Kim & Lam
[2018] FCCA 911
•16 April 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| KIM & LAM & ANOR | [2018] FCCA 911 |
| Catchwords: FAMILY LAW – Property – binding financial agreement – where a party seeks to join a creditor to the proceedings – issue estoppel – abuse of process - earlier interlocutory proceedings in the Supreme Court of NSW to discharge freezing order. |
| Legislation: Duties Act1997 (NSW) Family Law Act 1975 (Cth), ss.90B, 90C, 90D, 90G, 90K, 90KA Federal Circuit Court Rules 2001 (Cth), r.11.01 |
| Cases cited: Angeleska v State of Victoria [2015] VSCA 140 Senior & Anderson [2011] FamCAFC 129 Spalla v St George Motor Finance Ltd(ACN 007 656 555)(No.6) [2004] FCA 1699 |
| First Applicant: | MS KIM |
| First Respondent: | MS OKI & MR LAM |
| Second Respondent: | MR RIVERA |
| File Number: | SYC 2403 of 2017 |
| Judgment of: | Judge Harper |
| Hearing date: | 22 November 2017 |
| Date of Last Submission: | 22 November 2017 |
| Delivered at: | Sydney |
| Delivered on: | 16 April 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr Bolster |
| Solicitors for the Applicant: | Manning Lawyers |
| Counsel for the First Respondent: | Mr Lloyd |
| Solicitors for the First Respondent: | CS Lawyers |
| Counsel for the Second Respondent: | Mr Bedrossian |
| Solicitors for the Second Respondent: | De Silva Hebron Barristers and Solicitors |
THE COURT NOTES THAT:
The proceedings are part heard and listed on 30 April 2018 at 10.00am for final hearing with an estimate of two days.
IT IS NOTED that publication of this judgment under the pseudonym Kim & Lam & Anor is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYC 2403 of 2017
| MS KIM |
Applicant
And
| MS OKI & MR LAM |
First Respondent
| MR RIVERA |
Second Respondent
REASONS FOR JUDGMENT
Introduction
These proceedings concern a document dated 4 November 2016 (“the agreement”). It purports to be a Binding Financial Agreement for the purposes of Part VIIIA of the Family Law Act 1975 (“the Act”). The parties to the agreement are the First (“Mr Rivera”) and Second (“Ms Kim”) Respondents.
The material effect of the agreement, if upheld, was the transfer to Ms Kim by Mr Rivera of all his right, interest and title to the property at Property A (“Property A”).
The Applicants are judgment creditors of Mr Rivera pursuant to a judgment in the District Court of NSW in proceedings No … against Mr Rivera obtained on 4 November 2016. The judgment was expressed to be in two currencies: AUD534,191.41 and USD214,000, plus costs as agreed or assessed (“District Court judgment”). By their Initiating Application filed 20 April 2017 the Applicants seek a declaration that the agreement is not a Financial Agreement for the purposes of Part VIIIA of the Act and an order setting it aside, pursuant to s.90K(1)(aa) of the Act. For the purposes of these reasons it is not necessary to comment further on the position of the Applicants.
Ms Kim, by an Amended Response filed 15 June 2017 sought, inter alia, joinder of Company B. By her Second Further Amended Response filed 21 November 2017 seeks injunctive relief against Company B in the following terms:
That the Federal Court Applicant be restrained from continuing and/or seeking any Order that affect the ability of the Second Respondent from selling, disposing, mortgaging or otherwise dealing with the Property A property and/or the proceeds of sale of the property until further Order of the Court.
Ms Kim argues Company B is a necessary party to these proceedings because it seeks satisfaction of a judgment obtained in the Supreme Court of NSW against Mr Rivera by enforcement through a writ of execution against Property A. This is explained in more detail below. Ms Kim asserts she owns Property A solely by reason of the agreement and it is not available to Company B. Rule 11.01(1) of the Federal Circuit Court Rules 2001 (Cth) provides that “a person whose participation is necessary for the Court to completely and finally determine all matters in dispute in a proceeding must be included as a party”. Ms Kim contends Company B is such a person.
Company B opposes its joinder.
The proceedings were listed for hearing of all applications on 22 November 2017. One day was allocated, based upon the parties’ estimate of hearing when the matter was set down. However, when the matter was called on for hearing it quickly became apparent that at least 3 days would be required to deal with the various contending applications.
In order not to waste court hearing time, I proceeded to deal with two aspects of Company B’s resistance to joinder. Shortly stated, Company B argues that by reason of the judgment in Company B v Rivera …. given in the Supreme Court of NSW (“Supreme Court judgment”) Ms Kim is precluded by the principles of issue estoppel or abuse of process from contending the agreement is a Binding Financial Agreement for the purposes of Part VIIIA. If either argument succeeded, Company B argues its joinder would be unnecessary or futile.
These reasons are concerned only with the questions of issue estoppel and abuse of process as argued by Company B.
Background
For the purposes of these reasons it is necessary to recite only limited material facts which are uncontentious.
The Respondents were married in China in 2006.They moved to Darwin in 2008.
In 2011 Mr Rivera acquired Property A in his sole name. By transfer, dated 24 June 2014, Mr Rivera executed a transfer of Property A into the names of both himself and Ms Kim as joint tenants and they became registered proprietors.
On 4 November 2016 Ms Kim and Mr Rivera executed the agreement.
Also on 4 November 2016, as noted above, the Applicants in these proceedings obtained the District Court judgment. The District Court also made a freezing order on 5 April 2017 in respect of the Respondents’ assets, including Property A. That freezing order is not immediately important for the purposes of these reasons.
