Khalif & Khalif (No 2)
[2021] FedCFamC1F 308
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Khalif & Khalif (No 2) [2021] FedCFamC1F 308
File number(s): SYC 6144 of 2016 Judgment of: WATTS J Date of judgment: 16 December 2021 Catchwords: FAMILY LAW – STAY APPLICATION – Whether the husband’s brother has established that there are exceptional or special circumstances to grant a stay pending the conclusion of the proceedings he has commenced in the High Court of Australia – Where no exceptional or special circumstances exist – Whether there are other discretionary factors that would have led to an exercise of discretion had the husband’s brother met the threshold test – Where other discretionary factors would not have led to an order granting the stay.
FAMILY LAW – ENFORCEMENT – Whether an order should be made enforcing the husband’s brother’s compliance with the order that has not been stayed – Where there are currently apparent difficulties with the form of order sought by the wife by way of enforcement – Where the wife is given liberty, upon giving 7 days’ notice, to seek further orders in respect to enforcement.
FAMLY LAW – COSTS – Where the wife seeks a reiteration of the costs order made by the Full Court on 23 July 2021 – Where the husband’s brother seeks a condition be placed upon that costs order – Where both applications are dismissed.
FAMILY LAW – CAVEAT – Where the wife seeks an order that she be entitled to lodge a caveat on the title of a property which is vested bankruptcy property – Where no order has yet been in the wife’s favour made pursuant to s 79 of the Act – Where the wife has not otherwise asserted any equitable interest in that property – Application dismissed.
Legislation: Family Law Act 1975 (Cth) ss 33, 34, 78, 79, 80, 90AE, 123
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 44
Real Property Amendment (Certificates of Title) Act 2021(NSW)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 1.06, 13.12
Cases cited: Clemett and Clemett (1981) FLC 91-013
Commissioner of Taxation (Cth) of Australia v The Myer Emporium Ltd [No. 1] (1986) 160 CLR 220
Fencott v Muller (1983) 152 CLR 570
Jackson & Balen [2009] FamCAFC 131
Jennings Constructions Ltd v Burgundy Royale Investments Pty Ltd (1986) 161 CLR 681
Khalif & Khalif and Anor [2020] FamCA 39
Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457
Re Wakim: Ex parte McNally (1999) 198 CLR 511
Rizeq v Western Australia (2017) 262 CLR 1
Stack v Coast Securities (No. 9) Pty Ltd (1983) 154 CLR 261
Stanford v Stanford (2012) 247 CLR 108
Stephens & Stephens (Stay Application) (2010) FLC 93-429
Valceski v Valceski (2007) 70 NSWLR 36
Division: Division 1 First Instance Number of paragraphs: 73 Date of hearing: 29November 2021 Place: Sydney (via video-link) Counsel for the Applicant: Mr Lange with Ms Bartley Solicitor for the Applicant: Aquila Lawyers Counsel for the First Respondent: Mr Todd Solicitor for the First Respondent: Jordan Djundja The Second Respondent: Did not appear ORDERS
SYC 6144 of 2016 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR B KHALIF
Applicant
AND: MS KHALIF
First Respondent
MR KHALIF
Second Respondent
ORDER MADE BY:
WATTS J
DATE OF ORDER:
16 DECEMBER 2021
THE COURT ORDERS THAT:
1.The husband’s brother’s application filed 22 October 2021 seeking an order that Order 2 made by Watts J on 31 January 2020 be stayed, until his application for special leave to appeal to the High Court of Australia is determined and, if special leave is granted, until the appeal to the High Court is determined, is dismissed.
2.The wife’s application for enforcement of Order 2, in the form in which it has been made is dismissed but the wife is granted liberty, on seven (7) days’ notice, to apply for any further order(s) she seeks to enforce Order 2 made 31 January 2020.
3.Pending further order, the husband’s Trustee in Bankruptcy is restrained from dealing in any way with any interest in the property known as C Street, Suburb D, but has liberty, within 28 days of being served with this order, to apply for a discharge or variation of it.
4.The wife’s application for a reiteration of the Full Court’s costs order shall be dismissed.
5.The husband’s brother’s oral application for a condition to be placed upon the payment of the Full Court’s costs order made 23 July 2021 shall be dismissed.
