance with the terms of subsection 79A(2), so argued the wife.
[26] Section 79A(1)(a) as well as s 79A(1A) so provide.
They also contended that the represented third parties had not sought to engage the court to exercise its discretion in the formulation of protective orders. They argued that the represented third parties had been on notice of the wife’s intention to seek s 79A relief since at least 2013. Then, counsel for the wife advanced the following submission[27] –
Accepting that s79A is a statutory provision to be construed according to its terms, and even without recourse to the equitable doctrine of clean hands, it is difficult to imagine circumstances where the court would be persuaded to protect a fraudster from the consequences resulting from his fraud.
[27] Paragraph 23 other written submissions dated 10 June 2022.
So far as their contentions grounded in s 79A(1A) were concerned, counsel for the wife submitted that the consent minute they attached to their submissions sufficed to demonstrate that the elements of s 79A(1A) had been met. However, they qualified that submission with the contention that the court should make the order under s 79A “if the court agrees that the third parties have no standing to oppose the s 79A setting aside application”.
In the passage below I have addressed my construction of s 79A, especially the concepts where used in various sub-sections of “a person affected” on the one hand and “other person interested” on the other hand.
Returning to s 79A(1A) on which the wife primarily relied, counsel for the wife submitted that the husband and the wife were the only parties to the proceeding in which the 2009 orders were made by Cronin J. They argued that the husband’s legal personal representative as well as the husband’s trustees-in-bankruptcy agree to the setting aside of Cronin J’s orders. To the extent that there may be an issue of the husband personally consenting, despite his death, counsel for the wife argued –
(a)Bennett J found in her Honour’s 2018 reasons at paragraph 25 that the husband consented to the orders sought; and
(b)the decision in In the Marriage of McCabe[28] held that there was no reason to doubt that parties can expressly or by their conduct consent to the discharge of prior orders so as to enable the court to make a fresh property order.
[28] (1995) 19 Fam LR 579.
Counsel for the wife relied on the self-evident proposition emerging simply from statutory construction, when comparing s 79A(1)(a) with s 79A(1A) that the stipulation in s 79A(1)(a) for there to be a miscarriage of justice does not find enactment in s 79A(1A). To that extent the two provision are wholly different.
As her secondary contention, the wife relied on s 79A(1)(a) of the Family Law Act. Her counsel submitted that the subsection involves a consideration of at least three discrete integers, namely –
(a)an identification then proof of the specified misconduct - whether fraud, duress, suppression of evidence, the giving of false evidence “or any other circumstance”;
(b)a resultant miscarriage of justice by reason of the specified misconduct; and
(c)the exercise by the court of its statutory discretion to set aside or vary the affected order.
The wife relied on fraud committed by the husband.[29] She recognised that Lord Justice Denning’s aphorism that “fraud unravels everything”[30] is not absolute. Curiously her counsel relied on the decision of the High Court of Australia in Farley (Aust) Pty Ltd v J.R. Alexander & Sons (Queensland) Pty Ltd,[31] which predated Lazarus Estates Ltd v Beasley, where Williams J held that the ordinary meaning of fraud involves dishonesty or grave moral culpability,[32] actual fraud or dishonesty of some sort.[33] Williams J held that –
Fraud is conduct which vitiates every transaction known to the law. It even vitiates a judgment of the Court. It is an insidious disease, and if clearly proved spreads to and infects the whole transaction (Jonesco v Beard).[34]
[29] Paragraph 30(a) of the wife’s counsels’ written submissions dated 10 June 2022.
[30] Lazarus Estates Ltd v Beasley [1956] 1 QB 702, 712.
[31] (1946) 75 CLR 487.
[32] In Re Avery's Patent (1887) 36 Ch D 307, 316.
[33] Waimiha Sawmilling Co Ltd v Waione Timber Co Ltd [1926] AC 101, 106.
[34] [1930] AC 298.
One might be forgiven for thinking that the formulation by Williams J is very closely aligned with the statement extracted above by Lord Justice Denning that fraud unravels everything. However, Mr Glick QC in his verbal address[35] submitted that it may very well matter how the pleading of fraud is alleged and whether a perfected judgment is involved, relying on the observations of the High Court in Clone Pty Ltd v Players Pty Ltd (in liq)(receivers and managers appointed).[36] There, the High Court held that –
(a)the general power of a court to set aside a perfected judgment requires actual fraud, although there are other discrete grounds to set aside a perfected judgment; and
(b)it is not a precondition to the exercise of the power that the party seeking to set aside the judgment exercised reasonable diligence to attempt to discover the fraud during the earlier proceeding.
[35] 16 June 2022 T7.
[36] (2018) 264 CLR 165.
Counsel for the wife submitted[37]that the represented third parties had conceded the existence of fraud. They submitted that the relevant fraud was of a serious nature, adamantly maintained by the husband and Mr Jess Jnr over many years, that it involved enormous amounts of money and was perpetrated on the court as well as on the wife. They argued that the expression “miscarriage of justice” where used in s 79A(1)(a) has been judicially interpreted in such manner that it should not be given a restricted meaning.[38] On principles of statutory construction, it was held in In the Marriage of Gebert that the words “miscarriage of justice” should not be given a restricted meaning having regard to their coupling with the other words in s 79A(1)(a) “any other circumstance”. While bound by that observation,[39] independently I wholeheartedly embrace the Full Court’s construction of the subsection. Counsel for the wife also prayed in aid the slightly later decision in Clifton v Stuart[40] in which the phrase “miscarriage of justice” was held to “elucidate the proposition that ‘justice’ means just according to law” that is to say it relates to the integrity of the judicial process”. To my way of thinking, that is an important point. If the integrity of the judicial process has been somehow compromised by conduct that is permeated by fraud and which has led to the court erroneously making orders based on that fraud then a miscarriage of justice may have occurred within the contemplation of s 79A(1)(a).
[37] Paragraph 31 of the submissions filed on behalf of the wife.
[38] In the Marriage of Gebert (1990) 14 Fam LR 62.
[39] Hill v Zuda Pty Ltd [2022] HCA 21.
[40] (1990) 14 Fam LR 511.
Consenting to orders by one party where that consent was not fully informed impugns the integrity of the judicial process and therefore amounts to a miscarriage of justice, according to Pearce & Pearce.[41] There the court held that the integrity of the judicial process in respect of orders by consent demands full and frank disclosure in and about the orders and their antecedent negotiations because integrity of that process depends on each party giving a free and fully informed consent to the orders.
[41] [2016] FamCAFC 14 (at [21]) as well as Morrison & Morrison (1994) 18 Fam LR 519.