By Summons and Commercial List Statement dated 11 April 2017 Company B commenced proceedings in the Supreme Court of NSW against Mr Rivera, based upon a guarantee given by Mr Rivera (“Supreme Court proceedings”). The details of that claim are not important for the purposes of this judgment.
On 20 April 2017 the Applicants filed an Initiating Application in this court seeking, inter alia, relief pursuant to s.90K(1)(aa) of the Family Law Act 1975 (“the Act”), being a declaration that the agreement “is not a Financial Agreement for the purposes of Part VIIIA of the Family Law Act” or that the purported agreement be set aside.
On 27 April 2017 a freezing order was made in the Supreme Court proceedings (“freezing order”). The freezing order applied to Property A, which by then was owned either wholly or partly by Ms Kim. The freezing order did not prevent sale of Property A but required payment of the proceeds of sale into Court or an agreed bank account. This freezing order is central to these reasons.
The Freezing Order
The freezing order was made pursuant to Rule 25.14 of the Uniform Civil Procedure Rules (NSW) (“the UCP Rules”). Rule 25.14 is in the following terms:
(1) This rule applies if:
(a) judgment has been given in favour of an applicant by:
(i) the court, or
(ii) in the case of a judgment to which subrule (2) applies--another court, or
(b) an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in:
(i) the court, or
(ii) in the case of a cause of action to which subrule (3) applies--another court.
(2) This subrule applies to a judgment if there is a sufficient prospect that the judgment will be registered in or enforced by the court.
(3) This subrule applies to a cause of action if:
(a) there is a sufficient prospect that the other court will give judgment in favour of the applicant, and
(b) there is a sufficient prospect that the judgment will be registered in or enforced by the court.
(4) The court may make a freezing order or an ancillary order or both against a judgment debtor or prospective judgment debtor if the court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because any of the following might occur:
(a) the judgment debtor, prospective judgment debtor or another person absconds,
(b) the assets of the judgment debtor, prospective judgment debtor or another person are:
(i) removed from Australia or from a place inside or outside Australia, or
(ii) disposed of, dealt with or diminished in value.
(5) The court may make a freezing order or an ancillary order or both against a person other than a judgment debtor or prospective judgment debtor (a "third party" ) if the court is satisfied, having regard to all the circumstances, that:
(a) there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because:
(i) the third party holds or is using, or has exercised or is exercising, a power of disposition over assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor, or
(ii) the third party is in possession of, or in a position of control or influence concerning, assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor, or
(b) a process in the court is or may ultimately be available to the applicant as a result of a judgment or prospective judgment, under which process the third party may be obliged to disgorge assets or contribute toward satisfying the judgment or prospective judgment.
(6) Nothing in this rule affects the power of the court to make a freezing order or ancillary order if the court considers it is in the interests of justice to do so.
It is apparent that the freezing order was made in exercise of the jurisdiction granted in Rule 25.14(5) of the UCP Rules.
Ms Kim was at no time a party to the Supreme Court proceedings. No substantive relief was sought against her in those proceedings.
She was however a “Respondent” to the application for the freezing order, within Division 2 of Part 25 of the UCP Rules: see Rules 25.10, 25.13.
On 29 May 2017 Ms Kim filed a Notice of Motion seeking to have the freezing order, so far as it affected her assets, discharged. The notice of motion was heard by Ball J on 9 June 2017 and the Supreme Court judgment was given on 16 June 2017.
On 28 July 2017 default judgment in the Supreme Court proceedings was given against Mr Rivera in the amount of USD51,908,071.40.
The Supreme Court Judgment
The Supreme Court judgment is central to the arguments articulated by Company B and considered in these reasons.
Company B argues that in the hearing before Ball J, Ms Kim resisted continuation of the freezing order so far as it affected Property A on the basis that by reason of the agreement, Mr Rivera had no interest in Property A when the freezing order was made. Rather Property A was owned by Ms Kim alone.
At [6] of the judgment Ball J said:
The onus is on Ms Kim to establish that, notwithstanding that she and her former husband own the property as joint tenants, it is the subject of a binding financial agreement made under s 90C, with the result that the property effectively belongs to her. Originally, Ms Kim submitted that the question whether the property was the subject of a binding financial agreement should be determined by the Family Court. However, during the course of argument, Mr Glissan QC, who appeared for Ms Kim, properly conceded that this court has jurisdiction to determine that question. No relief under the Family Law Act is sought in respect of the relevant agreement. What is in issue is whether the agreement is an agreement to which that Act applies. Consequently, there is no reason to transfer the matter to the Family Court.
The issue was decided against Ms Kim. At [18] and [19] Ball J said:
18. Company B advances two reasons for why the agreement dated 4 November 2016 is not a binding financial agreement made under s 90C of the Family Law Act. First, the agreement was entered into after Mr Rivera and Ms Kim divorced. Second, Mr Rivera’s receipt cannot be accepted as evidence that he was provided with a copy of the statement given to Ms Kim in accordance with s 90G(1)(c), since the receipt he signed was dated 1 November 2016 but the statement was dated 4 November 2016.
19 I accept both those submissions.
Company B contends that this judgment creates either an issue estoppel as between Company B and Ms Kim which precludes her from asserting against Company B that the agreement is a binding financial agreement made under s 90C of the Act, or for similar reasons, it would be an abuse of process, for Ms Kim to re-litigate the issues lost by her before Ball J. Company B argues that either basis would be sufficient to conclude it is not a necessary party and the application for joinder should be dismissed.
