Magrath v Magrath

[2001] NSWSC 453

CITATION:	MAGRATH v. MAGRATH [2001] NSWSC 453
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	SC 4800/00
HEARING DATE(S):	21.05.01
JUDGMENT DATE:	4 June 2001
PARTIES :	Ellen Mildred Sinclair Magrath - Plaintiff Maxwell Brinsmead Magrath - Defendant
JUDGMENT OF:	Bryson J at 1

COUNSEL :	S.D. Epstein SC & Ms P. Lane - Plaintiff D. Baran - Defendant
SOLICITORS:	Collins Cornock & Co. Solicitors - Plaintiff Dorrough Smart Attorneys - Defendant
CATCHWORDS:	COURTS and JUDGES - Cross-vesting legislation - invalidity and Wakim - orders of Family Court for enforcement of agreement by H with W that H would grant a mortgage to a company controlled by W to secure a loan owed by H & W to the company were made in purported exercise of State jurisdiction - other orders of Family Court in exercise of Federal Jurisdiction required H to indemnify W against the loan - in an application under Federal Courts (State Jurisdiction) Act 1999 (NSW) the Supreme Court enforced the orders which the Family Court had purportedly made in exercise of State jurisdiction.
LEGISLATION CITED:	Federal Courts (State Jurisdiction) Act 1999 (NSW) Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW) Family Law Act 1975 (Cth) Evidence Act 1995 (NSW)
CASES CITED:	Re Wakim; ex parte McNally & Anor (1999) 198 CLR 511 Damberg v. Damberg & Anor (1999) 25 Fam LR 476 Residual Assco Group Ltd v. Spalvins (2000) 74 ALJR 1013 Re Macks; ex parte Saint (2000) 75 ALJR 203
DECISION:	Family Court orders enforced. See para 29.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRYSON J.

MONDAY 4 JUNE 2001

4800/00 ELLEN MILDRED SINCLAIR MAGRATH v. MAXWELL BRINSMEAD MAGRATH

JUDGMENT

1   HIS HONOUR: In these proceedings commenced on 29 November 2000 the plaintiff seeks orders under provisions of the Federal Courts (State Jurisdiction) Act 1999 (NSW) (FCSJ Act) dealing with proceedings and orders in proceedings PA6790 of 1993 in the Family Court of Australia.

2   The evidence consisted of the judgments and orders of the Family Court of Australia of 20 December 1995, 24 December 1998 and 24 July 2000 and a copy of Statement of Liquidated Claim 1720 of 2001 in the District Court at Sydney in which the plaintiff is LEA Properties Pty Ltd, the first defendant is Mr M.B. Magrath (now the defendant) and the second defendant is Mrs E.M.S. Magrath (now the plaintiff).

3   In the order of 20 December 1995 paras.1 to 9 were as follows:

1. That on or before 28 February 1996, the husband pay to the wife the sum of $104,200.
2. That if the said sum of $104,200 be not paid by 28 February 1996, it shall bear interest at the rate of 10% per annum from that date.
3. That upon receipt of the sum provided for in Order 1 above, together with any interest as set out in Order 2 above, the Wife sign all deeds and documents and do all things to effect a transfer to the husband of all of her right, title and interest in the property known as 173 Golden Four Drive, Bilinga, in the State of Queensland (hereinafter known as ‘the Bilinga property’).
4. That upon the transfer of the Wife’s right, title and interest in the said property, the husband indemnify the wife against any liability to LEA Properties Pty Limited, in relation to the principal debt secured by mortgage over the Bilinga property and in relation to interest falling due on the said mortgage on and from 1 January 1996.
5. That the spouse maintenance order made by this Court 17 August 1994, be discharged upon payment pursuant to Order 1 above, together with any interest pursuant to Order 2 above.
6. That the order of 17 August 1994, that the Bilinga property be sold, be discharge forthwith.
7. That upon payment of the sum provided for in Orders 1 and 2 above, the Wife transfer to the Husband any share or shares she holds in the company, Runville Pty Limited.
8. That each party be declared the owner of all furniture, personal possessions, motor vehicles, other chattels and cash as may be within the said party’s possession or control.
9. That leave be granted to each party to apply in relation to the implementation of any of the above orders on 7 days’ notice.

