Medlow & Medlow
[2016] FamCAFC 34
•8 March 2016
FAMILY COURT OF AUSTRALIA
| MEDLOW & MEDLOW | [2016] FamCAFC 34 |
| FAMILY LAW – APPEAL – APPLICATION FOR LEAVE TO APPEAL – Appeal against interlocutory orders – Consideration of Niemann v Electronics Industries Ltd [1978] VR 431 and Jess and Ors & Jess and Ors (2014) FLC 93-620 – Where Full Court of the Family Court of Australia adopts a new test to be applied in applications for leave to appeal under s 94AA of the Family Law Act 1975 (Cth) – Whether, in all of the circumstances, the decision is attended by sufficient doubt to warrant it being reconsidered by the Full Court and whether substantial injustice would result if leave were refused – Leave to appeal granted. FAMILY LAW – APPEAL – PROPERTY – INTERIM – Where the respondent is involved in ongoing litigation which will affect the assets of the parties – Where the respondent has significant ongoing legal expenses – Where the respondent was granted an interim property order for a disbursement of $2.9 million – Where the respondent was restrained by Family Court of Australia orders from dealing with certain property – Where the respondent’s share of proceeds of sale from an asset were frozen to meet the respondent’s obligations in another case – Where the appellant argued that the $2.9 million disbursement would therefore come from her property – Whether the primary judge failed to determine the source of power supporting the orders made – Whether the primary judge erred by making orders which have a real prospect of depleting the property of the parties – Whether the primary judge failed to give sufficient weight to previous breaches of orders – Appeal allowed - Where the funds advanced fully disbursed – Where the orders of the primary judge are discharged. FAMILY LAW – APPLICATION IN AN APPEAL – Where the appellant made an oral application for a stay of the orders for payment of the funds to the respondent and for interim property orders preventing the respondent from dealing with property – Where the funds were expended following hearing of the appeal – Where there is no utility in the proposed appeal – Application dismissed. FAMILY LAW – COSTS – Where the appellant sought an order for costs if the appeal was allowed –Where the respondent submitted he was not in a position to pay costs – Where impecuniosity is not, of itself, a bar to a costs order – Where there is evidence that the financial circumstances of the parties are in the category of high asset worth – Where the respondent has been wholly unsuccessful in the appeal – Where the respondent has breached Family Court of Australia orders – Where the respondent is to pay the appellant’s costs of the appeals. |
| Child Support (Assessment) Act 1989 (Cth) Family Law Act 1975 (Cth) ss 66L, 72, 74, 79, 80(1)(h), 94AA |
| Adam P Brown Male Fashions Proprietary Limited v Philip Morris Inc. and Anor (1981) 148 CLR 170 Decor Corporation Pty Ltd and Anor v Dart Industries Inc. (1991) 33 FCR 397 Gabel & Yardley (2008) FLC 93-386 Harris and Harris (1993) FLC 92-378 Hickey and Hickey and Attorney General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 Jess and Ors & Jess and Ors (2014) FLC 93-620 Niemann v Electronics Industries Ltd [1978] VR 431 Norbis v Norbis (1986) 161 CLR 513 Re Pozzi (1982) FLC 91-262 Rutherford and Rutherford (1991) FLC 92-255 Samsung Electronics Co Ltd v Apple Inc. (2011) 217 FCR 238 Stanford v Stanford (2012) 247 CLR 108 Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466 The Public Trustee (as Administrator of the estate of Pfeiffle deceased) v Pfeiffle (1990) FLC 92-123 Trustees of Property of Cummins v Cummins and Anor (2006) 227 CLR 278 |
| APPELLANT: | Ms Medlow |
| RESPONDENT: | Mr Medlow |
| FILE NUMBER: | SYC | 7742 | of | 2010 |
| FIRST APPEAL NUMBER: | EA | 106 | of | 2014 |
| SECOND APPEAL NUMBER: | EA | 140 | of | 2014 |
| DATE DELIVERED: | 8 March 2016 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | May, Ryan & Aldridge JJ |
| HEARING DATE: | 18 June 2015 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 18 July 2014 and 11 September 2014 |
| LOWER COURT MNC: | [2014] FamCA 530; [2014] FamCA 760 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Richardson SC |
| SOLICITOR FOR THE APPELLANT: | Barkus Doolan |
| COUNSEL FOR THE RESPONDENT: | Mr Kirk QC |
| SOLICITOR FOR THE RESPONDENT: | Watts McCray |
Orders
Leave to appeal against Orders (1)6, (3), (4) and (5) of the orders made by Loughnan J on 18 July 2014 be granted in EA 106 of 2014 filed on 6 November 2014.
The appeal filed by the wife on 6 November 2014 being proceedings EA 106 of 2014 be allowed.
The Orders (1)6, (3), (4) and (5) made on 18 July 2014 be discharged.
The oral application of the wife for a stay be dismissed.
The application for leave to appeal in EA 140 of 2014 filed on 6 November 2014 is dismissed.
The husband pay the wife’s costs of and incidental to the appeals being appeal numbers EA 106 of 2014 and EA 140 of 2014 as agreed or in default of agreement as assessed, including the costs of the Application in an Appeal dated 2 October 2015.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Medlow & Medlow has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Numbers: EA 106 of 2014; EA 140 of 2014
File Number: SYC 7742 of 2010
| Ms Medlow |
Appellant
And
| Mr Medlow |
Respondent
REASONS FOR JUDGMENT
Introduction
By an Amended Notice of Appeal (EA 106 of 2014) filed on 6 November 2014 Ms Medlow (“the wife”), seeks leave to appeal, and if granted, to appeal against certain orders made by Loughnan J on 18 July 2014. Those orders provided for an interim property settlement pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”) in favour of Mr Medlow (“the husband”).
The wife is also seeking leave to appeal, and if granted, to appeal a decision of Loughnan J on 11 September 2014, by an Amended Notice of Appeal (EA 140 of 2014) filed on 6 November 2014. Those orders provided for a further property distribution to the husband so that the total sum received by him was $2.9 million.
At the outset, it is necessary to explain that the husband is involved in three other pieces of litigation. The husband has been charged with a criminal act in relation to Mr G (“the criminal proceedings”). A company with which the husband is associated is involved in proceedings in the Supreme Court of New South Wales in which there are claims and counterclaims of significant sums of money (“the Mr G litigation”). In early 2011, orders were made in the Mr G litigation having the effect of freezing the husband’s assets up to the value of $15.5 million. Those proceedings have been stayed pending the criminal trial.
Another company associated with the husband is involved in proceedings also in the Supreme Court of New South Wales over significant holdings of land at Suburb I and Suburb J (“the Medlow litigation”). On 14 March 2014 the Family Court of Australia granted an injunction restraining the husband from settling that litigation.
A significant asset of the parties, a property jointly owned by them at B Street, Suburb C (“the Suburb C property”) sold for $37 million in mid 2014 resulting in net proceeds of $31 million.
Prior to the sale of the Suburb C property, on 8 April 2014 consent orders were made in the Family Court of Australia to refinance the loan over the Suburb C property, in order to facilitate a loan to the husband in the sum of $2.9 million to meet urgent legal expenses including the husband’s criminal trial and other legal and personal expenses. The Suburb C property was sold before these orders were effected.