While lengthy, it is pertinent to set out the way the wife cast her case in relation to defective disclosure concerning JRUT as amounting to whether she provided her consent to the orders made by Cronin J and how she argued that those orders were a miscarriage of justice by reason of their being an affront to the integrity of the judicial process. The wife’s counsel put the case in the following terms – [42]
The third parties’ case is that the 2009 Orders in some way took into account the value of the units and that, as a result, there is no miscarriage of justice as a result of the fraud. The third parties’ submissions fail both as a statement of fact and as correctly identifying and embodying the relevant affront to justice. There is simply no evidence that [Mr Jess Jnr] or the husband conveyed to the wife any of the figures referred to in [Mr Jess Jnr’s] most recent Affidavit. The wife denies that the 2009 Orders were predicated on a pool that included the value of the units. Justice Cronin was told the exact opposite to what the third parties now contend. Justice Altobelli referred to this absence of evidence in his recent subpoena judgement.19 The third parties avoid the essential point that the wife compromised her s79 entitlements, that the wife accepted the compromised position and did so without having details of the values to be attributed to the disputed units because she was at risk of not being able to persuade the Court that the DODT was a fraudulently created document. An act of fraud and deceit may achieve its intended purpose by causing its intended victim to accept the veracity and authenticity of the fraudulent document, and thereby be deceived. But the damage caused by the fraud is not so confined or restricted. Damage is caused even if the intended victim believes the document is fraudulent. For the fraudulent conduct of manufacturing a backdated DODT with all of the attendant problems associated with proving to the necessary satisfaction of the Court that the DODT was indeed fraudulent, also had the inevitable and foreseeable result on the risks of litigation; by causing, that is, the wife to devalue her prospects of achieving a just and equitable settlement given the existence of the fraudulent DODT. The wife’s compromise was the result of a fraudulently created set of circumstances which operated to fundamentally change the risks confronting the wife. This compromised settlement entered into by the wife of her s79 claims, in circumstances where she had hanging over her head a fraudulent DODT, constitutes an affront to the administration of justice and a miscarriage of justice so far as the wife is concerned.
[42] Paragraph 33 of the wife’s written submissions.
Of course, not every failure to give full and frank disclosure will amount to circumstances justifying the making of orders setting aside the relevant order. Counsel for the wife put the position in the following terms – [43]
It may be that some aspects of a failure of full and frank disclosure could also be considered fraud. It may also be accepted that not every failure of full and frank disclosure will amount to a court setting aside an order.[44] However, this is not just a case of failure of full and frank disclosure on some minor scale. This is a case of an established fraud, whereby the parties that now urge the court not to exercise its discretion are the parties who have been found to be “the drivers of creating the fraudulent DODT”. The operative effect of the DODT “was to divest the husband of substantial property interests in favour of…” [Mr Jess Jnr].[45]
[43] Paragraph 36 of the wife’s written submissions.
[44] Pearce & Pearce [2016] FamCAFC 14 (at [34]).
[45] Jess & Jess (2021) 63 Fam LR 545.
They argued that the wife’s consent to the 2009 orders was not free and informed. She gave evidence that she suspected but was unable to prove that the deed of declaration of trust was a fraud, and that the husband and Mr Jess Jnr knew it was a fraud yet they maintained it was legitimate and binding.
Counsel for the wife contended that a finding of fraud, in and of itself, will not be sufficient to enliven s 79A(1)(a). However, where the fraud leads to a miscarriage of justice then, so the wife argued, she became entitled to the exercise in her favour of the judicial discretion conferred by s 79A(1)(a) to the setting aside of Cronin J’s consent orders.
As has already been mentioned, the wife cast her case of fraud under the genus deceit. In essence, the wife contended that no valuation of any description had been produced ahead of the mediation or at any stage in this litigation, whether as to real estate, the value of XC or the value of the units in JRUT. Mr Glick QC put the point emphatically in the following manner –
MR GLICK:...other party do not seek any order in relation to standing, not an order which is going to be entered. It’s a ruling within the case itself.
HIS HONOUR: Well, this seems to have all the hallmarks of what was before the appeal court just the other day.
MR GLICK: Yes, your Honour.
…
MR GLICK: Interlocutory.
HIS HONOUR: - - - takes the form of a ruling, which can never be the subject of appeal; is that right?
MR GLICK: Well, it can be the subject of appeal.
HIS HONOUR: But at the end of the trial.
MR GLICK: At the end of the trial… and we say two things about the standing, to make it clear. There is a difference – we say three things: first, there is a difference between 79A(1)(a) and 79A(1A). Looking only at 79(1)…the integers are different, therefore, the consideration of standing, if I may call it that, is different… the legislation, on its face, allows that person to come to court and ask for some protective order, and [Mr Jess Jnr] has not asked for such an order… So we say that’s how it can be resolved… I’m now addressing 79A, subsection (1), sub-subsection (a). And if I may go back…
MR GLICK: Thank you, your Honour. I wish to make these submissions, if I may. Going forward in the affidavit, I’ve made the submissions in relation to paragraph 9. May I move on directly to the mediation. Now, your Honour, I will come to the transcript of what Mr Waller told your Honour about what it is they know and they don’t know, but I wish to make good this proposition. I want to advance it first, your Honour, and it’s this. I seek to make good this proposition which, in my respectful submission, is a significant proposition in relation to both the role of the intervenors and the second or third or fourth round, whatever it is, and it’s this: it is not in dispute, it is agreed, it is uncontentious that there was no valuation by an expert valuer of the units. I don’t know if I can use words to make it clearer. There is no valid value recognised by the court. I just want to make that absolutely clear. No value. I say that. No one says there is a value. Mr Waller talks about a value, but it isn’t a fact. Let me make good that proposition.
HIS HONOUR: Pardon me. This is in a temporal context in the lead-up to the mediation?
MR GLICK: At the mediation, in the lead-up to the mediation, as of today.
HIS HONOUR: So how could there be an effective mediation?
Mr Glick submitted that in certain quarters at the mediation the phrase “indicative valuation” was used.[46] Whatever may have been the true status of the so-called “indicative valuation”, at the mediation that document was the subject of consideration. Here, counsel for the wife submitted that no evidence existed that Mr AH of AJ Company was a valuer and that whatever he provided by way of indicative valuation was not an expert valuation within the contemplation of Part 7 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021. So far as the information Mr AH provided was concerned, counsel for the wife contended[47] that no detail was revealed about its content. In any event, Mr AH provided what he called “a very rough indication of value”.[48] Mr Glick QC described that as a “back of the envelope” document.[49]
[46] Federal Commissioner of Taxation v St Helen’s Farm (ACT) Pty Ltd (1981) 146 CLR 336 the High Court considered valuations in some little detail.