The applicants adopt the arguments of Company B. Ms Kim resists the arguments of Company B on the basis that the Supreme Court judgment neither determined the agreement should be set aside nor set it aside, nor gave Ms Kim the opportunity to litigate these questions properly.
Issue Estoppel
Although they are separate doctrines, there is a close relationship between res judicata, issue estoppel and abuse of process. More recent authorities suggest they all fall under the general rubric of abuse of process by re-litigation. In Spalla v St George Motor Finance Ltd (ACN 007 656 555) (No.6) [2004] FCA 1699, French J (as he then was) said at [67]:
“The considerations of public policy which underlie res judicata and issue estoppel help to define the scope of abuse of process by re-litigation generally. As Lord Hoffman said in Arthur JS Hall & Co v Simons [2000] 3 WLR 543 at 572, the underlying policies are that a defendant should not be troubled twice for the same reason and that there is ‘a general public interest in the same issue not being litigated over again’. Lord Hoffman observed that the second rationale could be used to justify the extension of the rules of issue estoppel to cases in which the parties are not the same but the circumstances are such as to bring the parties within the spirit of the rule.”
Issue estoppel was the second of three forms of estoppel described in Tomlinson v Ramsey Food Processing Pty Limited (2015-16) 256 CLR 507 by French CJ, Bell, Gageler and Keane JJ at 517-518, [22]:
“…The second form of estoppel is almost always now referred to as "issue estoppel. Estoppel in that form operates to preclude the raising in a subsequent proceeding of an ultimate issue of fact or law which was necessarily resolved as a step in reaching the determination made in the judgment. The classic expression of the primary consequence of its operation is that a “judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies”...”
In Ekes v Commonwealth Bank of Australia [2014] NSWCA 336 Bathurst CJ (with whom Beazley P and Emmett AJA agreed) said that for an issue estoppel to arise:
[110] …it is necessary that it be established that the same question arises, that the judicial decision said to create the estoppel was final and that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies: Carl Zeiss Stiftung v Rayner & Keeler Ltd [1967] 1 AC 853 at 935 and Kuligowski v Metrobus [2004] HCA 34; (2004) 220 CLR 363 at [21].
The questions of identity of parties and the finality of the Supreme Court judgment are key elements in assessment of the arguments of Company B considered in these reasons.
The parties or their privies
Company B relied upon the decision in S.C.F. Finance v Masri [1987] QB 1028 as authority for the proposition that an application to discharge a freezing order could create an issue estoppel. Relevantly in that case, the plaintiffs commenced substantive proceedings against a husband as first defendant. A Mareva order was made which covered certain moneys standing to the credit of his wife in London bank accounts on the basis they were in truth owned by the husband. The wife was joined as second defendant. She applied to have the Mareva order discharged on the basis that she owned the moneys. This application was adjourned. On 4 July 1985 the plaintiffs obtained a monetary judgment in the substantive action against the husband. After an unsuccessful appeal, the wife’s application for discharge was specifically listed for final hearing on 8 July 1985, as the “remaining part of the proceedings”. When it was set down counsel for the defendants stated that the wife’s application involved a simple issue, namely, “who owns the money” (at 1035). On 8 July 1985, the wife’s application was called on. Both she and the husband appeared. The wife through her counsel announced that she had decided not to proceed with her application for discharge. Her counsel made clear that the decision not to proceed involved no concession about the ownership of the moneys. The wife’s application was dismissed with costs.
Masri (supra) is often cited as an example of issue estoppel arising by the dismissal of an action without a hearing on the merits. The Court of Appeal held that the dismissal founded an estoppel on the question of who owned the money. However, for present purposes the important point of comparison is that the issue estoppel arose from an application to discharge a Mareva order.
However, the joinder of the wife as a party in Masri (supra) is an important difference to the present matter. It is apparent from the report in Masri that the hearing listed on 8 July1985 was to be a final hearing “on the merits” of the question of who owned the enjoined moneys. The two possible owners of the enjoined moneys were both formally joined as parties to the substantive proceedings and present when the final hearing was called on. I will return to this point later in these reasons.
As already pointed out, Ms Kim was not a party to the substantive Supreme Court proceedings at any stage. Those parties were Company B and Mr Rivera. Nor was she a privy of Mr Rivera in the requisite sense. Traditionally, privity of interest involves a mutual or successive relationship to the same right. The privy must claim "under or through" the person whose privy he or she is said to be: Ramsay v Pigram [1968] HCA 34; (1968) 118 CLR 271 (at 279).
Issue estoppel can in some circumstances bind a third party. As Brereton J explained in In the matter ofHIH Insurance Limited (in liquidation; De Bortoli Wines (Superannuation) Pty Ltd & anor v McGrath & ors [2014] NSWSC 774 at [45] Lord Hoffman's statement in Arthur JS Hall, referred to with apparent approval by French J in Spalla, above, extended the rules of issue estoppel to cases in which the parties are not the same but the circumstances are such as to bring the parties within the spirit of the rule.
Ms Kim might be thought to fall within the category of third party as considered by Brereton J in HIH Insurance (supra). But even that classification is problematic. She was a respondent to the application for a freezing order for the purposes of Division 2 of Part 25 of the UCP Rules. In the context of Part 25 she held a status expressly designated by the defined term “respondent” in Rules 25.10 and 25.13. She was also in direct contest with Company B on the hearing of the issues said to justify an extension or a discharge of the freezing order. To that extent she could be described as a “party” to Company B’s application for a freezing order, even if she was more akin to a third party in relation to the substantive Supreme Court proceedings.