The wife now argues that the orders of 8 April 2014 were falsely obtained, as she was not given notice that $15.5 million of the net proceeds from the Suburb C property would be frozen to meet the obligations of the husband pursuant to the orders of 2011 made in the Supreme Court of NSW in the Mr G litigation.
The husband brought the application from which the wife now appeals the orders, because he contended that at least part of the monies should be provided to him prior to the settlement of the Suburb C property.
The orders made 18 July 2014 are set out in full at [27] of these reasons. They had the effect of the husband receiving $1.65 million from the net proceeds of sale of the Suburb C property. In addition, the husband, it was agreed would borrow from Medlow Pty Ltd the sum of $1.25 million to be repaid together with interest from the sale proceeds of the Suburb C property. That loan was for the same purpose as intended in the 8 April 2014 consent orders.
On 11 September 2014, the primary judge made orders that allowed the husband to receive $2.9 million in total from the balance of the proceeds of sale as previously ordered. The wife appeals these orders, arguing that such payment will come from her share of the legal and beneficial interest in the Suburb C property as $15.5 million had been frozen pursuant to the Supreme Court orders.
In order to understand the parties’ contentions before the primary judge and before us, it is necessary to delve into the history of the matter.
Background
The parties commenced cohabitation in 1990, married in 1992 and separated in December 2008. They have two children one of whom is now 23 years old and the other is 18 years old.
At the commencement of the cohabitation the wife was 22 years old and the husband was 42 years old. At that time the wife had no significant property but the husband had accumulated significant wealth. The wife adduced evidence from a chartered accountant who had investigated the parties’ assets. He expressed the opinion that, as at 30 June 2010, the property of the parties was valued at not less than $73 million.
The proceedings for a property settlement under s 79 were commenced in 2010.
It is apparent that the criminal proceedings will be lengthy. At the time of the hearing before the primary judge it was then expected that the criminal trial would commence shortly. As events turned out, the criminal trial did not take place and those criminal proceedings have not yet commenced.
On 14 January 2011 the Family Court made the following order restraining the husband dealing with property:
1.That pending further Order, the husband both personally, by his attorneys, as a director of any of the Companies, in his capacity as a shareholder in any of the companies and/or in his capacity as an appointor of any of the Trusts is restrained (save for the purpose of giving effect to these Orders) from:
…
1.11unless otherwise agreed in writing by husband and wife further encumbering, charging, selling, dealing with or transferring any interest in any real property including rights as a mortgagee, whether such real property be owned by the husband personally, or by any of the companies or trusts;
…
Notwithstanding the restraint contained in the order of 14 January 2011, on 23 February 2011, in the Mr G litigation the following orders were made by consent:
1.That these proceedings be stayed until the final hearing and determination at first instance of the charges of […] or further order on the following conditions:
(a)that until further Order [the husband] must not remove from Australia or in any way dispose of, deal with or diminish the value of any of his assets in Australia (“[the husband’s] Australian Assets”) up to the unencumbered value of AUD $15,500,000 (“the Relevant Amount”) provided that if the unencumbered value of all [the husband’s] Australian Assets exceeds the Relevant Amount, [the husband] may remove any of those assets from Australia or dispose of, or deal with them, diminish their value, so long as the total unencumbered value of [the husband’s] Australian Assets still exceeds the Relevant Amount;
(b)…
(c)for the purposes of this order:
i.[The husband’s] Australian Assets include all assets in which [the husband] has a vested ownership interest whether or not in the name of [the husband] and whether they are solely or co-owned (but excludes any asset of a trust where [the husband] is the discretionary object of that trust);
…
(d)That [the husband] draws these Orders and the claims made in these Proceedings against the Plaintiff and [the husband], to the attention of the Family Court of Australia in the course of any application for any or orders (whether by consent or otherwise) affecting property of any kind in proceedings in that Court between him and his wife…
The wife is not a party to the proceedings in the Mr G litigation.
On 16 March 2011 consent orders were made in the Family Court of Australia which provided for the husband to pay spousal maintenance, adult child maintenance and child support. In addition, it was noted that the parties were currently cooperating to effect a sale of two properties at Suburb C. It was agreed that the net proceeds of sale would be paid into a trust controlled by the husband who would use those funds for investment purposes as set out in the agreement between the parties.
The sale of one of the Suburb C properties settled on 30 January 2014 and the proceeds were used to reduce the borrowings on the remaining property.
On 8 April 2014, by consent, orders were made for the refinancing of the other Suburb C property.
The orders provided for the wife to use her best endeavours to apply for a loan of up to $8.5 million and that, if she did not do so by 15 April 2014, a refinancing facility already arranged by the husband was to take place. The husband’s proposed refinancing facility saw a borrowing of $9.5 million of which $5.6 million was to repay the existing mortgage.
This borrowing would see net funds of approximately $2.9 million become available which were to be applied to pay the husband’s lawyers in the criminal proceedings, tax invoices issued in relation to the Medlow litigation, the husband’s obligations to the wife and the children (pursuant to the spousal maintenance and orders made on 16 March 2011) and the husband’s living expenses of $4,000 a week.
By the time the matter returned to court on 15 July 2014 neither party wished the refinancing to proceed. The Suburb C property had been sold and the mortgage discharged from the deposit paid by the purchasers. Settlement of the sale was due to occur on 10 September 2014. The husband still pressed for a payment to him of $2.9 million from the proceeds of sale. However, because he needed all of those funds prior to the settlement of the Suburb C property, he proposed that orders be made enabling him to borrow $1.25 million from his brother, with that loan to be secured over the Suburb C property and repaid on its sale.
It was the wife’s case, seemingly accepted by the husband, that the effect of the 23 February 2011 orders made in the Mr G litigation was that the husband was obliged to quarantine $15.5 million from the sale of the Suburb C property because that was the only asset in which the husband had a “vested ownership interest” within the meaning of Order 1(c) of those orders. On 18 July 2014 an order was made providing for $15.5 million of the proceeds of the Suburb C property to be placed in an interest bearing account to comply with the husband’s obligations under those orders.
Given that the net proceeds of sale were expected to be $31 million the wife proposed orders that would see her receive $15.5 million from the proceeds of sale, that is, half of the net proceeds of sale. In other words, the balance remaining after the transfer of $15.5 million as just described.
Appeal EA 106 of 2014
Justice Loughnan made orders on 18 July 2014 as follows:
(1)Orders and notations are made in terms of paragraphs 2, 4, 5 & 6 of the Application in a Case filed by the husband on 30 June 2014, as follows:
2. The court NOTES:
2.1That on 10 June 2014 the property situated at and known as [the Suburb C property] was sold for the amount of $37,000,000, with settlement of the sale of this property expected to occur on 9 September 2014.
2.2That the Husband intends to procure from [Medlow Pty Ltd] and/or nominee of the directors of [Medlow Pty Ltd] a loan in the amount of $1,250,000, on the basis of interest being charged at a rate of 7.5% per annum ("the loan");
2.3That the loan is proposed on the basis of the principal plus interest being discharged from the proceeds of the sale of the property situated at and known as [the Suburb C property]; upon settlement;
2.4That the loan is intended to be applied in the manner and for the purposes provided for in the Orders made by Justice Loughnan dated 8 April 2014, pending settlement of the sale of the […] [Suburb C] property.