4   There were further orders dealing with ancillary matters.

5   In the order of 24 December 1998 paras.1 to 5 were as follows:

1. That by way of indemnification pursuant to Order 4 made by this Court on 20 December 1995, the Husband pay to LEA Properties Pty Limited the sum of $42,116.61 due to it for the period from 28 February 1990 to 1 November 1997 in relation to the principal debt over the Bilinga property together with such further interest as may become due from the latter date to the date of determination.
2. That the document entitled ‘Heads of Agreement’ signed by the parties in the Supreme Court of NSW, and in particular as to the following terms -
That the Husband and Wife agree to execute a Memorandum of Mortgage in favour of LEA Properties Pty Limited in the sum of $165,000 over 173 Golden Four Drive, Bilinga, Queensland containing the following special conditions -
(a) Principal repayable on sale or 28 February 1998 whichever first occurs (no penalty for early repayment).
(b) Option to extend term at end of 3 years for 3 years more at then prevailing interest rate in Supreme Court Rules (or otherwise as agreed).
(c) Interest rate fixed at 10.5% for 3 years.
(d) Interest repayable monthly.
(e) Husband and Wife to be severally liable for one-half of principal and one-half of interest - no severance of joint tenancy intended thereby.
(f) Stamp duty, mortgagees, legal costs and fees to be responsibility of mortgagors.
(g) Husband’s liability for part interest acknowledged as paid, Wife acknowledged as still liable ($22,837.50).
(h) Unpaid interest to date to be capitalised as is case re future unpaid interest;
be declared pursuant to Cross Vesting Legislation to be valid agreement enforceable by the parties thereto against each other and in particular binding the Husband and Wife severally and jointly.
3. That the Husband execute a mortgage document to LEA Properties Pty Limited as prescribed in Order 2 above, and that he also execute an Application for Title as required by the Queensland Land Registry within 14 days of delivery of the said mortgage and Application for Title documents to him.
4. That pursuant to Section 84 of the Family Law Act in the event the Husband refuses or neglects to comply with the above order, the Registrar of the Family Court of Australia at Parramatta or his nominee, be appointed to execute the said mortgage and Application for Title in the name of the Husband and to do all acts and things necessary to give validity and operation to the said documents.
5. That liberty be granted to either party to apply in relation to the implementation of any of the above orders on 48 hours’ notice.

There were further orders dealing with costs and ancillary matters.

6 Observations in the judgment of Purdy J of 24 December 1998 show that in his Honour’s understanding and intention orders 2 and 3 were made in exercise of jurisdiction conferred on the Family Court of Australia by the cross-vesting legislation mentioned in order 2, being the Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW) and corresponding Federal legislation (JCCVActs).

7   In the order of 24 July 2000 para.1 was in these terms:

(1) That there be a declaration that the Family Court of Australia does not have jurisdiction to hear and determine proceedings relating to the enforcement of Heads of Agreement signed by the husband and wife and others by way of settlement of proceedings in the Supreme Court of NSW between Garry and Sherelle Clayton as plaintiffs and the Husband and Wife as defendants and numbered S2367 of 1994.

8   The claims in the Further Amended Summons filed on 21 May 2000 may be summarised as follows:

1(a) Under s.11(2) of the FCSJ Act that the proceeding in the Family Court of Australia be treated as a proceeding in this Court.

1(b) Alternatively that the part of the proceedings relating to enforcement of Heads of Agreement be so treated.

2. Ancillary orders pursuant to s.11(4).

3. A declaration that the rights and liabilities of the parties are enforceable in the same way as if order 4 of 20 December 1995 and orders 2, 3 and 4 of 24 December 1998 had been made in this Division.