6.The wife’s application for an order that she be entitled to lodge a caveat on the title of C Street, Suburb D, be dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Khalif & Khalif has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
WATTS J:
INTRODUCTION
Orders 1 and 2 made 31 January 2020 are in the following terms:
1.[The husband’s brother] is declared to hold 61.5 per cent of the beneficial interest in C Street, Suburb D (“the C Street property”) in trust for the husband.
2.The [husband’s brother] is to do all things and sign all necessary documents to transfer to the husband, as a tenant in common, 61.5 per cent of the legal interest in the C Street property.
Mr B Khalif (“the husband’s brother”), by way of application filed 22 October 2021, seeks a stay of Order 2 made by me on 31 January 2020 (“Order 2”), until such time as his application for special leave to appeal to the High Court of Australia is determined and, if special leave is granted, until the appeal to the High Court is determined.
The husband’s brother filed his application for special leave to appeal on 28 September 2021.
Ms Khalif (“the wife”), by way of response filed 3 November 2021, seeks that the husband’s brother’s application for a stay be dismissed and further seeks orders which she says are aimed at enforcing orders with which the husband’s brother has not complied, and further seeks an order that she be entitled to lodge a caveat on the property at C Street, Suburb D (“the C Street property”).
In reply, the husband’s brother orally sought an order that a condition be placed upon the Full Court’s order that he pay costs to the wife in the sum of $14,614 in respect of his unsuccessful appeal, namely, that the amount paid be held by the wife’s solicitor and not disbursed until the conclusion of the High Court proceedings.
I am informed by those representing the husband’s brother that the husband has been given notice of these current applications but has chosen not to actively participate as a party in them nor has the husband’s brother given notice of his stay application to the husband’s Trustee in Bankruptcy (“the Trustee”), asserting that a stay of Order 2 would not prejudice the property available to the Trustee.
BRIEF HISTORY
The wife commenced proceedings against the husband pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”) and against the husband’s brother invoking the court’s “accrued jurisdiction” on 23 September 2016.
I acknowledge at the outset that the High Court in Rizeq v Western Australia (2017) 262 CLR 1 said:
55. Thus, it is commonplace that resolution of a matter within federal jurisdiction may involve application both of Commonwealth law and of State law. Indeed it can happen that a matter in federal jurisdiction is resolved entirely through the application of State law. Application of State law in federal jurisdiction came for a period to be described, “[f]or want of a better term”, as “accrued jurisdiction”. There is “no harm in the continued use of the term ‘accrued jurisdiction’ provided it be borne in mind ... there [is] but one ‘matter’”. However, the imprecision the term introduces into the word ”jurisdiction” means that the term is best avoided. There is but one matter and that matter is entirely within federal jurisdiction, as distinct from State jurisdiction.
(Footnotes omitted)
and I shall use the expression “the application of State law” rather than the expression “accrued jurisdiction”.
The initial discrete part of the hearing took place before me on 19 and 21 November 2018. At that time, the husband, who has been a party to the proceedings at all times, was an undischarged bankrupt. The husband chose to take no active part as a party in the initial part of the hearing, other than as a witness for his brother. The active participants in this part of the proceedings were the wife and the husband’s brother.
On 31 January 2020, I delivered judgment and made orders against the husband’s brother.
On 7 February 2020, the husband’s brother filed a Notice of Appeal to the Full Court challenging the judgment.
On 12 February 2020, the husband’s brother sought a stay of Order 2. By consent, an order for the stay of Order 2 was made by me on that day, pending further order.
On 12 November 2020, the appeal was heard by the Full Court of the Family Court of Australia (as it then was).
On 23 July 2021, the Full Court delivered its judgment dismissing the appeal. The order staying Order 2 accordingly ceased on that day (Clemett and Clemett (1981) FLC 91-013, per Nygh J).
As indicated, on 28 September 2021 the husband’s brother filed an application for special leave to appeal to the High Court of Australia, seemingly out of time, and filed the application for a stay on 22 October 2021, having taken no step to comply with Order 2 in the meantime.