[47] 16 June 2022 T36.
[48] Ibid T37.
[49] Ibid T40.
Mr Glick QC submitted that somehow, in a manner unexplained, the arithmetic performed by Mr AH became elevated to a valuation in the amount of $41 million. Mr Glick somewhat theatrically described the alleged valuation variously –
(a)“this is nothing”;[50]
(b)“this is legally nothing”;[51] and
(c)“this then becomes the holy grail. It’s now a valuation”.[52]
[50] Ibid T38 L5.
[51] Ibid.
[52] Ibid T37 L45-46.
Mr Glick said the wife did not receive it nor was it suggested that she had. He disputed Mr Jess Jnr’s assertion that the so-called net equity table in any way represented the wife’s position for the simple reason that she never saw it. Altobelli J mentioned that in his Honour’s reasons on certain evidentiary objections.[53] Mr Glick challenged the entries on the table including the asserted $10 million as well as the 5.5 multiplier.
[53] Jess & Jess (No. 3) [2022] FedCFamC1F 408 (at [36]).
So far as the wife’s position at the mediation was concerned, she said she wanted 40%, at least that appeared in her mediation position statement. Mr Glick put the position in the following terms – [54]
So now we have this wonderful syllogism. Well, your Honour, you’ve heard that you have a valuation of this 41 million plus the land. 40 per cent is around 20 plus million. You see? She got what she wanted. That’s how they put their case. They say that – that’s how they put their case and they say, “We have – we are affected and we have standing because we negotiated on this basis.”
[54] 16 June 2022 T39 L27-31.
The units in JRUT escaped separate attention at the mediation, at least insofar as valuations were concerned.
It must be kept in mind that the wife maintains that she would have acted differently had she been able to prove the fraud. She asserts she was not aware of the value of XC or of the units in JRUT. It was common ground that no formal valuation had been obtained and no valuation exists to this day.[55]
[55] 16 June 2022 T40 L38-39 and T47.
So far as the amount for which the wife settled was concerned, the husband’s solicitor’s file note recorded that the husband’s advisors had assessed the range of entitlements in favour of the wife, once the units in JRUT were included, at between $35 million to $65 million. She compromised all litigation involving her for an amount near $20 million. Mr Glick QC somewhat cynically submitted that the settlement reached at mediation was set against some hard commercial negotiations by Mr Jess Jnr. He put the position in the following terms – [56]
They played a really nice game at this mediation. The game is this: “You are going to lose in the Supreme Court, and if you lose, you will have tremendous costs, and the units aren’t in, but we will compromise that and give you 20 million, and it’s a generous offer.”
[56] 16 June 2022 T43.
A memorandum of advice was produced after a dispute in relation to privilege had been determined by Altobelli J.[57] The memorandum was written by the husband’s Queen’s Counsel and junior counsel. The observation in that memorandum led Mr Glick QC to submit the following –
(a)having regard to there being no valuations and that negotiations proceeded on the basis of what each party could afford to pay and what the wife felt she was worth, no agreed pool of assets emerged;[58]
(b)Mr Jess Jnr participated in the mediation in the belief he was likely to succeed in the litigation he commenced in the Supreme Court and the wife would be unsuccessful in that litigation;
(c)all decisions proceeded on the basis that the Supreme Court litigation was compromised in his favour and that Mr Jess Jnr assumed all indebtedness to the ATO;
(d)Mr M expressly advised that Mr Jess Jnr and the husband needed to make immediate decisions about valuation;
(e)Mr M advised that the steps he recommended be set in train so as to ensure that valuations were complete before November 2009 and with that, proper disclosure; and
(f)if the trust assets were excluded from the pool the offer canvassed at mediation may have been generous .
[57] Jess & Jess (No 3) op cit (at [43]-[45]).
[58] 16 June 2022 T40 L26.
It was squarely put that no valuations of any description underpinned the discussions at the mediation, or for that matter any assessment of the quantum of the wife’s claim in her s 79 application. By the same token, the husband’s own Queen’s Counsel had advised, perfectly properly it seemed to me, that as the essential antecedent step in the procurement of any valuation evidence was the diligent discharge of the husband’s obligations under what was then Chapter 13 of the Family Law Rules in relation to disclosure.
It cannot be ignored that the wife in fact settled the litigation that was before Cronin J on 24 September 2009. The status of that settlement and the wife’s entitlement to challenge the consent orders was agitated before me as was the status of Mr Jess Jnr to resist orders being made under s 79A. Recognising that Mr Myers AC QC contended that the findings of Bennett J amounted to little more than a conclusion that the deed of declaration of trust was executed on a date other than the one it bears, the impact of the wife’s contentions about the husband and Mr Jess Jnr’s fraud fell into sharp focus, especially the manner in which that fraud bore upon the invitation for Cronin J to make consent orders the effect of which conferred about $20 million upon the wife.
Counsel for the wife distinguished the facts of this case from the court’s decision in Clone Pty Ltd v Players Pty Ltd (in liq) (receivers and managers appointed)[59] because in this case the relevant fraud was unknown to the wife at the time Cronin J made orders. In Clone, the High Court held that where common law fraud exists, a party is not to be prejudiced by his, her or its failure to detect the fraud. In this case, counsel for the wife contended that the knowledge possessed by the husband and Mr Jess Jnr was to the effect that each had actual knowledge of his, her and its own fraud,[60] whereas the wife was unaware of the value of the assets in issue. Counsel for the wife submitted that the facts of this case more closely approximated those in the decision of the Court of Appeal of England and Wales in Hayward v Zurich Insurance Company PLC[61] and in the appeal from the Court of Appeal in Hayward v Zurich Insurance Company PLC.[62] The facts repay close examination so I shall do my best to condense my summary of them in the interests of not unduly elongating these reasons.
[59] (2018) 264 CLR 165.
[60] 16 June 2022 T47 L30.
[61] [2015] EWCA Civ 327; [2015] All ER (D) 04 (Apr).
[62] [2016] UKSC 48; [2017] AC 142.