4.That the Husband and Wife shall do all acts and things and sign all documents to ensure that the sum of $1,250,000 from the loan is paid into the trust account of Watts McCray Lawyers and such funds shall be invested in a controlled monies investment account for that purpose until applied in accordance with these Orders ("The Trust Monies").
5.Unless otherwise agreed in writing by the Husband and Wife, the Trust monies shall be applied in accordance with paragraph 5 of the Orders dated 8 April 2014.
6.That upon settlement of the sale of [the Suburb C property], on or about 9 September 2014, the proceeds of the sale of the [Suburb C property] be paid and/or applied in the following manner and priority:
6.1The amount required to discharge the loan secured by the second mortgage referred to in order 3 herein provided to the Husband by [Medlow Pty Ltd] and/or nominee of the directors of [Medlow Pty Ltd];
6.2All costs and expenses of the sale including legal costs and disbursements for the conveyance, agents' commission, and valuers' fees;
6.3The amounts required to pay all municipal and water rates outstanding with respect to the property;
6.4Per Paragraphs 5 and 6 of the Orders dated 8 April 2014, in the further amount of $1,650,000, which further sum is intended to represent the balance of the moneys required and anticipated in those orders dated 8 April 2014;
6.5With the balance (of an amount of not less than $15,500,000) to be held in an interest bearing account in the names of the parties, in compliance with paragraph 1(c) of the Orders made in the Supreme Court proceedings being Case Number […] between [Medlow Pty Ltd] and [D Pty Ltd], such funds not to be disbursed except by further Order of the court.
(2)Notwithstanding the above orders the husband and wife shall do all things and sign all documents necessary to authorise a payment from the funds the sum of $173,188.39 to the trust account of the solicitors for the wife by way of interim costs.
(3)Otherwise the Court refuses to make orders at this time in accordance with the husband’s Application in a Case and the Response to an Application in a Case filed on behalf of the wife on 14 July 2014.
(4)Leave is granted to the parties to restore the proceedings to the list in relation to the Application or Response or otherwise on giving the Court and each other at least 48 hours prior written notice.
(5)Costs of and incidental to the proceedings of the Application in a Case filed 30 June 2014 are reserved.
The wife appeals from paragraphs (1)6, (3), (4) and (5).
The primary judge effectively made orders that gave the husband $2.9 million of the balance of the net proceeds of sale so as to pay legal fees, meet his obligations to the wife under existing orders and personal living expenses.
By a joint memorandum from senior counsel dated 16 November 2015 we have been informed as follows:
…
“That as at 2 October 2015, the funds in the amount of $2,900,000 released to the husband pursuant to the Orders made on 11 September 2014 by his Honour Justice Loughnan (being the fund the subject of the appeal filed by the wife on 14 October 2014 and amended on 6 November 2014) are now exhausted.”
It is agreed that costs of the Application in an Appeal filed 2 October 2015 should be costs of the appeal.
(Original emphasis)
The primary judge’s reasons
After setting out a brief introduction and chronology, his Honour referred to the orders the parties were seeking. He described the wife’s application thus, at [13]:
13.It is the wife’s case that her consent to the orders of 8 April 2014 was falsely obtained. In particular the wife asserts that it was not explained to her that $15.5 million from the net proceeds of sale of [the Suburb C property] would in effect be frozen to meet the obligations of the husband under the 2011 order made in the [Mr G] litigation. In addition, the wife asserts that the husband has failed to account for substantial funds to which he has had exclusive access, including substantial funds over recent months. To be fair it is clear that the wife had those concerns long before 8 April 2014. For that reason and because she contends that some of the payments he intends to make out of the borrowing are not payable and are not owing by the husband personally or in any event are payments to which she should not be required to contribute, she opposes his application. In the event that the court does not dismiss the husband’s application, the wife opposes the application of joint funds to certain debts, seeks a payment to her for interim costs and asks that the balance of the net proceeds be also paid to her...
The primary judge then noted that it seems agreed that the proposed orders of both parties invoke s 79 of the Act but noted the dispute between the parties as to the source of power used to make the 8 April 2014 orders. Of that dispute his Honour said at [15]:
15.As I indicated to counsel in the course of submissions it is not necessary to resolve the dispute in relation to the April orders. It is not in doubt that those orders can be changed and it is not in doubt that change is required. Events have overtaken the April orders, the [Suburb C] property is the subject of a contract for sale and the existing mortgage to the National Australia Bank has been paid out. Neither party presses for the April orders to be enforced as they were originally framed.
His Honour then referred to well-known passages from Harris and Harris (1993) FLC 92-378, Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466; Hickey and Hickey and Attorney General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 and Stanford v Stanford (2012) 247 CLR 108 and s 79 of the Act as to the correct approach to proceedings for interim property orders.
His Honour identified the approach he proposed to take as being at [33] – [35]:
33.An acceptable approach would be to:
a)Make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing;
b)Identify and assess the contributions of the parties within the meaning of ss 79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties;
c)Identify and assess the relevant matters referred to in ss 79(4)(d), (e), (f) and (g), (“the other factors”) including, because of s 79(4)(e), the matters referred to in s 75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties; and
d)Consider the effect of those findings and determinations and resolve what orders are just and equitable in all the circumstances of the case.
34.Obviously, those steps will be undertaken at the final hearing. Importantly, because of the other litigation, it is impossible to predict when that hearing will take place.
35.In considering the cases to be made, I can only make an assessment based on the facts and assertions made today.
His Honour noted the contention of the husband that the net available assets of the parties were approximately $59 million and the wife’s contention that, on a worst case basis, the current value of the parties’ property was $39,490,000. The latter, according to his Honour, seems substantially to consist of a property in Europe valued by the wife at $3.2 million, land at Suburb J valued at $17.5 million and the balance proceeds of sale of the Suburb C property of $15.5 million.
We pause to note that the main differences between the asserted net worth are that the husband includes the proceeds of the Suburb C property at $31 million and values the property in Europe at $6 million.
His Honour then set out his understanding of the opposing applications as follows at [40] – [43]:
40.If the husband is right in his argument, the wife’s claim is not threatened by the disbursement of $2.9 million by him, whether that sum is applied to the purposes he identifies or for any other purpose.
41.The real controversy is identified in the wife’s case. As I have indicated the wife points to a proper outcome for her being an award calculated at 35 per cent of the parties’ assets but importantly the assets as she asserts they existed and were valued in 2010. If such an outcome is considered achievable on the balance of probabilities and if the current pool is inadequate or barely adequate to support such an outcome then the orders sought by the husband could not be undone on a final basis. In those circumstances the orders should not be made.
42.As to whether the scenario identified by the wife is reasonably probable, it must be examined. The first thing to say is that it is not more probable than not that the ultimate property division between the parties will be based on the pool as it was valued in 2010. For obvious reasons in most cases the assets are identified and valued as at the date of hearing. Although in somewhat inconsistent terms the Full Court has supported the inclusion in a pool of assets identified for the purposes of s 79 assets that no longer exist and the exclusion of liabilities that do exist at the date of hearing.
