Johnson v Rzetelski

[1989] HCATrans 18

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No Sl00 of 1988

B e t w e e n -

JULIA JOHNSON

Applicant

and

LUCJAN RZETELSKI

Respondent

Application for special

leave to appeal

MASON CJ

Johnson

DEANE J

TOOHEY J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 17 FEBRUARY 1989, AT 2.27 PM

Copyright in the High Court of Australia

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MR M.D. BROUN, QC: If Your Honours please, I appear with

MR H. BLEICHER for the applicant for leave.

(instructed by John R. Quinn & Co)

MR P.I. ROSE, QC: If the Court pleases, I appear with my

learned friend, MR S.R. O'RYAN, for the respondent.

(instructed by Graham M. Cole & Co)

MASON CJ: Yes, Mr Broun.

MR BROUN:  Your Honours, the point of law involved seems to us

to be unconnected with any disputed questions of

fact and is in a fairly narrow type of compass, but

it is none the less of fundamental importance, we

would contend.

Essentially, the most general question which is

involved is whether there is anywhere in our legal

system any principle which enables a litigant who

has obtained an order from the court, where that

order has been breached, leading to damages, to claim

damages from the first party who has breached that

order. In effect, we put it in very general terms by

saying - we would seek to put it in general terms by

saying if there is a clear legal obligation placed

upon someone to do something, that person breaches

that obligation, at the time of the breach it was known

and,indeed,foreseeable, but indeed known that there

would be damages that would result from that breach,

then the person who has breached the order is liable to

pay compensation.

The second area of questions which arise is if

there is a principle of law to enable such compensation to be granted, can the Family Court of Australia do it?

Now, the way it arose in this case was that Mrs Johnson

was the beneficiary of an order made by the Family her a half interest in a property which was a block of

flats and some shares he held in a company which owned

the other half interest in the block of flats.	So the
effect of the order, in effect, was to make

Mrs Julia Johnson the sole owner of the block of flats

by ownership of the company that owned half and by

ownership of the other half directly herself.

There was a mortgage on that property. The

mortgage was accruing interest. It was known, and the

judgments make it clear that it was known, that in

order for her to refinance that mortgage or to make the

block of flats the subject of a strata title so that

she could sell one of the flats would require that she

became the owner first. So the damages that flowed of

the accumulation of interest on the mortgage was known

and foreseeable and, indeed, obvious.

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Mr Rzetelski declined, for reasons that I think

perhaps we need not to go into at all, to transfer

the real property and the interest in the company

during a period which Mr Justice Nygh, the trial judge

in the present matter, took the view that for part of

that period he really should have transferred it and

that damages arose during that period.

Now, we contended before Mr Justice Nygh and

before the Full Court of the Family Court that that

meant that Mrs Julia Johnson was entitled to some
damages from Mr Rzetelski in respect, that is to say,

to compensate her for the accumulation of interest on her mortgage during the period that he was wrongfully

failing to transfer pursuant to the order.

Mr Justice Nygh upheld that contention, drawing support

primarily by analogy from similar problems which had

arisen in respect of suits for specific performance,

an analogy which is by no means complete but an

analogy from that.

His Honour also drew support from another decision

of a single judge of the Family Court to which I will

return called MADJERIC. Mr Justice Nygh further held

that the proceedings were a matrimonial cause, being

proceedings in relation to an order of the court,

namely the order for the transfer of the property and

the transfer of the shares and accordingly held he had

jurisdiction and made an award.

The Full Court held that His Honour was wrong on the

first point, that there was no principle of law which

would enable damages to be awarded and that there was,

in any event, no jurisdiction in the Family Court to

make such an award and that it was not a matrimonial

cause and that it was not proceedings in relation to
completed proceedings or in relation to the previous_

order. The Full Court further rejected one other matter, namely that Mr Rzetelski had claimed some

interest on a sum of money that Mrs Johnson was ordered

to pay him which Mr Justice Nygh had ordered to the

husband and set off in part against the damages awarded

to the wife. I advanced before the Full Court, as an

alternative position as I had before Mr Justice Nygh, but Mr Justice Nygh did not have to consider it, that

at the very least, by reason of the damages flowing to

Mrs Johnson from Mr Rzetelski's breach the award of

interest to Mr Rzetelski ought not in the exercise of

the court's discretion be made.

Now, that last part of the argument is purely a

discretionary one and would perhaps not interest this

Court. So the essential questions are the existence

of a principle of law enabling damages to be obtained

for a breach of the order, and secondly, if there is

such a principle, could the Family Court give effect to it.

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Your Honours, the case which had arisen before involving this in the Family Court of Australia was

MADJERIC and if I may pass Your Honours copies of

that judgment.