APPLICABLE PRINCIPLES IN RELATION TO WHETHER A STAY SHOULD BE GRANTED
In paragraph 14 of the husband’s brother’s written submissions dated 27 October 2021, it was asserted that the power to order a stay is provided in the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the rules”), (with reliance placed by him upon r 1.06 item 3(d) of Table 1.1 of the rules). During oral submissions, counsel for the husband’s brother accepted that r 1.06 provides for a stay of proceedings as a case management tool and is not applicable to the stay of an order. There is provision in the rules for staying an order pending an appeal to the Full Court (r 13.12) but those rules have no application where, as in this case, a stay is sought pending the resolution of an application for special leave to the High Court, and if granted, the determination of the appeal by the High Court. However, in Stephens & Stephens (Stay Application) (2010) FLC 93-429 (“Stephens”) at [79], the Full Court said:
79.… there are no provisions in the Act or the Rules that directly address the question of a stay of orders of the Full Court pending the determination of an application for special leave. Nevertheless, it is well established that when an application for special leave to appeal is made to the High Court, the jurisdiction to grant a stay may be exercised by the court below and it is to that court (that is, the court in which the matter is pending and which is familiar with the matter) that an application to stay should be made: Fauna Holdings Pty Ltd and McGillivray v Mitchell [2000] FamCA 548; (2000) FLC 93-024; Tate and Tate (No 4) [2003] FamCA 113; (2003) FLC 93-139. As such, it is not controversial that this Court has the power to grant such a stay
It is accepted by all that the filing of an application for special leave to appeal does not automatically stay the operation of Order 2. It is further accepted that the power to order the stay is a discretionary one.
The relevant test is discussed in Stephens at [80]–[82]:
80. However, the jurisdiction to grant a stay pending an application for special leave to appeal to the High Court is an extraordinary jurisdiction and exceptional circumstances must be shown before its exercise is warranted. In Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd (No.1) (1986) 161 CLR 681 Brennan J said at 684:
A stay to preserve the subject-matter of litigation pending an application for special leave to appeal is an extraordinary jurisdiction and exceptional circumstances must be shown before its exercise is warranted. If an order for a stay is made, the respondent is kept out of the benefit of the order of the court in which the matter is pending until the hearing of the application for special leave to appeal. That was the situation to which this court adverted in Marconi's Wireless Telegraph Co. Ltd. v The Commonwealth[No 3] (1913) 16 CLR 384]. There the Court granted an order staying the operation of one of its own orders pending the hearing of an application to the Privy Council for special leave to appeal. What the court said in that case [at 386] is applicable to this case:
“The Court will not ordinarily grant an application of this kind unless very strong and special grounds are shown. This is a very peculiar case. The conditions are such that, on the one hand, if the stay is granted without more, the whole benefit of the action may be lost to the plaintiffs, while, on the other hand, unless the stay is granted on some fair terms, the defendants' appeal will be nugatory. It really is a question of the preservation of the rights of the parties without disregard of the balance of convenience.”
81. In Edelsten v Ward [No. 2] (1988) 63 ALJR 346, Brennan J, emphasising the “exceptional” character of the Court’s inherent jurisdiction to preserve the subject matter of litigation pending the making of a special leave application, said at 346:
[This jurisdiction] is one which can only be exercised in extraordinary circumstances. It is as well to emphasise that observation again lest the impression be created that, in the conduct of litigation, the orders of this Court are available to keep matters in status quo until the litigation is finally resolved. That is not the purpose of the inherent jurisdiction. Something quite exceptional must be shown before that jurisdiction is exercised.
82. In The Commissioner of Taxation of the Commonwealth of Australia v The Myer Emporium Ltd [No. 1] (1986) 160 CLR 220, Dawson J noted at 222 that the High Court Rules (see now O 70 r 8(1)) provide that, unless otherwise ordered, neither an application for special leave nor an appeal shall operate as a stay. His Honour said at 222–223:
It is well established by authority that the discretion which it confers to order a stay of proceedings is only to be exercised where special circumstances exist which justify departure from the ordinary rule that a successful litigant is entitled to the fruits of his litigation pending the determination of any appeal: see, e.g., The Annot Lyle [(1886) 11 P.D. 114]; Scarborough v. Lew's Junction Stores Pty. Ltd. [[1963] V.R. 129]. Special circumstances justifying a stay will exist where it is necessary to prevent the appeal, if successful, from being nugatory: see Wilson v. Church [No. 2] [(1879) 12 Ch. D. 454]; Klinker Knitting Mills Pty. Ltd. v. L'Union Fire Accident and General Insurance Co. Ltd. [[1937] VLR 142]. Generally that will occur when, because of the respondent's financial state, there is no reasonable prospect of recovering moneys paid pursuant to the judgment at first instance. However, special circumstances are not limited to that situation and will, I think, exist where for whatever reason, there is real risk that it will not be possible for a successful appellant to be restored substantially to his former position if the judgment against him is executed: see McBride v. Sandland [No. 2] [(1918) 25 CLR 369].