Mr Hayward suffered personal injuries at his workplace in respect of which he sued his employer for damages. The employer’s insurer, Zurich, conducted the employer’s defence. Video surveillance evidence was relied on by the insurer of Mr Hayward performing heavy work at his home. Shortly before the trial of the damages assessment, liability having been admitted, the parties settled upon the employer, through Zurich, agreeing to pay Mr Hayward a substantial amount in full and final settlement of Mr Hayward’s claim. Two years later, Mr Hayward’s neighbours approached the employer to say that they believed Mr Hayward’s claim that he suffered a back injury was dishonest because in their view, Mr Hayward had fully recovered from his injuries at least a year prior to settlement. They gave Zurich full witness statements. Zurich commenced a proceeding against Mr Hayward for deceit. The damages claimed were the equivalent of the difference between the sum paid by way of settlement and the amount of damages that should have been awarded had the truth been told. The trial judge held Mr Hayward had dishonestly exaggerated the effects of his injury. The trial judge awarded Mr Hayward damages limited to £14,720. The Court of Appeal allowed an appeal. Underhill LJ held that the original settlement was binding. His Lordship held, at [19], that if it is sufficiently apparent in any case that the defendant intended to settle notwithstanding the possibility that the claim was fraudulently advanced either generally or in some particular respect – the paradigm being where he has previously so asserted – there can be no reason in principle why he should not be held to his agreement even if the fraud subsequently becomes demonstrable.
Underhill LJ went on to make two further observations of present relevance. The first was as follows –
19.… It cannot be right that a Defendant who has made an allegation of fraud against the Claimant but decided in the end not to have it tested in the court should be allowed, whenever he chooses, to revive that allegation as a basis for setting aside the settlement. It may stick in the throat that the Claimant can retain the reward of his dishonesty, but the Defendant will have made the deal with his eyes open to the possibility of fraud, and there is an important public interest in the finality of settlements.
The second was this –
25.I would for those reasons allow the appeal in this action. The result is that the settlement in the original action remains binding and the judgment of Judge Moloney must be set aside. The result is unattractive because it means that the Appellant retains the benefit of a settlement far in excess of the value of his actual loos, though I dare say somewhat reduced by the incidence of costs in these protracted proceedings. But there is a wider principle at stake, that parties who settle claims with their eyes wide open should not be entitled to revive them only because better evidence comes along later.
Lord Justice Briggs allowed the appeal but delivered different reasons. Lady Justice King allowed the appeal agreeing with both judgments.
Of those three sets of reasons, counsel for the wife contended that in any settlement negotiations one is entitled to assume that the negotiations will involve “some argy-bargy”[63] but that assumption does not extend to assuming the other party to the negotiations will engage in fraud. They argued that if actual fraud can be established, the settlement can be undone. They submitted that Bennett J had held there was actual fraud, as did the Full Court. They submitted that the UK Supreme Court had made similar observations in Zurich Insurance Company PLC v Hayward.[64] To those I now turn.
[63] T50 L41.
[64] [2017] AC 142.
Lord Clarke with whom Lord Neuberger, Lady Hale and Lord Reed agreed, held that in that case Zurich did not know that Hayward was deliberately exaggerating the seriousness of his injuries, even though Zurich may have been suspicious of him. Lord Clarke held that even though Zurich had carried out its own investigation, that did not preclude Zurich from having been induced by representations made by Hayward because qualified belief or even disbelief does not rule out inducement especially where investigations were never going to find out evidence that subsequently came to light. Lord Clarke held that it could not fairly be said that Zurich had full knowledge of the facts.
Counsel for the wife placed heavy reliance on that observation.
Lord Clarke, Lord Neuberger, Lady Hale and Lord Reed allowed the appeal.
In separate reasons, also with whom Lord Neuberger, Lady Hale and Lord Reed agreed, Lord Toulson agreed with Lord Clarke in the result but added other observations. Lord Toulson embraced Lord Justice Denning’s statement that fraud unravels everything (emphasised by Lord Bingham in HIH Casualty and General Insurance Ltd v Chase Manhattan Bank[65]). Lord Toulson examined the constituent elements of the tort of deceit in the following terms –
[65] [2003] UKHL 6.
Analysis
58.To establish the tort of deceit it must be shown that the defendant dishonestly made a material false representation which was intended to, and did, induce the representee to act to its detriment. The elements essential for liability can be broken down under three headings: (a) the making of a materially false representation (the defendant’s conduct element); (b) the defendant’s accompanying state of mind (the fault element); and (c) the impact on the representee (the causation element). Where liability is established, it remains for the claimant to establish (d) the amount of any resulting loss (the quantum element).
Whether that analysis of deceit corresponds with observations in the High Court of Australia in Krakowski v Eurolynx Properties Ltd[66] was not argued before me so it is not appropriate to say anything further on point.
[66] (1995) 183 CLR 563.
Lord Toulson held that the claimant in a claim for deceit must show detriment. His Lordship put the proposition in the following terms –
62.Some torts do not require the claimant to have suffered any detriment. Trespass is an example. Deceit is not in that category. It is essential to show that the defendant’s false representation caused the claimant to act to its detriment. It stands to reason that this should be so. The vice of the defendant’s conduct consists in dishonestly making a false representation with the intention of influencing the representee to act on it to its detriment. If it does not cause the representee to do so, the mischief against which the tort provides protection will not have occurred. A misrepresentation which has no impact on the mind of the representee is no more harmful than an arrow which misses the target.
Lord Toulson emphasised how in any case of deceit, inducement is a question of fact ordinarily illustrated by the dishonest representation likely influencing the representee to act to his or her detriment in the belief of the truth of the dishonest representation.[67] On the specific facts of the case before the Supreme Court, Lord Toulson held as follows –
71. I agree with His Honour Judge Moloney QC’s analysis in para 2.5 of his judgment. The question whether there has been inducement is a question of fact which goes to the issue of causation. The way in which a fraudulent misrepresentation may cause the representee to act to his detriment will depend on the circumstances. He rightly focused on the particular circumstances of the present case. Mr Hayward’s deceitful conduct was intended to influence the mind of the insurers, not necessarily by causing them to believe him, but by causing them to value his litigation claim more highly than it was worth if the true facts had been disclosed, because the value of a claim for insurers’ purposes is that which the court is likely put on it. He achieved his dishonest purpose and thereby induced them to act to their detriment by paying almost ten times more than they would have paid but for his dishonesty. It does not lie in his mouth in those circumstances to say that they should have taken the case to trial, and it would not accord with justice or public policy for the law to put the insurers in a worse position as regards setting aside the settlement than they would have been in, if the case had proceeded to trial and had been decided in accordance with the corrupted medical evidence as it then was.
[67] [2017] AC 142 (at [63]).
The decision of the Court of Appeal was set aside and the decision of the trial judge restored.
Drawing on the parallels of that case with this, counsel for the wife submitted that Mr Hayward’s deceitful conduct was intended to influence the mind of the insurer by causing the insurer to value Mr Hayward’s claim more highly than it was worth if the true facts had been known.[68] Mr Glick QC argued that the wife negotiated because she factored in risk and, consistent with the Supreme Court of England and Wales’s analysis, the risk was that Mr Jess Jnr would be believed.[69] He stated in his affidavit that he was confident he would win his litigation. Mr Glick QC argued that Cronin J had been persuaded to make the consent orders on the urgings of counsel for the wife in the following terms, based on the information then disclosed to the wife –
Your Honour, the pool is made up of various direct and indirect interests in the [X Group].
