Kain and Kain & Ors
[2020] FamCA 650
•14 August 2020
FAMILY COURT OF AUSTRALIA
| KAIN & KAIN AND ORS | [2020] FamCA 650 |
| FAMILY LAW – INJUNCTIONS – prohibitory and mandatory – quia timet – whether to make such orders – intact marriage – serious issue to be tried – whether s 79 enlivened at all – held, injunction granted. FAMILY LAW – TRUSTS – serious issue to be tried whether trustee and the natural persons controlling the trustees acting in good faith – whether trustees preferring one category of beneficiary ahead of another. FAMILY LAW – PARTIAL PROPERTY SETTLEMENT – extremely large sums in issue in this case – whether reversible if orders made – held, not. FAMILY LAW – EVIDENCE – whether evidence of negotiations at a mediation culminating in a document admissible – whether document created at mediation accurately described as “heads of agreement” – whether proceeding actually resolved – whether s 131(2)(f) and (g) enlivened – held, evidence about whether the proceeding in fact resolved at mediation was admissible. |
| Commonwealth of Australia Constitution Act 1900 (Imp), s 75(v) Corporations Act 2001 (Cth), pt 2D.1 Evidence Act 1995 (Cth), ss 4(1)(b), 75, 131(1), 131(2) Family Law Act 1975 (Cth), ss 21(2A), 72, 79, 85A, 90AE, 106B, 114 Family Law Rules 2004 (Cth), rr 5.09, 6.04 Married Women's Property Act 1882 (Imp), s 17 Supreme Court Civil Procedure Act 1932 (Tas), s 11(12) The Married Women's Property Acts 1890-1952 (Qld), s 21 |
| Atlas Financial International Ltd v Nortbale Pty Ltd [2011] NSWSC 815 Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (No 3) [2002] FCA 1294 Banks & Banks [2015] FamCAFC 36 Barnes v Addy (1874) LR 9 Ch App 244 Barrett Property Group Pty Ltd v Dennis Family Homes Pty Ltd (No 2) (2011) 193 FCR 479 Bateman’s Bay Local Aboriginal Land Council v Aboriginal Community Benefit Fund Pty Ltd (1998) 194 CLR 247 Battiston v Maiella Construction Co Pty Ltd [1967] VR 349 Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 Bloss Holdings Pty Ltd v Brackley Industries Pty Ltd [2005] NSWSC 756 Blueseas Investments Pty Ltd v Mitchell (1999) 25 Fam LR 65 Brown v Commissioner of Taxation (2001) 47 ATR 178 Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 Charrington v Simons & Co Ltd [1970] 1 WLR 725 Cook v Taing [2014] VSC 428 Cory v Bretton [1830] 172 ER 783 Crayford Freight Services Ltd v Coral Seatel Navigation Co (1998) 82 FCR 328 Deiter v Deiter [2011] FamCAFC 82 DJL v The Central Authority (2000) 201 CLR 226 Donne v Lewis [1805] 32 ER 1221 Dunworth & Falletti [2020] FamCA 178 Eaby & Speelman [2015] FamCAFC 104 Earl of Mexborough v Bower [1843] 49 ER 1011 Earl of Ripon v Hobart [1834] 40 ER 65 Edwards v Transport Accident Commission [2013] VSC 557 Emanuele v Australian Securities Commission (1997) 188 CLR 114 Ex parte Robert Devenish and Henry Devenish v Richard Bernford (1691) Ex parte Swift [1835] 131 ER 1300 Fejo v Northern Territory (1998) 195 CLR 96 Field v Commissioner for Railways for New South Wales (1957) 99 CLR 285 Finlayson v Campbell [1997] NSWSC 374 Finlayson v Finlayson (2002) 29 Fam LR 460 Fletcher v Bealey (1885) 28 Ch D 688 Friar v Friar [2011] FamCAFC 71 Gabel & Yardley (2008) 40 Fam LR 66 Galafassi v Kelly (2014) 87 NSWLR 119 General Steel Industries Inc v Commissioner for Railways (New South Wales) (1964) 112 CLR 125 Glossop v Heston and Isleworth Local Board (1879) 12 Ch D 102 Grassby v R (1989) 168 CLR 1 Hall v Hall (2016) 257 CLR 490 Harrington v Lowe (1996) 190 CLR 311 Hartley Poynton Ltd v Ali (2005) 11 VR 568 Hepworth v Hepworth (1963) 110 CLR 309 Holder & Holder [2020] FamCA 347 Holmes v Millage [1893] 1 QB 551 In the Marriage of Caska (2001) 28 Fam LR 307 In the Marriage of Caska (No 3) (2004) 32 Fam LR 606 In the Marriage of Steel (1992) 15 Fam LR 556. In the Marriage of Waugh (1999) 27 Fam LR 63 In the Marriage of Woodland & Todd (2005) 33 Fam LR 177 In the Marriage of Yunghanns (1999) 24 Fam LR 400 In the Marriage of Zschokke (1996) 20 Fam LR 766 In the Matter of Excelsior Textile Supply Pty Ltd [1964] VR 574 Isenberg v The East India House Estate Co Ltd [1863] 46 ER 637 Jackson v Normanby Brick Co [1899] 1 Ch 438 Jemena Gas Networks (NSW) Ltd v Mine Subsidence Board (2011) 243 CLR 558 Jesson v Brewer [1763] 21 ER 312 Keech v Sandford [1726] 25 ER 223 Lawrence v Richmond [1820] 37 ER 367 Lindon v Commonwealth of Australia (No 2) (1996) 70 ALJR 541 Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 Maine & Maine (2016) 56 Fam LR 500 Mallet v Mallet (1984) 156 CLR 605 Marvel v Marvel (2010) 43 Fam LR 348 Masters v Cameron (1954) 91 CLR 353 McManus v Cooke (1887) 35 Ch D 681 Members of the Yorta Yorta Aboriginal Community v Victoria (2002) 214 CLR 422 Mulkearns v Chandos Developments Pty Ltd (No 4) (2005) 12 BPR 22,993 Mullane v Mullane (1983) 158 CLR 436 Nader v Sutherland Shire Council [2008] NSWCA 265 National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386 National Mutual Holdings Pty Ltd v Sentry Corporation (1989) 22 FCR 209 North London Railway Co v Great Northern London Railway Co (1883) 11 QBD 30 Owners of Cargo Lately Laden on Board “Siskina” v Distos Compania Naviera S.A. [1979] AC 210 Parsons v Bunge (1941) 64 CLR 421 Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1 Payne v Rowe (2012) 16 BPR 30,869 Phe v Leng (2019) 342 FLR 409 Queensland v Australian Telecommunications Commission (1985) 59 ALJR 562 R v Bell; ex parte Lees (1980) 146 CLR 141 R v Forbes; ex parte Bevan (1972) 127 CLR 1 R v Macfarlane; ex parte O'Flanagan and O'Kelly (1923) 32 CLR 518 R v Ross-Jones; ex parte Green (1984) 156 CLR 185 R v Watson; ex parte Armstrong (1976) 136 CLR 248 Re Horsham Kyosan Engineering Co Ltd [1972] VR 403 Re Sydney Formworks Pty Ltd (in liq) [1965] NSWR 646 Re Testro Bros Consolidated Ltd [1965] VR 18 Redland Bricks Ltd v Morris [1970] AC 652 Redmond & Redmond [2014] FamCAFC 155 Rocacelli v Seles [2019] FamCA 105 Rodgers v Rodgers (1964) 114 CLR 608 Rollings v Rollings [2009] FamCAFC 87 Ruane v Bachmann-Ruane (2012) 48 Fam LR 131 Rush & Tompkins Ltd v Greater London Council [1989] AC 1280 Salah & Salah (2016) 56 Fam LR 299 Senior v Anderson (2011) 45 Fam LR 540 Shepherd Homes Ltd v Sandham [1971] 1 Ch 340 Silver Fox Co Pty Ltd v Lenard’s Pty Ltd (No 3) (2004) 214 ALR 621 Simonds v Coyle (2019) 59 Fam LR 410 Simply Irresistible Pty Ltd v Couper [2010] VSC 505 Slea Pty Ltd v Connective Services Pty Ltd [2017] VSC 232 Smethurst v Commissioner of Police [2020] HCA 14 Smith v Smith (1875) LR 20 Eq 500 Spencer v Commonwealth (2010) 241 CLR 118 SS & AH [2010] FamCAFC 13 Stanford v Stanford (2012) 247 CLR 108 State Rail Authority of New South Wales v Smith (1998) 45 NSWLR 382 Strahan & Strahan (2009) 42 Fam LR 203 Taylor v Taylor (1979) 143 CLR 1 The Great Western Railway Company v The Birmingham & Oxford Junction Railway Company [1848] 41 ER 1074 Tomlin v Standard Telephones & Cables Ltd [1969] 3 All ER 201 Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 Wayne v Dillon (2008) 40 Fam LR 543 Western Australia v Southern Equities Corporation Ltd (1996) 142 ALR 597 Williamson v Henshaw [1747] 21 ER 217 Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) (No 6) [2011] FCA 350 Wirth v Wirth (1956) 98 CLR 228 Woodland v Todd (2005) 33 Fam LR 177 Woods v Bate (1986) 7 NSWLR 560 |
| J. Beames, General Orders of the High Court of Chancery (1815) Ronald Desiatnik, Without Prejudice Privilege in Australia (LexisNexis Butterworths, 2010) |
| APPLICANT: | Ms Kain |
| FIRST RESPONDENT: | Mr Kain |
| SECOND RESPONDENT: | Mr B Kain |
| THIRD RESPONDENT: | Mr C Kain |
| FOURTH RESPONDENT: | Mr D Kain |
| FIFTH RESPONDENT: | The Proper Officer, E Pty Ltd |
| SIXTH RESPONDENT: | The Proper Officer, F Pty Ltd |
| FILE NUMBER: | MLC | 13891 | of | 2018 |
| DATE DELIVERED: | 14 August 2020 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Wilson J |
| HEARING DATE: | 20 May, 17 & 22 July 2020 |
| DATE OF LAST SUBMISSION: | 11 August 2020 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr T. D.O.J. North SC with Mr T. Puckey and Dr S. McNicol QC with Ms A. Batrouney |
| SOLICITOR FOR THE APPLICANT: | Westminster Lawyers Pty Ltd |
| COUNSEL FOR THE FIRST RESPONDENT: | Mr M. Bartfeld QC with Ms H. Renwick |
| SOLICITOR FOR THE FIRST RESPONDENT: | Lander And Rogers |
| COUNSEL FOR THE SECOND RESPONDENT: | Mr D. Brown QC with Mr D. Matta |
| SOLICITOR FOR THE SECOND RESPONDENT: | Kalus Kenny Intelex |
| COUNSEL FOR THE THIRD RESPONDENT: | Mr D. Brown QC with Mr D. Matta |
| SOLICITOR FOR THE THIRD RESPONDENT: | Kalus Kenny Intelex |
| COUNSEL FOR THE FOURTH RESPONDENT: | Mr D. Brown QC with Mr D. Matta |
| SOLICITOR FOR THE FOURTH RESPONDENT: | Kalus Kenny Intelex |
| COUNSEL FOR THE FIFTH RESPONDENT: | Mr D. Brown QC with Mr D. Matta |
| SOLICITOR FOR THE FIFTH RESPONDENT: | Kalus Kenny Intelex |
| COUNSEL FOR THE SIXTH RESPONDENT: | Mr D. Brown QC with Mr D. Matta |
| SOLICITOR FOR THE SIXTH RESPONDENT: | Kalus Kenny Intelex |
Orders
I dismiss the first respondent’s application for an order that the affidavit of the applicant sworn 7 May 2020 and the affidavit of G sworn 6 May 2020 be removed from the court file.