43.I assume that the wife proposes to rely on assets as they existed and were valued in 2010 by arguing that the difference between those assets and the current assets be added-back.
(Footnotes omitted)
His Honour then discussed the authorities relating to “add backs” and continued at [47]:
47.It comes to this, because they are the exception rather than the rule it is not more probable than not, that the Court in these proceedings will allow add-backs to the pool of assets. Similarly, it is not probable that the trial judge will, for some other reason, find that the relevant date for identifying or valuing any assets, let alone all assets, should be 2010. It is not likely that the pool will be found to be the 2010 pool identified by the wife.
After briefly summarising the parties’ contributions his Honour continued at [52] – [55]:
52.In the outline of argument prepared by learned senior counsel for the husband, dated 9 July 2014, where the husband estimates the pool at $58,705,000, the following proposition is put:
7.2There can be no doubt that the husband was a wealthy man aged 41 years at the commencement of cohabitation (see the S 87 deed of 12 March 1990 with his former wife (H 1st Aff – annex A) and at that time the wife was 22 years of age and had no assets.
After 18 years of cohabitation, during which the wife had only limited involvement in the business and was assisted by paid staff in the home and with the children (housekeepers, personal assistants and gardeners), it is utterly inconceivable that the wife’s entitlement could be anywhere remotely close to the 50/50 division she claims, but even if that were her entitlement the provision of the $2.9M to the husband does not put the wife’s entitlement at risk. The husband seeks and [sic] 80/20 division and that will be seen (on the material currently available) to be more consistent with authority.
53.If, as the wife argues in another context, the pool is more like $39 million, a $2.9 million payment will not jeopardise her claim to 35 per cent of that pool.
54.Next, the wife’s case relies on the proposition that the $15.5 million that the husband is required to retain within Australia under the terms of the [Mr G] litigation orders, will be lost. There is no foundation for a finding that that outcome is more probable than not. Elsewhere the wife complains that she was not informed that retained funds should [sic] those making up the net sale proceeds of the [Suburb C] property. Paradoxically, at the same time, the wife seeks to impugn the value of the only other assets which could secure the obligation under the [Mr G] litigation orders. The argument presumably runs that the most reliable assets should be earmarked for her claims and the obligation under the [Mr G] orders can be secured against less reliable assets.
55.If the wife is correct and the retained $15.5 million is lost, prima facie that will reduce the pool and therefore, her entitlement. In turn that will reduce the likelihood that the disbursement of $2.9 million will threaten that entitlement.
The primary judge turned then briefly to the wife’s assertion that the husband had diverted, hidden or wasted assets. The primary judge said at [58] – [60]:
58.…It is variously asserted by the wife that the husband has had access to something like $25 million over recent years and has failed to account for all but about $900,000 of that fund. The wife expresses her fears, based on conversations she reports, that those funds have not been lost but that they have been hidden.
59.Of course it is possible that some or all of the wife’s fears are correct. The question is, is that sufficient for a finding on the basis of which the husband’s application should be dismissed. In my view it is not.
60.I propose to grant the husband’s application. There are reasons, including compelling reasons for the husband to have immediate access to funds. He has a case to make under s 79 that exceeds $2.9 million by a significant margin. On the balance of probabilities, the disbursement of $2.9 million will not threaten the wife’s claim.
It is apparent that his Honour’s reasoning is based upon two fundamental propositions. The first is that he understood the wife’s case to be that on a final hearing she would contend for a property division at trial of 35 per cent of the matrimonial assets valued as at 30 June 2010, a result which his Honour thought would be unlikely. The second is that the disbursement of $2.9 million to the husband as proposed would not jeopardise her claim, whatever it may be and even if the “$15.5 million is lost”.
Leave to appeal
It is necessary that we first deal with the leave application.
Leave to appeal is required by virtue of s 94AA of the Act. The section does not set out the matters to be taken into account in deciding whether to grant leave. Rather, general principles have been established by many cases in the common law courts.
For many years the test that has been applied in this Court as to whether leave should be given is that the applicant for leave should establish an error of principle and/or a substantial injustice (Rutherford and Rutherford (1991) FLC 92-255). That case did not determine whether the test was conjunctive or disjunctive, leaving the matter open, as had the High Court in Adam P Brown Male Fashions Proprietary Limited v Philip Morris Inc. and Anor (1981) 148 CLR 170 at 177.
In Adam P Brown, Gibbs CJ, Aickin, Wilson and Brennan JJ said at 177:
Nor is there any serious dispute between the parties that appellate courts exercise particular caution in reviewing decisions pertaining to practice and procedure. Counsel for Brown urged that specific cumulative bars operate to guide appellate courts in the discharge of that task. Not only must there be error of principle, but the decision appealed from must work a substantial injustice to one of the parties. The opposing view is that such criteria are to be expressed disjunctively. Cases can be cited in support of both views: for example, on the one hand, Niemann v. Electronic Industries Ltd. ; on the other hand, De Mestre v. A. D. Hunter Pty. Ltd. For ourselves, we believe it to be unnecessary and indeed unwise to lay down rigid and exhaustive criteria. The circumstances of different cases are infinitely various. We would merely repeat, with approval, the oft-cited statement of Sir Frederick Jordan in In re the Will of F. B. Gilbert (dec.):
“… I am of opinion that, … there is a material difference between an exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights. In the former class of case, if a tight rein were not kept upon interference with the orders of Judges of first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal.”
See also, Brambles Holdings Ltd. v. Trade Practices Commission; Dougherty v. Chandler. It is safe to say that the question of injustice flowing from the order appealed from will generally be a relevant and necessary consideration.
(Footnotes omitted)
For some years, the test applied in the Federal Court of Australia has been whether, in all of the circumstances of the case, the decision is attended by sufficient doubt as to warrant it being reconsidered by the Full Court and whether substantial injustice would result if leave were refused supposing the decision to be wrong (Samsung Electronics Co Ltd v Apple Inc. (2011) 217 FCR 238; Decor Corporation Pty Ltd and Anor v Dart Industries Inc. (1991) 33 FCR 397 at 398-400).
In Jess and Ors & Jess and Ors (2014) FLC 93-620 Bryant CJ, Thackray and Ainslie-Wallace JJ considered the two different tests and expressed an inclination to depart from the traditional test used in this Court in favour of the test applied by the Federal Court but were reluctant to do so because of the way in which the issue had been canvassed before them and because of the long standing approach in this Court.
With their Honour’s comments in mind, the parties in this matter were asked to provide submissions to the Court on what the appropriate test under s 94AA should be. We are grateful to senior counsel for both parties for their assistance.
As can be seen from the terms of s 94AA the section itself creates an unfettered discretion as to whether to grant leave.
In Jess and Ors, the Full Court of the Family Court said (at 79,679-79,680):
59. We are attracted to the formulation of the test used in the Full Court of the Federal Court for four primary reasons.
60. First, it has not been suggested there is anything in the legislative framework to suggest there is any logical basis for different approaches to be applied in the two courts. In our view, it is desirable there should be a uniform approach in federal intermediate appellate courts.
61. Secondly, there are many cases where a judge may have expressed himself or herself in a way which constitutes an “error of principle”, but nevertheless has arrived at a result which itself is not attended by “sufficient doubt” as to warrant a full blown appeal on an interlocutory issue.