There’s real property in the name of the husband alone, real property in the name of the husband’s wife, real property in the name of [PPP Investments] either its own right or as trustee of the [PPP Trust]. That’s an entity which the – associated with the wife. There’s personal chattels and jewellery and there’s various debts. The husband has a loan account with the [X Group] or [X Corporation Pty Ltd] and there’s a dispute as to the quantum of that. Your Honour will probably be aware that there have been lengthy proceedings both here and in the Supreme Court.
The only assets – there have been valuations prepared of real estate, and that real estate has been valued in the range of 73 million, however, that’s not of all that much assistance as that doesn’t tell your Honour what the liabilities are and it simply takes it out of the various entities. For various reasons – and there is some dispute as to those reasons – the wife would say that the husband didn’t provide the material he was supposed to provide to enable us to value the entities. He would, no doubt, dispute that. But what is very clear is that in order to value the various entities and this asset pool would put both parties to an enormous expense and would be a fairly difficult and lengthy exercise.
[68] T53.
[69] T53 L45.
Counsel for the represented third parties contended that those observations fatally dispose of the contentions advanced by the wife that this proceeding should be bifurcated.
It is none too easy to divine exactly why the court reasoned that the wording of s 79A “strongly suggests” one hearing. The court did not distil from any particular phrase or clause in any part of s 79A the wording said to be the source of the strong suggestion about there being one application only. Naturally I am bound by that decision.[104] But its intrinsic essence of reasoning in the passage extracted immediately above does not admit of any more than some suggestion about a particular construction of s 79A, I am far from persuaded that the suggestion there mentioned effected the elevation of some adjectival appellation “strongly”. Six years later, in February 1995 s 79A was again the subject of consideration in In the Marriage of Patching[105] in which Nicholson CJ delivered the reasons of the court.[106] The court held that in a s 79A application four steps are involved namely –
·first, examining whether there had been a suppression of evidence or other circumstance;
·second, whether that amounted to a miscarriage of justice;
·third, whether the court in its discretion should vary the order or set the order aside; and
·fourth, whether the court should make another order under s 79.
[104] Hill v Zuda Pty Ltd [2022] HCA 21.
[105] (1995) 18 Fam LR 675.
[106] That seems to be the only conclusion open although nowhere in the report are Fogarty and Jordan JJ mentioned.
The court held that by operation of various observations of other Full Courts including Prowse[107] and Morrison[108] the independent significance of the exercise of the discretion conferred by s 79A had been emphasised.
[107] Prowse (1994) 18 Fam LR 348.
[108] Morrison (1994) 18 Fam LR 519.
The court also held in Patching that it is generally preferable to deal with all four of the steps mentioned above in the one hearing although there will be cases where it is convenient to divide the procedure into several hearings, for example, where there is a discrete issue under the first or second step and the property circumstances of the parties are complex. The reasoning underpinning the desirability of undertaking one hearing only was explained in the following terms –
The reasons for that are obvious, namely that even if the court concludes that there have been circumstances which amount to a miscarriage of justice it must then consider whether in all the circumstances it should exercise its discretion to vary or set aside the orders and/or make a new s 79 order. In exercising that discretion it will have regard to, inter alia, the degree and nature of the miscarriage in question, any delay, alterations in the parties’ positions in the meantime, and the extent to which, if at all, it is now appropriate to vary the original orders: McIntyre, supra , provides an example of this. The last of those circumstances was important in this case for reasons which will subsequently become apparent. Of course there will be cases where it is convenient to divide the procedure into several hearings; for example, where there is a discrete issue under the first and or second step and the property circumstance of the parties are complex.
…
However, the procedure did in fact cause difficulty in this case because it meant that his Honour considered not only the question of a miscarriage of justice but also the discretion to set aside the original orders in a vacuum as it were, that is, without having the additional material against which to determine whether it was a proper exercise of discretion to do so and what other orders would be appropriate. Those difficulties emerge from his Honour's first judgment to which we now turn.
Of course, it must be said that no immutable rule of law or practice was prescribed by the court in Patching about the s 79A application being addressed in one or more hearings. The court said one hearing was generally preferable. In simple cases, the rationale for that cannot be gainsaid. Yet in complex cases involving difficult factual issues and complicated legal issues, unsurprisingly the court left open the possibility of the s 79A exercise being conducted in a manner “where it is convenient to divide the procedure into several hearings.” In other words, by no means could it be said that the court has foreclosed on the possibility of there being more than one hearing.
On the second day of the hearing of this application Mr Myers AC QC returned to the issue of the “interest” said to be possessed by the represented third parties. He said –
Well, our interest is to deal with the substitute order, the terms of which we’ve never been told.
…
And if our friends would be good enough to tell the court what they actually want in these proceedings, then we will be able to say precisely what our interest is. But this I can say, if, in some sense, there’s going to be an attack on the deed or have it set aside – it’s obviously the “must be”, we think, in the light of what that application says – then we have the clearest possibly interest.[109]
[109] T97 L29 to T98 L2.
Counsel for the represented third parties contended that the wife asserted in her amended initiating application that the deed pursuant to which the husband’s units in JRUT were transferred to Mr Jess Jnr was a sham. Counsel for the represented third parties also submitted that such an argument was not put to Bennett J and her Honour decided that the deed bore the wrong date. But they argued[110] that the ownership of the units was the subject of negotiation and that the agreement itself provided that if the husband did not perform his obligations the units went back to the husband resulting in the wife having access to them.[111] Mr Myers AC QC further submitted –
(a)by reason of the interrelationship between the deed and the consent order, as a matter of justice, various consequences must be the subject of further order if the consent order is to be set aside; and
(b)the contention that the value of the units not being taken into account in the consideration of the property pool is false.
[110] T103 L46.
[111] T104 L1-4.
On the latter point, Mr Myers submitted that the wife’s position had shifted from the objective question about whether the trust assets were taken into account to a question about the wife’s knowledge or capability of making an informed decision.
Mr Waller QC very helpfully addressed on the practical ramifications for this case if the leave sought by the wife were to be granted, or conversely, refused. In essence the represented third parties –
(a)favour the notion of this litigation going forward by pleadings as was canvassed in Cao v Trong;[112]
(b)say any statement of claim should be provided for the purpose of determining this s 79A application because, among other reasons, the wife asserts fraud and particulars of that fraud should be provided;
(c)say the statement of claim should articulate the constituent ingredients of the miscarriage of justice alleged; and
(d)say it should also articulate the factual particulars that give rise to the exercise of the discretion under s 79A.