However, on any view Ms Kim was a party only in the limited sense just described. She did not hold the status of a party, or third party, so as to fall within the rules of issue estoppel. This is because of the nature of the hearing before Ball J in which he made the relevant determinations of fact and law upon which Company B relies.
Interlocutory Decision
The statement of principle in Ekes (supra), above, suggests that issue estoppel can only arise out of a final decision, following numerous earlier statements of principle including in Carl Zeiss Stiftung v Rayner & Keeler Ltd (No.2)( [1967] 1 AC 853 at 935.
The Supreme Court judgment was not final. There are several reasons for this conclusion. The decision of Ball J extended the freezing order made pursuant to Rule 25.14(5) of the UCP Rules. The freezing order was predicated upon the Supreme Court’s satisfaction that there existed a “good arguable case” in the substantive proceedings against Mr Rivera. Such an order made because, having regard to all the circumstances, the Supreme Court was satisfied either “there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied” or a “process in the court is or may ultimately be available ... under which process [the respondent] may be obliged to disgorge assets.” This was because Ms Kim was in a position to control or influence the disposition of the proceeds of sale of Property A (Supreme Court judgment at [2]). The freezing order was therefore of a well-known type designed to prevent frustration of the ordinary processes of, and enforcement of the judgments of, the Supreme Court, in the event the substantive proceedings against Mr Rivera were successful, by preventing the dissipation of assets which may be available to satisfy any judgment against him.
Rule 25.14 reflects general law concepts developed in accordance with Mareva injunctions: TZ Ltd v ZMS Investments Pty Ltd [2010] NSWSC 196 at [6]; Samimi v Seyedabadi [2013] NSWCA 279 at [72]. Barrett J also observed in TZ Ltd (supra) at [23] that when hearing applications pursuant to Rule 25.14 of the UCP Rules the Court
“is working with limited material and cannot be expected to make more than a preliminary appraisal of the viability of the plaintiff's case” and “the threshold represented by the "good arguable case" test is not a particularly exacting one and is satisfied if the case put forward is "more than barely capable of serious argument."”
In my view, a hearing on a notice of motion brought by a non-party respondent to discharge a freezing order made under Rule 25.14 of the UCP Rules is properly characterised as an interlocutory hearing. Consequently, the decision resulting from the hearing is an interlocutory decision.
However, it has been recognised that an interlocutory decision can involve a final determination sufficient for issue estoppel, despite an obvious element of circularity or inherent tension in the concept of a final determination in an interlocutory judgment.
In Castillon v P&O Ports Ltd [2007] QCA 364, Holmes JA (with whom Wilson J agreed) examined at some length the relevant decisions touching upon this issue, including the judgment of Lord Guest in Carl Zeiss Stiftung and Makhoul v Barnes ((1995) 60 FCR 572) to which Company B made reference. It is helpful to set out at some length her discussion:
[55] Closer to home, the New Zealand Court of Appeal, in Joseph Lynch Land Co Ltd v Lynch ([1995] 1 NZLR 37) accepted, at least in principle, that an interlocutory judgment could found a subsequent issue estoppel; the question was, “concerned not so much with the character of the earlier decision, ie whether it should be regarded as final or interlocutory . . .[but] rather whether in the circumstances it is reasonable to regard the earlier decision as a final determination of the issue which one of the parties now wishes to raise.” (At 43) That said, the Court urged caution in coming to the conclusion that an estoppel had been created by a decision given in an interlocutory context.
[56] In Makhoul v Barnes ((1995) 60 FCR 572) the full Federal Court described as “too broadly expressed” the proposition (expressed by a single judge in an earlier decision) that the determination of an issue determined in interlocutory proceedings could not give rise to an issue estoppel. The Court referred to Carl Zeiss Stiftung (No 3) and Joseph Lynch Land Co as indicating that the correct approach was to consider whether the earlier decision ought to be regarded as a final determination of the issue, rather than focussing on the nature of the proceedings. (At 583)
[57] In Santos v Delhi Petroleum Pty Ltd ([2002] SASC 272) Lander J, with whom the other members of the South Australian Full Court agreed, considered the question. It was relevant, but not decisive, his Honour said, that the decision was made in an interlocutory application. The question must be answered: ‘[not] by reference to whether the application is interlocutory or otherwise but by reference to the order itself and whether it amounts to a final determination such that it is not only impractical to bring the issue before the court but impermissible.’ (At para [400]) An issue resolved on an interlocutory application could, if it finally determined the issue between the parties, give rise to an issue estoppel. That view was cited with approval by the New South Wales Court of Appeal in Inasmuch Community Inc v Bright. ([2006] NSWCA 99 at [60])
[58] Decisions made for the purpose of determining whether an order is final rather than interlocutory so as to give a right of appeal are not, as Handley JA, writing extra-curially has pointed out, (Handley K, “Res Judicata: General Principles and Recent Developments” (1999) 18(3) Aust Bar Rev 214) necessarily of assistance. As much can be seen from the rationale given in Carr v Finance Corporation of Australia Ltd (No 1) ((1981) 147 CLR 246 at 248) for the approach taken in that context. Gibbs CJ observed that the test in Licul v Corney, ((1976) 180 CLR 213) of whether the judgment or order appealed from finally determined the rights of the parties, required the court to have regard to the legal, as opposed to the practical, effect of the judgment. Otherwise uncertainty would result, and in some instances the court would have to investigate the facts and the course of the proceeding in order to determine the practical effect of the order; ‘an inquiry quite inappropriate when the only issue is whether a right of appeal exists.’ ((1981) 147 CLR 246 at 248) Mason J similarly regarded the disadvantage of having to undertake ‘an examination of the grounds on which the application to set aside was made, the grounds on which it was refused and the formation of a judgment as to the impact of the grounds of refusal on the prospects of bringing a second application’ (At 256) as militating against such an approach to classification in determining whether an appeal lay as of right. But such an exercise is, in contrast, appropriate in determining whether an issue estoppel exists; then, it is necessary to consider precisely what was decided and its actual effect in binding the parties.”