62. Thirdly, the two “integers” are applied conjunctively, whereas the question of whether the test used in the Family Court is conjunctive or disjunctive has been left open: Fitzpatrick & Fitzpatrick [2005] FamCA 497 at [28] and [29]. The conjunctive approach raises the bar and, in our view, supports the policy considerations which led French J (as he then was) to say that “[t]he time and resources of the Court and the parties should not lightly be taken up with appeals about decisions in connection with proceedings which do not finally determine the rights of the parties”: Johnson Tiles Pty Ltd v Esso Australia Pty Ltd at 583 [42]. This is an increasingly important consideration as the Court attempts to deal with the large number of appeals coming before it.
63. Fourthly, ensuring the first limb of the test is directed to the outcome at first instance, rather than to the path by which that outcome was reached, will keep the focus firmly fixed on the real issue – i.e. whether there is a realistic prospect of the decision being reversed if the appeal proceeds.
In Norbis v Norbis (1986) 161 CLR 513 the Court considered the nature of the discretion exercised under s 79 of the Act. At 519-520 Mason and Deane JJ said:
To avoid the risk of inconsistency and arbitrariness, which is inherent in a system of relief involving a complex of discretionary assessments and judgments, the Full Court, as a specialist appellate court with unique experience in the field of family law in this country, should give guidance as to the manner in which these assessments and judgments are to be made. Yet guidance must be given in a way that preserves, so far as it is possible to do so, the capacity of the Family Court to do justice according to the needs of the individual case, whatever its complications may be. Reconciliation of these goals suggests that in most, if not all, cases the Full Court of the Family Court should give guidance in the form of guidelines rather than binding principles of law. …
In the same case Brennan J said at 537:
It is one thing to say that principles may be expressed to guide the exercise of a discretion; it is another thing to say that the principles may harden into legal rules which would confine the discretion more narrowly than the Parliament intended. The width of a statutory discretion is determined by the statute; it cannot be narrowed by a legal rule devised by the court to control its exercise.
(Footnotes omitted)
The test currently applied by the Federal Court emanated from Niemann v Electronics Industries Ltd [1978] VR 431. Of that case and of the test posed by it, the Full Court of the Federal Court said in Decor Corporation at 399:
In our opinion, the major considerations to be derived from Niemann do provide an appropriate litmus test for the general run of cases in which leave to appeal from an interlocutory decision is sought. If differently constituted courts are to give consistent rulings, it is necessary that they be guided by relevant principles. There is a considerable body of authority which supports the approach taken in Niemann. But we do not understand the judges who decided Niemann to have laid down any rigid rules that might destroy a court’s discretion in all cases but those falling within them. That, so far as this Court is concerned, would be contrary to the unqualified terms of s 24(1A) of the Federal Court of Australia Act 1976 (Cth) which confer on the court an unfettered discretion.
The Court in Samsung did not disagree with that approach.
The adoption of a new test, in the form currently applied by the Federal Court, does not cross the boundaries mentioned in Norbis and Decor Corporation because it is a litmus test to be applied in the general run of cases but always in the context of the unfettered discretion given by s 94AA. In appropriate cases, it being a test or a guideline, it will give way to the particular interests of justice in that case.
We see merit in the Niemann test for the reasons set out by the Court as quoted above in Jess and Ors. Having regard to what was said there by their Honours and the issue being fully argued by senior counsel before us we see no reason to maintain the reluctance felt by that Full Court.
We are of the opinion that, subject to the caveat just discussed, the test to be applied in applications for leave to appeal under s 94AA of the Act is whether, in all of the circumstances, the decision is attended by sufficient doubt to warrant it being reconsidered by the Full Court and whether substantial injustice would result if leave were refused, supposing the decision to be wrong.
Before finally determining the issue of leave it is necessary to turn to the grounds of appeal and the merits.
It is convenient to deal with the grounds of appeal in the order that they were argued by senior counsel for the wife. We note ground 5 was abandoned.
The Appeal
Ground 2.2 – His Honour failed to determine the nature of, or source of, power supporting the order of 8 April 2014, the determination of which ought have informed the principles applicable to the determination of the application before him.
In oral argument, senior counsel for the appellant submitted that the primary judge was in error because there was no determination as to the nature of the 8 April 2014 orders or their “jurisdictional source”. It was submitted that this was a “necessary step” because:
MR RICHARDSON: …[I]n a statutory court one needs to look to the statute for the source of the power to do anything including the variation of orders and the question of what power those orders were made under necessarily would inform the relevant matters to be considered or the principles to be addressed in any variation of them.
…
It's relevant as to his Honour's reasons as well apart from your Honours being satisfied as to a source of power, but it's relevant for the parties to understand, and in particular my client to understand, how it was that his Honour proceeded to do what he did rather than to say, well, whatever it is, it can be varied and therefore I can escape from or depart…
(Appeal Transcript 18 June 2015, p 8, lines 5 - 9 and lines 27 – 31)
As a general proposition, the submission is unremarkable. However, the 8 April 2014 orders were made by consent. The parties chose not to identify the statutory provision under which each of the orders were to be made but it is apparent the Court had the power to variously make them pursuant to s 79 and s 80(1)(h) of the Act and some pursuant to ss 66L, 72 and 74 of the Act and the departure provisions of the Child Support (Assessment) Act 1989 (Cth). As they were by consent and the orders were clearly within the power of the Court to make them, it was not necessary in these further interlocutory proceedings for the primary judge then, in effect, retrospectively to discuss the precise basis upon which those orders were made.
It was clear, as was accepted by the wife, that in July 2014 the Court was being asked to make an order for interim property settlement pursuant to s 79 and s 80(1)(h) of the Act. Each party sought such an order. In those circumstances, we do not see why it was necessary for the primary judge to identify the head of power the parties invoked for the 8 April 2014 orders. It was not necessary to the exercise of power in the case before him. There were either the facts and circumstances then existing that justified an order under ss 79 and 80(1)(h) or there were not. It is well established that there can be more than one interim order under s 79 (Gabel & Yardley (2008) FLC 93-386).
This ground is not established.
Ground 1 – That his Honour’s discretionary decision miscarried in that he failed to find that the orders sought by the respondent would, if made, have a real prospect of depleting property of the appellant which would on final hearing be irrevocably lost and incapable of being reversed and in doing so erred in finding (Judgment para 60) that the disbursement of $2.9M will not threaten the appellant’s claim;
Ground 2.1 – His Honour failed to make findings and consider, consistent with the principles in Stanford v Stanford (2012) 247 CLR 108, any facts identifying the existence of a principled reason that on an interim basis he should make a property adjustment order to be satisfied from the legal interests of the appellant in the [Suburb C] property;
Ground 2.3 – His Honour erred in adopting an approach that included him making findings as to what outcome as to disputed questions of fact and law would be more probable at the final hearing (Judgment paras 30, 47 and 54) and relying upon those findings in a summary hearing to determine the interlocutory application before him;
Ground 2.4 – His Honour erred in failing to determine the application before him, in so far as issues related to prospective prejudice to the appellant at the final hearing, by assuming the appellant’s case at its highest rather than, in an untested environment, making findings as to the likely prospect of that case on probabilities;
Ground 3.1 – That at the final hearing she would contend that the Court should adopt 2010 as a valuation date;
Ground 3.2 – That if the $15.5M was lost (as addressed by the Supreme Court freezing orders) that it would prima facie reduce the pool of property available for division between the parties.