…
In the husband’s brother’s written submissions dated 27 October 2021, at paragraph 18, and in his written submission in reply at paragraph 6, he relies on the Full Court decision of Jackson & Balen [2009] FamCAFC 131 at [28] to suggest that it was not necessary for him to demonstrate “exceptional” or “special” circumstances. However, as discussed during oral submissions, the Full Court’s decision in that case was in the context of an appeal to it from the decision of a primary judge, by way of rehearing, applying principles applicable to appeals from discretionary judgments (House v The King (1936) 55 CLR 499). I am of the view that that statement does not represent the test in respect of an application for a stay pending an application for special leave to the High Court, and if granted, pending determination of the appeal by the High Court. The husband’s brother is required to demonstrate “exceptional” or “special” circumstances and to otherwise establish that additional factors favour the exercise of the court’s discretion.
As cited by the Full Court, in Stephens at [83], Brennan J in Jennings Constructions Ltd v Burgundy Royale Investments Pty Ltd (1986) 161 CLR 681 at 685 listed the following additional factors as being material to the exercise of the court’s discretion:
(a)whether there is a substantial prospect that special leave to appeal will be granted;
(b)whether the applicant has failed to take whatever steps are necessary to seek a stay from the court in which the matter is pending;
(c)whether the grant of a stay will cause loss to the respondent; and
(d)where the balance of convenience lies.
THE APPLICATION FOR A STAY
Are there exceptional or special circumstances?
In relation to that threshold test, the husband’s brother asserts that there are exceptional and special circumstances in this case because, in accordance with the test posed by Dawson J in Commissioner of Taxation (Cth) of Australia v The Myer Emporium Ltd [No. 1] (1986) 160 CLR 220 (cited above in Stephens at [82]), the failure to grant a stay would render the husband’s brother’s application for special leave nugatory because there is a real risk he may not be able to be substantially restored to his former position if his appeal is successful. The husband’s brother otherwise submits a balance of the additional factors favour an exercise of discretion to grant a stay of Order 2.
First, the husband’s brother argues that although the consequences of Order 1, which is not to be stayed, is to vest 61.5 per cent of the C Street property in the husband’s Trustee, the change of the registered title would place the Trustee in a stronger position to move against the property and have it sold. In respect to the question of procedural fairness to the Trustee, I note that having received regular notice, the Trustee is yet to show any active interest in the proceedings and accordingly I assess that risk as remote. As discussed during submissions, any risk can be ameliorated by making an ex parte order against the Trustee that he not do so. The Trustee should be given the right within 28 days, to contest an ex parte order restraining the Trustee from taking any further action in relation to the property pending the conclusion of the husband’s brother’s application for leave and possible appeal to the High Court.
Next, the husband’s brother asserts that a transfer “would imperil the security held by the bank” making reference to “loan-to-ratio value [sic]” (husband’s brother’s submissions in reply filed 26 November 2021, paragraph 10). In that regard, counsel for the husband’s brother referred to paragraph 9 of the affidavit of the husband’s brother’s solicitor filed 22 October 2021 which is in the following terms:
9.I am informed by [the husband’s brother], and verily believe, that the encumbrance on the C Street property does not exceed 38.5% of the value of the property.
