Kramer & Another & Ward
[2017] FamCAFC 270
•21 December 2017
FAMILY COURT OF AUSTRALIA
| KRAMER AND ANOR & WARD | [2017] FamCAFC 270 |
| FAMILY LAW – APPEAL – where the appellant brought proceedings for property adjustment pursuant to s 90SM of the Family Law Act 1975 (Cth) where the trial judge made a declaration that there was no de facto relationship between the parties pursuant to s 90RD of the Family Law Act 1975 (Cth) – where there was money held on trust “pending court action” –where those funds represented the proceeds of sale of real property owned solely by the respondent where the trial judge made orders releasing the trust funds to the respondent – where the funds were subsequently released to the appellant – where the trial judge ordered that the appellant and his solicitor be jointly and severally liable for the repayment to the respondent of those funds – where the trial judge directed the Marshal to make an application for contempt pursuant to r 19.02(4) of the Federal Circuit Court Rules 2001 (Cth) – where the appellant and his then solicitor appeal those orders. FAMILY LAW – APPEAL JURISDICTION – whether the trial judge had jurisdiction to make the order releasing the trust funds – whether the court’s jurisdiction was exhausted upon the making of the declaration that there was no de facto relationship – whether the court’s jurisdiction was exhausted such that the trial judge could not make an order requiring the repayment of those funds – whether the trial judge had jurisdiction or power to make an order that the appellant and his solicitor be jointly and severally liable for the repayment of the funds – where the trial judge could not make an order that the appellant and his solicitor be jointly and severally liable for the repayment of the funds but where his Honour did have jurisdiction and power to set aside the disbursal of the funds, including insofar as the solicitor received any of those funds. FAMILY LAW – APPEAL – DE FACTO RELATIONSHIP – whether the trial judge denied the appellant procedural fairness in the hearing and determination of the existence of a de facto relationship – where the issue was set down for discrete hearing – where each party filed affidavit material – where the appellant was examined – where counsel who appeared for the appellant before the trial judge conceded that there was no evidentiary basis upon which a declaration could be made as to a de facto relationship – where no error demonstrated. FAMILY LAW – APPEAL – CONSTRUCTION OF TRUST – where the appellant and his solicitor contend that if the trial judge had jurisdiction to make an order releasing the trust funds, his Honour’s discretion miscarried because releasing the funds to the respondent was based upon an erroneous construction of the trust – where the appellant and his solicitor contended that upon the proceeds of sale being deposited into trust, the appellant was the only person with a beneficial entitlement to those funds or, alternatively, each of the appellant and respondent had only a contingent entitlement – where the appellant contended that “pending court action” ought to be interpreted to mean alternative court actions than just the court action in the Federal Circuit Court – consideration of Harmer v Federal Commissioner of Taxation (1991) 173 CLR 264 and Dwight v Commissioner of Taxation (1992) 37 FCR 178 – appeal dismissed. |
| Family Law Act 1975 (Cth) Federal Court of Australia Act 1976 (Cth) Family Law Rules 2004 (Cth) |
| Australian Competition & Consumer Commission v The Shell Company of Australia Ltd (1997) 142 ALR 569; (1997) 72 FCR 386 Bienstein v Bienstein (2003) FLC 93-124 Browne & Keith (2015) 55 Fam LR 208; [2015] FamCAFC 143 Byrnes v Kendle (2011) 243 CLR 253; [2011] HCA 26 Dwight v Commissioner of Taxation (1992) 37 FCR 178 Federal Capital Commission v Laristan Building & Investment Co Pty Ltd (1929) 42 CLR 582; [1929] HCA 36 Felton v Mulligan (1971) 124 CLR 367; [1971] HCA 39 Harmer v the Commissioner of Taxation of the Commonwealth of Australia (1991) 173 CLR 264; [1991] HCA 51 Harrison & Ward and Anor [2017] FamCAFC 99 In the marriage of Whitaker (1980) FLC 90-813 Jackson v Sterling Industries Ltd (1987) 162 CLR 612; [1987] HCA 23 Kavan & Mallery (2015) FLC 93-651; [2015] FamCAFC 82 Kohan and Kohan (1993) FLC 92-340 LNC Industries Ltd v BMW (Australia) Ltd (1983) 151 CLR 575; [1983] HCA 31 Metwally v University of Wollongong (1985) 60 ALR 68 Mitty & Mitty and Ors (2010) 45 Fam LR 20; [2010] FamCAFC 256 Moorgate Tobacco Company Ltd v Philip MorrisLtd (1980) 145 CLR 457; [1980] HCA 32 Oswald & Karrington (2016) FLC 93-726; [2016] FamCAFC 152 Prantage & Prantage (2013) FLC 93-544 R v Bevan; Ex parte Elias and Gordon (1942) 66 CLR 452; [1942] HCA 12 |
| APPELLANT: (NA 4 of 2017) | Mr Kramer |
| APPELLANT: (NA 6 of 2017; NA 13 of 2017) | Mr Harrison |
| FIRST RESPONDENT: (NA 4 of 2017; NA 6 of 2017; NA 13 of 2017) | Ms Ward |
| FILE NUMBER: | BRC | 4572 | of | 2016 |
| FIRST APPEAL NUMBER: | NA | 4 | of | 2017 |
| SECOND APPEAL NUMBER: | NA | 6 | of | 2017 |
| THIRD APPEAL NUMBER: | NA | 13 | of | 2017 |
| DATE DELIVERED: | 21 December 2017 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Strickland, Kent & Cronin JJ |
| HEARING DATE: | 19 July 2017 |
| LOWER COURT JURISDICTION: | Federal Circuit Court of Australia |
| LOWER COURT JUDGMENT DATE: | 2 November 2016; 20 January 2017; and |
| LOWER COURT MNC: | [2016] FCCA 3454; [2017] FCCA 168 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT (NA 4 OF 2017): | Mr H Alexander |
| SOLICITOR FOR THE APPELLANT (NA 4 OF 2017): | Kramer Law |
| COUNSEL FOR THE APPELLANT (NA 6 AND NA 13 OF 2017): | Mr Galloway with Ms McLennan |
| SOLICITOR FOR THE APPELLANT (NA 6 AND NA 13 OF 2017) : | Aejis Legal |
| COUNSEL FOR THE FIRST RESPONDENT: | Ms Dart with Ms Buckley |
| SOLICITOR FOR THE FIRST RESPONDENT: | Hartley Healy |
Orders
Appeal Number NA 13 of 2017 from the orders of Judge Vasta dated 2 November 2016 and 20 January 2017 be dismissed.
Appeal Number NA 6 of 2017 from the orders of Judge Vasta dated 31 January 2017 be dismissed.
Appeal number NA 4 of 2017 from the orders of Judge Vasta dated 20 January 2017 is allowed in part, those orders be set aside, and in their place the following orders be made:
1. Pursuant to s 106B of the Family Law Act 1975 (Cth), the release of the funds to Mr Harrison from the funds formerly held in the trust account of Kramer Tax Pty Ltd is set aside.
2. Mr Harrison be, and is hereby liable to forthwith pay to, the trust account of the solicitors for Ms Ward a cash sum equal to:
(a)The total amount released to him on or about 8 November 2016 from the trust account of Kramer Tax Pty Ltd, plus
(b)Interest on the said sum or any proportion of that sum as remains outstanding calculated at the rate of 5 per cent per annum compound from the date of release of the amount on or about 8 November 2016 to the date of payment to the trust account of the solicitors for Ms Ward.
PROVIDED THAT the amount of $50,000 be deducted from the total of (a) and (b) in arriving at the total sum to be paid in compliance with this order.
3. Mr Kramer be, and is hereby liable to forthwith pay to the trust account of the solicitors for Ms Ward a cash sum equal to:
(a)The total of any amounts withdrawn from the corpus of, and accretions to, the trust fund originated by the deposit into the Kramer Law Practice Trust Account on or about 13 May 2015 of the sum of $197,133.17 LESS the total amount or amounts released to Mr Harrison from the trust account of Kramer Tax Pty Ltd on or about 8 November 2016, plus
(b)Interest on such withdrawn amount or amounts calculated at the rate of 5 per cent per annum compound from the date of withdrawal of the amount to the date of payment.
In respect of appeals numbered NA 6 of 2017 and NA 13 of 2017 Mr Harrison pay the costs of Ms Ward of and incidental to each of those appeals on an indemnity basis such costs to be agreed or, failing agreement, to be assessed with such costs to be paid within thirty (30) days of agreement or assessment.
In respect of appeal NA 4 of 2017 Mr Kramer pay the costs of Ms Ward of and incidental to the appeal on an indemnity basis such costs to be agreed or, failing agreement, to be assessed with such costs to be paid within thirty (30) days of agreement or assessment.
Pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth) the Court approves of and directs the Appeals Registrar to publish these orders and reasons for judgment to each of the Queensland Law Society and the Legal Services Commission of Queensland.
Pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth) the Court approves of the publication of copies of any document in relation to this matter as may be requested by either the Queensland Law Society or the Legal Services Commission.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Kramer and Anor & Ward has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NA 4 of 2017
File Number: BRC 4572 of 2016
| Mr Kramer |
Appellant
And
| Ms Ward |
First Respondent
And
| Mr Harrison |
Second Respondent
Appeal Number: NA 6 of 2017; NA 13 of 2017
File Number: BRC 4572 of 2016
| Mr Harrison |
Appellant
And
| Ms Ward |
First Respondent
And
| Mr Kramer |
Second Respondent
REASONS FOR JUDGMENT
Background facts and proceedings
On 18 May 2016 Mr Harrison filed an initiating application in the Federal Circuit Court of Australia in which it was asserted that Mr Harrison and Ms Ward were in a de facto relationship between 9 December 2012 and 9 February 2015, a total of two years and two months. He sought property adjustment orders consequent upon the breakdown of the asserted de facto relationship. Those orders sought “a lump sum payment of $150,000 from [Ms Ward] to [Mr Harrison] to reflect the financial advances made by [him] to [her,] other financial and non-financial contributions made toward the relationship …”, which payment was to be made from funds then held in the trust account of an entity referred to as “Kramer Tax Pty Ltd”. Mr Harrison additionally sought to retain as his sole property, real property owned by him valued at $210,000, his motor vehicle, a truck, the contents of his home and cash savings he recorded as being in an amount of about $190.
Ms Ward disputed the existence of any de facto relationship between the parties and sought that Mr Harrison’s initiating application be dismissed.
The funds held in the trust account (“the trust funds”) represented the proceeds of sale of a real property in Western Australia (“the Western Australia property”) which Ms Ward had owned in her sole name since 1995 and which was sold in early May 2015. At some time prior to its sale, Mr Harrison had lodged a caveat over the title of that property. It seems that in order to have Mr Harrison remove the caveat over the Western Australia property to enable its sale to settle, Ms Ward agreed to deposit the nett proceeds of sale into the trust account of Kramer Law, the sole legal practitioner firm of Mr Kramer who was acting as solicitor for Mr Harrison.
On 29 April 2015, Ms Ward signed an authority directed to the settlement agents acting on her behalf in the conveyance of the Western Australia property. Given the significance placed upon the terms of this document by counsel who appeared for Mr Kramer on appeal, it is necessary to set out the terms of that document in full:
I [Ms Ward] give you authority to settle the above property and pay the attached accounts from the proceeds.
I acknowledge that funds pertaining to the caveat will be held by [Kramer] Lawyers acting on behalf of [Mr Harrison] pending court action.
(Emphasis added)
There is no dispute that at the time of settlement of the sale of the Western Australia property, the sum of $197,133.17 was deposited into the Kramer Law Practice Trust Account.
Proceedings were not then commenced by Mr Harrison, with Mr Kramer acting for him, until May 2016, some nearly 12 months after the sale proceeds were paid into the Trust Account.