I dismiss the second to sixth respondent’s disjoinder application.
I make an order nunc pro tunc joining Mr B Kain, Mr C Kain, Mr D Kain, E Pty Ltd ACN … and F Pty Ltd ACN … as parties to this proceeding.
The first respondent and Mr B Kain, Mr C Kain and Mr D Kain in their capacity as directors of E Pty Ltd, F Pty Ltd and related companies –
(a)keep the applicant’s solicitors informed at all times immediately of any dealings or proposed dealings with property of any of the Kain Group entities, including providing copies of all resolutions or decisions, offers, negotiations or other communications concerning any such dealings, contemporaneously with their generation by, issue from or receipt by the Kain Group entities;
(b)be and are hereby restrained from taking any step with respect to the distribution of the proceeds of any dealings with property of any of the Kain Group entities to or for the benefit of any beneficiary of the said trusts other than the first respondent, including but not limited to the repayment of any unpaid present entitlements or loan accounts standing to the credit of the said Mr B Kain, Mr C Kain and Mr D Kain without the prior written agreement of the applicant or court order;
(c)be and are hereby restrained from taking any step with respect to the restructuring, amendment or modification of the Kain Group entities and the existing entitlements of beneficiaries, including but not limited to changes of control, shareholdings or beneficial entitlements of any kind without the prior written consent of the applicant or court order.
Paragraph 4 of the applicant’s 12 May 2020 application in a case for a part property settlement is dismissed.
On or before 12pm on 21 August 2020 the parties must bring in a minute setting out a timetable for pleadings.
Any application for costs must be filed and served on or before 4pm on 21 August 2020, returnable before me.
This proceeding is forthwith transferred from the docket of McEvoy J to my docket.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Kain & Kain has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 13891 of 2018
| Ms Kain |
Applicant
And
| Mr Kain |
First Respondent
And
| Mr B Kain |
Second Respondent
And
| Mr C Kain |
Third Respondent
And
| Mr D Kain |
Fourth Respondent
And
| The Proper Officer, E Pty Ltd |
Fifth Respondent
And
| The Proper Officer, F Pty Ltd |
Sixth Respondent
REASONS FOR JUDGMENT
Introduction
Various applications and cross applications were before me on 20 May, 17 July and 22 July 2020. Written submissions were last filed on 11 August 2020. Specifically –
a)the wife urged me to make orders in her favour formally enjoining the second to sixth respondents in relation to certain acts;
b)the second, third, fourth, fifth and sixth respondents sought orders for their disjoinder pursuant to rule 6.04 of the Family Law Rules;
c)the husband urged me to dismiss the wife’s injunction application; and
d)the wife sought a partial property settlement order.
In these reasons the applicant is described interchangeably as “the applicant” or “the wife” and the first respondent is described interchangeably as “the husband” or “the first respondent”.
Synopsis
For the reasons that follow, I make the orders sought by the wife in paragraphs 1 to 3 of her application in a case, I dismiss the wife’s application for a partial property settlement, I dismiss the disjoinder application and I order this proceeding be transferred from the docket of McEvoy J to my docket for ongoing case management.
The various applications
The wife commenced this proceeding on 1 December 2018. Her initiating application contained five paragraphs of present relevance. They were as follows –
1.That pursuant to Section 79(2) of the Family Law Act 1975 (“the Act”) the Court declare that it is just and equitable to make orders altering the property interests of the parties both legal and equitable.
2.That pursuant to Section 79(4) of the Act the Court make such orders as it deems appropriate altering the property interests of the parties both legal and equitable.
3.That pursuant to Section 72 of the Act the Court make such orders as it deems appropriate for the Husband to pay to the Wife periodic and/or lump sum maintenance.
4.That pursuant to Section 85A of the Act the Court make such orders as it considers just and equitable with respect to the application, for the benefit of the parties, of the whole or part of property dealt with by any ante-nuptial or post-nuptial settlements made in relation to the marriage.
5.That pursuant to Section 106B of the Act the Court make such orders as it deems appropriate to set aside any instrument or disposition made by or on behalf of the Husband, or by direction or in the interest of the Husband, which has been made to defeat an anticipated order in these proceedings or, irrespective of intention, is likely to defeat any such order.
By way of response[1] the husband sought an order dismissing the wife’s initiating application and he sought a procedural order for the parties to attend a private mediation.
[1] His response was sealed on 20 March 2019.
By her application in a case filed 12 May 2020 the wife applied for orders joining five additional respondents. They have been treated in this litigation as the second to sixth respondents although formal orders for their joinder have not been made. They were –
a)Mr B Kain;
b)Mr C Kain;
c)Mr D Kain;
d)E Pty Ltd; and
e)F Pty Ltd.
The natural persons being the second, third and fourth respondents are the husband’s sons from the husband’s first marriage. The two companies are trustees of trusts with which the first respondent (the husband) has or has had an association.
On 15 May 2020 the wife made wholesale amendments to her initiating application. She introduced paragraphs 6 - 18. It is utile to set those paragraphs out in terms, albeit a lengthy exercise, as follows –
6.That pursuant to Section 106B the appointments by the husband of MR B KAIN, MR C KAIN and MR D KAIN as appointors of the Kain Trust, the Kain Trust 3 and the Kain Trust 2 pursuant to the Deeds Poll of Appointment and Resignation dated 2 July 2015 be set aside and discharged.
7.That the Court declare the reinstatement of the husband as sole appointor of the said Trusts.
8.That pursuant to Section 106B the resolutions of E Pty Ltd ATF the Kain Trust dated 23 November 2016, 4 May 2017 and 27 April 2018 be set aside and discharged.
9.That E Pty Ltd be removed as the trustee of the Kain Trust and the Kain Trust 3 and F Pty Ltd be removed as the trustee of the Kain Trust 2.
10.That the Court appoint such new trustees of the said Trusts as it deems appropriate.
11.That such new trustees be joined as parties to this proceeding and forthwith do all things and make all distributions to the husband or the wife to meet the husband’s obligations and the wife’s entitlements pursuant to these orders.
12.That the husband do all things and sign all documents required to call upon the said Trusts to forthwith repay his existing unpaid present entitlements and loan accounts.
13.That the husband and the wife retain as joint proprietors the real property located at H Street, J Town, Victoria and described in Certificate of Title Volume … Folio … (“the J Town property”).
14.That the parties hereafter pay in equal shares all rates, taxes and outgoings (including gardening and maintenance costs) due in respect of the J Town property.
15.That within 30 days of the date of these orders the husband do all acts and things and sign all documents necessary to transfer to the wife all of his right title and interest in the real property located at K Street, L Town, New South Wales and described in Folio … (“the L Town property”).
16.That upon the said transfer the wife pay and indemnify the husband in respect of all rates,taxes and outgoings due in respect of the L Town property.
17.That unless otherwise specified in these orders and save for the purposes of enforcement, the husband and the wife each be solely entitled to the exclusion of the other to all other property (including superannuation) in their possession as at the date of these orders.
18.That the husband pay or cause to be paid to the wife a capital sum sufficient to effect an equal division of the totality of the property of the husband and the wife including property held within the said Trusts or within any superannuation fund.
On 19 May 2020 the second to sixth respondents put in issue their application in a case pursuant to which they sought orders under rule 6.04 of the Family Law Rules for their disjoinder.
The dramatis personae
At this juncture it is worthwhile to record the key personalities in this dispute.[2]
[2] Most of the information in this section has been distilled from the wife’s affidavit sworn 7 May 2020.
The applicant and the respondent commenced living together in 1988 and they married on … 1991. They have been together for over 34 years. The applicant is 70 years of age and the first respondent is 83 years of age. This was their second marriage for each and they have no children together.
The applicant has three children from a previous marriage – an eldest daughter now aged 48 years and twins aged 42.
The second respondent is the husband’s son of the husband’s first marriage. The second respondent is 54 years of age. He owns his own business.
The third respondent is also the husband’s son of the husband’s first marriage. The third respondent is 56 years of age. He manages the Kain Group, described below at paragraph 17.
The fourth respondent is also the husband’s son of the husband’s first marriage. The fourth respondent is 49 years of age. He works in the transport industry.
The husband founded a business entity that went by the trading name M Company in 1974 which, according to the wife, the husband sold in 1997 for approximately $270 million. She said the husband applied a substantial portion of the net proceeds of sale in investments described by the applicant as the Kain Group.
The applicant said the Kain Group was made up of three trusts. Each had a corporate trustee. The three trusts were –
a)the Kain Trust (“KT”) of which E Pty Ltd is the trustee;
b)the Kain Trust 2 (“KT2”) of which F Pty Ltd is the trustee; and
c)the Kain Trust 3 (“KT3”) of which E Pty Ltd is the trustee.
The applicant is a director of the trustee of the husband’s self-managed superannuation fund.
The applicant and the first respondent are jointly registered as proprietors of 10 acres of land and improvements at H Street, J Town that the applicant estimated to be worth $10m. She said that the husband is the sole registered proprietor of K Street, L Town, NSW.
Before going to the wife’s narrative of events in support of her various applications in this interlocutory skirmish, it is utile to record the husband’s version of events in relation to certain background matters.
Details about the children were the same as given by the applicant and respondent as were details of the date of cohabitation and marriage between the applicant and first respondent. That much of the case at least was not disputed.
The husband gave details of the corporate structure of the three trusts making up the Kain Group. Those details as given by him largely corresponded with those as given by the wife as to the identity of the trustees. So far as E Pty Ltd was concerned, the husband stated –
a)he and his three sons are directors of E Pty Ltd;
b)he and his son Mr B Kain, the second respondent, are co-secretaries of E Pty Ltd; and
c)he holds 60 of the 240 issued shares in the capital of E Pty Ltd, the balance being held equally by his three sons, making all four equal shareholders as to 60 of the 240 issued shares in the capital of E Pty Ltd.
So far as F Pty Ltd was concerned, he said he is the holder of the one issued share in the capital of F Pty Ltd. He said F Pty Ltd’s directors are the first respondent’s three sons and the secretary is the husband’s middle son Mr B Kain.
He said the beneficiaries of the KT are either primary beneficiaries or general beneficiaries. The primary beneficiaries are the husband’s children and the general beneficiaries include his spouse, his children’s spouses and descendants and any charitable organisation. The husband said the two other trusts were not within the classes of beneficiaries of the KT.
So far as the second trust, KT2, was concerned, the husband and his children were primary beneficiaries and the applicant, her siblings, the husband’s siblings and the husband’s descendant were general beneficiaries.
So far as the third trust, KT3, was concerned, the primary beneficiaries are the husband’s children and the general beneficiaries are the husband, the applicant, his children’s spouses and descendants and any charitable organisation.
Events leading to this litigation
It was common ground that the husband suffered a stroke in 2004 when he was 67 years of age.
The husband said that at about that time, that is to say 2004, he began to question the commercial advice he was receiving, citing the loss of millions of dollars in connection with a farm, leading to criminal charges being brought against a person in New South Wales. The husband said he did not consider that the applicant was sufficiently experienced to take over the management of family investments so he appointed his middle son in 2012 as the managing director of the Kain Group. The husband said that in 2017 he began to consider changing the configuration of the control of the family business and its assets. At the time, the husband said he was the sole appointor under each of the three trusts, conferring upon him the power to replace the trustee of each trust.