It is convenient to deal with these grounds together.
They challenge the way in which the primary judge approached the determination of the issue before him, in particular, what was said to be a failure to identify the parties’ existing legal and equitable interests in their property and then to determine whether it was just and equitable to order a property settlement altering those interests.
In oral submissions, senior counsel for the wife submitted that the wife would suffer prejudice from this approach, and it ultimately had the effect of summarily dismissing her case (Appeal Transcript 18 June 2015, p 14, lines 34 – 41).
As to the argument that the discretion miscarried, it is as well to recall that in Strahan at 85,645 the Full Court said:
132. In relation to the first stage, in our view, when considering whether to exercise the power under s 79 and s 80(1)(h) of the Act to make an interim property order the “overarching consideration” is the interests of justice. It is not necessary to establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power. In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.
133. In Harris at 79,930 the Full Court gave some examples of circumstances where it may be appropriate to exercise the power being “where both parties agree to the disposal of some assets pending the trial” and “[u]rgent situations” to avoid injustice. Another example is where, as in this case, one party requires funds to assist in defraying the costs of litigation without which funds an injustice may be caused.
The primary judge found that there were compelling reasons for the husband to have access to funds. They were not expressly identified by the judge but they are easy enough to infer – a large part of the $2.9 million was earmarked to pay the husband’s impending legal fees, particularly, in relation to the criminal proceedings.
In s 79 applications, including interim or partial property applications, the starting point is the identification of the parties’ property and of their interests in it. In Stanford the majority said at 120:
37. First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. So much follows from the text of s 79(1)(a) itself, which refers to “altering the interests of the parties to the marriage in the property” (emphasis added). The question posed by s 79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.
In undertaking that task the Court will take into account what was said by the High Court in Trustees of Property of Cummins v Cummins (2006) 227 CLR 278 at 302-303:
71.The present case concerns the traditional matrimonial relationship. Here, the following view expressed in the present edition of Professor Scott’s work respecting beneficial ownership of the matrimonial home should be accepted:
“It is often a purely accidental circumstance whether money of the husband or of the wife is actually used to pay the purchase price to the vendor, where both are contributing by money or labor to the various expenses of the household. It is often a matter of chance whether the family expenses are incurred and discharged or services are rendered in the maintenance of the home before or after the purchase.”
To that may be added the statement in the same work
“Where a husband and wife purchase a matrimonial home, each contributing to the purchase price and title is taken in the name of one of them, it may be inferred that it was intended that each of the spouses should have a one-half interest in the property, regardless of the amounts contributed by them.”
(Footnote omitted.)
72.That reasoning applies with added force in the present case where the title was taken in the joint names of the spouses. There is no occasion for equity to fasten upon the registered interest held by the joint tenants a trust obligation representing differently proportionate interests as tenants in common. The subsistence of the matrimonial relationship, as Mason and Brennan JJ emphasised in Calverley v Green, supports the choice of joint tenancy with the prospect of survivorship. That answers one of the two concerns of equity, indicated by Deane J in Corin v Patton, which founds a presumed intention in favour of tenancy in common. The range of financial considerations and accidental circumstances in the matrimonial relationship referred to by Professor Scott answers the second concern of equity, namely the disproportion between quantum of beneficial ownership and contribution to the acquisition of the matrimonial home.
(Footnotes omitted)
This was said to be particularly so if the property was jointly owned. Thus, in that case, Mrs Cummins was denied the benefit of what she claimed to be a resulting trust in her favour arising from unequal contributions to the purchase price.
Having ascertained the parties’ existing interests in their property the Court must consider whether making a property order is just and equitable. This is not be determined “by beginning from the assumption that one or other party has the right to have the parties’ property divided between them” (Stanford at [40]).
As has been said earlier the husband contended that the present property pool had a value of $58,705,000 and the wife, on a worst case basis, contended for a pool of $39 million.
It was, of course, neither desirable nor possible for the primary judge, on an interim hearing, to determine which of those contentions was correct.
In support of these challenges, senior counsel for the wife focused on the Suburb C property. That property was jointly owned and the sale and division of the proceeds severed the joint tenancy (RePozzi (1982) FLC 91-262; The Public Trustee (as Administrator of the estate of Pfeiffle deceased) v Pfeiffle (1990) FLC 92-123).
Thus, at the time of the hearing, each of the parties was entitled to receive $15.5 million of the proceeds. That was their legal entitlement.
Order (1)6.5 made on 18 July 2014 provided that $15.5 million be disbursed from the proceeds of sale and held in an interest bearing account in compliance with the orders in the Mr G litigation made in February 2011. This is in recognition of the fact that the only asset in which the husband had a “vested ownership interest” was his interest in the Suburb C property proceeds of sale. There was, therefore, force in the wife’s submission that, on the evidence before the Court, the property available for distribution on a final hearing could consist solely of the property in Europe, her share of the proceeds of the sale of the Suburb C property and the land at Suburb J.
It does, however, seem to be the case that his Honour was of the view that should the $15.5 million preserved under the Supreme Court orders be lost, the effect would be to reduce the wife’s entitlement. Whilst his Honour was correct to say that no one can predict what the outcome of the Mr G litigation will be, it is a reasonable, and indeed the only, inference available from the fact that the parties in that litigation agreed that $15.5 million was an appropriate sum to set aside on account of the plaintiff’s claim, that the entire sum of $15.5 million must be at risk in those proceedings (Appeal Transcript 18 June 2015, p 13, lines 12 – 21). It follows, inevitably, that on an interim hearing the primary judge could not proceed on the basis that this sum would be available for distribution to the parties of the marriage at a final hearing because it might be entirely lost. As put by senior counsel for the wife, “Oh well, that’s happened. This money can come out of her share now albeit one day it might be his.” (Appeal Transcript 18 June 2015, p 10, lines 32 – 33).
It follows from the above that the payment of $2.9 million must necessarily affect the wife’s legal and beneficial interest in the remaining proceeds of sale of the Suburb C property. Yet, at [63], the primary judge said:
… As is apparent from the discussion above, the nature of the relief means that the husband is seeking access to his own funds. …
If this sentence was intended to mean, as we are satisfied it must, that an order in favour of the husband would do no more than give him access to his share in the proceeds of the sale of the Suburb C property it is wrong. The husband had already dealt with his half of the proceeds by agreeing to the orders in the Supreme Court requiring him to quarantine $15.5 million pending the outcome of that case. If it is intended to indicate, as was submitted by senior counsel for the husband, that whatever may happen the husband would be entitled to a distribution on a final property hearing of at least $2.9 million from the sale proceeds, and was therefore receiving his own money his Honour did not say why that would be so.