At some later time, although unknown to and not within the means of knowledge of Ms Ward until late November 2016, Mr Kramer as sole principal of his firm Kramer Law caused the total trust fund to be removed from the Kramer Law Practice Trust Account and instead placed into the Trust Account of Kramer Tax Pty Ltd, a non‑law practice trust account. At all material times Mr Kramer was the sole director and shareholder of Kramer Tax Pty Ltd. Thereafter, the sum of $197,266.77 was caused by Mr Kramer to be placed into a Westpac Term Deposit, with the “designator” recorded as “ATF [Mr Harrison]” with a maturity date of 31 January 2016. It is unclear on the material before the Court what happened to the funds upon their maturity, given that, as discussed below, they were not released until November 2016.
It became apparent before the trial judge in October 2016 that there was a dispute between the parties as to whether or not they had ever been in a de facto relationship within the meaning of Part VIIIAB of the Family Law Act 1975 (Cth) (“the Act”). His Honour set down the hearing and determination of this discrete issue for 2 November 2016.
Each of Mr Harrison and Ms Ward had filed an affidavit and a financial statement in support of their respective cases.
The evidence contained in Mr Harrison’s affidavit fell well short of establishing any fact necessary to demonstrate the existence of a de facto relationship. While Mr Harrison asserted that he and Ms Ward “shared a physical, emotional, domestic and financial relationship”, such a statement is conclusory and was not supported by any facts which might enable a court to be satisfied of such a conclusion.
Given this lack of factual basis, when the trial commenced on 2 November 2016, Mr Harrison was sworn to give oral evidence and was initially asked some questions by the trial judge.
The evidence which flowed from Mr Harrison orally, if taken at its highest, established that:
a)On 9 December 2012, Mr Harrison called Ms Ward and she asked him to “come over and have a talk…”; (Transcript 2 November 2016 p 8, l 41-42)
b)Mr Harrison then went over to her house, “took some money” (although he does not say why, how much or what was done with that money), and Ms Ward became upset about trouble she was having with her next door neighbour; (Transcript 2 November 2016 p 9, l 7)
c)Ms Ward told Mr Harrison that there was a VRO [presumably a violence restraining order] in place against her and her neighbour had installed a camera; (Transcript 2 November 2016 p 9, l 12-13)
d)Ms Ward asked Mr Harrison if there was anything he could do to assist her with her difficulties with her neighbour; (Transcript 2 November 2016 p 9, l 13-15)
e)Mr Harrison thereafter “proceeded in full thrust to try and sort out the issues in every angle that’s possible to mankind”; (Transcript 2 November 2016 p 9, l 15-17)
f)Mr Harrison left Ms Ward’s property on 9 December and returned on 11 December; (Transcript 2 November 2016 p 9, l 24-30)
g)Mr Harrison returned to Ms Ward’s property on 11 December and slept in a bus in the backyard and he “proceeded to try and start a situation there” (although what is meant by this statement is unclear) in relation to the difficulties she was said to be having with her neighbours and “the courts”; (Transcript 2 November 2016 p 9, l 32)
h)On 11 December, Ms Ward asked him to sleep in the bus on the premises “and make sure everything is safe in the house and the premises for [her], and help [her] look after ….. without having any sex”; (Transcript 2 November 2016 p 9, l 43-47)
i)The parties had sex “about a week and a half, two weeks later, and that was the extent of the sexual relationship within the confines of the house…”; (Transcript 2 November 2016 p 9, l 47)
j)He then remained living in the bus at the back of the house from December 2012 until March “two thirteen”; [presumably 2013]; (Transcript 2 November 2016 p 11, l 3-8)
k)After March 2013, Mr Harrison moved back to Queensland and thereafter the parties kept in touch “very, very periodically” (Transcript 2 November 2016 p 11, l 10-11).
Mr Harrison did not assert at any point of his oral evidence at trial that he had ever given or loaned or advanced or otherwise provided Ms Ward with any money.
The extent of Mr Harrison’s affidavit evidence as to financial arrangements or contributions between he and Ms Ward can be summarised as follows:
a)They “shared a … financial relationship”;
b)He “would support her by advancing her money and paying her bills and paying for food”;
c)He “paid $904.65 in fines for her”;
d)He “helped her with [credit] card payments” in an unparticularised amount and at an unparticularised time;
e)“[Ms Ward] would ask [Mr Harrison] for money. She said he [sic] didn’t have any money to pay bills. She used to bring out bills and show me and I used to try and settle her down and break it up.” While he asserts that Ms Ward asked him for money and he would attempt to calm her distress at not being able to afford her bills, again, he does not assert that he met those expenses for her or, if he did, in what amount;
f)“[Ms Ward] sent [him] some pretty nasty texts about not giving her money…” again, an assertion about not providing her money;
g)“[Mr Harrison] kept giving her money. Eventually [he] was starting to run out of money…”;
h)“In or about April 2014 [Mr Harrison] said to her: ‘I can’t keep supporting you; I am going to go down fast’”;
i)“During [the parties’ asserted] relationship [Mr Harrison] spent over $366,000.00 in expenditure on [Ms Ward] … This expenditure on [her] was funded by an inheritance from [his] late mother’s estate of $414,984.49 received on 28 March 2014.”
Mr Harrison annexes what he asserts are bank statements, invoices and schedules which evidence money either given to or paid to third parties on behalf of Ms Ward. He does not proffer any explanation as to how he has identified those transactions on the bank statements which he says were paid on behalf of Ms Ward. This is particularly curious in circumstances where a number of those transactions are at grocery shops or represent cash withdrawals from ATMs. Additionally, a number of the transactions bear a hand annotated question mark and yet find their way into Mr Harrison’s compiled schedule of expenses, wholly attributed as funds he has advanced Ms Ward.
We interpolate here that it is an absurdity for Mr Harrison to suggest, as he does at paragraphs 44 and 46 of his affidavit, that his asserted expenditure on Ms Ward in the 15 months prior to April 2014, which he claims totals “over $366,000”, was sourced from an inheritance he received in March 2014. This is particularly so when his evidence as to his financial position at the commencement of their “relationship” in December 2012 was that he had “just finished” work and he owned property and chattels with a maximum value of $27,500, including superannuation of $13,000 and the bank statements he chose to exhibit to his affidavit record the only income received into his accounts beyond February 2013 was by way of Centrelink payments. A further nonsense is made of this evidence by the fact that, at the time of trial Mr Harrison swore an affidavit in which he deposed to having property valued at $313,815 including real property valued at $210,000 which was not the subject of a mortgage. He has not identified any alternative source from which the asserted expenditure of $366,000 could have been met.
It also appears incredible that the expenses Mr Harrison asserts he met on behalf of Ms Ward were for household expenses and bills, but totalled $366,000 for a period of only approximately 15 months.
Following Mr Harrison’s oral evidence, a discourse ensued between counsel who then appeared for Mr Harrison and the trial judge in which his Honour raised his difficulty with the state of the evidence before him (“I cannot see how on earth this becomes a de facto relationship”). Counsel sought to have the matter adjourned to be heard “at some point in the future” on the basis that Mr Harrison may not have understood the trial judge’s questions (Transcript 2 November 2016 p 12, l 7). There is no basis on the material before this Court for this suggestion: Mr Harrison did not once ask for a matter to be clarified, he did not ask for any terminology to be explained, and he did not require a question to be put to him on more than one occasion so that he could answer it.
His Honour refused the application for an adjournment, primarily for the reason that the issue as to the existence of a de facto relationship had been specifically set down for a discrete hearing. The following exchange ensued between his Honour and counsel for Mr Harrison:
HIS HONOUR: I put this matter down specifically - - -
[COUNSEL]: Yes. Yes. I understand, your Honour. I understand.
HIS HONOUR: - - - for this because I’m sick of this. In my docket, I’ve got [Ms Ward] we’re having to try and find on a car phone all the time. She’s saying it needs to be done urgently. There’s money, $197,266.77, sitting in a trust account which has not been properly accounted for. On this evidence, I cannot see how this comes before this court as a de facto property adjustment at all. There was nothing misleading or deceptive in anything I asked because I’m asking to figure out exactly what’s going on with regard to this affidavit. Now, you know that the Family Law Act talks about what – the sorts of things needed for a court to be convinced that there was a de facto relationship and the point here is that there is – there’s no cohabitation realistically at all and even if one were to really generalise what cohabitation means, we’re looking at three months and you know that there has to be at least two years before the section gets enlivened unless there is something
[COUNSEL]: Yes.
HIS HONOUR: - - - that is of such a moment that would mean it would be unjust to do otherwise and for that you have to show that there was a de facto relationship and on what [Mr Harrison] has said, there’s just
[COUNSEL]: On the evidence, I agree with your Honour. There is no evidence of a de facto relationship.
(Transcript 2 November 2016 p 12, l 18 – 42)
(Emphasis added)
Thus, counsel who appeared for Mr Harrison on 2 November 2016 specifically conceded on the record in open court that on the evidence before the Court, the trial judge could not be satisfied of the existence of a de facto relationship. Counsel did not raise any contention to the effect that his Honour would be satisfied that the parties were in a de facto relationship albeit of a shorter duration than the prescribed two year period of cohabitation but that despite this his Honour ought to make a property adjustment order pursuant to s 90SM because Mr Harrison “made substantial contributions of a kind mentioned in paragraph 90S(4)(a), (b) or (c)” or that failing to do so would result in serious injustice (s 90SB).
His Honour then canvassed with counsel for Mr Harrison what should be done with the funds then held in trust and counsel did not make any application that the money remain held in trust pending any further proceedings to be commenced in another jurisdiction, nor did he oppose the release of the funds to Ms Ward, other than to reiterate his client’s position that “there has been payments by [Mr Harrison]” (Transcript 2 November 2016 p 13, l 1-11).
His Honour then delivered brief ex tempore reasons for judgment and made orders in the following terms:
AND UPON THE DECLARATION OF THE COURT THAT:
A. There was no De facto relationship pursuant to s.90RD of the Family Law Act 1975 between the Applicant and Respondent.
THE COURT ORDERS ON A FINAL BASIS:
1. That the sum of $197,266.77 held in the trust account of [Kramer Law] be released to the Respondent within seven (7) days of this Order.
2. That the Application filed 18 May 2016 be dismissed.
NOTATION:
A. That upon receipt of the Respondent’s bank account details by email to chambers, the Court shall then forward such information [sic] the Applicant for the purposes of Order 1 above.
There was no appeal filed against this order by either Mr Harrison or Mr Kramer at this time. Indeed Mr Kramer has never formally appealed the 2 November 2016 orders, although as will become apparent, he made a collateral attack on the validity of those orders.
On 3 November 2016, Mr Kramer sent the following email to his Honour’s associate:
Dear Associate, we refer to the following hearing for this matter and to the final orders proposed by his Honour. After reviewing the file, we note the amount provided by the applicant [a reference to Mr Harrison, Mr Kramer’s client] to his Honour is incorrect. The amount held in the third party trust account and to be paid to the respondent is $199,673.97. This practice does not operate a trust account and did not have the correct information from the third party until today. The applicant deposited the funds into [Kramer Tax Proprietary Limited] trust account. Could you please correct his Honour’s final orders to reflect this? We apologise for the inconvenience and thank you for your assistance. Yours faithfully, [Mr Kramer].
(Emphasis added)
It may be interpolated here that Mr Kramer’s email is deliberately misleading in important respects. Bearing in mind that this is an email from a legal practitioner who, as an officer of the Court owing his primary duty to the Court to be scrupulously honest, this is of particular concern. The so-called “third party” being referred to in this email was at the time a company solely owned and controlled by Mr Kramer. At all material times it was Mr Kramer himself that undertook the practice of the legal firm Kramer Law and it was Mr Kramer who was, solely, the acting mind and will of Kramer Tax Pty Ltd as its sole director and sole shareholder. Similar observations may be made of the further correspondence Mr Kramer caused to be directed to the Court now referred to.
Later on 3 November 2016, a further email was received by his Honour’s chambers from Kramer Law which recorded:
We refer to our earlier email today and the amount was incorrect. Please find the attached corrected email.
…
…We refer to the following hearing for this matter and to the final orders proposed by his Honour. After reviewing the file, we note the amount provided by the applicant to his Honour is incorrect. The amount held in the third party trust account and to be paid to the respondent is $184,673.97.