That hearsay evidence is equivocal as to whether the husband's brother would need to further reduce the loan which is secured by his current equity in the C Street property in order to have the bank consent to a registration of the transfer. The husband’s brother has not provided any evidence of the loan-to-value ratio. In fact, I was told by counsel for the husband’s brother that the bank had not been informed by his client about these proceedings or the orders which have been made. The last knowledge I had about the husband’s brother’s financial circumstances is that he was a highly successful entrepreneur with gross assets of $21,750,000 and net assets of $10,340,000 (Khalif & Khalif and Anor [2020] FamCA 39 (“Khalif & Khalif”) at [156]; see also [42] and [45]). The husband’s brother has not sought to provide updated evidence as to his financial circumstances in the context of this application. Even if the husband’s brother needed to reach some new arrangement with his bank in order to comply with Order 2, he has not established that such a circumstance would make his appeal nugatory because he could not be substantially restored to his former position. If his appeal was successful he would get back the whole of the interest in the C Street property, albeit with a lower encumbrance.
Finally, the husband’s brother refers to the future completion of the final hearing of the wife’s application for a property settlement order. I am told there is a directions hearing before Rees J some time in 2022. It is submitted that, if the transfer is registered, it is possible that her Honour might hear and determine the wife’s application for a property settlement order prior to the completion of the High Court proceedings on the basis that the husband’s brother only has a 38.5 per cent interest in the C Street property. It is further submitted that that possibility creates a real risk of not being able to successfully restore the husband’s brother to his former position if his appeal to the High Court is successful.
There are a number of answers to those submissions:
(a)first, it is in my view highly unlikely her Honour would embark upon a completion of the final hearing of the application for a property settlement order whilst the High Court proceedings were extant;
(b)secondly, if I am wrong about that, her Honour could be asked to stay any orders that she might make pending the outcome of the High Court appeal; and
(c)thirdly, her Honour could do what the husband’s brother suggests on the basis of Order 1 made 31 January 2020, in respect of which no stay has ever been sought.
I do not accept that there is any real current risk to the husband’s brother arising out of any speculation as to what the docket trial judge may do in the future.
I find that the husband’s brother has not established that there are exceptional or special circumstances to grant a stay.
In the event I am wrong about that, I shall now turn to the four additional factors (referred to in [20]) that may have otherwise been relevant to the exercise of discretion.
Is there substantial prospect special leave will be granted?
The argument made by the husband’s brother in his Application for Special Leave to Appeal (husband’s brother’s solicitor’s affidavit filed 22 October 2021, Annexure “A”) are met by the wife’s Response filed in the High Court (wife’s solicitor’s affidavit filed 3 November 2021, Annexure “JJ7”).
The husband’s brother submits that he “has good prospects of success, and even a preliminary assessment of them by any judicial mind would lead to the conclusion that the application is most certainly arguable” (husband’s brother’s written submissions dated 27 October 2021, paragraph 24.
Speaking for myself, I am one judicial mind who is unable to conclude that the husband’s brother’s contentions in his Application for Special Leave to Appeal are seriously arguable.
The husband’s brother makes three broad contentions:
(a)there was no jurisdiction nor power to make the declaration in Order 1 of 31 January 2020, or, alternatively, there was no basis to make the order, in circumstances where the husband was an undischarged bankrupt;
(b)the consequential orders (particularly Order 2) should not have been made; and
(c)there was a failure to join necessary parties.
In respect of the issue of the jurisdiction and power to make Order 1, the husband’s brother did not raise at trial or on appeal any question of the lack of jurisdiction and power to hear and determine the controversy between the wife and himself as to whether he held an interest in the C Street property in trust for his brother. The husband’s brother’s accepts that:
…[T]his Court was not provided by either party with the assistance to which it was entitled. As a result, the power to make the orders which had been sought by the applicant wife was never considered by Watts J.
(Husband’s brother’s written submissions dated 27 October 2021, paragraph 24)
As discussed in oral submissions, in my view, the better explanation as to why no party raised the issue of jurisdiction and power at the hearing before me was that it was never seriously in doubt.
In an application for a property settlement order in this Court, it is an everyday occurrence that there is a controversy as to the ownership of property between a spouse or spouses on the one hand and a third party or third parties on the other. Those third parties are very often close relatives to one or both the spouses and those controversies go both ways: a spouse may claim that property held by a third party is property of a spouse, and vice versa a third party may claim that property held by a spouse is property owned by that third party. To cite examples of published decisions which illustrate this everyday aspect of the exercise of jurisdiction when making a property settlement order would lead to a compilation of a long list.