4 and 5. Orders dealing with execution of the mortgage by a Registrar.

6. Removal of the defendant’s Caveat 704308926 over the land subject to the transfer of mortgage, Title Reference 15982111 in the Queensland Torrens Register.

7. Removal of the defendant’s Caveat 7162515F on title of a home unit owned by the plaintiff at Castle Hill New South Wales.

9   Removal of the Caveats was not contentious and I was assured by the defendant’s counsel that action was already being taken to remove them.

10 In the plaintiff’s case, as in the reasons of Purdy J, orders made by the Family Court of Australia in exercise of its powers relating to property settlement under s.79 of the Family Law Act 1975 (Cth) were distinguished from orders made by that Court with the object of enforcing what it had found were contractually binding Heads of Agreement. Under the Heads of Agreement, as found, Mr Magrath had a contractual obligation to Mrs Magrath to grant a mortgage to LEA Properties Pty Ltd to secure a loan made by LEA Properties Pty Ltd to both Mr Magrath and Mrs Magrath which related to the purchase of the property at Bilinga. Mrs Magrath was to transfer the Bilinga property to Mr Magrath and Mr Magrath was to indemnify her against the loan in conformity with orders made on 20 December 1995 under s.79 of the Family Law Act in the undoubted exercise of Federal jurisdiction. Findings of Purdy J showed that a form of mortgage was proffered for Mr Magrath to execute before February 1997, and a form of transfer was proffered in 1997, but that Mr Magrath did not execute them.

11   The plaintiff’s case was that orders 2, 3 and 4 of the Orders of 24 December 1998 were made in the purported exercise of jurisdiction conferred on the Family Court of Australia by the JCCV Acts and hence were an ineffective judgment as defined by s.4 of the FCSJ Act. It was also the plaintiff’s case that she has the benefit of the declaration in s.6 of the FCSJ Act that the rights and liabilities of all persons are declared to be and always to have been the same as if those orders had been a valid judgment of this Division; and that she has the benefit of the declaration of enforceability in subs.7(1). Plaintiff’s counsel contended that the plaintiff has the benefit of issue estoppels and res judicata in respect of the reasons given by Purdy J; I regard this as doubtful having regard to the definition of “judgment” in s.3 which may not extend to the reasons, but it is not necessary to come to a conclusion.

12   The defendant’s counsel put many submissions to me against the plaintiff’s case. The submissions put did not take the form of an argument meeting the plaintiff’s case or the contentions on which the plaintiff’s counsel relied, but consisted of many observations which were in a general way adverse to the plaintiff’s position on some broad view. It is not open to me to address anew the merits of the claim on which Purdy J’s orders of 24 December 1998 were based, or the validity of the findings which led his Honour to make the orders of that day. That is so because of the declaration of rights in s.6 of the FCSJ Act. If Purdy J’s orders had been a valid judgment of this Division they would not be open to review by me except in very limited circumstances. The opportunity to make such review is conferred by subs.10(1) but only in circumstance in which a decision of this Court could be similarly dealt with. No application has been made, by cross-claim or notice of motion in these proceedings, for an order varying the orders or otherwise dealing with them in ways referred in by s.10; none of the matters referred to by defendant’s counsel would, in my understanding, open any order of this Court for reconsideration. The grounds available are very limited, for example, that the earlier order was obtained by fraud. The defendant’s position generally was not consistent with s.10 as it was to the effect that no operation should be accorded to Purdy J’s orders. The plaintiff’s application to me was an appropriate occasion for the defendant to bring forward any such application under subs.10(1), by cross-claim or otherwise, but he did not.