This practice does not operate a trust account and did not have the correct information from the third party until today. The applicant deposited the funds into [Kramer Tax Proprietary Limited] trust account. Could you please correct his Honour’s final orders to reflect this? We apologise for the inconvenience and thank you for your assistance.
The assertion that “the applicant deposited the funds into [Kramer Tax Proprietary Limited] trust account” is nothing but misleading. Ms Ward, not Mr Harrison, caused the proceeds of sale of the Western Australia property to be deposited into the trust account of Kramer Law. Any movement of the funds to Kramer Tax Pty Ltd was done by Mr Kramer without any authorisation by Ms Ward, and thus without her consent.
We reiterate the observation that the references to “third party” in these emails obfuscates that at all material times Mr Kramer was the sole principal of his law practice and the sole director and shareholder of Kramer Tax Pty Ltd. An ASIC search reveals the registered office of Kramer Tax Pty Ltd to be the same address as is recorded on the correspondence sent by the entity referred to as Kramer Law.
His Honour’s associate responded to those emails on 4 November 2016 observing that no alteration would be made to the terms of the order in circumstances where counsel who acted for Mr Harrison at the hearing (we note instructed by Mr Kramer) confirmed the amount was as recorded in the order and no evidence had been presented in support of any lesser sum.
It seems no explanation was ever provided for the difference of some $15,000 between what was said to be held in the trust account earlier on 3 November 2016, and the lesser sum referred to later on the same day, or why this sum was less than what was initially deposited into the trust account more than 12 months earlier.
It should also be observed that it is clear that the money deposited into the Kramer Tax Pty Ltd trust account was later deposited into an interest bearing term deposit and thus, allowing for interest, the sum which is unaccounted for must in fact be greater than $15,000.
It would also appear that, despite the terms of the correspondence set out above in which Mr Kramer clearly acknowledges that the trust funds are “to be paid to [Ms Ward]”; no money was ever paid to Ms Ward in compliance with his Honour’s orders.
On 8 November 2016, Mr Harrison withdrew his instructions from Kramer Law (at least in respect of the Federal Circuit Court proceedings) and served a notice seeking to withdraw all of the funds held on trust on his behalf. Immediately, the entirety of the proceeds of sale which remained in the trust account (or one of them) in an approximate amount of $184,000 was released to Mr Harrison by Mr Kramer, without any notice whatsoever to Ms Ward. This extraordinary occurrence is despite the fact that, even at its highest Mr Harrison’s claim pursuant to s 90SM as was known by Mr Kramer as the solicitor responsible for preparing Mr Harrison’s application, was for only $150,000.
Also on 8 November 2016, Mr Harrison filed a claim against Ms Ward in the Queensland District Court. The nature of this claim is not before the Court. It is entirely unclear, in circumstances where Mr Harrison’s initiating application sought the sum of $150,000 in full satisfaction of what he asserted were his legal rights to funds, and where he received and retained the sum of approximately $184,000, what possible further claim he might have against Ms Ward.
On 10 November 2016, Mr Kramer emailed his Honour’s associate in the following terms:
I refer to your email of 4.11.16. We no longer hold instructions to act for [Mr Harrison]. Please direct inquiries to him. As he has domestic violence complaints against [Ms Ward] with police, we are unable to provide his contact details. Thank you for your assistance. Yours faithfully, [Mr Kramer].
This email is particularly curious. Not only had the proceedings in the Federal Circuit Court been finalised some eight days earlier, but to the certain knowledge of Mr Kramer the funds the subject of those proceedings had been released to Mr Harrison, contrary to the order. No mention is made in this email that the money had been disbursed to Mr Harrison (and perhaps partly to Mr Kramer himself by way of fees given the discrepancies in amounts).
It is also not clear what “inquiries” would or could legitimately be directed to Mr Harrison in respect of finalised proceedings.
At some time between 2 November 2016, when the orders were made in her favour, and 6 December 2016, Ms Ward sought the assistance of Women’s Legal Service to have the money she was entitled to pursuant to the orders released to her. The response received from Kramer Law/ Mr Kramer was nothing short of misleading. By correspondence, dated 21 November 2016, on letterhead styled “Kramer Law Lawyers & Accountants ABN (…)”, Mr Kramer records the following.
…
We have previously written to [Ms Ward] about this. We do not act for [Mr Harrison] in this matter and have filed a Notice of Withdrawal.
[Mr Harrison] was in Court when the Order to pay was made.
This practice does not have a trust account.
Funds from settlement were paid to [Mr Harrison] and held in a third party non-solicitor trust account.
As we no longer act for [Mr Harrison] and do not have a trust account, please direct your enquiries to [Mr Harrison].
Could you please also advise of [Ms Ward’s] address for service or if you hold instructions to accept service of documents. …
It is abundantly clear that the proceeds of sale of the Western Australia property were never “paid to [Mr Harrison]” in any way prior to them being released by Kramer Law nor were they lawfully held in a “third party non-solicitor trust account”, having been transferred to that account without the knowledge or consent of Ms Ward. The money was initially deposited by the settlement agents acting for Ms Ward into the trust account of Kramer Law pending court action, after which time, any movement or change to the status of those funds was effected by Mr Kramer without the knowledge or consent of Ms Ward.
Curiously, while asserting that he did not act for Mr Harrison “in this matter” Mr Kramer also sought confirmation of Ms Ward’s address for service. The only logical conclusion as to the need to obtain Ms Ward’s address for service is that Mr Kramer held instructions to serve a document upon her; that he continued to hold instructions, and there remained a process which required service (presumably relating to the District Court proceedings). While Mr Kramer later sought to rely upon this correspondence before Judge Vasta as evidence of his attempts to contact Ms Ward prior to releasing the funds to Mr Harrison (Transcript 20 January 2017 p 7, l 25-27), such an assertion is unsustainable. Evidently, the trust money had been disbursed some 13 days previously.
Further attempts by Women’s Legal Service, assisting Ms Ward, to obtain information from Mr Kramer or Kramer Tax Pty Ltd were met with silence. Notably, Mr Kramer never disclosed to the Women’s Legal Service, or the Court for that matter, that he had again without any authorisation from Ms Ward, taken part of the trust funds for his own benefit.
It was not, at any stage, made clear by Mr Kramer either to Ms Ward or Women’s Legal Service on her behalf that the money was no longer being held upon trust or that it had been paid out to Mr Harrison.
On 6 December 2016, Ms Ward filed an application in a case seeking the enforcement of the 2 November 2016 orders:
1.That this matter be heard urgently and that the time period for service of this application be abridged.
2. That [Kramer Tax Pty Ltd] be joined in these proceedings as 2nd Respondent.
3. That the Trustee of the [Kramer Tax Pty Ltd] Trust Account is hereby restrained from releasing the funds held in their Trust Account in the amount of $197,133.17 to [Mr Harrison] which are held from the sale proceeds of property at [Western Australia] owned by [Ms Ward].
4. That the Trustee of the [Kramer Tax Pty Ltd] Trust Account release the funds referred to in Order 1 to [Ms Ward], plus interest of $40.50 per day calculated from 2 November 2016 within seven (7) days of the date of these Orders.
5. That in the event that the Trustee of the [Kramer Tax Pty Ltd] Trust Account has released the funds to [Mr Harrison], the Respondent, [Mr Harrison], pay to the Applicant, [Ms Ward], the sum of $197,133.17 plus interest of $40.50 per day calculated from 2 November 2016 within seven (7) days of the date of these Orders into Savings Account number …
That application in a case also included Kramer Tax Pty Ltd as a party to be served with the application.
One of the complaints of Mr Kramer is that Ms Ward’s application did not seek relief against him personally, however, in circumstances where neither Mr Harrison nor Mr Kramer had disclosed to Ms Ward up to the time of the filing of her application that the funds had been disbursed at all, let alone how they had been disbursed, and where Mr Kramer had no entitlement to any of the funds, the terms of Clause 5 of the application in a case are entirely understandable. Ms Ward was entitled to assume that if the funds had been erroneously disbursed, they would have been disbursed to the only other person who brought a claim in respect of them. Furthermore, it is evident that what Ms Ward was seeking was the repayment of all of the funds that she deposited into the trust account and that she was entitled to pursuant to the terms of the 2 November 2016 order, and not only such sum as Mr Harrison had received or retained.
This application initially returned before Judge Vasta on 14 December 2016, at which time there was no appearance by or on behalf of Mr Kramer, Kramer Law or Kramer Tax Pty Ltd.
His Honour joined to the proceedings an entity he referred to as “Kramer Law Lawyers and Accountants Pty Ltd”, being the name recorded on the letterhead of the correspondence sent by Mr Kramer, and ordered that the principal of that entity show cause as to why they should not be dealt with for contempt of court. His Honour also referred the “conduct” of that entity to the Legal Services Commission and the Queensland Law Society.
His Honour also recorded a notation that if there was no appearance by or on behalf of Kramer Law Lawyers & Accountants Pty Ltd on the next occasion that the Court would consider issuing a warrant for the arrest of the principal.
The matter was adjourned to 19 December 2016. It is apparent that at some time between 14 December 2016 and 19 December 2016, Mr Kramer became aware of the existence of the proceedings in which he was named as a party.
On 19 December 2016, the matter returned before his Honour. At that time, Mr Kramer appeared by counsel who informed the court that Mr Kramer was overseas and would not be returning until 16 January 2017. His Honour made orders:
1. That both the First Respondent [Mr Harrison] and the Principal of the Second Respondent are to appear in person before the Court or the Court will consider issuing a warrant for their arrest.
2. That the Second Respondent file and serve an affidavit in relation to these proceedings by no later than 4.00pm on 18 January 2017.
3. That this matter be adjourned for mention only at 9.30am on 20 January 2017 in the Federal Circuit Court at Brisbane.
On 18 January, in compliance with his Honour’s order, Mr Kramer filed an affidavit. That affidavit asserts the following:
1. [Mr Kramer is] the principal of [Kramer Law] and [has] carriage of this matter.
Background
2. On or about 23rd of February 2015 this practice started acting for [Mr Harrison], the first respondent in these family law property proceedings.
3. [Mr Harrison] was in a relationship with the applicant [Ms Ward], and advanced her substantial sums of money while they resided both together and when apart.
4. [Mr Harrison] placed a caveat over the home of [Ms Ward] at [Western Australia], where they resided together from mid 2012.
5. On or about 8th of May 2015 [Ms Ward] sold [the Western Australia property], and the sale proceeds of $197,133.17 were paid into the trust account of [Kramer Law] on 13th of May 2015.
6. Attempts were made to resolve the property matter with [Ms Ward], but without success. According to [Mr Harrison], she is on the run from the WA police over alleged criminal charges.
7. About 18 months ago, this practice decided to close its trust account due to the high costs of compliance. (e.g. staff and accountant costs).
8. [Mr Harrison] agreed with [Kramer Tax Pty Ltd] to place the redeemed funds from [Kramer Law Trust Account] into that company’s trust account, until finalisation of the matter.
9. [Kramer Tax Pty Ltd] is an accounting company independent of [Kramer Law] and does not do any legal work. Its trust account is administered by a non lawyer director and an accountant.
10. On the 2nd of November 2016, Judge Vasta made orders dismissing [Mr Harrison’s] application of the 18th of May 2016, on the basis that no de facto existed and that [Ms Ward] be paid the funds held in (the nonexistent) [Kramer Law] Trust Account.
11. [Mr Harrison] was present at that hearing of the 2nd of November 2016, and was aware of the nature of the orders.
12. On or about 8th of November 2016 [Mr Harrison] instructed this practice to commence proceedings against [Ms Ward] in the District Court of Queensland, seeking recovery of the monies advanced to her. A claim has been filed in that Court.
13. On or about the 8th of November 2016, [Mr Harrison] terminated instructions to this practice to act.
14. On or about 8th of November 2016 [Mr Harrison] withdrew funds from [Kramer Tax Pty Ltd] Trust Account…
The affidavit continues by making gratuitous comment upon the appropriateness and validity or otherwise of his Honour’s orders. Mr Kramer never identifies the sum which was actually released to Mr Harrison, nor does he explain any difference between that sum and that which was deposited by Ms Ward together with accretions to the fund.