When considering whether it is just and equitable to make a property settlement order it is necessary to begin by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property (Stanford v Stanford (2012) 247 CLR 108 at [37]). When the interests of third parties are involved, there are two usual basis of jurisdiction and power to deal with this first step. Most commonly, the controversy is determined by the application of State law. As already mentioned, this has been referred to as the court exercising “accrued jurisdiction” (Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457; Fencott v Muller (1983) 152 CLR 570; Stack v Coast Securities (No. 9) Pty Ltd (1983) 154 CLR 261; and Re Wakim: Ex parte McNally (1999) 198 CLR 511).
Less commonly, s 78 of the Act is invoked to make declarations in relation to the title or rights, if any, that a party has in respect of property, prior to exercising any power under s 79 to alter the interests of the spouse’s property or vested bankruptcy property pursuant to s 79 (see the discussion by Brereton J in Valceski v Valceski (2007) 70 NSWLR 36 at [30]–[36]). This power includes the ability to bind third parties.
From the outset, the husband’s brother was joined as a third party to the proceedings between the wife and the husband (wife’s Initiating Application filed 23 September 2016). As against the husband’s brother, the wife sought a declaration that he held the whole of his legal right, title and interest in the C Street property upon trust for his brother, the husband.
As I commented during submissions, the use of the word “associated” in [61] of my reasons for judgment of 31 January 2020 is infelicitous as is obvious from what comes before and after it in that paragraph. The word should have been “accrued”. Any implied reference to s 33 of the Act would make the paragraph nonsensical because s 123 of the Act clearly applies to s 33 proceedings and accordingly the then Family Law Rules would have imposed the duties of full and frank disclosure upon the husband’s brother. I note that it is not contemplated by any party in their special leave applications that s 33 provided any jurisdiction for the orders that were made and I accept that is so.
The finding at the centre of the primary judgment was to the effect that the brothers had colluded to deny that the husband had any beneficial interest in the C Street property, thereby defeating any claim the wife might have under s 79 of the Act in respect of that interest.
Order 1 made 31 January 2020 and the consequential orders are made in reliance upon State law.
In the alternative, if s 78(1) of the Act was relied upon, s 78(2) is available to make consequential orders following the declaration. If additional power was needed, once an order was made under s 78, the provisions of s 80(1)(h)(i) and (k) and s 34(1) of the Act (which has since been repealed), now s 44 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) were available to make the consequential orders.
Consequently, there was ample jurisdiction and power to make the declaration in Order 1 and the consequential orders.
The husband’s brother asserts that somehow jurisdiction that had been properly invoked to hear and determine a controversy about the husband’s interest in the C Street property, was lost upon the husband becoming a bankrupt, absent the husband’s Trustee in Bankruptcy being a party. I can see no basis for such an assertion. The wife’s claim in respect of the property of the husband became a claim in respect of the property which now vested in the husband’s Trustee (s 79(1)(b) and (d)(ii) of the Act).
The Trustee has not yet sought, pursuant to s 79(11)(c) of the Act to become a party to the proceedings nor has any party yet sought to join the Trustee to the proceedings.
The husband’s Trustee did not attend the proceedings in circumstances where the husband was asserting he had no assets. Whilst the husband remained a party to the proceedings, he chose to play no active part as a party in the hearing as to whether the husband held any interest in the C Street property (see the provisions in s 79(12) and (13) of the Act).
Whether Order 1, which fixes the husband’s interest in the C Street property at 61.5 per cent, binds the husband’s Trustee, if the Trustee has been given notice and chosen not to apply, pursuant to s 79(11)(c) of the Act, to be joined as a party to the proceedings, would be a matter for further consideration once the Trustee is joined as a party.
In respect of the position of the husband’s brother’s bank, it would be unusual for a financial institution with a registered first mortgage to be given notice of an application for a property settlement order. That is because their interest is protected by the mortgage and unless there is some application for an order binding the financial institution which alters those rights, it is not necessary to join it. Given the bank’s non-participation in the proceedings as a result of the husband’s brother not telling it about them, the orders do not bind the bank holding the mortgage on the C Street property but only the husband’s brother nor has any order been made that deprives the bank of their rights under the existing mortgage on the C Street property. Order 3 is only made against the husband’s brother.