MASON CJ:	Thank you.
MR BROUN:	In MADJERIC the husband had been ordered to deliver certain property to the wife. It was alleged, though
I think the judgment was delivered before any
determination of the facts had been made,that prior to delivering it or on delivery the furniture was
damaged, perhaps a matter that occurs quite frequently
in Family Law matters. Having been ordered to deliver
property to the wife, the husband puts an axe through
it and delivers the fragments.  What were the facts in
this case we do not know.  Anyway, he delivered
damaged furniture.  The question before Mr Justice Elliott,
the judge in MADJERIC, was:  was he entitled to award
damages for the condition of the furniture in breach of the order. His Honour held that he was entitled to
do so and particularly referred to principles that a
court is entitled to do such things as will perfect their order and protect their order and His Honour also held that it was a matrimonial cause relating to the previous order and that, indeed, it was a matrimonial
cause (ca) because it related to the property of the
husband and the wife and that it fell within the
court's jurisdiction on both of those bases.

The Full Court, in the present case, also

overruled MADJERIC saying that there was no such

principle and that indeed Mrs Madjeric was not entitled

to compensation for the damage done to the furniture.

So, Your Honours, as we see it, it is a fairly

fundamental question. It will involve the examination

of the authorities on specific performance to which

Mr Justice Nygh made reference,but I think probably

only briefly because they are a quite imperfect analogy

in a number of respects, but it would involve

particularly the consideration of general principles of

law as to whether the existence of a legal obligation,

the knowledge by the person under that legal

obligation that damages will flow from breach, the

breach and damages, whether that gives rise to a right

to claim compensation.

If Your Honours were to uphold that general

argument it would, of course, be a very important

principle of law; it might be seen as a substantial

development of tort law or, if not tort law, as a

substantial development of the law of court orders and

the effect of court orders. But, Your Honours, we

"wOUld also seek to argue the more narrow ground that the

court having decided that this lady should receive

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the benefit of this property, the husband's actions

in breach of it having led to a diminution of the

value to her, that she should be entitled to claim from
the court by some sort of an award of a financial

nature compensation for the damages which flowed to her

because of the husband's breach. Those are the points,

Your Honours.

MASON CJ: Thank you, Mr Broun. Yes, Mr Rose.

MR ROSE:  If the Court pleases, it is the respondent's

submission that this application should be refused for

these reasons: the Full Court of the Family Court held, as my friend indicated in his submissions to
Your Honours, that first of all the proceedings were

not a matrimonial cause and therefore, before proceeding

to the question of power the court did not have

jurisdiction to entertain it. Central to that argument

was an interpretation of section 4(l)(f) of the

FAMILY LAW ACT which contains a definition of part of
the meaning of matrimonial cause and paragraph (f)

of section 4(1) enables the court to entertain

proceedings which do not have to be between parties to

a marriage -

in relation to concurrent, pending or completed

proceedings of a kind referred to in any of

paragraphs (a) to (e) -

and so far as those proceedings are concerned, they

include proceedings, of course, in relation to property

of the parties to a marriage. The interpretation of

paragraph (f) has been the subject of a number of

judgments of this Court and in particular this Court's

decision in FOUNTAIN V ALEXANDER,(1982) 150 CLR 615,

if I might hand copies up to Your Honours, in particular

at page 629 when in part of the reasons for judgment of

Your Honour the Chief Justice, in the last paragraph,

Your Honour stated:  Paragraph (f) is not specific in spelling

out the relationship which is required to subsist
between the proceedings which it includes, viz.
"Any other proceedings", and "concurrent, pending
or completed proceedings" of a kind mentioned in

the earlier paragraphs.

It is -

an expression of wide and general import, it

should not be read down in the absence of

some compelling reason for so doing.

Then, after the next two sentences, in the second-

last sentence, Your Honour posed what Your Honour

described as the vital question:

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None the less the vital question remains:

Is there any solid ground for limiting the

relationship? Putting to one side the question of validity shortly to be examined, I can think of none.

In the previous sentence Your Honour had said:

It was suggested that the paragraph looks to subsequent proceedings which involve the working

out of an order made in earlier proceedings.