At paragraph 29 Mr Kramer concludes:
In summary, the argument against contempt is as follows:
a. [Mr Harrison] was in court when the original orders were made.
b. The legal practice did not hold any money in its trust account or account of [Mr Harrison], as that account was closed about 18 months ago.
c. The legal practice was not a party to the orders.
d. the accounting practice was not a party to the orders.
e. Despite knowing about the content of the orders, [Mr Harrison] gave instructions to the accounting firm to release the money to him, and he had the capacity to do so.
(Emphasis added)
On 20 January 2017, the matter returned before his Honour at which time Mr Kramer appeared on his own behalf. His Honour commenced that court attendance with the following interaction with Mr Kramer:
HIS HONOUR: Okay. All right. Now, as you understand, this matter has taken a life of its own from the time that I made the particular order on 2 November. Now, [Mr Kramer], you have provided an affidavit to the court which was filed on Wednesday. There are matters in there that I am of the view need greater explanation so I can figure out what has actually occurred here as to whether there has been a contempt of my order. Now, are you prepared to give evidence?
[MR KRAMER]: Your Honour, I have material in that affidavit, but I can’t attest to anything at this point in relation to [Kramer Tax Proprietary Limited] because I - - -
HIS HONOUR: I don’t – I’m not going to be asking you about that.
[MR KRAMER]: Right.
HIS HONOUR: There’s other matters. So are you prepared to give evidence?
[MR KRAMER]: Absolutely, your Honour.
Leaving aside Mr Kramer’s assertion that he could not attest to anything in relation to Kramer Tax Pty Ltd at a time when he was the sole director and shareholder of that company, Mr Kramer was sworn in and gave a number of different (and inconsistent) explanations as to why and how the money was disbursed from the trust account:
a)That the conveyancers who acted for Ms Ward in the sale of the Western Australia property made arrangements for the proceeds of sale to be deposited into the trust account and “[the conveyancer’s] simply made that arrangement for the money to be held on trust for [Mr Harrison] until we completed the matter”; (Transcript 20 January 2017 p 3, l 22-23)
b)That the money was held “on trust for [Ms Ward] and [Mr Harrison] because there is a dispute as to [what if any part of that money is owed to Mr Harrison]”; (Transcript 20 January 2017 p 3, l 36-38)
c)That the money was paid in with “no accompanying commentary” as to on whose behalf it was being held and was thus somehow just being held “on trust” but not for somebody specifically; (Transcript 20 January 2017 p 3, l 40-43)
d)The conveyancers “volunteered” to place the proceeds of sale into the trust account but he was “not sure of the motive”; “it was simply a [sic] arrangement… Moneys were paid and we just simply put the funds into the trust account”; (Transcript 20 January 2017 p 4, l 1-6)
e)“the moneys were to come into [the] trust account and the deal was that the caveat would then be released – withdrawn, and the moneys would stay in [the] trust account for determination by the court”; (Transcript 20 January 2017 p 4, l 8-11)
f)That the money was “just held … in trust, pending this matter to be resolved”; (Transcript 20 January 2017 p 4, l 16)
g)Mr Kramer did not recall it being specified that the funds were to be held on trust for both Mr Harrison and Ms Ward and thus could not be dealt with in any way without consent of both parties; “[i]t was just simply the money given from the proceeds of the sale”; (Transcript 20 January 2017 p 4, l 46 - p 5, l 2)
h)There was no authority received from Ms Ward for the payment of the funds from Kramer Law Practice Trust Account to Kramer Tax Pty Ltd trust account because “it wasn’t identified that way” being held on behalf of Ms Ward in any way (whether jointly with Mr Harrison or otherwise); (Transcript 20 January 2017 p 5, l 26)
i)When asked directly where the authority was from Ms Ward to move the money from the Kramer Law Practice trust account, Mr Kramer answered “[w]ell, it wasn’t identified that way, your Honour. It was just simply money that was held and we redeemed it and [Mr Harrison] had it placed into the other trust account”; (Transcript 20 January 2017 p 5, l 26-28)
j)That the money was moved from the law practice trust account to the tax practice trust account without Ms Ward’s authority because the solicitors were unable to contact Ms Ward despite attempts; (Transcript 20 January 2017 p 5, l 32-33)
k)That no authority was obtained both because the funds were not clearly identified on whose behalf they were held and because they had problems contacting Ms Ward; (Transcript 20 January 2017 p 6, l 19-20)
l)The money was ultimately released to Mr Harrison without Ms Ward’s authority because they “had no forwarding address. We had no contact. When Women’s Legal Service were acting, we asked and they never provided any details”; (Transcript 20 January 2017 p 7, l 25-27)
m)The money was released because Women’s Legal Service were not acting on behalf of Ms Ward; (Transcript 20 January 2017 p 7, l 44 – p 8, l 4)
n)“…[Mr Harrison] was the subject of the [2 November] order [and] He had every right to withdraw to pay the amount to [Ms Ward]”; and (Transcript 20 January 2017 p 8, l 20-21)
o)The order was misdirected as it referred to the Kramer Law trust account which did not at that time exist; (Transcript 20 January 2017 p 11, l 4-5 and l 25-27)
p)The money was released to Mr Harrison so that he could pay that money to Ms Ward; (Transcript 20 January 2017 p 11, l 33-34)
q)“[the money] was simply put into trust, and we held it in trust in his name and we put it in trust in the other entity” (Transcript 20 January 2017 p 12, l 9-10).
His Honour then made orders in the following terms:
AND UPON THE COURT FINDING THAT the First Respondent [Mr Harrison] and Second Respondent [Kramer Law Lawyers & Accountants ABN (…)] are jointly and severally liable for the payment of $197,266.77 to [Ms Ward]
THE COURT ORDERS UNTIL FURTHER ORDER:
1. That the First and Second Respondent pay the sum of $197,266.77 to the Applicant by no later than 12.00pm on 27 January 2017 by way of direct deposit to the Applicant’s bank account…
2. That in the event that such monies referred to in Order 1 above have not been deposited, this matter be listed for mention … on 31 January 2017 …
That order was subsequently amended pursuant to the slip rule on 31 January 2017 to substitute Mr Kramer personally for Kramer Law Lawyers & Accountants.
Each of Mr Harrison and Mr Kramer filed an appeal from the 20 January 2017 orders. In the interim, they each also made applications to stay the 20 January 2017 order pending the resolution of the appeal.
On 31 January 2017, the trial judge made additional orders which are the subject of appeal NA 6 of 2017. Those orders provided:
1. That pursuant to r.19.02(4) of the Federal Circuit Court Rules 2001 that the Marshal be directed to make an application that the First Respondent, [MR HARRISON] and the Second Respondent, [MR KRAMER] be dealt with for contempt of Orders made on 2 November 2016.
2. That the Oral Application by both the First Respondent and Second Respondent for a Stay of Orders made on 20 January 2017 and amended on 31 January 2017 be dismissed.
On 30 May 2017 Kent J granted Mr Harrison’s application for an extension of time to file a notice of appeal (NA 13 of 2017) from the orders made on 2 November 2016 and 20 January 2017 on condition that Mr Harrison pay into Court the sum of $50,000 (Harrison & Ward and Anor [2017] FamCAFC 99). That sum was paid into Court and on the hearing of these appeals Mr Harrison consented to an order for those funds to be released to Ms Ward.
Leave to appeal
In appeal NA 4 of 2017 Mr Kramer seeks leave to appeal against the orders made on 20 January 2017, and in appeal NA 6 of 2017 Mr Harrison seeks leave to appeal against the orders made on 31 January 2017.
It is clear that leave to appeal is necessary from an interlocutory decree, a suppression order or a vexatious proceedings order (Family Law Regulations 1984, reg 15A). When considering whether an order “finally determines the rights of the parties”, it is necessary for the “appellate court to look at the consequences of the order itself and to ask whether it finally determines the rights of the parties in a principal cause between them” (Bienstein v Bienstein (2003) FLC 93-124 at 78,105).
In respect of the 20 January 2017 orders, we are comfortably satisfied that those orders finally determine the rights of the parties to the trust funds and their obligation to repay such sums. We do not consider that leave to appeal is necessary in respect of the 20 January 2017 orders.
As will become apparent, we do not consider the 31 January 2017 orders were in fact a “judgment, decree or order” capable of forming the basis of an appeal as those orders do not determine any rights of the parties.
Mr Kramer’s standing to challenge the 2 November 2016 orders
Whilst no party before us took specific issue with Mr Kramer’s standing to challenge the 2 November 2016 orders, in circumstances where he purports to launch a collateral attack upon them, we consider it necessary to make some observations in this regard. Mr Kramer asserts in his appeal from the 20 January 2017 orders that those orders are void as they seek to enforce orders made beyond jurisdiction (referring to the 2 November 2016 orders). That is to say, Mr Kramer asserts that the order providing for the release of the trust funds to Ms Ward was beyond jurisdiction and therefore not capable of being enforced, or capable of founding a contempt charge. Indeed his appeal against the 20 January 2017 orders is the vehicle Mr Kramer used to challenge the 2 November 2016 orders in a manner as if he was an appellant from those orders. Indeed the vast majority of his appeal, and Ms Ward’s need to respond to it, and the appeal hearing itself, was occupied with this collateral attack.
Pursuant to r 22.04 of the Family Law Rules 2004 (Cth),
Each person who is directly affected by the orders sought in the Notice of Appeal, or who is likely to be interested in maintaining the order under appeal, must be made a respondent to the appeal or the application for leave to appeal.
It would seem to us that Mr Kramer is neither “directly affected” by the 2 November 2016 orders nor is he likely to be interested in maintaining the order under appeal, however, in circumstances where no party has raised this as an issue on this appeal and the challenges raised by Mr Kramer are very similar in their nature to those raised by Mr Harrison, we have proceeded to hear and determine those arguments advanced by Mr Kramer.
Of course it necessarily follows, given that Mr Kramer’s appeal from the 20 January 2017 orders is the vehicle for his concerted challenges to the 2 November 2016 orders that this is highly relevant to the question of costs, as will be discussed.
The appeals
This Court is concerned with three appeals:
a)NA 13 of 2017, being Mr Harrison’s appeal from the orders of 2 November 2016 and 20 January 2017, for which he was granted an extension of time in May 2017;
b)NA 4 of 2017, being Mr Kramer’s appeal from the orders of 20 January 2017; (including the collateral challenges to the orders of 2 November 2016); and
c)NA 6 of 2017, being Mr Harrison’s appeal from the orders of 31 January 2017.
As referred to above, while Mr Kramer does not formally appeal the orders made on 2 November 2016, counsel who appeared on his behalf at the hearing of the appeals, relied upon challenges to the validity of that order in undermining the basis upon which the 20 January 2017 orders were made. Indeed, as we have said, most of Mr Kramer’s focus in the appeal proceedings was upon the 2 November 2016 orders.
We interpolate here to observe that a number of challenges raised by the appellants before this Court, were not ever joined in issue before the trial judge. Specifically, arguments in respect of the construction of the terms of the trust for the moneys held, and who was beneficially entitled to the trust funds, were never raised before the primary judge and counsel who then appeared on behalf of Mr Harrison accepted that the funds would be released to Ms Ward. While the circumstances in which a party is entitled to mount arguments for the first time on appeal which were not advanced at the primary stage are constrained (Metwally v University of Wollongong (1985) 60 ALR 68) we nevertheless heard those arguments and will deal with them.
2 November 2016 orders
Mr Harrison asserts three broad errors on the part of the trial judge in making the 2 November orders:
a)That his Honour denied Mr Harrison procedural fairness in making the declaration and the consequential orders releasing the funds (Grounds 1, 2, 3, 8);
b)That his Honour failed to provide adequate reasons for releasing the trust funds (Ground 9); and
c)That the order releasing the trust funds was made beyond jurisdiction or power (Grounds 5, 6, 7).