13 Observations of the defendant’s counsel were very diffuse and it is difficult for me to narrate their substance. Section 91 of the Evidence Act 1995 (NSW) limits the use which may be made of statements of fact in Purdy J’s judgments; those statements are available so as to show the view of the facts held by the Family Court which formed the basis on which the Family Court acted, but not so as to show that those facts objectively exist. From his Honour’s reasons it appears that the Heads of Agreement to which Purdy J intended to give effect had been entered into by persons interested in the estate of Mrs Magrath’s late father to settle an appeal in litigation dealing with his dispositions; LEA Properties was not a party to that litigation or to the Heads of Agreement. It can be seen from the terms of Purdy J’s decision of 20 December 1995 that his Honour assumed and the hearing proceeded on the assumption that the mortgage had been or would be granted. Purdy J explained this assumption in his reasons of 24 December 1998, and proceeded to make an order to make good the assumption. Plainly from his reasons Purdy J took the view that the Heads of Agreement had been agreed to by Mr Magrath in circumstances in which they were contractually binding. In the decision of 24 December 1998 his Honour found that the Heads of Agreement had been signed by Mr Magrath and other parties. Mr Magrath’s counsel made a number of observations relating to a contention that this conclusion was wrong or unsatisfactory or capable of further consideration, but in my view there is no substantial reason for me to re-examine the factual findings on which Purdy J acted, or to decide whether the Heads of Agreement had indeed been signed or whether Mr Magrath had become contractually bound to them by dealing with them in some way other than signing them. Nor do I see any significance in the fact that Purdy J in his judgment did not set out the whole terms of the Heads of Agreement and addendum.

14 The reasons and orders of 20 December 1995 provide some context within which the reasons and orders of 24 December 1998 can be placed and the operation of paras.2 and 3 requiring execution of a mortgage can be understood, but that relation between paras.2 and 3 and the orders made in pursuance of the power in s.79 does not in any way detract from or qualify their operation or their basis in State jurisdiction. They are not in my opinion in any way qualified or of less effect because they were made in a context of litigation over family property and discretionary orders adjusting rights; the orders relating to execution of the mortgage were made in enforcement of what were found to be contractual rights. Counsel’s observations about the state of compliance with property settlement orders do not in my opinion have a bearing on the operation of the orders of 24 December 1998 in relation to the mortgage. Those orders have the force given to them by s.6.

15   Counsel made many observations adverse to the plaintiff’s conduct of these proceedings and the limited nature of the evidence tendered by the plaintiff. In my view these observations were not well based, having regard to the matters which on a correct view the plaintiff was required to prove in the present proceedings. The absence from evidence of any affidavit or oral evidence of hers or of the Heads of Agreement is not a subject for effectual criticism.

16   Counsel made extensive submissions on materials on which it was said that the plaintiff could have gone into evidence, including the circumstances surrounding negotiation of the Heads of Agreement and subsequent correspondence dealing with it. In my view these criticisms were not well based. Nor did counsel’s repeated observation that the disputes arose out of family matters and family property have any bearing in my view on the enforceability of the obligation, or on whether I should make the orders sought.

17   Counsel also made adverse observations on what was said to be delay by the plaintiff in enforcing her rights, which arise, ultimately, out of the loan transaction of 1992. These observations were not well based as the plaintiff’s claim arises out of Heads of Agreement in 1995 by which she had a contractual right that the defendant should secure to LEA Properties a debt for which she was liable in common with him; and the importance of this obligation was enhanced by the order for him to indemnify her which was made later in 1995. There was in my view no significant delay, and no delay adverse to her claim, in her later conduct of the Family Court litigation which led to her obtaining orders in 1998, unfortunately defeated by a misconception, held by the Family Court of Australia but widely shared, that the JCCV Acts were valid, and she pursued her claim by proceedings in the Family Court of Australia and in this Court in the year 2000. There has been no showing of circumstances detrimental to Mr Magrath in any way arising from what was asserted to be delay.