Than, Your Honours, at page 630, in the first

paragraph in the second-last sentence Your Honour

stated:

The reach of the paragraph cannot be

made to depend on whether the new order sought

is expressed to operate by way of variation of

the old order, for the paragraph looks to a

relationship between proceedings rather than a

relationship between orders. This relationship

is satisfied when in the first proceedings -

and then Your Honour dealt with the orders for

custody which were the subject of the proceedings then

before the Court. So that the test is, in our

submission, that the paragraph looks to the

relationship between the proceedings rather than a

relationship between the orders and, in this particular

case, the proceedings in respect of which it is sought
to argue constitute the requisite relationship are

proceedings for alteration of property interests

pursuant. to the power given to the court in accordance

with the provisions of section 79 and the proceedings

in which damages are sought by reason, in this particular

case, of interest accruing due to the inability of the

applicant to refinance an existing loan.

Now, it is our respectful submission to Your Honours

that those two different types of proceedings do not

constitute the necessary nexus or relationship for

the purpose of bringing them within the definition of

paragraph (f) as interpreted and as construed by this

Court. That approach was further emphasized by

Your Honours in REG V ROSS-JONES EX PARTE GREEN,

(1984-85) 156 CLR 185 - if I could hand copies of

that authority up to Your Honours, with respect.

MASON CJ:	Thank you.
MR ROSE:	At page 197, in the last paragraph which commences

with the words:

As the words of .par.(£) show, and as

PERLMAN V. PERLMAN indicates, the relationship

must exist between the proceedings themselves.

It is not enough that what is done in one of

the proceedings would indirectly affect the

practical outcome of the other proceedings.

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So it is our submission that even though there may

have been some indirect effect in terms of the issues

sought to be advanced in the later proceedings because

of non-compliance at a particular stage with an order
for alteration of property interests which resulted

in the applicant suffering some damage, it is our submission that none the less the issues that are

raised in the proceedings are such that there is not
the appropriate relationship and that the submissions

made on behalf of the applicant are directed rather to

the relationship between orders that were made as

opposed to the relationship between the proceedings

themselves.

That matter was again, perhaps more exhaustively,

looked at by this Court in the judgment of the former

Chief Justice Mr Justice Gibbs in PERLMAN,

(1984-85) 155 CLR 474 at page 484, if I might hand

those up to Your Honours. At page 484, in the

corrnnencement of the main paragraph, starting with the

words "The words 'in relation to'" His Honour provided

some detailed analysis with appropriate examples by

way of an aid of construction and His Honour stated

there, as Your Honour the Chief Justice did in the other

two cases to which I have made reference:

The words "in relation to" import

the existence of a connexion or association

between the two proceedings -

and, at the risk of overemphasizing it, the two

proceedings in this matter Here proceedings for

alteration of property interests and subsequently

proceedings for damages and in PERLMAN's case the
particular facts were tha.t the appellant was seeking

damages due to the respondent's non-compliance with the terms of a maintenance agreement which had been approved under section 87 of the FAMILY LAW ACT and

was seeking enforcement of the provisions of that

agreement in the Supreme Court of New South Wales. It was sought to argue that those proceedings

were a matrimonial cause being proceedings in

relation to completed proceedings and therefore the

not the appropriate relationship because on the one

Fa~ily Court of Australia had exclusive jurisdiction.

hand there had been earlier proceedings for an order

for approval of an agreement; the subsequent proceedings

were proceedings for enforcement of the terms of that

particular agreement and consequently there was not

the appropriate relationship or connection between the

two proceedings themselves.

So, Your Honours, it is our respectful submission

that Their Honours were correct in their reasons for

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judgment, particularly at pages 27 to 28 of the

application book, and at the foot of page 27 when

Their Honours raised the question:

Do the proceedings instituted by the wife for damages for breach of an order of the Court made under Sec.79 bear the

appropriate relationship to the coupleted
property proceedings? Are they "consequential

on or incidental to" the decree -

and then Their Honours refer to RE ROSS-JONES EX PART2

GREEN.

Then, at the top of page 28:

In our view they are not. The proceedings

for damages do not flow directly and solely
from the orders made pursuant ::o Sec.79. If
anything, they are consequential on or incidental
to an alleged breach of the Court's orders, not

the orders themselvea.

Now, Your Hc.nours, section 79 is, as I have already

submitted, the power to make orders for alteration of
property interests of a party to a marriage and that
includes making an order for settlement of property and
the discretion to make that order is a wide one which

takes into account various factors in section 79(4)

and section 75(2). It is our respectful submission

that even if Your Honours were of the view that the

question of jurisdiction in terms of interpretation of
paragraph (f) is a matter which may attract the
question of special leave, the question of power, in
our submission, is clear and does not include any power
to make an order for damages under that section or any

other section of the Act.