The collateral attack on these orders by Mr Kramer can be summarised as follows:
a)That his Honour had no jurisdiction to make the consequential order releasing the trust funds;
b)If his Honour did have jurisdiction,
i)then the order releasing the trust funds proceeded on an erroneous construction of the terms of the trust, which is to say the funds were actually held on trust for Mr Harrison, and not Ms Ward; and
ii)the order releasing the trust funds was an erroneous exercise of discretion.
The hearing on 2 November 2016 and the declaration that there was no de facto relationship
Mr Harrison’s challenges in respect of procedural fairness and adequacy of reasons can be dealt with briefly. He asserts that there were a number of procedural irregularities in the hearing which, in the circumstances, denied him natural justice, including that neither party formally read the material they relied upon, and that the trial judge undertook the questioning of Mr Harrison.
The following is abundantly clear from the uncontentious facts and history of the matter, including as set out above.
The discrete issue of the existence of a de facto relationship was set down for hearing in October 2016 at a time when all parties were present. The matter was set for hearing a number of weeks after the first return date (during which period Mr Harrison was agitating to have Ms Ward file material) and it was listed at a time when Mr Harrison, as the applicant, had already filed an affidavit setting out precisely the basis upon which he asserted he and Ms Ward were in a de facto relationship. There was no suggestion during the course of the October 2016 hearing by the lawyer who appeared on that occasion on behalf of Mr Harrison that he would need a further opportunity to lead evidence, nor that he should be provided an opportunity to rely upon more than the single affidavit he had filed and which is provided for by the Family Law Rules 2004 (Cth) (leaving aside that there was no indication that any such additional affidavit existed).
Each of Mr Harrison and Ms Ward filed evidence in support of their contentions being one affidavit and a financial statement each. It is a somewhat disingenuous submission to suggest that the parties did not formally identify the material upon which they relied in circumstances where the following is the opening exchange between his Honour and counsel who appeared for Mr Harrison:
HIS HONOUR: […] Okay. Now, I set the matter down for a preliminary hearing as to whether there was a de facto relationship. Now, I did this because, quite frankly, on what I have before me, […], from your client it’s somewhat short on being able to show me that there’s a de facto relationship, so I wanted to have this. Now, this is the only evidence that you have before the court at this point.
[COUNSEL FOR MR HARRISON]: That’s correct, your Honour.
HIS HONOUR: All right. Okay. Thank you. [Ms Ward], I’ve got your affidavit, and I’ve seen what you’ve had to say…
(Emphasis added)
While we accept that during the course of this exchange, the documents are not specifically identified, in circumstances where the parties had each only filed a single affidavit and counsel who acted for Mr Harrison was in the courtroom, it is tolerably clear that both his Honour and the parties were at one as to what material was being relied upon by each party.
In the case of Mr Harrison, this evidence was filed nearly 12 months after the trust funds were initially deposited into the trust account, and even longer after Mr Harrison had caused a caveat to be registered on the title of the Western Australia property. This is a very significant period of time during which it must have been abundantly clear to all persons concerned, including Mr Harrison and Mr Kramer acting on his behalf, that there was a significant dispute between the parties as to the nature of the subject relationship and that Mr Harrison would be required to lead sufficient evidence to establish not only the existence of a de facto relationship within the meaning of Part VIIIAB of the Act; but the bases upon which he contended he ought to receive a property adjustment which would have seen him receive approximately 77 per cent of the nett proceeds of sale of real property that had been owned solely by Ms Ward for nearly 18 years prior to the commencement of any asserted relationship; together with retaining to the complete exclusion of Ms Ward all of his right, title and interest in unencumbered real property which was acquired during the subsistence of the asserted relationship, along with his other assets. There could be no sensible suggestion that Mr Harrison was not squarely on notice that he would be required to lead evidence which established his assertions, particularly when, based on the material before this Court, he was represented by solicitors for the duration of this time including prior to the deposit of the proceeds of sale into his solicitors trust account.
Mr Harrison appeared at the hearing on 2 November 2016 represented by both solicitor and counsel. Leaving aside the prospects of success of an application no oral application was in fact made to adduce further oral evidence in chief to clarify or supplement any of Mr Harrison’s affidavit evidence and the evidence in chief merely confirmed that which was contained in that affidavit.
Mr Harrison was sworn and asked some questions by his Honour to clarify the basis upon which he asserted the parties were in a de facto relationship.
Mr Harrison’s oral evidence, at its highest, was that from about mid-December 2012, he had lived in a bus at the back of Ms Ward’s property for approximately three months, there had been occasions when they had sexual intercourse, he had attempted to assist her with some troubles she was having with her neighbour and the courts, he had left her property in March 2013 and thereafter he had maintained contact with her “very, very periodically”.
Counsel who appeared for Mr Harrison before the primary judge conceded that on the evidence before his Honour, there was no de facto relationship between the parties. Counsel who appears for Mr Harrison on the appeal contends that this concession “may have been confined to the oral testimony elicited by his Honour’s own questions and not to the Appellant’s affidavit evidence” (summary of argument filed 16 June 2017, paragraphs 11(a) and 22(c)). With respect to counsel any plain reading of the exchange indicates that no such qualification is placed upon the concession. Reference to both Mr Harrison’s affidavit and oral evidence demonstrates that it was a proper concession to make.
Thereafter, his Honour sought submissions from Mr Harrison’s counsel as to why he should not release the funds then held on trust, and no meaningful submission was forthcoming.
Insofar as it is now asserted that the issue of a de facto relationship was dealt with summarily without a proper hearing or testing of evidence, such an assertion is plainly incorrect: Mr Harrison filed an affidavit, questions were asked of him, he gave the sworn evidence he gave at a trial he and his lawyers had advance notice of and at which the existence or otherwise of a de facto relationship was the issue to be determined. No suggestion was made on behalf of Mr Harrison that an opportunity to cross-examine Ms Ward would elicit sufficient further evidence to establish his case when it was he who bore the onus of proof. Furthermore, insofar as it is now suggested that Mr Harrison was not heard on the issue of the release of funds, reference to the transcript reveals that such a suggestion is untenable. Neither this Court, nor justice, is served by the making of grossly inaccurate submissions as to facts such as those made to us in this respect by counsel for Mr Harrison.
His Honour was certainly bound to provide sufficient reasons to enable the parties to follow his reasoning, however this obligation is confined by the issues actually joined in the proceedings and, counsel having unequivocally conceded on Mr Harrison’s behalf that no evidential basis for finding a de facto relationship existed, the issues joined between the parties then ended.
There is no merit in these grounds.
The order releasing the trust funds
The jurisdiction challenges
Each of Mr Harrison and Mr Kramer assert that his Honour had no jurisdiction to make the order releasing the trust funds because, having made a declaration that there was no de facto relationship, his Honour had exhausted the jurisdiction conferred upon the Court.
It is true that his Honour had no jurisdiction to make any order altering the rights and interests of the parties pursuant to s 90SM, as such an order is contingent upon there being a breakdown of a de facto relationship. However, his Honour was not exercising jurisdiction under s 90SM in making the order releasing the funds; so much was properly conceded by counsel who appeared for each of Mr Kramer and Mr Harrison when they accepted that Mr Harrison’s right to bring any further proceeding in respect of a debt or loan claim had not been extinguished by the making of the declaration or the release of the funds.
The Federal Circuit Court is created as “a court of law and equity” by s 8 of the Federal Circuit Court of Australia Act 1999 (Cth) (“the FCC Act”). It has, relevantly, “such original jurisdiction as is vested in it by laws made by the Parliament (a) by express provision…”
The Act is one such law of Parliament.
Pursuant to s 39B of the Act, jurisdiction is conferred on the Federal Circuit Court of Australia with respect to matters arising under the Act in respect of which de facto financial causes are instituted. “De facto financial cause” is defined by s 4 of the Act to mean, relevantly:
(c) proceedings between the parties to a de facto relationship with respect to the distribution, after the breakdown of the de facto relationship, of the property of the parties or either of them; or
…
(g) any other proceedings (including proceedings with respect to the enforcement of a decree or the service of a process) in relation to concurrent, pending or completed proceedings of a kind referred to in any of the preceding paragraphs.
It is clear that as an incident of hearing an application pursuant to s 90SM, the Court may, pursuant to s 90RD, declare that a de facto relationship existed, or never existed between those two people. Here, Mr Harrison clearly brought an application pursuant to s 90SM of the Act for property adjustment orders, and the court was exercising its jurisdiction pursuant to s 90RD in making the relevant declaration.
As was made plain in Moorgate Tobacco Company Ltd v Philip Morris Ltd (1980) 145 CLR 457 (“Moorgate”) (per Stephen, Mason, Aickin and Wilson JJ) at 476:
… The cases establish that federal jurisdiction is attracted if the right or duty based in a federal statute is directly asserted by the plaintiff or defendant, but not if the federal question arises only in some incidental fashion...
(Emphasis added)
Similarly, in Federal Capital Commission v Laristan Building & Investment Co Pty Ltd (1929) 42 CLR 582 (“Laristan”) (cited with approval in LNC Industries Ltd v BMW (Australia) Ltd (1983) 151 CLR 575) Dixon J observed at 585 - 586:
… [i]t may well be that all claims of right arising under the law in force in the Territory come within this description, because they arise indirectly as the result of the Seat of Government Acceptance Act 1909 (see sec. 6), and the Seat of Government (Administration) Act 1910 (see secs. 4 to 7 and 12). But it is at least clear that a claim to a right conferred by or under ordinances made by the Governor-General in Council under sec. 12 of the Seat of Government (Administration) Act is a matter arising under an enactment of the Parliament.
(Emphasis added)
Again, in Felton v Mulligan (1971) 124 CLR 367 at 408:
A comparison between the terms of s 76(i.) and those of s 76(ii.) of the Constitution indicates that a distinction is to be drawn between a matter “arising under” a law of the Parliament and a matter which involves the interpretation of such a law. The fact that the interpretation of a law is involved does not necessarily mean that there is a matter arising under the law. But, in my opinion, there is a matter arising under the law if the source of the right claimed by the plaintiff or applicant or the source of a defence which asserts that the defendant or respondent is immune from the liability or obligation alleged against him is a law of the Parliament. I think that that view of what constitutes a matter arising under a law of the Parliament is in conformity with the statements made in R. v. Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett [(1945) 70 CLR 141] by Latham C.J. and McTiernan J. [at 174]. There Latham C.J. said: “If a right claimed is conferred by or under a federal statute, the claim arises under the statute”. Likewise, in my opinion, if the answer made to a claim is that the defendant is free from the obligation asserted against him and that this freedom is conferred by an Act of the Parliament, the defence arises under that Act and the result is that there is before the Court a “matter” which arises under that Act…
(Emphasis added)
Mr Harrison was by his initiating application evidently asserting a right to a property settlement upon the breakdown of a de facto relationship which right arises by virtue of the provisions of the Act.
In the event, in making the declaration pursuant to s 90RD his Honour was evidently exercising jurisdiction “with respect to [a] matter arising under [the Act] in respect of which de facto financial causes are instituted” regardless of the fact that Mr Harrison’s claim was ultimately unsuccessful.
In the exercise of its jurisdiction, the Federal Circuit Court has such powers as are conferred on it by the legislation. Sections 14 and 15 of the FCC Act provide as follows:
14. In every matter before the Federal Circuit Court of Australia, the Federal Circuit Court of Australia must grant, either:
(a) absolutely;
(b) on such terms and conditions as the Federal Circuit Court of Australia thinks just;
All remedies to which any of the parties appears to be entitled in respect of a legal or equitable claim properly brought forward by him or her in the matter, so that, as far as possible:
(c) all matters in controversy between the parties may be completely and finally determined; and
(d) all multiplicity of proceedings concerning of those matters may be avoided.
15. The Federal Circuit Court of Australia has power, in relation to matters in which it has jurisdiction, to:
(a) make orders of such kinds, including interlocutory orders, as the Federal Circuit Court of Australia thinks appropriate; and
(b) issue, or direct the issue of writs of such kinds as the Federal Circuit Court of Australia thinks appropriate.
