Kramer & Another & Ward

Case [2017] FamCAFC 270

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…

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Kramer & Another & Ward [2017] FamCAFC 270
Case
[2017] FamCAFC 270
Decision Date

CaseChat Overview and Summary

The case of Kramer & Another & Ward involves an appeal from property adjustment proceedings initiated under the Family Law Act 1975 (Cth). Mr Kramer, representing Mr Harrison, appealed against several orders made by Judge Vasta. The primary issue was whether the trial judge had the jurisdiction to order the release of trust funds to the respondent, Ms Ward, and subsequently to make an order for repayment of those funds by the appellant and his solicitor. The appeal also questioned whether the trial judge had procedurally denied the appellant fairness in determining the existence of a de facto relationship and if there was an erroneous construction of the trust regarding the funds.

The court examined the jurisdiction of the trial judge in releasing the trust funds, considering whether the court's jurisdiction was exhausted upon the declaration of no de facto relationship. It was established that while the trial judge did not have jurisdiction to order the repayment of the funds, he did have the jurisdiction to set aside the disbursal of those funds. The court also considered whether the appellant was denied procedural fairness in the determination of the de facto relationship, finding no error in the process followed by the trial judge.

In terms of the construction of the trust, the court rejected the appellant's argument that the trial judge's discretion miscarried due to an erroneous interpretation of the trust. The court found that the phrase "pending court action" did not necessarily mean any alternative court actions but referred to the proceedings in the Federal Circuit Court. Therefore, the appeal was dismissed in part and allowed in part.

The final orders of the court set aside the release of funds to Mr Harrison and ordered him to repay the funds to Ms Ward's solicitors, with interest. Mr Kramer was also ordered to compensate Ms Ward for any amounts withdrawn from the trust fund, with interest. Additionally, costs were awarded against both Mr Harrison and Mr Kramer for the respective appeals. The court directed the publication of these orders to the Queensland Law Society and the Legal Services Commission of Queensland, as well as any other requested documents related to the matter.

Orders

Orders of the court

1.

Appeal Number NA 13 of 2017 from the orders of Judge Vasta dated 2 November 2016 and 20 January 2017 be dismissed.

2.

Appeal Number NA 6 of 2017 from the orders of Judge Vasta dated 31 January 2017 be dismissed.

3.

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.

4.

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.

5.

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.

6.

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.

7.

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.

Background

Background to the litigation

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. Background2. 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)

Evidence

Evidence Before The Court

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.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

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.