In terms of the inherent jurisdiction of the court previous judgments of this Court, and in particular in	that again is a matter which has been the subject of
TAYLOR's case, 143 CLR 1, if I may hand up copies of
the judgments in that appeal. At the foot of page 5,
in the judgment of Mr Justice Gibbs as he then was, His Honour commences to consider the question of
inherent power in that particular case to set aside an order for property settlement in the absence of a party at the hearing and then, at the top of page 6,
His Honour quotes from a judgment of Mr Justice Menzies
in REG V FORBES and in that particu:ar quotation
His Honour had made it clear that where a party did not
have an opportunity to appear, then notwithstanding
that it was a court of limited jurisdiction, there was
inherent power for that person to be heard and if necessary for the orders to be set aside. Then, on
that page at page 6, in the third sentence, part of that quotation:

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Inherent jurisdiction is not something derived

by implication from statutory provisions

conferring particular jurisdiction; if such a

provision is to be considered as conferring

more than io actuall; expressed that further

jurisdiction in conferred by implication

according to accepted standards of statutory

construction and it would be iuaccurate to

describe it as 'inherent jurisdiction', ..... Courts

of unlimited jurisdiction have 'inherent

jurisdiction' . "

Then, in the second quoted passage 'Wh.i.Gh appears after

the first paragraph immediately following the first

quotation:

"Such inhere-nt jurisdiction as the Court may

have,could not go beyond protecting its
function as a Court constituted with the

limited jurisdicti.Jn afforded by the Act."

So that, Your Honours, in our submission, so far as

inherent power is concerned, that power is only for

the purpose of enabling the Court within the limits of

its own jurisdiction to afford natural justice or to

ensure that its orders are carried out and so far as

the orde1 in respect of which it is sought to argue

there is the appropriate nexus or relationship, that

was an order for transfer by tP-e respondent of his

interest in a particular parcel of real estate as well

as his shares in a company and that if one is to move

to the next step of considering a power to order

damages, that represents a head of power, in our

respectful submission, which goes far beyond the

question of enabling the court to enforce its orders or

to ensure that the principles of natural justice have

been complied with.

So, Your Honours, in our respectful submission

this is not a matter for special leave as the points

of law sought to be argued by my learned friend have	already been .the subject of consideration on a number
of occasions by this Court. There are specific provisions in Part X of the Family Court Rules which deal with a variety of measures of enforcement of court or.ders, none of which includes a power for
damages and therefore, in our respectful submission,
special leave should not be granted.

MASON CJ: Thank you, Mr Rose. Yes, Mr Broun.

MR BROUN:  Your Honours, in relation to jurisdiction, we would

seek to support what Mr Justice Nygh said on that at

page 11 of the appeal papers where His Honour said, in

the middle:

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The claim by the wife is a "matrimonial

cause" within the definition of paragraph (f)
and hence the court has been invested with

jurisdiction pursuant to Section 39(1). Since

the proceeding flows directly and solely from

the orders made pursuant to Section 79, it is

a proceeding which can be described as being

"in relation to" the completed proceedings -

We would contend that one does not even need to go

so far as say that the proceedings flow solely from

the orders, though of course they do in the sense that

if the orders had not been made the whole basis for the

proceeding would disappear, the whole basis of the
proceeding being the consequence of the breach of the

orders.

We would contrast that with the passage my learned

friend read from page 28 where the Full Court seems also to have used the notion of "solely" but put it

around the other way and suggested that in order to

bring proceedings under the definition (f) as being

"in relation to", the proceedings for damages would

have to flow directly and solely from the orders made

under section 79. In my submission, there is no

support for that principle anywhere. One can be "in

relation to" a completed proceeding, that is to say

the orders which were the outcome of the proceedings,

without being solely derived from that or solely "in relation to", but in fact these proceedings were, in

our submission, very close to being solely relating to

that. There was an order; the husband breached the

order, knowing what the consequences were going to be;

our claim really was based on that order and that was

the main basis for it.

As to the question of power, Your Honours,that

has always been a very difficult question in the

Family Court. It seems to trouble many of the judges.

Mr Justice Nygh referred to an inherent power saying,

at page 11: 

The Family Court is ..... a superior court of record

and has for the purposes of its limited

jurisdiction an inherent power to ensure that

its. orders are made effective.

So Your Honours we would, taking for example the

MADJERIC facts which are the simplest ones, submit

that if the court does not have power to compensate

where a husband having been ordered to deliver

furniture puts an axe through them, then it has no

power to make its orders effective and, indeed, the
inherent power to make orders effective must include
a power to do something in the situation where the
orders are complied with nominally but where the effect

or benefit of the orders is destroyed.

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MASON CJ:  Mr Broun, we need not trouble you any further

there. There will be a grant of special leave

in this matter.

MR BROUN:  Thank Your Honours.

AT 2.59 PM THE MATTER WAS ADJOURNED SINE DIE

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