The husband said that by 2015 the middle son Mr B Kain had assumed the day-to-day running of the KT and the KT3 by reason of his role as managing director of E Pty Ltd. However, both F Pty Ltd and E Pty Ltd were subject to the husband’s power of appointment.
According to the husband, by 2015 the first respondent’s and the applicant’s combined wealth approximated $95 million. He said he took the view they had “more money than we would ever need, for the rest of each of our lives.”
On 2 July 2015 the husband deliberately resigned from his role as appointor of the three trusts in favour of his three sons.
Only superficial details of certain of the events that followed were given by the husband from paragraph 63 and following of his affidavit sworn 19 May 2020. The husband said that “at around the time” which I take him to mean July 2015 “it was decided” that certain assets would be sold. The husband did not say who made that decision and if by more than one person, whomever else was involved. He did say that E Pty Ltd and F Pty Ltd decided at board level to “sell their respective assets over a period of time”, those assets consisting mainly of real estate. The husband said, (again in the passive tense thereby not revealing who actually decided) that “it was decided to make a distribution to each of my three sons in the amount of $20 million each”. He said his three sons received unpaid present entitlements in that amount.
Pausing there, in paragraph 50(e) of his affidavit sworn 19 May 2020 the husband swore to the existence of his unpaid present entitlements in KT in the sum of a little over $14 million. By his proposal recorded in paragraph 64 of his affidavit the husband said “it was decided” to make a distribution of $20 million to each of his three sons (inferentially a total of $60 million) without descending to the detail of the source of $60 million worth of unpaid present entitlements. It was difficult to see how that decision was commercially maintainable although that point need not be explored for present purposes.
Be that as it may, the husband addressed the steps taken in the realisation of assets of the Kain Group. The reason for that realisation was not the subject of detailed evidence by the husband. It seemed that in the course of the husband’s examination of the Kain Group’s succession he concluded that he and his wife had more money than they would ever need, he had made a will, he had superannuation and that the various trusts’ investments in significant land holdings were secure. Yet the trustees nevertheless decided to sell the assets under the control of the trustees over a period of time, mostly real estate holdings. The mechanics of the sale were explained in paragraph 65 of the husband’s affidavit. It was as follows –
The process of the Kain Group realisation (also referred to as the “E Pty Ltd asset realisation”) involves large parcels of real estate, and is a process that was always envisaged to take a number of years to complete. The aim of the process was always to achieve an orderly sale of the assets of KT, at times of optimal market conditions, to achieve the maximum realistic sale price.
A fair reading of paragraph 66 of the husband’s affidavit revealed that E Pty Ltd sold the real estate holdings of KT. He said he received payments “proportionate to the value of my entitlements in KT”. His words were as follows –
As the real estate holdings of KT have been realised, I have received payments which are proportionate to the value of my entitlements in E Pty Ltd FT (consisting of my loan accounts and UPEs) as against those of my sons (consisting of their UPEs) in a manner designed to pay out our respective entitlements simultaneously. The pool of sale proceeds available for distribution is net of an amount retained by the trust in order to meet ongoing and estimated forward operating expenses. This has been facilitated by way of reduction in my loan accounts and UPEs in KT, as was always envisaged.[3]
[3] Paragraph 66 of the husband’s affidavit sworn 19 May 2020.
He did not say who envisaged what. He said he kept the wife informed.
Returning to the wife’s narrative of events, she gave a version of events that took up from 2004 following the husband suffering two major seizures while he was in rehabilitation. She said that at that time the husband’s two older sons refused to pay for the husband’s medical expenses arising from the husband’s stroke so she became very wary of her husband’s sons, believing that she was “at their mercy financially”. The applicant said the husband suffered a fall in the shower in mid-July 2004 or thereabouts resulting in a head injury. She said the husband became very withdrawn, he had little awareness of what was going on around him and he became dependent on the wife. She said the husband and the applicant became socially isolated and “there was very little communication with Mr Kain’s sons” (her words).
The wife said the husband executed an enduring power of attorney (financial) on 15 September 2006 appointing the wife as his attorney in relation to the husband’s self-managed superannuation fund. She said that power was executed on the basis that the husband was incapable of managing his own affairs.
The applicant said she was not aware (I assume from that she meant that she was not aware at the time) that the husband had made a will and executed an enduring power of attorney on 29 July 2011.
She said that by 2012 she was concerned for her financial security. She said that the husband, who had previously kept his middle son out of the business affairs of the trust, progressively permitted the middle son to assume a greater role in the operations of the group. The wife said she continued to regard the husband’s middle son as “overbearing, controlling and aggressive” towards her (her words). The wife sent the husband a letter on 19 March 2012 that began “to Mr Kain”. It was as follows –
To Mr Kain -
I hope that this letter will help to clarify the concerns I have about several issues and that you will give these concerns proper and due consideration. I'm sure that you want to have both an efficient and harmonious relationship with your own family as well as satisfy my need for confidence and security for my future.
Over the last 25 years that we have been together, I have always supported you in your business and personal ventures. Things that were important to you I saw as important to our relationship even though I was not always included in the decision making process. Misunderstandings often occurred and this caused damage to both our emotional wellbeing and the trust we had in each other. Our emotional wellbeing depends on how fairly and kindly other people treat us.
Recent events at your office have brought further damage and doubt to my ability to feel secure. Your company policy has always appeared to be secretive and non inclusive leaving me with no feeling of control over my own future. Making some changes to keep me properly informed of the financial situation overall would not compromise the company in any way. I am not asking for anything that is unreasonable but I suggest that by changing a couple of things there could be a lot more harmony all round.
The applicant’s requests to attain some insight into the group included her being provided with monthly reports, regular meetings and her inclusion in discussions and decision making.
Through the exchange of documentation in this case the applicant said she learned that on or about 25 February 2013 the husband’s long-term solicitor, Mr N, provided written advice to the husband in relation to transferring control of the three trusts to the husband’s sons. Of those steps she said the following about her knowledge of them –
I was not informed of or consulted about these plans by Mr Kain, Mr N, or anyone else. I was not informed of a number of steps that would subsequently be taken by or in the name of Mr Kain for the benefit of his sons over the coming years, of which I have now become aware only by reason of having issued this proceeding.[4]
[4] Paragraph 32 of the wife’s affidavit sworn 7 May 2020.
Between 2013 and late 2014 the husband was examined by several medical specialists in relation to his cognitive functioning. Various theories were offered at the time including suspected frontotemporal lobe dementia, ischaemic events and vascular dementia. A neuropsychological assessment conducted in July 2014 by Dr O revealed that the husband demonstrated significant cognitive disability into which the husband had no insight leading Dr O to express the following opinion –
Mr Kain demonstrates evidence of a significant cognitive disability, into which he has no insight. It is my opinion, therefore, that he lacks the capacity to make informed financial decisions.
According to the wife, the husband’s son Mr B Kain did not accept any diagnosis that the husband was afflicted with dementia. Mr B Kain insisted that the husband was able to comprehend and articulate his wishes. The wife said in paragraph 41 of her affidavit the following –
On 2 October 2014 Mr B Kain responded to my email to Mr D Kain. Mr B Kain said, in relation to Mr Kain’s cognitive functioning, “Whilst his cognitive abilities are not what they were pre2004 he is still, given appropriate time, able to comprehend and articulate his wishes”. He declined to answer my question about Mr Kain’s power of attorney on the basis that he believed it was premature. In relation to finances, he stated that “with regard to regular monthly payment to your joint accounts will be maintained until such time as it is required to be reviewed.” That provided no assurance to me. Rather, it alarmed me. It seemed to confirm my worst fear, that Mr Kain and I were no longer making decisions about our income and our finances.
According to the wife she had no knowledge of a collection of events in the period March to July 2015. The activities of which she said she was unaware included the following –
a)the husband’s making a codicil to his will on 13 March 2015;
b)the husband’s ceasing to be a director and the secretary of F Pty Ltd on 23 March 2015;
c)the husband’s resignation of the role of appointor to the KT, the KT3 and KT2, each dated 2 July 2015; and
d)the dilution in the husband’s shareholding in E Pty Ltd and the concurrent allotment of 180 additional shares in E Pty Ltd to each of the husband’s sons, that is to say, 60 to each.
The wife expressed her concerns about those issues in her letter to the husband dated 28 April 2016. The letter was measured, considered and rational. The salient parts of it were as follows –
I love you very much. We’ve been together for 30 years now. This year we will celebrate 25 years married. We have grown older together and now are in the ‘twilight’ of our lives.
…
I want to make decisions for us without having to explain myself to the boys or seek their permission to pay for things. I need to be financially independent from E Pty Ltd and the boys. You know that I am committed to giving you the best care that I can, and have always done so since we have been together. I also need to provide for my care, should I need it, but under the arrangement that presently exists I am not, and will not be, in a position to do so.
I feel anxious and filled with worry over how I will manage your care when it becomes more expensive to care for you. I want to be in a position to independently take care of you and me for as long as we both live without being answerable to the boys and without being dependent on them for monthly payments into our account. I am a grown woman and your wife. I don’t need to be supervised and controlled by the boys.
According to the wife, during 2016 the husband and his sons executed a variety of commercial documents in relation to E Pty Ltd. They included a shareholders agreement between E Pty Ltd as trustee of KT and of KT3 as well as a document entitled side deed to shareholders agreement. The wife said those documents were created and executed without her knowledge. She also said that on 23 November 2016 the directors of E Pty Ltd resolved to distribute to the husband and his three sons $150,000 in pre-GST capital profit reserves.
By February 2017 the applicant appeared to have become suspicious about the activities of the husband and his three sons. She said in paragraph 51 of her affidavit that in late February 2017 the Kain Group’s chief financial officer visited the applicant at home asking for her written consent to E Pty Ltd applying to the Supreme Court of Victoria to vary the terms of certain deeds of trust and, as she was a beneficiary, E Pty Ltd needed her written consent. She said she refused to give her consent.
The wife said that on 4 May 2017, without her knowledge the board of E Pty Ltd resolved to advance $60 million of capital from pre-CGT capital profit reserves to the husband’s sons in equal shares.
In late June 2017 the wife expressed her concerns about the husband’s capacity to drive a motor vehicle. She said that precipitated an angry visit by the second respondent to her. As it happened the husband passed a driving test.
During 2017 the wife appointed solicitors to assist her “to secure my financial independence” (her words). Concurrently, she retained other solicitors to assist her with this family law litigation. For ease of reference I describe those solicitors as the wife’s “commercial solicitors” and the wife’s “family law solicitors” to differentiate between the two firms.
By early 2018 the wife’s commercial solicitors ascertained that the husband’s superannuation was valued at over $10 million and that the husband had been drawing over $90,000 per month in two tranches. By that date the husband had turned 80. On or about the same date the wife said she ascertained that KT owed the husband $55 million as an unpaid loan together with over $13 million by way of an unpaid present entitlement.
During February 2018 the husband and wife obtained an estimate of the costs associated with repair work at their home. It was $1,189,100. The wife said her commercial solicitors twice wrote to E Pty Ltd in February 2018 requesting E Pty Ltd to distribute sufficient funds to meet the builder’s repair costs. She said E Pty Ltd did not respond to the two letters from her commercial solicitors. She said that the husband paid for the repairs from his superannuation.
The wife swore that on 5 July 2018, the husband’s solicitor asserted that the Kain Group was valued at $168 million, although that valuation did not include the matrimonial home in Victoria, the New South Wales property and the husband’s superannuation fund.
The wife swore that in September 2018 the husband stated he wanted to make a new will in response to which the wife’s commercial solicitors wrote to the husband’s solicitor expressing the wife’s concerns about the husband’s testamentary capacity.