The husband’s brother has not led any evidence at trial or in this application to establish his bank would be adversely affected by the order.
The husband’s brother had the capacity to join the husband’s Trustee in Bankruptcy and/or the bank to the proceedings but did not do so.
No submission was made at trial or on appeal to the Full Court asserting that s 90AE of the Act had any work to do in the context of the part of the proceedings determined to date. The husband’s interest in the C Street property arose at the time of the transactions (Parsons and Anor v McBain (2001) 109 FCR 120 at [11]–[13]). The declaration sought by the wife against the husband’s brother did not “alter” rights he had in the C Street property but “declared” what they were under State law (or alternatively under s 78 of the Act). No power has yet been exercised under s 79(1) to alter rights in the property of the spouse or in vested bankruptcy property.
No order has been yet made against the husband’s Trustee nor against the husband’s brother’s bank.
There is no basis to conclude Order 1 made 31 January 2020 was invalid because the husband’s Trustee and/or the husband’s brother’s bank were not parties.
I conclude in the context of this application and on the basis of the case he has developed to date, that the husband's brother does not have substantial prospects of success in the proceedings he has instituted in the High Court.
Seeking a stay from this Court
Obviously, by making the application for a stay, the husband’s brother has taken the necessary step to seek a stay from the Court in which the matter is pending.
Loss to the wife
In relation to the question as to whether or not the stay will cause loss to the wife, the husband’s brother points to the facts that:
(a)he has proffered an undertaking as to damages;
(b)the restraining orders (Orders 4(a)-(d)) made 12 February 2020 remain in place;
(c)the wife has no interest in the C Street property unless and until an order is made under s 79 of the Act.
The wife highlights that she commenced these proceedings in 2016 and are now over five years old; her assertion of the “oppositional history” of the husband’s brother and the husband towards the wife’s claim in these proceedings and the persistent refusal by the husband’s brother to comply with an undertaking to the Court and Court orders. Whilst the husband’s brother makes the point that he has not breached Orders 4(a)-(d) made 12 February 2020, he has previously seriously breached an undertaking given to the Court (see Khalif & Khalif at [49] and [50]) and he has failed to comply with Order 2 (when that order had not been stayed) and the costs order of the Full Court made 23 July 2021. The wife submits that there is a continuing risk to her, in the event that the husband’s brother’s proceedings in the High Court were unsuccessful, that she will face continued oppositional behaviour from the husband’s brother and that she will be disadvantaged if Order 2 is not complied with in the meantime because it is likely she will need to make further applications for its enforcement. I find there is merit in that assertion.
Balance of convenience
In relation to where the balance of convenience lies, the husband’s brother repeats arguments as to how the Trustee may seek to deal with the property and how Rees J may take the property into account in the pool of assets in a future property settlement hearing and determination which takes place prior to the High Court proceedings. I have already found those arguments to be without substance.
Conclusion in respect to the stay
Ultimately, the central question is whether or not the husband’s brother has established exceptional or special circumstances because the failure to grant a stay would render his application for special leave and his appeal to the High Court nugatory. I find it will not. In any event, the discretionary factors would not move me to grant the stay. Accordingly, I shall dismiss the husband’s brother’s application for a stay. Consequently, the husband’s brother should comply with Order 2 as soon as is practicable.
THE WIFE’S APPLICATION FOR THE DELIVERY OF A DULY EXECUTED TRANSFER
By way of enforcement of Order 2 made 31 January 2020, the wife seeks an order that the husband’s brother cause to be delivered to the solicitor for the wife, a duly executed transfer of such interest in registerable form in partial compliance with Order 2 within seven days.
In the event that that order was not made without more, in the alternative, the wife offers an undertaking by the wife’s solicitor that he shall hold the transfer pending disposal of the High Court proceedings and in the event that the husband’s brother is successful, shall within seven days return the transfer to the husband’s brother’s solicitors but in the event that the appeal is unsuccessful, he would register the transfer within seven days of the dismissal of the special leave application or any High Court appeal.