As was observed by Starke J in R v Bevan; Ex parte Elias and Gordon (1942) 66 CLR 452 at 465 “jurisdiction being thus attracted, this Court is clothed with full authority essential for the complete adjudication of the matter and not merely the interpretation of the Constitution”.
Section 23 of the Federal Court of Australia Act 1976 (Cth) (“the FCA Act”) is in largely the same terms as s 15 of the FCC Act. It is therefore instructive to consider the application of that section as interpreted by authority.
In respect of s 23 of the FCA Act, Deane J observed in Jackson v Sterling Industries Ltd (1987) 162 CLR 612, at 622:
… Wide though that power is, it is subject to both jurisdictional and other limits. It exists only “in relation to matters” in respect of which jurisdiction has been conferred upon the Federal Court. Even in relation to such matters, the power is restricted to the making of the “kinds” of order, whether final or interlocutory, which are capable of properly being seen as “appropriate” to be made by the Federal Court in the exercise of its jurisdiction.
Deane J continued (at 623), observing that a power to prevent an abuse of process or frustration of a court’s process should be accepted “as an established part of the armoury of a court of law and equity” and that “the power to grant such relief in relation to a matter in which the Federal Court [relevantly] has jurisdiction is comprehended by the express grant to that Court by s 23 of the [FCA Act]”, but that orders must be framed “so as to come within the limits set by the purpose which [the order] can properly be intended to serve”. Permitting the retention of the trust funds for an indefinite period of time until such time as Mr Harrison might resolve to bring proceedings in another jurisdiction on an entirely different legal basis would be permitting an abuse or frustration of the Court’s processes.
However, as Wilson and Dawson JJ observed in Jackson (at 619):
… it cannot be suggested that either the power to grant relief under s. 23 or an implied power to prevent an abuse of process extends to the creation and enforcement of rights in addition to those for the protection or enforcement of which the jurisdiction of the Court is invoked. The power given by s. 23 is expressly limited to the making of orders in relation to matters in which the Court has jurisdiction and it does not extend the jurisdiction of the Federal Court. Nor could that Court’s implied power be employed to create and enforce new rights. Whilst the implied power carries with it all that is necessary for the proper functioning of that Court, it does not extend its jurisdiction beyond that which is vested in it.
It could not possibly be argued, for reasons which will become apparent, that releasing the trust funds to Ms Ward created or enforced new rights. The release of the funds merely gave effect to Ms Ward’s existing rights.
As earlier referred to, Mr Harrison’s claimed entitlement to property adjustment orders pursuant to s 90SM crystalised into a claimed entitlement to $150,000 of the trust fund. Ms Ward denied the existence of a de facto relationship and consequently any entitlement of Mr Harrison whatsoever to the fund. The “matter” before the trial judge to which federal jurisdiction was attracted embraced both the determination of the existence or otherwise of a de facto relationship and the entitlement or otherwise of either or both parties to the trust fund. In Moorgate the High Court said at 477 and 480:
… once federal jurisdiction is attracted, it is exercised “throughout the case” (Felton v. Mulligan); it is not lost by subsequent disclaimer. The disclaimer may inhibit what the court does in the exercise of its jurisdiction but it does not affect the existence of its jurisdiction…
…
…Although the word “matter” in s.76(ii.), as we have seen, has often been translated as embracing “right”, “title”, “duty”, “privilege”, “protection”, “immunity” and “defence”, its content should not be confined to these terms and to what they denote. “Matter” is the subject matter for determination in a legal proceeding (In re Judiciary and Navigation Acts; Carter v. Egg and Egg Pulp Marketing Board (Vict.)); in our opinion it extends to a claim that a party satisfies or does not satisfy a statutory description, whether it be a qualification or a condition, when conformity with that description is made essential to the grant of a right for which the federal statute makes provision.
(Footnotes omitted)
We are comfortably satisfied that his Honour, having determined Mr Harrison’s claim for orders pursuant to the Act, in the exercise of jurisdiction conferred by the Act had juridical power to make the consequential order for the release of the trust funds to Ms Ward
The construction of the trust argument
Counsel who appeared for Mr Kramer before us argued that, if the Court did have jurisdiction to make the order releasing the funds (to either party) the order his Honour made was based on an erroneous construction of the terms of the trust on which the funds were held.
For the reasons which follow, we wholly reject that submission.
Particularly, counsel asserted that on no construction of the “trust” was Ms Ward beneficially entitled to those funds. He contended that the following “constructional choices” were open to the Court when considering the entitlement to the trust:
a)On whose behalf the funds were held;
b)Whether “pending court action”, as appears in the authority signed by Ms Ward, referred only to the proceedings in the Federal Circuit Court or other potential court actions.
Beneficial entitlement to the trust funds
Counsel sought to place reliance upon Byrnes v Kendle (2011) 243 CLR 253 to support his assertion that absent any vitiating factor, the terms of the trust are determinative of parties’ interests and no further inquiry into the subjective intention of the settlor is required.
Particularly, reliance was placed upon the following passages of that judgment:
17The passage quoted in Jolliffe from the eleventh edition of Lewin on Trusts was reproduced in the twelfth to sixteenth editions of that work, but not in the seventeenth or eighteenth editions. In the eighteenth edition of Lewin on Trusts, published in 2008, Jolliffe is treated as a case about a sham trust in which the settlor was allowed to assert his own shamming intent to defeat the effect of his declaration of trust as against the revenue authority. The authors refer to the “powerful dissent” of Isaacs J and observe that:
“A settlor who has executed a declaration of trust is subject to the usual rule that prevents a party to a legal document from relying on mere mental reservations to resist its enforcement.”
A short statement of the position in a case such as the present, written in the context of the trust of the family home, appears in The Law of Trusts by Thomas and Hudson:
“In circumstances in which there has been an express trust declared over land, the terms of that trust will be decisive of the parties’ equitable interests in land, in the absence of any fraud, undue influence, or duress.”
The relevant intention in such a case is that manifested by the declaration of trust. Such a case does not require any further inquiry into the subjective or “real” intention of the settlor. I also respectfully agree with and adopt the reasons of Gummow and Hayne JJ on this question.
(per French CJ, at 263)
…
59Likewise, the "objective theory" of contract formation, which, as Mason A-CJ, Murphy and Deane JJ put it in Taylor v Johnson, stands "in command of the field", is concerned not with "the real intentions of the parties, but with the outward manifestations of those intentions". While the origins and nature of contract and trust are quite different, there is, as Mason and Deane JJ observed in Gosper v Sawyer, no dichotomy between the two. For example, a common form of express trust is that created by covenant between settlor and trustee. Hence the significance of consistency between trust and contract with respect to matters of intention in contract formation and trust declaration.
(per Gummow & Hayne JJ, at 275)
(Footnotes omitted)
We accept entirely that it is the settlor’s manifested intention which is relevant to the construction of the trust. However, we do not accept, as was contended by counsel, that Ms Ward signing the authority directed to her settlement agents authorising the payment of the proceeds of sale amounts to her manifesting an intention to relinquish her beneficial entitlement to those funds. The full terms of that acknowledgement and authority bear repeating at this stage:
I [Ms Ward] give you authority to settle the above property and pay the attached accounts from the proceeds.
I acknowledge that funds pertaining to the caveat will be held by [Kramer] Lawyers acting on behalf of [Mr Harrison] pending court action.
(Emphasis added)
Counsel asserted that in signing this acknowledgment Ms Ward agreed that the funds would be held “on behalf of [Mr Harrison] pending court action”.
Such an interpretation would make a nonsense of that document. Not only is that document not a trust deed, it merely identifies the trustee and their relationship to the proceedings: that is Kramer Lawyers acting on behalf of Mr Harrison.
The only logical conclusion of counsel’s construction is that, regardless of the outcome of the proceedings, that is, irrespective of whether the Court finds the parties were in a de facto relationship, or any potential adjustment made to the parties’ property interests pursuant to s 90SM orders, the subject funds would be paid to Mr Harrison. Such a construction not only renders the phrase “pending court action” meaningless, as on that construction Mr Harrison’s rights were not dependent upon any court action, it also renders the whole requirement to hold funds on trust nugatory, as they could, at any time, have been withdrawn by Mr Harrison and applied at his will.
Alternatively, counsel contended that the proper construction of the trust was one which would see each of Ms Ward and Mr Harrison’s right to the funds becoming contingent upon the resolution of proceedings: that is, neither party had a present entitlement to the funds until the Court resolved the parties’ claims to the funds. In support of this construction, counsel referred to Harmer v Commissioner of Taxationof the Commonwealth of Australia (1991) 173 CLR 264.
Harmer can hardly be seen as authority for such a proposition. With all due respect to counsel, this represents a fundamental misunderstanding of Harmer and the nature of the dispute before the High Court.
In Harmer, the court was concerned with the liability of a trustee solicitor to pay income tax on interest accrued on funds held on trust pending the resolution of the claims to that money. Provisions of the relevant tax legislation provided that tax was to be paid by the person “presently entitled” to the income.
Riverhall, a developer, had borrowed a principal sum of $125,000 from In Residence Pty Ltd to be used in the proposed development of units. Pursuant to the terms of the lending agreement, Riverhall was to repay the principal plus a certain specified share of the profits on the development. There was no dispute that as a consequence of this agreement Riverhall was to make payment of $198,195. Various persons and entities made a claim to this sum as a consequence of agreements entered into by In Residence, which had subsequently gone into liquidation. Thereafter, Riverhall commenced interpleader proceedings in the Supreme Court to determine the proportions in which each of the four claimants were to be paid from the sum.
Riverhall was ordered to deposit the sum of $198,195 into court and it was thereafter to be held in a redeemable interest bearing investment deposit by a solicitor for one of the parties pending the determination of the proceedings.
Interest in amounts of $39,883.30 and $30,665.90 accrued in the following two financial years while the proceedings were yet to be determined. A dispute arose as to which of the four claimants or trustee was liable to pay income tax on the interest accrued in the financial years in which it was earned - being prior to the resolution of the dispute between the claimants. That interest was indisputably payable to the solicitor trustees. The solicitors claimed that one or other of the claimants was “presently entitled” to the interest during the tax years in which it was earned. The High Court observed at 272 - 274:
… After payment in, the claimants acquired an interest in the moneys in the sense that they were entitled to insist that they be properly administered and applied for the purposes for which they were paid in. However, no claimant was beneficially entitled to either the whole or any part of the moneys paid into court or of the interest earned thereon … The respective interests of the individual claimants were, at best, contingent…
…
In contrast with a case where the moneys paid into court are subject to a pre-existing trust and the dispute is between claimants to a direct and vested interest in the actual moneys, the function of the court in the present case was not to resolve a dispute between the claimants about beneficial ownership of the moneys themselves … The moneys paid into court were not themselves the subject matter of dispute but were held to satisfy any order, including any order for costs, made by the court consequent upon its determination of those conflicting claims and counterclaims...
By the sheer nature of the interpleader proceedings, Riverhall was required to relinquish any interest in any of the money paid into trust and agreed to dispose of the amount in the manner ordered by the Court (at [3]). The money was merely held pending the resolution of the various claims to it.
The reasoning in Harmer is entirely consistent with the approach taken by the Court in Byrnes v Kendle. The filing of interpleader proceedings and the payment into court of the contested sum of money manifests the settlor’s intention to relinquish any claim to the contested funds. The settlor’s intention is to benefit those claimants in such amounts and proportions as determined by the court, and as such it is, again, entirely consistent with the reasoning in Harmer that the interests of the claimants remain contingent until such time as the court has determined the claims.
Counsel also placed reliance upon Dwight v Commissioner of Taxation (1992) 37 FCR 178.
