Kannis & Kannis
[2002] FamCA 1150
•24 December 2002
[2002] FamCA 1150
FAMILY LAW ACT 1975
IN THE FULL COURT
OF THE FAMILY COURT OF AUSTRALIA Appeal Nos WA6L of 2000
AT PERTH & WA9 of 2002
File No PT5812 of 1998
BETWEEN:
THEODORE JOHN KANNIS
(By his next friend
JOHN THEODORE HULIN KANNIS)
Appellant Husband
- and -
YVONNE CONSTANCE KANNIS
Respondent Wife
REASONS FOR JUDGMENT
CORAM: Nicholson CJ, Buckley and Kay JJ
DATE OF HEARING: 11 November 2002
DATE OF JUDGMENT: 24 December 2002
APPEARANCES: Mr Ackman QC with Ms Crisford of Counsel, instructed by Butlers, Solicitors, 83-85 Stirling Highway, Nedlands WA 6090, appeared on behalf of the Appellant Husband.
Mr Metaxas of Counsel and Ms Vernon of Counsel, instructed by Metaxas & Vernon, Barristers and Solicitors, Level 5, 37 St George’s Terrace, Perth WA 6000 appeared on behalf of the Respondent Wife.
KANNIS
WA 6L of 2000 and WA 9 of 2002
Coram: Nicholson CJ, Buckley & Kay JJ
Date of hearing: 11 November 2002
Date of judgment: 24 December 2002
PRACTICE and PROCEDURE – consent appointment of son as Next Friend – finding that Next Friend an unreliable witness - whether the trial Judge should have dismissed Next Friend of his own motion.
PROPERTY SETTLEMENT – Contributions – lack of full and frank disclosure of assets- adjustment to contribution shares to recognise failure to disclose.
The parties had been married for 42 years and had accumulated known assets amounting to $33 million.
The husband suffered from dementia. Prior to trial the parties’ son had been appointed as a Next Friend for the husband.
Chief Judge Holden at first instance found that the husband and the next friend had failed to disclose all the husband’s assets. In that light, his Honour reduced his finding on contributions of 60% in favour of the husband, to a 50% split including section 75(2) considerations.
The husband appealed arguing inter alia that the lack of disclosure had not been deliberate, and that the husband was being penalised for the failings of the Next Friend, when the correct course would have been for his Honour to remove the next friend if his Honour was of the view that the Next Friend was unsatisfactory.
Held:
The only issue upon which it could be properly be said that the behaviour of the Next Friend impinged on the proceedings was the issue of non-disclosure. There were ample other matters readily conceded or clearly open to the trial Judge about that issue which would enable the findings to stand independently of any criticism of the Next Friend.
Whether the non-disclosure is wilful or accidental, is a result of misfeasance, or malfeasance or nonfeasance, is beside the point. The duty to disclose is absolute. Where the Court is satisfied the whole truth has not come out it might readily conclude the asset pool is greater than demonstrated. In those circumstances it may be appropriate to err on the side of generosity to the party who might be otherwise be seen to be disadvantaged by the lack of complete candour. Chang and Su (2002) Fam CA 156 and Weir v Weir (1993) FLC 92-338; 16 Fam LR 154 applied.
APPEAL DISMISSED WITH COSTS
REPORTABLE IN Edited form on the Next Friend issue
This is an edited version of the delivered judgment. It deals only with the issue of the removal of the Next Friend.
This is an appeal brought on behalf of the husband against orders made by Chief Judge Holden in the Family Court of Western Australia on 30 July 2002.
His Honour determined that the identifiable property of the parties, which exceeded $33 million, should be divided equally between them at the conclusion of a marriage that had spanned more than 42 years. He concluded that in the circumstances an equal division of the ascertainable assets was a just result even though the husband’s contributions had been greater, because the husband had transferred some funds to a woman he had been involved with for many years, and it was probable that he had not made a full and frank disclosure of all the assets in his possession.
By his Notice of Appeal the husband sought either a new trial of the competing property applications or orders which would divide an adjusted pool of assets as to 60 per cent in favour of the husband and 40 per cent in favour of the wife.
Background
When the orders were made the husband was 71 and the wife 70. They had married in February 1956 and separated in mid-1998. There were five children born of the marriage between 1960 and 1969, one of whom had only survived for one month.
