McKean & Walker

[1999] FamCA 578

[1999] FamCA 578

FAMILY LAW ACT 1975

IN THE FULL COURT  
OF THE FAMILY COURT OF AUSTRALIA  Appeal No EA4 of 1998
AT SYDNEY  File No SY2180 of 1998

BETWEEN:

DAVID ANDREW MCKEAN
Appellant
- and -

PETER MURRAY WALKER
Respondent

REASONS FOR JUDGMENT OF THE FULL COURT

CORAM:  ELLIS ACJ, KAY and MUSHIN JJ
DATE OF HEARING:  6 May 1999
DATE OF JUDGMENT:                  26 May 1999

APPEARANCES:  The Appellant appeared in person (GPO Box 2202, Sydney, NSW  2001).

Ms Pepper of Counsel, instructed by Clayton Utz, Solicitors, Levels 27-35, No. 1 O'Connell Street, Sydney, NSW  2000 appeared on behalf of the Respondent.

McKEAN and WALKER

EA4 of 1998
Coram:   Ellis ACJ, Kay and Mushin JJ    
Date of appeal:      6 May 1999
Date of judgment:  26 May 1999

PRACTICE AND PROCEDURE – Orders – Variation – Firm appointed as trustees/receivers – One member of firm seeking to be substituted for whole firm – Machinery provision – Whether "slip rule" applies

PRACTICE AND PROCEDURE – Requirement of notice of intention to vary orders to persons who may be affected

This was the second of two appeals brought by Mr McKean against orders of Faulks J.  His Honour appointed Ferrier & Hodgson jointly and severally as trustees to oversee the distribution of Mr McKean’s assets to several successful claimants.

Lawyers for Ferrier & Hodgson approached the Court by letter with an affidavit in support.  For reasons of practicability they requested that a single partner, Mr Peter Walker, be appointed as trustee.  Orders were made in chambers to give effect to the proposal.  Mr McKean was not made aware of this correspondence nor given notice of the amendment.

Faulks J subsequently dismissed an application by the appellant to restrain Mr Walker from acting as trustee.

On appeal, Mr McKean challenged the refusal to restrain Mr Walker.

Held

• In the absence of the appellant showing sufficient detriment to justify the granting of the injunction the appeal should be dismissed.

• There was, however, substance in the complaint that the orders were amended at the behest of a non-party and without Mr McKean having a chance to be heard.  It is essential that proper notice be given to all parties who may be affected by variation of orders (see internal memorandum of the Chief Justice, 16 October 1998).  Failure to provide notice amounts to a fundamental breach of the rules of natural justice.  

Appeal dismissed
No order for costs
Reportable

1. On 2 June 1997 Faulks J made a series of orders in several proceedings brought against David Andrew McKean (the appellant in these proceedings).  Those proceedings culminated in orders being made against the appellant which rendered him liable to pay moneys to several different applicants.  To facilitate the orderly distribution of Mr McKean's assets amongst the several applicants, Faulks J ordered:

"1.      That for the purpose of administration of these orders, the partners of the firm of Ferrier & Hodgson, Chartered Accountants, are appointed jointly and severally as trustees for the sale and liquidation of assets as hereinafter provided.

2.        That the respondent will do all things that may be necessary to assist the trustees in the realisation and liquidation of such of his assets including any property in which he has an interest with any other person for the purposes of complying with the terms of these orders.  Such property is identified at least in part in Schedule 'A' annexed to these orders."

1. The transcript of 2 July 1997, which led to the framing of the form of the order is not contained in the Appeal Book.

1. By letter dated 1 July 1997 Karmen Bennett of the firm Clayton Utz, Solicitors, wrote to the Registrar of the Family Court of Australia at Canberra saying that they acted on behalf of Peter Murray Walker, a member of the firm of Ferrier Hodgson, Chartered Accountants, and were enclosing an affidavit from him and seeking to have Order 1 of the orders of 2 June 1997 deleted and replaced with an order that read:

"That for the purpose of administration of these orders, Peter Murray Walker, Chartered Accountant and a member of the firm Ferrier Hodgson in Sydney, be appointed as trustee for the sale and liquidation of assets as hereinunder provided."

They also sought consequential amendments to Orders 2, 3.1, 5.3, 8, 12.1, 13, and 14.

1. There was substantive change sought to Order 2 to have inserted after the words "with the terms of these orders" the words:

", whereby the proceeds from the realisation and liquidation of such assets will be applied first, in payment of all costs, commissions and expenses incurred by the trustee in acting in accordance with these orders, and secondly, in discharge of any other term of these orders."

1. Finally they sought an amendment to Order 3(iii) by inserting the words “all costs incurred by the trustee, including any” before the words “legal costs associated with the sale”.

1. The letter of 1 July 1997 and the affidavit in support thereof were never drawn to the attention of the appellant.  Orders were made in chambers by the trial Judge as sought by Mr Walker by simply amending and reissuing the orders of 2 June 1997. 

1. The appellant filed an application on 27 October 1997 seeking to restrain Peter Murray Walker from acting as a trustee for the sale and liquidation of his assets.  On 28 October 1997 Faulks J heard and dismissed that application.  The appellant seeks to appeal against the refusal to restrain Mr Walker from acting.

1. Whilst we have no Reasons for Judgment relating to the dismissal of that application, the Appeal Book does contain some portions of the transcript of 28 October 1997.  It appears that the appellant sought to argue that it did not behove any person, and particularly a non-party to make a unilateral approach to the Court without notice to all parties affected, to seek a change to the orders of the Court that had been duly entered. 

1. His Honour indicated that he had exercised slip rule powers (Order 31 rule 6).  Mr McKean said:

"…my understanding of the slip rule is that it is not applied in these circumstances once the order of the court is effected, as they seem to say, and things have started to happen on it.