18   Counsel also made some observations relating to the terms of the mortgage document to be executed. From his observations and some matters in Purdy J’s decisions I understand that forms of Transfer and Mortgage have been proffered, but there has been no debate about the appropriateness of the particular forms proffered for carrying out the orders, if the orders are effective. Counsel also made observations about the appropriateness of requiring execution now of a mortgage which was to be for a term of three years and renewable for a further three years expiring on 13 February 2001. In my understanding there is no substantial reason why, if Mr Magrath did incur an obligation to give a mortgage with an obligation to repay on a date which has now passed, that obligation cannot be enforced; there is no anomaly and no reason why the obligation should not be complied with notwithstanding that it now requires repayment forthwith. I take the same view of observations by counsel dealing with the rates of interest and what he put forward as a high amount arising from the calculation of interest and its cumulation with principal; that is no more than giving effect to what Purdy J found to have been agreed. The obligation is not open to reconsideration or review by this Court on the ground of hardship or any like ground, and in any event no hardship was proved and I do not see any. The cumulation of the amount of principal and interest with the amount of $104,200 paid long ago to Mrs Magrath in compliance with the order of 20 December 1995 to produce a total of approximately $400,000 has no validity.

19   Counsel made a number of observations directed to the likelihood of LEA Properties requiring payment of the debt. In this connection it was submitted that the District Court proceedings were a sham. In my view there really is no material on which to gauge the likelihood that repayment will be required, and the plaintiff is entitled to enforcement of the Heads of Agreement and to the protection of having Mr Magrath give a mortgage to LEA Properties no matter how great or little is the prospect that the company will require repayment. There is no reason to think that the company has abandoned its right or that the District Court proceedings are in some way a sham. In particular Mrs Magrath’s position in LEA Properties is not a reason so to think.

20   I reject the contention that LEA Properties having brought proceedings based on personal liability means that the company had abandoned any right in respect of the mortgage. The right in respect of the mortgage is a right of Mrs Magrath that the company should be given a mortgage, not a right which the company could abandon. Its District Court proceedings could not in any way be seen as an abandonment.

21   Counsel also suggested or contended that some observations of Purdy J showed that he acted in 1995 on the basis or on an assumption that the mortgage debt would not be enforced. In my view his Honour’s observations do not show any conclusion, or any idea at all that Mr Magrath could expect that the loan to LEA Properties would not be enforced, and his Honour’s orders overall demonstrate his Honour’s understanding to the contrary. The order for indemnification must have been made on the view that the debt might well be enforced, for otherwise Mrs Magrath would not need such protection.

22   It was submitted that the application should be dismissed on discretionary grounds. Several grounds were contended to be discretionary grounds for declining relief to the plaintiff. The contentions were these: it was said that there has been extraordinary delay in having a mortgage executed; it was said that the fact that the term of the mortgage has expired is a reason why the obligations should not be enforced: it was said that the mortgage was meaningless: it was said that the amount of interest which has accrued since 1995 exceeds the value of the property; it was said that the projected immediate impact of an obligation to pay principal and interest on execution of the mortgage was a reason why the obligations should not be enforced; it was said again that the matter is a Family Law matter, apparently on the footing that that was a reason for not enforcing the obligations. In my view it is not open to me to dismiss the application as a matter of discretion, because the plaintiff makes a claim of right. Further, the grounds which have been put forward are not substantial grounds on which any discretion should be exercised adversely to her.

23   Defendant’s counsel also in written submissions referred me to the principles formulated in Re Wakim; ex parte McNally & Anor (1999) 198 CLR 511 which were the basis of Purdy J’s decision of 24 July 2000. I was also referred to the decision of Austin J in Damberg v. Damberg & Anor (1999) 25 Fam LR 476 which relates to procedural difficulties; in that case his Honour found that there was no occasion for declaratory order. The present circumstances are very different as the plaintiff’s claim is highly contentious and declaratory relief is obviously appropriate. Counsel also referred me to ResidualAssco Group Ltd v. Spalvins (2000) 74 ALJR 1013, and to Re Macks; ex parte Saint (2000) 75 ALJR 203, and in particular to the judgment of McHugh J at paras 111-113 and of Kirby J at para 260; and to other passages in which show that the legislation does not simply authorise the transfer of proceedings from one court to another.