Following Castillon (supra) the Victorian Supreme Court stated the principle succinctly in PPP v QQQ as the representative of the Estate of RRR (deceased) (06 May 2011) [2011] VSC 186 as follows:
[18] In estoppel cases the test is whether it is reasonable to regard the interlocutory decision as a final determination of the issue. See generally, Somodaj v Australian Iron and Steel Ltd (1963) 109 CLR 285 at 296; [1963] HCA 50; Joseph Lynch Land Co Ltd v Lynch [1995] 1 NZLR 37 at 43 (CA); Makhoul v Barnes (1995) 60 FCR 572 at 583; Re Martin; Ex parte Amtron Australia Pty Ltd (1996) 62 FCR 438; (1996) 141 ALR 117; Mullen v Conoco Ltd [1998] QB 382 at 391; Castillon v P & O Ports Ltd (No 2) [2008] 2 Qd R 219 at [49]–[58]; [2007] QCA 364.
The authorities therefore establish that an interlocutory decision may finally determine an issue for the purpose of the doctrine of issue estoppel, where it is reasonable to regard the interlocutory decision as such a final determination. In such an exercise it is necessary to consider precisely what was decided and its actual effect in binding the parties. The question is not simply whether the Supreme Court judgment was interlocutory but whether it can reasonably be regarded as finally having disposed of, or settled, the parties’ substantive rights.
There have been numerous judicial statements which militate against a conclusion that a decision either granting or refusing an interlocutory injunction could create an issue estoppel, for the very reason it does not finally dispose of the parties’ rights. In Carl Zeiss Stiftung (supra) the example of an interim injunction was pointed to as the type of decision unlikely to create an issue estoppel because it is subject to alteration by the court or tribunal making it. This is consistent with the rule of practice recognised in the Supreme Court of NSW and expressed by McLelland J in Brimaud v Honeysett Instant Print Pty Limited (1988) 217 ALR 44 at 46–47 as follows:
“Interlocutory orders, of their very nature, create no res judicata or estoppel, and the Court retains jurisdiction to set aside, vary or discharge an interlocutory order up to the time of the final disposition of the proceedings.”
Although in a different context, in Nominal Defendant v Manning [2000] NSWCA 80 when commenting on the meaning of s 75A (8) of the Supreme Court Act1970 (NSW) which uses the expressions “trial or hearing on the merits”, Heydon JA said at [55]
“the expression would not include a hearing on whether an interlocutory injunction should be granted, because that type of hearing is not a hearing on the ultimate substantive merits of the case, only on whether there is a serious question to be tried and where the balance of convenience lies.”
The learned authors of Spencer, Bower and Handley, Res Judicata (Lexis Nexis, 4th, 2009) say at [5.32]:
“The dismissal of an interlocutory application on procedural grounds or on the merits is not final and does not bar a further application although that is not likely to succeed unless supported by additional evidence or a different argument…Interlocutory order in matters of practice and procedure, such as an interlocutory injunction, remain under the control of the court…Such questions do not decide any question finally, not even whether there should be an interlocutory injunction, or its terms.”
Such pronouncements are made at a high level of generality. As the discussion in Castillon (above) makes clear, it is also necessary to give some close attention to precisely what Ball J determined.
It is clear from the Supreme Court judgment that the ultimate question for determination by Ball J was whether the freezing order should continue. This determination relied upon him forming the view there was “a danger that a judgment or prospective judgment will be wholly or partly unsatisfied” or “a process in the court is or may ultimately be available ... under which process [the respondent] may be obliged to disgorge assets or contribute toward satisfying the judgment or prospective judgment.” He was thus deciding whether a “danger” existed which may adversely affect the integrity of the court’s processes, or Ms Kim “may” become obliged to disgorge assets. In order to form either view, Ball J reached an interlocutory conclusion as to whether Property A was subject to a binding financial agreement under s.90C of the Act ([4], [5]). As set out above, for the purposes of the Supreme Court judgment, the answer to this question depended on two factual issues: whether Ms Kim and Mr Rivera were divorced prior to 4 November 2016 when the agreement was entered into and whether there was evidence that s.90G(1)(ca) of the Act had been satisfied by Mr Rivera receiving a copy of the statement of legal advice given to Ms Kim.
As to the question of divorce, Ball J concluded, on the evidence before him, Mr Rivera had not lived in Australia since November 2014 and Ms Kim initiated divorce proceedings in China in about April 2016. He therefore inferred Mr Rivera was ordinarily resident in China when Ms Kim initiated divorce proceedings there. He then said at [21]
“Absent any other evidence, that is sufficient to conclude that the divorce satisfies the requirements of s.104 and consequently will be recognised in Australia.”