[112] [2019] FamCA 336.
Mr Waller QC relied on the observations of the court in Thomas, as Trustee of the Bankrupt Estate of Hicks & Hicks.[113] In that case the husband and wife agreed to consent orders being made in September 2011. Six months later the husband presented his own petition in bankruptcy whereupon Mr Thomas was appointed trustee of the husband’s bankrupt estate. The trustee sought orders setting aside the consent orders made in September 2011. The primary judge bifurcated the hearing and determining the application to set aside the consent orders.
[113] [2018] FamCAFC 37.
A careful reading of the reasons of each of the judgments of the members of the court reveals that there is no clear ratio decidendi. Strickland J delivered reasons allowing the appeal yet Murphy J delivered different reasons although agreeing that the appeal should be allowed. Austin J delivered yet a third set of reasons but in support of the dismissal of the appeal. In my view very little in the way of binding precedent emerges from that decision. For example, at paragraph 46 of those reasons Strickland J made observations about the difficulty in bifurcating a s 79A application, citing In the Marriage of Patching[114] where Nicholson CJ held that bifurcating the proceeding may very well be appropriate, even in bifurcating the proceeding into several hearings where, for example, a discrete issue emerges under the first or second step and the property circumstance of the parties are complex. In Hicks, Strickland J glossed over that element of the court’s decision in Patching, entirely overlooking it, especially the notion that bifurcating may well be appropriate in a complex set of circumstances, as here. Murphy J did not address that issue. In dissent, Austin J observed that it was desirable to avoid two hearings that might result in contradictory findings, citing Gitane v Velacruz[115] and Patching. Yet Austin J did not address the considered reasons of Nicholson CJ in Patching where the Chief Justice made observations to the effect that bifurcation may very well be ordered in certain circumstances including the factual complexity of the parties’ property circumstances.
[114] (1995) 18 Fam LR 675.
[115] (2008) 39 Fam LR 460.
In any event, Mr Waller QC submitted that bifurcating the proceeding leads to real complications in circumstances where the issues that inform the fourth step are to be taken into consideration in the consideration and determination of the third step and for that reason, there is no possibility of appropriate bifurcating in a s 79A application. Instead, so Mr Waller submitted, the s 79A application ought to be dealt with as one indivisible exercise.[116]
[116] T111.
The wife’s reply
Mr Glick QC and Mr Dickson QC for the wife divided their client’s replies.
Mr Glick QC pointed to the concession made by Mr Waller QC on behalf of the represented third parties on 3 March 2022 that the findings of Bennett J amounted to findings of fraud.[117] Further, before Altobelli J the finding of fraud was conceded. [118]
[117] T5 L7 before me on 3 March 2022; and T113 L4-10.
[118] T10 L20 before Altobelli J on 31 May 2022.
So far as the represented third parties’ standing on the wife’s application to set aside the 24 September 2009 orders under s 79A(1A) were concerned, Mr Glick QC renewed his contention that the represented third parties have no standing because they have no interest or if they have an interest, it is not one that requires protection. Mr Glick submitted that the represented third parties might be affected but they have no interest and so, he asked rhetorically, why should the Cronin J orders not be set aside.
Mr Dickson QC first addressed the bifurcation issue. He argued that the position now being advanced by the represented third parties was a “seismic shift” (his words) from the position adopted to date. Mr Dickson QC argued that over the wife’s opposition, the represented third parties pressed Bennett J to bifurcate the proceeding, which her Honour did, on the basis that by so doing, the case might be shortened. Mr Dickson QC submitted that s 79A(1)(a) posited a collection of contentious issues, not least of which was the characterisation of fraud or whether a miscarriage of justice has occurred, for example. Under s 79A(1A) the wife’s evidentiary burden is vastly more circumscribed in that the simple issue is whether, relevantly here, the husband and wife (or now husband’s personal representative) consent to the setting aside of the consent orders made by Cronin J on 24 September 2009. And they do.
There is considerable force in that submission.
Mr Dickson submitted that on that analysis, as all parties agreed should be the consequence, the case essentially starts from “square one” (my words) “which is a blank canvas” (Mr Austin’s words) with pleadings.[119]
[119] In Cao v Trong I ordered pleadings appropriate to a standard in the Supreme Court of Victoria. Since the promulgation of the Federal Circuit and Family Court of Australia (Family Law) Rules, my practice when ordering pleadings has been to order that those pleadings are prepared filed and served in accordance with the standard appropriate to the standard required in the Federal Court of Australia.
Mr Dickson also pointed out that for the hearing before Altobelli J, the parties proceeded on the basis that the issue to be determined on the application on 16 and 17 June 2022 was whether the court should pronounce orders in terms of the signed consent orders which seek an order pursuant to s 79A(1A) for the 2009 order to be set aside. While not spelled out in terms, the reference to s 79(1) was more correctly a reference to s 79A(1A). It seemed readily apparent the parties’ reliance upon the consent orders must be taken to be their invocation of s 79A(1A) rather than s 79A(1)(a) of the Family Law Act. Mr Dickson put the point succinctly in these terms –
But certainly, there are going to be massive complexities to the property case. That is going to happen anyway. We say deal with the 79A simpliciter, set aside the orders, start again with a blank canvas and you can do it very simply under the 1A procedure.
Mr Dickson then addressed the issue of “other person interested” in s 79A(2). He contended that the represented third parties have a direct interest in the s 79 proceeding once the case converts to the “blank canvas” phase. But he said the represented third parties have not identified any interest in the setting aside of the 24 September 2009 orders. Mr Dickson submitted that Mr Jess Jnr acquired no rights or benefits from the settlement that were compromised by the orders of Cronin J. Further, Mr Dickson argued that Mr Jess Jnr resisted his joinder when application was made to join him. Yet the represented third parties had filed no affidavit material identifying a relevant interest and that fact was a matter that should not persuade the court against making an order under s 79A(1A).
Consideration
Despite this litigation having been on foot for as long as it has, I am conscious that more than a month has elapsed since this application was argued on 16 and 17 June 2022. Consistent with the imperatives underpinning the expeditious hearing and determination of trials and applications in a case in the Major Complex Financial Proceedings List, it is necessary for me to rule on this application without further delay.