In Dwight, the court was tasked with determining who was “presently entitled” to money held on trust as security for costs, and the interest earned thereon, such that a liability to pay tax would accrue. In that case, the United States Surgical Corp. was ordered to pay in excess of $395,115 into a solicitor’s trust account by way of security for costs which fund was later invested. Thereafter, the Commissioner of Taxation assessed the solicitors (as trustees) as liable to pay tax on the interest earned by that fund. The trustee of the fund argued that United States Surgical had a vested and indefeasible interest in the fund and therefore was “presently entitled” to the fund for the purposes of the relevant tax legislation. The Commissioner argued that no person was presently entitled to the fund and therefore the trustee was liable to meet the taxation obligations.
That is, the dispute arose as to which person or entity was “presently entitled” to the fund while it was deposited in trust pending the resolution of the proceedings – not following the resolution of the claim in either party’s favour.
The following observations of Hill J at 186 are apt to these proceedings:
Where the security takes the form of an order that moneys be deposited in the names of the solicitors of the parties, the moneys will be held, at least until the time a cost order is made (and perhaps until a bill of costs has been prepared and taxed, in default of agreement between the parties as to the quantum of costs), in trust for the plaintiff who has deposited them with the trustees. However, the trustees will be affected by, and bound to have regard to, the equitable rights of the defendant, which rights are co-extensive with his rights to have the fund held pending the determination of the proceedings and the making of a cost order, and if that order be in his favour, pending his having recourse to the fund to the extent of the costs taxed or agreed. In other words, the defendant has rights in the nature of a lien over the fund to secure reimbursement to himself, if an order of costs be made in his favour, out of the security fund.
(Emphasis added)
Hill J accepted that “the money was held on trust for United States Surgical, subject to an equitable charge for such sums as should be ordered against it for costs … [and] that United States Surgical would not be presently entitled to the income of the security account.”
Hill J continued, at 190:
So it may be said that here the defendants in the three proceedings, in respect of which security was ordered, are in a like sense not beneficiaries in the security fund, albeit that by reason of the charge or lien over the fund for their benefit they have standing in a court of equity, should, for example, the trustees of the fund seek to appropriate the trust assets. The same cannot, however, be said of United States Surgical. The moneys in the fund are its moneys, although they are subject to a charge or lien in favour of the defendants creating an equitable interest co-extensive with the rights which that charge carries with it.
(Emphasis added)
His Honour observed (at 190) that “the question becomes whether the existence of that charge or lien brings about the result that there is no present entitlement or deemed present entitlement” at the time of the tax assessment. His Honour concluded (at 192) that “United States Surgical had… a vested and indefeasible interest in the income from the security account … [and] [i]n the result United States Surgical was presently entitled to the whole of the income of the security fund…”
It is important to draw a distinction between the conclusion arrived at by Hill J in Dwight as it related to the security funds during the course of those proceedings – that is before any liability to pay costs had been incurred - and that sought to be drawn by counsel from his Honour’s reasoning for the purposes of this case.
The primary judge’s conclusions here relate to the beneficial ownership of the funds upon the dismissal of Mr Harrison’s application for property adjustment, that is after Mr Harrison’s rights, co-extensive with the proceedings, had been extinguished by that dismissal.
Neither of these cases can be seen to support any assertion made by counsel who appeared for either Mr Harrison or Mr Kramer to the effect that Mr Harrison had any extant right whatsoever, whether contingent or otherwise, in the trust funds once his Honour had determined the claim.
There is no substance in counsel’s arguments as to the proper construction of the terms of the trust. At all material times Ms Ward was beneficially entitled to the funds and her entitlement to receive the return of her funds crystallised and was absolute upon the finalisation of the subject proceeding when the orders were made.
What eventuality were the trust funds to be retained until?
While it ought to be emphasised at this point that counsel who appeared for Mr Harrison before the trial judge made no application for the trust funds to remain in the trust account pending the resolution of some other (yet to be initiated) proceedings, each of Mr Harrison and Mr Kramer contend on appeal that his Honour erred in releasing the trust funds when there was a “constructional choice” as to the meaning of the phrase “pending court action”.
It was contended before this Court that the words “‘pending court action’” were intended to refer to [Mr Harrison’s] application in a ‘de facto financial cause’ or, in the context that he was seeking to recover funds lent, advanced or paid at the request of [Ms Ward], included any other court action…” (supplementary summary of argument at paragraph 8(e)(vii)).
Similarly, counsel who appeared for Mr Harrison asserted that the proceeds of sale “would remain on trust until determination by a court of competent jurisdiction of the competing parties’ entitlement thereto” (submissions in reply at paragraph 9(c)) and that “it is the question of entitlement to the funds that is to be resolved by “‘court action’” and not the question of whether or not there was a de facto relationship” (submissions in reply at paragraph 11).
This submission, however, neglects to acknowledge that in circumstances where it was Mr Harrison who lodged the caveat over the title of the Western Australia property it was squarely within his power to adduce evidence as to the nature of the interest he asserted in that property (or its subsequent proceeds of sale). Additionally, it neglects to acknowledge that pursuant to the terms of the initiating application filed by Mr Harrison on legal advice, the interest asserted in that document was in the following terms:
a lump sum payment of $150,000 from [Ms Ward] to [Mr Harrison] to reflect the financial advances made by [him] to [her,] other financial and non-financial contributions made toward the relationship …
Specifically, there was no evidence contained in Mr Harrison’s affidavit evidence, or oral evidence, that any of the monies he had provided to Ms Ward were by way of loan, or imbued with any legal obligation cast upon Ms Ward.
The Federal Circuit Court was clearly a “court of competent jurisdiction” to resolve the claim brought by Mr Harrison, which was the only basis upon which Mr Harrison asserted any entitlement to that fund.
Moreover, whether or not Mr Harrison ever had, or has, some legitimate money claim or cause of action against Ms Ward, this was never of itself capable of giving rise to a caveatable interest in the real property Ms Ward solely owned; nor any right to encumber Ms Ward’s entitlement to deal as she chose with her property, including money, prior to Mr Harrison obtaining an enforceable judgment. Short of Mr Harrison making out an entitlement to an interlocutory injunction, the mere fact of a money claim against Ms Ward never had any relevant nexus to her ownership of a real property or her entitlement to the proceeds of its sale.
Error of discretion
Self-evidently from these observations it will be seen that we find no substance in the contention that there was an error in the exercise of the trial judge’s discretion.
20 January 2017 orders
When regard is had to the supplementary summary of argument filed on 18 July 2017 by counsel on behalf of Mr Kramer, it is clear that his challenges to the 20 January 2017 order can be distilled to:
a)That Mr Kramer was denied procedural fairness at the hearing on 20 January 2017;
b)The Court did not have jurisdiction to make the 20 January 2017 orders because:
i)Having determined that there was no de facto relationship as between Mr Harrison and Ms Ward the Court’s jurisdiction had effectively been exhausted and therefore the court could not entertain any application in a case filed by Ms Ward seeking the enforcement of the earlier order, to join Mr Kramer or to make the orders for the reimbursement of the monies;
ii)His Honour did not have jurisdiction to hold Mr Kramer liable in any way for the disbursement of funds or Mr Harrison and Mr Kramer jointly and severally liable for the repayment of the trust funds to Ms Ward, and specifically that s 106B does not provide a proper basis for the same.
Procedural fairness
Perhaps ironically when compared to Ms Ward’s position with respect to Mr Kramer’s unilateral conduct in dealing with her money without her knowledge or consent, counsel asserted that Mr Kramer was “taken by surprise” by the turn of events on 20 January 2017. Counsel submits that there was no evidence that Mr Kramer had been served with the application of Ms Ward and he had “not turned his mind to the matter and had no prior knowledge of the questions he was going to be expected to answer”. This argument makes a mockery of the uncontentious facts before this Court.
It is clear that Mr Kramer was aware of Ms Ward’s application by no later than 19 December 2016, when he had instructed counsel to appear on his behalf before his Honour (despite the fact that counsel curiously announced his appearance as “I’m instructed by [Mr Kramer]. I appear amicus” (Transcript 19 December 2016 p 2, l 7-8). His Honour made his attitude toward Mr Kramer’s conduct abundantly clear during the course of that hearing and the nature of the inquiry when the matter was to return in January 2017.
Furthermore, Mr Kramer filed and served an affidavit in compliance with his Honour’s 19 December 2016 orders, he attended the hearing on 20 January 2017, and when asked if he was prepared to enter the witness box and give evidence he responded “absolutely”. Insofar as it is asserted that he was not aware of the questions he was going to be asked, the same can be said of every witness in a proceeding. He was sufficiently aware of the nature of the inquiry and had sworn an affidavit, the content of which formed the basis of the questions.
We reject the proposition that Mr Kramer was denied procedural fairness.
Jurisdiction
Counsel for Mr Kramer contended that having determined there was no de facto relationship as between Mr Harrison and Ms Ward, the Federal Circuit Court had no jurisdiction to entertain Ms Ward’s application in a case. This submission cannot be sustained. We have already set out earlier the nature of the jurisdiction being exercised by the Federal Circuit Court.
Additionally, pursuant to s 39B of the Act jurisdiction is conferred on the Federal Circuit Court in respect of de facto financial causes which for this purpose includes “any other proceedings (including proceedings with respect to the enforcement of a decree or the service of a process) in relation to concurrent, pending or completed proceedings of a kind referred to in any of the preceding paragraphs.”
The application brought by Ms Ward was evidently brought by way of enforcement of the 2 November 2016 orders. The Court’s power to enforce its own order, even after the completion of proceedings, is plainly contemplated by the definition of de facto financial cause.
It is well settled that a judge is not required to “resort to a form of incantation, identifying the power being used to make the order” (Browne & Keith (2015) 55 Fam LR 208 at 212). Similarly, in Kavan & Mallery (2015) FLC 93-651 (per Bryant CJ, Finn and Strickland JJ) the Full Court observed at 80,297:
We do not consider that it was fatal to her Honour’s decision that she did not identify the source of power upon which she relied to make the order transferring the proceedings to the Supreme Court (R v Bevan; Ex parte Elias and Gordon (1942) 66 CLR 452 at 487; Lockwood v The Commonwealth (1954) 90 CLR 177 at 184; Brown v West (1990) 169 CLR 195 at 203; Attorney-General (SA) v Corporation of the City of Adelaide (2013) 249 CLR 1 at 76). However, it was necessary that the conditions required for the exercise of the power were satisfied (Eastman v Director of Public Prosecutions (ACT) (2003) 214 CLR 318 at 362 [124] per Heydon J; Australian Education Union v Department of Education and Children’s Services (2012) 248 CLR 1 at 17 [34] per Crennan and Kiefel JJ).
Thus it was necessary only for the conditions to be satisfied for the exercise of the power, and that was clearly so.
Counsel for Mr Kramer also asserted that s 106B of the Act does not confer jurisdiction on the Court to hold Mr Kramer liable for the repayment of any of the funds wrongly paid to Mr Harrison, and particularly not to hold him “jointly and severally liable”. We agree that s 106B does not provide a proper basis for Mr Kramer to be held jointly and severally liable for funds received by Mr Harrison, however we do not accept that s 106B is not a proper basis upon which Mr Kramer can be held liable to repay any of the trust funds which he has received or caused to be withdrawn for his own benefit.
Section 106B provides:
(1)In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which irrespective of intention, is likely to defeat such an order.
…
(2)The court may order that any money or real or personal property dealt with by any instrument or disposition referred to in subsection (1)… may be taken in execution or charged with the payment of such sums for costs or maintenance as the court directs, or that the proceeds of sale must be paid into court to abide its order.
(3)The court must have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested.
(4)A party or a person acting in collusion with a party may be ordered to pay the costs of any other party or of a bona fide purchase or other person interested of and incidental any such instrument or disposition and the setting aside or restraining of the instrument or disposition.
(4AA)An application may be made to the court for an order under this section by:
(a)a party to the proceedings; or
(b)a creditor of a party to the proceedings if the creditor may not be able to recover his or her debt if the instrument or disposition were made; or
(c)any other person whose interests would be affected by the making of the instrument or disposition.
(4A)In addition to the powers the court has under this section, the court may also do any or all of the things listed in subsection 80(1) or s 90SS(1).