At the time of the marriage neither party had any assets of significance. The husband was trained as an optometrist and had just commenced a partnership business known as “WA Opticians”. The partnership persisted until 1972 when the husband acquired his partner’s interest. In 1982 he established another business known as “Budget Specs” which ceased to operate in 1997. The businesses were very successful and generated substantial profits.
In 1961 the parties incorporated Kannis Holdings Pty Ltd. Each of the parties was a director and shareholder of the company. The company invested the profits earned by the optical business in real estate. By 1984 it held 20 properties. By the time of the trial it had acquired another three properties.
…
A very significant issue in the proceedings was whether in addition to the monies undisclosed in foreign accounts the husband also held significant assets by way of cash, jewellery and gold bullion which he had failed to discover…
Early in the proceedings issues arose as to the husband’s mental capacity to give appropriate instructions. In April 2000 the wife filed an application seeking an order that the Public Trustee be appointed as Next Friend for the husband. In May 2000, on the husband’s application, consent orders were made appointing the parties’ son John as the husband’s Next Friend.
Notwithstanding the appointment of the Next Friend, the wife remained suspicious that the husband’s asserted dementia was a ruse to avoid him having to give evidence as to the whereabouts of the alleged missing assets. The issue of the husband’s mental capacity remained in heated contest right throughout the proceedings….
…
Undisclosed assets
His Honour identified that there were four aspects of the case essentially relied upon by the wife to persuade him that there was up to $20 million of undisclosed assets. These were:
(a)the actual discovery of undisclosed assets in Hong Kong;
(b)the failure to disclose the true amount in a Credit Suisse account;
(c)the evidence of the parties' daughter, Anthea Kannis-Pitsikas; and
(d)that at least early in the proceedings, and perhaps even up until the date of trial, the husband's reliance upon a Next Friend was unnecessary and amounted to little more than a conspiracy between him and other members of the family to avoid having to give evidence which might have revealed the extent of his non-disclosure.
…
His Honour concluded
“73. …I am satisfied that the husband made this material non-disclosure and that there has been no reasonable explanation as to why he did so. That fact leads me to have a serious suspicion that the husband has not made full and frank disclosure.”
…
Did the husband need a Next Friend?
Having determined that there was from time to time in the possession of the husband some significant amounts of jewellery and bullion and that the husband kept large sums of cash in safety deposit boxes, his Honour then focussed on issues of the husband’s health and appointment of Next Friend. The correlation between the two is not immediately apparent save that it ties in with the four matters identified by the trial judge in para 28 above. Any confusion relating to correlation of the two aspects was not, in our view, germane to the ultimate outcome of the proceedings.
His Honour extensively examined evidence relating to the husband’s asserted state of health but concluded:
“137 Although I confess to being left with an uneasy feeling about the circumstances surrounding the appointment of the Next Friend and the level of the husband's competence at the time of that appointment, a careful review of all of the expert evidence, does not persuade me that the husband was not in need of a Next Friend or that the appointment was part of a conspiracy to conceal assets.”
The pool determined
Having dismissed the wife’s assertions that somehow the husband’s sudden inability to give evidence in the proceedings was a part of a cover-up relating to this undisclosed assets, his Honour nonetheless concluded that there was “a high probability that there has not been a full and frank disclosure of all of the assets in the possession of the husband”. He said that he came to that conclusion for the following reasons (emphasis added):
“138. I am satisfied, however, that here is a high probability that there has not been a full and frank disclosure of all of the assets in the possession of the husband. I come to that conclusion for the following reasons:
(a)the admitted non-disclosure of a significant sum of money in Hong Kong;
(b)the non-disclosure of the true amount standing to the husband's credit with Credit Suisse;
(c)my finding that I am satisfied that there was at some time in the possession of the husband, significant amounts of jewellery, bullion and cash and the lack of explanation as to what became of those assets; and
(d)my view of the conduct of the husband's Next Friend and son, John Kannis who, in my view, proved to be a very unreliable witness. In my view, he did not show a commitment to making appropriate investigations in order to established whether or not there were assets that had not been disclosed. When challenged as to why he had not made enquiries of his father about a number of matters, he was quick to hide behind his father's health problems. On the other hand, when he was called upon to explain certain actions of his father that were inconsistent with John Kannis' sworn evidence, his explanation was that his father was not a vegetable.”
…
The Appeal
…
The appeal was then argued in respect of three matters:
· the adjustment of 10 per cent of the ascertained pool to make allowance for the findings relating to undisclosed assets;
· whether the trial Judge, having found that the Next Friend was an unreliable witness, ought of his own motion to have aborted the proceedings on the basis that the Next Friend was not properly looking after the interests of the husband in the proceedings; and,
· whether the learned trial Judge had erred in not accepting the evidence of the parties’ daughter Christine relating to the gift of the $400,000.