On the question the satisfaction of s.90G(1)(c) Ball J said at [22]
I also accept Company B’s submission that there is no evidence that the requirements of s 90G(1)(ca) of the Family Law Act have been satisfied. The only evidence that Mr Rivera was given a copy of the statement provided to Ms Kim under s 90G(1)(c) is the receipt that he signed on 1 November 2016. However, that cannot be evidence that he was given a copy of the statement because that statement could not have been in existence at the time he gave the receipt, since the statement is dated 4 November 2016. There is no other evidence that Mr Rivera was given a copy of the statement provided to Ms Kim under s 90G(1)(c).
At [23] of the Supreme Court judgment Ball J also gave consideration to s.90G(1A) of the Act saying:
Under s 90G(1A) a financial agreement may be binding even if, relevantly, s 90G(1)(ca) has not been complied with if “a court is satisfied that it would be unjust and inequitable if the agreement were not binding on the spouse parties to the agreement”. However, there is no material before the court from which it is possible to conclude that it would be unjust and inequitable if the agreement were not binding.
In my view these are the type of interlocutory factual conclusions routinely made on interlocutory applications where the court does not have the benefit a party’s full preparation of evidence, testing through cross examination and final argument. Ball J did not finally determine or dispose of the rights of the parties in relation to the agreement. Rather he made some factual findings for the limited purpose of deciding whether there existed a relevant “danger” or possibility of disgorgement of assets by Ms Kim, so as either to discharge or continue an interlocutory injunction, designed to protect the integrity of the court’s processes. As Dixon J said in Blair v Curran (1939) 62 CLR 464 at 533: “Findings, however deliberate and formal, which concern only evidentiary facts and not ultimate facts forming the very title to rights give rise to no preclusion. Decisions upon matter of law which amount to no more than steps in a process of reasoning tending to establish or support the same proposition upon which the rights depend do not estop the parties if the same matters of law arise in subsequent litigation.”
One further point can illustrate clearly why it would not be reasonable to view the Supreme Court judgment as final. To treat the conclusions of Ball J as a final determination, would have, according to Company B, the consequence of precluding Ms Kim from making any case for a declaratory order in this court pursuant to s.90G(1A) that the agreement was binding, on the basis that that “it would be unjust and inequitable if the agreement were not binding” on Ms Kim and Mr Rivera. It is true that Ball J specifically observed that “there is no material before the court from which it is possible to conclude that it would be unjust and inequitable if the agreement were not binding.” But that conclusion could not be construed as final. As was made clear in the Supreme Court judgment itself, Ball J was not considering any relief under, nor exercising any jurisdiction under, the Act. In pressing her interlocutory application, Ms Kim might have sought to, but at that stage was not obliged to, lead evidence about justice and equity under s.90G(1A) in order to discharge the freezing order. But in my view, even if she had done so, the formation of view by Ball J about such evidence could not have resulted in a final determination of the satisfaction required by s.90G(1A)(c) in the context of an application regarding a Part 25 freezing order. For the same reason nor could the absence of such evidence.
I am satisfied that although there was some investigation of what might be called the “merits” of arguments regarding the agreement, it neither required nor involved any final disposition of rights. It is not reasonable to regard the Supreme Court judgment as such a final determination. It was an interlocutory determination against a non-party to substantive litigation, who was a respondent for the limited purpose of Division 2 of Part 25 of the UCP Rules and a freezing order.
The force of this conclusion can be tested by comparing the position of Mr Rivera to that of Ms Kim in the Supreme Court proceedings. On the application for the freezing order Company B had only to satisfy the “good arguable case” test against Mr Rivera, a test which, as Barrett J said in TZ Ltd, is satisfied if the case put forward is "more than barely capable of serious argument." It is clear from the authorities discussed above that the Supreme Court judgment could not in those circumstances give rise to any issue estoppel against Mr Rivera on Company B’s substantive claim against him. It would therefore be surprising if it could nonetheless create an issue estoppel against him for some other purpose. Moreover, Mr Rivera was a party to the Supreme Court proceedings. It would be an even more surprising result if the Supreme Court judgment could give rise to an issue estoppel against Ms Kim, who was not a party.
It is here that the central differences to the decision in Masri (supra) should be emphasised. As discussed above, in Masri (supra) the wife was joined as a party to the substantive proceedings. The issue of ownership of the moneys was listed for a final hearing. Those factors are absent from the hearing before Ball J and the Supreme Court judgment.
It is also relevant that Order 3 sought by Ms Kim in her Second Further Amended Response seeks a declaration that the agreement “be one made pursuant to s.90D of the Family Law Act 1975 (Cth).” This appears to be relief in the nature of rectification of the agreement. Ball J was not asked to consider rectification. The possibility of rectification is, however, another indication that there has been no final determination of rights.
Company B argued that Ms Kim would be estopped from arguing rectification on the basis of the principle in Port of Melbourne Authority v Anshun (1981) 147 CLR 589, because Ms Kim could have sought an order for rectification from Ball J. I do not accept this argument.
The structure of Part VIIIA of the Act distinguishes between “financial agreements” (ss.90B, 90C and 90D) and such agreements which are “binding” because they comply with s.90G: Senior & Anderson[2011] FamCAFC 129; (2011) FLC ¶93-470; 45 Fam LR 540 at [94]. Only “binding” financial agreements oust the jurisdiction of this Court under Part VIII of the Act. However, financial agreements have been held to be susceptible to the equitable doctrine of rectification in circumstances where its requirements are made out, and the requirements of s 90B, s 90C and s 90D, and can apply where the debate is whether a contract exists at all: Senior at [106]-[107]. In Senior a financial agreement was rectified by altering references to s.90C to s.90D. Rectification is a form of final relief. Such questions are properly decided through an exercise of the jurisdiction as to powers and the grant of legal and equitable remedies in respect of contracts given to this court by s.90KA of the Act, particularly s.90KA(a), which is the “same” as the High Court’s original jurisdiction. This is not a jurisdiction exercisable by the Supreme Court of NSW. It was reasonable for Ms Kim not to seek rectification before Ball J.