The wife swore at paragraph 72 of her affidavit that over four meetings in July, August and October 2018 a medical doctor conducted neuropsychological assessments of the husband, of which assessments the wife was then unaware.
The wife said that the neuropsychological assessment referred to immediately above revealed “no evidence of further decline since Dr O’s report in 2014”. The wife presently challenges many of the observations in that assessment.
This proceeding was commenced on 1 December 2018.
It was common ground that on 13 May 2019 a mediation was conducted in this litigation before the Honourable Peter Young AM QC. A substantial dispute emerged in the applications before me whether, and if so to what extent, it was permissible to have regard to any aspect of that mediation. My consideration of that issue is set out below.
According to the wife, the mediation was conducted over three days, namely 13 May, 21 June and 21 August 2019. The applicant said certain terms were agreed. The husband disputed the phenomenon of agreement at mediation.
The applicant swore in her affidavit that following a board meeting of E Pty Ltd on 6 September 2019 a decision was made to the effect that the Kain Group would be wound up and that the husband decided the wife would be paid $48 million.
She said that on 8 October 2019 the husband told her that the assets of E Pty Ltd had been sold and that the proceeds would be split equally between the husband, the wife and the husband’s three sons. Later that month, according to the wife, the husband told the wife certain information that indicated that complications were emerging with any resolution of the disputes between them.
This proceeding then went to a case assessment conference on 20 November 2019 where disclosure orders were made.
The applicant said over $26 million in assets have been distributed since January 2020. She said the sale of a particular piece of real estate called “the T building” was to settle in May for $16 million. The applicant said on 18 March 2020 that the husband told her she would receive less than a one-fifth share in the proceeds of the settlement between KT and an international entity called P Company.
That set of circumstances provoked the wife to file her application in a case returnable in May 2020.
Objections
Written submissions were filed by all parties, in addition to lengthy verbal addresses over three days in relation to the application first before me in May 2020. Junior counsel for the applicant identified in his written submissions dated 19 May 2020 that four issues fell for determination, namely –
a)the joinder of the second, third, fourth, fifth and sixth respondents;
b)disclosure concerning the realisation and distribution of assets by or in relation to the three family trusts that are in issue in this case;
c)orders enjoining parties in respect of distributions from those family trusts; and
d)interim property settlement orders.
In written submissions filed on behalf of the husband, Mr Bartfeld QC who appeared with Ms Renwick, contended that objections to evidence needed to be determined ahead of any adjudication on interim applications. To those written submissions the husband’s counsel took issue in relation to 55 separate sentences or phrases within sentences of passages in the wife’s affidavit made 6 May 2020. It seemed to me that those objections were proper for a trial. However when hearsay evidence is admissible on the hearing of an interlocutory application,[5] it struck me that little productive point was achieved by determining objections to phrases used by the wife in her affidavit such as those taken by the husband’s counsel including “he had”, or “no progress was made” or “even though” or “and that in”. Those objections I decline to entertain at this stage of this proceeding.
[5] Rule 5.09 of the Family Law Rules and s 75 of the Evidence Act.
The other objections fell into a variety of other categories. Among them were objections as to relevance, conclusion, argument, the disclosure of a state of mind, comment, speculation, hearsay and opinion. Those are perfectly proper grounds on which to base evidentiary objections. For the purposes of the hearing of the injunction applications in particular in this matter, I am willing to proceed on the basis that the objections taken have been made out and that they have been successfully established in their entirety.
However, notwithstanding those objections, for the reasons set out below, in my view the evidence in this case demonstrates that the urgency of the circumstances of this application, the serious issues to be tried and the balance of convenience all favour the granting of the injunction sought.
The evidentiary objections taken by the husband were not merely matters of form but rather were of substance. The husband called in aid observations made in In the Marriage of Waugh[6] to the effect that the court when ordering an injunction must do so on admissible evidence as opposed to general concerns. That much is true. However, it is far from uncommon for the evidence in an injunction application at an interim level to be less fully formed than it is on an application for a permanent injunction following a trial. By its very nature, a quia timet injunction application involves a consideration of matters formulated at high speed where the information and documentation on which the applicant relies is not fully formed and where information obtained on an information and belief basis is admissible. It is one thing to say that general concerns may not support the grant of an injunction. However, it is an altogether different thing to say that an injunction should not (or worse, will not) be granted when the evidence is in a state of fluidity or where evidence of a standard short of evidence appropriate for a trial is to be adduced.
[6] (1999) 27 Fam LR 63.
The husband made other evidentiary objections, most stridently in relation to the receipt of evidence about the mediation conducted before the Hon. Peter Young AM QC. Specifically, the husband protested about my receiving in evidence any evidence “about settlement discussions in the nature of negotiations in mediations”.[7] Counsel for the husband argued that s 131(1) of the Evidence Act contained a prohibition on divulging that evidence.
[7] Paragraph 8 of annexure A to the written submissions filed on behalf of the husband dated 19 May 2020.
It is important to trace through the husband’s arguments on point and then to address the contentions advanced by Dr S. McNicol QC and Ms Batrouney in opposition.
On 30 July 2019 the husband and the wife entered into a mediation agreement with Mr Young as mediator. According to the husband’s submissions, a mediation agreement was executed between those parties for what counsel said was “each tranche of the mediation”. Four clauses of the mediation agreement were relevant to this debate, three under the heading “confidentiality of mediation” and one under the heading “settlement of dispute”. Clauses 16, 17 and 18 were as follows –
CONFIDENTIALITY OF MEDIATION
16.The parties to this agreement agree that the mediation is privileged and without prejudice to the rights of any party to the dispute and no evidence shall be called or given by any party to the dispute in any court in relation to:
a.any settlement proposal made by any party to the dispute or the mediator;
b.the willingness or unwillingness of any party to the dispute to consider any offer to compromise; or
c.any statement made by any party to the dispute, their legal practitioner or a witness in the course of the mediation or in preparation for the mediation,
except as may be permitted by this agreement or required by the operation of the law.
17.Notwithstanding any confidentiality provisions in this agreement any party to this agreement may give such evidence of the agreement, the conduct of the mediation and any statement made in the course of the mediation as may be necessary in any action to:
a.enforce or interpret this agreement; or
b.recover any fees due to the mediator.
18.A party must not disclose to any person other than their legal and other professional advisors, information or matters obtained during the mediation unless compelled by law to do so.
Those provisions replicated the common law position.
Under the heading “settlement of dispute” was clause 21 on which counsel for the husband relied in paragraph 11 of annexure A to their written submissions. Clause 21 was as follows –
21.Notwithstanding any other provision in this agreement, in the event that the parties to the dispute participating in the mediation are husband and wife and the dispute involves a matrimonial clause (within the meaning given to that phrase by Section 4(1) of the Family Law Act 1975) any agreement reached between the parties is not binding or enforceable unless such agreement:
a.has been embodied in order made by a court of competent jurisdiction; or
b.is a Financial Agreement which is binding on both the parties to the dispute by virtue of the operation of Part VIIIA of the Family Law Act 1975.
The salient aspect of clause 21 lay in the portion that provided that no settlement was binding on the parties unless that settlement was embodied in a court order (relevantly, of this court) or in an agreement made under Part VIIIA of the Family Law Act.
Anticipating that the wife would rely on s 131(2)(f) of the Evidence Act, counsel for the husband contended that the mediation itself prohibited the disclosure of evidence of the making of a settlement. That provoked a sophisticated debate on the operation of s 131 of the Evidence Act to the circumstances of this case. The evidence sought to be excluded related to any aspect of any resolution of disputes between the husband and wife and it was recorded in the affidavit of the wife herself and also her commercial solicitor, G.
G swore an affidavit on 6 May 2020. She gave evidence in that affidavit relating to a period between late February 2017 and 24 April 2020. Her affidavit was extremely detailed spanning 121 paragraphs. The husband objected to it in its entirety. In his response to application in a case dated 19 May 2020, the husband sought orders that the wife’s 7 May 2020 affidavit and the affidavit of G sworn 6 May 2020 “be struck out in their entirety and uplifted from the court file”. He sought the removal of that affidavit from the court file. That was a very large submission. The force of that submission gave some insight into the significance with which the husband viewed the wife’s reliance on hers and Ms G’s affidavits.
Ms G swore in her affidavit that she has acted for the wife as the wife’s solicitor since February 2017. Not every paragraph of her affidavit contained information of negotiations of one form or another. In certain respects, her evidence corroborated the applicant’s evidence on a particular point, which point was not always pertinent to negotiations. Paragraph 8 was an illustration. In that paragraph Ms G deposed to being informed by the applicant that E Pty Ltd wanted to apply to the Supreme Court of Victoria to vary the terms of the relevant trusts and that E Pty Ltd needed the wife’s consent. The applicant gave similar evidence adding that she (the applicant) refused to give that consent. That had nothing to do with the mediation. Taking another illustration, in paragraph 21 of her affidavit Ms G deposed to an email having been sent with an updated structure diagram of the Kain Group. That was not objectionable for being the revelation of negotiations. Another illustration was paragraph 38 that spoke of ATO documentation. That was not a communication concerning or in relation to negotiations. Ms G’s affidavit was replete with information of a factual nature that did not touch or concern negotiations.
That said, Ms G did give information in parts of her affidavit that related to the disclosure of negotiations. Ordinarily such evidence would be inadmissible and would be cloaked by the privilege that prevents the disclosure of that information. In order to render that information admissible, s 131 needed to be invoked by the applicant. Further, the wife put in evidence as exhibit A11 to her 7 May 2020 affidavit a document she described as “our terms of settlement (made) 21 August 2019”. Dr McNicol QC described that document as “heads of agreement”. Dr McNicol QC also identified subsequent correspondence between the legal representatives concerning the heads of agreement[8] as well as subsequent conversations between the parties concerning the terms of settlement[9] as representing the evidence to which objection was taken by the husband.
[8] Wife’s affidavit dated 7 May 2020 at [92], [93], [102] and Ms Ms G’s affidavit dated 6 May 2020 at [81], [91], [93], [117], [120].
[9] Wife’s affidavit dated 7 May 2020 at [88], [89], [91], [97], [99] – [103] and Ms Ms G’s affidavit dated 6 May 2020 at [77].
To better understand the contentions advanced on behalf of the wife to the effect that no substance existed in the husband’s privilege objections, it is necessary to recite the terms of s 131. It is also necessary to record Dr McNicol QC’s contentions that a consideration of the impugned evidence bore directly upon the question of whether the wife’s application for orders under s 79 should be granted on the basis that she demonstrated that it is just and equitable for the court to make the orders the wife seeks. Dr McNicol QC also argued that the impugned evidence was relevant to the joinder application as well as to the question whether the injunction sought should be granted.
The wife’s contentions about s 131 in relation to the evidence of settlement negotiations calls for careful consideration. The starting point is the terms of s 131 itself. It is in the following terms –
(1) Evidence is not to be adduced of:
(a)a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute; or
(b)a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute.
(2)Subsection (1) does not apply if:
(f)the proceeding in which it is sought to adduce the evidence is a proceeding to enforce an agreement between the persons in dispute to settle the dispute, or a proceeding in which the making of such an agreement is in issue; or
(g)evidence that has been adduced in the proceeding, or an inference from evidence that has been adduced in the proceeding, is likely to mislead the court unless evidence of the communication or document is adduced to contradict or to qualify that evidence; or
At once it is relevant to point out that by operation of s 4(1)(b) of the Evidence Act, the provisions of that legislation apply to interlocutory applications of which this is one.