It is reasonable to assume that the wife’s application refers to a paper transfer.
On the morning of the hearing, the husband’s brother raised as a “practical difficulty” as to the form of the enforcement order sought by the wife because of very recent changes to conveyancing practices in New South Wales which has abolished the use of paper Certificates of Title. The written submissions in reply refer to the Real Property Amendment (Certificates of Title) Act 2021(NSW) and the Registrar’s Declaration that, from 11 October 2021, all dealings must be effected electronically. During submissions I pointed out that no document had been provided to support that submission. An undertaking was given to provide documents. After the hearing, the solicitor for the husband’s brother provided a copy of the legislation but no other document. Assessing the publicly available link to the website of the Office of the Registrar-General (Absolution of Certificates of Title | Registrar-General (nsw.gov.au)) it seems to indicate that from 11 October 2021 all dealings must be effected electronically.
The wife’s solicitor has not had any proper opportunity to comment upon the very recent changes in conveyancing practices but it seems that what now needs to happen is for the husband’s brother to complete various tasks and give the necessary authorities to his lawyers to ensure that legal title is transferred to his brother electronically in accordance with Order 2.
It follows from my reasons in respect of the husband’s brother’s stay application that Order 2 made 31 January 2020 will remain undisturbed. Thus, the husband’s brother has been ordered to do what it takes to ensure the transfer happens whatever the formalities for that might be. Because of the delay in the husband’s brother’s compliance with Order 2, it seems that the form of the order for enforcement by the wife is otiose. The wife’s solicitor should set out to the husband’s brother’s solicitor exactly what steps the husband’s brother needs to take for him to fulfil the obligations imposed upon him by Order 2. When originally made, the old rules provided that compliance with Order 2 was to be as soon as was practicable. To create some assistance to the wife in the event that the husband’s brother continues to fail to comply with all the obligations Order 2 places upon him, I shall make an order that the wife have liberty to apply to the Docket Judge, upon giving seven days’ notice, for any order or orders she seeks for the enforcement of Order 2.
THE FULL COURT’S COSTS ORDER
On 23 July 2021 the Full Court ordered that the husband’s brother pay the wife’s costs of the appeal in the amount of $14,614 within 28 days. He has not done so.
As discussed at the hearing on 29 November 2021, in as much as the wife seeks an order which replicates the Full Court’s costs order, it is inappropriate to make such an order a second time simply because the husband’s brother has failed to comply with it in the first place. The rules provide for various avenues for enforcement of a money order.
In reply, the husband’s brother made an oral application that if he is to comply with the Full Court’s order, then that compliance should be conditional upon the funds paid by way of costs being held by the wife’s solicitor pending the outcome of the High Court proceedings. That application in effect seeks a partial stay of the husband’s brother's compliance with the Full Court’s costs order. The husband’s brother suggests that, because the wife is indigent (wife’s submissions filed 3 November 2021, paragraph 5), if he is successful in the High Court, the costs order would be discharged and his position would not be able to be restored. That however ignores the fact that the husband’s brother’s application for leave to appeal to the High Court is not based upon any of the arguments he made to the Full Court, which arguments were entirely unsuccessful.
The wife’s application for a reiteration of the Full Court’s costs order shall be dismissed. The husband's brother’s oral application for a condition to be placed upon the payment of the Full Court’s costs order shall be dismissed. The obligation on the husband’s brother to immediately pay the costs order remains extant.
CAVEAT
The wife seeks an order that she “be entitled to lodge a caveat with the NSW Registrar General” (by implication upon the title of the C Street property).
The husband’s brother concedes that Order 1 made 31 January 2020 creates a caveatable interest in the husband’s favour (which interest has vested in the Trustee). The husband’s brother points out that any interest the wife might have in the C Street property will only arise at the conclusion of the s 79 proceedings.
To date, the wife has not asserted that she herself has any equitable interest in the husband’s interest in the C Street property which has vested in the husband’s Trustee.. If in fact she did have such an equitable interest, she does not need a court order to lodge a caveat; she would have a right to do so.
The application the wife makes for an order authorising the lodgement of a caveat shall be dismissed.
I certify that the preceding seventy-three (73) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Watts. Associate:
Dated: 16 December 2021
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