Company B’s reliance on issue estoppel fails.
Abuse of Process
An abuse of process may be found in subsequent litigation even where there is no issue estoppel. In Tomlinson the joint judgment of French CJ, Bell, Gageler and Keane JJ said:
[24] To explain contemporary adherence to the comparatively narrow principle in Ramsay v Pigram, it is appropriate also to explain the relationship between the doctrine of estoppel and the doctrine of abuse of process as it has since come to be recognised and applied in Australia. The doctrine of abuse of process is informed in part by similar considerations of finality and fairness. Applied to the assertion of rights or obligations, or to the raising of issues in successive proceedings, it overlaps with the doctrine of estoppel. Thus, the assertion of a right or obligation, or the raising of an issue of fact or law, in a subsequent proceeding can be simultaneously: (1) the subject of an estoppel which has resulted from a final judgment in an earlier proceeding; and (2) conduct which constitutes an abuse of process in the subsequent proceeding.
[25] Abuse of process, which may be invoked in areas in which estoppels also apply, is inherently broader and more flexible than estoppel. Although insusceptible of a formulation which comprises closed categories, abuse of process is capable of application in any circumstances in which the use of a court's procedures would be unjustifiably oppressive to a party or would bring the administration of justice into disrepute. It can for that reason be available to relieve against injustice to a party or impairment to the system of administration of justice which might otherwise be occasioned in circumstances where a party to a subsequent proceeding is not bound by an estoppel.
[26] Accordingly, it has been recognised that making a claim or raising an issue which was made or raised and determined in an earlier proceeding, or which ought reasonably to have been made or raised for determination in that earlier proceeding, can constitute an abuse of process even where the earlier proceeding might not have given rise to an estoppel. ...
Company B characterised the abuse alleged here as “the sort described in Reichel v Magrath (1889) 14 App Cas 665 at 668” as a “scandal to the administration of justice.” Reichel v Magrath was referred to by the High Court in Tomlinson in support of the propositions set out in paragraph [26] just cited.
A determination that an abuse of process has occurred is not strictly a discretionary decision. Rather, it is an evaluative decision of a subjective nature, regarding an issue upon which minds may differ: Ghosh v NineMSN Pty Ltd [2015] NSWCA 334 at [37] following Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; 226 CLR 256 at [7]).
Identity of parties is not necessary. As was made clear by the NSW Court of Appeal, in O’Shane v Harbour Radio Pty Ltd [2013] NSWCA 315; (2013) 85 NSWLR 698 at [99]–[111] at [105] a court may intervene to prevent an abuse, notwithstanding that the subsequent proceedings are not between the same parties or their privies. Rather, the court “will act upon an abuse of process where the use of the court’s procedures would bring the administration of justice into disrepute”. See also Angeleska (Known as Slaveska) v State of Victoria [2015] VSCA 140; Kermani v Westpac Banking Corporation [2012] VSCA 42; (2012) 36 VR 130, and the discussion of Brereton J in HIH Insurance, above.
The High Court in Tomlinson (supra) reaffirmed the position that the central concepts are the use of a court's procedures that would be unjustifiably oppressive to a party or would bring the administration of justice into disrepute.
In State Bank of New South Wales Ltd v Stenhouse Ltd (1997) Aust Torts Rep 81-423 (64,077). At 64,089, Giles CJ Comm D held a determination whether there was an abuse included the following factors: the importance of the issue in and to the earlier proceedings; the terms and finality of the finding as to the issue sought to be re-litigated; the identity between the relevant issues in the two proceedings; the extent of the oppression and unfairness to the other party if the issue is re-litigated, the impact of the re-litigation upon the principle of finality and on the public confidence in the administration of justice; as well as the overall balance of justice between the parties. The approach of Giles CJ was approved by the NSW Court of Appeal in Rippon v Chilcotin [2001] NSWCA 142; 53 NSWLR 198 per Handley JA at [32] (Mason P and Heydon JA agreeing). See also Haines v Australian Broadcasting Commission [1995] NSWSC 136; (1995) 43 NSWLR 404; R v O’Halloran [2000] NSWCCA 528; 159 FLR 260 at 293 per Heydon JA (Spigelman CJ and Mason P agreeing)
Although Ms Kim is seeking to re-litigate in this court issues the subject of interlocutory decision in the Supreme Court, I note that successive applications for interlocutory relief in the same court can constitute an abuse of process when they violate the principle of finality. It is well recognised that a subsequent application to set aside, vary or discharge an interlocutory order must be founded on a material change of circumstances, or the discovery of new material which could not reasonably have been put before the court on the hearing of the original application: Brimaud v Honeysett (above) at 46–47. In NSW, case management principles and imperatives in the Civil Procedure Act are also now acknowledged as important considerations in this area of discourse: Fletcher v Besser [2010] NSWCA 30. In the Federal Court of Australia, judges have also been guided by similar considerations: P Dawson Nominees Pty Ltd v Australian Securities and Investments Commission (No.2) (2009) 255 ALR 466; [2009] FCA 413; Australian Competition and Consumer Commission v Adata (Vic) Pty Ltd (No.2) [2015] FCA 272. Therefore it would have been open to Ms Kim to have brought successive applications in the Supreme Court to discharge the freezing order. Such applications would not necessarily be an abuse of process. The question would depend on the evidence relied upon and the circumstances at the time such applications were made, including case management issues.