Further, it is clear that the primary judge did not engage with the wife’s case. The wife’s case is that the assets that had been available in July 2010 had been realised and spent by the husband for his own benefit or disposed of to associates in such a way that would enable the Court, on a final hearing, to find that those assets remained held for the benefit of the husband (Appeal Transcript 18 June 2015, p 15, lines 15-21). In those circumstances, the wife would assert, at the final hearing, that a just alteration of the parties’ interests in their property would see her receive 35 per cent of the value of the assets held in July 2010. This would be met by her receiving a much greater percentage than 35 per cent of the value of the assets that existed at the time of the hearing, even as much as 100 per cent of those assets. The wife submitted that, in those circumstances, any diminution in the pool of assets would be a diminution of her entitlement in such a way that it could not be adjusted on a final hearing.
Senior counsel for the wife referred us to the following passage in Strahan, where the Full Court said at 85,646:
136.As to the third matter identified at 79,930 by the Full Court in Harris, in discussion before us it was described as the “adjustment issue” or “claw-back issue”. It was submitted by senior counsel for the Wife that it is relevant to consider whether an order would give the applicant “more than they would be indubitably entitled to on a final hearing” or alternatively “would it give them so much that it could not be adjusted on a final hearing?” As we have observed the Full Court in Zschokke at 83,220-221 stressed the importance of consideration of the “adjustment issue” if the power in s 80(1)(h) of the Act is being exercised. We accept the submission and observe that this matter is relevant because the discretion conferred by the power in s 79 is to make such order as the Court considers appropriate provided it is just and equitable to make the order in circumstances where the power will not be exhausted by the interim order. As Bryant CJ and Coleman J observed in Gabel v Yardley at [69] and [72] the interim order must be capable of variation or reversal without resort to s 79A of the Act or appeal. As Finn J said at [126] the interim order must be “capable of alteration at any time prior to, or as part of, the final exercise of the s 79 power”.
Again there is considerable force in the submissions of the wife that the orders made by the primary judge effected a diminution in the pool of assets that may not have been amenable to adjustment on a final hearing.
Finally, the husband submitted that it is quite clear that on any final hearing he would receive at least $2.9 million given that he had introduced all of the property to the marriage.
We commence by referring to the following passage in Strahan 85,646:
139. We also emphasise that in order to establish an appropriate case for an interim property settlement order more is required than the mere fact that upon a final hearing the applicant would receive the property being sought (or an amount in excess of the funds being sought) from the other party.
The onus was clearly upon the husband to establish that there were sufficient assets available for the interim distribution and that the effect of any interim order was capable of being reversed as part of the final hearing or at least would not defeat the wife’s property claims. The onus was not on the wife to adduce such evidence.
The value of the matrimonial assets as at 30 June 2010 was calculated by the wife’s counsel on the hearing at first instance as being $107,408,945, by the wife’s senior counsel on appeal as being $113,738,675 and by the husband’s senior counsel on appeal as being $84,855,932. Assuming the wife was entitled to 35 per cent and assuming it was appropriate to use those figures, this would lead to a distribution to the wife of approximately $37.6 million, $39.8 million and $29.7 million respectively. Given that the major assets remaining for distribution were identified by the wife as being $36,200,000 (the European property, the Suburb J land and the wife’s interest in the Suburb C property proceeds) it is by no means clear or obvious, using any of those figures that the $2.9 million distribution to the husband would be able to be “clawed back” on a final hearing.
We accept that on the evidence available to him the primary judge was wrong to find that the husband “has a case to make under s 79 that exceeds $2.9 million by a significant margin”.
That could only be done by accepting the husband’s submissions that the net property presently available was $58,705,000. As has already been observed that is not correct because $15.5 million was potentially taken out of that pool by the husband’s actions in agreeing to the Supreme Court orders in the Mr G litigation.
It was the wife’s case that the $15.5 million set aside was the husband’s money and that if it was lost that was on the account of the husband’s entitlement and not their joint entitlement. Accordingly, although its loss might reduce the pool of available assets, it would not necessarily reduce her entitlement. Indeed, the wife submits it would give her a greater claim to the remaining assets. Accordingly it was wrong of the primary judge to find that even if $15.5 million was lost the disbursement of $2.9 million would not threaten the wife’s entitlement.
It follows that the husband’s submission that he should receive an interim settlement of $2.9 million from the wife’s share of the Suburb C property proceeds of sale because at a final hearing he would be entitled to at least that additional sum cannot be accepted. The primary judge could not have been satisfied on the evidence and the submissions before him that it was inevitable that the husband would receive an additional $2.9 million or that it could be “clawed-back” at a final hearing. The husband had already received $15.5 million of the parties’ property which was at risk of being lost. If the husband’s application was accepted, the husband would, potentially, have received not $2.9 million but $18.4 million from the Suburb C property.
The grounds have been established. Subject to leave, these errors would lead to the appeal being allowed.
Ground 4 – That his Honour’s discretionary decision miscarried as a consequence of:
4.1 His failure to take into account that the appellant’s consent to the orders of 8 April 2014 had been procured in circumstances of the respondent’s failure to disclose fundamental facts, namely the existence of the $15.5M freezing order in the Supreme Court proceedings and that his failure to do so was highly relevant to the appellant’s consent;
4.2 Failing to take into account that the failure to disclose referred to in 4.1 was relevant to determining what inferences, if any, favourable to the outcome sought by the respondent, were available to be drawn in the application before him arising from the parties having consented to the orders of 8 April 2014.
We have already referred to the history of the orders made in the Supreme Court as to the restraint on the husband dealing with $15.5 million of vested ownership assets. It is to be recalled that that order required the husband to draw those orders to the attention of the Family Court of Australia “…in the course of any application for any or orders (whether by consent or otherwise) affecting property of any kind in proceedings in that Court between him and his wife…” [as per original]. It is to be observed that the husband in consenting to the making of the Supreme Court orders was in breach of Order 1.11 of the orders made on 14 January 2011 which restrained him from encumbering, charging, selling, or dealing with any interest in any real property owned by the husband personally unless agreed by the husband and the wife.
There is no evidence that the wife agreed to the orders made in the Supreme Court of New South Wales. Whilst there may be some debate as to whether the actions of the husband amounted to encumbering or charging the property there can be no doubt that he was dealing with his interest in the property in agreeing to those orders.
On 6 May 2014 the solicitor for the husband wrote to the solicitors for the wife enclosing a copy of the Supreme Court orders. It was not suggested by the husband that a copy of the orders had previously been provided to the wife. Even so, the husband contended that the wife was well aware of the orders. In his affidavit filed 30 June 2014 the husband deposed (at [23]):
…
(a)In about November 2013 I had a conference including myself, [the husband’s lawyer], [the wife] and [the wife’s accountant]. In the course of that conference, we had a discussion including a conversation to the following effect:
Me: “If we sell the house, we will be able to repay the bank loan. And we’ve also got the obligation that we have to leave $15.5 million because of the [Supreme Court] matter being put off until after my trial.”
Either [the wife’s accountant] or [the wife] then said: “Well as to the $15.5 million, we will deal with that when the time comes. We haven’t sold the house yet.”
…
(Original emphasis)
The husband also asserted that he had said to the wife on a number of occasions between 2011 and 2013 words to the effect “…we have to leave $15.5 million because of the [Mr G litigation] matter”.