The heads of agreement document, being exhibit A11 was a brief document of six numbered paragraph, not expressed in narrative form and resembling more closely a bullet point executive summary of matters discussed. It appears (although I cannot say with certainty at this point) to have been written by two persons as two different types of ink in the writing of it seem to have been used. It read as follows –
1. J Town remains held as joint tenants.
2. L Town to Ms Kain.
3.Payment of $48 million (of which $3 million has already been paid, with $45 million to be paid.)
4. Cash payment of $45 million.
5. Terms as to:
i. interest (if any and at what rate)
ii. instalments (if required)
iii.security, such as is reasonable and proper in the circumstances, to be agreed.
6.Parties not to take any further step in the proceeding before 11 September 2019 during which time Mr Kain will formulate and provide to Ms Kain detailed proposed settlement terms.
That document bears the signatures of the wife, G, the husband and Mr Q, his solicitor.
Self-evidently, that document did not represent the terms of settlement between the parties. Paragraph 6 said as much. An interesting question emerged, although one not debated before me, whether that document, A11, was an agreement to agree having no contractual force or whether it was a document attracting the operation of principles canvassed by the High Court in Masters v Cameron.[10] It is not necessary to consider those matters at this juncture. That said, Dr McNicol QC brought to my attention the decision of Rares J in Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) (No 6).[11] There, his Honour held that a settlement agreement signed by the parties or recording the terms of their agreement is a document or communication by parties who are no longer in dispute but who have in fact arrived at agreement. That beggars the question in this case about whether the document exhibited as A11 recorded the terms by which the husband and wife had agreed to resolve their dispute. That document recorded that a great many terms were still the subject of negotiations, hence paragraph 6. To the extent that it could be said that any agreement on point had been reached, paragraph 2 was bereft of details as were paragraphs 3, 4 and 5. Another issue emerged about whether the document marked as A11 was capable of being specifically enforced. The point was not debated before me and no party took the point. It is not appropriate to say more on it now and so I do not.
[10] (1954) 91 CLR 353.
[11] [2011] FCA 350.
At common law, as a matter of public policy evidence was excluded of admissions by words or conduct made by or on behalf of parties during the course of their negotiations to settle litigation. The precise genesis of the public policy is not easily or reliably traced yet an early illustration emerged in Cory v Bretton.[12] The breadth of the policy preventing disclosure of without prejudice communications, whether so marked or not, was stated by the plurality in Field v Commissioner for Railways for New South Wales[13] where the plurality[14] held as follows[15] –
The law relating to communications without prejudice is of course familiar. As a matter of policy the law has long excluded from evidence admissions by words or conduct made by parties in the course of negotiations to settle litigation. The purpose is to enable parties engaged in an attempt to compromise litigation to communicate with one another freely and without the embarrassment which the liability of their communications to be put in evidence subsequently might impose upon them. The law relieves them of this embarrassment so that their negotiations to avoid litigation or to settle it may go on unhampered. This form of privilege, however, is directed against the admission in evidence of express or implied admissions. It covers admissions by words or conduct. For example, neither party can use the readiness of the other to negotiate as an implied admission. It is not concerned with objective facts which may be ascertained during the course of negotiations. These may be proved by direct evidence. But it is concerned with the use of the negotiations or what is said in the course of them as evidence by way of admission. For some centuries almost it has been recognised that parties may properly give definition to the occasions when they are communicating in this manner by the use of the words “without prejudice” and to some extent the area of protection may be enlarged by the tacit acceptance by one side of the use by the other side of these words.
[12] [1830] 172 ER 783.
[13] (1957) 99 CLR 285.
[14] Dixon CJ, Webb, Kitto & Taylor JJ.
[15] (1957) 99 CLR 285, 291.
In the context of family law litigation questions of admissibility of settlement negotiations arose in Rodgers v Rodgers.[16] There, the court[17] held as follows –
In spite of the arguments of counsel for the appellant we are satisfied, as was the learned trial judge, that agreement was never reached between the parties and that their negotiations in an effort to reach agreement must be taken to have been without prejudice. That they were not expressed to be without prejudice is of no consequence; it is sufficient that the wife's first petition was then pending, that claims had been made upon the husband, and that the negotiations took place bona fide with a view to compromise. We do not understand the observation that whilst the “document” would not have been admissible in other jurisdictions there was something to be said for the view that it and the negotiations which preceded it were admissible in the Matrimonial Causes jurisdiction as showing the conduct of the parties. That husband and wife who are parties to a subsisting cause in the Matrimonial Causes jurisdiction, or, who contemplate such proceedings, should be able to negotiate with a view to reconciliation or as to what financial provision should be made for one party freely and without fear that, failing agreement, what is said or done by them may later be used in evidence is, in our view, not open to question.
[16] (1964) 114 CLR 608.
[17] McTiernan, Taylor & Owen JJ.
Referring to Rodgers v Rodgers a later decision of the High Court in Harrington v Lowe[18] cited Field v Commissioner as well as the decision of the House of Lords in Rush & Tompkins Ltd v Greater London Council.[19] The plurality[20] in Harrington v Lowe held as follows –
Counsel also referred to the principle that, even where the words “without prejudice” are not used, privilege will attach to communications which are made in the course of genuine negotiations with intent to compromise an existing dispute. The purpose is to encourage compromises by sparing the parties the embarrassment which might be caused to them if the negotiations fail and later their communications are liable to be put in evidence. In particular, negotiations undertaken between spouses in an effort to achieve reconciliation or to reach an agreement regarding financial arrangements for the future are taken to be “without prejudice” negotiations whether or not the spouses are parties to a subsisting matrimonial cause or contemplating such proceedings. Thus, in Rodgers v Rodgers, it was said in the joint judgment of this Court:
“That husband and wife who are parties to a subsisting cause in the Matrimonial Causes jurisdiction, or, who contemplate such proceedings, should be able to negotiate with a view to reconciliation or as to what financial provision should be made for one party freely and without fear that, failing agreement, what is said or done by them may later be used in evidence is, in our view, not open to question.” (Emphasis added.)
[18] (1996) 190 CLR 311.
[19] [1989] AC 1280.
[20] Kirby J wrote separate reasons, although agreeing in the result.
The textbooks are replete with observations on the privilege attaching to without prejudice statements made in the course of attempts to settle a dispute.[21] According to Ormrod J in Tomlin v Standard Telephones & Cables Ltd[22] the rule “is of respectable antiquity”.
[21] J. Dyson Heydon, Cross on Evidence (LexisNexis Butterworths, 12th ed, 2020) esp chapter 13 Privilege, paragraph 25350 and the sources set out in footnote 914, R. G. Toulson & C. M. Phipps, Confidentialty (Sweet & Maxwell, 3rd ed, 2012), Bankim Thanki QC (ed), The Law of Privilege (Oxford University Press, 3rd ed, 2018), Hodge Malek QC, Phipson on Evidence (Thomson Reuters, 19th ed, 2018, esp para 24-37 et seq), Colin Passmore, Privilege (Sweet & Maxwell, 4th ed, 2020), Ronald Desiatnik, Without Prejudice Privilege in Australia (LexisNexis Butterworths, 2010), Sir David Foskett, Foskett on Compromise (Sweet & Maxwell, 9th ed, 2019) and Suzanne B. McNicol, Law of Privilege (Law Book Company, 1992).
[22] [1969] 3 All ER 201, 205.
The Full Court of this court spoke of the importance in the Family Court of avoiding litigation between spouses whenever it can be avoided in In the Marriage of Steel.[23]
[23] (1992) 15 Fam LR 556.
Returning to Dr McNicol QC’s submissions, she contended that s 131(1) was concerned with a communication in connection with an attempt to negotiate a settlement of the dispute. She argued that the subsection was not concerned with the settlement document and in support she called in aid the decision of the Court of Appeal of the Supreme Court of New South Wales in State Rail Authority of New South Wales v Smith.[24] In that case Beazley JA with whom Priestley and Handley JJA agreed, held that s 131(1) was not concerned with the settlement document itself. Rares J in Wingecarribee Shire Council applied the reasoning on point of French J (prior to his Honour’s elevation to Chief Justice of the High Court of Australia) in Western Australia v Southern Equities Corporation Ltd[25] where his Honour held that the privilege attaching to without prejudice negotiations does not disappear merely because a concluded agreement is reached.
[24] (1998) 45 NSWLR 382.
[25] (1996) 142 ALR 597.
Section 131(1) is directed to a written or verbal communication during negotiations in an attempt to settle a dispute. That communication may, if verbal, take the form of an offer or other proposal, a concession or an agreed fact or issue. Likewise, if the communication is in writing, it may take the form of a note as to an amount, a form of wording on some particular issue, an undertaking or a proposal for one party to do a particular thing by a particular date. That list is far from exhaustive.
The general exclusion imposed by s 131(1) of the Evidence Act does not apply in the circumstances to which subsection (2) is directed. Relevantly to this litigation, Dr McNicol QC relied on subparagraphs (f) and (g) of s 131(2). Section 131(2)(f) is directed to two circumstances. The first is where a proceeding is on foot by which one party seeks to enforce the settlement agreement. The second is where a contest has arisen about whether a settlement agreement was actually entered into. The latter is relevant here.
So far as s 131(2)(g) was concerned, it applied so as to render the general exclusion conferred by s 131(1) inapplicable in circumstances where evidence that has been adduced in the proceeding is likely to mislead the court unless evidence of the communication or document is adduced to contradict or to qualify the evidence.
In this case it was the wife’s position that an agreement to settle this litigation was reached at mediation. The husband says no such agreement was reached, relying on the observations of the Full Court of the Supreme Court of Victoria in Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd.[26] The husband contended in essence that whatever was the culmination of the mediation, it was too vague and uncertain to constitute a settlement agreement.[27]
[26] [1994] 2 VR 106.
[27] Paragraph 14(a) of Annexure A of the husband’s written submissions.
Those two positions, diametrically opposed as they are, raised the question whether an agreement to resolve this litigation was in fact reached at mediation. That enlivens s 131(2)(f) of the Evidence Act. The precise words of that subsection that are relevant to this case are these –
“…or a proceeding in which the making of such an agreement is in issue.”
It seemed to me that this proceeding is a proceeding in which one party seeks to adduce such evidence because this litigation is “a proceeding in which the making of such an agreement is in issue” for the purposes of s 131(2)(f) of the Evidence Act.
Dr McNicol QC relied on the decision of Mansfield J of the Federal Court of Australia in Silver Fox Co Pty Ltd v Lenard’s Pty Ltd (No 3).[28] That was a costs dispute in which s 131(2)(h) was in issue rather than ss 131(2)(f) and (g) as is the position in this case. Nevertheless, Dr McNicol QC drew from Mansfield J’s judgment the proposition that the terms of the Evidence Act prevail over the terms of a mediation agreement. To my mind, other, more presently relevant holdings emerged from Mansfield J’s decision. Among them were the following –
a)citing the decision of the High Court in Field v Commissioner for Railways for New South Wales,[29] Mansfield J held that s 131(1) reflected the longstanding common law principle forbidding the adducing of evidence of communications in an attempt to negotiate a settlement of a dispute;
b)citing the decision of Goldberg J in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (No 3)[30] Mansfield J embraced Goldberg J’s formulation of the policy lying behind s 131(1) of the Evidence Act where Goldberg J held as follows –
... the policy lying behind s 131 of the Evidence Act is twofold. First, it is to lay down a statutory basis for excluding evidence of communications relating to attempts to settle disputes. Secondly, it is to provide specific exceptions to such exclusion. The exception found in s 131(2)(h) relates to the probative value or probative nature of the contents of the communication and not to the manner in which the communication came initially to be subjected to the protection from being adduced into evidence found in subs (1) of s 131; and
c)Mansfield J held as follows about s 131(1) –
Section 131(1), subject to its exceptions, gives effect to the policy of ensuring the course of negotiations – whether private or by mediation – are not adduced into evidence for the purpose of influencing the outcome on the primary matters in issue. Clearly, it is in the public interest that negotiations to explore resolution of proceedings should not be inhibited by the risk of such negotiations influencing the outcome on those primary issues. It is equally in the public interest that negotiations should be conducted genuinely and realistically.