HIS HONOUR:          Well, you may or may not think that is the case.  As far as I am concerned, the purpose of the rule is quite clear and that is to provide that inadvertent errors of a procedural nature or a clerical nature are corrected.  It is exactly what has happened in this case to facilitate the implementation of the matter.  There is no change in the status of the person involved.  It was simply a practical question.  Now, where do you suffer any disadvantage as a result?

MR MCKEAN:          Well, through being (a) denied the right to be heard and through being denied the knowledge- - -

HIS HONOUR:          You have been heard in relation to the appointment of the trustees in the first place and the decision that was made was, as I recall it, your second choice, or whatever it may have been, along with somebody else's.  The implementation of one of the partners in substitution for the others is a practical extension of that which does not afford any disadvantage to you at all whether you were heard or not.  You were heard on the first question and a determination was made.  Now, what else do you want to say?

MR MCKEAN:          Well, I was not only deprived of being heard, I was deprived of sighting the papers that were produced to the court to enable it to happen.

HIS HONOUR:          I accept that, but what is the disadvantage you have suffered?  A partner in a firm that you were content to have appointed was put as trustee.  He was one of the people who, in fact, was appointed in accordance with your direction - in accordance with your - when I say consent, your second choice in the first place.  So that what happened was the elimination of however many thousand partners Mr Walker has from the process, which would have increased the costs, which would have decreased the benefit either to the beneficiaries or to you.  So at the moment all I can see is that you actually had an advantage from it and were relieved of the obligation of having to do anything about the document.  I know that sounds unreasonably paternalistic, and I am not suggesting you should not have been served, I am merely saying that I cannot see that you could possibly have suffered any disadvantage

…

Well, what can be your complaint.  I understand you feel aggrieved, which you are entitled to, that you were not given notice.  I accept that.  There is no question about that.  To the extent that I ought properly to have averted to that for my part, I apologise.  There is certainly no malice intended.  The practical result, as I said, is that this was not a change of substance, it was a change of form to facilitate the more efficient realisation of the implementation of the orders.  Now, I understand, as I said, that you would feel aggrieved that you were not consulted, but I cannot see how you can, in substance, be aggrieved because of any practical effect.

MR MCKEAN:          Yes, I gained, I guess, from what I have heard a wrong impression that it was your intention to appoint a number of people jointly and severally.

HIS HONOUR:          No.  I appointed the firm on the basis that, I must say from my ignorance, I did not realise how many heads the hydra had, but having determined that that was so it was clearly impracticable for this to occur.

MR MCKEAN:          Well, I will not seek to say any more about that."

1. At the hearing of the appeal the appellant advised us that the estate was effectively wound up and there was no practical advantage to be gained by any person by setting aside the amendments to the original orders.  At the same time he sought to air his grievances that:

• the orders were amended at the suit of a non-party, namely Mr Walker;  and,

• the orders were amended without giving him a chance to be heard on the issue of the amendment.

We granted the appellant leave to amend his Notice of Appeal by deleting from the Grounds of Appeal the words "and by treating a request to be told trustee's name as excuse to run up expense showing lack of fine judgment, and greed".

1. We think there is significant substance in his complaint, whether or not the orders could properly have been amended pursuant to Order 31 rule 6 or whether they should have been amended pursuant to the inherent power of the Court to deal with the variation of machinery provisions of orders (see In the Marriage of McDonald (1976) 1 Fam LR 11,391. It is a cardinal rule of the administration of justice that any party to the proceedings who is affected by orders already pronounced is entitled to be given notice of any intention to vary the orders unless the Court concludes in the unusual circumstances of any particular case that it is appropriate to dispense with such notice.

1. In a memorandum circulated on 16 October 1998 to (amongst others) all Area Judge Administrators and to the Chief Judge of the Family Court of Western Australia, the Chief Justice sought to draw attention to

"the lack of understanding which can arise for parties where an Order made in open court is later varied, for proper reasons and in open court, without prior formal notice having been given to the parties that such variation will take place."

His Honour said that in his view

"where a party to proceedings has questioned the accuracy of an Order to the Court, and the Order is to be subsequently amended, the proceedings for such variation should be preceded by notice to the parties and conducted in open court." 

1. Subject to the limitation that there may be circumstances in which it is appropriate to deal with a non-controversial amendment in Chambers rather than in open court, we would adopt the views of the Chief Justice on this very important aspect of ensuring that proper notice has been given to all parties who may be affected by an alteration to the Orders.

1. It is not apparent in this case that any attention was ever paid to the right of the appellant to be heard in respect of the amendments to the orders.  Whilst it was most unlikely that there would be a surplus of the estate sufficient to leave any return to him from it, that remote possibility was sufficient for him to be heard on the issue of who might be an appropriate trustee and what charges, if any, they would be entitled to claim as against the estate. 

1. In our view, the failure to give the husband notice of the application was a fundamental breach of the rules of natural justice.  It is clear from the transcript that the learned trial Judge acknowledged it as such.  At the same time, however, it is correct that ultimately the appellant was unable to establish before the trial Judge that he suffered any sufficient detriment to justify the granting of the injunction sought.  In those circumstances, it was appropriate for the trial Judge to dismiss the application, the subject matter of this appeal, and accordingly we would dismiss the appeal.

Costs

1. Ms Pepper, who appeared on behalf of Mr Walker, sought an order that her client be granted costs.  Given that Mr Walker's solicitors ought never have approached the Court in the manner in which they did, but should have brought proceedings on a Form 8 giving due notice to the appellant, we are of the view that it would be entirely inappropriate for us to make an order for costs in favour of Mr Walker.

1. The formal orders will be:

1.      That the appeal be dismissed.

2.        That there be no order as to costs.