As has already been observed, in my view –
(a)an order should be made in pursuance of s 79A(1A) setting aside the orders made by Cronin J on 24 September 2009;
(b)Mr Jess Jnr does not have a relevant interest to oppose the consent application put forward by the wife, the husband’s personal representative and the trustees because Mr Jess Jnr was not a party to the orders made by Cronin J, irrespective of the interest he understandably wishes to agitate in his case in relation to the units in JRUT once a later s 79 proceeding is commenced;
(c)no mandatory requirement exists in the learning compelling a s 79A application to be dealt with at the same time as the s 79 proceeding is conducted;
(d)in complex litigation of which this is an exemplar, Nicholson CJ’s observations in Patching should be applied to the effect that there is no immutable rule forbidding bifurcation;
(e)Mr Jess Jnr and the represented third parties will have the opportunity of putting their case with all its factual and legal implications in a s 79 proceeding in which all parties participate to raise such material interest each is advised to raise;
(f)while the forgoing in relation to s 79A(1A) disposed of the need to embark upon a consideration of the litany of sophisticated arguments in relation to s 79A(1)(a), I take the view that a case of miscarriage of justice may have been made out by reason of the fraud engaged in by Mr Jess Jnr and the husband in relation to the units in JRUT, for the reasons Bennett J found in respect of fraud;
(g)the deed of declaration of trust may not be invalid by being made on a date other than the date it bears, (on which I express no concluded view) but that does not detract from the fact that the settlement was procured in circumstances where the wife was wholly ignorant for reasons beyond her control of the true value of the asset pool in respect of which her interest was compromised;
(h)an arguable case has been made out under s 79A(1)(a); and
(i)the represented third parties have not sought an order in relation to their interests which they argue needs protection.
I now develop each.
Section 79A(1a)
Counsel for the wife relied primarily on s 79A(1A) contending that the wife was a person affected by the orders made by Cronin J. They argued that all relevant parties had consented to the making of orders setting aside the orders made by Cronin J. As had already been recorded above, they argued that the represented third parties were not other persons interested because Mr Jess Jnr and the represented third parties had no involvement in the orders made by Cronin J.
I agree.
There can be no dispute that the represented third parties will be affected by an order setting aside the s 79 consent order when a subsequent application is made contesting the parties’ interests in property, whether legal or equitable, in accordance with principles adumbrated in Stanford v Stanford.[120] However, to my way of thinking, to say that a party may hereafter be “affected” by orders made in a s 79 application is quite different to saying that a party who was not a party to the litigation in which the consent orders were made, nor was that party heard on those consent orders, nor does that party propound orders for its protection on this application, is an “other person interested” in the making of the order under s 79A(1A) setting aside the 24 September 2009 consent orders. I find difficult to accept the submission advanced on behalf of the represented third parties[121] that an interested person is a person who is interested in the application made and is not a person who is interested in the order in relation to which the application is made. In that context no differentiation is made about the nature of the asserted interest. At one end of the spectrum might be the existence of a financial interest. Along the spectrum might be some contingent property interest such as an equitable mortgagee. At the other end of the spectrum might be a person having nothing more than an intellectual desire to better acquaint himself or herself with the application being made, that is to say, a curiosity. In this application the represented third parties did not articulate the precise nature of the interest on which they sought to rely. Nor did they articulate the orders they sought for their protection. I confess to encountering very considerable difficulty in conceiving of factual circumstances in which the mere phenomenon of some abstract interest held by a person in the s 79A application could properly found the statutory interest to which s 79A(2) is directed. The analogy drawn in arguendo about the person sitting at the back of the court on the hearing of an injunction application and who asserts some interest in being heard is probably explicable on the basis that his or her “interest” is tied to the orders about to be made and in respect of which the judge must hear that person lest the judge erroneously makes an injunction impinging upon the rights of an innocent third party. That is very far from the circumstances of this case.
[120] (2012) 247 CLR 108.
[121] T90.
To my mind the better view is that the “other person interested” where those words appear in s 79A(2) is confined to a person, not being a bona fide purchaser, with an interest in the order to which s 79A is directed, namely, the earlier order under s 79, that being here the Cronin J orders made 24 September 2009. Were it otherwise, any person asserting an interest in the consequence of the setting aside order being made, could meddle in the orderly consideration of the question of whether to set aside the earlier order. To my mind, that would serve to invite illegitimate participation by busybodies in the determination of the single question under s 79A(1A) whether all parties to the proceeding which was compromised agree to vary or set aside that earlier order. Here, all parties do. The represented third parties were not parties to that earlier order.
One can readily conceive of reasons why the need to protect a bona fide purchaser appears in s 79A(2). A simple hypothetical illustration should suffice. Let it be assumed that pursuant to consent orders under s 79 a very valuable chattel was the subject of property alteration orders such that, say, the wife acquired a boat which she quickly onsold for which the purchaser paid proper consideration in a very large sum. If the husband and wife later agreed to set aside the s 79 consent order then the subsequent purchaser of the boat would be significantly interested in maintaining his or her ownership in the boat by contending that the boat should not be brought back to the asset pool. The boat purchaser in that situation would be entitled to rely on s 79A(2) in contending that in any subsequent s 79A application, his interest required protection. But again, this is a very different set of circumstances than those of this case.
For reasons already stated, in my view it is appropriate to make an order under s 79A(1A) setting aside the orders made by Cronin J on 24 September 2022.
Section 79A(1)(a)
Most of the engagement on the return of this application related to s 79A(1)(a). Even though I have decided that the wife should have an order setting aside the consent order made on 24 September 2009 pursuant to s 79A(1A) nevertheless her application was cast additionally under s 79A(1)(a).
There was no doubt that she was a person affected by the order made by Cronin J under s 79. Section 79A(1)(a) proceeds upon the court being satisfied of the elements in subsection (1)(a). Authority that binds me commands the demonstration of what has been called “four steps”. Those steps emerge from the observations of Nicholson CJ in In the Marriage of Patching.[122] It is necessary to dissect the facts to reveal conformity with each step.
[122] (1995) Fam LR 675, 677.
The first step calls for the court’s satisfaction that there had been fraud, duress or the suppression of evidence including the failure to disclose relevant information. The giving of false evidence was not alleged. Fraud was alleged. The failure to disclose relevant information was also alleged. Having regard to Mr Waller QC’s concession of the existence of fraud I am willing to proceed on the basis that fraud was established by that concession. While a strong argument was advanced by Mr Myers AC QC to the effect that Bennett J made findings that the relevant instrument had been executed on a date other than the date it bore, and that those findings do not, per se, equate to fraud, in my view having regard to the multiple findings of fraudulent conduct traced by Bennett J as well as by the Full Court, I am persuaded that it is highly arguable that the consent orders were the product of fraud.