[28] (2004) 214 ALR 621.
[29] (1957) 99 CLR 285.
[30] [2002] FCA 1294.
Dr McNicol QC submitted that the observations in Silver Fox concerning s 131(2)(h) (rendering inapplicable evidence to which s 131(1) was ordinarily applicable) apply to all of the exceptions in s 131(2). So far as ss 131(2)(f) and (g) are concerned, I agree.
Sitting as a single judge of the Supreme Court of New South Wales in Finlayson v Campbell,[31] Young J was concerned with the question whether a settlement agreement was reached following without prejudice discussions. Young J took the view that s 131(2)(g) of the Evidence Act was enlivened. Admitting the evidence of those without prejudice discussions, Young J held as follows –
I believe the only sensible way of reading s 131(2)(f) is that if it is alleged that there is an agreement resulting from the without prejudice discussions, and it appears that such allegation is supportable, the court should, at that stage, allow the evidence to be adduced. Accordingly, even though in the ultimate I have found that there was no agreement, I believe I should admit the evidence.
[31] [1997] NSWSC 374.
Dr McNicol QC placed considerable store on s 131(2)(g). In essence, she argued that I was at risk of being misled if I received only the husband’s evidence about settlement because, so she said, a contrary version of events was given by the wife as well as by Ms G. To my mind, there is considerable force in that submission. Dr McNicol contended that I was at risk of being misled because receipt of the husband’s evidence about rounds of mediation being conducted on 21 August 2019 and 31 January 2020 left unexplained –
a)that the parties came to an agreement at the third mediation (according to the wife);
b)the parties recorded their agreement in writing and signed it; and
c)the husband subsequently resiled from that agreement.
It was said on behalf of the wife that those were important matters so as to contradict or to qualify the husband’s evidence on point within the contemplation of s 131(2)(g).
I agree.
In support of her argument about s 131(2)(g) Dr McNicol QC relied on two decisions of the Family Court of Australia, namely Phe v Leng[32] and Woodland v Todd.[33] Counsel brought those two decisions to my attention to demonstrate that the authorities in relation to s 131(2)(g) of the Evidence Act divide into two camps, euphemistically described by the court in Phe v Leng as “the broader view” as opposed to the “narrower view”.
[32] (2019) 342 FLR 409.
[33] (2005) 33 Fam LR 177.
Taking first the narrower view, an impressive array of authority underpins it. Those include Brown v Commissioner of Taxation,[34] Bloss Holdings Pty Ltd v Brackley Industries Pty Ltd,[35] Barrett Property Group Pty Ltd v Dennis Family Homes Pty Ltd (No 2),[36] Atlas Financial International Ltd v Nortbale Pty Ltd[37] and Payne v Rowe.[38] In essence, the narrower view is “that s 131(2)(g) of the Evidence Act has to be read as applying only to cases where the privilege in s 131(1) could enable a party to mislead the court about the course of an attempt to settle a dispute where that matter was an issue in the proceedings and the privileged communication contradicted or qualified evidence which had been admitted about that issue.”
[34] (2001) 47 ATR 178.
[35] [2005] NSWSC 756.
[36] (2011) 193 FCR 479.
[37] [2011] NSWSC 815.
[38] (2012) 16 BPR 30,869.
The broader view of s 131(2)(g) is supported by an equally impressive array of authorities. Those include Nader v Sutherland Shire Council,[39] Mulkearns v Chandos Developments Pty Ltd (No 4),[40] Simply Irresistible Pty Ltd v Couper[41] and Edwards v Transport Accident Commission.[42] In essence, the broader view is “that s 131(2)(g) of the Evidence Act applies where the existence or the contents of otherwise privileged communication contradicts or qualifies existing evidence or an inference from that evidence and the court is otherwise likely to be misled unless the communication is adduced.”
[39] [2008] NSWCA 265.
[40] (2005) 12 BPR 22,993.
[41] [2010] VSC 505.
[42] [2013] VSC 557.
The fact of there being differing views about the operation of s 131(2)(g) was pointed up in Galafassi v Kelly[43] and in Slea Pty Ltd v Connective Services Pty Ltd.[44]
[43] (2014) 87 NSWLR 119.
[44] [2017] VSC 232.
The two views were addressed by the recent decision of the Full Court of this court in Phe v Leng. After examining the content of the broader view and of the narrower view, the Full Court supported the broader view. That decision binds me. On basic principles of the doctrine of precedent and stare decisis I am required to apply it. Aside from its specific application to an issue under the Family Law Act, on principles relating to the doctrine of precedent and stare decisis none of the cases mentioned above in the context of either the broader view or the narrower view were otherwise than of persuasive authority. Conversely Phe v Leng is directly binding. That said, in Phe v Leng the court relied on a policy imperative subsisting in litigation under the Family Law Act that does not subsist to an equivalent degree in litigation conducted in the common law courts. That policy was explained in the following terms in Phe v Leng –
51.We also note that our acceptance of the broader view is consistent with an emphasis, in matters arising in courts exercising jurisdiction under the Family Law Act 1975 (Cth) (“the Family Law Act”), on the second policy objective of genuine negotiations. In applications for a property settlement order, each party has an obligation of full and frank disclosure, starting with pre-action procedures for a case and continuing until the case is finalised (see r 13.01 of the Family Law Rules 2004 (Cth)). This obligation exists during settlement negotiations as much as it does when giving evidence.
In this case the wife contended that the litigation and the lis pendens inter se between her and the husband was compromised at mediation. She produced what she contended were the terms of settlement recorded as exhibit A11 to her May 2020 affidavit. The husband said no such resolution was reached. In determining whether or not an agreement to resolve the lis pendens was in fact reached, in my view it is necessary for me to examine the whole of the evidence, especially evidence of negotiations and to determine whether a compromise was in fact reached. In my view, the general prohibition prescribed by s 131(1) of the Evidence Act is countermanded in the circumstances of this case, especially in relation to the exceptions to s 131(1) provided by s 131(2)(f) and (g).
Dr McNicol QC prayed in aid of her contentions about the admissibility of the so-called settlement agreement in this case the holdings of the Full Court in In the Marriage of Woodland & Todd.[45] There, the Court (Finn, May & O’Reilly JJ) held as follows –
38.Where parties enter into an agreement concerning property, other than an agreement approved under the provisions of the Act or embodied in consent orders, and one party subsequently commences proceedings under s 79 for an alteration of property interests, the Court must determine the application on its merits having regard to the factors as set out in s 79(4) as they exist at the time of the hearing of the application under s 79 and according to the law in force at that time and not, as to either of those two matters, at the time the agreement was made. There is no threshold test, before embarking upon the s 79 exercise, to determine whether the earlier agreement was just and equitable at the time it was made according to the facts as they then existed and the law then in force. The earlier agreement should be considered (as an indication of what the parties may have regarded as just and equitable at the time), but its provisions only given effect if they coincide with an order which is just and equitable according to s 79 at the time of the hearing.
[45] (2005) 33 Fam LR 177 (at [38]).
In my view, applying In the Marriage of Woodland & Todd, it will be necessary to examine the entirety of the so-called settlement agreement in order to make a proper assessment of the s 79 application in this litigation.
For those reasons I receive in evidence the affidavit of G as well as the entirety of the affidavit of the wife made 7 May 2020. I disagree with the submissions urged on behalf of the husband on 20 May 2020 where senior counsel submitted that I would fall into appellable error[46] by admitting into evidence details of negotiations. I do not accept the contention that s 131 of the Evidence Act “absolutely prohibits” any reliance upon negotiations as he said. No such absolute prohibition applies. The entire tenor and import of s 131(2) and its various subsections provide for the exceptions otherwise prescribed by s 131(1).
[46] T14 L46 et seq, transcript 20 May 2020.
It may transpire that the husband is ultimately successful in his contentions that no settlement was reached or that for a variety of legal reasons the document exhibited as A11 is not, in law, a valid settlement agreement. Counsel for the husband invited me to rely on the decision of Elliott J of the Supreme Court of Victoria in Cook v Taing.[47] That case seemed to depend on a construction of the terms of the alleged settlement. In this case the parties are at an anterior point, namely, whether evidence of negotiations and of any resolution of the litigation should be admitted. That debate necessarily precedes a consideration of any construction of the agreement. The husband’s counsel also invited me to consider the decision in Rollings v Rollings.[48] They argued that while the admissibility of the informal agreement was not the subject of consideration in Rollings v Rollings, in that case the court held that it was erroneous to consider the terms of the informal agreement as some form of yardstick in the ascertainment of what amounts to the justice and the equity of any particular outcome. Similar holdings emerged in cases such as Maine & Maine,[49] Senior v Anderson[50] and Ruane v Bachmann-Ruane.[51]
[47] [2014] VSC 428.
[48] [2009] FamCAFC 87.
[49] (2016) 56 Fam LR 500.
[50] (2011) 45 Fam LR 540.
[51] (2012) 48 Fam LR 131.
It is true that the applicant and first respondent are not estranged, finally separated or divorced. But it is also true that since the decision was made to realise the three trusts, and pursuant to that decision, sales have been effected with substantial distributions having been made to the husband and his three sons. It can no longer be assumed or expected that any adjustment in existing interests in property could be effected consensually as needed or desired. It seemed to me that there was considerable force in the contentions made by the applicant’s counsel that the wife has in fact an arguable case for an entitlement to an order under s 79. Put differently, I do not agree that her claim to a s 79 order is likely to fail merely because she and the husband are not separated or because they currently have some fiscal unity of sorts in their financial arrangements.
The factual matters giving rise to any consideration of the s 79 point are hotly contested. At this interlocutory juncture I am forbidden by authority from making far reaching factual findings. Put differently, as cases such as Marvel v Marvel[161] have held, findings of fact on a contested interim application should only be made with great circumspection. To find that the wife’s prospects of advancing her case under s 79 are “doomed” is to make a finding wholly antithetical to a finding having great circumspection. I decline to do so on this application. In my view her s 79 claim is arguable.
[161] (2010) 43 Fam LR 348.
The joinder application
Counsel for the second to sixth respondents in written submissions dated 20 May 2020 as well as in verbal submissions pressed forcefully for their clients’ joinder to be disjoined, although they contended that the second to sixth respondents had not been properly joined as parties in the first place. Their disjoinder application was brought pursuant to rule 6.04 of the Family Law Rules. They put their primary position in this case in the following terms –
It is submitted that the motives of the Wife appear to be founded in an attempt to fetter the discretion of the Second to Sixth Respondents variously in their capacities as trustees, rather than seek to bring to end and sever the financial relationship between her and the Husband.[162] Notwithstanding the motives of the Wife, the gravamen of these submissions is premised on the basis that any orders the Wife seeks for final relief can be achieved without the participation of the Second to Sixth Respondents. It is submitted that, part of the enquiry the Court must embark upon is to establish the true or real position the Wife seeks to achieve by way of final relief.[163]
[162] See section 81 of the Family Law Act 1975 (Cth).