(5) In this section:
disposition includes:
(a)a sale or gift; and
(b)the issue, grant, creation, transfer or cancellation of, or a variation of the rights attaching to, an interest in a company or a trust.
…
interest:
…
(b) In a trust includes:
(i)a beneficial interest in the trust; and
(ii)the interest of a settlor in property subject to the trust; and
(iii)a power of appointment under the trust; and
(iv)a power to rescind or vary a provision of, or to rescind or vary the effect of the exercise of a power under, the trust; and
(v)an interest that is conditional, contingent or deferred.
(Emphasis added)
The terms of s 106B make plain that such relief is available when:
a)There are proceedings under the Act; and
b)There is an “instrument or disposition”; and
c)The instrument or disposition is made by or on behalf of a party or by direction of a party or in the interest of the party; and
d)Made in order to defeat an existing or anticipated order in the proceedings, or irrespective of intention, is likely to defeat such an order.
The relief sought in clause 3 of Ms Ward’s application in a case was specifically directed to the trustee of the entity then holding the trust funds, Kramer Tax Pty Ltd, of which Mr Kramer was at all relevant times the sole director and shareholder. As will be clear from its terms, s 106B provides a sufficient juridical basis for such an order to be made.
Proceedings under the Act
Section 106B was materially altered by amendments to the Act in 1983. The precursor to its former iteration, s 85, applied only to “proceedings under this Part … [in respect of an] anticipated order in those proceedings for costs, maintenance or the declaration or alteration of any interests in property…” These amendments make plain that the provision in its amended form applies to transactions likely to defeat any order of the court in proceedings of any kind under the Act. That includes an order incidental or consequential to a s 90RD declaration.
In In the marriage of Whitaker (1980) FLC 90-813, Nygh J considered that “proceedings under the Act” was not confined to current proceedings but was broad enough to encompass completed proceedings.
Even if for present purposes the arguments made by counsel for Mr Kramer are accepted, that is that Ms Ward only ever had a contingent interest in the fund held on trust pending the outcome of any proceeding relating to the fund, subsection 106B(5)(b) makes plain that an interest in a trust includes an interest that is conditional, contingent or deferred.
There could be no suggestion other than that the release of the trust funds to Mr Harrison amounted to a “disposition”. Any suggestion that the disposition was not “by or on behalf of” Mr Harrison is dispelled by the terms of s 249 of the Legal Profession Act 2007 (Qld) which makes plain a solicitor may not deal with money held on trust without the authority of the person on whose behalf the fund is held. Additionally, on 8 November 2016 Mr Harrison signed an authority directed to Mr Kramer seeking the release of all funds then held on trust making plain that this was a disposition on behalf of Mr Harrison.
There could similarly be no suggestion that the disposition of funds to Mr Harrison had any effect other than of defeating the order made by Judge Vasta on 2 November 2016.
In Mitty & Mitty and Ors (2010) 45 Fam LR 20, the husband authorised his solicitors to pay their own account from funds then held on trust, in circumstances where there was an existing order requiring the husband to pay to the wife a sum equal to that which he paid his solicitors (a dollar for dollar order). The wife sought an order setting aside the payment of half of the fees (such that she could obtain an equal amount of fees). The trial judge held that in the circumstances where the husband was aware that he had no other source of funds from which to meet his obligations under the dollar for dollar order, the husband’s authorisation of the payment of fees was made with the intention or effect of defeating the operation of the dollar for dollar order. His Honour made an order setting aside the disposition and requiring the solicitors to repay to their trust account half of the sum paid to them to be held on trust pending further order.
In that case the trial judge and the Full Court were concerned with arguments as to the ownership of the funds arising from the source of those funds. The husband had borrowed money from his sisters to meet his legal fees and contended that the money paid into the trust account was not his money and that therefore somehow affected whether the transaction amounted to a disposition within the meaning of s 106B. The trial judge rejected that contention and recorded “that the source of the funds was not from the matrimonial assets is of no weight in the argument…”
Specifically, at [23], Fowler J observed that “[the money] could only have been removed from the solicitor’s trust account and paid to the solicitors in circumstances where the husband had authorised the transfer. In those circumstances, the payment became a payment by the husband. If it was not, then certainly it was a payment on behalf of the husband”.
The husband appealed those orders.
The Full Court, hearing an application for summary dismissal of the appeal recorded their satisfaction (at [115]) that “there was no error of principle by the primary Judge” and dismissed the appeals.
Faulks DCJ (delivering separate reasons agreeing with their Honours Boland and Stevenson JJ) observed similarly at [50] that “the transfer of the money of the trust at least when it was transferred from the trust account to satisfy the tax invoice submitted by the solicitors constituted a disposition “by or on behalf of” the husband which was made to defeat an existing order in these proceedings, or which at least was likely to effect the defeat of such and [sic] order”.
Obviously, given the foregoing discussion in respect of the beneficial entitlement to the trust funds, Mr Kramer personally had no entitlement to the trust funds. To the extent that he received or retained any part whatsoever, whether by way of meeting costs and disbursements incurred by Mr Harrison or otherwise, he is liable to disgorge those funds.
In summary then, whilst we accept that s 106B does not provide jurisdiction for the order in general terms that Mr Kramer be “jointly and severally liable” for the full amount disbursed, we are satisfied it is a juridical source of power in respect of any portion of the trust fund which Mr Kramer received for himself, whether for legal fees or otherwise.
For those reasons the order dated 20 January 2017 will be varied on the appeal in the manner provided for at the commencement of these reasons.
Miscarriage of discretion
Counsel for Mr Kramer asserts “the orders made 20 January 2017 were not a lawful, judicial or reasonable exercise of the court’s power or discretion in relation to [Mr Kramer]” (supplementary summary of argument at paragraph 8(f)).
For reasons which will be apparent from the foregoing, we are not persuaded that his Honour’s discretion miscarried.
31 January 2017 orders
The appeal from his Honour’s refusal to stay the 20 January 2017 orders is futile in circumstances where the appeal of the substantive orders has now been heard.
The order referring the papers to the Marshal to commence contempt proceedings does not amount to a “decree” for the purposes of an appeal.
Pursuant to ss 94 and 94AAA of the Act, the Family Court has jurisdiction in respect of appeals “from a decree” of either the Family Court or the Federal Circuit Court in the relevant circumstance. Section 4(1) of the Act provides that a decree is a “decree, judgment or order”. No further guidance is provided in the legislation as to the meaning of any of those terms.
It was held in Oswald & Karrington (2016) FLC 93-726 at 81,687 that “it is well settled that reasons for judgment are not of themselves a “judgment” in this connection. A judgment is the formal order by which a Court disposes of the matter before it”.
Pursuant to r 19.04 of the Federal Circuit Court Rules,
The Court may direct the Marshal to make an application [for contempt].
What is immediately apparent from the terms of that rule is that there is in fact no application on foot in respect of contempt as a consequence of such a direction and there has been no determination by the Court in respect of the rights of either Mr Harrison or Mr Kramer.
It is clear from the foregoing, that there has been no determination of any application for contempt, and indeed, as far as this Court is aware, there has been no application for contempt filed. The effect of his Honour’s referral was that proceedings for contempt are to be commenced. There has been no determination of the rights of either Mr Harrison or Mr Kramer, there has been no finding that the conduct of either of those persons amounted to contempt and those persons have not been sanctioned for this behaviour. In the circumstances, we do not consider that such an order is a “decree” for the purposes of the Act capable of founding an appeal.
Conclusion
There being no merit in either of Mr Harrison’s appeals (NA 13 of 2017 and NA 6 of 2017), both of those appeals are dismissed.
For the same reasons, there is no merit in Mr Kramer’s collateral challenge, advanced within his appeal, to the orders made on 2 November 2016.
We are satisfied of error on the part of the trial judge in respect of the orders of 20 January 2017 to the extent to which those orders imposed upon Mr Kramer a personal liability to repay that proportion of the trust fund paid to Mr Harrison. However, Mr Kramer ought be held personally liable for any proportion of the trust funds he caused to be removed which were not paid to Mr Harrison.
We will therefore vary the order of 20 January 2017 pursuant to s 94AAA(6) of the Act and make the orders that ought to have been made in the first instance, including provision for the payment of interest pending payment.
Costs
Mr Harrison has been wholly unsuccessful in respect of each of his appeals (NA 13 of 2017 and NA 6 of 2017) within the meaning of s 117(2A)(e) of the Act.
More fundamentally though, and relevant to subparagraphs (d) and (g) of s 117(2A), if Mr Harrison had ensured the order of 2 November 2016 had been complied with, as it should have been, Ms Ward’s position of being kept out of money to which she was solely entitled would not have been compounded by having to respond and deal with meritless appeals, at financial and no doubt emotional cost.
It is obvious, relevant to subparagraph (a) of s 117(2A), that Ms Ward’s financial circumstances are bereft without the return of her funds and, even with that, Mr Harrison’s financial circumstances are superior.
The subject matter of these proceedings and the conduct of Mr Harrison in bringing them about, starting with his non-compliance with a solemn order of the Federal Circuit Court, dictate the conclusion that Ms Ward ought not be out of pocket in having to resist these appeals.
Unsurprisingly, Ms Ward sought her costs on an indemnity basis and we are well satisfied that the circumstances justify what is recognised as a very great departure from an order for costs on a party and party basis (Kohan and Kohan (1993) FLC 92-340; Prantage & Prantage (2013) FLC 93-544). In summary, by reference to s 117(2) and (2A) of the Act we are of the opinion that there are circumstances that justify an order for Mr Harrison to pay Ms Ward’s costs on an indemnity basis and that such an order is just.
With respect to Mr Kramer’s appeal (NA 4 of 2017) whilst that appeal enjoyed a measure of success in that the orders of 20 January 2017 have been varied, Mr Kramer utilised his appeal as the vehicle by which he mounted a collateral attack upon the orders made on 2 November 2016. That collateral attack has been wholly unsuccessful and it occupied the work involved in these appeals collectively, in terms of Ms Ward’s costs incurred and the appeal hearing, to a far greater extent than that part of the appeal directed to the orders made on 20 January 2017 in respect of which Mr Kramer enjoyed partial success.
Relevantly, Mr Kramer’s complicit conduct enabled the non-compliance that occurred with respect to the original orders of 2 November 2016. Notably, Mr Kramer was at all material times an officer of the Court. Further, Mr Kramer obtained a personal benefit via his removal of some part of the trust funds for his own benefit. Obviously, had the original orders of 2 November 2016 been complied with, as they ought to have been, the subsequent orders, including those of 20 January 2017 the subject of Mr Kramer’s appeal would never have been made.
At the outset of the hearing of the appeal Mr Kramer consented to an order that he pay Ms Ward’s costs on an indemnity basis brought about by the late production of his supplementary summary of argument for the appeal.
In addition to these costs, in the extraordinary circumstances of this case and, notwithstanding the partial success of Mr Kramer’s appeal directed to the order of 20 January 2017, we are of the opinion that Mr Kramer ought be responsible for Ms Ward’s costs of and incidental to his appeal on an indemnity basis.
Referral of the papers to the Queensland Law Society and Legal Services Commission
We note that pursuant to orders made by the trial judge on 14 December 2016, “…the Legal Services Commission of Queensland and the Queensland Law Society be notified in relation to the conduct of [Kramer] Law Lawyers & Accountants Pty Ltd.”
We also note that in reasons for judgment delivered on 30 May 2017 (Harrison & Ward and Anor [2017] FamCAFC 99) Kent J made observations as to Mr Kramer’s conduct by reference to relevant provisions of the Legal Profession Act 2007 (Qld) and the Trusts Account Act 1973 (Qld). We would endorse those observations.
We consider it wholly appropriate that in the circumstances, these reasons also be provided to the Legal Services Commission of Queensland and the Queensland Law Society for consideration of any disciplinary measures that ought be taken with respect to Mr Kramer and we will make such a request of the Registrar.
I certify that the preceding one hundred and ninety-six (196) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Strickland, Kent & Cronin JJ) delivered on 21 December 2017.
Associate:
Date: 21 December 2017
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