…
Removal of the Next Friend
The second matter argued by Mr Ackman was that once the trial Judge reached a conclusion that the Next Friend was acting detrimentally to the husband’s case, then of his own motion he should have moved to have the trial aborted and another Next Friend appointed.
It should be pointed out that at no stage did counsel on behalf of the husband make any such application to the trial Judge. At no stage was any application made to this Full Court to remove the Next Friend who was presumably providing the instructions to Mr Ackman to pursue the appeal. In all the circumstances we find the submission incongruous. We would have expected that if there was any perception of a potential conflict between the Next Friend and the husband, or that the Next Friend’s conduct of the case was patently harmful to the husband, his experienced solicitors or his counsel would have moved to make an application for removal.
The Family Law Rules provide that a person who because of mental infirmity does not understand the nature and possible consequences of the proceedings or is not capable of adequately conducting or giving adequate instruction for the conduct of the proceedings, is a person who needs a Next Friend. Order 15 rule 14 (1) of the Family Law Rules provides for the appointment of a Next Friend
“(a) on the application of a person under this Order;
(b) if it appears to the court to be necessary, of its own motion.”
The Rules then provide that before making the appointment the court must be satisfied that the person to be appointed
“(a) is a fit and proper person to be Next Friend of the party; and
(b) has no interest in the proceedings adverse to the party; and
(c) has filed a consent in accordance with the Form 29.”
The role of the Next Friend is to conduct litigation and provide appropriate instructions to so do. The appointment of a Next Friend is also necessary to enable a decision to be given which will be binding on the person under a disability: Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at pp 83, 88 and 100.
The responsibilities of a guardian ad litem for what was then known as a person with a mental defect are discussed in Read v Read [1944] SASR 26 at 28-29:
“[A] person who accepts the duties of guardian ad litem does not do so…as a matter of form. A guardian ad litem on behalf of an insane person or an infant represents that person before the Court, and it is his duty to see that every proper and legitimate step for that person’s representation is taken. He has got to give his mind to it, and decide for himself upon the material put before him what course of action to take…”
In this case the parties’ son John was appointed as Next Friend of the husband. He had no interest in the proceedings adverse to the husband. Indeed as it transpired his interests in the proceedings appeared to coincide with that of the husband in that he was a beneficiary under the husband’s will. The husband apparently lacked any further testamentary capacity and accordingly, providing that John outlived his father, he would in due course inherit a share of his father’s estate. The greater that estate the more valuable John’s interest would become.
Order 15 rule 18 provides:
“The court may remove a person as a Next Friend if
(a)the person makes application to be removed as Next Friend; or
(b)the court considers that it is appropriate that the person be removed as Next Friend.”
When originally enacted in 1976 the then relevant Family Law Regulations (reg 75) followed the form of rule 128 of the Matrimonial Causes Rules in that they provided for the removal of a guardian ad litem if the Court considered it “desirable”. The change from “desirable” to “appropriate” was introduced effective as of 1 July 2000. There appear to be no reported decisions on the circumstances as to when it might be appropriate for this power to be exercised.
It seems to us unusual to say that the Next Friend in these proceedings wants to run an argument that the Court should have removed him even though he made no application to be removed. The basis upon which he asserts that the Court on its own motion should have removed him is a little difficult to follow.
In his written submissions counsel on behalf of the husband says:
“34.The learned trial Judge erred in the exercise of his discretion in permitting the trial to commence and continue when the issue of the husband’s capacity and/or appropriateness of the son as Next Friend had not been determined.
…
36.As the learned trial Judge ultimately found that the husband was in fact incapacitated and required a Next Friend, it was the Next Friend’s conduct and not that of the husband that caused any non-disclosure.
…
39.…the learned trial Judge should not have permitted the trial to commence or proceed with the son as Next Friend when the wife was attacking the bona fides of the son as Next Friend.
…
42.The learned trial Judge further erred in the exercise of his judicial discretion in permitting the trial to proceed if the learned trial Judge believed at any time the Next Friend was failing to make a full and frank disclosure.”
It was then further submitted that if it could be shown that the Next Friend had acted contrary to the interests of the disabled person or that he conducted the litigation improperly he ought be removed. (See Re Taylor’s application [1972] 2 All ER 873 per Denning MR).