[163] Paragraph 9 of the written submissions dated 20 May 2020 filed on behalf of the second to sixth respondents.
Counsel for the second to sixth respondents also argued that the husband and wife were able to effect a property settlement between them without the involvement of the second to sixth respondents.
At the threshold, counsel for the second to sixth respondents argued that a proper basis for joinder had not been made out. It seemed that the second to sixth respondents emerged as parties to this litigation upon McEvoy J granting leave to the applicant on 24 April 2020 to amend her initiating application. It also seemed that the second to sixth respondents were introduced to the proceeding without leave having been given by McEvoy J for their joinder.
I hereby make an order for their joinder, nunc pro tunc.[164]
[164] Emanuele v Australian Securities Commission (1997) 188 CLR 114, In the Marriage of Caska (2001) 28 Fam LR 307, Finlayson v Finlayson (2002) 29 Fam LR 460, In the Marriage of Caska (No 3) (2004) 32 Fam LR 606.
At a high level of abstraction it may nowadays be fairly said that the administration of justice in more recent times has generally not favoured the application of procedural rigidities and instead prefers a more flexible approach to statutory preconditions of a procedural character.[165] As Ormiston JA pointed out in Hartley Poynton Ltd v Ali,[166] the learning on the legal principle known by the Latin epithet nunc pro tunc can be reckoned to the times of Charles II.[167]
[165]Emanuele v Australian Securities Commission (1997) 188 CLR 114, 147 (Kirby J).
[166] (2005) 11 VR 568.
[167] The origins of orders made nunc pro tunc can be traced to Williamson v Henshaw [1747] 21 ER 217, Jesson v Brewer [1763] 21 ER 312, Donne v Lewis [1805] 32 ER 1221, Lawrence v Richmond [1820] 37 ER 367 and Ex parte Swift [1835] 131 ER 1300. More recently in Australia the learning on the doctrine of nunc pro tunc was explained by the High Court in Emanuele v Australian Securities Commission (1997) 188 CLR 114, 131 to mean “now instead of then” citing Lord Clarendon’s speech in Ex parte Robert Devenish and Henry Devenish v Richard Bernford (1691) referred to in J. Beames, General Orders of the High Court of Chancery (1815). In Australia, the concept of nunc pro tunc has been considered in Parsons v Bunge (1941) 64 CLR 421, In the Matter of Excelsior Textile Supply Pty Ltd [1964] VR 574, Re Testro Bros Consolidated Ltd [1965] VR 18, Re Sydney Formworks Pty Ltd (in liq) [1965] NSWR 646, Battiston v Maiella Construction Co Pty Ltd [1967] VR 349, Re Horsham Kyosan Engineering Co Ltd [1972] VR 403, Woods v Bate (1986) 7 NSWLR 560, National Mutual Holdings Pty Ltd v Sentry Corporation (1989) 22 FCR 209, Crayford Freight Services Ltd v Coral Seatel Navigation Co (1998) 82 FCR 328, Hartley Poynton Ltd v Ali (2005) 11 VR 568 and Simonds v Coyle (2019) 59 Fam LR 410, although in that last case one judge called the principle of nunc pro tunc a “rule of practice and procedure to regularise the records of the court”. The above survey of cases reveals that the principle goes very much further than a practice rule to regularise the court records. In Emanuele Dawson J mentioned the false dichotomy of dividing a statutory provision affecting an entitlement to commence a legal proceeding into jurisdictional and procedural issues.
In my view each is a necessary party. I do not agree that property orders can effectively and exhaustively be made in the absence of the inclusion of the second to sixth respondents in this proceeding. The evidence revealed that the second to sixth respondents have participated in the realisation of substantial trust assets and in the distributions of those trust assets to the second, third and fourth respondents in their personal capacities. Those trust assets should have been administered for the benefit of the beneficiaries under the three trusts. The corpus of those trusts has been diluted in circumstances that call for investigation. Issues that will emerge include the power of the second, third, fourth, fifth and sixth respondents to realise trust assets. More important will be the power of the two corporate trustees, controlled by one or more of the other respondents, to make valid distributions of trust assets to the second, third and fourth respondents in their personal capacities and for their absolute benefit without consultation with or approval from the beneficiaries for whose benefit the trustees were required to hold those trust assets.
In their written submissions the second to sixth respondents wrote[168] that joinder of the second to sixth respondents was unnecessary. I do not agree. On one view of the evidence, a conclusion may well be open following the trial of this proceeding that the husband and his sons have deliberately procured the corporate trustees to act in a manner that reduces the trust assets so that the legal and equitable interests that must be taken into account for the purposes of Stanford v Stanford are irretrievably altered with the consequence that as between the husband and the wife those assets no longer are amenable to alteration. Of course, no more than that should be said of the issue at this stage. I do not agree that the case against the second to sixth respondents is “clearly frivolous or vexatious” as was held to be the touchstone for summary dismissal in General Steel Industries Inc v Commissioner for Railways (New South Wales).[169] More recently, the High Court expressed the test in Spencer v Commonwealth[170] as being “no reasonable prospect” of success. I agree with the observations in Friar & Friar[171] that the power of summary dismissal should be “sparingly employed”. I take the firm view in this case that it is not appropriate to disjoin the second to sixth respondents.
[168] At paragraph 12.
[169] (1964) 112 CLR 125, 129.
[170] (2010) 241 CLR 118.
[171] [2011] FamCAFC 71.
On behalf of the second to sixth respondents it was contended that those parties need not remain in this litigation as the remedies that can be enlivened under s 106B of the Family Law Act are sufficiently broad to capture the ambit of the relief the wife seeks. They contended that the second to sixth respondents’ relevance as parties could only be justified if they were “necessary” as parties. They called in aid the decision in Wayne v Dillon.[172] They argued that even if the wife could demonstrate that an adjustment of 50% of the entirety of the parties’ legal and equitable interests was just and equitable, such an outcome can be achieved without the inclusion in this litigation of the second to sixth respondents.
[172] (2008) 40 Fam LR 543.
I do not agree.
It is arguable that by their conduct the second, third and fourth respondents procured the corporate trustees to transfer assets in favour of the second, third and fourth respondents. Debate about s 106B will be very much after the fact if further transfers are effected. The court must act pre-emptively in preventing further erosion of the asset base.
I refuse the disjoinder application under rule 6.04.
Before leaving the s 106B argument advanced by the second to sixth respondents, it is utile to record two matters urged by counsel for the wife. First, counsel for the wife contended, correctly in my view, that the second to sixth respondents did not address the propositions advanced by the wife in relation to s 85A and s 90AE nor the breach of trust claims she makes in this case. I do not accept that the wife has an exhaustive array of remedies in her s 106B claim alone.
Second, counsel for the wife argued that a significant portion of the husband’s assets was made up of “loan accounts in the family trusts”.[173] They said s 90AE of the Family Law Act conferred power upon the court to make orders that would bind the second to sixth respondents. Counsel for the wife put the matter in the following terms in paragraph 7(c)(ii) of their undated reply submissions –
In circumstances where the Second to Fourth Respondents are far from bona fide arms-length third parties and the Husband remains a director of the Fifth and Sixth Respondents, who were formerly his alter ego as a result of his powers of appointment, there is a very strong case for the Court at trial to exercise the powers in s.90AE in order to effect the division of property between Husband and Wife ultimately determined to be just and equitable.
[173] I infer from that inelegant language that the wife was stating that the husband had advanced loans to the trustees of the trust.
To my mind there was merit in those contentions, at least for the purposes of this interlocutory application.
That said, the time has been reached to require all parties to file proper pleadings as if this were litigation conducted in the Commercial Court of the Supreme Court of Victoria or litigation in the Federal Court of Australia.
Undertaking as to damages
As is apparent from the foregoing, the husband’s principle thesis on this application is that no injunction should be granted. Counsel for the husband pointed out that the wife did not proffer an undertaking as to damages. Highlighting the position adopted in civil litigation in common law courts, counsel for the husband argued that the giving of an undertaking is ordinarily the price of an injunction as was held in National Australia Bank Ltd v Bond Brewing Holdings Ltd,[174] canvassed in Blueseas Investments Pty Ltd v Mitchell[175] and in my own decision in Holder & Holder.[176] Counsel for the husband did not go so far as to argue that I should refuse the wife’s injunction by reason of her failure to provide any undertaking as to damages. However, counsel for the husband did argue that the wife’s capacity to meet any such undertaking was in doubt having regard to their contentions that the wife’s entitlement to a final s 79(1) order in her favour was likewise in doubt.
[174] [1991] 1 VR 386 (Brooking J).
[175] (1999) 25 Fam LR 65.
[176] [2020] FamCA 347.
At this stage of this litigation where the evidence is in such an embryonic state, I am unwilling to conclude that the wife’s prospects of establishing an entitlement to a s 79 order are as poor as the husband says they are. In my view, at this stage it is possible to state that she has an arguable case for an entitlement to a s 79 order.
In view of the fact that the husband did not press for the refusal of any injunction in the absence of the proffering of an undertaking, it is not necessary to determine whether an order should be made enjoining the respondents in the absence of such an undertaking.
Paragraphs 2 and 3(d) of the application in a case
Upon enquiry, counsel for the wife confirmed that their client no longer pressed for orders in terms of paragraphs 2 and 3(d) of the wife’s application in a case filed 12 May 2020.
Paragraph 3(a) of the application in a case
Counsel for the husband addressed the orders sought in paragraph 3(a) of the wife’s application in a case. They argued that a proper juridical basis exists for the making of an injunction only if admissible evidence was given to support the making of the order rather than “general concerns”. They cited a full court decision they said made that point. Naturally, the making of an injunction, as with any order, is predicated upon the existence of evidence to support the order. But in the equity jurisdiction, for centuries an apprehension of fear that a particular event will come to pass unless the injunction is ordered has been a recognised basis for the making of quia timet injunctions. Authorities of enormous veneration made good that point including Earl of Ripon v Hobart,[177] Fletcher v Bealey[178] and R v Macfarlane; ex parte O’Flanagan and O’Kelly.[179] The discussion in Dr Spry QC’s book The Principles of Equitable Remedies[180] in the section Quia Timet Injunctions is particularly useful.
[177] [1834] 40 ER 65.
[178] (1885) 28 Ch D 688.
[179] (1923) 32 CLR 518.
[180] Dr I.C.F. Spry, The Principles of Equitable Remedies (LBC Information Services, 6th ed, 2001).
For those reasons I am of the view that orders in terms of paragraphs 1, 2 and 3 of the wife’s application in a case should be made.
Sale of the S Business site
Counsel for the husband submitted that the wife had delayed in the bringing of her application and that she had not adequately accounted for that delay. In reply, Mr North SC submitted as follows –
MR NORTH SC: Thank you, your Honour. My friend Mr Bartfeld accused my client of sitting on her hands in seeking the relief. Your Honour, the chronology shows that the wife, until very recently, had been led to believe that no sales were proceeding and, with no sales proceeding, no prospect of substantial distribution. Insofar as those representations might have given her comfort, she has lost confidence in the representations by the husband and the other respondents as to what they may or may not be doing.
And that’s why she presses for the injunctions that she does, and they’ve always been injunctions granting her no more than the relief necessary to protect her legitimate interests in having her claim determined and ultimately satisfied. She doesn’t seek to restrain sales, never has. She has sought to be kept informed in a timely way, and she hasn’t been. She has sought to restrain distributions other than to the husband because, on her claim, those other parties aren’t entitled to them. Now, she still seeks that restraint, and her basis for it has been argued earlier.