However, where the relevant alleged re-litigation is taking place in another court, as here, the decisions by reference to which the principles of abuse of process by re-litigation have been articulated, have usually been final decisions, such as Stenhouse. Another example is Rippon v Chilcotin, above, in which purchasers of property were precluded from suing accountants in a second set of proceedings in which they attempted to re-litigate issues of reliance on representations which they had lost in earlier proceedings. The accountants were not parties to the earlier proceedings but this was held not to create oppression or unfairness. The second proceedings were held to be an abuse of process because they threatened the integrity of the administration of justice and raised the prospect of conflicting judgments.
However, interlocutory determinations can sometimes ground successful claims of abuse of process. Company B made reference to Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404 where Hunt CJ at CL upheld a claim of abuse of process in relation to a certain imputation in a defamation case. The plaintiff had a separate question concerning the alleged imputation decided against him, then attempt to re-litigate the same imputation in the guise of the different tort of injurious falsehood or misleading and deceptive conduct. In the court of his judgment Hunt CJ held that the issue must be one lost in the earlier case, of importance to the final result, and properly argued. Company B contends that those factors are present in the Supreme Court judgment.
But the decision in Haines merely confirms the need for the element of finality to be present in the determination. In that case the earlier proceeding had been the separate determination of a question pursuant to the then Part 31, Rule 2 of the Supreme Court Rules 1970. Although such a separate determination is treated as interlocutory, being a determination within existing proceedings, it is well also established that such separate determinations of law or fact will bind the parties, subject to any appeal, in the further conduct of the proceedings: Fidelitas Shipping Co Ltd v V/O Exportchleb [1966] 1 QB 630 at 642; [1965] 2 All ER 4 O’Toole v Charles David Pty Ltd (1991) 171 CLR 232 at 245, 260 and 295, since “That result is surely what the language and the context of the provision contemplate” per Mason CJ at 245.
More recently in Tyne (Trustee) v UBS AG (No.2) [2017] FCAFC 5 the Full Court of the Federal Court of Australia dealt with a situation where abuse of process had been claimed in the Federal Court where earlier proceedings in the Supreme Court of New South Wales were permanently stayed and were not decided on their merits. The stay was based in part upon the doctrine of res judicata, arising from a judgment in Singaporean proceedings. Consequently, no findings were made in the Supreme Court proceedings other than findings underlying the grant of the permanent stay. Abuse of process was upheld in the Federal Court by the primary judge. On appeal, the majority (Jagot and Farrell JJ) held therefore that the decision of the primary judge that there was an abuse of process was in error: at [90]-[98]. Again the relevant element of a final factual or legal determination was absent.
In the circumstances of this case, where the preceding determination of Ball J was interlocutory, with interlocutory findings of fact, and no final determination of substantive rights, it is difficult to see any oppression or unfairness to Company B or a threat to the integrity of the administration of justice. In this Court the same or similar issues will be litigated but in the context of the exercise of jurisdiction under the Act on a final basis. Specific relief under that Act is sought by Ms Kim and will ultimately be the subject of final determination in this court. It was common ground in the Supreme Court judgment that such relief was not being sought in that court, and nor could it. For those reasons it is difficult to see how Ms Kim’s application constitutes a use of this Court’s processes unjustifiably oppressive to Company B. For the same reasons, they could not threaten the integrity of the administration of justice. There is no prospect of conflicting final judgments.
Company B’s reliance on abuse of process also fails.
For the forgoing reasons I am not satisfied the Supreme Court judgment created either an issue estoppel or abuse of process which would preclude Ms Kim from arguing the agreement should be held to be a bind financial agreement within Part VIIIA. Therefore that question remains to be determined.
Finally, I observe that if the agreement is not “binding” under Part VIIIA of the Act, it could still have effect as an agreement. Company B sought to meet this possibility by reliance on provisions of the Duties Act1997 (NSW), submitting in short that the agreement if not “binding” would have no effect at all. I do not consider those submissions further in these reasons.
It should be recognised however that one consequence of the agreement not being “binding” under Part VIIIA, would be that this Court’s jurisdiction over the matrimonial assets of the parties pursuant to Part VIII would not be ousted. In such circumstances the effect of the agreement would be limited: DW & GT [2005] FamCA 161; (2005) 33 FamLR 177 at [37]-[39]; Senior at [96]. Mr Rivera and Ms Kim may be treated as co-owners for the purposes of considering the application of Part VIII of the Act. This would raise for debate the provisions of ss.75(2) and 79 of the Act and orders for just and equitable adjustment of property interests as between Ms Kim and Mr Rivera. In this process the interests of creditors are taken into account (s.75(2)(ha)) of the Act. Consideration as to whether Company B is a necessary party would then take place in circumstances where the agreement has no, or limited, effect and Company B may then be seeking enforcement of a judgment against Mr Rivera’s interest in Property A. I simply note these questions and express no concluded view about them at this stage.
I will not make formal orders. I will give the parties an opportunity to consider these reasons prior to 30 April 2018.
I confirm the hearing dates on 30 April and 1 May 2018.
I certify that the preceding eighty-three (83) paragraphs are a true copy of the reasons for judgment of Judge Harper
Date: 16 April 2018
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