Re Taylor was a case in which the parent of the child who had been damaged by the taking of thalidomide during pregnancy refused to accept a proposed offer of settlement in respect of the child’s claim. On an application to remove a parent in those circumstances as Next Friend Lord Denning said:
“If he is to be removed, it should only be done if the proposed settlement is so clearly beneficial for his child that he is acting improperly in refusing it.”
Re Taylor is not authority for the proposition put forward by Mr Ackman. It is authority for the proposition that in respect of the removal of a Next Friend who refuses to accept an infant’s compromise, such removal will take place only if the welfare of the child demands it.
Order 15 rule 14 provides expressly that the Court may appoint a person as Next Friend of its own motion, and we do not see the absence in rule 18 of the words “of its own motion” as necessarily limiting the circumstances in which a person may be removed as Next Friend. While there seems to be no reported precedent for such a course being taken, it has been acknowledged that such a course might be necessary in some circumstances (see Re Birchall (1880) 16 Ch D 41). As a matter of logic, such a course might seem necessary where the Next Friend is clearly neglecting or damaging the interests of the party.
However, in many cases there are safeguards against such conduct short of the Court bringing its own motion. Other persons with the interests of the party at heart can take steps: the party’s legal representatives, for while they are instructed by the Next Friend, their client is the party, or other family members and friends. Here the husband was represented by solicitors and two Counsel. His daughter Christine, herself a lawyer, was also intimately involved in the husband’s case. This litigant was not lacking for protectors.
The power granted under rule 18 is a discretionary power to be exercised either on the application of the Next Friend or in circumstances where the Court considers it is appropriate that the person be removed as Next Friend.
It is almost impossible to see why in this case the Court ought have been of the view that it was appropriate to remove John from the role of being his father’s Next Friend. The father was represented by senior counsel, instructed by an experienced firm of solicitors. At issue was the extent to which the large fortune that had been accumulated during the course of the marriage should be divided between the husband and the wife after 42½ years of married life. The fact that the Next Friend for the husband stood to gain if his father obtained a more favourable result then that sought by the wife could not be seen as a reason to remove him. Indeed to the contrary. There was some communality of interest between the Next Friend and his father. The fact that the Next Friend proved to be an unreliable witness would not be enough to make it appropriate to remove him.
Further, even if his Honour had considered such a course, there were strong arguments against doing so. It would involve delay and costs for both parties. And it would amount to an interference in the running of the husband’s case by those who there was no reason to suggest did not have his interests at heart. There was no allegation that the Next Friend had deliberately acted against his father’s interests, merely that in the exercise of his judgment he had made mistakes which have had the effect of damaging those interests. While there may or may not have been bad faith towards the court, there was none towards the husband. It would have been mere second-guessing by Chief Judge Holden to interfere in the running of the husband’s case by replacing the Next Friend.
In summary, whilst we are unable to set out the circumstances in which it might be appropriate for a Court to remove a guardian ad litem or Next Friend of its own motion, nothing that has been put to us in this case would indicate to us why Chief Judge Holden should have done so nor why it would be appropriate to set aside the entire verdict and send the matter back for retrial. The only issue upon which it could be properly be said that the behaviour of the Next Friend impinged on the proceedings was the issue of non-disclosure. There were ample other matters readily conceded or clearly open to the trial Judge about that issue which would enable the findings to stand independently of any criticism of the Next Friend.
In any event, as already indicated we do not view the criticism of the Next Friend in the manner in which it has been asserted that we should. We see the criticism as no more than the trial Judge’s saying that the behaviour of the Next Friend in the proceedings did not ameliorate the suspicions that were otherwise raised in respect to issues of non-disclosure.
There remains a certain irony to this application being made to us in circumstances where yet another senior member of counsel appears before us instructed by the Next Friend and himself makes no application to have the Next Friend removed from the proceedings before us. As already mentioned it seems incongruous, if there is any validity at all in the point that the Next Friend should not be party to the proceedings once his conduct is under challenge, that no application is made before us to have him removed from the proceedings.
Those grounds of appeal that are directed towards the asserted inappropriate conduct of the trial Judge in failing to abort the proceedings even though he was not asked so to do, must fail.
The Court made certain orders by consent adjusting the mechanics of dividing the parties assets but otherwise dismissed the appeal with costs.
I certify that the preceding
paragraphs
are a true copy of the reasons
for judgment delivered by this
Honourable Full Court.
Elizabeth Hore
Associate
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