That was in response to a focused debate during which a particular asset described as the S Business premises had been the subject of the respondents’ contentions to the effect that the wife’s legal representative had been informed at all times of the negotiations for and settlement of that sale. Self-evidently, the evidence about what the wife was told about asset sales and about the extent of her state of knowledge is a triable issue. It may transpire that the husband is ultimately successful in demonstrating that the wife through her commercial solicitors was aware at all relevant times of the state of negotiations and progress in the sale of assets. On the state of the affidavit material filed thus far I simply cannot say. The true state of affairs must be disclosed by cross-examination of the relevant witnesses. Suffice it to say that at this juncture of this interlocutory application where the evidence is untested the question of full and frank disclosure of the sale of S Business is unresolved. It is relevant to observe that the wife does not seek to restrain the sale of assets. However she does seek information about proposed and actual asset sales.
In short, I am unable to conclude that the wife is disentitled to the order she seeks on account of her alleged delay in bringing this application. Having said that, I do acknowledge the extremely detailed and carefully analysed chronology prepared by Mr Bartfeld QC and his juniors identifying disclosure given concerning the sale of the S Business site. That chronology and the documents put forward to support each event was a most helpful document.
Part property settlement
In relation to interim property orders, certain guiding principles are applicable to the facts of this case. They include the following –
a)the majority of the court in Strahan & Strahan[181] held that when consideration is being given to the appropriateness of an order being made for an interim property settlement order, more is required than the mere fact that upon a final hearing the applicant would receive the property being sought (or an amount in excess of the funds being sought) from the other party;
b)balance must be given to the risks of unduly limiting the final orders that can be made against the circumstances said to show that it is just and equitable to make interim orders;
c)in Strahan it was held that the first stage of any consideration of an application for a partial property settlement order requires a determination of whether the interests of justice require the exercise of power under s 79 and s 80(1)(h) on an interim basis;
d)compelling circumstances need not be shown by an applicant for a partial property settlement order, as was held in Strahan;
e)ordinarily an order under s 79 is made once only after a final hearing, as was held in Strahan at [132];
f)consideration must be given to the reversibility of the order, as was held in In the Marriage of Zschokke[182] and Gabel & Yardley;[183]
g)a court entertaining an application for a partial property settlement should consider the need for and effect of interim orders weighed against the risks that the exercise of the power on an interim basis will interfere with the power of the court to make just and equitable orders on a final basis;
h)a court entertaining an application for a partial property settlement order should consider whether the order is just and equitable according to at least a preliminary view of the likely range of outcomes;
i)a court entertaining an application for a partial property settlement order should balance the risks by considering not only the quantum of the orders but also the risk of unduly limiting the final orders that can be made or even potentially defeating parties’ claims; and
j)a court entertaining an application for a partial property settlement should take into account that a party should not be denied the ability to liquidate assets where there are real needs for those resources such as meeting debts due to creditors.
[181] (2009) 42 Fam LR 203.
[182] (1996) 20 Fam LR 766.
[183] (2008) 40 Fam LR 66.
There can be no doubt that the wealth of the parties involved in this case is vast. That may explain why in paragraph 4 of her application in a case the wife sought a part property settlement order of $45 million. In their written submissions dated 16 July 2020, counsel for the wife contended that her proposed partial property settlement order was for no more than $17.5 million of the $85.5 million in existing legal and equitable interests of the husband and wife, excluding the assets of the family trusts, which equated to 20% or thereabouts of the combined assets of the husband and wife. Counsel for the wife expressed no hesitation in their contentions of her entitlement, submitting as follows –
It is unarguable that such an adjustment of property is just and equitable in the circumstances of the case – indeed the Wife is undoubtedly entitled to significantly more – and the proposed order is capable of adjustment at trial in any event. It is appropriate to make the order to address the imbalance of financial security presently oppressing the Wife in her life at home with her Husband and her struggle to gain financial independence from her Husband and his sons in this litigation.
The husband opposed the making of the partial property order. Yet counsel for the wife identified that –
a)the husband had stated in paragraphs 49, 54 and 56 of his affidavit sworn 19 May 2020 that he was concerned to retain sufficient financial security for both he and his wife, that the money he and the wife controlled was more than the two would ever need and he wanted to make further provision for the wife;
b)during the currency of this litigation the husband advanced two partial property settlements to the wife aggregating $5.58 million and he agreed to hold money distributed by the trusts pending the resolution of this litigation; and
c)the fact of this litigation demonstrated that the consensual adjustment to the husband’s and wife’s existing property arrangements had come to an end.
Here, I have carefully considered the matters to be taken into account as were set out in Strahan v Strahan. One of the most important issues for present purposes is the reversibility of any partial property order in case a court is hereafter of opinion that according to s 79 principles, property interests should be adjusted in such manner that the wife would be required to restore to the husband some or a large portion of the sum ordered in her favour in this part-property settlement. Counsel for the applicant contended that no impediment existed to the making of the part-property orders. On behalf of the wife, on 22 July 2020 Mr North SC, citing the plurality in Stanford, submitted as follows –
MR NORTH SC: It emerges from the judgment of the plurality in Stanford that one of the assumptions that can be brought to an end, not only by a voluntary separation but other conduct between the parties, is the assumption that any adjustment to their property interests may be affected as needed or as desired. Clearly, both on the interim property settlement and any application for a final order, any assumption that 5 these parties could consensually agree on alterations is informed by their conduct, including entering into agreements, whether binding or not, and seeking thereafter to resile from them. And in our respectful submission, there is ample evidence to support both the final order sought and any interim property settlement order when one has regard to the attempts to resile from the agreement by the husband.
Further, on 22 July 2020 Mr North SC referred to written submissions filed on behalf of the wife on previous occasions in relation to his client’s application for a partial property settlement.[184] Relevantly summarised those written submissions were as follows –
[184] Paragraphs [26]-[31] of 12 May 2020 written submissions (updated for 17 July 2020 hearing) and paragraph [3] of the submissions on behalf of the wife made 22 July 2020 in reply to the husband’s submissions.
a)there exists a “significant imbalance” in the financial power as between the husband and wife, in the husband’s favour;
b)the wife sought orders pursuant to paragraphs 2, 3(d) and 4 of her application in a case sealed 12 May 2020 for a partial property settlement, paragraphs 2 and 3(d) not being pressed by the wife during the 17 July 2020 hearing;
c)in recent months the husband had received distributions from the family trusts in the sum of $19,284,443, with $2,580,000 of that amount having been paid to the wife by way of partial property settlement with the balance being held by the husband on a personal undertaking given to the wife;
d)the relief sought by the wife pursuant to s 79 was in terms of paragraph 4(a) and (b) of her application in a case for payment to her of all monies distributed to the husband this year and an additional $10 million from monies held by the husband pursuant to a personal undertaking, those payments to constitute a partial property settlement;
e)the partial property settlement sought by the wife would not total more than $17.5 million of the total legal and equitable interests of the husband and wife amounting to $85.5 million, a 20.5% adjustment of property;
f)such an adjustment in property is just and equitable in the circumstances and is only part of what the wife would otherwise be entitled to, with any partial property order being amenable to adjustment at trial;
g)a partial property settlement in the terms sought by the wife would address the “imbalance of financial security” asserted by the wife;
h)any contention by the husband that there was no basis for an alteration of property interests as between the parties on the principles of Stanford is devoid of merit given the husband deposed to retaining sufficient financial security for both himself and his wife, the husband having previously advanced partial property settlements to the wife totalling $5.58 million and the husband having agreed to hold funds from the family trusts until the resolution of this proceeding;
i)the existence of this proceeding itself indicated an end to any assumptions underpinning existing property arrangements between the husband and wife and any assumption that adjustments to those property arrangements would be by consent; and
j)pursuant to Strahan the wife pressed for a partial property settlement to “establish an entitlement to an order on an interim basis, with the risk that if she ultimately fails she will be ordered to repay those monies paid to her under the order”.[185]
[185] Paragraph 3 of the wife’s submissions made 22 July 2020 in reply to the husband’s submissions.
On behalf of the husband, Mr Bartfeld QC argued with some force that no partial property order should be made. He said that over a period of time the husband had disbursed significant sums to the wife already and that she has no need for further funds pending the hearing and determination of this proceeding. Mr Bartfeld also argued that it was inappropriate to make a partial property order when the very basis for an entitlement to any order under s 79 was in dispute as was the case in this proceeding. At all events, he submitted that the wife had no need and she had not demonstrated on the evidence that she was entitled to a partial property order. In any event, Mr Bartfeld said the amount sought by the wife of $45 million was extremely large.
To my mind, there is considerable force in the husband’s contentions. In my view, whatever may be my views of the strength of the s 79 point on the hearing of this interlocutory application, the fact remains that the husband has put squarely in issue for trial whether it is appropriate to make an order under s 79 at all in the circumstances of this case. Of course, the mere fact that he takes that position does not, in and of itself, mean that a partial property order must of necessity must not be made. However, in any partial property order it is largely gainsaid that after a trial, an order under s 79 will in fact be made. That cannot be said in this case. The point is arguable. For that matter, I regard the point as constituting a serious issue to be tried, as the passages above record. It is conceivable that after a trial, the evidence reveals that in all the circumstances of this case it is not in fact and in law just and equitable to make any order altering the legal and equitable interests in property of the parties. Were such a result to obtain, then any partial property order pursuant to these orders would turn out to have been wrongly made and issues of reversibility would then be engaged.
Mr Bartfeld’s point about the wife’s need for a part property order is also valid. On any view the parties in this litigation enjoy immense wealth. No issue was taken by the wife with the husband’s assertion that recently they had more money than they needed. The real issue seemed to be the wife’s concerns that the husband’s mental fabric was weak, that he had lost effective control of the Kain Group, that his sons from a previous marriage were in effective control of the Kain Group and that they were not, or may not, be favourably disposed towards her so she wanted to secure her financial circumstances by obtaining a partial property order before the sons disbursed the trusts’ assets beyond the wife’s control or benefit.
Those fears or apprehensions on the wife’s part were legitimate to invoke a claim for a quia timet injunction. However, they did not amount to evidence of particular utility in a partial property application.
Further, the sum sought was ambit where Mr North SC advanced a worthy argument to the effect that the sum sought represented something in the order of 20% of the total value of property in this case and so, he contended, I should feel no hesitation in making the order. To my mind that contention proceeds on a tenuous foundation as it presupposes the wife’s entitlement to the part property order in the first place and it fails to recognise that the husband’s contentions about the s 79 point may have validity.
That said, I recognise that unless the activities of Mr Brown’s clients are arrested, a very significant risk exists that the trust assets will or may be irretrievably diluted. And while the wife may well possess remedies under s 106B to endeavour to recover any funds later found to have been invalidly disbursed, a risk exists that by then it may be too late and the proceeds may well have been irretrievably exhausted. That highlights all the more the need for orders enjoining the respondents. But it says nothing of any entitlement to, or the propriety of the making of, a part property order. I am not willing to make a part property order for $45 million.
Conclusion
The orders I am willing to make are set out at the commencement of these reasons. In view of the requirement for pleadings, I will require the parties to bring in a minute in relation to a timetable for pleadings.
If residual issues remain to be agitated consequent upon these orders I will hear the parties on a date to be fixed.
If any application for costs follows I direct that any such application be filed within 7 days returnable before me.
I certify that the preceding two hundred and seven (207) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Wilson delivered on 14 August 2020.
Associate:
Date: 14 August 2020
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