Of course, the relevant conduct that demonstrated fraud went beyond the issues mentioned immediately above. Mr Glick QC placed heavy reliance upon the deceit of the husband, especially in the formulation of the correspondence drafted originally by Mr ZZ as later amended by Mr Jess Jnr that went to the wife. It said nothing about units in JRUT. Further, no valuation evidence was adduced whether in conformity with what was then the Family Law Rules or at all. Statements made at and prior to the mediation about the value of the pool of assets were wildly inaccurate. The wife had been seeking disclosure and precious little had been proffered by the husband. The memorandum from the husband’s Queen’s Counsel recognised as much. I am not at all persuaded that the so called “indicative valuation” was remotely close to being a valuation routinely seen in this court.
The wife settled the case on 24 September 2009 significantly uninformed about the true value of the pool or about claims made in relation to assets making up the pool. As a matter of common human experience, on the balance of probabilities it is more likely than not that she would not have settled on the terms she did if the true position had been revealed to her on 24 September 2009, namely that Mr Jess Jnr claimed the full beneficial ownership in the units in JRUT and that she was compromising her claims for a comparatively modest amount.
So far as the application of the correct legal test of miscarriage of justice was concerned, I am persuaded that the trial judge, Cronin J, may not have adequately investigated whether the proposed compromise was just and equitable prior to approving the compromise. Cronin J seemed to accept, possibly erroneously, that the pool was made up of assets that could not be valued and that the parties were willing to resolve the case “on a commercial resolution”. A settlement on a commercial basis is not the same as a settlement that is just and equitable. People settle cases for many and varied reasons, financial desperation often being one. A resolution on that basis is unlikely to be a just and equitable resolution. In my view, counsel for the wife made a very strong point when, in reliance upon the decision of the UK Supreme Court in Zurich Insurance Company PLC v Hayward,[123] they submitted that the wife would not have settled had the true facts been revealed about the overall value of the pool, the contentious circumstances in which Mr Jess Jnr came to become the holder of the equitable estate in the units in JRUT and the paucity of actual valuation evidence to support the numbers being canvassed at mediation.
[123] [2017] AC 142.
Of course, it is dangerous for me to definitively find that a miscarriage of justice has occurred. That is for two reasons, namely –
(a)authority such as Eaby v Speelman,[124] Marvel v Marvel,[125] SS & AH,[126] Redmond[127] and others instruct a trial judge in my shoes to make findings of fact on an interlocutory application only with great circumspection; and
(b)there is a risk that if I were to make factual findings on this interlocutory application, those findings may be found after trial in some different manner, in other words, a risk of inconsistent conclusions exists.
[124] [2015] FamCAFC 104.
[125] (2010) 43 Fam LR 348.
[126] [2010] FamCAFC 13.
[127] [2014] FamCAFC 155.
Accordingly, it is sufficient for present purposes to say that a state of persuasion exists on the balance of probabilities that a case for the existence of a miscarriage of justice has been made out that must go to trial. That, it seems to me, underpins Nicholson CJ’s holding in Patching to the effect that in some s 79A applications, it will be convenient to divide the procedure into several hearings, such as where a discrete hearing is required to determine whether there has been fraud, duress, suppression of evidence including the failure to disclose relevant information, the giving of false information or any other circumstances (the first step) or whether that amounted to a miscarriage of justice (the second step).
Further, the represented third parties have indicated in strong terms that they wish to give evidence and to be heard on a collection of factual and legal issues, not the least of which is the manner in which any proposed s 79 application hereafter jeopardises their existing rights. They say they have a collection of rights at law and in equity that they wish to press. All that can be accommodated when an entirely new further amended application is recast in articulating the claims and counterclaims each party wishes to advance for remedies under s 79.
So far as the third step of the s 79A procedure is concerned, the question became whether to set aside Cronin J’s orders. I take the view that despite their being consent orders, those consent orders of Cronin J cannot stand. The orders were obtained –
(a)when Cronin J had a significantly imperfect understanding of the nature and magnitude of the property pool such that he was unlikely to have been able to make a fully informed decision about whether the proposal urged, admittedly by consent, was in fact and in law just and equitable;
(b)when an enormous lacuna of information existed and which was needed for all parties to fully assess their circumstances;
(c)in circumstances when, had the wife the benefit of knowledge of the size and composition of the pool, especially the composition of unit holders in one of the largest assets (XC) she would not have settled; and
(d)in circumstances where very little in the way of objectively verifiable valuation evidence existed to support the arithmetic underpinning the settlement.
A settlement procured in those circumstances is self-evidently defective, irrespective of one party’s desire to reach a so-called “commercial resolution”. Consent orders procured in those circumstances are unlikely to reflect true consent. A commercial resolution is not the same as orders that are just and equitable.
In my view, the consent orders must be set aside.
The fourth step is whether another order under s 79 should be made. In my view the answer is in the affirmative. That will only be done after all parties have put forward all each wishes to say by way of fact and law.
Bifurcation
Whether described as a bifurcation of the proceeding hereafter or whether described as being “convenient to divide the procedure into several hearings” as was the wording in Patching, the result is the same. This s 79 application must recalibrate by the filing of a further amended initiating application in which the wife sets out in precise terms the relief she seeks against all respondents. She must do so in exquisite detail as to factual contentions. Insofar as she asserts fraud, she will be required to particularise her assertions. A statement of claim to a standard appropriate to a proceeding in the Federal Court of Australia must be filed. I apprehend there will be cross claims, replies and possibly rejoinders, maybe even a surrejoinder. The time has been reached for this case to go forward on a proper footing. I will require a minute of proposed timetable to be filed and served in three weeks.
So far as pleadings are concerned, let me address Mr Waller QC’s point about fraud. He is correct in pointing out that ordinarily a pleading of fraud carries with it burdensome obligations on the pleader to cast the detail with very considerable care. I agree. However, Mr Waller proposed that the wife was required, in this s 79A application, to set out a statement of claim and possibly even to provide disclosure on her contentions concerning the elements of s 79A(1)(a). On that I respectfully disagree. To do so would only serve to introduce a cumbersome task in a case that has already been bedevilled by lengthy and costly delays. Such a proposal was antithetical to the overarching purpose set out in the Federal Circuit and Family Court of Australia (Family Law) Rules of providing efficiency as to procedure, cost and timing in litigation. In my view, the proposal of requiring the wife to file a statement of claim limited to the elements of s 79A(1)(a) was not consistent with the overarching purpose. I reject the concept.
Where to from here
This proceeding is adjourned until 10:00am on 16 August 2022.
On or before 4:00pm on 14 August 2022 the parties must confer and produce a minute that gives effect to these reasons.
I am willing to entertain a costs application. In the minute I will require the parties to identify a staged approach for affidavits and submissions in support of any costs application any party seeks.
I certify that the preceding one hundred and eighty-two (182) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wilson. Associate:
Dated: 29 July 2022
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