The wife’s position was that she was aware of an obligation on the husband to quarantine $15.5 million but was not aware that that amount was to be quarantined only from assets in which the husband had a “vested ownership interest”, namely the Suburb C property. (Appeal Transcript, 18 June 2015, p 9, lines 31-36). The wife said had she known this she would never have consented to the 8 April 2014 orders. The position, at least according to the wife, is that the husband agreed to the Supreme Court orders in breach of the Family Court orders made 14 January 2011. Then in breach of the Supreme Court orders the husband did not provide a copy of those orders to the Family Court and did not provide a copy to the wife until 6 May 2014.
The primary judge dealt with this saying, at [54]:
54.Next, the wife’s case relies on the proposition that the $15.5 million that the husband is required to retain within Australia under the terms of the [Mr G] litigation orders, will be lost. There is no foundation for a finding that that outcome is more probable than not. Elsewhere the wife complains that she was not informed that retained funds should those making up the net sale proceeds of the [Suburb C] property. Paradoxically, at the same time, the wife seeks to impugn the value of the only other assets which could secure the obligation under the [Mr G] litigation orders. The argument presumably runs that the most reliable assets should be earmarked for her claims and the obligation under the [Mr G] litigation orders can be secured against less reliable assets.
The primary judge did not identify what other assets existed in which the husband had a “vested ownership interest”.
The point raised by the wife was that the husband obtained her consent to the 8 April 2014 orders having not disclosed the precise nature of the Supreme Court orders which would have made it clear, on the facts and circumstances then known to her, that the only asset from which the $15.5 million could be quarantined would be the proceeds of the Suburb C property. The husband then sought to build on that failure, which was itself built on the husband’s conduct of entering into the Supreme Court orders in breach of the earlier Family Court orders, to obtain yet further funds for his benefit by seeking an additional $2.9 million.
During the appeal hearing, senior counsel for the husband argued that the wife knew the effect of those orders and instead “hid” behind the without prejudice meetings, and did not take an opportunity to be cross-examined on this issue when invited to by the primary judge (Appeal Transcript 18 June 2015 pp 45 – 46).
It is true, as the primary judge correctly observed, that the Court was not in a position to make findings on the disputed issue as to what the wife was told of these orders in various meetings. However, what was clear is that the husband breached the 14 January 2011 orders by agreeing to the orders in the Mr G litigation. He then breached those orders by not providing the wife with a copy of the orders until after the 8 April 2014 orders had been entered into. In other words, all that was in dispute was what the wife had been told about the Mr G litigation orders not that there had been a breach, which is beyond doubt.
These breaches of the orders were significant matters which should have been given considerable weight. The primary judge erred in not doing so.
This ground is established.
Ground 6 – That his Honour’s discretionary decision miscarried in that he failed to deal with at all, or adequately, the application by the appellant for an interim property settlement;
Ground 7 – That his Honour’s discretionary decision miscarried in that he failed to give adequate reasons for dismissing the application by the appellant for an interim property settlement.
The wife’s application was for the payment of the balance of the Suburb C property proceeds to her. That payment was described by her as being “by way of interim property settlement”. That phrase is repeated in these grounds of appeal. It is difficult, therefore, to be critical of the primary judge who described her application by using the same phraseology. However, it is apparent from what we have said already that we accept that the wife was simply seeking an order that she receive the interest to which she was legally entitled and was not seeking an interim order intending to alter property rights.
As to refusing the payment to the wife the primary judge said at [75]:
75.Lastly, the wife seeks that the balance of the net proceeds of the [Suburb C property] sale be paid to her. No justification was advanced for such an order. The balance of the proceeds will be held as the parties agreed in April with any further disbursements to be by written agreement or further order of the Court.
The justification advanced by the wife was that the funds were, in fact, her funds. The order was therefore a restraint on her receiving her own assets. Of course, in appropriate cases, such orders are commonly made. In his Application in a Case filed 21 August 2014, the husband sought an order that the wife be restrained from disposing of, encumbering, charging, selling or otherwise dealing with personalty in her possession or control without written consent of the husband, however, the primary judge declined to make such an order (at [28] of the reasons of 11 September 2014). No challenge is made against his Honour’s refusal to grant that injunction. In those circumstances, it is clear that the funds should have been paid to the wife.
These grounds are also established.
Conclusion as to leave
There has been an error of principle and a substantial injustice would result if leave to appeal was not granted. There will be a grant of leave, and as we have explained, the appeal will be allowed there being an error in the approach to such application and in the exercise of discretion.
Form of the orders
The wife has established that there were fundamental errors by the primary judge which led to the orders being made from which she appeals. It follows that leave to appeal should be granted. The appeal should be allowed. The orders of the Court below must be discharged. In our view the primary judge should have ordered that the proceeds of the sale of the Suburb C property be disbursed by paying $15.5 million into the joint account as ordered by the primary judge, $15.5 million to the wife and the balance, if any, divided equally between the parties. This order simply gives effect to the parties’ legal interests in that property.
On 2 October 2015 the husband attempted to file an Application in an Appeal seeking leave to adduce further evidence. That Application was resolved by the parties who forwarded to the Court a memorandum signed by senior counsel for the husband and the wife to which we referred at the outset. It informed the Court that the amount of $2.9 million released to the husband by the orders of the primary judge had been exhausted.
In those circumstances there is no utility in making any order returning any un-used funds to the wife (which is an order we otherwise would have made).
In the course of his submissions, senior counsel for the wife made an oral application for a stay of the orders for the payment of the funds to the husband and for interim orders preventing the husband from dealing with the remaining funds under his control. Due to the complexities of the matter we were not then in a position to determine that Application. As the remaining funds were expended by October 2015, again, there is now no utility in the application which will be dismissed.
As agreed by the parties, the costs of this Application will be costs in the appeal.
Appeal EA 140 of 2014
An Amended Notice of Appeal was filed on 6 November 2014. This is an appeal from Orders (1)4 and (1)5, (3), (4) and (5) made on 11 September 2014.
A further application in relation to the orders of 18 July 2014 was heard by the primary judge on 5 September 2014. The husband sought to amend the earlier orders to take account of the fact that $1.25 million had not been borrowed by him but to ensure that he still received $2.9 million from the proceeds of sale. The wife applied to stay the orders. Limited orders were made providing for a stay but allowing the husband to apply some funds at his discretion. Given that the orders the subject of those applications will be discharged and that the monies have been fully expended, there is no utility in any further consideration of this appeal.
The application for leave to appeal from the orders made on 11 September 2014 will be dismissed.
Costs
Submissions were sought from the parties as to costs. In the event that the appeal was successful the wife sought an order for costs. That was opposed by the husband who submitted that he was not in a position to pay costs. It is well established that impecuniosity is, of itself, not a bar to a costs order.
There are circumstances which justify the husband paying the wife’s costs of and incidental to both appeals. The husband has been wholly unsuccessful, there is no doubt that he has breached orders of the Family Court and, at least on his case, the financial circumstances of the parties are such that they are in the category of high asset worth. The application for leave to appeal in EA 140 of 2014 was justified albeit we will refuse to give leave but only because there is no longer utility in consideration of the appeal. The application before the primary judge was for a stay and variation of orders that we will discharge. The appropriate order is that the husband pays the wife’s costs of the appeals.
I certify that the preceding one hundred and nineteen (119) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (May, Ryan & Aldridge JJ) delivered on 8 March 2016.
Associate:
Date: 8 March 2016
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