24   If there were any application to vary or otherwise deal in accordance with s.10 of the FCSJ Act with the rights created in accordance with orders 2 and 3 of 24 December 1998 it would be necessary to address the validity of s.10 in its relevant operation; that in turn would require clear definition of the variation or other order which the Court was asked to make under s.10. The question of validity would require an address to views expressed in Re Macks; ex parte Saint (2000) 75 ALJR 203 and referred to at para.4 of the head-note at 205. However as there is no such application I leave this matter unexamined.

25   The plaintiff asks by claim 1 in her Further Amended Summons that the Court make an order under s.11(2) of the FCSJ Act that the proceeding in the Family Court of Australia be treated as a proceeding in this Court. Power to act in that way is discretionary.

26   In my opinion the order of 24 July 2000 was a relevant order within the definition in subs.11(1) of the FCSJ Act as it falls within para.(c) of that definition. In Residual Assco Group Ltd v. Spalvins (2000) 74 ALJR 1013 some observations were made in the principal judgment at para.17 relating to relevant orders as defined in s.11 of the corresponding and closely similar South Australian legislation. Their Honours said: “… the ‘relevant orders’ to which s.11 refers were not made in the exercise of invalidly conferred cross-vesting jurisdiction. ‘Relevant orders’ are orders of federal courts that dismiss for want of jurisdiction proceedings relating to State matters. They are to be contrasted with orders by those courts dismissing or upholding on their merits proceedings relating to State matters brought under the cross-vesting legislation. Orders of the latter kind were invalidly made because the jurisdiction to make them depended on invalid legislation. They were orders made or purported to be made in the exercise of State jurisdiction. They may or may not be nullities. But ‘relevant orders’ are not orders that determine any State matter.”

27 The orders which the Family Court of Australia has made in these proceedings include orders disposing finally (but subject to that Court’s powers) of proceedings relating to settlement of property under s.79 of the Family Law Act which were undoubtedly within the jurisdiction of the Family Court of Australia. The decision and orders which that Court made on rights arising out of the Heads of Agreement related to a part of the controversy between the parties which, while important, was relatively less important than the property settlement under s.79. The order of 24 July 2000 did not relate to the whole of the proceedings, but only to the orders relating to rights under the Heads of Agreement and to their enforcement. In my understanding the Supreme Court has jurisdiction under the JCCV Acts to hear and determine the whole of the proceedings including the enforcement of the orders made by the Family Court of Australia under s.79 of the Family Law Act. However I regard it as doubtful whether subs.11(2) authorises the Supreme Court to make an order that the whole of the proceedings in the Family Court of Australia be treated as a proceeding in the Supreme Court; the better view may be that the proceeding which may be so treated under subs.11(2) is the proceeding in respect of which the Family Court of Australia made the relevant order, that being part only of the proceedings before the Family Court of Australia, its determination and orders. It is fully open to the Supreme Court to enforce the rights and liabilities created by s.6 and in accordance with s.7 and there is no need or occasion to make a further decision on the merits of the claim to enforce the Heads of Agreement having regard to the effect of ss.6 and 7 and the terms of the orders of 24 December 1998. I am of the view that I should not make an order under s.11(2), and I should not attempt to treat either the whole proceedings in the Family Court of Australia or part of them as proceedings in the Supreme Court.

28   In my opinion the plaintiff should succeed and I should make orders for the specific performance of the obligations under paras.2 and 3. Paragraph 4 relating to execution of documents by a Registrar of the Family Court cannot have effect. It may become necessary to make an order for execution of documents by the Registrar in Equity but the obligation to execute them is the obligation of Mr Magrath and the ordinary course is to obtain or compel his execution.

29   Orders:

(1) Declaration as claimed in Claim 3 of the Further Amended Summons filed on 21 May 2001.
(2) Order that the rights and liabilities of the parties in accordance with Declaration 1 be specifically performed and carried into execution under the directions of the Court.

(3) Liberty to apply for directions.
(4) Order that the defendant pay the plaintiff’s costs of the proceedings.
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Last Modified: 06/07/2001